Document:

EXECUTION COPY

                      COMMON SECURITIES GUARANTEE AGREEMENT

                                   Viatel, Inc

                           Dated as of April 12, 2000

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                                TABLE OF CONTENTS

                                                                            Page

                                    ARTICLE I
                         DEFINITIONS AND INTERPRETATION

SECTION 1.1.          Definitions Interpretation.............................2

                                   ARTICLE II
                                    GUARANTEE

SECTION 2.1.          Guarantee..............................................3
SECTION 2.2.          Subordination..........................................4
SECTION 2.3.          Waiver of Notice and Demand............................4
SECTION 2.4.          Obligations Not Affected...............................4
SECTION 2.5.          Rights of Holders......................................5
SECTION 2.6.          Guarantee of Payment...................................5
SECTION 2.7.          Subrogation............................................5
SECTION 2.8.          Independent Obligations................................6
SECTION 2.9.          Acknowledgment by Guarantor............................6

                                   ARTICLE III
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 3.1.          Limitation of Transactions.............................6
SECTION 3.2.          Ranking................................................7

                                   ARTICLE IV
                                   TERMINATION

SECTION 4.1.          Termination............................................7

                                    ARTICLE V
                                  MISCELLANEOUS

SECTION 5.1.          Successors and Assigns.................................8
SECTION 5.2.          Amendments.............................................8
SECTION 5.3.          Notices................................................8
SECTION 5.4.          Benefit................................................9
SECTION 5.5.          Governing Law..........................................9

NYDOCS01/689470 2

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                      COMMON SECURITIES GUARANTEE AGREEMENT

                  This  COMMON  SECURITIES   Guarantee  Agreement  (the  "Common
Securities Guarantee"), dated as of April 12, 2000, is executed and delivered by
VIATEL, INC., a Delaware  corporation (the "Guarantor"),  for the benefit of the
Holders  (as  defined  herein)  from time to time of the Common  Securities  (as
defined herein) of Viatel Financing Trust I, a Delaware statutory business trust
(the "Trust").

                  WHEREAS,  pursuant to an Amended and Restated  Declaration  of
Trust (the "Declaration"), dated as of April 12, 2000, among the trustees of the
Trust named  therein,  the Guarantor,  as sponsor,  and the holders from time to
time of undivided  beneficial interests in the assets of the Trust, the Trust is
issuing on the date  hereof  92,783.5  common  securities,  having an  aggregate
stated  liquidation  amount of  $4,639,175  designated  the 7 3/4% Trust  Common
Securities (the "Common  Securities") (plus up to an additional  18,556.7 Common
Securities,  having an aggregate liquidation amount of $927,835, to meet capital
requirements  of the Trust in the event of an issuance of Additional  Securities
(as defined in the Placement  Agreement dated April 6, 2000 among Morgan Stanley
& Co., Incorporated,  Salomon Smith Barney Inc., Banc of America Securities LLC,
the  Trust  and  the  Guarantor)),  designated  the 7  3/4%  Convertible  Common
Securities;

                  WHEREAS,  as incentive  for the Holders to purchase the Common
Securities,  the Guarantor desires  irrevocably and unconditionally to agree, to
the extent set forth in this  Common  Securities  Guarantee,  to  guarantee  the
obligations  of the Trust to the Holders of Common  Securities  on the terms and
conditions set forth herein; and

                  WHEREAS,  the  Guarantor is also  executing  and  delivering a
guarantee  agreement (the  "Preferred  Securities  Guarantee") in  substantially
identical  terms to this  Common  Securities  Guarantee  for the  benefit of the
holders of the Convertible Preferred Securities (as defined herein), except that
if an Event of  Default  (as  defined in the  Indenture),  has  occurred  and is
continuing,  the rights of Holders of the Common Securities to receive Guarantee
Payments (as defined  herein) under this Common  Securities  Guarantee  shall be
subordinated  to the  rights of  Holders  of  Preferred  Securities  to  receive
Guarantee Payments (as defined in the Preferred Securities  Guarantee) under the
Preferred Securities Guarantee;

                  NOW,  THEREFORE,  in  consideration  of the  purchase  by each
Holder of Common  Securities,  which purchase the Guarantor  hereby agrees shall
benefit  the  Guarantor,   the  Guarantor  executes  and  delivers  this  Common
Securities Guarantee for the benefit of the Holders.

<PAGE>

                                    ARTICLE I
                         DEFINITIONS AND INTERPRETATION

SECTION 1.1.      DEFINITIONS INTERPRETATION

                  In  this  Common  Securities  Guarantee,  unless  the  context
otherwise requires:

                  (a) capitalized terms used in this Common Securities Guarantee
         but not  defined in the  preamble  above have the  respective  meanings
         assigned to them in this Section 1.1;

                  (b) terms  defined in the  Declaration  as at the date  hereof
         have the same  meaning  when used in this Common  Securities  Guarantee
         unless otherwise defined in the Common Securities Guarantee;

                  (c)  a  term  defined  anywhere  in  this  Common   Securities
         Guarantee has the same meaning throughout;

                  (d) all  references  to "the Common  Securities  Guarantee" or
         "this  Common  Securities  Guarantee"  are to  this  Common  Securities
         Guarantees as modified, supplemented or amended from time to time;

                  (e) all  references  in this Common  Securities  Guarantee  to
         Articles  and  Sections  are to  Articles  and  Sections of this Common
         Securities Guarantee unless otherwise specified;

                  (f) a term  defined  in the Trust  Indenture  Act has the same
         meaning when used in this Common Securities Guarantee, unless otherwise
         defined in this  Common  Securities  Guarantee  or unless  the  context
         otherwise requires;

                  (g) a reference to the singular includes the plural and vice
         versa;

                  (h) a reference to any person shall include its successors and
         assigns;

                  (i) a reference to any agreement or instrument shall mean such
         agreement or instrument as supplemented,  modified, amended, or amended
         and restated, and in effect from time to time; and

                  (j) a reference to any statute, law, rule or regulation, shall
         include any amendments  thereto  applicable to relevant Person, and any
         successor statute, law, rule or regulation.

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                  "Convertible  Debentures" means the 7 3/4% Convertible  Junior
Subordinated  Debentures  due  April  15,  2015  of the  Guarantor  held  by the
Institutional Trustee (as defined in the Declaration).

                  "Convertible   Preferred   Securities"  means  the  securities
representing  preferred  undivided  beneficial  interests  in the  assets of the
Trust.

                  "Guarantee   Payments"   means  the   following   payments  or
distributions,  without duplication,  with respect to the Common Securities,  to
the  extent  not  paid  or  made  by the  Trust:  (i)  any  accrued  and  unpaid
Distributions as defined in the Declaration that are required to be paid on such
Common  Securities to the extent the Trust shall have funds available  therefor,
(ii) the redemption price, including all accrued and unpaid Distributions to the
date of redemption  (the  "Redemption  Price") to the extent the Trust has funds
available therefor,  with respect to any Common Securities called for redemption
by the Trust, and (iii) upon a voluntary or involuntary dissolution,  winding-up
or termination of the Trust (other than in connection  with the  distribution of
Convertible  Debentures  to the Holders in  exchange  for Common  Securities  as
provided in the Declaration or the redemption of all the Common Securities), the
lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid
Distributions on the Common  Securities to the date of payment to the extent the
Trust has funds  available  therefor,  and (b) the amount of assets of the Trust
remaining  available for  distribution to Holders upon  liquidation of the Trust
(in either case,  the  "Liquidation  Distribution").  If an Event of Default (as
defined in the Indenture), has occurred and is continuing, the rights of Holders
of the  Common  Securities  to receive  Guarantee  Payments  under  this  Common
Securities  Guarantee are  subordinated  to the rights of Holders of Convertible
Preferred Securities to receive Guarantee Payments.

                  "Holder" shall mean any holder, as registered on the books and
records of the Trust, of any Common Securities.

                  "Indenture"  means the  Indenture  dated as of April 12,  2000
among the Guarantor and The Bank of New York, a New York banking corporation, as
trustee,  pursuant to which the  Convertible  Debentures are to be issued to the
Institutional Trustee (as defined in the Indenture) of the Trust.

                                   ARTICLE II
                                    GUARANTEE

SECTION 2.1.               GUARANTEE

                  The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders  the  Guarantee  Payments  (without  duplication  of amounts
theretofore  paid by the Trust),  as and when due,  regardless  of any  defense,
right of  set-off  or  counterclaim  which  the Trust  may have or  assert.  The
Guarantor's obligation to make a Guarantee Payment may be satisfied by direct

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payment of the  required  amounts by the  Guarantor to the Holders or by causing
the Trust to pay such amounts to the Holders.

SECTION 2.2.               SUBORDINATION

                  If an event of default under the Indenture has occurred and is
continuing,  the rights of Holders of the Common Securities to receive Guarantee
Payments under this Common  Securities  Guarantee are subordinated to the rights
of Holders of Convertible  Preferred  Securities to receive  Guarantee  Payments
under the Preferred Securities Guarantee.

SECTION 2.3.               WAIVER OF NOTICE AND DEMAND

                  The  Guarantor  hereby  waives  notice of  acceptance  of this
Common  Securities  Guarantee  and of any  liability  to which it applies or may
apply, presentment,  demand for payment, any right to require a proceeding first
against the Trust or any other Person before  proceeding  against the Guarantor,
protest, notice of nonpayment,  notice of dishonor, notice of redemption and all
other notices and demands.

SECTION 2.4.               OBLIGATIONS NOT AFFECTED

                  The  obligations,  covenants,  agreements  and  duties  of the
Guarantor under this Common Securities  Guarantee shall in no way be affected or
impaired by reason of the happening from time to time of any of the following:

                  (a) the release or waiver,  by operation of law or  otherwise,
         of the performance or observance by the Trust of any express or implied
         agreement,   covenant,   term  or  condition  relating  to  the  Common
         Securities to be performed or observed by the Trust;

                  (b) the  extension of time for the payment by the Trust of all
         or any  portion of the  Distributions,  Redemption  Price,  Liquidation
         Distribution  or any other sums  payable  under the terms of the Common
         Securities  or the extension of time for the  performance  of any other
         obligation  under,  arising out of, or in connection  with,  the Common
         Securities   (other   than  an   extension   of  time  for  payment  of
         Distributions,  Redemption Price, Liquidation Distribution or other sum
         payable that results from the extension of any interest  payment period
         on the Convertible  Debentures or any extension of the maturity date of
         the Convertible Debentures permitted by the Indenture);

                  (c) any failure,  omission,  delay or lack of diligence on the
         part  of  the  Holders  to  enforce,  assert  or  exercise  any  right,
         privilege,  power or remedy  conferred  on the Holders  pursuant to the
         terms of the Common Securities,  or any action on the part of the Trust
         granting indulgence or extension of any kind;

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                  (d) the  voluntary or  involuntary  liquidation,  dissolution,
         sale  of  any   collateral,   receivership,   insolvency,   bankruptcy,
         assignment for the benefit of creditors,  reorganization,  arrangement,
         composition or  readjustment  of debt of, or other similar  proceedings
         affecting, the Trust or any of the assets of the Trust;

                  (e)      any invalidity of, or defect or deficiency in, the
         Common Securities;

                  (f)      the settlement or compromise of any obligation
         guaranteed hereby or hereby incurred; or

                  (g) any other  circumstance  whatsoever  that might  otherwise
         constitute a legal or equitable discharge or defense of a guarantor, it
         being  the  intent  of this  Section  2.4 that the  obligations  of the
         Guarantor  hereunder shall be absolute and unconditional  under any and
         all circumstances.

                  There  shall be no  obligation  of the  Holders  or any  other
Persons to give notice to, or obtain  consent of, the Guarantor  with respect to
the happening of any of the foregoing.

SECTION 2.5.               RIGHTS OF HOLDERS

                  The Guarantor expressly acknowledges that any Holder of Common
Securities may institute a legal  proceeding  directly  against the Guarantor to
enforce  its rights  under  this  Common  Securities  Guarantee,  without  first
instituting a legal proceeding against the Trust or any other Person.

SECTION 2.6.               GUARANTEE OF PAYMENT

                  This  Common  Securities  Guarantee  creates  a  guarantee  of
payment and not of collection.

SECTION 2.7.               SUBROGATION

                  The  Guarantor  shall be  subrogated to all (if any) rights of
the  Holders of Common  Securities  against  the Trust in respect of any amounts
paid to such Holders by the Guarantor  under this Common  Securities  Guarantee;
PROVIDED,  HOWEVER,  that the Guarantor shall not (except to the extent required
by  mandatory  provisions  of law) be entitled to enforce or exercise any rights
that it may acquire by way of  subrogation or any  indemnity,  reimbursement  or
other  agreement,  in all  cases  as a  result  of  payment  under  this  Common
Securities  Guarantee,  if, at the time of any such payment, any amounts are due
and unpaid under this Common Securities  Guarantee.  If any amount shall be paid
to the Guarantor in violation of the preceding sentence, the Guarantor agrees to
hold such  amount in trust for the  Holders  and to pay over such  amount to the
Holders.

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SECTION 2.8.               INDEPENDENT OBLIGATIONS

                  The Guarantor  acknowledges that its obligations hereunder are
independent  of the  obligations  of  the  Trust  with  respect  to  the  Common
Securities  and that the  Guarantor  shall be liable as principal  and as debtor
hereunder  to make  Guarantee  Payments  pursuant  to the  terms of this  Common
Securities Guarantee  notwithstanding the occurrence of any event referred to in
subsections (a) through (g), inclusive, of Section 2.4 hereof.

SECTION 2.9.               ACKNOWLEDGMENT BY GUARANTOR

                  The Guarantor acknowledges its obligation to issue and deliver
common stock,  par value $0.01 per share, of the Guarantor (the "Common Stock"),
upon the conversion of the Common Securities.

                                   ARTICLE III
                    LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 3.1.               LIMITATION OF TRANSACTIONS

                  So long as any Common  Securities remain  outstanding,  if (i)
the  Guarantor  has  exercised  its  option to defer  interest  payments  on the
Convertible  Debentures by extending the interest payment period and such period
or extension  thereof,  shall be continuing,  (ii) there shall have occurred any
default by the Guarantor on any of its payment or other  obligations  under this
Common Securities Guarantee or (iii) there shall have occurred and be continuing
any event  that,  with the giving of notice or the lapse of time or both,  would
constitute  an event of default  under the  Declaration,  then the Guarantor (a)
shall not declare or pay  dividends on, make  distributions  with respect to, or
redeem,  purchase or acquire, or make a liquidation payment with respect to, any
of its capital stock,  (b) shall not make any payment of interest,  principal or
premium,  if any, on or repay,  repurchase or redeem any debt  securities of the
Guarantor  that rank PARI PASSU with or junior in  interest  to the  Convertible
Debentures  and (c) shall not make any  guarantee  payments  with respect to any
guarantee  by the  Guarantor of the debt  securities  of any  subsidiary  of the
Guarantor if such  guarantee  ranks PARI PASSU with or junior in interest to the
Convertible  Debentures  (other than (i) a  reclassification  of the Guarantor's
capital  stock or the  exchange  or  conversion  of one  class or  series of the
Guarantor's capital stock for another class or series of the Guarantor's capital
stock;  (ii) the purchase of fractional  interests in shares of the  Guarantor's
capital stock pursuant to the conversion or exchange  provisions of such capital
stock or the security  being  converted  into or exchanged  for the  Guarantor's
capital stock;  (iii) the payment of dividends or  distributions in common stock
of the  Guarantor;  (iv) any  declaration  of a dividend in connection  with the
implementation  of a  stockholders'  rights plan, or the issuance of stock under
any such plan in the future,  or the redemption or repurchase of any such rights
pursuant thereto;  (v) payments under this Common  Securities  Guarantee and the
Preferred Securities  Guarantee;  (vi) purchases of the Guarantor's common stock
related to the issuance of the

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Guarantor's  common stock or rights under any of the  Guarantor's  benefit plans
for the Guarantor's  directors,  officers or employees;  or (vii) obligations of
the Guarantor under any dividend reinvestment and stock purchase plans).

SECTION 3.2.               RANKING

                  (a)  This  Common  Securities  Guarantee  will  constitute  an
         unsecured obligation of the Guarantor and will rank (i) subordinate and
         junior in right of payment to all other  liabilities  of the Guarantor,
         except any  liabilities  that may be made PARI PASSU expressly by their
         terms,  (ii) PARI PASSU with the most senior  preferred  or  preference
         stock now or hereafter  issued by the  Guarantor and with any guarantee
         now or  hereafter  entered  into by the  Guarantor  in  respect  of any
         preferred or preference  stock of any Affiliate of the  Guarantor,  and
         (iii) senior to the Common Stock.

                  (b) The holders of any  obligations  of the Guarantor that are
         senior in priority  to the  obligations  under this  Common  Securities
         Guarantee  will be entitled to all of the rights inuring to the holders
         of "Senior  Indebtedness"  under Article 12 of the  Indenture,  and the
         Holders  of the Common  Securities  will be subject to all of the terms
         and  conditions of such Article 12 with respect to any claims or rights
         hereunder with the same effect as though fully set forth herein.

                                   ARTICLE IV
                                   TERMINATION

SECTION 4.1.               TERMINATION

                  This Common Securities Guarantee shall terminate upon (i) full
payment of the amount payable upon redemption of the Common Securities, (ii) the
distribution  of the  Guarantor's  Common Stock to the Holders in respect of the
conversion of the Convertible  Preferred Securities into the Common Stock or the
distribution  of the Convertible  Debentures (as defined in the  Declaration) to
the Holders of all of the Common Securities or (iii) full payment of the amounts
payable  in  accordance  with the  Declaration  upon  liquidation  of the Trust.
Notwithstanding the foregoing, this Common Securities Guarantee will continue to
be  effective  or will be  reinstated,  as the case  may be,  if at any time any
Holder of Common  Securities  must  restore  payment  of any sums paid under the
Common Securities or under this Common Securities Guarantee.

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<PAGE>

                                    ARTICLE V
                                  MISCELLANEOUS

SECTION 5.1.               SUCCESSORS AND ASSIGNS

                  All  guarantees  and  agreements   contained  in  this  Common
Securities Guarantee shall bind the successors, assigns, receivers, trustees and
representatives  of the  Guarantor and shall inure to the benefit of the Holders
of the Common Securities then outstanding.

SECTION 5.2.               AMENDMENTS

                  Except  with  respect to any  changes  which do not  adversely
affect  the rights of  Holders  (in which  case no  consent  of Holders  will be
required),  this Common Securities  Guarantee may only be amended with the prior
approval of the Holders of at least a majority in liquidation  amount of all the
outstanding Common Securities. The provisions of Section 12.2 of the Declaration
with  respect to  meetings of Holders of the  Securities  apply to the giving of
such approval.

SECTION 5.3.               NOTICES

                  All notices provided for in this Common  Securities  Guarantee
shall be in writing,  duly signed by the party giving such notice,  and shall be
delivered,  sent by  facsimile  or mailed by  registered  or  certified  mail or
overnight courier, as follows:

                  (a) if given to the Trust, in care of the Regular  Trustees at
         the Trust's  mailing  address set forth below (or such other address as
         the Trust may give notice of to the Holders of the Common Securities):

                  c/o Viatel, Inc.
                  685 Third Avenue
                  24th Floor
                  New York, New York  10017
                  Attention:  General Counsel

                  (b) if  given to the  Guarantor,  at the  Guarantor's  mailing
         address set forth  below (or such other  address as the  Guarantor  may
         give notice of to the Holders of the Common Securities):

                  Viatel, Inc.
                  685 Third Avenue
                  24th Floor
                  New York, New York  10017
                  Attention:  General Counsel

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<PAGE>

                  (c) if  given  to any  Holder  of  Common  Securities,  at the
         address set forth on the books and records of the Trust.

                  All such  notices  shall be  deemed to have  been  given  when
received in person,  telecopied with receipt confirmed, or mailed by first class
mail,  postage  prepaid  except  that if a notice or other  document  is refused
delivery or cannot be delivered  because of a changed address of which no notice
was given,  such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.

SECTION 5.4.               BENEFIT

                  This Common Securities  Guarantee is solely for the benefit of
the Holders of the Common Securities and is not separately transferable from the
Common Securities.

SECTION 5.5.               GOVERNING LAW

                  THIS COMMON SECURITIES GUARANTEE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK.

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<PAGE>

                  THIS COMMON SECURITIES  GUARANTEE  AGREEMENT is executed as of
the day and year first above written.

                                          VIATEL, INC.,
                                          as Guarantor

                                          By: /s/ James P. Prenetta
                                             ------------------------------
                                             Name:  James P.Prenetta
                                             Title: Senior Vice President and
                                                      General Counsel

                                       10EXECUTION COPY

                              AMENDED AND RESTATED
                            ENGINEERING, PROCUREMENT
                            AND CONSTRUCTION CONTRACT
                              (OUTSIDE PLANT WORK)

                         DATED AS OF NOVEMBER 15, 1999,
                        EFFECTIVE AS OF FEBRUARY 19, 1999

                                     BETWEEN
                                 BECHTEL LIMITED
                                  AS CONTRACTOR

                                       AND

                     VICAME INFRASTRUCTURE DEVELOPMENT GMBH
                                  AS DEVELOPER

                                       and

                            VIATEL GERMAN ASSET GMBH
                                    AS OWNER

                                       AND

                          METROMEDIA FIBER NETWORK GMBH
                                    AS OWNER

                                       AND

                     CARRIER 1 FIBER NETWORK GMBH & CO. OHG
                                    AS OWNER
                          ---------------------------------------

                       GERMAN NETWORK DEVELOPMENT PROJECT

                                    GND NO. 1

                                       AND

                                    GND NO. 2

<PAGE>

                                TABLE OF CONTENTS

                                                                           PAGE

SECTION 1.  DEFINITIONS; INTERPRETATION......................................2

      1.1.  DEFINED TERMS....................................................2

      1.2.  RULES OF CONSTRUCTION............................................2

SECTION 2.  INTENT OF CONTRACT AND RELATIONSHIP OF THE PARTIES...............3

      2.1.  Generally........................................................3

      2.2.  Interpretation...................................................3

      2.3.  Relationships Among the Parties..................................3

SECTION 3.  CONTRACT DOCUMENTS...............................................4

      3.1.  Form Part of this Contract.......................................4

      3.2.  Conflicts........................................................4

SECTION 4.  RESPONSIBILITIES OF THE CONTRACTOR...............................5

      4.1.  Scope of Work....................................................5

      4.2.  Overall System Design Responsibility.............................6

      4.3.  Technical Information............................................7

SECTION 5.  TECHNICAL REQUIREMENTS, MILESTONE SCHEDULE  AND PROGRESS
            MEETINGS.........................................................7

2      5.1.  Technical Requirements...........................................7

      5.2.  Milestone Schedule...............................................7

      5.3.  Progress Meetings................................................8

SECTION 6.  COMPLIANCE WITH LAWS; PERMITS....................................8

      6.1.  Compliance With Laws.............................................8

      6.2.  Variations Required By Law.......................................8

      6.3.  Permits..........................................................9

      6.4.  No Liability....................................................10

SECTION 7.  THE SCHEDULED ROUTE.............................................10

      7.1.  Generally.......................................................10

      7.2.  Wayleave Procurement and Approval...............................10

      7.3.  Alternative Wayleaves...........................................11

SECTION 8.  OWNER OBLIGATIONS...............................................12

      8.1.  Owner-Procured Equipment and Vendor Specifications..............12

                                       -i-
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                         TABLE OF CONTENTS (CONTINUED)                    PAGE

      8.2.  POP Sites and Owner Specifications..............................13

      8.3.  The Developer's Review and Approval.............................14

      8.4.  Owner Permits...................................................15

      8.5.  Access to Owner Facilities......................................15

      8.6.  Cooperation and Non-Interference with Work......................15

      8.7.  No Diminishment.................................................15

SECTION 9.  MAINTENANCE OF BOOKS AND RECORDS................................15

      9.1.  Maintenance of Records..........................................15

      9.2.  Access to Records...............................................16

      9.3.  Subcontractors..................................................16

SECTION 10. TAXES...........................................................17

      10.1. General.........................................................17

      10.2. Exemption from Taxes............................................17

      10.3. Withholding.....................................................17

      10.4. Indemnity.......................................................17

SECTION 11. INTELLECTUAL PROPERTY RIGHTS....................................18

      11.1. Generally.......................................................18

      11.2. Injunction......................................................18

      11.3. Infringement Order..............................................19

      11.4. New Developments by the Contractor..............................19

      11.5. The Contractor's Existing Intellectual Property.................19

SECTION 12. PAYMENTS FOR THE WORK...........................................20

      12.1. Compensation....................................................20

      12.2. Fixed and Incentive Fees........................................20

            (a)   GND No. 1 Outside Plant...................................20

            (b)   GND No. 2 Outside Plant...................................20

      12.3. General Conditions of Payment...................................21

      12.4. Timing of Payments..............................................22

      12.5. Contractor Invoices.............................................24

            (b)   Reimbursement Invoices....................................24

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                       TABLE OF CONTENTS (CONTINUED)                      PAGE

            (c)   Documents.................................................25

      12.6. The Developer's Right to Withhold Payment.......................26

      12.7. Overdue Payments................................................27

SECTION 13. DEDUCTIONS FROM PAYMENTS TO THE CONTRACTOR......................27

      13.1. Amounts Payable.................................................27

      13.2. Deduction.......................................................27

      13.3. Certificate.....................................................28

SECTION 14. CONTRACTOR SECURITY.............................................28

      14.1. Generally.......................................................28

      14.2. Form of Contractor Surety Bond..................................28

      14.3. Issuer Requirements.............................................28

SECTION 15. CONTRACT VARIATIONS.............................................29

      15.1. Equitable Relief................................................29

      15.2. Procedure For Implementing Contract Variations..................30

      15.3. Effect of Contract Variations...................................30

      15.4. Performance Pending Resolution..................................30

      15.5. No Delay........................................................30

SECTION 16. OWNER-CAUSED DELAYS.............................................31

      16.1. Generally.......................................................31

      16.2. Effect..........................................................32

SECTION 17. GUARANTEED RFS DATE.............................................32

      17.1. Guaranteed RFS Date.............................................32

      17.2. [intentionally omitted].........................................32

SECTION 18. FORCE MAJEURE...................................................32

      18.1. Definition......................................................32

      18.2. Mitigation......................................................33

      18.3. Notice..........................................................33

      18.4. Application.....................................................34

      18.5. Extension of Time...............................................34

      18.6. Limitation......................................................34

                                       -iii-
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                       TABLE OF CONTENTS (CONTINUED)                      PAGE

SECTION 19. PROJECT MANAGER AND THE DEVELOPER'S  REPRESENTATIVE.............34

      19.1. Project Manager.................................................34

      19.2. The Developer's Representative..................................35

SECTION 20. INSPECTION RIGHTS...............................................35

      20.1. Generally.......................................................35

      20.2. Covered Work....................................................36

      20.3. No Relief.......................................................36

SECTION 21. DEFECTIVE WORK..................................................36

      21.1. Generally.......................................................36

      21.2. Existence of Defects............................................36

SECTION 22. SUSPENSION OF WORK BY THE DEVELOPER.............................37

      22.1. Generally.......................................................37

      22.2. The Contractor's Duties Upon Suspension.........................37

      22.3. The Contractor's Duties After Suspension........................38

SECTION 23. TERMINATION FOR CONVENIENCE.....................................38

      23.1. Termination.....................................................38

      23.2. Termination Date................................................38

      23.3. Termination Payment (Convenience)...............................38

SECTION 24. EVENTS OF DEFAULT AND REMEDIES..................................40

      24.1. Events of Default and Remedies..................................40

      24.2. No Prejudice....................................................42

      24.3. Notice of Exercise of Remedies..................................42

      24.4. Contractor's Right to Suspend Work and Terminate Contract.......42

SECTION 25. TAKE OVER AND PAYMENTS TO THE DEVELOPER.........................43

      25.1. Replacement Contractors.........................................43

      25.2. No Right of Compensation........................................43

      25.3. Payments to the Owners..........................................43

SECTION 26. TERMINATION FOR DEFAULT.........................................44

      26.1. Effect of Termination...........................................44

                                       -iv-
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                       TABLE OF CONTENTS (CONTINUED)                      PAGE

      26.2. Termination Date................................................44

      26.3. Right to Terminate..............................................44

      26.4. Right to Complete the Work......................................44

SECTION 27. DUTIES UPON TERMINATION.........................................44

      27.1. Generally.......................................................44

      27.2. Subcontractor Claims............................................46

      27.3. Funds Held by the Owners........................................46

SECTION 28. LIMITATION OF LIABILITY.........................................46

      28.1. No Consequential Damages........................................46

      28.2. Other Limitations...............................................47

      28.3. Scope of Limitations............................................47

      28.4. Work Provided By Others.........................................47

      28.5. Loss, Injury or Damage to Persons, the System or the Work.......47

      28.6. Transfer of Ownership...........................................47

      28.7. Hazardous Waste or Materials....................................47

SECTION 29. THE CONTRACTOR'S ON-SITE DUTIES.................................48

      29.1. Reasonable Precautions..........................................48

      29.2. Waste Disposal..................................................48

SECTION 30. PERFORMANCE TESTS...............................................48

      30.1. Generally.......................................................48

      30.2. Right of Waiver.................................................48

      30.3. Long-Term Obligations...........................................49

      30.4. Operating Revenues..............................................49

SECTION 31. PLANT ACCEPTANCE................................................49

      31.1. Initial Plant Commissioning Report..............................49

      31.2. RFS Acceptance..................................................49

      31.3. Commercial Acceptance...........................................51

      31.4. Documentation to be Delivered Upon RFS Acceptance or
            Commercial Acceptance...........................................52

      31.5. Failure to Achieve RFS Acceptance or Commercial Acceptance......52

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                       TABLE OF CONTENTS (CONTINUED)                      PAGE

      31.6. Final Acceptance................................................53

SECTION 32. WARRANTIES......................................................53

      32.1. General Warranties..............................................53

      32.2. Notification of Breach of Warranty..............................53

      32.3. Repair Generally................................................54

      32.4. Repair or Replacement...........................................54

      32.5. Repair by the Developer.........................................55

      32.6. Repaired or Replacement Parts...................................55

      32.7. The Developer's Expenses........................................55

      32.8. Scope of Liability for Defects..................................55

SECTION 33. ASSIGNMENT AND SUBCONTRACTING...................................55

      33.1. Generally.......................................................55

      33.2. Subcontracts....................................................56

      33.3. Existing Subcontracts...........................................56

      33.4. Breach..........................................................56

      33.5. Conditional Assignment..........................................56

      33.6. No Obligations of Owner Persons to Subcontractors...............57

SECTION 34. THE CONTRACTOR'S PERSONNEL......................................57

SECTION 35. THE DEVELOPER'S STAFF...........................................57

      35.1. Generally.......................................................57

      35.2. Limitations.....................................................57

SECTION 36. TITLE...........................................................57

      36.1. Generally.......................................................57

      36.2. Title to Supplies and Work......................................58

      36.3. Transfer of Title...............................................58

      36.4. Removal of Liens................................................58

      36.5. No Release of the Contractor; Contractor Obligations
            in Lieu of Transfer of Direct Possession........................59

      36.6. Bailment........................................................59

      36.7. Title to the Cable Links........................................59

                                       -vi-
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                       TABLE OF CONTENTS (CONTINUED)                      PAGE

SECTION 37. REPRESENTATIONS AND WARRANTIES..................................60

      37.1. Contractor's Representations and Warranties.....................60

      37.2. The Developer's Representations and Warranties..................62

      37.3. Representations and Warranties of the Owners....................63

SECTION 38. DISPUTE RESOLUTION AND CONSENT TO JURISDICTION..................64

      38.1. Mutual Discussions; Mediation...................................64

      38.2. Consent to Jurisdiction.........................................64

SECTION 39. INDEMNIFICATION.................................................65

      39.1. Contractor to Indemnify.........................................65

      39.2. Owners to Indemnify.............................................66

      39.3. Conditions to Effect Indemnification............................66

SECTION 40. RISK OF LOSS....................................................66

      40.1. Generally.......................................................66

      40.2. Payments to the Owners..........................................67

SECTION 41. INSURANCE.......................................................67

      41.1. Types of Insurance..............................................67

      41.2. Notice of Cancellation..........................................67

      41.3. Copies..........................................................67

      41.4. Failure to Maintain Insurance...................................67

      41.5. Compliance With Policies........................................67

      41.6. Claim Information...............................................67

      41.7. Remedy of Loss or Damage........................................67

      41.8. Insolvency of Insurers..........................................67

SECTION 42. DOCUMENTS, INFORMATION AND CONFIDENTIALITY......................68

      42.1. Generally.......................................................68

      42.2. The Contractor to Retain Drawings...............................68

      42.3. Confidentiality.................................................68

SECTION 43. PUBLICITY.......................................................69

SECTION 44. CORRUPT GIFTS AND THE PAYMENT OF COMMISSIONS....................69

      44.1. Gifts, Etc......................................................69

                                       -vii-
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                       TABLE OF CONTENTS (CONTINUED)                      PAGE

      44.2. Payments........................................................70

      44.3. Foreign Corrupt Practices Act...................................70

      44.4. Permitted Activities............................................70

      44.5. Materiality.....................................................71

SECTION 45. NOTICES.........................................................71

      45.1. Methods and Effectiveness.......................................71

      45.2. Addresses.......................................................72

      45.3. English Language................................................74

SECTION 46. NO CONFLICTS....................................................74

SECTION 47. MISCELLANEOUS...................................................74

      47.1. Headings........................................................74

      47.2. GOVERNING LAW...................................................74

      47.3. Severability....................................................74

      47.4. Integration.....................................................75

      47.5. Amendments and Waivers..........................................75

      47.6. Further Assurances..............................................75

      47.7. Counterparts....................................................75

      47.8. Successors and Assigns..........................................75

      47.9. No Third Party Beneficiaries....................................75

      47.10.United Nations Convention On Contracts For The
            International Sale Of Goods.....................................75

      47.11 Remedies Cumulative.............................................76

EXHIBIT 1 DEFINED TERMS

EXHIBIT 2 FORM OF CONTRACTOR SURETY BOND

EXHIBIT 3 FORM OF CERTIFICATE AND PAYMENT AND FINAL RELEASE

EXHIBIT 4 FORM OF LIEN RELEASE

EXHIBIT 5 FORM OF RETAINAGE LC

EXHIBIT 6 FORM OF CORPORATE GUARANTEE

EXHIBIT 7 FORM OF OWNER ESCROW AGREEMENT

APPENDIX 1 REIMBURSABLE COSTS

                                     -viii-
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                       TABLE OF CONTENTS (CONTINUED)                      PAGE

APPENDIX 1 REIMBURSABLE COSTS   TABLE (1-A) STANDARD RATES

APPENDIX 2 NETWORK DESCRIPTION AND PROJECT SCOPE

APPENDIX 2 NETWORK DESCRIPTION AND PROJECT SCOPE

APPENDIX 2 NETWORK DESCRIPTION AND PROJECT SCOPE  TABLE (2-A) ROUTE DISTANCES

APPENDIX 2 NETWORK  DESCRIPTION  AND PROJECT  SCOPE TABLE (2-B)  DETAILED  CABLE
      ROUTING

APPENDIX 2 NETWORK DESCRIPTION AND PROJECT SCOPE  TABLE (2-C) TECHNICAL
      SPECIFICATIONS AND STANDARDS

APPENDIX 2 NETWORK DESCRIPTION AND PROJECT SCOPE  TABLE (2-D) DESCRIPTION OF
      CONTRACTOR PROVIDED MATERIALS

APPENDIX 3 OWNER-PROCURED EQUIPMENT

APPENDIX 4 MILESTONE SCHEDULE

APPENDIX 5 WAYLEAVE APPLICATION PROCESS

APPENDIX 5  TABLE A WAYLEAVE CRITERIA

APPENDIX 6 INSURANCE

APPENDIX 7 PERFORMANCE TEST STANDARDS

APPENDIX 7 TABLE 7-A PERFORMANCE TEST STANDARDS

APPENDIX 8 STORAGE AND MARKING PROCEDURES

APPENDIX 9 PAYMENT METHODOLOGY [INTENTIONALLY OMITTED]

APPENDIX 10 OWNER ESCROW SCHEDULE

APPENDIX 11 INDEPENDENT EXPERT PROCEDURES

                                       -ix-
<PAGE>

                                    GND NO. 1
                                       AND
                                    GND NO. 2

                       GERMAN NETWORK DEVELOPMENT PROJECT

                              AMENDED AND RESTATED
               ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT
                              (OUTSIDE PLANT WORK)

AMENDED AND RESTATED ENGINEERING, PROCUREMENT AND CONSTRUCTION CONTRACT (OUTSIDE
PLANT WORK),  dated as of November 15, 1999,  effective as of February 19, 1999,
among and between:

     BECHTEL  LIMITED,   a  United  Kingdom  limited   liability   company  (the
          "CONTRACTOR"); and

     VICAMEINFRASTRUCTURE  DEVELOPMENT  GmbH, a  GESELLSCHAFT  MIT  BESCHRANKTER
          HAFTUNG organized under the laws of Germany (the "DEVELOPER"); and

     VIATELGERMAN ASSET GmbH, a GESELLSCHAFT MIT BESCHRANKTER  HAFTUNG organized
          under the laws of Germany ("VIATEL"); and

     METROMEDIA FIBER  NETWORK GmbH, a  GESELLSCHAFT  MIT  BESCHRANKTER  HAFTUNG
          organized under the laws of Germany ("MFN"); and

     CARRIER 1 FIBER  NETWORK  GmbH & Co.  OHG,  an  OFFENE  HANDELSGESELLSCHAFT
          organized under the laws of Germany ("CARRIER 1"),

with  each of  Viatel,  MFN and  Carrier  1 acting  as an Owner  hereunder,  and
hereinafter  individually  referred  to as an "OWNER" or,  collectively,  as the
"OWNERS".

                              W I T N E S S E T H :

             WHEREAS,   the   Owners  are   developing   certain   fiber   optic
telecommunications networks, consisting, in part, of the Systems (as hereinafter
defined) to be located along the Scheduled Route (as hereinafter defined) in the
Federal Republic of Germany; and

             WHEREAS,  the  Owners  previously  entered  into  the  Engineering,
Procurement and  Construction  Contract  (Outside Plant Work) dated February 19,
1999 (the "FIXED PRICE CONTRACT") with Contractor and the Developer  pursuant to
which the Contractor was to perform certain  services  necessary for the design,
engineering, procurement, construction,  installation and testing of the Outside
Plants (as hereinafter  defined) for the German Network  Development Project GND
No. 1 and GND No. 2 on a fixed price, turnkey,  date-certain basis in accordance
with the Performance Parameters (as hereinafter defined); and

                                       1
<PAGE>

             WHEREAS,  the  Parties  now desire to amend and  restate  the Fixed
Price Contract so that, among other things, such Fixed Price Contract reflects a
cost plus  arrangement  with fixed and incentive fees,  effective as of February
19, 1999.

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

                          SECTION 1. DEFINITIONS; INTERPRETATION

1.1          DEFINED  TERMS.  As  used  in  this  Contract  and in all  Contract
             Documents,  capitalized  terms  shall  have the  meanings  ascribed
             thereto in EXHIBIT 1 hereto.

1.2          RULES OF  CONSTRUCTION.  In the  interpretation  of this  Contract,
             unless the context otherwise requires:

            (a)   The  singular  includes  the plural  and vice  versa  and,  in
                  particular  (but  without   limiting  the  generality  of  the
                  foregoing), any word or expression defined in the singular has
                  the corresponding meaning used in the plural and vice versa;

            (b)   The term "or" is not exclusive;

            (c)   The  term   "including"   shall   mean   "including,   without
                  limitation";

            (d)   Any reference to any gender includes the other gender;

            (e)   Any reference to any agreement,  instrument, contract or other
                  document shall:

                  (i)   Include all appendices,  exhibits, annexes and schedules
                        thereto; and

                  (ii)  Be a reference to such agreement,  instrument,  contract
                        or other  document as amended,  supplemented,  modified,
                        suspended, restated or novated from time to time;

            (f)   Any  reference to any Codes and  Standards  shall  include all
                  statutory   and   administrative   provisions   consolidating,
                  amending  or  replacing  such Codes and  Standards,  and shall
                  include all rules and regulations promulgated thereunder;

            (g)   Any reference to "hereof", "hereto", "herein",  "hereunder" or
                  any other  similar term is a reference  to this  Contract as a
                  whole,  and not to any  particular  provision  or part of this
                  Contract;

            (h)   Any reference to any Person includes its permitted  successors
                  and assigns;

            (i)   Unless otherwise specified, a reference to a Section, Exhibit,
                  or Appendix is to the  Section,  Exhibit,  or Appendix of this
                  Contract;

                                       2
<PAGE>

            (j)   Unless otherwise specified,  any right may be exercised at any
                  time and from time to time;

            (k)   The fact that  counsel to any Party  shall have  drafted  this
                  Contract shall not affect the  interpretation of any provision
                  of  this  Contract  in a  manner  adverse  to  such  Party  or
                  otherwise prejudice or impair the rights of such Party; and

            (l)   If an index or similar reference  referred to in this Contract
                  is changed or no longer  published  or  reported by the Person
                  (or  such  Person's   successor)  who,  on  the  date  hereof,
                  publishes or reports such index or reference, then the Parties
                  shall use their best  efforts  to replace  such index with the
                  best substitute for the changed or nolonger published index or
                  reference.

          SECTION 2. INTENT OF CONTRACT AND RELATIONSHIP OF THE PARTIES

2.1.  GENERALLY. The Contractor shall:

      (a)   undertake  all  necessary  Work and perform in full its  obligations
            hereunder  in order to plan,  supply,  install,  assemble,  test and
            furnish  to each Owner (to the  extent of its  respective  ownership
            interest  therein)  each Outside  Plant (or segment  thereof) as set
            forth in the Technical Requirements; and

      (b)   achieve RFS Acceptance  for each Outside Plant (or segment  thereof)
            on or before the Guaranteed RFS Date therefor,

      in each case, upon and subject to the provisions of this Contract.

2.2.  INTERPRETATION.  The Contractor shall perform all of the Work specified or
      reasonably  inferred  from this  Contract.  The  Contractor's  performance
      hereunder shall include everything requisite and necessary to complete the
      entire Work  notwithstanding the fact that every item necessarily involved
      may not be  specifically  mentioned  in the  Technical  Requirements.  The
      intent of this  Contract is to relieve the Owner  Persons of the necessity
      of engaging or  supplying  any labor,  service,  equipment  or material to
      complete  the Outside  Plants,  unless the labor,  service,  equipment  or
      material is expressly  itemized in this Contract as being furnished by any
      such Owner Persons.

2.3.  RELATIONSHIPS AMONG THE PARTIES. The Parties hereto agree that:

      (a)   THE OWNERS.  Each of the Owners is entering  into this Contract as a
            several but not joint obligor,  and, in any event, each such Owner's
            liability with respect to all obligations hereunder shall be limited
            pro rata to its  percentage of ownership in the Outside Plants to be
            delivered by the Contractor hereunder, which percentage shall be:

            (i)   [REDACTED], in the case of Viatel;

            (ii)  [REDACTED], in the case of MFN; and

                                       3
<PAGE>

        (iii) [REDACTED], in the case of Carrier 1,

            subject to the proviso that,  such  percentages may be adjusted from
            time to time and the Developer  shall  provide  timely Notice to the
            Contractor with respect to any such adjustment.

      (b)   APPOINTMENT  OF DEVELOPER  AS AGENT.  Each Owner has  appointed  the
            Developer as its sole and  exclusive  agent,  with full and complete
            authority to act on its behalf with respect to all matters  relating
            to the administration and performance of this Contract.

      (c)   NON-LIABILITY  OF THE DEVELOPER TO THE CONTRACTOR.  The Developer is
            acting  solely in the  capacity  as an agent of each Owner and shall
            bear no liability hereunder to any Contractor Person.

      (d)   EXCLUSIVE POINT OF CONTACT. No Owner Person other than the Developer
            shall be entitled to instruct or direct the Contractor  with respect
            to  any  matter  hereunder.   The  Contractor  shall  disregard  any
            instructions  purported  to be given on behalf  of any Owner  unless
            given by the Developer acting through its Developer's Representative
            appointed pursuant to Section 19.2. In the event,  however, that the
            Contractor  has  failed to achieve  RFS  Acceptance  of the  Outside
            Plants by March 31, 2000,  each Owner  (acting  singly or with other
            Owners as they may elect) shall be entitled to pursue all  available
            remedies  against the  Contractor to the full extent of such Owner's
            (or Owners') pro rata ownership interest in the Outside Plants.

      (e)   NO IMPLIED RELATIONSHIPS.  Unless expressly contemplated herein, the
            relationships  between  and among the  Parties  shall not be that of
            partners or joint  venturers,  and nothing herein contained shall be
            deemed to  constitute a  partnership  or joint  venture  among them.
            Except for the  Developer's  agency for the Owners as  expressed  in
            clause (b) of this Section 2.3 and  elsewhere in this  Contract,  or
            unless otherwise  expressly  stipulated  herein, no Party shall have
            authority  or power  to bind or act  unilaterally  as agent  for any
            other Party.

                          SECTION 3. CONTRACT DOCUMENTS

3.1.  FORM PART OF THIS CONTRACT. Each Contract Document shall be deemed to form
      and be read and  construed as part of this  Contract,  and all matters and
      things  herein  expressed as a duty or  obligation of either Party (either
      actual or potential) therein shall be the duty or obligation of such Party
      hereunder.

3.2.  CONFLICTS.  In the  event of any  conflict  between  a  provision  of this
      Contract  and a  provision  of any  Contract  Document,  the former  shall
      prevail.  In the event of any conflict  between or among the provisions of
      one or more Contract Documents that cannot be resolved by any provision of
      this  Contract,  then the  provision in the Contract  Document  having the
      highest order of precedence below shall prevail:

                                       4
<PAGE>

      (a)   Network Description and Project Scope;

      (b)   Milestone Schedule; and

      (c)   other Technical Requirements.

                  SECTION 4.  RESPONSIBILITIES OF THE CONTRACTOR

4.1.  SCOPE OF WORK. The Contractor shall plan,  supply,  install,  assemble and
      test each  Outside  Plant in  accordance  with all  terms  and  conditions
      contained in this Contract. Each Outside Plant shall be in full accordance
      with  the  Technical  Requirements  and  the  other  requirements  of this
      Contract and the Contract Documents. As more specifically described in the
      Technical  Requirements,  including  the Network  Description  and Project
      Scope,  the Contractor  shall perform or continue to perform the following
      obligations,  with each item listed herein constituting,  individually and
      as  referenced  collectively  with any  other  such  items,  the Work (the
      "WORK"):

      (a)   WAYLEAVE SUPPORT AND SCHEDULED ROUTE  SPECIFICATIONS.  In accordance
            with  and  subject  to the  Wayleave  Criteria  and  the  terms  and
            provisions  of  Section  7  hereof,  procurement,  as agent  for the
            Owners,  of all Wayleaves  necessary to complete each Outside Plant,
            including  preparation  and  presentation  to the  Developer,  on an
            ongoing  basis in  accordance  with the  Wayleave  Criteria and this
            Contract,  of all Wayleave  documentation,  together  with  periodic
            written updates as to Scheduled Route  specifications and completion
            status;

      (b)   FIBER OPTIC CABLE ASSEMBLY AND  INSTALLATION.  Installation of ducts
            and assembly and  installation  of the Fiber Optic Cable,  including
            the  procurement  and  provision  of all  materials,  equipment  and
            services necessary for the joining,  secure placement,  safeguarding
            and  maintenance of such Fiber Optic Cable along the Scheduled Route
            in accordance with the Technical Requirements;

      (c)   FIBER OPTIC CABLE SPLICING AND TESTING.  Splicing and testing of the
            Fiber  Optic  Cable  as  provided  in  the  Technical  Requirements,
            including  testing of such Fiber Optic Cable over the entire  length
            thereof,  on an ODF-to-ODF basis, in accordance with the Performance
            Test Standards;

      (d)   REPEATER  AND  POP  SITE  SUPPORT.  As  specified  in the  Technical
            Requirements,  identification  and  presentation to the Developer of
            potential  Repeater Sites (including  preparation and submission for
            the  Developer's  approval of title  documents or other  instruments
            necessary to convey to the Developer the requisite interests in such
            sites) complying in all respects with the Vendor  Specifications (as
            such  exist as of the date of this  Contract)  therefor,  as well as
            construction  of Repeater  Facilities and  refurbishment  of the POP
            Sites,  in each case,  as specified in the Network  Description  and
            Project Scope (Appendix 2) and the other Technical Requirements;

                                       5
<PAGE>

      (e)   COORDINATION WITH VENDORS.  Technical  coordination with the Vendors
            in all aspects of the Work,  such that each  Outside  Plant shall be
            compatible with, and meet or exceed, the Performance  Parameters and
            the other Technical Requirements;

      (f)   PERFORMANCE  PARAMETERS  AND THE  WARRANTIES.  Meeting all terms and
            conditions of the  Technical  Requirements  (including  the relevant
            Performance  Parameters) by each  Guaranteed RFS Date, and complying
            with all Warranties throughout the Warranty Period;

      (g)   MEET  INTENT  OF  CONTRACT.  All  other  matters  specified  as  the
            responsibility  of the  Contractor  in this Contract or any Contract
            Document, and satisfying in all respects the intent of this Contract
            as  expressed  in Section 2 hereof  and  elsewhere  in the  Contract
            Documents; and

      (h)   RELATED WORK;  ADVISORY SERVICES AND ANCILLARY WORK AND SUPPLIES AND
            SERVICES.  In  connection  with  any and all of the  foregoing,  the
            Contractor shall:

            (i)   attend and  observe  final  System  testing  conducted  by the
                  Vendors  and  others  and assist  with the  resolution  of any
                  issues relating to the Work;

            (ii)  furnish all construction tools and equipment,  small tools and
                  temporary  electricity,   water,  heat,  telephone  and  other
                  construction  utilities  required  to  complete  each  Outside
                  Plant;

            (iii) compile  and  deliver  to the  Developer  all such  documents,
                  drawings,  specifications  and  other  data  developed  by the
                  Contractor in its performance of the Work (including,  subject
                  to Section 4.2 hereof, all relevant technical and design data)
                  that are  necessary to allow the Owners to own and operate the
                  Outside  Plants  as  contemplated  by  this  Contract  and the
                  Contract Documents;

            (iv)  arrange for transportation and receipt,  unloading and storage
                  at appropriate  locations of all supplies and other components
                  of each Outside Plant and the Work;

            (v)   carry  out all  Work-item  storage,  inventory,  handling  and
                  marking  activities  as  specified  in the Storage and Marking
                  Procedures  in order to maintain and deliver,  as the separate
                  and distinct property of each Owner, all equipment, materials,
                  supplies and other items of Work  procured or installed by the
                  Contractor  that are to be delivered to such Owner  hereunder;
                  and

            (vi)  obtain, furnish and maintain in effect all Contractor Permits,
                  to the extent provided for in Section 6.3(a) hereof.

4.2.  OVERALL SYSTEM DESIGN  RESPONSIBILITY.  Each Owner shall, to the extent of
      its ownership  interest in the Outside Plants, be responsible for (and the

                                       6
<PAGE>

      Developer, acting on behalf of each Owner, shall provide to the Contractor
      all  technical  data and  specifications  as required  hereunder  for) the
      overall   network   design  for  the  System,   including  the  selection,
      configuration and integration of System components.

4.3.  TECHNICAL  INFORMATION.  In addition to the requirements for the provision
      of technical information described in this Contract, the Contractor shall,
      upon  request,  provide  the  Developer  with  such  additional  technical
      information  in  connection  with  this  Contract  as  the  Developer  may
      reasonably require.

              SECTION 5. TECHNICAL REQUIREMENTS, MILESTONE SCHEDULE
                              AND PROGRESS MEETINGS

5.1.  TECHNICAL  REQUIREMENTS.  In accordance with Section 4.1 hereof,  the Work
      shall comply with the Technical Requirements.

5.2.  MILESTONE  SCHEDULE.  The Contractor  shall perform all Work in conformity
      with the  Guaranteed  RFS Dates and  Critical  Path Items set forth in the
      Milestone Schedule.

      (a)   Schedule  Recovery.  If the  Contractor  fails to  complete  (or has
            reason to  believe  that it is likely to fail to  complete)  any (i)
            Critical  Path  Item  or  (ii)  other  items  of  Work  that,  taken
            individually or in the aggregate,  are likely to result in a failure
            to complete any Critical  Path Item,  in each case, by the scheduled
            date identified in the Milestone Schedule  therefor,  the Contractor
            shall:

            (i)   immediately notify the Developer in writing of such failure or
                  likelihood  of delay,  specifying  the reasons  therefor,  and
                  provide  the  Developer  with a detailed  work-around  plan (a
                  "SCHEDULE  RECOVERY PLAN") for correcting  delays or potential
                  delays in meeting all scheduled  dates and the  Guaranteed RFS
                  Date which  includes  forecasts  of the  amount of  additional
                  Reimbursable  Costs that would be incurred to  implement  such
                  Schedule Recovery Plan;

            (ii)  at the  Developer's  direction,  accelerate its performance of
                  the Work by  providing  whatever  efforts,  resources or means
                  necessary  (which  efforts,  resources or means shall,  in any
                  event, comply with all other requirements of this Contract) to
                  recover  adherence  to  the  Milestone  Schedule,   including,
                  without   limitation,   additional   or  overtime   labor  and
                  additional construction equipment; and

            (iii) furnish  to  the  Developer   weekly  written  status  reports
                  detailing  the   Contractor's   progress  under  any  Schedule
                  Recovery Plan.

          The Contractor hereby  acknowledges that its failure (i) to notify the
          Developer and furnish a Schedule  Recovery Plan within [REDACTED] Days
          after  becoming  aware (or after it should have  become  aware) of any
          delay  affecting or likely to affect any Critical  Path Item set forth
          in the  Milestone  Schedule  or,  (ii) with  respect to any such delay
          actually occurring and continuing, to implement the

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<PAGE>

            Schedule  Recovery Plan immediately  after directed by the Developer
            to  implement  such  Schedule  Recovery  Plan  and  its  failure  to
            implement  it at the  rate of  progress  set  forth  therein,  shall
            constitute an Event of Default under Section 24.1(a) hereof.

      (b)   NO DIMINISHMENT.  The Contractor's preparation and implementation of
            any  Schedule  Recovery  Plan  shall in no way  relieve or limit the
            Contractor's  obligations to comply with the Critical Path Items set
            forth in the  Milestone  Schedule and to achieve RFS  Acceptance  by
            each  Guaranteed  RFS Date, and the  Developer's  acceptance of Work
            performed  pursuant to any such Schedule  Recovery Plan shall not be
            deemed or construed as a waiver by the Developer or any Owner of any
            of its rights or remedies under this Contract.

5.3.  PROGRESS  MEETINGS.  The  Contractor  shall  prepare  and  submit  to  the
      Developer  on a monthly  basis,  accurate and  detailed  progress  reports
      providing a narrative  description  of the status of Work items as against
      the Milestone Schedule, and providing projections (identifying anticipated
      items of Subcontractor  Supplies and Subcontractor  Services together with
      the  Subcontractor  Costs payable in respect  thereof) of the Reimbursable
      Costs  that  the  Contractor   reasonably  expects  to  incur  during  the
      subsequent month with a comparison of such  Reimbursable  Costs as against
      the budget; and, in connection therewith,  the Contractor shall (i) attend
      meetings with the Developer's Representative,  at such times and places as
      may be  reasonably  required  by the  Developer,  to discuss  the  general
      progress of the Work, and (ii) furnish,  at least twice  monthly,  summary
      progress reports as against the budget and the Milestone  Schedule and any
      monthly report(s).

                          SECTION 6.  COMPLIANCE WITH LAWS; PERMITS

6.1.  COMPLIANCE WITH LAWS. The Contractor  shall comply with all Laws and Codes
      and Standards of the countries, states, provinces and territories in which
      any part of the Work is to be done and with all international  treaties in
      any way affecting this Contract or applicable to any of the Work.

6.2.  VARIATIONS  REQUIRED  BY LAW.  The  Contractor  shall,  before  making any
      variation  from  any  design,  drawing,  plan  or  procedure  that  may be
      necessitated  by complying with Laws and Codes and Standards,  give to the
      Developer written Notice,  specifying the variations  proposed to be made,
      and  the   reasons   for   making   them,   and  make   proposals   for  a
      Contractor-requested  variation  in  accordance  with  Section  15.1.  The
      Contractor shall, upon and subject to the provisions of this Contract:

      (a)   give all notices  required by Codes and Standards to be given to any
            Governmental Authority;

      (b)   perform  or permit  the  performance  by  authorized  Persons of any
            inspection required by applicable Codes and Standards; and

                                       8
<PAGE>

      (c)   pay as Reimbursable Costs hereunder all fees,  charges,  impositions
            or any other  moneys  payable to any  Governmental  Authority or any
            public officer in respect of the Work.

6.3.  PERMITS.

      (a)   CONTRACTOR   PERMITS.   The  Contractor  shall  be  responsible  for
            obtaining,  maintaining and complying with all Permits in connection
            with the  installation  of each  Outside  Plant  (collectively,  the
            "CONTRACTOR  PERMITS")  including  the  following  (which  shall  be
            Reimbursable Costs hereunder):

            (i)   Permits from environmental, municipal and highway authorities,
                  including  approvals of all  quasi-governmental  associations,
                  corporations and  public-interest  groups to conduct clearing,
                  digging,  installation and remediation Work (but excluding any
                  Work in respect of environmentally  hazardous  materials) upon
                  public or municipal lands along the Scheduled Route;

            (ii)  Permits for the Contractor's and its Subcontractors' personnel
                  and equipment used to perform the Work;

            (iii) Permits necessary for the Contractor's and its Subcontractors'
                  vehicles  and  equipment to enter and work at all Sites in the
                  applicable regions or municipalities; and

            (iv)  all other Permits and approvals for the removal or remediation
                  of  natural  and  man-made  obstructions  along the  Scheduled
                  Route.

      (b)   OWNER PERMITS. Except to the extent of the Contractor's  obligations
            specified   in  Section  7  hereof,   each  Owner  shall  be  solely
            responsible,   at  its  expense,  for  obtaining,   maintaining  and
            complying  with  all  Permits  in  connection   with  the  permanent
            ownership  and operation of each Outside  Plant  (collectively,  the
            "OWNER PERMITS"), including:

            (i)   Permits for each Outside  Plant to be operated and  maintained
                  (including  any Telecom  Licenses) on and after RFS Acceptance
                  along the Scheduled Route;

            (ii)  Permits  and   Wayleaves   for  the   permanent  or  long-term
                  occupation of public lands along the Scheduled Route; and

            (iii) Permits and Wayleaves  from the respective  owners  (including
                  planning  permissions  and  landlords'  consents) to occupy or
                  cross private  lands,  existing  cable  systems,  pipelines or
                  lease blocks and for long-term  maintenance  agreements at the
                  occupation or crossing points.

                                       9
<PAGE>

      (c)   COOPERATION. Each Party shall:

            (i)   use all  reasonable  efforts in  assisting  the other Party to
                  obtain the Permits contemplated by this Section 6.3; and

            (ii)  exchange   material   information  and  attend  meetings,   as
                  reasonably  necessary,  with the  other  Party  regarding  the
                  progress in obtaining such Permits.

6.4.  NO LIABILITY. No Party shall be responsible for any act or omission of the
      other Party that violates any Law.

                              SECTION 7. THE SCHEDULED ROUTE

7.1.  GENERALLY.  APPENDIX 2 hereto sets forth the planned  Scheduled Route upon
      which  each  Outside  Plant is to be  completed.  It is the intent of this
      Contract  that  such  Scheduled   Route  shall,   to  the  maximum  extent
      practicable,  be located in its entirety  upon Public  Wayleaves  that the
      Contractor,  as agent for the  Owners,  shall  procure  and present to the
      Developer  for  approval  and  signature  in  accordance  with Section 7.2
      hereof.

7.2.  WAYLEAVE PROCUREMENT AND APPROVAL. As part of the Work, the Contractor has
      conducted,  and shall continue to conduct,  negotiations with Governmental
      Authorities  and  others in  appropriate  jurisdictions  to  document  and
      secure, as agent for the Owners,  sufficient Public Wayleaves to allow the
      Outside Plants to be completed  along the entirety of the Scheduled  Route
      in accordance  with the Technical  Requirements  and applicable  Codes and
      Standards.

      (a)   DOCUMENTATION  PROCEDURES. As part of the Work, the Contractor shall
            compile and prepare all documentation  necessary to secure each such
            Public  Wayleave  for the benefit of the Owners,  and shall  present
            such documentation to the Developer, whereupon the Developer shall:

            (i)   in the case of Public  Forms,  approve  and sign  (or,  in the
                  Developer's  discretion,  cause each  relevant  Owner to grant
                  power of attorney to a Contractor  Person to approve and sign)
                  each such Public Form, returning the same to the Contractor or
                  the appropriate Governmental Authority, as applicable,  within
                  a period of  [REDACTED]  Business  Days after the  Developer's
                  receipt thereof; and

            (ii)  in the case of Public Contracts meeting all criteria specified
                  in APPENDIX 5 hereto,  review,  approve,  sign and return each
                  such Public  Contract  to the  Contractor  or the  appropriate
                  Governmental  Authority,  as  applicable,  within a period  of
                  [REDACTED]   Business  Days  after  the  Developer's   receipt
                  thereof.

      (b)   GENERAL TERMS AND CONDITIONS OF PUBLIC  WAYLEAVES.  Without limiting
            the criteria  specified with respect to Public Contracts in APPENDIX

                                       10
<PAGE>

            5 hereto, each Public Wayleave procured by the Contractor,  as agent
            for the Owners,  shall,  absent a Regulatory  Change occurring after
            the RFS Date:

            (i)   be effective for the period  provided by the relevant Laws and
                  Codes and Standards relating thereto; and

            (ii)  [REDACTED]

      (c)   APPROVAL BY THE DEVELOPER. The Owners shall assume (in proportion to
            their pro rata  ownership  interests in the Outside  Plants) any and
            all costs or fees payable to any  Governmental  Authority in respect
            of the use and maintenance of Public  Wayleaves  entered into by the
            Developer,  and the  Contractor  shall be relieved  from any further
            liability with respect thereto.

7.3.  ALTERNATIVE  WAYLEAVES.  If the Contractor is unable, despite commercially
      reasonable  professional  efforts and compliance  with all applicable Laws
      and Codes and Standards,  to procure Public  Wayleaves with respect to any
      portion or portions of the Scheduled  Route it shall provide Notice to the
      Developer and, after consultation with the Developer, as part of the Work,
      prepare a  work-around  plan  identifying  alternative  wayleaves or other
      System access rights ("ALTERNATIVE WAYLEAVES") complying with this Section
      7.3  and  the  other  requirements  of  this  Contract  and  the  Contract
      Documents.

      (a)   GENERAL  REQUIREMENTS  FOR CONTRACTOR  PROPOSALS.  Each  Alternative
            Wayleave  proposed by the  Contractor  shall (x) be effective (or be
            subject  to  successive  renewal)  for  a  period  of no  less  than
            [REDACTED] from the RFS Date for the Outside Plant of which it
            is a part,  and (y) comply in all  respects  with the  criteria  set
            forth therefor in APPENDIX 5 hereto.  Each work-around plan prepared
            and submitted by the Contractor in connection  with any  Alternative
            Wayleave shall:

            (i)   contain a detailed  description of the terms and conditions of
                  each   Alternative   Wayleave,   demonstrating,   by  specific
                  reference  to the  appropriate  sections of APPENDIX 5 hereto,
                  satisfaction of each of the criteria set forth therein;

                                       11
<PAGE>

            (ii)  attach  form  documentation  for the  conveyance  of each such
                  Alternative Wayleave; and

            (iii) specify the adjustment to the Milestone  Schedule,  if any, to
                  which  the  Contractor  would be  entitled  if  Outside  Plant
                  completion   were  to  be   effected  on  the  basis  of  such
                  Alternative Wayleaves.

      (b)   DEVELOPER REVIEW AND APPROVAL. The Developer shall, immediately upon
            receipt thereof, review and consider each such work-around plan and,
            within [REDACTED] after such receipt, shall notify the Contractor:

            (i)   of its acceptance of such plan,  whereupon the Developer shall
                  (x) execute  and return to the  Contractor  the  documentation
                  presented  to  the  Developer   for  the   conveyance  of  the
                  applicable Alternative Wayleaves and, (y) if applicable, enter
                  into a Contract  Variation with the Contractor  reflecting the
                  appropriate adjustment to the Guaranteed RFS Dates; or

            (ii)  of its rejection thereof, specifying, by detailed reference to
                  each relevant Contract Document,  the Developer's  reasons for
                  its determination that (x) the Alternative  Wayleaves proposed
                  do not  comply  with the  criteria  set  forth in  APPENDIX  5
                  hereto,  or (y) such work-around plan is not acceptable to the
                  Developer  in  light  of  the  Vendor  Specifications,   other
                  Technical Requirements or applicable Codes and Standards;

            PROVIDED,  that  nothing in this  Section 7.3 shall be deemed to (A)
            require the  Developer  to consider or accept as part of the Work or
            pay for any  Contractor  proposal  that  does  not  comply  with the
            express  terms of this  Section 7 or any Contract  Document,  or (B)
            prohibit   or  limit  any   activity   by  the   Developer   in  the
            identification,   development   and   implementation   of   suitable
            work-around  plans,  subject to any rights that the  Contractor  may
            have for Contract Variations in respect of Work affected by any such
            plans.

                          SECTION 8. OWNER OBLIGATIONS

8.1.  OWNER-PROCURED  EQUIPMENT  AND VENDOR  SPECIFICATIONS.  Each  Owner  shall
      procure  and  install (or cause to be  installed)  each item of  equipment
      identified in APPENDIX 3 hereto (such items  individually or collectively,
      the "OWNER-PROCURED EQUIPMENT"), in each case, by the date(s) set forth in
      the Milestone  Schedule for the  Contractor's  commencement  of Work on or
      involving any such item. All vendors of Owner-Procured  Equipment shall be
      obligated by the Developer  or, as  applicable,  the relevant  Owner(s) to
      cooperate with the Contractor and to so conduct their operations so as not
      to interfere with or impede the Contractor in carrying out the Work,  and,
      to the  extent  of any  Owner-Caused  Delay  on  account  of any  Vendor's
      non-cooperation,  the Contractor shall be entitled to a Contract Variation
      in respect thereof  pursuant to Section 15.1 hereof.  Contractor shall use
      reasonable  efforts to avoid waste of Owner-Procured  Equipment.  Prior to

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<PAGE>

      the  Contractor's  commencement  of any Work (i) on or with respect to any
      item(s)  of  Owner-Procured  Equipment  or (ii)  that is,  by its  nature,
      dependent upon or subject to coordination with the  specifications for any
      item(s) of  Owner-Procured  Equipment,  the Developer shall furnish to the
      Contractor any  modifications or supplements to the Vendor  Specifications
      (all of which shall be  integrated  into and form a part of the  Technical
      Requirements)  for each  relevant item of  Owner-Procured  Equipment on or
      before the date set forth in the Milestone  Schedule for the  Contractor's
      commencement  of any such Work. If any  modification  or supplement to any
      Vendor  Specification  requires a change in the scope of Work as set forth
      in the Technical  Requirements  which affects  materially a Guaranteed RFS
      Date, the Parties shall  equitably  adjust the  applicable  Guaranteed RFS
      Date pursuant to a Contract Variation.

8.2.  POP SITES AND OWNER SPECIFICATIONS.  The Developer shall, as agent for and
      at the sole cost and expense of the  Owners,  select and procure POP Sites
      complying  in all  respects  with the POP Site  Specifications  annexed as
      APPENDIX 2 hereto.

      (a)   POP SITES GENERALLY.  With respect to each such POP Site so selected
            and  procured  after  the  effective  date  of  this  Contract,  the
            Developer shall:

            (i)   promptly  notify the Contractor of the location  thereof,  and
                  furnish  all   specifications   and  data  necessary  for  the
                  Contractor  to  verify  its  compliance   with  the  POP  Site
                  Specifications,  however,  such verification  shall not confer
                  any  responsibility  on the part of the  Contractor  for floor
                  loadings or hazardous materials;

            (ii)  obtain all landlord consents,  planning  permissions,  Permits
                  and Wayleaves necessary for refurbishment of the POP Sites and
                  the  conversion  thereof,  if applicable  (other than building
                  permits which will be procured by the  Contractor) to the uses
                  envisioned by this Contract; and

            (iii) secure all other consents and approvals,  if any, necessary to
                  allow  Contractor  Persons  to  enter  upon  such POP Site and
                  commence the Work to be  performed  thereon on or prior to the
                  date specified in the Milestone  Schedule for the commencement
                  of such Work.

     The  Contractor  shall  review  all POP Site  specifications,  records  and
     documents  supplied by the  Developer  and shall notify the  Developer,  no
     later than ten (10) Business  Days after its receipt of the relevant  data,
     of its consent, not to be unreasonably  withheld,  to the proposed POP Site
     (PROVIDED,  that the Contractor  shall not be entitled to any such right of
     consent   with  respect  to  the   selection  of  POP  Sites   procured  or
     contractually  committed to by the Owners, or by the Developer on behalf of
     such Owners,  on or before the  effective  date of this  Contract).  As the
     Contractor's   review  of  proposed  POP  Sites  shall  not  encompass  any
     assessment  of  potentially  hazardous  materials  or floor  loadings,  the
     Contractor's consent to any POP Site shall not be construed as its approval
     with respect tosuch matters.  In the event that the Contractor is unable to
     grant  its  consent  to any such  Developer  proposal,  it shall  provide a
     written  statement  identifying,  by  specific  reference  to the  relevant
     sections of the POP Site  Specifications,  the  reasons  for its  rejection
     thereof. The Contractor shall, in

                                       13
<PAGE>

     accordance  with and  subject  to  Section  15.1  hereof,  be  entitled  to
     appropriate  adjustments  through a  Contract  Variation  for any  material
     Owner-Caused Delays associated with the Developer's selection (on behalf of
     the Owners) of  acceptable  POP Sites,  or if any such POP Site selected is
     subsequently  found to contain  hazardous  materials or  substandard  floor
     loadings rising to the level of Owner-Caused Delay.

      (b)   OWNER SPECIFICATIONS. Included as part of the Technical Requirements
            are Owner  Specifications  that provide (subject to the remainder of
            this Section 8.2(b)),  with respect to the POP Sites and in relation
            to items of equipment, materials and services to be furnished by the
            Owners  (whether  acting  directly or by and through the  Developer)
            hereunder,    detailed    specifications    therefor   (the   "OWNER
            SPECIFICATIONS")    containing   sufficient   technical   data   and
            instruction  to enable the Contractor to complete each Outside Plant
            in accordance  with the Technical  Requirements.  From time to time,
            the  Developer  may  provide on behalf of the Owners  modifications,
            clarifications  or  additions  to  the  Owner  Specifications.   The
            Contractor shall comply in all respects with and be entitled to rely
            upon such Owner  Specifications,  as modified, in the performance of
            the Work.  The Owners shall be  responsible  (to the extent of their
            respective  ownership  interests  in the  Outside  Plants)  for  the
            overall  network  design for the System,  including  the  selection,
            configuration  and  integration  of System  components.  The  Owners
            shall, in accordance with their pro rata ownership  interests in the
            Outside Plants  indemnify the Contractor from and against any Losses
            to the extent arising from any infringement or claimed  infringement
            of patent,  copyright or other  industrial or intellectual  property
            rights by reason of the  Contractor's  use, in  accordance  with the
            terms and conditions of this Contract, of the Owners' overall system
            design or Owner-supplied or  Owner-supplied  technology,  design and
            equipment.  To the  extent  that  any  modifications  to  the  Owner
            Specifications  purport  to require a change in the scope of Work as
            set forth in the Technical  Requirements,  the applicable Guaranteed
            RFS  Date(s)  shall be  equitably  adjusted  pursuant  to a Contract
            Variation  subject to Section  15.1 hereof.  In the event,  however,
            that the Contractor determines, in respect of any item of Work, that
            (x) an Owner Specification  conflicts with any Vendor  Specification
            or other  Technical  Requirement,  or (y) any technical  information
            needed  by the  Contractor  for due  performance  of the Work is not
            accurately or comprehensively  set forth in the Contract  Documents,
            it shall immediately apply to the Developer for instruction  thereon
            and shall not  continue  such Work  until it has  received  an Owner
            Specification  with respect  thereto.  The  Contractor  shall not be
            entitled to receive any payment for Work performed in  contravention
            of the preceding sentence.

8.3.  THE DEVELOPER'S  REVIEW AND APPROVAL.  The Developer hereby undertakes to,
      as  expeditiously as possible (but in no event later than the dates herein
      specified therefor), to (i) review and approve all items of Work complying
      with the Contract  Documents for which such approval is required hereunder
      and,  (ii)  in  relation  to  any  application  for,  or  granting  of any
      authorizations  or rights of way  (including any  Wayleaves,  Permits,  or

                                       14
<PAGE>

      other rights and interests in the Sites and the Systems)  required for the
      installation  of Outside Plant  components,  review,  approve and sign all
      relevant documentation  conforming to this Contract submitted to it by the
      Contractor  (unless  the  Contractor  is  duly  authorized  to sign on the
      Owners' behalf) and take such other steps that may be necessary (including
      the  payment  of any fees,  premiums  or rents)  in  connection  with such
      applications,   authorizations   and  grants   hereunder.   The  Developer
      recognizes  that such  expeditious  review and approval is critical to the
      Contractor's  completion  of the Work in  accordance  with  the  Milestone
      Schedule,  and the Developer acknowledges that its unreasonable refusal or
      delay with  respect to  conforming  Work may  entitle  the  Contractor  to
      schedule  relief  pursuant  to  Contract  Variations.   In  addition,  the
      Developer  shall  use   commercially   reasonable   efforts  to  meet  the
      Contractor's  requests for  accelerated  review of all  submissions to the
      Developer  conspicuously  marked  "Urgent - For Expedited  Review" or with
      words of similar effect.

8.4.  OWNER PERMITS. The Owners shall, at their own expense and in proportion to
      their  respective  ownership  interests,  procure and  maintain  the Owner
      Permits.

8.5.  ACCESS TO OWNER FACILITIES. The Developer shall grant or obtain permission
      for Contractor  Persons to enter into Owner  facilities  forming a part of
      the Systems to perform items of Work hereunder.

8.6.  COOPERATION AND NON-INTERFERENCE  WITH WORK. The Developer shall cooperate
      with, and refrain from interfering  with, the Contractor  Persons in their
      performance of the Work,  and the Developer  shall cause all Owner Persons
      to so cooperate and refrain from such interference.

8.7   NO  DIMINISHMENT.  The  Contractor's  responsibility  for the  design  and
      installation of each Outside Plant shall not in any way be diminished, nor
      shall the  Contractor's  design approach be restricted or limited,  by any
      Owner Person's:

      (a)   acceptance of the  Contractor's  guidance or  recommendations  as to
            engineering standards and design specifications;

      (b)   suggestions  or  recommendations  on any aspect of the design of any
            part of the Outside Plants,  except to the extent  specifically  set
            forth  in any  Vendor  Specification  or in an  Owner  Specification
            expressly marked as such;

      (c)   acceptance  or  approval  of any  portion of the Work  delivered  in
            connection therewith; or

      (d)   acceptance or approval of any Subcontractor.

                   SECTION 9. MAINTENANCE OF BOOKS AND RECORDS

9.1.  MAINTENANCE OF RECORDS.  The  Contractor  shall compile and shall maintain
      for a period ending upon the later of:

      (a)   three (3) years after the RFS Date; and

                                       15
<PAGE>

      (b)   the date on which no claim based upon,  arising out of or related to
            this Contract is outstanding,

      all books, records,  vouchers and accounts pertaining to this Contract and
      the Work, including such books, records,  accounts and vouchers related to
      the  Contractor's   payments  to  Subcontractors   and  the  Reimbursement
      Invoices.

      All such books,  records,  vouchers and accounts  shall be  maintained  in
      accordance  with generally  accepted  accounting  principles and practices
      consistently  applied,  and shall, upon the Developer's prior instruction,
      be organized to allow for  segregation  of System  investment  and related
      records as the  Developer  may direct.  At the  Developer's  request,  all
      records  required to be  maintained  pursuant to this Section 9.1 shall be
      delivered  to the  Developer  on  Final  Acceptance,  in  which  case  the
      Contractor  shall be  entitled  to keep  copies  thereof  (subject  to its
      confidentiality obligations under Section 42 hereof). The Contractor shall
      maintain its customary  fiscal  records and books of account in accordance
      with generally accepted accounting  principles and practices  consistently
      applied. Nothing contained herein shall give any Owner Person the right to
      audit or examine the actual costs incurred by the Contractor  with respect
      to any  Reimbursable  Costs for which the  Owners  have  agreed to pay the
      rates specified on Table (1-A) to Appendix 1 to this Contract.

9.2.  ACCESS TO  RECORDS.  The  Contractor  shall,  during  the  period in which
      Contractor is required to compile and maintain  books,  records,  vouchers
      and  accounts  pursuant  to Section  9.1  hereof,  give each Owner  Person
      access,  at the times and in such a manner as the Developer may direct, to
      all documentation and records required to be kept, obtained and maintained
      pursuant to Section 9.1 hereof;  PROVIDED,  HOWEVER,  that with respect to
      all such books,  vouchers,  documentation and records created prior to the
      execution date of this Contract (the "PRE-CONTRACT EXECUTION PERIOD"), the
      Contractor  shall  provide all such  material to the Owner  Persons to the
      extent  and in the  form it  exists  and to  provide  it in a  format  the
      Developer or such Owner Person may  reasonably  request,  to the extent to
      which it has not  previously  been  delivered.  The  Contractor  shall not
      destroy any such  documentation or records without affording the Developer
      an  opportunity  to review or copy the same. At the  Developer's  request,
      prior  to  Final  Acceptance,  copies  of all  documentation  and  records
      required  to be kept,  obtained  and  maintained  pursuant  to Section 9.1
      hereof shall be delivered to the Developer (subject to any confidentiality
      obligations under Section 42 hereof).

      Notwithstanding  any of the  foregoing,  with respect to the  Pre-Contract
      Execution  Period,  the Contractor  shall be relieved of any obligation to
      provide any Owner Person with access to or copies of  documentation of the
      nature set forth in Section 9.1 hereof that were not in  existence  during
      the Pre-Contract  Execution Period. To the extent that such  documentation
      was  in  existence  during  the  Pre-Contract   Execution  Period  and  in
      Contractor's possession,  the provisions of the first paragraph of Section
      9.1 hereof shall apply to such documentation.

9.3.  SUBCONTRACTORS.  The Contractor shall obtain from its Subcontractors  such
      supporting  records,  as  applicable,  in form and  substance  similar  to
      thoserequired of the Contractor

                                       16
<PAGE>

      under Section 9.1 above,  and the Contractor shall maintain such records
      for the period referred to in Section 9.1 above.

                                SECTION 10. TAXES

10.1. GENERAL.  The Owner  acknowledges  that Taxes in respect of the Work shall
      constitute Reimbursable Costs, and that any Taxes actually paid in respect
      of any Subcontractor  Services or Subcontractor  Supplies shall constitute
      Subcontractor Costs.

10.2. EXEMPTION  FROM TAXES.  The  Parties  shall take  commercially  reasonable
      measures   (including,    without   limitation,   the   accommodation   of
      Tax-efficient   Owner  Person   entity   structures   and   title-transfer
      arrangements)  to have all items of Work made exempt from all Taxes (or to
      maximize  later  refunds or credits  in respect of Value  Added  Taxes and
      other  Taxes  already  assessed  or  paid),  whether  in the  procurement,
      assembly or  installation  thereof,  and shall  cooperate  fully with each
      other in this respect.

10.3. WITHHOLDING.  With  respect to any Tax  payable or assessed in relation to
      any payment due to the Contractor, the following procedures shall apply:

      (a)   If the Developer or any Owner:

            (i)   receives  a  notice,  order or  instruction  from a  competent
                  Governmental  Authority  that a Tax is required to be withheld
                  by Law; or

            (ii)  otherwise has a reasonable  belief that any Tax is required to
                  be withheld from any payment due to the Contractor,

            then the  Developer  (acting for itself or on behalf of the relevant
            Owner) shall  promptly so inform the Contractor as far in advance of
            any proposed withholdings as practicable.

      (b)   If  any  requirement  to  withhold  Tax  becomes   applicable,   the
            Contractor  shall  obtain  documentary  evidence  from the  relevant
            taxing authorities reasonably satisfactory to the Developer that the
            Developer (or relevant  Owner) is not required to withhold such Tax.
            If the Contractor is unable to obtain such documentary evidence on a
            timely basis,  then the Developer (or relevant  Owner) shall proceed
            to  withhold  any such  Tax via an  escrow  agent or other  mutually
            agreeable procedure.  Thereafter,  the Developer (or relevant Owner)
            shall, at the  Contractor's  expense,  provide any  documentation or
            other  cooperation as may be reasonably  requested by the Contractor
            to permit the  Contractor  to recover any withheld  amounts to which
            the Contractor is entitled.

10.4. INDEMNITY.  The Contractor  shall protect,  defend,  indemnify in full and
      hold  harmless  each Owner  Person from and against any Losses based upon,
      arising  out of or  otherwise  related  to  Taxes  that  are  owed  by the
      Contractor to any taxing authority.

                                       17
<PAGE>

                                  SECTION 11.  INTELLECTUAL PROPERTY RIGHTS

11.1. GENERALLY. The Parties hereby acknowledge and agree that:

     (a)  the Developer  shall  furnish on behalf of the Owners,  and the Owners
          shall  be  solely  responsible  (to  the  pro  rata  extent  of  their
          respective   ownership  interests  in  the  Outside  Plants)  for  the
          procurement of intellectual  property  rights,  if any,  sufficient to
          realize  the goals  contemplated  by this  Contract  relating  to, the
          Owner-Procured   Equipment,  the  Vendor  Specifications,   the  Owner
          Specifications   and  the  overall  network  design  for  the  Systems
          (including  the  selection,  configuration  and  integration of System
          components),  and  that the  Owners  shall  (to such pro rata  extent)
          indemnify,  protect,  defend and hold harmless the Contractor from and
          against all Losses based upon, arising out of, or otherwise related to
          an infringement or claimed infringement of patent,  copyright or other
          industrial  or   intellectual   property   rights  by  reason  of  the
          Contractor's  possession  or use of such Owner- or  Developer-supplied
          items in its performance of the Work; PROVIDED, that (i) the Developer
          shall bear no such indemnity  liability  hereunder,and (ii) the Owners
          shall be under no  indemnity  obligation  with  respect  to any Losses
          arising out of or relating to any  Contractor  Person's  possession or
          use of any such item in a manner or for a  purpose  inconsistent  with
          terms of this Contract or any Contract Document; and

      (b)   with respect to all items other than as  addressed in the  preceding
            clause (a) of this Section  11.1,  the  Contractor  (i) grants to or
            shall  cause the  respective  owners of such  intellectual  property
            rights  to grant to  Developer  and the  Owners  all  other  patent,
            copyright  and other  industrial  or  intellectual  property  rights
            applicable  to  the  Work  or  necessary  for  completion,  use  and
            operation  of each Outside  Plant or any part thereof in  accordance
            with  this  Contract  (and  all  costs  incurred  by the  Contractor
            relating to this clause (i) shall be Reimbursable  Costs hereunder),
            and (ii) in  connection  with  clause  (i) above,  shall  indemnify,
            protect, defend and hold harmless each Owner Person from and against
            all Losses based upon,  arising out of, or  otherwise  related to an
            infringement or claimed  infringement of patent,  copyright or other
            industrial or  intellectual  property  rights by reason of any Owner
            Person's  possession,  enjoyment  or use of the Work or the  Outside
            Plants  or any part  thereof.  Notwithstanding  the  foregoing,  the
            Contractor  shall be under no obligation to indemnify  Owner Persons
            with respect to any Losses  relating to any  infringement or claimed
            infringement where the assembly, installation, possession or use for
            which  infringement  is claimed was  undertaken by the Contractor at
            the Developer's express written instruction or direction. The Owners
            (to the pro rata extent of their respective  ownership  interests in
            the  Outside  Plants)  shall,  in such  cases,  indemnify  and  hold
            harmless the  Contractor  from and against any Losses so incurred by
            the Contractor at the Developer's written direction.

11.2. INJUNCTION.  If, as a  consequence  of any  action or claim  described  in
      Section  11.1 hereof,  the use of either  Outside  Plant is enjoined,  the
      Party  subject to the  indemnity  obligation  therefor  shall use its best
      efforts to negotiate with the claimant so as to remove such  injunction or

                                       18
<PAGE>

      to obtain for the Developer,  the Contractor or the relevant Owner(s),  as
      the case may be, a license or other  agreement in respect  thereof as soon
      as possible.  If such  responsible  Party is unable to have the injunction
      removed,  and such Party is (i) the Contractor,  it shall be liable to the
      Owners for any and all Losses arising as a result of such  injunction,  or
      (ii) the  Developer  (or any Owner or all of them),  the  Developer  shall
      execute and deliver to the  Contractor,  in accordance with and subject to
      Section 15.1 hereof, a Contract  Variation  providing for equitable relief
      to Contractor in respect of the material  impact upon the  Guaranteed  RFS
      Date(s) caused by such injunction on the Work.

11.3. INFRINGEMENT  ORDER.  Except to the extent relating to the  Owner-Procured
      Equipment, the Vendor Specifications and the Owner Specifications,  in the
      event that either  Outside Plant or any part thereof is held to constitute
      infringement  and is subject to an order  restraining its use or providing
      for its surrender or destruction,  the Contractor shall at its own expense
      promptly  (but  in  no  event  later  than  sixty  (60)  Days  after  such
      injunction, or such shorter period imposed by any claimant) either:

      (a)   procure  for the  Developers  and the Owners the right to retain and
            continue to use the affected portions of the Outside Plant; or

      (b)   modify  the  Outside  Plant so that it becomes  non-infringing  in a
            manner acceptable to the Developer.

11.4. NEW  DEVELOPMENTS  BY THE  CONTRACTOR.  If, in  performing  the Work,  the
      Contractor  develops any new items or processes  that are  independent  of
      items or processes developed by the Contractor  otherwise than pursuant to
      this Contract,  any  intellectual  property rights therein shall belong to
      the Owners (pro rata in accordance with their  ownership  interests in the
      Outside   Plants),   and  the  Contractor   shall  have  a   non-exclusive
      royalty-free license to use the same for any purpose.

11.5. THE CONTRACTOR'S EXISTING INTELLECTUAL PROPERTY. All intellectual property
      rights in items or processes  developed by the  Contractor  otherwise than
      pursuant to this Contract shall remain the property of the Contractor, but
      to the extent  that the  Contractor  uses any such items or  processes  in
      performing  the Work,  the  Owners  (pro  rata in  accordance  with  their
      ownership  interests in the Outside  Plants)  shall have a  non-exclusive,
      royalty-free  license to use the same for any purpose  connected  with the
      Systems, including the right to grant sub-licenses for any such purpose.

                                       19
<PAGE>

                        SECTION 12. PAYMENTS FOR THE WORK

12.1. COMPENSATION.  The  Developer  on  behalf  of the  Owners  shall  pay  the
      Contractor  for its  Work in the  manner  and at the  times  specified  in
      Section 12.3 hereof, compensation consisting of an amount equal to the sum
      of (a)  Reimbursable  Costs, as set forth in APPENDIX 1 hereto,  and (b) a
      fixed  fee (the  "FIXED  FEE") as set  forth in  Section  12.2  below.  In
      addition,  the Contractor may be entitled to certain Incentive Fees as set
      forth in Section 12.2 below.

12.2. FIXED AND INCENTIVE  FEES. Upon RFS Acceptance of GND No. 1 Outside Plant,
      the  Contractor  shall be paid a Fixed  Fee of  [REDACTED].  In  addition,
      provided  that no Event of Default has  occurred  and is  continuing,  the
      Contractor  shall be entitled to receive certain  incentive fees (each, an
      "INCENTIVE FEE") within [REDACTED] the applicable invoice therefor, in the
      following  amounts and subject to the following  conditions  and the terms
      hereof:

      (a)   GND NO. 1 OUTSIDE  PLANT.  If the GND No. 1 Outside  Plant meets the
            criteria for RFS  Acceptance  set forth in Section 31.2 hereof on or
            before the Guaranteed RFS Date  applicable  thereto,  the Contractor
            shall be entitled to receive an Incentive Fee of [REDACTED].

      (b)   GND NO. 2 OUTSIDE PLANT. For each segment of GND No. 2 Outside Plant
            other than Hamburg-Berlin  (i.e.,  Essen-Dortmund,  Dortmund-Bremen,
            Bremen-Hamburg, Berlin-Dresden,  Dresden-Leipzig,  Leipzig-Nurnberg,
            Nurnberg-Munchen and Munchen-Karlsruhe)  that meets the criteria for
            RFS  Acceptance  set forth in Section  31.2  hereof on or before the
            Guaranteed RFS Date  applicable  thereto,  the  Contractor  shall be
            entitled  to  receive an  Incentive  Fee of  [REDACTED];  and if the
            Hamburg-Berlin segment of GND No. 2 Outside Plant meets the criteria
            for RFS Acceptance set forth in Section 31.2 hereof on or before the
            Guaranteed RFS Date  applicable  thereto,  the  Contractor  shall be
            entitled to receive an Incentive Fee of [REDACTED].

      (c)   TOTAL  COMPLETION COST UNDERRUN FEE. If the Total Completion Cost is
            equal to or less than the amount  set forth in the Total  Completion
            Cost column in the table below,  the Contractor shall be entitled to
            the applicable  Incentive Fee set forth in the corresponding  column
            below:

<TABLE>

<S>                            <C>
---------------------------------------------------------------
TOTAL COMPLETION COST           INCENTIVE FEE ENTITLEMENT
---------------------------------------------------------------
---------------------------------------------------------------
[REDACTED]                      [REDACTED]
---------------------------------------------------------------
---------------------------------------------------------------
[REDACTED]                      [REDACTED]
---------------------------------------------------------------
---------------------------------------------------------------
[REDACTED]                      [REDACTED]
---------------------------------------------------------------
</TABLE>

      For  purposes  of  calculating  an  adjustment  to the  Fixed  Fee and the
      Incentive  Fees  described in Section 12.2 and  paragraphs  (a) and (b) of
      Section 12.2 above in accordance with Section  15.1(b) hereof,  such Fixed
      Fee and Incentive  Fees are based on the following  percentages  of Target
      Cost:

                                       20
<PAGE>

<TABLE>

<S>                            <C>                <C>

---------------------------------------------------------------------
                                FIXED FEE         INCENTIVE FEE
---------------------------------------------------------------------
---------------------------------------------------------------------
GND 1                           [REDACTED]        [REDACTED]
---------------------------------------------------------------------
---------------------------------------------------------------------
GND 2 - each segment other      [REDACTED]        [REDACTED]
than Hamburg-Berlin
---------------------------------------------------------------------
---------------------------------------------------------------------
GND 2 -Hamburg-Berlin segment   [REDACTED]         [REDACTED]
---------------------------------------------------------------------
</TABLE>

      If the Target Cost  increases  or  decreases  in  accordance  with Section
      15.1(b) hereof, the Total Completion Cost column in the table set forth in
      Section  12.2(c)  will be  increased  or  decreased  by the  amount of the
      adjustment in the Target Cost.

12.3. GENERAL CONDITIONS OF PAYMENT.

      (a)   PAYMENTS IN DEUTSCHE MARKS. All payments to the Contractor hereunder
            shall be made in Deutsche  Marks;  PROVIDED,  that (i) to the extent
            that applicable Law otherwise requires, the currency of any
            relevant  payment shall be as  specifically  provided in such Law or
            Laws, and (ii) upon the general  unavailability,  for any reason, of
            Deutsche Marks, all payments and obligations  arising or denominated
            hereunder in Deutsche  Marks shall be valued and payable in the Euro
            equivalent  thereof.  All  payments  hereunder  are  to be  made  to
            Contractor by electronic  wire transfer or Automated  Clearing House
            transfer to:

                        Citibank N.A.
                        Cottons Centre
                        London SE1 2QT
                        Account Number : 3155161
                        Credit: Bechtel Limited
                        Reference: (Bechtel Invoice Number)
                        Swift Code: CITIGB2L

      (b)   INVOICES.   All  Contractor  Invoices  shall  be  submitted  to  the
            Developer in accordance with Section 12.5 hereof.

      (c)   FINAL PAYMENT.  On receipt by the Contractor of the final payment of
            the  Reimbursable  Costs,  the  Fixed  Fee  and  the  Incentive  Fee
            hereunder (the "FINAL PAYMENT"):

            (i)   the  Developer  and each Owner shall  thereby be released from
                  all claims whatsoever by the Contractor,  whether at law or in
                  equity,  contract or tort or otherwise,  by reason of anything
                  based upon, arising out of or relating to this Contract, other
                  than:

                  (A)   claims  asserted  in  writing  on or  before  the  Final
                        Payment is made;

                  (B)   claims  arising  from  circumstances,   acts  or  events
                        occurring after the Final Payment is made; and

                                       21
<PAGE>

                  (C)   claims that the  Contractor  was not aware of, and could
                        not have been  aware of,  and that are based on the acts
                        or omissions of Owner Persons; and

            (ii)  the covenants  and  agreements of the Developer and each Owner
                  shall  terminate  and be of no further force and effect except
                  the  requirement  of the Developer to return to the Contractor
                  the Retainage LC at the expiration of the Warranty Period.

      (d)   EFFECT OF PAYMENT.  No payment (final or otherwise) made under or in
            connection  with this Contract  shall be conclusive  evidence of the
            performance of the Work, or of this  Contract,  in whole or in part,
            and no such payment shall:

            (i)   be construed to  constitute  the  acceptance  of any Defective
                  Work or supplies containing Defects; or

            (ii)  release the Contractor from any of its obligations  under this
                  Contract.

      (e)   EXCHANGE  RATE. The rate of exchange to be used by the Contractor in
            the conversion of all non-Euro currencies shall be the average daily
            rate of exchange for the period covered by the invoice. The exchange
            rates shall be those published in THE FINANCIAL TIMES.

12.4. TIMING OF PAYMENTS.

      (a)   RETAINAGE  LC. On or before March 16,  1999,  the  Contractor  shall
            deliver  in  favor of the  Developer  an  irrevocable,  first-demand
            letter of  credit  (the  "RETAINAGE  LC") in the  amount,  until the
            [REDACTED]  anniversary  of the later to occur of the two RFS Dates,
            of  [REDACTED]  and  reduced to  [REDACTED]  of such  stated  amount
            thereafter,   as  security  for  performance  of  the   Contractor's
            obligations hereunder. The Retainage LC shall be effective as of the
            date of this  Contract  and shall  remain in effect  until the Final
            Acceptance   Date.   Nothing  in  this  Contract   shall  limit  the
            Developer's  ability to draw on the Retainage LC in connection  with
            any Event of  Default  or with  respect  to any  amount due from the
            Contractor  to the  Developer  or any Owner in  satisfaction  (or in
            partial  satisfaction)  of any  obligation of the Contractor to such
            Persons under this Contract.  If the Retainage LC has an expiry date
            which is prior to the date of Final  Acceptance,  the  Retainage  LC
            shall  provide for a right of the Developer to draw down in full all
            available  amounts  thereunder if the Retainage LC is not renewed or
            extended  prior to thirty (30) Days before  such  expiry  date.  The
            Developer   shall  return  the   Retainage  LC  to  the   Contractor
            concurrently  with the  Developer's  delivery of the  Certificate of
            Final Acceptance.

      (b)   RETURN OF CONTRACTOR  SURETY BOND.  The  Developer  shall return the
            Contractor Surety Bond to the Contractor  concurrently with delivery
            of the  Certificate of RFS Acceptance in respect of the later of the
            two Outside Plants to achieve RFS Acceptance.

                                       22
<PAGE>

      (c)   PAYMENTS  GENERALLY.  Neither the Developer nor any Owner shall have
            any  obligation  to pay  for any  portion  of the  Work  that is not
            complete or has a Defect;  and all amounts invoiced pursuant to this
            Section 12.4 shall be:

            (i)   subject to  appropriate  inspection  by the  Developer  or its
                  designee  of any  Work  tendered  by the  Contractor  and  the
                  Developer's determination in accordance with Sections 12.6 and
                  13 hereof;

            (ii)  due and payable [REDACTED] Days after the earlier of:

                  (A)   the date that the  Contractor  provides the  Developer a
                        copy of the  Contractor  Invoice by facsimile  (PROVIDED
                        that the original Contractor Invoice is delivered to the
                        Developer within one week thereafter); or

                  (B)   the  date  that  the  Developer  receives  the  original
                        Contractor Invoice.

      (d)   OWNER  ESCROW.  The  Owners  shall,  on or before  March  31,  1999,
            establish for the benefit of the Contractor,  an escrow account (the
            "OWNER  ESCROW")  on terms  substantially  in the form of  EXHIBIT 7
            hereto and with a bank  reasonably  acceptable to the  Contractor as
            security  for payments  for the Work.  The Owners shall  maintain in
            such Owner Escrow,  for each relevant period,  the amounts set forth
            in APPENDIX 10 hereto (as such  amounts may be revised  from time to
            time  pursuant to the Owner Escrow  Agreement).  The Owners shall be
            entitled to withdraw  from the Owner  Escrow any amounts that are in
            excess of the  required  amount  specified in APPENDIX 10 hereto (as
            such  required  amount may be revised from time to time  pursuant to
            the Owner  Escrow  Agreement).  If the Owners,  or the  Developer on
            behalf thereof, request the Contractor to review proposed changes to
            the Owner Escrow,  the Contractor  shall respond to any such request
            within [REDACTED]  following receipt of such request. The Contractor
            shall be entitled to have a security  interest in the Owner  Escrow.
            Prior to  exercising  any  rights  against  the  Owner  Escrow,  the
            Contractor  shall  notify  the  Developer  and each  Owner  that the
            Developer  has  failed to pay on behalf of the  Owners,  within  the
            period specified for such payment,  an amount due and payable to the
            Contractor in respect of a Contractor  Invoice duly submitted by the
            Contractor in accordance with this Section 12. The Developer  shall,
            to the extent that no Event of Default nor other event entitling the
            Developer to withhold payments to the Contractor has occurred and is
            continuing,  reimburse the requested  amount on behalf of the Owners
            to the  Contractor  by  the  close  of  business  on the  [REDACTED]
            Business Day next succeeding the Contractor's Notice,  whereupon the
            Developer's  failure to do so, shall entitle the  Contractor to draw
            upon the Owner  Escrow in the  amount of such  outstanding  payment.
            Upon the Contractor's exercise of any rights

                                       23
<PAGE>

            against the Escrow Account in accordance with this Section  12.4(d),
            the  Owners  shall,  within  [REDACTED]  Business  Days  thereafter,
            deposit  (in  accordance  with  such  Owners'  respective  ownership
            interests  in the  Outside  Plants)  funds  in an  aggregate  amount
            sufficient  to restore  the  balance  of the  Escrow  Account to the
            required  amount  specified in APPENDIX 10 hereto (as such  required
            amount may be revised from time to time pursuant to the Owner Escrow
            Agreement),  for the date on which  such  funds  are  restored.  Any
            failure by the Owners to so  replenish  the Owner Escrow to the full
            required  balance  thereof  within such  [REDACTED]  period shall be
            deemed an Owner Default for purposes of Section 24.4 hereof.

12.5. CONTRACTOR INVOICES.

      (a)   GENERALLY.  The  Contractor  shall  be  entitled  to  submit  to the
            Developer  twice monthly  Contractor  Invoices for its  Reimbursable
            Costs  applicable to the Work performed  ("REIMBURSEMENT  INVOICE").
            Each Reimbursement Invoice shall be a Contractor Invoice in form and
            substance satisfactory to the Developer and shall detail, in respect
            of each of the  individual  Owners and with  specific  reference  to
            applicable item numbers stated in any Vendor  Specification or Owner
            Specification,  the Work items deliverable to such Owners,  together
            with all amounts payable to the Contractor in respect thereof.

      (b)   REIMBURSEMENT INVOICES. The Contractor shall attach to or include in
            each  Reimbursement  Invoice  a  statement  (x)  certifying  to  the
            Developer  (together with such proof of payment as the Developer may
            reasonably   request)   that  the  full   amount  of  the   invoiced
            Reimbursable  Costs have in fact been  expended or  disbursed by the
            Contractor  as of the date of such  Reimbursement  Invoice,  and (y)
            allocating the  Reimbursable  Costs between those costs described on
            APPENDIX  1 and  Subcontractor  Costs,  and  shall  submit  together
            therewith the following - documents:

            (i)   as to  Reimbursable  Costs  described  on  APPENDIX  1, (1) an
                  itemized  statement  supported by data  indicating  the names,
                  dates of  performance,  salary  grades,  job positions and job
                  hours of  Contractor's  personnel who have been engaged in the
                  performance  of the Work  during  the  period  covered by such
                  invoice;  (2) a  Lien  Release  executed  by  the  Contractor,
                  certifying  that each  person  engaged by it to  perform  Work
                  hereunder  has been  paid in full and that  there are no Liens
                  asserted with respect to the Work for which  reimbursement  is
                  sought;  and  (3) in the  case of  Other  Direct  Costs,  such
                  substantiating data as the Developer may require; and

            (ii)  as to Subcontractor Costs, (1) an itemized statement detailing
                  each payment made to or  Contractor-approved  invoice from the
                  Subcontractor(s) with specific identification (by reference to
                  the relevant  Subcontract) of items of Subcontractor  Supplies
                  or Subcontractor  Services for which reimbursement is claimed;
                  (2) the  Subcontractor  Cost  Verification as to Subcontractor
                  Services or Subcontractor Supplies having a Subcontractor Cost
                  (including   all   prior   payments   made  to  the   relevant
                  Subcontractor  in respect thereof) in excess of [REDACTED] for
                  which   reimbursement  is  sought;  and  (3)  a  lien  release
                  certification executed by each Subcontractor with respect to

                                       24
<PAGE>

                  all Subcontractor  Services or Subcontractor Supplies having a
                  Subcontractor  Cost  (including all prior payments made to the
                  relevant  Subcontractor  in  respect  thereof)  in  excess  of
                  [REDACTED]  for  which  reimbursement  is  sought;   PROVIDED,
                  HOWEVER,   that  if  the   Contractor  has  certified  in  its
                  Subcontractor Cost Verification,  submitted pursuant to (2) of
                  this   clause   (ii),   that   it  will   pay   the   relevant
                  Subcontractor(s)  when due,  the  Contractor  can satisfy such
                  lien release  certification  requirement  by certifying to the
                  Developer  that  such  lien  release   certification  will  be
                  furnished within  [REDACTED] after the Contractor has effected
                  its payment to the Subcontractor(s).

                  Notwithstanding  anything contained in this clause (ii) to the
                  contrary,  at the  request of the  Developer,  the  Contractor
                  shall submit the documents  referred to in (2) and (3) of this
                  clause (ii) without regard to whether the Subcontractor  Costs
                  are less than [REDACTED] for which  reimbursement is sought if
                  the   Subcontract   or   Subcontracts   associated   with  the
                  Developer's  request  are still open and have not been  closed
                  out as a  result  of the  completion  of the  Subcontractor(s)
                  work.

                  The Contractor  shall  indemnify in full and hold harmless the
                  Developer and the Owners from and against any Losses  suffered
                  or incurred by the  Developer or the Owners  arising out of or
                  related to instances  wherein the  Contractor has certified to
                  the Developer  that it will pay the relevant  Subcontractor(s)
                  when  due  or  that  it  will   furnish   the   lien   release
                  certification  from such  Subcontractor(s)  within  [REDACTED]
                  after  the   Contractor   has  effected  its  payment  to  the
                  Subcontractor(s) and the Contractor either has not effectuated
                  such payment when due or at all or has not provided  such lien
                  release  certification  within [REDACTED] after the Contractor
                  has effected its payment to the Subcontractor(s) or at all.

                  Notwithstanding   the   foregoing,   with   respect   to   the
                  Pre-Contract   Execution  Period,   the  Contractor  shall  be
                  relieved  of the  obligation  to provide  the  Developer  with
                  documentation of the nature set forth in this clause (ii) that
                  (A) was not in  existence  during the  Pre-Contract  Execution
                  Period  and (B) cannot be  procured  by the  Contractor  using
                  Prudent  Practices.  To the extent that such documentation was
                  in existence during the  Pre-Contract  Execution Period or can
                  be procured by the  Contractor  using Prudent  Practices,  the
                  provisions   of  this   clause   (ii)  shall   apply  to  such
                  documentation.

      (c)   DOCUMENTS.  The Contractor  shall provide one (1) original and three
            (3) copies of each  Reimbursement  Invoice,  plus one (1) additional
            copy  to be sent  by  facsimile  on the  date  of  issuance  of such
            Reimbursement  Invoice.  At a  minimum  and  where  applicable,  the
            following documents in the following quantities shall accompany each
            Contractor Invoice:

            (i)   Lien Release - One (1) original and three (3) copies;

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<PAGE>

            (ii)  Work Release  Certificate,  signed by the  Contractor  and the
                  QA/QC  Contractor,   and  counter-signed  by  the  Developer's
                  Representative  or other  Developer  designee  (in each  case,
                  within a  reasonable  time after the  Contractor's  submission
                  thereof  for  signature)  - One (1)  original  and  three  (3)
                  copies; and

            (iii) such other documentation  necessary to demonstrate  compliance
                  with the  terms of this  Contract  in such  quantities  as the
                  Developer shall request.

12.6. THE DEVELOPER'S RIGHT TO WITHHOLD PAYMENT.

      (a)   GENERALLY. Notwithstanding the foregoing, the Developer may withhold
            any payment or other  amount due to the  Contractor  hereunder in an
            amount  and to such  extent as the  Developer  may  determine  to be
            reasonably  necessary  to protect the Owners from any Loss or damage
            reasonably  determined by the Developer to exceed the then-available
            funds under the Contractor Security because of:

            (i)   Defective Work not remedied in accordance with this Contract;

            (ii)  Work that has been paid for and is not complete;

            (iii) the Contractor's failure to comply with any Warranty;

            (iv)  the  Contractor's  failure to perform  the Work in  accordance
                  with this Contract;

            (v)   third-party suits, stop notices, attachments,  levies or Liens
                  (other than Owner Liens) against  either  Outside  Plant,  the
                  Work or any Party resulting from the  Contractor's  failure to
                  perform its obligations in accordance with this Contract;

            (vi)  Losses or other damage to any Owner or any Subcontractor  that
                  results  from the  Contractor's  failure to obtain or maintain
                  insurance required hereunder;

            (vii) the  Contractor's  failure to  provide  on a timely  basis the
                  documentation required under Section 12 hereof; or

            (viii)reasonable   evidence   that  any  payment   previously   made
                  hereunder  (together  with  all  other  previously   requested
                  amounts)  exceeds the amount  payable with respect to the Work
                  actually performed.

            In the Notice to the  Contractor  referenced  above,  the  Developer
            shall set forth its justification  for the proposed  withholding and
            provide the Contractor  with a [REDACTED]  period to cure the matter
            (or agree in  principle  with the  Developer  on a plan for remedial
            action with respect thereto) giving rise to the proposed withholding
            prior to the implementation thereof.

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<PAGE>

      (b)   THE DEVELOPER'S  APPLICATION OF FUNDS  WITHHELD.  The Developer may,
            upon Notice to the  Contractor  of its intention to do so, apply any
            funds withheld or moneys to become due to the Contractor to satisfy,
            discharge or secure the matters set forth in Section  12.6(a)  above
            if the  Contractor  has continued to fail to cure such matter within
            [REDACTED]  after  Notice by the  Developer  as  provided in Section
            12.6(a) above. Any such  application  shall be deemed payment to the
            Contractor.  No action by either Party  during the above  activities
            shall affect the Milestone  Schedule unless a Contract  Variation is
            agreed  to by the  Developer.  If  the  Developer's  withholding  is
            determined  to be  wrongful,  the  Developer  shall  promptly pay on
            behalf of the Owners the withheld  amount with  interest at the rate
            set forth in Section 12.7 from the due date  thereof  until the date
            of payment.

      (c)   RELEASE  OF  PUNCH  LIST  RESERVE.   Within   [REDACTED]  after  the
            Contractor  has,  to  the  Developer's  satisfaction,  remedied  the
            deficiencies and completed the Work indicated on any Punch List, the
            Developer  shall  release to the  Contractor  the Punch List Reserve
            held by the  Developer  in respect of such  incomplete  or Defective
            Work.

12.7. OVERDUE  PAYMENTS.  If a party  shall  fail to pay any  undisputed  amount
      within  [REDACTED] after the due date for such payment,  such amount shall
      accrue  interest,  at a rate  equal to the lesser of (i) the one (1) month
      London  Interbank  Offered Rate for Euros (as published for such period in
      THE FINANCIAL  TIMES) PLUS [REDACTED]  percent  ([REDACTED]%)  or (ii) the
      maximum  interest rate permitted by applicable Law, for each day from such
      due date until payment in full.

             SECTION 13. DEDUCTIONS FROM PAYMENTS TO THE CONTRACTOR

13.1. AMOUNTS  PAYABLE.  To the extent that an amount is not withheld in respect
      thereof  pursuant to Section 12.6 hereof or has not been drawn or obtained
      for the Owners'  benefit under any  Contractor  Security,  all Losses that
      Owner  Persons  shall have incurred or sustained by reason of any act that
      entitles the Owners to indemnification  under this Contract or any default
      or  omission  of the  Contractor  in the  performance  of  this  Contract,
      together  with any sum or sums payable to the  Developer  (for the Owners'
      account) under this Contract,  shall be paid by the Contractor on or prior
      to the earlier of:

      (a)   the  date  that  is  [REDACTED]  after  receipt  of the  certificate
            referenced in Section 13.3 hereof; and

      (b)   the date the Final Payment is made.

13.2. DEDUCTION.  Should the Contractor fail to make any payment  required under
      Section 13.1 hereof by the due date thereof, the Developer may then deduct
      the  amount of the  requested  payment  from any moneys  that are,  or may
      become,  due to the Contractor or have been made available by it under any
      Contractor Security.  If the moneys so due or deposited shall be less than
      the amount so deductible, the difference shall be treated as a debt by the
      Contractor to the Owners (the collection of which to be carried out by the
      Developer)  and shall be paid by the  Contractor to the  Developer  within

                                       27
<PAGE>

      [REDACTED]  after  the  Contractor's  receipt  of the  Developer's  demand
      therefor. If the Contractor fails to make such payment within such period,
      then the  amount  of such  deficiency  may be  recovered  in any  court of
      competent jurisdiction.

13.3. CERTIFICATE.  A certificate  signed by the Developer stating the amount of
      the Losses, costs, charges, expenses, damages or other amounts referred to
      in this Section 13 shall be PRIMA FACIE evidence of the matter stated.

                               SECTION 14.  CONTRACTOR SECURITY

14.1. GENERALLY.  In  addition  to the  Contractor's  security  provided  by the
      Retainage  LC as set forth in  Section  12.4(a),  the  performance  of the
      Contractor's  obligations under this Contract shall also be secured by the
      following:

      (a)   the Corporate Guarantee, which shall be delivered on or before April
            15, 1999 and remain in effect  until the Final  Acceptance  Date and
            shall secure the  Contractor's  unconditional  obligation to achieve
            RFS Acceptance of each Outside Plant; and

      (b)   a performance  and payment  surety bond in  substantially  the form,
            with such changes as the issuer  thereof may  require,  of EXHIBIT 2
            hereto (the "CONTRACTOR SURETY BOND") which shall be delivered on or
            before August 1, 1999 and shall secure the performance of all of the
            Contractor's obligations under this Contract.

14.2. FORM OF CONTRACTOR SURETY BOND. The Contractor Surety Bond shall:

      (a)   be issued  and  outstanding  until  the date on which the  Developer
            issues the  Certificate of RFS Acceptance in respect of the later of
            the two Outside Plants to achieve RFS Acceptance;

      (b)   be in an amount equal to [REDACTED]; and

      (c)   name the Developer,  each Owner or their  respective  successors and
            permitted assigns as beneficiaries thereof.

14.3. ISSUER  REQUIREMENTS.   The  Contractor  Surety  Bond  and  all  renewals,
      extensions  and  replacements  thereof  shall be issued  by a  bonding  or
      insurance company acceptable to the Developer at the time of issuance.  If
      the financial  condition of any such bonding or insurance company declines
      to less than an A.M. Best rating of A, the Contractor  shall,  at its sole
      cost and  expense,  within  thirty  (30) Days  after any such  decline  in
      rating,  replace the issuer of the  Contractor  Surety Bond with an entity
      acceptable to the Developer;  PROVIDED that if the Contractor  Surety Bond
      is provided by more than one  bonding or  insurance  company and each such
      company is jointly and severally liable thereunder,  the highest rating of
      any one of such companies shall be controlling.

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<PAGE>

                         SECTION 15. CONTRACT VARIATIONS

15.1. EQUITABLE  RELIEF.  The parties shall be entitled to equitable relief with
      respect  to  the   requirements   of  this   Contract  in  the   following
      circumstances  and in accordance  with the following  procedures (any such
      equitable  relief in accordance  with this Section 15 shall be recorded by
      means of a formal writing (a "CONTRACT  VARIATION") agreed to between, and
      executed  by,  the  Parties in  accordance  with the  procedure  set forth
      herein):

      (a)   ADJUSTMENT TO GUARANTEED  RFS DATES.  If the  Contractor is, despite
            the exercise of Prudent  Practices  and through no fault or omission
            of any Contractor  Person,  delayed in its  performance of the Work,
            the Contractor  may, to the extent that such delays result  directly
            from any Change Event or any change or addition to the general scope
            of this Contract or change to the method or manner of performance of
            the Work as  instructed  by the  Developer  on behalf of the  Owners
            (such instructions, "OWNER-REQUESTED VARIATIONS") or any combination
            of Change Events or  Owner-requested  Variations,  be entitled to an
            adjustment to the applicable Guaranteed RFS Date(s). Notwithstanding
            anything to the contrary set forth herein,  the Contractor  shall be
            entitled  to  a  Contract   Variation   executed  and  delivered  in
            accordance  with this Section 15.1(a) with respect to the applicable
            Guaranteed  RFS Date only to the extent that its  performance of the
            Work is  materially  delayed or is likely to be  materially  delayed
            (despite the  Contractor's  use of Prudent  Practices in  mitigation
            thereof)  by any  Change  Event or  Owner-requested  Variations  (or
            combination thereof).

      (b)   ADJUSTMENT TO FIXED FEE OR INCENTIVE FEES IN LIMITED  CIRCUMSTANCES.
            The  Developer  may from time to time issue  written  notices to the
            Contractor  directing  additions to,  revisions to or deletions from
            the scope of Work under this  Contract.  The  Contractor  shall give
            immediate  effect to each such  notice;  PROVIDED,  that such notice
            shall in no way limit the  Contractor's  entitlement to Reimbursable
            Costs in  respect of Work  performed  by the  Contractor  in its due
            prosecution of the Work prior to the Developer's notice of additions
            to,  deletions or  reductions of the relevant  item(s) of Work.  The
            Fixed  Fee and  Incentive  Fees  referred  to in  Sections  12.2 and
            12.2(a) and (b) hereof shall be subject to  adjustment in accordance
            with this  Section  15.1(b) by adjusting  the Target  Cost,  and the
            Incentive  Fees  referred  to in  Section  12.2(c)  hereof  shall be
            subject to  adjustment in  accordance  with this Section  15.1(b) by
            adjusting  the  Total  Completion  Cost  column in the table in such
            Section 12.2(c),  in each case only in the following  circumstances:
            (i) the  addition or deletion of a POP or (ii) the addition of a new
            point-to-point  route (e.g., a proposed Hamburg to Hanover to Bremen
            POP route) to the Detailed  Cable Routing  described in Table 2-B of
            Appendix  2. In the  case  of an  additional  POP or  point-to-point
            route,  the amount of the  increase  in the Target Cost shall be the
            Reimbursable  Costs  incurred in the Work. If a POP is deleted,  the
            Target Cost will be decreased by the  unexpended  amount  associated
            with the deleted  POP  remaining  in the  then-current  budget.  The
            Target Cost (or Total Completion Cost column in the table in Section
            12.2(c)), as so adjusted, will be set forth in a Contract Variation.

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<PAGE>

15.2. PROCEDURE FOR IMPLEMENTING CONTRACT VARIATIONS.  In the event that a Party
      wishes to claim any  equitable  relief  hereunder on account of any Change
      Event,  such Party shall give the other Party written notice of its intent
      to submit such claim (which notice shall state the basis of such claim and
      the general nature of the relief  requested)  within  [REDACTED]  after it
      becomes aware of such basis for equitable  relief.  The  submitting  Party
      shall submit to the recipient its documented and  substantiated  claim for
      such  adjustment(s) as soon as practicable  after giving such notice,  but
      not later than  [REDACTED]  after giving such notice,  unless  extended in
      writing by the submitting  Party.  Such claim shall include an estimate of
      the  impact  of such  proposed  relief on the  Guaranteed  RFS  Dates,  as
      applicable,  as supported by sufficient  costing and description detail to
      allow the recipient to make a reasonable  determination  as to such impact
      and the desirability of such relief in light of available alternatives.

      The  recipient  shall  respond  to the  submitting  Party's  claim  within
      [REDACTED]  after  receipt.  If the recipient  agrees that the  submitting
      Party's claim should be implemented,  the recipient shall issue a Contract
      Variation  incorporating such claim. If the recipient disagrees in any way
      with  the  submitting  Party's  claim  for  the  Contract  Variation,  the
      recipient  shall return the submitting  Party's claim,  marked to show the
      recipient's  modifications  thereto.  The original  submitting Party shall
      within  [REDACTED] of receipt of such mark-up,  either advise the original
      recipient of its agreement to such modifications or request a meeting with
      the  original  recipient  to resolve  any and all  disagreements  with the
      modifications  made by the  original  recipient.  If the latter  option is
      taken,  the Parties shall meet as soon as  practicable  to resolve in good
      faith  discussions  any  disagreements.  In the event that the Parties are
      unable to resolve any such dispute within [REDACTED] after commencement of
      mutual discussions in respect thereof,  such dispute shall be referred for
      resolution,  within  [REDACTED]  after  such  referral,  by  the  Parties'
      respective senior  management  personnel  directly,  or by the independent
      technical  expert  ("INDEPENDENT  EXPERT") whom they may agree to appoint.
      All matters that the Parties may desire to refer to an Independent  Expert
      shall be governed by Independent  Expert Procedures annexed as APPENDIX 11
      hereto.  The  resolutions of all  disagreements  shall be reflected in the
      Contract Variation.

15.3. EFFECT OF CONTRACT VARIATIONS.  Each Contract Variation,  to be effective,
      shall be in writing and executed by the Contractor  and the Developer.  No
      Contract  Variation shall vitiate or invalidate this Contract.  Subject to
      the  provisions of this Section 15, the  Contractor  comply with each such
      Contract Variation.

15.4. PERFORMANCE  PENDING  RESOLUTION.  If the  Parties  are unable to agree on
      certain  aspects  of  any  Contract  Variation,  at  the  request  of  the
      Developer, the Contractor shall continue to perform, pending resolution of
      the relevant matter, this Contract as provisionally modified by such terms
      of the relevant Contract  Variation as to which the Parties have evidenced
      their agreement in a writing signed by both Parties.

15.5. NO  DELAY.  In  preparing  any  proposal  for a  Contract  Variation,  the
      Contractor  shall  structure  its claims for  equitable  relief such as to
      envision  completion,  to the extent  practicable,  of the Work under this
      Contract,  as modified by the proposed Contract  Variation,  in accordance

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<PAGE>

      with  the  Milestone  Schedule.  In this  respect,  the  Contractor  shall
      cooperate with the Developer to prepare all reasonable  work-around plans,
      alternate sources or any other means available in order to prevent delays.

                         SECTION 16. OWNER-CAUSED DELAYS

16.1  GENERALLY. The following events or circumstances,  to the extent resulting
      directly in any increased delay to the Contractor in its completion of the
      Work in accordance with the Milestone  Schedule and the other requirements
      of this Contract, shall, upon the Developer's failure to effect a cure (or
      any Owner's  failure to effect such cure,  the tender of which directly by
      any Owner the Contractor  hereby agrees to accept) within [REDACTED] after
      the  Contractor's  Notice  thereof,  constitute  "OWNER-CAUSED  DELAY" for
      purposes of this Contract:

      (a)   acts or  omissions  of Owner  Persons or  Vendors of  Owner-Procured
            Equipment  (A) causing any  casualty or damage to the Systems or any
            Owner-Procured  Equipment or Work, or (B) wrongfully interfering (by
            inspection  or otherwise,  to the extent not otherwise  contemplated
            herein) with the provision of the Work;

      (b)   except to the extent that any relevant  obligation  of the Developer
            or the Owners is  governed  by  another  express  provision  of this
            Contract,  the Developer's or any Owner Person's failure to furnish,
            by the date set forth in the Milestone Schedule for the Contractor's
            commencement   of  Work   with   respect   thereto,   any   item  of
            Owner-Procured  Equipment  (including  the  Developer's or any Owner
            Person's failure to furnish items of  Owner-Procured  Equipment that
            are  free  from  defects  and   deficiencies)   or  any  information
            (including the  Developer's  failure to timely provide  accurate and
            complete  information)  that it is  required  to provide  hereunder,
            which failure, in each case (A) relates to an item that is necessary
            to the  Contractor in order to complete the Work in accordance  with
            the Milestone  Schedule and (B) continues  (without the  Developer's
            furnishing thereof or accommodation therefor) for a period in excess
            of  [REDACTED]  after  the  Contractor's  Notice  to  the  Developer
            thereof;

      (c)   any Owner Person's unreasonable refusal to review or approve, or any
            unreasonable  delay in its review,  approval,  signature or delivery
            of,  any  item  of  Work   (including,   without   limitation,   the
            Wayleave-related   documentation  specified  in  Section  7  hereof)
            complying with this Contract and Contract  Documents,  in each case,
            within the time periods  specified in this Contract for such review,
            approval, signature or delivery;

      (d)   the failure by the Developer to make available to Contractor Persons
            the Sites  (including any such failure with respect to the POP Sites
            to be made available in accordance  with Section 8.2(a)) on a timely
            basis,  or any  interruption  (except  for  purposes  of  reasonable
            inspection as envisioned by this  Contract) in the  availability  to
            the relevant Contractor Persons of any such Site caused by any Owner
            Person (including by virtue of any Owner Person's  commercial use or
            operation of the Systems or any RFCS Portion thereof); or

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<PAGE>

      (e)   the  Developer's  exercise of suspension  rights pursuant to Section
            22.1 hereof.

16.2. EFFECT.  At such time as the Developer (or any Owner,  as applicable)  has
      failed to cure any event or circumstance of Owner-Caused  Delay within the
      period specified in Section 16.1 hereof, the Contractor may be entitled to
      a  Contract  Variation,  and the  procedures  of  Section  15 shall  apply
      thereto.

                         SECTION 17. GUARANTEED RFS DATE

17.1. GUARANTEED  RFS DATE. The  Contractor  guarantees  that RFS Acceptance for
      each  Outside  Plant (or  segment  thereof)  shall  occur on or before the
      Guaranteed RFS Date for such Outside Plant (or segment  thereof),  as each
      such date may be extended in accordance with Sections 15 and 18 hereof.

17.2. [INTENTIONALLY OMITTED].

                            SECTION 18. FORCE MAJEURE

18.1. DEFINITION.

      (a)   INCLUDED EVENTS. An event or circumstance  shall be a "FORCE MAJEURE
            EVENT" if such event or circumstance:

            (i)   is beyond the Contractor's reasonable control;

            (ii)  is not the  result  of any  breach  by the  Contractor  of any
                  provision of this Contract;

            (iii) was not caused by the negligent or careless act or omission of
                  any Contractor Person;

            (iv)  will result in a delay in the  completion of any material part
                  of  the  Work  despite  the   Contractor's   exercise  of  all
                  commercially  reasonable  diligence and pursuit of alternative
                  measures of performance; and

            (v)   is of a  general  type or  nature  falling  within  one of the
                  following  categories,  provided as examples of Force  Majeure
                  Events subject to relief hereunder:

                  (A)   civil  disturbance,  war,  invasion  or act  of  foreign
                        enemies;

                  (B)   civil uprising or rebellion,  or broad-based  disruption
                        in freight or distribution networks;

                  (C)   strikes, lockouts, slowdowns and other labor disruptions
                        of any kind,  except as excluded  hereunder  pursuant to
                        paragraph (b)(i) below;

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<PAGE>

                  (D)   willful,  malicious  or  criminal  acts of  sabotage  or
                        interference   by   individuals   or   pressure   groups
                        (including,  without limitation,  by environmentalists),
                        or  disruptive  public  demonstrations  of such Persons,
                        directed  against  the  System  or  Contractor   Persons
                        (including  their  properties or assets) for the purpose
                        of halting or interrupting performance and completion of
                        the Work;

                  (E)   fire, flood,  epidemic, act of God, natural disaster and
                        Unusually Severe Weather Conditions (PROVIDED,  that the
                        Contractor  shall  remain  responsible  for all  weather
                        conditions  that  do  not  constitute  Unusually  Severe
                        Weather Conditions);

                  (F)   acts or  failures  to act,  or  material  and  unexcused
                        delays in acting, of Governmental Authorities (including
                        Changes in Law and Wayleave or Permit Failures); and

                  (G)   Unanticipated Site Conditions.

      (b)   EXCLUDED EVENTS.  The following events are explicitly  excluded from
            the term Force  Majeure Event and are solely the  responsibility  of
            the Contractor:

            (i)   any strikes,  labor disputes and lockouts involving solely and
                  exclusively  the  employees  of (A)  the  Contractor,  (B) any
                  Subcontractor or (C) any of their respective agents hereunder;

            (ii)  late delivery of equipment or materials  (except to the extent
                  caused by a Force Majeure Event);

            (iii) economic hardship;

            (iv)  default of  Subcontractors  (except to the extent  caused by a
                  Force Majeure Event);

            (v)   events  and  conditions  of which  the  Contractor  is  deemed
                  hereunder to have fully informed itself; and

            (vi)  all other  events and acts failing to meet any of the criteria
                  set forth in Section 18.1(a) hereof for a Force Majeure Event.

18.2. MITIGATION.  The Contractor shall use commercially  reasonable  efforts to
      mitigate and minimize the effects of any Force Majeure Event and to resume
      in full its performance under this Contract.

18.3. NOTICE.  The Contractor  shall advise the  Developer's  Representative  in
      reasonable  detail of any Force Majeure Event within  [REDACTED]  from the
      date  of the  occurrence  thereof;  PROVIDED  that if the  Contractor  can
      satisfactorily  demonstrate  to the Developer that the Contractor has been
      unavoidably  delayed in  becoming  aware of the  occurrence  of such Force
      Majeure  Event,  such period and the time period set forth in Section 18.4
      hereof shall commence from the date reasonably determined by the Developer
      that the  Contractor  became aware,  or should have become aware,  of such
      occurrence.

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<PAGE>

18.4. APPLICATION. If the Contractor is directly delayed in the execution of the
      Work by any Force Majeure Event,  the  Contractor  shall have the right to
      apply in writing to the Developer's Representative within [REDACTED] after
      the  occurrence  of such  Force  Majeure  Event  for an  extension  of any
      Guaranteed  RFS Date or any date set forth in the Milestone  Schedule,  if
      and to the extent any such date is affected by such Force  Majeure  Event.
      Such application shall set forth a statement of all the facts on which the
      Contractor bases such an application,  including a detailed description of
      work-around  plans,  alternate  sources or any other means the  Contractor
      will  utilize to make up for any such  period of delay and to prevent  any
      further delay to the Work.

18.5. EXTENSION OF TIME.  The  extension  of time,  if any, to be allowed to the
      Contractor  pursuant  to this  Section 18 shall be set forth in a Contract
      Variation  duly  executed  and  delivered  in  accordance  with Section 15
      hereof,  and shall be for such periods as the  Developer  approves  (which
      approval  shall not be  unreasonably  withheld) as necessary to remedy the
      schedule  effects of the Force Majeure Event,  but shall in no event limit
      either Party's  rights under this  Contract,  including any Party's rights
      with  respect  to matters  arising  prior to the  occurrence  of the Force
      Majeure Event.

18.6. LIMITATION. Unless:

      (a)   an event  is a Force  Majeure  Event as  provided  in  Section  18.1
            hereof;

      (b)   the Contractor notifies the Developer thereof within the time period
            provided in Section 18.3 hereof;

      (c)   the Contractor  applies for an extension of time in respect  thereof
            within the time period provided in Section 18.4 hereof; and

      (d)   the  Developer  approves an extension of time in respect  thereof in
            accordance with Section 18.5 hereof,

      the Contractor  shall not be entitled to, and shall not claim an extension
      of time,  for such event,  except to the extent  that (i) the  Contractor,
      despite its exercise of due diligence, did not know and was unaware of the
      nature and extent of the relevant  Force Majeure  Event,  and (ii) neither
      the  Developer  nor any  Owner  was not  substantially  prejudiced  by the
      Contractor's  failure  to provide  the  notices  within  the time  periods
      referenced in items (b) and (c) above.

         SECTIOM 19. PROJECT MANAGER AND THE DEVELOPER'S REPRESENTATIVE

19.1. PROJECT  MANAGER.  The  Contractor  shall  designate  in writing a project
      manager (the "PROJECT MANAGER") to be responsible for the coordination and
      monitoring of the Work on the Contractor's  behalf,  and shall provide the
      Developer with a summary of such Project Manager's background and relevant
      experience.  The  Project  Manager  shall  act as the  principal  point of

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<PAGE>

      contact between the Contractor and the Developer, and shall have authority
      to act and make  decisions  on behalf  of,  and be  authorized  to bind by
      contract or otherwise, the Contractor. If the Project Manager shall resign
      or at any  time  be  unable  to  act,  the  Contractor  shall  immediately
      designate a successor by Notice to the Developer.

19.2. THE DEVELOPER'S REPRESENTATIVE. The Developer shall designate in writing a
      system manager (the  "DEVELOPER'S  REPRESENTATIVE")  to be responsible for
      coordination  and monitoring of the Work on the  Developer's  behalf.  The
      Developer's Representative shall provide the interface with the Contractor
      on all technical and contractual matters pertaining hereto, and shall have
      authority  to act and make  decisions on behalf of, and be  authorized  to
      bind by  contract or  otherwise,  the  Developer  (and,  accordingly,  the
      Owners). The Developer's  Representative shall from time to time authorize
      in writing Persons to carry out specific tasks on the Developer's  behalf.
      To the extent that the Developer  desires to appoint a third-party  (I.E.,
      any Person  other than an employee or  Affiliate  of the  Developer or any
      Owner) as the Developer's Representative, the Developer shall consult with
      the Contractor as to such  appointment,  providing the Contractor with the
      opportunity to make reasonable comments with respect thereto.

                          SECTION 20. INSPECTION RIGHTS

20.1. GENERALLY.  At all times during which Work is being  performed  hereunder,
      the Developer and its designees  shall,  upon reasonable  prior notice and
      within normal business hours, have full access to the Work. The Contractor
      shall provide  appropriate  facilities for such access and for the purpose
      of  inspection  and  testing  in  accordance  with the  provisions  of the
      Technical  Requirements.  The Developer and its designees shall be allowed
      full access to all plants,  offices  and Sites of the  Contractor  and its
      Subcontractors  to enable it to inspect the Work and to monitor  progress.
      The Developer and its designees shall have the right to establish resident
      representative(s)  at the Contractor's and its Subcontractors'  plants and
      at all Sites,  and, at the  Developer's  or its  designee's  request,  the
      Contractor and its  Subcontractors  shall make available  suitable  office
      space and  facilities for such  representative(s)  and, to the extent such
      office space and facilities  are not otherwise  specified in the Technical
      Requirements  as included in the Work, the Contractor may be entitled,  to
      the extent provided in Section 15 hereof, to Contract Variation in respect
      thereof  to the  extent  the  provision  of  additional  office  space and
      facilities impacts the Milestone Schedule. The Contractor shall include in
      all of its Subcontracts such provisions as may be necessary to secure such
      rights on behalf of the Developer or its designees.  The  Developer's  and
      its designee's inspection activities may include:

      (a)   an audit of the Contractor's and its Subcontractors' quality control
            system and practices and their application to the Work, including to
            the design, manufacture, transportation, installation and testing of
            the Work,  each Outside  Plant,  and all  materials  and  components
            thereof; and

      (b)   inspection  of all parts of the Work to ensure  compliance  with the
            Technical Requirements.

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20.2  COVERED  WORK.  If any portion of the Work is believed by the Developer to
      have  been  covered   contrary  to  the  request  of  or  to  requirements
      specifically  expressed in this  Contract,  the  Developer  shall  provide
      Notice to the  Contractor  setting  forth  the  basis for the  Developer's
      belief and the Contractor  shall provide its written response within three
      (3) Business Days after such Notice. Any disputes shall be settled by good
      faith   discussion   amongst  the  Project  Manager  and  the  Developer's
      Representative. If the Developer is able to substantiate its position, the
      Work  involved  must,  if  required  in  writing by the  Developer  or its
      designee,   be  uncovered  for  its  observation  and  replaced,   at  the
      Contractor's  expense. If any other portion of the Work is covered and the
      Developer or its designee had not  specifically  requested the opportunity
      to inspect  such Work  prior to it being  covered  and it was not  covered
      contrary to  requirements  specifically  expressed in this  Contract,  the
      Developer or its designee may request the opportunity to inspect such Work
      and it shall be uncovered by the  Contractor.  If such Work is found to be
      in accordance  with this  Contract,  the cost of uncovering and recovering
      shall be  charged to the Owners as a  Reimbursable  Cost.  If such Work is
      found not to be in accordance with this Contract, the Contractor shall pay
      all costs of uncovering and recovering.

20.3. NO RELIEF.  Except as provided by Section  20.1, no  inspection,  audit or
      approval by or on behalf of the  Developer  or any other  Owner  Person in
      respect of any aspect of the Work shall  relieve the  Contractor of any of
      its responsibilities  under this Contract.  Notwithstanding the foregoing,
      to the extent that the Contractor is required to interrupt  performance of
      any portion of the Work on account of the  Developer's  inspection  of any
      Work found in such inspection to be in compliance with all requirements of
      this Contract,  the  Contractor  shall be entitled to an extension of time
      equal to the  duration of such  interruption,  to the extent  specified in
      Section 15.1 hereof.

                           SECTION 21. DEFECTIVE WORK

21.1. GENERALLY.  Without  limiting or impairing  the  Contractor's  obligations
      pursuant to Section 32 hereof with respect to any Defects in the Work,  if
      at any time before the relevant RFS Date, any of the Contractor's  Work is
      found to contain  Defects,  or is  otherwise  not in  accordance  with the
      Contract  Documents,  the  Developer or its designee may reject such Work,
      and the Owners shall have no liability  with respect to payment  therefor,
      notwithstanding that:

      (a)   satisfaction may previously have been expressed;

      (b)   title to such Work may have passed to the Owners in accordance  with
            Section 36 hereof;

      (c)   such Work may previously have been accepted; or

      (d)   payment may have been made in respect of such Work.

21.2. EXISTENCE  OF  DEFECTS.  A Defect  shall be deemed to exist when  actually
      discovered  or when it should have been  apparent to a prudent  contractor
      performing  the Work,  after  reasonable  inspection or testing,  that the
      relevant Work is not in conformity  with the  requirements of the Contract

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<PAGE>

      or any Contract  Document.  Each  occurrence of an alleged Defect shall be
      subject  to  expedited  review  by the  Parties  as to  whether  a  Defect
      attributable  to the  Contractor or a deficiency  attributable  to a third
      party. If the Contractor has reasonable  grounds for disagreement with any
      Developer  determination as to the existence of a Defect attributed to the
      Contractor,  such dispute shall be immediately  (but in no event more than
      two (2) Business Days after the Developer's Notice of such  determination)
      referred to deliberation amongst the Parties' senior-management  personnel
      for resolution.  If the senior-management  personnel are unable to resolve
      the  dispute  within  five (5)  Business  Days  after  such  referral  for
      resolution in accordance  with the  Independent  Expert  Procedures as set
      forth in APPENDIX 11 hereto.

                 SECTION 22. SUSPENSION OF WORK BY THE DEVELOPER

22.1. GENERALLY. Should the Developer desire, in its sole discretion, to suspend
      the whole or any part of the Work or  suspend  for a further  period  Work
      already suspended  pursuant to this Section 22, the Developer shall notify
      the  Contractor,  indicating  the  period of the  proposed  suspension  or
      further  suspension.  If the Contractor believes that such suspension will
      result in additional  costs or delay for the  Contractor,  the  Contractor
      shall, within [REDACTED] after such Notice,  furnish an itemized statement
      to the  Developer  indicating  (a) the  extension  of time  to  which  the
      Contractor   believes  it  would  be  entitled  if  the  suspension   were
      implemented,  (b) the Contractor's estimate of the additional Reimbursable
      Costs, if any, that would result from the proposed  suspension and (c) the
      Contractor's  estimate as to additional  terms of this  Contract,  if any,
      which would be affected by the proposed  suspension.  Upon receipt of such
      itemized  statement  (or if no  such  statement  is  received  within  the
      stipulated  [REDACTED],  the Developer  shall either confirm or cancel the
      proposal to suspend or further  suspend the Work or further  question  the
      Contractor on the basis of such  itemized  statement.  Promptly  after the
      Parties  agree on any  extension  of time,  they shall  execute a Contract
      Variation in respect thereof in accordance with Section 15 hereof.

      In the event that the  Developer  shall,  pursuant to this  Section  22.1,
      suspend the Work in its entirety for (i) a period of  [REDACTED],  or (ii)
      periods totaling  [REDACTED],  such suspension  shall,  upon the expiry of
      such  [REDACTED]  period,  as  applicable,  constitute a  Termination  for
      Convenience for all purposes hereof.

22.2. THE CONTRACTOR'S DUTIES UPON SUSPENSION.  During any such suspension,  the
      Contractor shall:

      (a)   cease  performance  of the  Work  and  place no  further  orders  or
            Subcontracts relating to the suspended Work;

      (b)   protect and care for all materials, equipment and supplies forming a
            part of the Work or each  Outside  Plant,  in transit to or from the
            Sites or at storage areas for which it is responsible; and

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<PAGE>

      (c)   give the Developer  copies of all  outstanding  orders and contracts
            for  materials and services and take any action with respect to such
            orders and contracts as the Developer may direct.

22.3. THE  CONTRACTOR'S  DUTIES  AFTER  SUSPENSION.  Upon the  cessation of such
      suspension,  the Contractor shall resume  performance of the Work within a
      reasonable period after being directed to do so by the Developer.

                     SECTION 23. TERMINATION FOR CONVENIENCE

23.1. TERMINATION.  The  Developer  may,  upon  written  Notice  (a  "NOTICE  OF
      TERMINATION  FOR  CONVENIENCE")  to the Contractor at any time,  terminate
      this Contract or otherwise terminate the Contractor's employment hereunder
      as  to  either  the  whole  or  part  of  the  Work  (a  "TERMINATION  FOR
      CONVENIENCE").  A  Termination  for  Convenience  shall not  nullify  this
      Contract but shall operate to terminate the Contractor's  right to proceed
      with the Work and to  discharge  the Owners from their  obligations  under
      this Contract,  except for the Owners'  obligation to pay the  Termination
      Payment (Convenience). A Termination for Convenience shall not relieve the
      Contractor from liability under applicable Law for damages for any failure
      or  omission  to  perform  any  portion  of this  Contract  prior  to such
      termination  or  prejudice  any legal  rights  of the Owner  Person or the
      Contractor, whether those rights arise under this Contract or otherwise.

23.2. TERMINATION  DATE. A Termination for Convenience  shall be effective,  and
      this Contract  shall be  terminated,  when the Notice of  Termination  for
      Convenience is delivered to the Contractor.

23.3. TERMINATION PAYMENT (CONVENIENCE).

      (a)   AMOUNT.  In the case of a Termination  for  Convenience,  the Owners
            shall make a payment to the  Contractor  (the  "TERMINATION  PAYMENT
            (CONVENIENCE)")  equal to the sum of (i) Reimbursable Costs incurred
            by the Contractor as of the Termination Date, (ii) the Fixed Fee and
            any Incentive Fee payable in accordance  with Section 12.2 hereof so
            long as the  Contractor  has  met the  criteria  for  any  such  fee
            pursuant to such Section 12.2, and (iii) the Contractor's reasonable
            and necessary  costs incurred in connection  with the termination of
            vendor orders and  Subcontracts,  demobilization  from the Sites and
            the  performance  of  its  duties  upon   termination  as  specified
            hereunder

      (b)   TERMINATION  CLAIM.  The Contractor  shall submit to the Developer a
            written termination claim (the "TERMINATION CLAIM"). The Termination
            Claim  shall  set forth a  calculation  of the  Termination  Payment
            (Convenience)  and all  other  relevant  facts,  and  shall  contain
            supporting  documentation in respect thereof.  The Termination Claim
            shall be  submitted  promptly,  but,  in any  event,  no later  than
            [REDACTED]  from the effective date of termination of this Contract;
            PROVIDED,  however,  that the Developer and the Contractor may agree
            to such additional time as may be reasonably required to compile and
            submit   such   Termination   Claim  and   gather   the   supporting
            documentation therefor.

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<PAGE>

       (c)  REVIEW  PERIOD.   Within   [REDACTED]   after  its  receipt  of  the
            Termination  Claim (the  "TERMINATION  CLAIM  REVIEW  PERIOD"),  the
            Developer  shall convey any  objections  or requests for  additional
            information  it may have with  respect to the  determination  of the
            Termination Payment (Convenience). The Contractor shall provide such
            information  to  the  Developer  as  soon  as  practicable.  If  the
            Developer objects to any portion of the Termination  Claim, it shall
            notify  the  Contractor  in  writing,  not later than the end of the
            Termination  Claim Review Period,  of each item it believes requires
            adjustment and, for not more than  [REDACTED](or  such longer period
            as the Parties may agree),  the Parties shall attempt to resolve any
            differences.

      (d)   ACCOUNTING  FIRM.  If the  Parties  are  unable to so  resolve  such
            differences within such time period,  they shall, within [REDACTED],
            jointly submit the items in dispute to a "Big Four"  accounting firm
            mutually  agreed  upon  by the  Contractor  and  the  Developer  for
            resolution on an expedited basis with a request for a written report
            thereon to be submitted  within  [REDACTED] from such submittal.  If
            the Parties cannot agree on the  determination of the accountant for
            the purposes hereof, the accountant shall be a "Big Four" accounting
            firm designated by the mutual  agreement of a "Big Four"  accounting
            firm  designated by the Developer and a "Big Four"  accounting  firm
            designated by the Contractor.  Adjustments to the Termination  Claim
            by the accountant, if any, shall be:

            (i)   made in accordance with the criteria set forth in this Section
                  23.3;

            (ii)  set forth in its written report; and

            (iii) final and  binding on the  Parties in the  absence of manifest
                  error.

            Judgment   may  be  entered   thereon   in  a  court  of   competent
            jurisdiction.  The  accountant  shall have no authority to change or
            alter the terms and conditions of this Contract.  Such determination
            by the  accountant  shall not relieve  either  Party from  liability
            under applicable Law for damages for breach of contract or prejudice
            any legal right of the  Parties,  whether  those  rights arise under
            this  Contract  or  otherwise.  The  Contractor  shall  provide  the
            accountant with access,  under  confidentiality  conditions,  to all
            books of account and records of the  Contractor  that relate to each
            Outside  Plant  and  are  relevant  to  the   determination  of  the
            Termination  Claim,  based on the criteria set forth in this Section
            23.3. The fees and expenses  incurred in connection  with any review
            by the  accountant  pursuant to this Section  23.3(d) shall be borne
            one-half by the Owners and one-half by the Contractor.

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<PAGE>

                   SECTION 24. EVENTS OF DEFAULT AND REMEDIES

24.1. EVENTS OF DEFAULT AND REMEDIES.  If at any time (any of the following,  an
      "EVENT OF DEFAULT"):

      (a)   the  Contractor  fails to (i)  carry out  engineering,  fabrication,
            supply,  delivery,  installation  and testing of the Work on or with
            respect to any Critical  Path Item at the rate of progress  required
            by the Milestone  Schedule,  and (ii) prepare,  implement and comply
            with a Schedule  Recovery  Plan in  respect  of any such  delayed or
            incomplete  Work,  in each  case,  within  the time  periods  and in
            accordance with the provisions set forth in Section 5.2 hereof; or

      (b)   the  Contractor  commits  any  material  breach  of, or fails in any
            material  respect to comply with and observe,  any provision of this
            Contract; or

      (c)   the  Contractor  abandons  the  Work  for  a  period  in  excess  of
            [REDACTED] or intimates  without lawful cause or justification  that
            the Work will not or cannot be completed; or

      (d)   the  Contractor  shall make a general  assignment for the benefit of
            creditors,  or any proceeding  shall be instituted by the Contractor
            seeking  to  adjudicate  it a  bankrupt  or  insolvent,  or  seeking
            liquidation,  winding up, reorganization,  arrangement,  adjustment,
            protection,  relief or  composition  of the  Contractor or its debts
            under Law relating to bankruptcy,  insolvency or  reorganization  or
            relief or the  appointment  of a receiver,  trustee or other similar
            official  for  the  Contractor  or for any  substantial  part of its
            property  or the  Contractor  shall  take any  corporate  action  to
            authorize  any of the  actions  set  forth  above  in  this  Section
            24.1(d); or

      (e)   an  involuntary  petition  shall be filed or an action or proceeding
            otherwise  commenced against the Contractor seeking  reorganization,
            arrangement or  readjustment  of the  Contractor's  debts or for any
            other relief under any  bankruptcy or insolvency  act or Law, now or
            hereafter  existing and remain undismissed or unvacated for a period
            of [REDACTED]; or

      (f)   a receiver, assignee, liquidator, trustee or similar officer for the
            Contractor or for all or any part of its property shall be appointed
            involuntarily; or

      (g)   the  Contractor  shall  file  a  certificate  of  dissolution  under
            applicable  Law or shall  be  liquidated,  dissolved  or wound up or
            shall commence or have commenced against it any action or proceeding
            for  dissolution,  winding  up or  liquidation,  or  shall  take any
            corporate action in furtherance thereof; or

      (h)   the Contractor either:

            (i)   fails to make prompt payment of any undisputed  invoice due to
                  any Subcontractor or otherwise for materials or labor; or

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<PAGE>

            (ii)  repudiates  or is in  default  with  respect  to  any  of  its
                  obligations to a Subcontractor; or

      (i)   the Contractor fails, after being notified thereof by the Developer,
            to promptly  correct any Defective  Work during  performance  of the
            Work or within the Warranty Period; or

      (j)   any  representation  or warranty made by the Contractor herein or in
            any certificate,  financial statement or other document furnished to
            any Owner Person by or on behalf of the Contractor shall prove to be
            false or  misleading  in any  material  respect as of the time made,
            confirmed or furnished;

            then,  upon the  occurrence  of any Event of Default  referred to in
            paragraph  (a), (b), (i) or (j) of this Section 24.1,  the Developer
            may, by Notice in writing,  advise the  Contractor  of such Event of
            Default and the  Contractor  shall have  [REDACTED]  to correct such
            Event of  Default to the  satisfaction  of the  Developer  PROVIDED,
            HOWEVER,  that,  if such  Event of  Default  cannot be cured in such
            [REDACTED]  period through the diligent  efforts of Contractor,  but
            can be cured in a longer period without there  occurring any failure
            to  meet  the  Milestone  Schedule,  the  Contractor  shall  have an
            additional  period,  not to exceed  [REDACTED],  so long as it shall
            commence  the cure  during  such  [REDACTED]  period and  diligently
            pursue such cure. If the Contractor  fails to correct any such Event
            of  Default  to  the  satisfaction  of  the  Developer  within  such
            [REDACTED]  (or subject to the  conditions set forth in the previous
            sentence,  such longer period), or, upon the occurrence of any other
            Event of Default,  then the  Developer  on behalf of the Owners may,
            upon  written  Notice (a "NOTICE OF  EXERCISE OF  REMEDIES")  to the
            Contractor,  exercise  any  or  all  of  the  following  rights  and
            remedies:

                  (A)   exercise their rights under the Contractor Security;

                  (B)   exercise their rights with respect to the withholding of
                        payments to the  Contractor in  accordance  with Section
                        12.5 hereof;

                  (C)   take the Work wholly or partly out of the control of the
                        Contractor  or any  other  Person  in whose  control  or
                        possession  the Work or any part of it may be, and cause
                        to be completed the same in  accordance  with Section 25
                        hereof (a "TAKE OVER");

                  (D)   terminate  this Contract in  accordance  with Section 26
                        hereof (such event,  a "TERMINATION  FOR DEFAULT";  such
                        Notice of Exercise of Remedies, a "NOTICE OF TERMINATION
                        FOR DEFAULT"); or

                  (E)   exercise any and all rights and  remedies  they may have
                        under  law  or  equity,   including   seeking   specific
                        performance and the recovery of damages, subject, in any
                        event, to the provisions of Section 28 hereof.

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<PAGE>

            The foregoing  remedies are cumulative,  and the Developer on behalf
            of the Owners may elect one or more thereof without prejudice to any
            other  right or remedy  the Owners may have,  subject,  however,  to
            Section 28 hereof. Notwithstanding any of the foregoing,  Contractor
            shall be  entitled  upon a  Termination  for  Default to be paid its
            Reimbursable  Costs (and any applicable  Fixed Fee and Incentive Fee
            so long as the Contractor has met the criteria for such fee pursuant
            to Section 12.2 hereof) for Work  performed in accordance  with this
            Contract and the  Contract  Documents  by the  Contractor  up to the
            effective  date of such  termination,  less any amount  owing to the
            Owners hereunder,  the latter of which amounts may be applied by the
            Owners to the payment and performance of any outstanding obligations
            of the Contractor hereunder.

24.2. NO PREJUDICE. No action taken by the Developer under this Section 24 shall
      prejudice any right of the Owners under Section 13 hereof.

24.3. NOTICE OF EXERCISE OF REMEDIES.  Any Notice of Exercise of Remedies  shall
      be conclusive  evidence of the matters  stated  therein for the purpose of
      allowing the Developer on behalf of the Owners to implement the provisions
      of this Section 24.

24.4. CONTRACTOR'S RIGHT TO SUSPEND WORK AND TERMINATE CONTRACT.

      (a)   SUSPENSION OF WORK BY THE CONTRACTOR.  [REDACTED]

      (b)   TERMINATION BY THE CONTRACTOR.  [REDACTED]

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<PAGE>

      (c)   EFFECT OF CONTRACTOR  TERMINATION.  Any termination of this Contract
            by the Contractor on account of any of the circumstances  referenced
            in the foregoing  Section 24.4(b) hereof shall be treated  hereunder
            as a  Termination  for  Convenience  for  purposes  of  the  Owners'
            obligation  to make payment to the  Contractor in the amounts and in
            the manner specified in Section 24.3 hereof.

               SECTION 25. TAKE OVER AND PAYMENTS TO THE DEVELOPER

25.1. REPLACEMENT CONTRACTORS. If the Developer on behalf of the Owners elects a
      Take Over,  the Owners may contract  with and employ any Person or Persons
      (each, a  "REPLACEMENT  CONTRACTOR")  to further  execute and complete the
      Work or any portion thereof,  and each Replacement  Contractor may provide
      such supplies and labor as may be necessary to enable that completion.

25.2. NO RIGHT OF  COMPENSATION.  In the  event of a Take Over  (whether  or not
      through a Replacement  Contractor),  the Contractor shall have no right to
      any  compensation  arising  from such  action  and the Owners may pay each
      Replacement Contractor such amounts of money as may be agreed upon between
      such Replacement Contractor and the Owners.

25.3. PAYMENTS TO THE OWNERS.  If the Developer on behalf of the Owners elects a
      Take Over, the Contractor shall,  without prejudice to any other rights or
      remedies of the Owners  hereunder or under  applicable Law with respect to

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<PAGE>

      the Event of Default (including recourse to the Contractor  Security),  be
      liable to the Owners (subject,  in any event, to the provisions of Section
      28 hereof) as direct damages for an amount equal to:

      (a)   all costs  (including  the costs of redoing  any portion of the Work
            not  reasonably  usable in the  completion of each Outside Plant) so
            incurred by the Owners; MINUS

      (b)   the total amount paid to the Owners under the Contractor Security.

      The  Contractor  shall  refund  to the  Owners  all  amounts  paid  to the
      Contractor  for Work  not  reasonably  usable  in the  completion  of each
      Outside Plant within  [REDACTED]  after written  Notice that such Work has
      been rejected by the Developer.

                       SECTION 26. TERMINATION FOR DEFAULT

26.1. EFFECT OF  TERMINATION.  A Termination  for Default shall not nullify this
      Contract but shall operate to terminate the Contractor's  right to proceed
      with the Work and to  discharge  the Owners from their  obligations  under
      this Contract.  A Termination for Default shall not relieve the Contractor
      from  liability  under  applicable  Law for  damages  for any  failure  or
      omission to perform any portion of this Contract prior to such termination
      or prejudice any legal rights of the Owners or  Contractor,  whether those
      rights arise under this Contract or otherwise,  subject,  in any event, to
      the provisions of Section 28 hereof.

26.2. TERMINATION  DATE. A Termination for Default shall be effective,  and this
      Contract shall be terminated,  when the Notice of Termination  for Default
      is served upon the Contractor.

26.3. RIGHT TO  TERMINATE.  The  Developer  on behalf of the Owners may exercise
      their  right to  terminate  this  Contract  whether or not any of the Work
      remains to be executed or whether or not the time limit for  completion of
      the Work has expired.

26.4. RIGHT TO COMPLETE THE WORK. On a Termination for Default, the Owners shall
      be empowered to complete the Work in the same manner as provided for under
      Section 25 hereof, as if the Work had been taken wholly out of the control
      of the Contractor by the Owners and this Contract had not been terminated.

                       SECTION 27. DUTIES UPON TERMINATION

27.1. GENERALLY.  Upon receipt of a Notice of Termination  for  Convenience or a
      Notice of  Termination  for  Default  (each,  a "NOTICE OF  TERMINATION"),
      unless otherwise  directed by the Developer in such Notice, the Contractor
      shall:

      (a)   stop  work  under  this  Contract  on the  date  and  to the  extent
            specified in the Notice of Termination;

      (b)   place no further  orders or  contracts  for  materials,  services or
            facilities  except as may be necessary for completion of the portion
            of the Work, if any, under this Contract that is not terminated;

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      (c)   unless otherwise  directed by the Developer,  use reasonable efforts
            to terminate all orders and contracts and  Subcontracts  (other than
            Subcontracts conditionally assigned to the Owners in accordance with
            Section  33.5  hereof)  to  the  extent  that  they  relate  to  the
            performance of Work terminated by the Notice of Termination;

      (d)   assign  to  the  Owners  (or  at  the  Developer's  direction,   any
            Replacement  Contractor),  in the  manner,  at the  time  and to the
            extent  directed by the Developer,  all of the  Contractor's  right,
            title and interest  under such orders,  contracts and  Subcontracts,
            whether or not terminated;

      (e)   use reasonable efforts to settle all outstanding liabilities and all
            claims arising out of such termination of orders and contracts, with
            the Developer's approval or ratification to the extent the Developer
            so requires;

      (f)   transfer  title to the Owners as  provided  for in Section 36 hereof
            and deliver the  following to the  Developer  in the manner,  at the
            time,  at the  place  and to the  extent  (if any)  directed  by the
            Developer:

            (i)   the  fabricated  or  unfabricated   parts,  Work  in  process,
                  completed Work, supplies and all other items commenced, partly
                  executed,  produced  or  completed  as part of, or acquired in
                  connection with, the performance of the Work terminated by the
                  Notice of Termination; and

            (ii)  the  completed  or  partially   completed   plans,   drawings,
                  information, Permits and other property or items that, if this
                  Contract had not been terminated,  would have been required to
                  be furnished to the Owners;

      (g)   in the case of any property or items referred to in Section  27.1(f)
            hereof:

            (i)   use its best  efforts  in the case of an Event of  Default  or
                  reasonable   efforts  in  the  case  of  a   Termination   for
                  Convenience  to use such property or items in the  manufacture
                  of other projects that the Contractor has, or will have, under
                  contract  for  other   customers;   the  amount   received  by
                  Contractor  therefor  shall be deducted  from the  Termination
                  Payment  (Convenience)  or paid in such  other  manner  as the
                  Developer on behalf of the Owners may direct; and

            (ii)  use reasonable  efforts to sell, in the manner,  at the times,
                  to  the  extent  and  at  the  price  or  prices  directed  or
                  authorized  by the  Developer;  the  proceeds of any such sale
                  shall be deducted from the Termination  Payment  (Convenience)
                  or paid in such other manner as the Developer may direct;

      (h)   complete  performance  of such part of the Work as may not have been
            terminated by the Notice of Termination;

      (i)   take such action as may be  necessary,  or which the  Developer  may
            direct,  for the protection and preservation of the property related
            to this Contract that is in the Contractor's possession and in which
            the Owners have or may acquire an interest;

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<PAGE>

      (j)   grant  to  the  Owners,   any   Replacement   Contractor   and  each
            Subcontractor  a  continuing  right to use any and all  patented  or
            proprietary  information  that  the  Developer  deems  necessary  to
            complete  each  Outside  Plant,  subject to  reasonable  proprietary
            restrictions; and

      (k)   at the Developer's request and at the Contractor's expense:

            (i)   for Default,  supply any proprietary components needed for the
                  completion and operation of each Outside Plant;

            (ii)  assist  the   Developer  in  preparing  an  inventory  of  all
                  equipment in use or in storage;

            (iii) assign to the Owners or to any Replacement Contractor and make
                  available  all  issued  Permits  then  held by the  Contractor
                  pertaining to each Outside Plant; and

            (iv)  remove all such equipment,  waste and rubbish as the Developer
                  may designate.

27.2. SUBCONTRACTOR   CLAIMS.   For  a  Notice  of   Termination   for  Default,
      notwithstanding  Section  27.1(e),  the Owners  shall not be liable to the
      Contractor with respect to any claim that any  Subcontractor  may raise or
      assert arising out of any termination of this Contract.

27.3. FUNDS HELD BY THE OWNERS.  Without  prejudice to Section 13 hereof,  for a
      Notice of Termination for Default:

      (a)   all sums of money  that may remain in the hands of the Owners or the
            Developer with respect to this Contract; and

      (b)   all funds made available under any Contractor  Security or any other
            security retained for the due fulfillment of this Contract,

      at the  election  of the  Developer  may be  withheld  pending  the  final
      determination  of the rights and  obligations  of the  Parties  under this
      Contract.

                       SECTION 28. LIMITATION OF LIABILITY

28.1. NO CONSEQUENTIAL  DAMAGES.  Except as otherwise specified herein,  neither
      Party  (which  shall  include,  for  purposes  of  this  Section  28,  all
      Subcontractors and Vendors) shall be liable,  whether by contract, at law,
      in tort or otherwise, for any indirect or consequential losses or any loss
      of  income  or  profit,  loss of  opportunity  to do  business,  claims of
      customers  or the costs of, or  associated  with,  the use of  restoration
      facilities  or like items of indirect  or  consequential  damage.  Neither
      Party  shall make claims to the other for such  indirect or  consequential
      loss and each Party  hereby  releases,  subject to the other terms of this
      Contract,  the  other  from any  such  losses  and  shall  take all  steps
      necessary to extend like releases to such other Party's  Subcontractors or
      Vendors, as applicable.

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28.2. OTHER LIMITATIONS.  The total aggregate liability of the Contractor to all
      Owner Persons under, arising out of or in connection with this Contract or
      otherwise  with respect to the Work shall not exceed an  aggregate  amount
      (the "TOTAL LIABILITY CAP") equal to [REDACTED] of the Reimbursable Costs.
      Notwithstanding any of the foregoing,  the following shall not be included
      in, or subject to, the Total  Liability  Cap,  and shall not be taken into
      account  in  establishing  the  Contractor's  total  aggregate   liability
      hereunder:

      (a)   Indemnifiable Losses, for which there shall be no limit; and

      (b)   the Contractor's unconditional obligations to achieve RFS Acceptance
            of each Outside Plant.

28.3. SCOPE OF  LIMITATIONS.  With respect to matters  falling  within the Total
      Liability  Cap, the waivers and  disclaimers  of liability,  releases from
      liability,  limitations  and  apportionments  of liability  and  exclusive
      remedy provisions expressed in this Contract shall apply even in the event
      of the fault,  negligence (in whole or in part), strict liability,  breach
      of  contract,  or otherwise  of the Party  released or whose  liability is
      waived, disclaimed, limited, apportioned or fixed by such exclusive remedy
      provision, and shall extend to such Party's related or Affiliated entities
      and its and their directors, officers, employees and agents.

28.4. WORK  PROVIDED  BY OTHERS.  The  Contractor  shall have no  liability  for
      services,  materials  or  equipment  furnished  by Vendors.  To the extent
      practicable, the Owners shall procure that all indemnity, all releases and
      all  hold-harmless  agreements  contained in such Owner's  contracts  with
      third  parties  engaged to perform  services or supply  materials  for the
      System,  whereby such  parties  agree to  indemnify,  release and hold the
      Owner harmless shall extend like protection to the Contractor.

28.5. LOSS,  INJURY OR DAMAGE TO PERSONS,  THE SYSTEM OR THE WORK. Except to the
      extent constituting  Indemnifiable Losses hereunder,  (i) the Contractor's
      liability for Loss of or damage to any elements of the System or the Work,
      or for any injury to, or death or disease of, any Person, shall be limited
      to  those  payments  made  on the  Contractor's  behalf  by  the  insurers
      affording  the  insurance  described  in Section  41 hereof,  and (ii) the
      Owners shall release the  Contractor  from any Loss,  damage or expense in
      excess  of  those  payments  as a  result  of Loss of or  damage  to other
      property  of the Owners or in the custody of the Owners (or as a result of
      any injury to, or death or disease of, any Person).

28.6. TRANSFER OF OWNERSHIP.  The Owners agree that any future  recipient of any
      interest  in the  Systems  or the  Outside  Plant  will be  bound  by such
      releases  and  limitations  of  liability  such that the  total  aggregate
      liability of the Contractor to such Persons shall not exceed the limits of
      liability set forth herein.

28.7. HAZARDOUS   WASTE  OR  MATERIALS.   Except  to  the  extent   constituting
      Indemnifiable Losses hereunder, the Contractor shall have no liability for
      or in respect of hazardous  waste or materials  that may be encountered in
      carrying  out the Work,  and the Owners  shall  indemnify  the  Contractor
      against any additional costs and any liabilities to third parties that the
      Contractor  may incur as a  consequence  of such waste or materials  being
      encountered.

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                   SECTION 29. THE CONTRACTOR'S ON-SITE DUTIES

29.1. REASONABLE PRECAUTIONS.  The Contractor acknowledges that, until such time
      as title to each  Outside  Plant has passed in its entirety to the Owners,
      it shall remain solely  responsible for the institution and maintenance of
      all such usual and reasonable precautions for the protection of the Sites,
      the Outside Plant and any Work, and for the prevention of danger or damage
      to all  persons or  property on or near the Sites.  Without  limiting  the
      generality of the foregoing,  the Contractor  shall,  as part of the Work,
      ensure that each Site is constructed,  secured, illuminated and maintained
      in such manner as would a reasonably prudent owner of a facility analogous
      to such Site.

29.2. WASTE  DISPOSAL.  The  Contractor  shall,  as part of its Work  hereunder,
      manage  and  dispose  of all waste  materials  in strict  accordance  with
      applicable Codes and Standards,  and shall, as part of its Work hereunder,
      keep each Site free from debris and waste  resulting from the  performance
      of the Work and the presence of the  Contractor  Persons at such Site.  In
      the event that any  Contractor  Person shall  discover the presence of, or
      cause the discharge of, any material of a hazardous  nature on or from any
      Site, the Contractor  shall  immediately  notify the Developer,  and shall
      instruct all Contractor  Persons to desist immediately from the Work until
      further instruction from the Developer.

                          SECTION 30. PERFORMANCE TESTS

30.1. GENERALLY.

      (a)   THE  CONTRACTOR'S  OBLIGATION  TO  CONDUCT  PERFORMANCE  TESTS.  The
            Contractor  shall  conduct and repeat as necessary  the  Performance
            Tests as required  hereunder in connection with RFS Acceptance (and,
            as  applicable,  Commercial  Acceptance)  and Final  Acceptance,  in
            accordance with the Performance Test Standards and such supplemental
            testing procedures, consistent with such Performance Test Standards,
            prepared  by the  Contractor  in  accordance  with  normal  industry
            standards.    The   Contractor    shall   permit   the   Developer's
            representatives  to be  present  during the  conduct of  Performance
            Tests and shall  provide to the  Developer  reports  and result data
            based upon the conduct of such Performance Tests.

      (b)   SAFETY.  If during  any  Performance  Test,  it is  discovered  that
            testing  cannot be  conducted  in a safe manner in  accordance  with
            industry practice, such Performance Test shall be terminated and the
            Contractor  shall  remedy  the  unsafe  condition,   whereupon  such
            Performance Test shall start over.

30.2. RIGHT OF WAIVER.  The  Developer  may,  but shall have no  obligation  to,
      waive, defer or reduce any of the requirements relating to the achievement
      of RFS Acceptance or Final Acceptance at any time by written Notice to the
      Contractor; PROVIDED that the Developer's exercise of any rights hereunder

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<PAGE>

      shall apply only to such  requirements  as the  Developer  may specify and
      shall in no event relieve the Contractor of any requirements, liability or
      other obligations not so specified.

30.3. LONG-TERM   OBLIGATIONS.   Nothing  in  this  Section  30,  including  the
      Developer's  approvals,  nor the issuance of a  Certificate  of Commercial
      Acceptance or a Certificate of RFS Acceptance,  shall in any way modify or
      alter the Contractor's  obligations with respect to Warranties  hereunder.
      Neither the inspection,  approval or payment, including the Final Payment,
      under this Contract shall:

      (a)   be construed to be an acceptance of any Defective Work;

      (b)   be an admission of the Contractor's  satisfactory performance of the
            Work; or

      (c)   relieve  the  Contractor  of  any  of  its  obligations  under  this
            Contract.

30.4. OPERATING REVENUES. Any and all revenues generated by the operation of the
      Outside Plants shall be solely for the account of the Owners.

                          SECTION 31. PLANT ACCEPTANCE

31.1. INITIAL  PLANT  COMMISSIONING  REPORT.  At  such  time  as the  Contractor
      determines  that it has  met the  requirements  for a  Certificate  of RFS
      Acceptance  in respect of either  Outside Plant (or segment  thereof),  it
      shall  submit to the  Developer  under cover of a Notice an initial  plant
      commissioning  report  (an  "INITIAL  PLANT  COMMISSIONING  Report")  with
      respect to such Outside Plant (or segment thereof)  prepared in accordance
      with the Testing and Acceptance  Specifications referenced in Table 2-C to
      the Network  Description and Project Scope.  Within thirty (30) Days after
      its  receipt of the  relevant  Initial  Plant  Commissioning  Report,  the
      Developer shall:

      (a)   issue a Certificate  of RFS  Acceptance  in accordance  with Section
            31.2 hereof; or

      (b)   not accept the relevant  Outside  Plant (or segment  thereof) in its
            existing  condition  and the terms and  provisions  of Section  31.5
            hereof shall apply.

31.2. RFS ACCEPTANCE.

      (a)   GENERALLY.  The  Contractor  shall,  together with its submission of
            Initial  Plant  Commissioning  Report to the Developer in connection
            with its  application for RFS Acceptance of either Outside Plant (or
            segment thereof),  certify to the Developer that, as of the date set
            forth in such certification:

            (i)   such Outside Plant (or segment thereof) (A) has been completed
                  in accordance  with the Technical  Requirements  and any other
                  requirements of this Contract (except for Punch List Items, if
                  any), and (B) has passed, as of such  certification  date, all
                  Performance  Tests as required by the Technical  Requirements;
                  and

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<PAGE>

            (ii)  all  requirements  of this  Contract  (except  for Punch  List
                  Items,  if any)  relating  to such  Outside  Plant or  segment
                  thereof  (including  all  Technical  Requirements)  have  been
                  fulfilled and all required  documentation  has been completed,
                  in each case  other than  those  that do not,  by the  express
                  terms hereof, have to be fulfilled or completed on or prior to
                  the RFS  Date;  PROVIDED,  that RFS  Acceptance  shall  not be
                  deemed to  include or require  (A)  completion  of work by the
                  Vendors  or  other  of  the  Owners'   agents  or  contractors
                  hereunder,  except  to  the  extent  necessary  to  allow  the
                  Contractor to test each Outside  Plant in accordance  with the
                  Performance  Test  Standards  (and to the extent that any such
                  necessity  results  in any  delay  or  increased  cost  to the
                  Contractor  in achieving RFS  Acceptance,  such event shall be
                  deemed  a  Owner-Caused  Delay,  and the  Contractor  shall be
                  entitled  to  equitable  relief  to the  extent  specified  in
                  Section 15.1 hereof) or (B) the absence of minor  defects that
                  do not  materially  affect the use or operation of the Outside
                  Plant and are included on a Punch List adopted by the Parties.

            The Developer shall review the  Contractor's  submission  within the
            period  specified in Section 31.1 hereof and, to the extent that the
            Developer has neither requested additional  information nor raised a
            Dispute  with  respect  to the  Contractor's  submission  by written
            Notice to the Contractor  (which Notice shall articulate the reasons
            for   the   Developer's    determination   that   the   Contractor's
            certifications  made  in its  application  for  RFS  Acceptance  are
            erroneous or are inaccurately dated) prior to the expiration of such
            period,  shall issue a "CERTIFICATE OF RFS ACCEPTANCE" in accordance
            with the Technical  Requirements  dated,  and to be effective as of,
            the date (the "RFS DATE") as of which the  Contractor has certified,
            by its Notice  given  pursuant  to  Section  31.1  hereof,  that all
            conditions  for RFS  Acceptance  have been met. The following  shall
            occur on the RFS Date:

                  (A)   each Outside  Plant shall be deemed to be  provisionally
                        accepted by the Owners; and

                  (B)   title to any part of the relevant Outside Plant that has
                        not previously passed shall be transferred to the Owners
                        in  accordance  with  Section  36.7 hereof and the risks
                        thereof  and  responsibility  for  routine   maintenance
                        shall,  subject to Section 31.2(b)  hereof,  pass to the
                        Owners.

      (b)   PUNCH  LIST.  The   Certificate  of  RFS  Acceptance   may,  in  the
            Developer's sole  discretion,  be unqualified or may have annexed to
            it a Punch List,  which shall be compiled by the  Developer,  of any
            outstanding  minor  deficiencies  or  items to be  completed  by the
            Contractor.  The Contractor shall, as part of its Work hereunder and
            as soon as  practicable,  remedy the  deficiencies  and complete the
            Work  indicated  on all  such  listed  items  so as to  ensure  full
            compliance with the requirements of this Contract.

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<PAGE>

31.3. COMMERCIAL ACCEPTANCE. If at any time the Developer determines that, based
      upon  information  supplied by the Contractor,  any portion of the Outside
      Plant is suitable to be put into  commercial  service (such  portion,  the
      "RFCS PORTION"),  then the Developer, at its option and without obligation
      (except to the extent specified in clause (a) of this Section 31.3), shall
      issue,  with the  consent  (except as  provided in such clause (a)) of the
      Contractor (which consent shall not be unreasonably  withheld or delayed),
      to the Contractor a "CERTIFICATE OF COMMERCIAL ACCEPTANCE."

      (a)   RFCS SEGMENTS.  If, based upon ODF-to-ODF  Performance  Test results
            (as well as any  other  information  and  testing  data  that  would
            otherwise  be  required to  demonstrate  RFS  Acceptance  for either
            Outside Plant on an overall basis) provided to it by the Contractor,
            the  Developer  determines  that any RFCS Segment meets the criteria
            for RFS  Acceptance  as set  forth in  Section  32.1  hereof  and is
            suitable to be put into commercial service, then the Developer shall
            issue to the  Contractor,  within fifteen (15) Days after  receiving
            from the Contractor all testing data and other information necessary
            to make the foregoing  determination,  a  Certificate  of Commercial
            Acceptance  in respect of the relevant  RFCS  Segment.  In the event
            that the  Developer is unable to issue a  Certificate  of Commercial
            Acceptance  for any RFCS  Segment,  it shall  notify the  Contractor
            promptly  (but,  in any event,  within the  foregoing  15-Day period
            after the  Contractor's  submission  of the  relevant  data)  with a
            written Notice  specifying in reasonable  detail the reasons for its
            inability to do so.

      (b)   EFFECT OF COMMERCIAL ACCEPTANCE. Upon the Commercial Acceptance Date
            with respect to any RFCS Portion:

            (i)   the Owners  shall be entitled to commence  commercial  service
                  over such RFCS Portion;

            (ii)  title to the RFCS Portion that has not previously passed shall
                  be transferred  to the Owners in accordance  with Section 36.7
                  hereof,  and  the   responsibility  for  routine   maintenance
                  thereof, pass to the Owners;

            (iii) the risk for the RFCS  Portion  shall be vested in the Owners,
                  except that any risk attributable to the Outside Plant or part
                  of the Outside  Plant that requires  corrective  action by the
                  Contractor  shall  remain  the  sole   responsibility  of  the
                  Contractor;

            (iv)  the requirements of RFS Acceptance for such RFCS Portion shall
                  be  deemed  to have  been met as of the  date of the  relevant
                  Certificate of Commercial  Acceptance and, for purposes of the
                  Developer's  assessment of RFS Acceptance for overall  Outside
                  Plant of which such RFCS Portion is a part,  such RFCS Portion
                  shall  require no further  testing or inspection in connection
                  with that RFS Acceptance process; and

            (v)   the  Warranty  Period  shall  commence in respect of such RFCS
                  Portion.

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      (c)   PUNCH LIST. The Certificate of Commercial  Acceptance  shall have as
            an attachment a list of items requiring  corrective action and items
            still to be provided. Such corrective action shall be taken promptly
            and  such  items  completed  by the  Contractor  as part of its Work
            hereunder. When:

            (i)   the outstanding corrective action has been taken;

            (ii)  all outstanding items have been delivered and approved; and

            (iii) the  conditions  described  in Section  31.2  hereof have been
                  satisfied,   the  Developer   shall  issue  a  Certificate  of
                  Commercial  Acceptance.  Upon  such  issuance,  title  to  the
                  remainder  of the Outside  Plant shall be  transferred  to the
                  Owners in  accordance  with  Section  36.7 hereof and the risk
                  with respect to such remainder of the Outside Plant shall pass
                  to the Owners and the  provisions  of  Section  31.2(b)  shall
                  apply.

      (d)   NO DIMINISHMENT OF THE CONTRACTOR'S  OBLIGATIONS.  The issuance of a
            Certificate  of  Commercial  Acceptance  shall in no way relieve the
            Contractor from its obligation to provide  Outside Plants  complying
            with the technical and other  requirements  of this Contract and, in
            particular,  any  deterioration  or Defects in either  Outside Plant
            occurring  or  becoming  known  between the date of issuance of such
            Certificate  and  the  date  of  issuance  of a  Certificate  of RFS
            Acceptance shall be corrected at the sole expense of the Contractor,
            except to the  extent  that such  Defects  are  attributable  to the
            operation or maintenance (or lack thereof) of the RFCS Portion under
            the control of the Owners.

      (e)   EQUITABLE RELIEF FOR  INTERFERENCE  WITH WORK. In the event that the
            Owners' commencement of commercial  operations on or with respect to
            any RFCS Portion(s)  obstructs,  delays or otherwise interferes with
            the Contractor's prosecution of the Work, such obstruction, delay or
            interference shall be treated as an "Owner-Caused Delay" pursuant to
            Section  16.1(e)  hereof,  entitling the  Contractor to  appropriate
            adjustment to the Milestone Schedule or the Target Cost,  determined
            in accordance with Section 15.1 hereof.

31.4. DOCUMENTATION   TO  BE  DELIVERED   UPON  RFS   ACCEPTANCE  OR  COMMERCIAL
      ACCEPTANCE.  Within forty-five (45) Days after achieving each RFS Date and
      any Commercial Acceptance Date, as applicable, the Contractor shall submit
      to the Developer the following  documents,  in each case,  relating to the
      particular  Outside Plant or RFCS Portion having  achieved,  respectively,
      RFS Acceptance or Commercial Acceptance:

      (a)   one (1) hard  copy  and one (1)  electronic  copy of the "as  built"
            drawings for such Outside Plant or RFCS Portion; and

      (b)   test documentation, the operating manuals and serial numbers for the
            equipment associated with such Outside Plant or RFCS Portion.

31.5. FAILURE TO ACHIEVE RFS ACCEPTANCE OR COMMERCIAL  ACCEPTANCE.  If neither a
      Certificate of RFS  Acceptance nor a Certificate of Commercial  Acceptance

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      is issued due to the  existence of Defects with respect to either  Outside
      Plant or the Work, the Developer  shall,  without  prejudice to any of its
      other rights and remedies under this Contract, issue a list detailing such
      Defects  and  advise  the  Contractor  of a period  of time in which  such
      Defects  shall be  remedied  to the  satisfaction  of the  Developer.  The
      Contractor shall issue an additional  commissioning report similar in form
      and substance to the Initial Plant  Commissioning  Report to the Developer
      after all actions  required to remedy such  Defects have been taken by the
      Contractor  and such report shall be  considered  in  accordance  with the
      provisions of Section 31.1 hereof.

31.6. FINAL   ACCEPTANCE.   The  Developer  shall  issue  to  the  Contractor  a
      "CERTIFICATE OF FINAL  ACCEPTANCE" in respect of each Outside Plant within
      ten (10)  Days  after the date on which  all of the  following  conditions
      have, in the Developer's judgment, been satisfied in full:

      (a)   the Developer has issued a Certificate of RFS Acceptance;

      (b)   the  Warranty  Period  applicable  to each  component of the Outside
            Plant has expired and there are no Warranty claims  outstanding with
            respect thereto;

      (c)   any and all items on all Punch Lists  relating to the Outside  Plant
            have been completed; and

      (d)   the  Developer  has  received the  Certificate  of Payment and Final
            Release.

                             SECTION 32. WARRANTIES

32.1. GENERAL   WARRANTIES.   Notwithstanding  any  Outside  Plant  having  been
      provisionally  accepted by the Owners and without  prejudice  to any other
      warranty made by the Contractor  hereunder,  the Contractor warrants until
      the expiration of the Warranty Period to the Owners that the Work and each
      Outside Plant shall (each of the following, a "GENERAL WARRANTY"):

      (a)   be free from  Defects in design  (to the extent of the  Contractor's
            responsibility  therefor,  as limited as  described  in Section  4.2
            hereof), materials, construction and workmanship;

      (b)   comply  with  all  applicable  requirements  of Laws and  Codes  and
            Standards;

      (c)   be  fit  for  the   particular   use   described  in  the  Technical
            Requirements; and

      (d)   meet the Network  Description  and Project  Scope,  the  Performance
            Parameters and all other requirements of this Contract.

32.2. NOTIFICATION OF BREACH OF WARRANTY. If any aspect of the Work has not been
      performed in accordance with any General  Warranty,  the Contractor shall,
      at its own expense, either repair (in accordance with Section 32.3 hereof)
      or replace (in accordance with Section 32.4) all such Work; PROVIDED that:

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      (a)   the  Developer  has provided the  Contractor  with a written  Notice
            stating with reasonable specificity the basis for Developer's belief
            that the relevant Work has not been performed to the requirements of
            the applicable General Warranty; and

      (b)   such  Notice  has been  given  within a  reasonable  time  after any
            Owner's discovery of the facts or circumstances  giving rise to such
            Owner's  belief  and,  except to the extent  relating  to any latent
            Defect not  reasonably  discoverable  by the Owners  within the time
            period available,  is issued prior to the expiration of the Warranty
            Period.

32.3. REPAIR  GENERALLY.  If at any time within the  Warranty  Period any Defect
      occurs in  either  Outside  Plant as a result  of a  failure  of a General
      Warranty, the Contractor shall, upon receiving appropriate Notice given in
      accordance with Section 32.2 hereof,  promptly repair or replace such part
      or parts  thereof to the  satisfaction  of the  Developer on behalf of the
      Owners without any charge to the Owners.  The Contractor  shall make every
      reasonable effort to minimize the period of time that any Outside Plant is
      out of service for repair and testing. For failures or any situations that
      cause  or risk an  outage  of any  Outside  Plant,  the  Contractor  shall
      initiate a corrective  intervention  immediately  after  receipt of Notice
      from the Developer.

32.4. REPAIR OR REPLACEMENT. During the Warranty Period:

      (a)   the Contractor shall make an appropriate investigation,  at its sole
            cost  and  expense,  of any  items of  Defective  Work  repaired  or
            replaced pursuant to this Section 32 to determine, to the reasonable
            satisfaction  of the Developer,  the type of Defect and the cause of
            failure of the defective item or items. The Contractor shall provide
            a descriptive  written report to the Developer on the results of the
            investigation,  the type of Defect found and, when appropriate,  the
            repair carried out on such  defective item or items.  The Contractor
            shall also state  whether the type of Defect and the "root cause" of
            the failure  are the result of a generic  Defect  occasioned  by not
            adhering to the Technical  Requirements  and whether such failure is
            expected to occur elsewhere in the Outside Plant;  PROVIDED that the
            Contractor's  determination shall not be conclusive for the purposes
            of  this  Section  32.  Additionally,  whether  or not  having  been
            occasioned by a Defect,  the Contractor may independently  undertake
            such  investigations to determine whether a generic Defect may exist
            and, if any generic Defect is identified,  the Contractor  shall, in
            coordination with the Developer  appropriately repair or replace all
            affected elements of the Outside Plant; or

      (b)   the Developer may alternatively  direct the Contractor to conduct an
            investigation  of suspected  generic  Defects wherein the Contractor
            shall  prepare  a  descriptive  written  report as  provided  for in
            Section  32.4(a).  If,  as  the  result  of any  such  investigation
            conducted pursuant to this Section 32.4(b),  all Work is found to be
            free  of  any  Defects  for  which  the  Contractor  is  responsible
            hereunder,  the Developer shall, on behalf of each Owner,  reimburse
            the  Contractor  for  all  costs  incurred  in the  conduct  of such
            inspection  and  evaluation,   which  reimbursement  shall  include,
            exclusively  for purposes of this Section 32.4,  compensation to the

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            Contractor  for  Contractor  Persons  engaged and its  equipment and
            facilities  utilized in such connection at each of their  respective
            rates customarily charged in similar projects.

32.5. REPAIR BY THE DEVELOPER. If upon the occurrence of any breach of a General
      Warranty  during the  Warranty  Period the  Contractor  has failed,  after
      proper  Notice  given by the  Developer  in  accordance  with Section 32.2
      hereof, to (i) make prompt repair or replacement, or (ii) minimize Outside
      Plant  out-of-service  time for  testing  and repair,  the  Developer  may
      arrange  for the  repair  or  replacement  of any  Defective  Work and the
      Contractor  shall  reimburse  the  Developer  for the cost of  repairs  or
      replacements; PROVIDED, the Developer satisfies its commitment to (i) give
      the  Contractor  prompt  Notice  of  any  such  repair  undertaking,  (ii)
      coordinate its repair  activities with those of the Contractor,  and (iii)
      comply with the Contractor's  repair policies  delivered to the Developer,
      and the Contractor shall be permitted to have a representative  present to
      observe such  repairs.  Any repair by the  Developer  shall not in any way
      diminish the Contractor's obligations under this Section 32.

32.6. REPAIRED OR  REPLACEMENT  PARTS.  Each defective part repaired or replaced
      pursuant to this Section 32 (a "REPLACEMENT ITEM") shall itself be subject
      to the provisions of this Section, and shall be warranted from the date of
      repair  or  replacement,  as  applicable,  until  a  date  two  (2)  years
      thereafter;   PROVIDED  that  the  Warranty   Period   applicable  to  any
      Replacement Item shall in no case exceed thirty-three (33) months from the
      applicable RFS Date.

32.7. THE DEVELOPER'S  EXPENSES.  The Contractor  shall pay to the Developer all
      the  expenses (if any)  incurred by the  Developer in testing or examining
      any part of each Outside  Plant for the purpose of or in  connection  with
      this  Section  32 or in or about  or in  connection  with the  correction,
      replacement  or repair of any part of such Outside Plant  attributable  to
      the Contractor's breach of its General Warranty obligations.

32.8. SCOPE OF LIABILITY FOR DEFECTS. Except to the extent that the Developer or
      any Owner may have a remedy  pursuant to Section 39 hereof,  the  remedies
      specified in this Section 32 are the  Developer's and the Owners' sole and
      exclusive  remedies for Defects  arising out of or in connection  with the
      Contractor's  performance  under this Contract.  There are no standards of
      performance,  guarantees or warranties  with respect to Defects other than
      those expressed in this Section 32.

                    SECTION 33. ASSIGNMENT AND SUBCONTRACTING

33.1. GENERALLY.  The Contractor shall not, without the prior written consent of
      the  Developer,  assign this  Contract or any part of the Work, or assign,
      mortgage,  charge or encumber  any of the moneys due or becoming due under
      this Contract,  or any other benefit or obligation  whatsoever arising, or
      that may arise under this Contract.  The Contractor  shall not be relieved
      of  responsibility  under this  Contract for such parts of the Work as are
      assigned or as may be  subcontracted.  To the extent  that the  Contractor
      subcontracts portions of the Work to any of its Affiliates, the Contractor
      guarantees  and  shall  ensure  such   Affiliate's   compliance  with  all

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      requirements  of  this  Contract  and  the  Contract  Documents,  and  the
      Developer  and the Owners  agree to hold only the  Contractor  and, to the
      extent provided for in the Corporate Guarantee, Bechtel Corporation liable
      for any Affiliate's failure to so comply.

33.2. SUBCONTRACTS.  From and after the  execution  date of this  Contract,  the
      Contractor  shall not enter  into a  contract  with a  Subcontractor  that
      requires  payment in excess of DM 200,000 without the written  approval of
      the Developer. In addition,  Contractor shall ensure that each Subcontract
      shall contain:

      (a)   provisions  allowing the  Developers  and its  designees  reasonable
            access to all plants,  offices and Sites in accordance  with Section
            19 hereof;

      (b)   provisions  stating  that the  Subcontractor  shall  have no  rights
            against  the  Developer  or any Owner and shall not create or assert
            any Lien (equitable or otherwise) against the Developer,  any Owner,
            any Outside Plant or any of the Work;

      (c)   provisions  designating the Developers and the Owners as third-party
            beneficiaries  and setting  forth a  conditional  assignment of such
            Subcontract to such Persons in accordance  with Section 33.5 hereof;
            and

      (d)   such other  provisions of this Contract as prudently  should be made
            applicable to such  Subcontract or  Subcontractor in order to permit
            the  Contractor  to fulfill its  obligations  hereunder or otherwise
            give full effect to the provisions of this Contract.

33.3. EXISTING SUBCONTRACTS.  The Contractor represents,  warrants and covenants
      that all  Subcontracts  entered into by the  Contractor on or prior to the
      date hereof contain, or shall be amended to contain, provisions addressing
      the matters set forth in Section 33.2 hereof.

33.4. BREACH.  If the  Contractor  commits  any breach of this  Section  33, any
      assignment,  mortgage, charge, encumbrance or Subcontract in contravention
      of this Section 33 shall,  as against the Developer or any Owner,  be null
      and void and of no force and  effect,  and may be  ignored  by such  Owner
      Persons.  The  Contractor  shall  protect,   defend,  indemnify  and  keep
      indemnified  the Developer and the Owners  against all Losses  suffered or
      incurred by such  Persons  arising  out of or related to such  assignment,
      mortgage, charge, encumbrance or Subcontract.

33.5. CONDITIONAL ASSIGNMENT. The Contractor shall make a conditional assignment
      to the Developer for the benefit of the Owners of all of the  Contractor's
      Subcontracts  and all Permits entered into,  acquired or obtained,  as the
      case may be, in connection  with the  performance  of this Contract or any
      part of the Work.  Upon a  Termination  for  Default  or Take  Over,  such
      conditional assignment shall become fully effective and the Developer (and
      the Owners, as applicable) shall acquire all benefits of such Subcontracts
      and Permits (including prices and delivery dates,  discounts,  rebates and
      refunds)  except for those  Subcontracts  or Permits,  if any, that relate
      exclusively to the portion of the Work, if any, not Taken Over.

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33.6. NO OBLIGATIONS OF OWNER PERSONS TO SUBCONTRACTORS. No Subcontractor or any
      of its employees,  representatives  or agents shall be deemed or construed
      to be employees,  representatives or agents of the Developer or any Owner.
      No Subcontractor shall be deemed a third-party beneficiary of, or have any
      interest in, this Contract.

                     SECTION 34. THE CONTRACTOR'S PERSONNEL

The Contractor shall employ,  and shall ensure that its  Subcontractors  employ,
for Work to be performed in connection  with this Contract only such persons who
are safety-conscious, suitably skilled and experienced, and the Contractor shall
agree to provide to the  Developer,  subject to the  Developer's  assumption  of
appropriate  confidentiality  undertakings in respect thereof,  such resumes and
other relevant biographical and employment data as of such date on file with the
Contractor  for all such persons as the Developer may  reasonably  request.  The
Developer,  or its designee,  may object to and direct the  Contractor to remove
any  person  employed  by the  Contractor  or any  Subcontractor  as to whom the
Developer may provide substantiation of a lack of safety-consciousness, suitable
skills or experience and such person shall be removed within a reasonable period
of time and shall not be employed  again for any portion of the Work without the
prior approval of the Developer's Representative.

                        SECTION 35. THE DEVELOPER'S STAFF

35.1. GENERALLY. Where the Technical Requirements provide for stipulated Work to
      be carried  out by the  Developer,  such Work shall be carried  out in the
      manner   and  with  the   responsibilities   as  defined   therein.   Such
      participation  by  any of the  Developer's  staff  (or  any  other  Person
      designated  by the  Developer by contract or  otherwise) in the Work shall
      not be construed as relieving the Contractor of its responsibility for the
      design, quality and performance of each Outside Plant.

35.2. LIMITATIONS.  Where any of the  Developer's  staff  (or any other  Persons
      designated by the Developer by contract or otherwise)  participate  in the
      Work, they shall remain officers,  partners, employees or agents and under
      the administrative  control of the Developer.  The Contractor shall not be
      liable  for any  negligent  act or  omission  of  such  staff,  agents  or
      designees,  but if in giving  instructions  to be carried  out by any such
      Persons, or by omitting to give such instructions, the Contractor fails to
      use proper  skill and care,  the  Contractor  shall be deemed to have been
      negligent and shall be liable for the consequence of such negligence.

                                SECTION 36. TITLE

36.1. GENERALLY.  The Contractor shall transfer title  ("EIGENTUM") to the Cable
      Links (and all  portions  thereof)  in  accordance  with the German Law of
      Property ("SACHENRECHT").  Such transfer of title shall be effected by the
      Contractor  in such  manner as to realize  that (i) Carrier 1 and MFN will
      each acquire separate title ("ALLEINEIGENTUM") to one identical Cable Link
      and   (ii)   Viatel   will   acquire    separate    title   to   (A)   one
      Contractor-completed  Cable Link  including  Fiber Optic Cable pulling and

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      (B) one  Contractor-completed  Cable Link  without  such Fiber Optic Cable
      pulling.  Each of Carrier 1, MFN and Viatel (or any assignee thereof as to
      whom the  Contractor  has been  notified in  accordance  with  Section 2.3
      hereof)  is,  for  purposes  of its right to  receive  title to Work items
      hereunder, referred to in this Section 36 as a "DESIGNATED OWNER".

36.2. TITLE TO SUPPLIES AND WORK.  When held or installed by the  Contractor  at
      any Site,  all  physical  items  ("KORPERLICHE  GEGENSTANDE")  of  supply,
      equipment,  materials and other Work (each, an "ITEM") intended for use in
      each Cable Link shall be identified  by the  prominent  display of notices
      and by marking  the Items,  in  accordance  with the  Storage  and Marking
      Procedures  to be attached  hereto as APPENDIX 8, as being the property of
      each Designated Owner. The Contractor shall suitably annotate the relevant
      books of inventory and installation, and shall allow the Developer access,
      for and on behalf of the Designated Owners, to its premises and records in
      order to check that such identification has been carried out.

36.3. TRANSFER OF TITLE.  The Contractor  shall transfer title  ("EIGENTUM")  to
      each Item  intended  for use in each  Cable Link to the  Designated  Owner
      thereof  upon  submission  to  the  Developer  of the  Contractor  Invoice
      (together with all  documentation  required under Section 12.5 hereof) for
      the  Reimbursement  Invoice,  specifying that such Item is payable by such
      Designated Owner, subject, in any event, to any rights the Owners may have
      under  Section  12.5  hereof.  For  the  purpose  of this  title  transfer
      ("EIGENTUMSUBER-TRAGUNG"), the submission of the Contractor Invoice to the
      Developer for payment by the Developer on behalf of each Designated  Owner
      constitutes the offer,  and the payment thereof by the Developer on behalf
      of such Designated  Owner  constitutes  the  acceptance,  of the agreement
      among the Contractor and such Designated Owner that the title to all Items
      either  (i)   identified  in  such   Contractor   Invoice  and  supporting
      documentation or (ii) specified in this Contract or any Contract  Document
      as included in the Milestone  Event for which such  Contractor  Invoice is
      paid  or  payable  (the  "TRANSFERRED  PROPERTY"),   shall  pass  to  such
      Designated   Owner.  The  Contractor  shall  transfer  direct   possession
      ("UNMITTELBARER   BESITZ")  of  each  Item  of  Transferred  Property,  as
      identified in accordance with the Storage and Marking Procedures,  to each
      Designated Owner upon the agreement  referred to in the preceding sentence
      relating thereto;  PROVIDED, that if the Contractor is to retain, pursuant
      to any  provision of this  Contract or any Contract  Document,  possession
      ("BESITZ",  hereinafter  "POSSESSION") of any Item of Transferred Property
      (each, a "RETAINED  ITEM") until any later date, the provisions of Section
      36.5 hereof shall apply. The Contractor  represents and warrants that each
      Designated  Owner shall  acquire good and clear title to such  Transferred
      Property, free and clear of all Liens (other than Owner Liens).

36.4. REMOVAL OF LIENS.  The  Contractor  shall  secure the  removal of any Lien
      (other than Owner  Liens) on the Work or any portion of each Cable Link or
      Outside Plant within thirty (30) Days after obtaining  notice thereof.  If
      any Lien (other than Owner Liens) is not discharged, satisfied or released
      within such 30 Days or such  earlier time as may be necessary in order for
      any Owner to avoid being damaged  thereby,  the Developer may, upon Notice
      to the  Contractor of its intention to do so, apply any funds  withheld or
      moneys to become due to the Contractor hereunder to satisfy,  discharge or

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      secure the release  (including by posting a bond) of such items.  Any such
      application  by the  Developer  shall be deemed  payment  on behalf of the
      Owners to the Contractor. Any additional expense incurred by the Developer
      (or any Owner) as a result of the Contractor's  breach of any provision of
      this Section 36.4 shall be borne by the Contractor.

36.5. NO RELEASE OF THE CONTRACTOR;  CONTRACTOR  OBLIGATIONS IN LIEU OF TRANSFER
      OF DIRECT  POSSESSION.  The transfer of title shall not absolve or release
      the Contractor from any other obligation or liability under this Contract.
      With respect to Retained Items,  the Contractor and each of the Designated
      Owners  hereby agree that, in lieu of delivering  direct  Possession,  the
      Contractor shall diligently  safeguard such Retained Items for each of the
      Designated  Owners  ("BESITZMITTLUNGSVERHALTNIS",  Secs.  868,  930 of the
      German  Civil Code  [BGB]).  To the extent  that  third  parties  (such as
      Subcontractors  or vendors) are in Possession of any Transferred  Property
      at the time of the  transfer of title  ("EIGENTUMSUBERTRAGUNG")  or obtain
      such  Possession  from the Contractor  thereafter,  the Contractor  hereby
      assigns to each Designated Owner any claim the Contractor may have for the
      retrieval or reconveyance  ("ABTRETUNG DES  HERAUSGABEANSPRUCHS")  of such
      Transferred Property.

36.6. BAILMENT.  The Contractor  shall serve as bailee of any Retained Items and
      shall remain  liable to each  Designated  Owner (acting by and through the
      Developer in the enforcement of such liability) and shall bear the risk of
      loss or damage thereto,  until the risk of loss thereof has passed to such
      Designated Owner in accordance with Section 40 hereof. Notwithstanding the
      foregoing,  it shall be the individual  responsibility  of the appropriate
      Designated  Owner to take all  action  within  its  reasonable  control to
      prevent any third party in  contravention  of the  Contractor's  aforesaid
      bailee rights to take direct  Possession of any of the Designated  Owner's
      Items  of  Transferred  Property  while  Work on such  property  is  still
      ongoing.

36.7. TITLE TO THE CABLE  LINKS.  To the extent  title has not  previously  been
      transferred to the appropriate  Designated  Owner pursuant to Section 36.3
      hereof  (other  than Work being  completed  pursuant  to  Section  27.1(h)
      hereof), then, upon:

      (a)   the issuance of a Certificate  of RFS Acceptance or a Certificate of
            Commercial Acceptance in accordance with Section 31 hereof; or

      (b)   termination, in whole or in part, of this Contract or the Contractor
            pursuant to Sections 23 or 26 hereof,

      Contractor shall be obligated to transfer absolute and exclusive right and
      title  to and  interest  in any and all  parts  of the  Cable  Links  (the
      "Remaining Parts"), as such parts shall be specifically  identified as the
      separate property reserved for each of the Designated Owners:

            (i)   in  the  relevant  "as  built"   drawings,   in  the  case  of
                  Certificate  of RFS  Acceptance or a Certificate of Commercial
                  Acceptance,  to be delivered to the Developer (for the benefit
                  of the Owners) within the time periods specified herein; or

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            (ii)  in the case of any  termination  pursuant to Sections 23 or 26
                  hereof,   all  such  plans,   specifications  and  inventories
                  otherwise  required to be  prepared  for or  delivered  to the
                  Developer (for the benefit of the Owners)  pursuant to Section
                  27.1 hereof;

      to such  Designated  Owner upon the  Developer's  payment on behalf of the
      Owners of the Final Payment (or, as applicable,  any Termination Payment).
      To the extent that  Possession has not been  previously  transferred  from
      Contractor to the Designated Owners, Contractor shall also be obligated to
      transfer direct Possession  (UNMITTELBARER  BESITZ) to the Remaining Parts
      to  the  Designated  Owners.  For  this  purpose,  the  submission  of the
      Contractor's  invoice (with the relevant  supporting  information)  to the
      Developer  for  such  payments  from  the  Developer  on  behalf  of  each
      Designated  Owner shall  constitute the offer,  and the payment thereof by
      the  Developer on behalf of such  Designated  Owner shall  constitute  the
      acceptance,  of the agreement  among the  Contractor  and such  Designated
      Owner that the title to all remaining  Cable Link  portions  shall pass to
      such Designated  Owner.  The Contractor  represents and warrants that each
      Designated  Owner shall  acquire  good and clear title  thereto,  free and
      clear of all Liens (other than Owner Liens).

                   SECTION 37. REPRESENTATIONS AND WARRANTIES

37.1. CONTRACTOR'S   REPRESENTATIONS  AND  WARRANTIES.   The  Contractor  hereby
      represents and warrants that:

      (a)   ORGANIZATION; POWER AND AUTHORITY. It is a limited liability company
            duly  organized  and validly  existing  under the Laws of the United
            Kingdom,  and it or its relevant  Affiliates  are  authorized  to do
            business in all jurisdictions where the Work is to be performed, and
            it has all  requisite  legal  power and  authority  to execute  this
            Contract  and  to  perform  the  terms,  conditions  and  provisions
            thereof.

      (b)   AUTHORIZATION.  The execution and delivery by the Contractor of this
            Contract has been duly authorized by all requisite corporate action.

      (c)   ENFORCEABILITY.  This  Contract  constitutes  the  legal,  valid and
            binding obligation of the Contractor, enforceable in accordance with
            the  terms  thereof  except  as  enforceability  may be  limited  by
            applicable  bankruptcy,  insolvency,  reorganization,  moratorium or
            other similar Laws affecting  creditors' rights generally and to the
            extent that the remedies of specific performance,  injunctive relief
            and  other  forms of  equitable  relief  are  subject  to  equitable
            defenses,  the  discretion of the court before which any  proceeding
            therefor may be brought, and the principles of equity in general.

      (d)   NO CONFLICT.  Neither the execution,  delivery or performance by the
            Contractor  of  this   Contract,   nor  the   consummation   of  the
            transactions contemplated thereby, will result in:

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            (i)   a  violation  of, or a conflict  with,  any  provision  of the
                  organizational documents of the Contractor;

            (ii)  a contravention  or breach of, or a default under, any term or
                  provision of any material contract, agreement or instrument to
                  which the Contractor is a party or by which it or its property
                  may be bound, which contravention,  breach or default could be
                  reasonably  expected to have a material  adverse effect on the
                  ability of the  Contractor  to perform its  obligations  under
                  this Contract to consummate the  transactions  contemplated by
                  this Contract; or

            (iii) a violation by the Contractor of any Law.

      (e)   NO VIOLATION OF LAW. It is not in violation of any Law  promulgated,
            or  judgment   entered,   by  any  governmental   authority,   which
            violations, individually or in the aggregate, would adversely affect
            it or its performance of any obligations hereunder.

      (f)   LITIGATION.  There are no actions, suits or proceedings, now pending
            or (to its best knowledge) threatened against it before any court or
            administrative  body or  arbitral  tribunal  that  might  materially
            adversely affect the ability of the Contractor or any  Subcontractor
            to perform its obligations hereunder.

      (g)   LICENSES.  It will hold all  national,  provincial,  local and other
            Permits  required to allow it to operate or conduct its business now
            and as contemplated by this Contract.

      (h)   QUALIFICATIONS. It has:

            (i)   examined  the  Contract  Documents  thoroughly  and has become
                  familiar with their terms;

            (ii)  full experience and proper  qualifications to perform the Work
                  and to construct the Outside Plants; and

            (iii) taken reasonable steps to ascertain the nature and location of
                  the Work,  the  general  character  and  accessibility  of the
                  Outside  Plant   build-out,   the  existence  of  above-ground
                  obstacles  to  construction,   and  other  general  and  local
                  conditions  (including labor,  safety and environmental)  that
                  might affect its  performance  of the Work; but the Contractor
                  has not carried out a detailed  survey of the  proposed  route
                  and has not established whether  unconditional  Wayleaves will
                  be available for the whole of the proposed route; accordingly,
                  the Contractor does not warrant that the whole of the proposed
                  route will be suitable  or  feasible  and does not warrant the
                  precise nature or scope of the work which will be required.

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37.2. THE  DEVELOPER'S  REPRESENTATIONS  AND  WARRANTIES.  The Developer  hereby
      represents and warrants that:

      (a)   ORGANIZATION;   POWER  AND  AUTHORITY.  It  is  a  GESELLSCHAFT  MIT
            BESCHRANKTER  HAFTUNG duly organized and validly  existing under the
            laws of Germany,  and is  qualified to do business in Germany and in
            all  jurisdictions in which the nature of the business  conducted by
            it makes such qualification  necessary,  and has all requisite legal
            power and  authority  to execute  this  Contract  and to perform the
            terms, conditions and provisions thereof.

      (b)   AUTHORIZATION.  The  execution and delivery by the Developer of this
            Contract has been duly authorized by all requisite corporate action.

      (c)   ENFORCEABILITY.  This  Contract  constitutes  the  legal,  valid and
            binding obligation of the Developer,  enforceable in accordance with
            the  terms  hereof  except  as  enforceability  may  be  limited  by
            applicable  bankruptcy,  insolvency,  reorganization,  moratorium or
            other similar Laws affecting  creditors' rights generally and to the
            extent that the remedies of specific performance,  injunctive relief
            and  other  forms of  equitable  relief  are  subject  to  equitable
            defenses,  the  discretion of the court before which any  proceeding
            therefor may be brought, and the principles of equity in general.

      (d)   NO CONFLICT.  Neither the execution,  delivery or performance by the
            Developer of this Contract, nor the consummation of the transactions
            contemplated thereby, will result in:

            (i)   a  violation  of, or a conflict  with,  any  provision  of the
                  organizational documents of the Developer;

            (ii)  a contravention  or breach of, or a default under, any term or
                  provision of any material contract, agreement or instrument to
                  which the  Developer is a party or by which it or its property
                  may be bound, which contravention,  breach or default could be
                  reasonably  expected to have a material  adverse effect on the
                  ability of the Developer to perform its obligations under this
                  Contract to consummate the  transactions  contemplated by this
                  Contract; or

            (iii) a violation by the Developer of any Law.

      (e)   NO VIOLATION OF LAW. It is not in violation of any Law  promulgated,
            or  judgment   entered,   by  any  governmental   authority,   which
            violations, individually or in the aggregate, would adversely affect
            it or its performance of any obligations hereunder.

      (f)   LITIGATION.  There are no actions, suits or proceedings, now pending
            or (to its best knowledge) threatened against it before any court or
            administrative  body or  arbitral  tribunal  that  might  materially
            adversely  affect  the  ability  of the  Developer  to  perform  its
            obligations hereunder.

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<PAGE>

      (g)   LICENSES.  It will hold (either directly,  through its Affiliates or
            by  contract)  all  national,  provincial,  local and other  Permits
            required to allow it to operate or conduct its  business  now and as
            contemplated by this Contract.

37.3. REPRESENTATIONS   AND   WARRANTIES  OF  THE  OWNERS.   Each  Owner  hereby
      individually represents and warrants to the Contractor that:

      (a)   FUNDING  FOR THE  CONTRACT.  It has  provided  to the  Developer  an
            irrevocable  letter of credit for the benefit of the Developer which
            permits  the  Developer  to draw  upon  such  letter  of  credit  by
            presentation of a sight draft to the issuing bank to obtain funds to
            pay,  among other  things,  the Owner's share of payments due to the
            Contractor hereunder.

      (b)   ORGANIZATION;   POWER  AND  AUTHORITY.  It  is  a  GESELLSCHAFT  MIT
            BESCHRANKTER  HAFTUNG  (or,  in the  case of  Carrier  1, an  OFFENE
            HANDELSGESELLSCHAFT)  duly organized and validly  existing under the
            laws of Germany,  and is  qualified to do business in Germany and in
            all  jurisdictions in which the nature of the business  conducted by
            it makes such qualification  necessary,  and has all requisite legal
            power and  authority  to execute  this  Contract  and to perform the
            terms, conditions and provisions thereof.

      (c)   AUTHORIZATION.  Its execution and delivery of this Contract has been
            duly authorized by all requisite corporate action.

      (d)   ENFORCEABILITY.  This  Contract  constitutes  its  legal,  valid and
            binding obligation,  enforceable in accordance with the terms hereof
            except as  enforceability  may be limited by applicable  bankruptcy,
            insolvency,   reorganization,   moratorium  or  other  similar  Laws
            affecting  creditors'  rights  generally  and to the extent that the
            remedies of specific performance,  injunctive relief and other forms
            of  equitable  relief  are  subject  to  equitable   defenses,   the
            discretion of the court before which any proceeding  therefor may be
            brought, and the principles of equity in general.

      (e)   NO CONFLICT.  Neither the execution,  delivery or performance by the
            Contractor  of  this   Contract,   nor  the   consummation   of  the
            transactions contemplated thereby, will result in:

            (i)   a  violation  of, or a conflict  with,  any  provision  of the
                  organizational documents of such Owner;

            (ii)  a contravention  or breach of, or a default under, any term or
                  provision of any material contract, agreement or instrument to
                  which such Owner is a party or by which it or its property may
                  be bound,  which  contravention,  breach or  default  could be
                  reasonably  expected to have a material  adverse effect on the
                  ability of such Owner to perform  its  obligations  under this
                  Contract to consummate the  transactions  contemplated by this
                  Contract; or

            (iii) a violation by such Owner of any Law.

                                       63
<PAGE>

      (f)   NO VIOLATION OF LAW. It is not in violation of any Law  promulgated,
            or  judgment   entered,   by  any  governmental   authority,   which
            violations, individually or in the aggregate, would adversely affect
            it or its performance of any obligations hereunder.

      (g)   LITIGATION.  There are no actions, suits or proceedings, now pending
            or (to its best knowledge) threatened against it before any court or
            administrative  body or  arbitral  tribunal  that  might  materially
            adversely   affect  the   ability  of  such  Owner  to  perform  its
            obligations hereunder.

      (h)   LICENSES.  It will hold (either directly,  through its Affiliates or
            by  contract)  all  national,  provincial,  local and other  Permits
            required to allow it to operate or conduct its  business  now and as
            contemplated by this Contract.

           SECTION 38. DISPUTE RESOLUTION AND CONSENT TO JURISDICTION

38.1. MUTUAL DISCUSSIONS; MEDIATION.

      (a)   MUTUAL  DISCUSSIONS.   If  a  dispute  or  difference  of  any  kind
            whatsoever  shall  arise  between the  Parties in  connection  with,
            relating  to  or  arising  out  of  this  Contract,   including  the
            interpretation,  performance, non-performance or termination of this
            Contract,  the Parties  shall  attempt to settle such dispute in the
            first instance by mutual discussions between the Project Manager and
            the Developer's Representative.

      (b)   SENIOR MANAGEMENT  REVIEW. If any dispute or difference has not been
            resolved within a period of fifteen (15) Days of mutual  discussions
            conducted  in  accordance  with  the  foregoing  clause  (a) of this
            Section 38.1, or such longer time as is mutually  agreed in writing,
            the dispute or  difference  shall be  submitted  for  resolution  to
            responsible  senior  management  of each Party who are not  directly
            involved  with this  Contract or the Systems,  who shall (i) meet in
            person,  (ii)  allocate  sufficient  time and resources for thorough
            consideration  of all relevant matters and (iii) endeavor to resolve
            the relevant  dispute or difference  within fifteen (15) Days of the
            matter being referred to them.

      (c)   MEDIATION.  In the event that any dispute or difference has not been
            resolved within thirty (30) Days (unless the Parties  mutually agree
            to a longer period) of senior-management  discussions carried out in
            accordance  with the preceding  clause (b) of this Section 38.1, the
            Parties shall endeavor to settle the same by  non-binding  mediation
            under the  Construction  Industry  Mediation  Rules of the  American
            Arbitration Association prior to any litigation in respect thereof.

38.2. CONSENT TO JURISDICTION.  The Parties hereto agree that,  without limiting
      the  ability  of either  Party to appeal an order of any such  court,  the
      United  States  District  Court for the Southern  District of New York and
      state  courts  located  in the  State of New  York  shall  have  exclusive
      jurisdiction  to  enforce  the terms of this  Contract  and to decide  any
      claims or disputes  that may arise or result from,  or be connected  with,

                                       64
<PAGE>

      this  Contract  and any  superseding  agreement,  any  breach  or  default
      hereunder  or  thereunder,  or the  transactions  contemplated  herein  or
      therein.  Any  and  all  claims,  actions,  causes  of  action,  suits  or
      proceedings  relating to the foregoing  shall be filed and maintained only
      in such courts,  and the Parties  hereto  hereby  irrevocably  consent and
      submit  to  the  jurisdiction  of  such  courts.  If an  action,  suit  or
      proceeding  is  instituted  in the United  States  District  Court for the
      Southern District of New York or a state court located in the State of New
      York, each Party agrees not to assert,  by way of motion,  as a defense or
      otherwise, in any such action, suit or proceeding, any claim that:

      (a)   it is not subject personally to the jurisdiction of such court;

      (b)   such action, suit or proceeding is brought in an inconvenient forum;

      (c)   the venue of such action, suit or proceeding is improper; or

      (d)   this Contract and any  superseding  agreement or the subject  matter
            hereof or thereof may not be enforced in or by such court.

      Any and all service of process,  and any other  notice in any such action,
      shall be given  personally  or by  registered  or certified  mail,  return
      receipt  requested,  or by any other means of mail that  requires a signed
      receipt,  postage prepaid,  mailed to such a Party as herein provided. The
      Parties agree to and submit to enforcement of interim  judgments issued in
      any such court.

                           SECTION 39. INDEMNIFICATION

39.1. CONTRACTOR  TO INDEMNIFY.  To the extent that any of the following  Losses
      are not  recoverable  by the relevant Owner Persons out of the proceeds of
      insurance  procured and  maintained by the  Contractor  for the benefit of
      such Owner Persons in connection with this Contract,  the Contractor shall
      be liable for, and shall indemnify, protect, defend and hold harmless each
      Owner  Person from and  against,  all Losses  (each of the  following,  an
      "INDEMNIFIABLE LOSS"), to the extent arising from:

      (a)   any injury to, or death or disease of, any person, or any damage to,
            or loss of use of, any property or asset based upon,  arising  under
            or  otherwise  related  to  the  negligent  act or  omission  of any
            Contractor  Person  in  connection  with  the  performance  of  this
            Contract; or

      (b)   any  infringement or claimed  infringement of intellectual  property
            rights to the extent provided in Section 11.1(b) hereof; or

      (c)   any act or omission of any  Contractor  Person that violates any Law
            or any Tax requirement; or

      (d)   the   discharge  or  presence  of  any   environmentally   hazardous
            construction waste generated from the Contractor's  Work,  excluding
            any  such  environmentally  hazardous  construction  waste  the sole
            source of which was pre-existing environmental  contamination at the
            Site.

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<PAGE>

39.2  OWNERS TO INDEMNIFY.  To the extent that any of the  following  Losses are
      not recoverable by the relevant  Contractor  Person out of the proceeds of
      insurance  procured  and  maintained  by either of the  Contractor  or the
      Owners  (acting  by and  through  the  Developer  in the  procurement  and
      maintenance  thereof) in connection  with this Contract,  each Owner shall
      (to the pro rata extent of its ownership  interest in the Outside  Plants)
      be liable for, and shall indemnify, protect, defend and hold harmless each
      Contractor Person from and against, all Losses to the extent arising from:

      (a)   any  infringement or claimed  infringement of intellectual  property
            rights as described in Section 11.1(a) hereof; or

      (b)   any act or omission of any Owner Person that violates any Law.

39.3  CONDITIONS  TO  EFFECT  INDEMNIFICATION.  Each  Party's  obligations  with
      respect to indemnification as set forth in Sections 11.1(a), 11.1(b), 28.5
      and  39.1  and  39.2  shall  be  subject  to the  conditions  that (a) the
      indemnitee  provides the indemnitor  reasonably prompt Notice of any claim
      or suit brought; (b) the indemnitee  cooperates in the defense of any such
      claim or suit;  and (c) the indemnitor has the sole control of the defense
      and  settlement to the extent of the  indemnitor's  liability for any such
      claim or suit,  provided that the indemnitor  shall confirm in writing its
      obligation  to  indemnify  the  indemnitee  with  respect  to all cost and
      expenses  with  respect  to such  claim  or  suit.  The  above  referenced
      indemnification  provisions  shall  only apply to  occurrences  during the
      performance  of the Work and neither  Party shall have any  obligation  to
      indemnify  against any claim or suit  occurring  after the expiration of a
      period of two (2) years after the Final Acceptance Date.

                            SECTION 40. RISK OF LOSS

40.1. GENERALLY.  Notwithstanding that title in whole or in part to the Work may
      have  passed to any Owner  pursuant to Section 36 hereof,  the  Contractor
      shall  retain  the  risk of loss and  remain  and be  responsible  to each
      affected  Owner  (acting by and through the  Developer in the  enforcement
      thereof)  to make good for Loss or damage  to the  Outside  Plants or Work
      (including  the Owner  Procured  Equipment  as described in APPENDIX 3 but
      specifically  excluding the Nortel switching  equipment  identified in the
      second  paragraph  of Section 3.1 of  APPENDIX  2,  subject to the proviso
      below) arising from any cause (other than the negligent or willful acts or
      omissions of Owner Persons)  whatsoever from the date hereof until (i) the
      RFS Date, or (ii) the issuance of a Certificate  of Commercial  Acceptance
      (but only to the extent that such supplies or Work  constitute part of the
      RFCS Portion), whichever is earlier, in accordance with Section 31 hereof;
      PROVIDED,  that in the  case  of  such  Nortel  switching  equipment,  any
      insurance  proceeds  received by the Contractor  relating thereto shall be
      used to repair or replace  such  Nortel  switching  equipment  or shall be
      delivered to the Developer, at the Developer's option.

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<PAGE>

40.2. PAYMENTS TO THE OWNERS. Where the Contractor has not, either in accordance
      with the terms of this Contract or  otherwise,  without cost or expense to
      the  affected  Owner,  corrected  any damage to any  Outside  Plant or any
      portion  thereof  with  respect to which it retains the risk of loss,  the
      Contractor  shall pay to the  Developer,  for the  benefit of such  Owner,
      compensation equal to the expenses  reasonably incurred by or on behalf of
      such Owner of  correcting  such damage or other loss.  This  Section 40 is
      without  prejudice to the  obligations of the  Contractor  under any other
      provision of this Contract.

                              SECTION 41. INSURANCE

41.1. TYPES OF INSURANCE.  The  Contractor  shall,  at its own expense,  provide
      insurance to the reasonable  satisfaction  of the Developer  until the RFS
      Date or Final  Acceptance  Date,  as  applicable,  of the types and in the
      coverage amounts specified in APPENDIX 6 hereto, and the costs of doing so
      shall be Reimbursable Costs hereunder.

41.2. NOTICE OF CANCELLATION. All of the insurance coverages shall provide that,
      prior to any  cancellation  or material  change  thereto  initiated by the
      insurers,  a thirty  (30) Day written  Notice  shall be  forwarded  to the
      Developer.

41.3. COPIES.  The Contractor  shall furnish the Developer with  certificates of
      insurance (as  accompanied by appropriate  documentation  to establish the
      inclusion  in each  relevant  policy of all terms  and  conditions  as are
      required  hereunder or in any Contract Document for inclusion  therein) to
      verify that the  Contractor  has complied with the insurance  requirements
      under this Contract.

41.4. FAILURE TO MAINTAIN  INSURANCE.  If the Contractor fails to effect or keep
      in force any of the  insurance  required by this Section 41, the Developer
      may, without  prejudice to any other rights it or any Owner may have under
      this  Contract,  effect and keep in force any such  insurance  and pay the
      premium due or take out new insurance satisfactory to the Developer.

41.5. COMPLIANCE  WITH  POLICIES.  The  Contractor  shall comply with all terms,
      conditions  and  guaranties  contained  in all  policies  relating  to the
      insurance  required  by this  Section  41 and  shall  make all  reasonable
      efforts so that its insurance brokers and insurers give the Developer such
      information in respect thereto as the Developer may reasonably request.

41.6. CLAIM  INFORMATION.  The Contractor shall notify the insurers promptly and
      shall supply all necessary information  concerning any occurrence that may
      give  rise to a claim  under  the  above  insurance  policies  in order to
      expedite the processing of the claim.

41.7. REMEDY OF LOSS OR DAMAGE. Following a loss or damage, the Contractor shall
      remedy any such loss or damage with due  diligence  and dispatch and shall
      not wait for any insurance proceeds to effect the repairs.

41.8. INSOLVENCY OF INSURERS. The insolvency, liquidation, bankruptcy or failure
      of  any  insurer   providing   insurance   for  the   Contractor   or  any
      Subcontractor,  or  failure of any such  insurer  to pay claims  accruing,
      shall not be  considered  a waiver of, nor shall it excuse the  Contractor

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<PAGE>

      from complying with, any of the provisions of this Contract.

             SECTION 42. DOCUMENTS, INFORMATION AND CONFIDENTIALITY

42.1. GENERALLY.   All  drawings,   diagrams,   specifications   and  any  other
      information to be provided by the  Contractor to the Developer  under this
      Contract  shall be  supplied  by the  Contractor  in  accordance  with the
      specified procedures and schedules set forth in the Technical Requirements
      (including  the Network  Description  and Project  Scope).  The Contractor
      shall be solely  responsible  for any delay  resulting from failure on its
      part  to  provide  such  drawings,   diagrams,   specifications  or  other
      information to the Developer within the times required.

42.2. THE CONTRACTOR TO RETAIN DRAWINGS.  All drawings and documents held by the
      Contractor at the RFS Date shall be retained by the Contractor  during the
      Warranty Period to enable the Contractor to supply any  replacement  parts
      or  extensions  to any  Outside  Plant  if  these  shall  subsequently  be
      required.  At the Developer's  request,  the Contractor  shall provide the
      Developer with access to all such documents.

42.3. CONFIDENTIALITY.

      (a)   GENERALLY.   All  drawings,   diagrams,   specifications   or  other
            information  supplied  in  connection  with this  Contract  by or on
            behalf of either Party (such  disclosing  Party or person  acting on
            its  behalf,  the  "DISCLOSING  PARTY")  to the  other  Party  (such
            recipient Party, together with its directors,  officers,  employees,
            agents  or  subcontractors  or any of  their  respective  directors,
            officers,  employees,  agents or  subcontractors,  the "RECIPIENTS")
            that are  marked  or  designated  by the  Disclosing  Party as being
            confidential  and proprietary  shall be used solely in assisting the
            Recipients  in  performance  of this  Contract and shall not, at any
            time earlier than the third (3rd) anniversary of the latest RFS Date
            hereunder be disclosed by such Recipients to any third party without
            the  prior  written  consent  of the  Disclosing  Party,  except  as
            expressly  permitted  under  clause (b) of this Section  42.3.  Each
            Party hereto shall ensure that each  potential  Recipient  under its
            control or acting on its behalf in connection  with this Contract is
            subject to appropriate confidentiality  undertakings with respect to
            all information disclosed hereunder.

      (b)   Notwithstanding  the absence of the Disclosing Party's prior written
            consent, any Recipient may disclose information furnished hereunder:

            (i)   as necessary  for the  performance  of this Contract (and then
                  only under conditions of confidentiality as set forth herein);

            (ii)  as required by Law or pursuant to court order;

            (iii) if it is or  becomes  generally  available  to the  public  by
                  publication   or  otherwise,   other  than  by  disclosure  in
                  violation of this Section 42;

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<PAGE>

            (iv)  if it was within  any  Recipient's  possession  prior to being
                  furnished  to a  Recipient  by or on behalf of the  Disclosing
                  Party;

            (v)   if it becomes available to the Recipient on a non-confidential
                  basis; or

            (vi)  if it was  independently  developed by the  Recipient  without
                  reference to the  information  provided by or on behalf of the
                  Disclosing Party.

            To the extent  practicable,  any  Recipient  shall  give  reasonable
            advance  Notice  to the  Disclosing  Party  prior to any  disclosure
            pursuant to Section 42.3(b)(ii) hereof.

      (c)   TITLE TO INTELLECTUAL PROPERTY. The copyright and all other forms of
            intellectual  property  in all  drawings,  specifications  and  data
            issued by either Party in connection with this Contract shall remain
            the   property  of  that   Party;   PROVIDED   that  any   drawings,
            specifications and data relating  specifically to the Outside Plants
            (as  distinguished  from  the  Contractor's  standard  products  and
            services)  provided by or on behalf of any Contractor  Person to the
            Developer for the benefit of the Owners shall become the property of
            each such Owner (in proportion to its respective  ownership interest
            in the Outside Plants) and the Contractor  hereby so assigns to each
            Owner all of its right,  title and interest,  that now exists or may
            arise in the future,  in and to such  drawings,  specifications  and
            data.  The  Developer and each of the Owners shall have the right to
            use and  reproduce  all drawings,  diagrams and  specifications  and
            other information provided by or on behalf of the Contractor for its
            own use in connection with the operation,  marketing and maintenance
            of the Outside Plants and  interconnection  with other systems,  but
            not for other commercial purposes.

                              SECTION 43. PUBLICITY

No  publicity  relating to this  Contract or the Work shall be  published in any
newspaper, magazine, journal or any other written, oral or visual medium without
the prior written approval of the Developer's Representative.

            SECTION 44. CORRUPT GIFTS AND THE PAYMENT OF COMMISSIONS

44.1. GIFTS, ETC. THE CONTRACTOR:

      (a)   represents and warrants that no Contractor Person has; and

      (b)   covenants that no Contractor Person shall,

      offer or give or agree to give to any Owner  Person any gift,  commission,
      rebate or  consideration of any kind as an inducement or reward for doing,
      influencing  or  carrying  out any act in  relation  to the  obtaining  or
      execution  of this  Contract  or for  showing any favor or disfavor to any
      Person in relation to this Contract.

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<PAGE>

44.2. PAYMENTS.  The  Contractor  covenants  that  neither  it,  nor  any  other
      Contractor Person, shall, directly or indirectly:

      (a)   offer, pay, promise to pay or authorize the payment of any money, or
            offer,  give, promise to give or authorize the giving of anything of
            value to any foreign (non-U.S.)  government  official or any foreign
            political party,  official thereof or candidate for political office
            for purposes of influencing  any act or decision of such  government
            official or political party, official or candidate, or inducing such
            government official or political party, official or candidate to use
            its or its influence with the government or instrumentality  thereof
            to   influence   any  act  or   decision  of  such   government   or
            instrumentality;

      (b)   offer, pay, promise to pay or authorize the payment of any money, or
            offer,  give, promise to give or authorize the giving of anything of
            value to any  Person  while  knowing or having a reason to know that
            all or a portion  of such money or thing of value will be offered or
            given to any such government  official or any such political  party,
            official  thereof or candidate for political  office for purposes of
            influencing  any act or  decision  of such  government  official  or
            political party, official or candidate,  or inducing such government
            official or political party, official or candidate to use its or its
            influence with respect to any act or decision of such  government or
            instrumentality;

      (c)   use  fictitious,   inflated,   duplicate,   anonymous,   inadequate,
            unrecorded or otherwise false accounts, transfers, records, reports,
            documents or bookkeeping  entries for the purpose of (i) concealing,
            mislabeling,   misstating,  omitting  or  otherwise  falsifying  the
            existence, source or application of funds for the uses proscribed by
            Section  44.2(a) or 44.2(b)  hereof,  (ii)  excluding  them from the
            Developer's or any Owner's usual system of financial  accountability
            or (iii)  obtaining  approval by any Owner Person of any  activities
            proscribed by Section 44.2(a) or 44.2(b) hereof.

44.3. FOREIGN  CORRUPT  PRACTICES  ACT.  The  Contractor  acknowledges  that the
      prohibitions  set forth in Section 44.2 hereof conform to the requirements
      of the U.S. Foreign Corrupt  Practices Act of 1977, as amended,  and shall
      apply to all activities of each  Contractor  Person,  notwithstanding  the
      fact that such  activities may be permitted by the standards or customs of
      countries other than the United States.

44.4. PERMITTED ACTIVITIES. Section 44.2 hereof does not prohibit:

      (a)   the normal extension of those common courtesies and social amenities
            (including  meals,  holiday  gifts  and  tips  of  nominal  amounts)
            consistent  with  ethical  business  practices  that are offered and
            received on a basis of  friendship or  hospitality,  and without the
            expectation  of  anything  in return,  and are of too little  value,
            duration or frequency to give even the  appearance  of  impropriety;
            PROVIDED that the cost thereof is properly  identified and disclosed
            on the books of the Developer or relevant Owner;

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<PAGE>

      (b)   the payment of  commissions  or fees to  responsible  and  qualified
            consultants, agents, marketing representatives, attorneys and others
            for necessary and legitimate services actually  performed;  PROVIDED
            that the  amount  paid is  reasonably  related  to the value of such
            services or the benefits resulting therefrom;

      (c)   payments to Persons  whose  duties are  essentially  ministerial  or
            clerical, which are not intended to influence the misuse of official
            position,  but rather are  intended to  encourage  the lawful use of
            official  position  to  expedite a matter or to act with  respect to
            matters not involving any discretion; or

      (d)   any  payment to a  government  official,  employee or agency that is
            specifically   required  by  Law,   regulation  or  decree   equally
            applicable to all similarly situated companies.

44.5. MATERIALITY.  Breach of this  Section 44 may render  the  Contractor,  its
      Subcontractors and agents liable to punishment by Law, and any such breach
      shall constitute an Event of Default.

                               SECTION 45. NOTICES

45.1. METHODS AND  EFFECTIVENESS.  All  notices,  requests,  consents  and other
      communications  hereunder (each, a "NOTICE") shall be in writing and shall
      be delivered by one or more of the following methods:
<TABLE>

<S>                                   <C>
===================================================================
METHOD                                DATE OF EFFECTIVENESS
===================================================================
Personal delivery                     Date delivered
===================================================================
Facsimile  with  return  confirmation Date   sent   if    received
of transmission                       during    normal    business
                                      hours,  otherwise  the  next
                                      Business Day
===================================================================
Nationally    recognized    overnight Business  Day after the date
courier service                       sent  if  within   the  same
                                      country,  otherwise the date
                                      delivered
===================================================================
Firstclass  certified mail,  postage Fifth Day after the date sent
prepaid and return receipt requested
===================================================================

</TABLE>

                                       71
<PAGE>

45.2. ADDRESSES.  Unless otherwise notified in writing, for the purposes of this
      Section 46, the addresses and facsimile numbers of the Parties are:

      (a)   THE CONTRACTOR. If to the Contractor, at the following addresses:

            Bechtel Limited c/o Bechtel Overseas Corporation
            c/o Pipeline Engineering GmbH
            Kallenbergstrasse 5
            D-45141 Essen
            GERMANY
            Attention: Mr. Allan L. Aldridge, Project Manager
            Facsimile:  +49-201-320-5309

            WITH A COPY TO:

            Bechtel Limited
            P.O. Box 739
            London W6 8DP
            UNITED KINGDOM
            Attention: Mr. William W. West, Project Director
            Copy: Mr. George B. Baber, General Manager
            Facsimile: +44-181-846-4938

            AND AN ADDITIONAL COPY TO:

            Bechtel Corporation
            50 Beale Street
            San Francisco, CA 94105
            Attention:  General Counsel
            Facsimile:  +1-415-768-1777

      (b)   THE DEVELOPER. If to the Developer, at the following address:

            ViCaMe Infrastructure Development GmbH
            c/o Viatel U.K.
            Parnell House
            25 Wilton Road
            London  SW1V 1EJ
            UNITED KINGDOM
            Attention:  Mr. John Langmaid, Project Manager
            Facsimile:   +44-171-828-1907

                                       72
<PAGE>

            AND A COPY TO:

            Viatel, Inc.
            685 Third Avenue
            New York, New York 10017
            UNITED STATES OF AMERICA
            Attention:  General Counsel
            Facsimile:  +1-212-350-9250

      (c)   THE OWNERS. Notwithstanding Section 2.1(b) hereof, in the event that
            notice  must be given  pursuant  to this  Contract  to any  Owner or
            Owners, such notice shall be provided as follows:

            (i)   VIATEL.  If to  Viatel,  at the  addresses  for the  Developer
                  specified above in paragraph (b).

            (ii)  MFN. If to MFN, at the following address:

                  Metromedia Fiber Network, Inc.
                  Zeil 5
                  60308 Frankfurt Main
                  GERMANY
                  Facsimile:  +1-49-69-297-24200

                  WITH A COPY TO:

                  Metromedia Fiber Network, Inc.
                  One North Lexington Avenue
                  White Plains, New York  10601
                  Attention:   President
                  Facsimile:  +1-914-421-6777

                  AND AN ADDITIONAL COPY TO:

                  Metromedia Fiber Network, Inc.
                  One Meadowlands Plaza
                  East Rutherford, New Jersey  07073-2137
                  Attention:  General Counsel

            (iii) CARRIER 1. If to Carrier 1, at the following address:

                  Carrier 1 Fiber Network GmbH & Co. oHG
                  Lyoner Stra(beta)e 15
                  60528 Frankfurt am Main
                  Germany

                                       73
<PAGE>

                  WITH A COPY TO:

                  Carrier 1 Fiber Network GmbH & Co. oHG
                  Militarstrasse 36
                  CH-8004  Zurich
                  SWITZERLAND
                  Attention:  President
                  Facsimile:  +41-1-297-2601

                  AND AN ADDITIONAL COPY TO:

                  Providence Equity Partners Inc.
                  901 Fleet Center
                  50 Kennedy Plaza
                  Providence, Rhode Island  02903
                  Attention:  Managing Director
                  Facsimile:  +1-401-751-1790

      or to such  other  place and with such  other  copies as either  Party may
      designate as to itself by written Notice to the other Party.

45.3. ENGLISH LANGUAGE.  Except where otherwise provided, all documents relating
      to this  Contract and all  communications  between the Parties shall be in
      the English language.

                            SECTION 46. NO CONFLICTS

The  Contractor  represents  and warrants that it has not, nor will it hereafter
enter into,  any contract with any customer,  and has not, and will not, take or
omit any action, in either case that could jeopardize its ability to perform its
obligations under this Contract.

                            SECTION 47. MISCELLANEOUS

47.1. HEADINGS. For the purposes of interpretation, the headings of the Sections
      hereof shall not be deemed to form part of this Contract.

47.2. GOVERNING  LAW.  THIS  CONTRACT  SHALL IN ALL  RESPECTS BE  CONSTRUED  AND
      GOVERNED  IN  ACCORDANCE  WITH THE LAWS OF THE STATE OF NEW  YORK,  UNITED
      STATES,  APPLICABLE TO AGREEMENTS  MADE AND TO BE PERFORMED  WHOLLY WITHIN
      SUCH STATE  (INCLUDING  SECTIONS 5-1401 AND 5-1402 OF THE NEW YORK GENERAL
      OBLIGATIONS  LAW), BUT, TO THE FULLEST EXTENT PERMITTED BY LAW,  EXCLUDING
      ALL OTHER CHOICE-OF-LAW AND CONFLICTS-OF-LAW RULES.

47.3. SEVERABILITY.  If any  provision  of this  Contract  shall be  invalid  or
      unenforceable, such invalidity or unenforceability shall not invalidate or
      render  unenforceable the entire Contract,  but rather the entire Contract
      shall  be  construed  as if  not  containing  the  particular  invalid  or

                                       74
<PAGE>

      unenforceable  provision or provisions,  and rights and obligations of all
      Parties shall be construed and enforced accordingly.

47.4. INTEGRATION.   This  Contract   supersedes   all  prior  oral  or  written
      understandings  between the Parties and,  constitutes the entire agreement
      with respect to the subject matter of this Contract.

47.5. AMENDMENTS AND WAIVERS.

      (a)   AMENDMENTS.  This Contract and any of its provisions may be amended,
            supplemented or otherwise  modified by another  agreement in writing
            signed by a duly authorized person on behalf of each Party.

      (b)   WAIVERS.  Any  provision of this Contract may be waived if, and only
            if, such waiver is in writing and signed by the Party  against  whom
            the  waiver is to be  enforced.  No failure or delay by any Party in
            exercising any right, power or privilege  hereunder shall operate as
            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.

47.6. FURTHER  ASSURANCES.  The  Contractor  shall  provide  any  and  all  such
      cooperation  and  assistance as the Developer  may  reasonably  request in
      connection with the  implementation  of this Contract and the engineering,
      procurement  and  construction of the Outside  Plants.  Specifically,  the
      Contractor shall promptly provide any technical, engineering, financial or
      other  information  that the Developer is entitled to under this Contract,
      whenever  requested by the  Developer,  including in  connection  with any
      requests  by,  filings to, or  regulatory  requirements  of,  Governmental
      Authorities.

47.7. COUNTERPARTS.  This Contract may be executed in one or more  counterparts,
      each of which when so  executed  shall be deemed to be an  original.  Such
      counterparts together shall constitute but one Contract.

47.8. SUCCESSORS AND ASSIGNS. This Contract shall be binding upon, and is solely
      for the benefit of, each Party,  its successors  and permitted  assignees.
      The  Developer  or any Owner may  assign  its  interest  in this  Contract
      without  the  consent  of the  Contractor  to any  Affiliate  or  group of
      Affiliates,  and such assignment  shall be effective  immediately upon the
      Developer's  provision of Notice  thereof to the  Contractor in accordance
      with Section 2.3(a) hereof. The Contractor may not assign its interests in
      this Contract without the written consent of the Developer.

47.9. NO  THIRD  PARTY  BENEFICIARIES.  Unless  otherwise  expressly  stipulated
      herein,  nothing in this  Contract  is  intended to confer upon any Person
      other than each Party,  its successors and permitted  assignees any rights
      or remedies of any nature whatsoever under or by reason of this Contract.

47.10.UNITED  NATIONS  CONVENTION  ON CONTRACTS  FOR THE  INTERNATIONAL  SALE OF
      GOODS.  The Parties agree that the United Nations  Convention on Contracts
      for the International Sale of Goods shall not apply to this Contract.

                                       75
<PAGE>

47.11.REMEDIES  CUMULATIVE.  The rights and remedies  herein  provided  shall be
      cumulative and not exclusive of any rights or remedies provided by Law.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       76
<PAGE>

      IN WITNESS WHEREOF, the Parties have duly executed this Contract as of the
date first set forth above.

                                 BECHTEL LIMITED

                                 By  /s/ George Edwin Conniff, Jr.
                                   ____________________________________
                                 Name:  George Edwin Conniff, Jr.
                                 Title: President

                                 VICAME INFRASTRUCTURE DEVELOPMENT GmbH

                                 By /s/ Sheldon M. Goldman
                                   ____________________________________
                                 Name:  Sheldon M. Goldman
                                 Title: Managing Director

                                 VIATEL GERMAN ASSET GmbH

                                 By  /s/ Sheldon M. Goldman
                                   ____________________________________
                                 Name:  Sheldon M. Goldman
                                 Title: Managing Director

                                 METROMEDIA FIBER NETWORK GmbH

                                 By  /s/ Richard E. Nohe
                                   ____________________________________
                                 Name:  Richard E. Nohe
                                 Title: Managing Director

                                 CARRIER 1 FIBER NETWORK GmbH & Co. OHG

                                 By/s/ Edward Gross
                                      ____________________________________
                                 Name:  Edward Gross
                                 Title: Managing Director

                                       77
<PAGE>

                                                                  EXECUTION COPY

                                    ADDENDUM
                                       TO
                              AMENDED AND RESTATED
                            ENGINEERING, PROCUREMENT
                            AND CONSTRUCTION CONTRACT
                              (OUTSIDE PLANT WORK)

                         DATED AS OF NOVEMBER 15, 1999,
                        EFFECTIVE AS OF FEBRUARY 19, 1999

                                     BETWEEN
                          BECHTEL LIMITED AS CONTRACTOR

                                       AND

               VICAME INFRASTRUCTURE DEVELOPMENT GMBH AS DEVELOPER

                                       and

                        VIATEL GERMAN ASSET GMBH AS OWNER

                                       AND

                     METROMEDIA FIBER NETWORK GMBH AS OWNER

                                       AND

                 CARRIER 1 FIBER NETWORK GMBH & CO. OHG AS OWNER

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

                       GERMAN NETWORK DEVELOPMENT PROJECT

                             GND No. 1 and GND No. 2

<PAGE>

     ADDENDUM TO AMENDED AND RESTATED ENGINEERING,  PROCUREMENT AND CONSTRUCTION
CONTRACT  (OUTSIDE PLANT WORK),  dated as of November 15, 1999,  effective as of
February 19, 1999, among and between BECHTEL  LIMITED,  a United Kingdom limited
liability  company (the  "CONTRACTOR");  and VICAME  INFRASTRUCTURE  DEVELOPMENT
GmbH,  a  GESELLSCHAFT  MIT  BESCHRANKTER  HAFTUNG  organized  under the laws of
Germany (the  "DEVELOPER");  and VIATEL  GERMAN ASSET GmbH, a  GESELLSCHAFT  MIT
BESCHRANKTER  HAFTUNG  organized  under  the  laws of  Germany  ("VIATEL");  and
METROMEDIA FIBER NETWORK GmbH, a GESELLSCHAFT MIT BESCHRANKTER HAFTUNG organized
under the laws of Germany  ("MFN");  and CARRIER 1 FIBER NETWORK GmbH & Co. OHG,
an OFFENE HANDELSGESELLSCHAFT organized under the laws of Germany ("CARRIER 1"),
with  each of  Viatel,  MFN and  Carrier  1 acting  as an Owner  hereunder,  and
hereinafter  individually  referred  to as an "OWNER" or,  collectively,  as the
"OWNERS".

                              W I T N E S S E T H :

     WHEREAS,   the  parties   have   entered  into  the  Amended  and  Restated
Engineering,  Procurement and Construction  Contract (Outside Plant Work), dated
as of November  15, 1999,  effective  as of February 19, 1999 (the  "AMENDED EPC
CONTRACT"); and

     WHEREAS,  the  parties  desire to adopt this  Addendum  to the  Amended EPC
Contract to clarify certain matters.

     NOW,  THEREFORE,  the parties,  in consideration of the mutual undertakings
herein expressed, covenant and agree with each other as follows:

     1. ADDENDUM TO THE AMENDED EPC CONTRACT.  The Amended EPC Contract shall be
and hereby is amended as follows:

          1.1 Section 9.2 of the  Amended  EPC  Contract  shall be and is hereby
     deleted  in  its  entirety  and  the  following  language  shall  be and is
     substituted therefor:

          "9.2 ACCESS TO RECORDS.  The  Contractor  shall,  during the period in
     which  Contractor  is  required  to compile and  maintain  books,  records,
     vouchers  and  accounts  pursuant to Section  9.1  hereof,  give each Owner
     Person  access  to all  documentation  and  records  required  to be  kept,
     obtained and maintained pursuant to Section 9.1 hereof; PROVIDED,  HOWEVER,
     that with respect to all such books,  vouchers,  documentation  and records
     created  prior to the execution  date of this  Contract (the  "PRE-CONTRACT
     EXECUTION  PERIOD"),  the Contractor shall provide all such material to the
     Owner  Persons to the extent and in the form it exists and to provide it in
     a format the Developer or such Owner Person may reasonably  request, to the
     extent to which it has not previously been delivered.  The Contractor shall
     not  destroy  any such  documentation  or  records  without  affording  the
     Developer an  opportunity  to review or copy the same.  At the  Developer's
     request, prior to Final Acceptance, copies of all documentation and records
     required to be kept, obtained and maintained pursuant to Section 9.1 hereof
     shall  be  delivered  to the  Developer  (subject  to  any  confidentiality
     obligations under Section 42 hereof).

<PAGE>

          Notwithstanding any of the foregoing, with respect to the Pre-Contract
     Execution  Period,  the  Contractor  shall be relieved of any obligation to
     provide any Owner Person with access to or copies of  documentation  of the
     nature set forth in Section  9.1 hereof that were not in  existence  during
     the Pre-Contract  Execution Period.  To the extent that such  documentation
     was  in  existence  during  the   Pre-Contract   Execution  Period  and  in
     Contractor's  possession,  the provisions of the first paragraph of Section
     9.1 hereof shall apply to such documentation."

1.2  The definition of "Warranty  Period"  contained in Exhibit 1 to the Amended
     EPC  Contract  shall  be and is  hereby  deleted  in its  entirety  and the
     following language shall be and is substituted therefor:

            "WARRANTY  PERIOD" [REDACTED]

     2.  REFERENCE TO AND EFFECT ON THE AMENDED EPC CONTRACT.  Each reference in
the  Amended EPC  Contract  to "the  Contract,"  "this  Contract,"  "hereunder,"
"hereof,"  "herein" or words of like import shall mean and be a reference to the
Amended EPC Contract as amended  hereby.  The Amended EPC  Contract,  as amended
hereby, shall remain in full force and effect.

     3. COUNTERPARTS. This Addendum may be executed in one or more counterparts,
each of which  shall be  deemed an  original,  but all of which  together  shall
constitute one and the same instrument.

                    [remainder of page intentionally blank]

                                        2
<PAGE>

     IN WITNESS WHEREOF,  the parties hereto have duly executed this Addendum as
of the date first set forth above.

                                           BECHTEL LIMITED

                                           By: /s/ George Edwin Conniff, Jr.
                                              ______________________________
                                                Name: George Edwin Conniff, Jr.
                                                Title: President

VICAME INFRASTRUCTURE DEVELOPMENT GmbH     VIATEL GERMAN ASSET GmbH

By:  /s/ Sheldon M. Goldman                By:  /s/  Sheldon M. Goldman
   _________________________________          ______________________________
     Name:  Sheldon M. Goldman                  Name: Sheldon M. Goldman
     Title: Managing Director                   Title: Managing Director

METROMEDIA FIBER NETWORK GmbH              CARRIER 1 FIBER NETWORK
                                           GmbH & Co. OHG

By:  /s/ Richard E. Nohe                    By: /s/ Edward Gross
    _________________________________          ______________________________
    Name:  Richard E. Nohe                     Name:  Edward Gross
    Title: Managing Director                   Title: Managing Director

                                        3
<PAGE>

                                                                       EXHIBIT 1
                                                                   DEFINED TERMS

      "AFFILIATE"  of any  Person  means  any other  Person  that,  directly  or
indirectly through one or more intermediaries, controls the first Person, or any
other  Person  that is  controlled  by or under  common  control  with the first
Person. For the purposes of this definition, the term "CONTROL" shall be defined
as direct or  beneficial  ownership of greater than fifty  percent  (50%) of the
equity interests or greater than fifty percent (50%) of the voting control of an
entity.

      "ALTERNATIVE  WAYLEAVE" has the meaning ascribed thereto in Section 7.3 of
the Contract.

      "BUSINESS  DAY" means any Day,  other than a Saturday,  Sunday or national
statutory holiday in any of Germany, the United Kingdom or the United States.

      "CABLE LINK" means each of (A) the two (2) subducts to be fully  completed
by the  Contractor  and (B) two (2)  additional  subducts to be completed by the
Contractor without Fiber Optic Cable pulling,  in each case, along the Scheduled
Route as part of the Outside Plant,  together with all materials,  equipment and
supply (including,  without limitation, the Fiber Optic Cable as supplied by the
Developer) to be annexed to, installed within or integrated into such subduct in
accordance  with the terms and  conditions  of this  Contract  and the  Contract
Documents.

      "CARRIER  1" has the  meaning  ascribed  thereto  in the  preamble  to the
Contract.

      "CERTIFICATE OF COMMERCIAL ACCEPTANCE" has the meaning ascribed thereto in
Section 31.3 of the Contract.

"CERTIFICATE OF FINAL  ACCEPTANCE" has the meaning  ascribed  thereto in Section
31.6 of the Contract.

      "CERTIFICATE OF PAYMENT AND FINAL RELEASE" means the certificate delivered
by the Contractor to the Developer in the form of Exhibit 3 to the Contract.

      "CERTIFICATE  OF RFS  ACCEPTANCE"  has the  meaning  ascribed  thereto  in
Section 31.2 of the Contract.

      "CHANGE EVENT" means any of the following:  (a) a Regulatory Change; (b) a
Wayleave  or  Permit  Failure;  (c)  Owner-Caused  Delay;  (d) the  Contractor's
implementation  of (i) any work-around plan approved by the Developer in respect
of: Force Majeure Events or (ii)  Alternative  Wayleaves;  (e) the  Contractor's
exercise of suspension  rights pursuant to Section 24.4(a) of the Contract;  (f)
to the extent specified in Section 20.3 of the Contract, delays sustained by the
Contractor in connection with the Developer's unwarranted exercise of inspection
rights hereunder;  (g) Unanticipated Site Conditions;  and (h) any other grounds
specifically referred to in the other provisions of this Contract that expressly
entitle the  Contractor  to  equitable  relief  pursuant to Section  15.1 of the
Contract.

                                       1
<PAGE>

      "CODES  AND   STANDARDS"   means  the   regulations,   codes,   standards,
specifications,   interpretations  and  other  applicable  requirements  of  any
industrial  association or professional  discipline pertaining to or relating to
any Outside Plant and the Work.

      "COMMERCIAL  ACCEPTANCE DATE" means the date on which the Developer issues
the Certificate of Commercial Acceptance in respect of any RFCS Portion.

      "CONTRACT"  means  Sections  1  through  47 of the  Amended  and  Restated
Engineering,  Procurement and Construction  Contract (Outside Plant Work), dated
as of  November  15,  1999,  effective  as  of  February  19,  1999,  among  the
Contractor,  the Developer and the Owners, including all Exhibits and Appendices
thereto.

     "CONTRACT DOCUMENTS" means the items listed in Section 3.2 of the Contract.

      "CONTRACT VARIATION" has the meaning ascribed thereto in Section 15 of the
Contract.

      "CONTRACTOR"  has the  meaning  ascribed  thereto in the  preamble  to the
Contract.

      "CONTRACTOR  INVOICE"  means an invoice (a) prepared in form and substance
satisfactory to the Developer, (b) naming each of the Owners as several obligors
to the extent of the respective payments (and corresponding line items for Value
Added Tax) specified thereon for such Owners and (c) submitted by the Contractor
to the Developer in accordance with Section 12.5 of the Contract.

      "CONTRACTOR PERMITS" has the meaning ascribed thereto in Section 6.3(a) of
the Contract.

      "CONTRACTOR PERSON" means (a) the Contractor, (b) any Subcontractor or (c)
any subsidiary,  Affiliate, agent,  representative,  director, manager, officer,
employee (including the Project Manager), transferee, successor or assign of the
Contractor or any Subcontractor.

      "CONTRACTOR  SECURITY" means any of all of the Contractor Surety Bond, the
Corporate Guarantee or the Retainage LC.

      "CONTRACTOR  SURETY BOND" has the meaning ascribed thereto in Section 14.1
of the Contract.

      "CORPORATE GUARANTEE" means the corporate guarantee in favor of the Owners
from  Bechtel  Corporation,  a Nevada  corporation,  securing  the  payment  and
performance  obligations  of  the  Contractor  hereunder,  to  be  delivered  in
accordance with Section 14.1(a) of the Contract in the form set forth in Exhibit
6 hereto.

      "CRITICAL  PATH ITEM"  means each item of Work  identified  as such in the
Milestone Schedule.

      "DAY" means the 24-hour period beginning and ending at 00.00 hours Central
European Time.

      "DEFECTIVE WORK" means any portion of the Work that contains Defects.

                                       2
<PAGE>

      "DEFECTS" means:

            (a)   when used with respect to  structures,  materials and supplies
                  provided  by the  Contractor  as part of the Work,  such items
                  that are not:

                  (i)   of good quality or free from  improper  workmanship  and
                        deficiencies; and

                  (ii)  free from errors or omissions  in design or  manufacture
                        in light of the Technical Requirements; and

            (b)   when  used with  respect  to the Work  (including  any and all
                  design, engineering, startup activities, materials, equipment,
                  tools, supplies,  installation or quality-control  activities)
                  or any portion thereof:

                  (i)   it is not in  accordance  with the  Contract  Documents,
                        including,    without    limitation,    the    Technical
                        Requirements;

                  (ii)  it is not  provided  in a  workmanlike  manner  or is of
                        improper or inferior workmanship; and

                  (iii) it would, in the Developer's  determination based on the
                        results  of  the  Contractor's  inspection  and  testing
                        activities   (including,    without   limitation,    the
                        Performance  Tests),  adversely  affect  the  ability of
                        either  Outside  Plant  to  meet  any of  the  Technical
                        Requirements over the applicable Warranty Period.

      "DESIGNATED OWNER" has the meaning ascribed thereto in Section 36.1 of the
Contract.

      "DEUTSCHE MARK" or "DM" means the lawful currency of Germany.

      "DEVELOPER"  has the  meaning  ascribed  thereto  in the  preamble  to the
Contract.

      "DEVELOPER'S  REPRESENTATIVE"  has the meaning ascribed thereto in Section
19.2 of the Contract.

      "DISCLOSING PARTY" has the meaning ascribed thereto in Section 42.3 of the
Contract.

      "EURO" means the single currency of the European Monetary Union adopted by
the Member States thereof to be effective as of January 1, 1999.

      "EVENT OF DEFAULT" has the meaning ascribed thereto in Section 24.1 of the
Contract.

      "FIBER OPTIC CABLE" means the fiber optic cable, as specifically described
in Appendices 2 and 3 to the  Contract,  to be procured by each Owner at its own
cost and expense,  and to be made available by the Developer for installation by
the Contractor, as part of the Work, along the Scheduled Route.

      "FINAL  ACCEPTANCE"  means  the  issuance  of  the  Certificate  of  Final
Acceptance.

                                       3
<PAGE>

      "FINAL  ACCEPTANCE  DATE" means the date on which Final Acceptance of each
Outside Plant occurs.

      "FINAL PAYMENT" has the meaning ascribed thereto in Section 12.3(c) of the
Contract.

      "FIXED  FEE" has the  meaning  ascribed  thereto  in  Section  12.2 of the
Contract.

      "FIXED PRICE CONTRACT" has the meaning ascribed thereto in the preamble of
the Contract.

      "FORCE MAJEURE EVENT" has the meaning  ascribed thereto in Section 18.1 of
the Contract.

      "GENERAL WARRANTY" has the meaning ascribed thereto in Section 32.1 of the
Contract.

      "GERMANY"  means  the  Federal  Republic  of  Germany,  and  includes  all
political or territorial subdivisions thereof.

      "GND NO. 1 OUTSIDE PLANT"  means  the  Outside  Plant  for  the  GND No. 1
System.

      "GND NO. 1 SYSTEM" means the fiber-optic  telecommunications link, as more
precisely described in the Network  Description and Project Scope,  beginning in
Essen,  Germany, and running south along the Scheduled Route in the direction of
and terminating in Karlsruhe, Germany.

      "GND NO. 2 OUTSIDE PLANT"   means   the  Outside  Plant  for the GND No. 2
System.

      "GND NO. 2 SYSTEM" means the fiber-optic  telecommunications link, as more
precisely described in the Network  Description and Project Scope,  beginning in
Essen,  Germany,  and running  clockwise  along the Scheduled  Route  connecting
certain major population centers and terminating in Karlsruhe, Germany.

      "GOVERNMENTAL  AUTHORITY"  means any  nation or  government,  any state or
other  political  subdivision  thereof,  and any  entity  exercising  executive,
legislative,  judicial,  regulatory or administrative functions of or pertaining
to government.

      "GUARANTEED RFS DATE" means, [REDACTED]

                                       4
<PAGE>

      "INCENTIVE  FEE" has the meaning  ascribed  thereto in Section 12.2 of the
Contract.

      "INDEMNIFIABLE  LOSS" has the meaning  ascribed thereto in Section 39.1 of
the Contract.

      "INDEPENDENT  EXPERT" has the meaning  ascribed thereto in Section 15.2 of
the Contract.

      "INITIAL PLANT  COMMISSIONING  REPORT" has the meaning ascribed thereto in
Section 31.1 of the Contract.

      "LAW" means any federal, state,  provincial,  local or other constitution,
charter,  act,  statute,  law,  ordinance,   code,  rule,   regulation,   order,
proclamation,  specified standard or objective criteria,  Permit, other approval
or other  legislative or  administrative  action of any Governmental  Authority,
including:

            (a)   a final decree, judgment or order of a court; and

            (b) any building code applicable to either Outside Plant.

      "LIEN" means any mortgage,  pledge,  lien, deed of trust,  claim,  charge,
security  interest,  attachment or encumbrance of any kind, or any other similar
type  of   preferential   arrangement,   including   materialmen's,   laborers',
mechanics',  Subcontractors'  and vendors' liens, and including any agreement to
give  any of the  foregoing,  any  conditional  sale or  other  title  retention
agreement, any lease in the nature thereof.

      "LIEN  RELEASE"  means the lien  release  executed  and  delivered  by the
Contractor in the form of EXHIBIT 4 hereto, which shall contain:

            (a)   a waiver  and  release  of any and all Liens  arising  from or
                  relating to such portions of the Work to which any  Contractor
                  Invoice relates; and

            (b)   a certification to the Developer for the benefit of the Owners
                  that the Outside Plants and Work are free from Liens.

                                       5
<PAGE>

      "LOSSES" means all damages,  obligations,  debts,  deficiencies,  demands,
judgments, causes of action, costs, charges, fines, penalties,  claims, actions,
proceedings,  liabilities,  losses,  demands,  suits,  prosecutions  or expenses
(including reasonable attorney's fees, disbursements,  costs, expenses and other
charges).

      "MFN" has the meaning ascribed thereto in the preamble to the Contract.

      "MILESTONE  EVENT"  means  any  and  all  events  for  which  an  Activity
Description and  commencement and completion dates are provided in the Milestone
Schedule.

      "MILESTONE SCHEDULE" means APPENDIX 4 to the Contract.

      "NETWORK DESCRIPTION AND PROJECT SCOPE" means APPENDIX 2 to the Contract.

      "NOTICE" has the meaning ascribed thereto in Section 45.1 of the Contract.

      "NOTICE OF  EXERCISE OF  REMEDIES"  has the  meaning  ascribed  thereto in
Section 24.1 of
the Contract.

      "NOTICE OF TERMINATION"  has the meaning  ascribed thereto in Section 27.1
of the Contract.

      "NOTICE OF TERMINATION FOR  CONVENIENCE"  has the meaning ascribed thereto
in Section 23.1 of the Contract.

      "NOTICE OF TERMINATION  FOR DEFAULT" has the meaning  ascribed  thereto in
Section 24.1 of the Contract.

      "ODF"  means  each  Optical  Distribution  Frame  of a  type  and  in  the
configuration specified in APPENDIX 2 to the Contract.

      "OUTSIDE  PLANT"  means the whole of the Fiber  Optic  Cable  link,  on an
ODF-to-ODF  basis  (but  excluding  the  Owner-Procured  Equipment),  along  the
Scheduled  Route  (together with all  equipment,  materials and supplies used or
installed by the  Contractor in the assembly,  installation  and  interfacing of
such Fiber Optic Cable in accordance with the Technical  Requirements),  as more
particularly described in the Network Description and Project Scope.

      "OWNER-CAUSED  DELAY" has the meaning  ascribed thereto in Section 16.1 of
the Contract.

      "OWNER  DEFAULT" has the meaning  ascribed  thereto in Section 24.4 of the
Contract.

      "OWNER ESCROW" has the meaning set forth in Section 12.3(f).

      "OWNER ESCROW  AGREEMENT"  means the  Undertaking  and Pledge and Security
Agreement,  dated as of February  19,  1999,  entered into among and between the
Developer,  the  Contractor,  each Owner and the  collateral  agent signing as a
party thereto in substantially the form of Exhibit 7 hereto, with such revisions
that the collateral agent may reasonably require as a condition to its execution
thereof.

      "OWNER  LIEN"  means any Lien  created  directly by the  Developer  or any
Owner.

                                       6
<PAGE>

      "OWNER PERMITS" has the meaning  ascribed thereto in Section 6.3(b) of the
Contract.

      "OWNER PERSON" means:

            (a)   the   Developer,   the   Developer's   Representative,   QA/QC
                  Contractor, and the Vendors;

            (b)   anyone else acting on behalf of the  Developer or any Owner in
                  connection with the Contract; and

            (c)   the  successors,   assigns,   employees,   agents,   officers,
                  directors and Affiliates of any of the foregoing.

      "OWNER-PROCURED EQUIPMENT" has the meaning ascribed thereto in Section 8.1
of the Contract.

      "OWNER-REQUESTED  VARIATIONS" has the meaning  ascribed thereto in Section
15.1(a) of the Contract.

      "OWNER  SPECIFICATIONS" has the meaning ascribed thereto in Section 8.2(b)
of the Contract.

      "PARTIES" means the Developer, the Contractor and the Owners.

      "PERFORMANCE   PARAMETERS"   means  all  such  performance   criteria  and
acceptable test-result data for the Outside Plants and the components thereof as
set in Appendices 2 and 7 to the Contract.

      "PERFORMANCE TEST STANDARDS" means APPENDIX 7 to the Contract.

      "PERFORMANCE  TESTS" means the Outside Plant tests conducted in accordance
with the Technical Requirements.

      "PERMITS" means all:

            (a)   permits,     "no    objections",     permissions-in-principle,
                  authorizations,    consents,   registrations,    certificates,
                  licenses, orders, work  authorizations/visas,  permissions for
                  the  operation  of  field   equipment   (including   vehicles,
                  machinery and  communications  equipment and  facilities)  and
                  similar authorizations; and

            (b)   consents,  licenses,  waivers,  privileges,  acknowledgements,
                  agreements,  concessions, approvals from and all other filings
                  with and applications submitted to, any Governmental Authority
                  or any other Person,

but not including  Wayleaves,  Telecom  Licenses or any of the  foregoing  which
relate to the POPs.

                                       7
<PAGE>

      "PERSON"  means an individual,  corporation,  limited  liability  company,
partnership,  joint venture, trust,  unincorporated organization or Governmental
Authority.

      "POP SITE"  means,  as  described  in the  greater  detail in the  Network
Description and Project Scope,  each physical  location of any facility designed
to house termination and switching equipment for the Systems.

      "PRE-CONTRACT  EXECUTION  PERIOD"  has the  meaning  ascribed  thereto  in
Section 9.2 of the Contract.

      "PROJECT  MANAGER" has the meaning ascribed thereto in Section 19.1 of the
Contract.

      "PRUDENT  PRACTICES"  means:  (a)  in  respect  of any  Work  constituting
engineering  or   construction-management   work,  those   practices,   methods,
specifications  and standards of safety and performance,  as the same may change
from  time to  time,  as are  commonly  used  by  professional  firms  regularly
performing  engineering  and  construction-management  services  in Germany  for
facilities of the type and size similar to the System, and (b) in respect of any
Work  constituting  procurement  or   contract-administration   services,  those
practices,  methods,  equipment,  specifications  and  standards  of safety  and
performance,  as the same may change from time to time,  as are commonly used by
professional firms regularly performing engineering and construction services in
Germany for  facilities  of the type and size similar to the System,  which,  in
each case, in the exercise of reasonable  judgment and in the light of the facts
known at the time the decision was made, are considered  professional,  safe and
prudent  practice in connection  with the  supervision of design,  construction,
installation   and  use  of  equipment,   facilities  and   improvements,   with
commensurate  standards of safety,  performance,  dependability,  efficiency and
economy.

      "PUBLIC  CONTRACT" means any instrument or document relating to any Public
Wayleave  setting  forth  negotiated  terms and  conditions  differing  from, or
supplemental to, the statutory terms and conditions applicable to Public Forms.

      "PUBLIC  FORM" means any  standard-form  application,  instrument or other
document issued or utilized by, or required for submission to, any  Governmental
Authority in Germany that does not contain or require any  negotiated  provision
or other special term or condition  not  otherwise set forth in applicable  Laws
and Codes and Standards of Germany.

      "PUBLIC  NOTICE"  means,  in  relation  to any  Wayleave,  Permit  or Site
requirement or condition, any statement,  report, comment or other indication by
or  attributable  to any  Governmental  Authority,  regardless  of the  means of
communication or publication thereof, of which the Contractor knows or is aware.

      "PUBLIC WAYLEAVE" means any Wayleave along the Scheduled Route that is (i)
subject to official grant by any appropriate  Governmental Authority in Germany,
and (ii) available to the general public upon uniform terms and conditions  (or,
in  the  case  of  Public  Contracts,   upon  substantially  uniform  terms  and
conditions,  subject to limited  negotiation of certain provisions) as expressly
set forth in applicable Laws and Codes and Standards of Germany.

                                       8
<PAGE>

      "PUNCH LIST" means the list prepared by the Developer identifying items of
the Work that are incomplete or that contain Defects.

      "PUNCH LIST RESERVE" means an amount in cash equal to two hundred  percent
(200%) of the cost of completing or correcting all items identified on the Punch
Lists prepared in connection with Commercial Acceptance or RFS Acceptance.

      "QA/QC CONTRACTOR" means the representative  nominated by the Developer to
facilitate the quality assurance/quality control program for the Outside Plants.

      "RECIPIENT"  has  the  meaning  ascribed  thereto  in  Section  2.3 of the
Contract.

      "REGULATORY CHANGE" means:

            (a)   the adoption,  enactment or application  to either Party,  the
                  Work or any Outside  Plant of any Law  (including  any Tax) or
                  Codes and Standards of or in the United Kingdom,  Germany, the
                  European Union or the United States not existing or applicable
                  to such Party or Outside Plant on the date of the Contract; or

            (b)   any  change  in any  Law  (including  any  Tax) or  Codes  and
                  Standards of or in the United Kingdom,  Germany,  the European
                  Union or the United States or in the application  thereof by a
                  Governmental Authority after the date of the Contract,

but not  including  any Law or Codes and  Standards  or  application  thereof in
existence on the date of the Contract that, by its terms, becomes or will become
effective and  applicable to either Party or any Outside Plant after the date of
the Contract.

      "REIMBURSABLE COSTS" shall mean those costs specified in APPENDIX 1 to the
Contract, together with the Subcontractor Costs.

      "REIMBURSEMENT  INVOICE"  has the  meaning  ascribed  thereto  in  Section
12.5(a) of the Contract.

      "REPEATERS"  means  the  Owner-Procured  Equipment  of a  type  and in the
configuration  specified in the Network  Description  and Project  Scope that is
necessary to amplify the signal transmitted  through the Fiber Optic Cable along
the Scheduled Route.

      "REPEATER   FACILITIES"  means  any  and  all  equipment,   materials  and
facilities  (other than the  Repeaters)  to be furnished by the  Contractor,  as
described  in, and meeting the  requirements  of, the  Network  Description  and
Project Scope.

      "REPEATER SITE" means each physical location (including applicable fencing
and parking  areas) for any Repeaters or Repeater  Facilities,  as described in,
and meeting the requirements of, the Network Description and Project Scope.

                                       9
<PAGE>

      "REPLACEMENT  CONTRACTOR" has the meaning ascribed thereto in Section 25.1
of the Contract.

      "REPLACEMENT ITEM" has the meaning ascribed thereto in Section 32.6 of the
Contract.

      "RETAINAGE  LC" means letter of credit  delivered by the Contractor to the
Developer  pursuant  to  Section  12.3(a)  of  the  Contract,   which  shall  be
substantially in the form of Exhibit 5 hereto.

      "RFCS  PORTION"  has the meaning  ascribed  thereto in Section 31.3 of the
Contract.

      "RFCS  SEGMENT"  means  each  segment  contained  in the GND No. 2 Outside
Plant, as described further in Section 12.2(b) of the Contract.

      "RFS ACCEPTANCE" means the issuance by the Developer of the Certificate of
RFS Acceptance.

      "RFS DATE" means,  in respect of each Outside Plant (or segment  thereof),
the date on which RFS  Acceptance  of such  Outside  Plant (or segment  thereof)
occurs, as determined in accordance with Section 31.2 of the Contract.

      "SCHEDULED  ROUTE"  means  the  Fiber  Optic  Cable  route for each of the
Systems,  as more  precisely  identified in APPENDIX 2 of the Contract,  as such
route may be subject to change from time to time in accordance  with and subject
to the provisions of the Contract  (including,  without  limitation,  Section 15
thereof).

      "SCHEDULE  RECOVERY PLAN" has the meaning  ascribed thereto in Section 5.2
of the Contract.

      "SITE" means any location or locations at which any  Contractor  Person is
at any time  performing,  or, as reflected  in the  Technical  Requirements,  is
required to perform, the Work hereunder.

      "STORAGE AND MARKING PROCEDURES" means APPENDIX 8 to the Contract.

      "SUBCONTRACT"  means any  contract,  or the  conclusion  of any  contract,
between the Contractor and any  Subcontractor,  or between any Subcontractor and
any other  Person,  relating  to the Work or any supply to be  provided  by such
Subcontractor in respect of the Outside Plants.

      "SUBCONTRACTOR"  means any contractor (other than the Contractor),  vendor
or  supplier  that  contracts  to perform  services  or provide  supplies to the
Contractor constituting part of the Work.

      "SUBCONTRACTOR  COST" means any payment actually disbursed pursuant to any
Subcontract to any Subcontractor.

                                       10
<PAGE>

      "SUBCONTRACTOR COST VERIFICATION" means the certification  executed by the
Contractor  representing  and  confirming  to the Owners that (i) either (a) the
Contractor has, in fact, paid to the relevant  Subcontractor(s)  the full amount
of Subcontractor Costs as to which such Subcontractor Cost Verification  relates
or (b) the  Contractor  will  pay to the  relevant  Subcontractor(s)  when  such
payment is due and (ii) to the best of the  Contractor's  knowledge and based on
its full inspection as required hereunder,  the relevant  Subcontractor Supplies
and Subcontractor Services are in accordance with the Technical Requirements and
have been  completed  and  delivered to the extent  required  under the relevant
Subcontract for payment in respect thereof.

      "SUBCONTRACTOR  SUPPLIES" means any and all materials,  plant,  machinery,
equipment,  hardware and other items provided by any Subcontractor pursuant to a
Subcontract.

      "SUBCONTRACTOR  SERVICES" means any and all services to be provided by any
Subcontractor pursuant to a Subcontract.

      "SYSTEM" means each of the GND No. 1 System and the GND No. 2 System.

      "TAKE  OVER" has the  meaning  ascribed  thereto  in  Section  24.1 of the
Contract.

       "TARGET  COST"  means DM  [REDACTED],  being  the Total  Completion  Cost
estimate  agreed by the Parties as of the execution date of the Contract,  which
amount shall be fixed  throughout  the term of the Contract  except as otherwise
set forth in Section 15.1(b) of the Contract.

       "TAXES" means all taxes and duties of any type, including  sales-of-goods
taxes,  value added taxes,  customs duties or other levies and duties applicable
to the performance of the Work hereunder,  but excluding taxes,  duties or other
charges levied upon or  attributable  to the Parties'  respective  properties or
incomes.

      "TECHNICAL REQUIREMENTS" means the following documents:

            (a)   each of  Appendices 1 through 11 to the  Contract,  and all of
                  such Appendices collectively;

            (b)   the Vendor Specifications; and

            (c) the Owner Specifications.

      "TELECOM  LICENSE"  means any  license  or  similar  authorization  of any
Governmental  Authority  that a Person must hold in order to act as the owner or
operator of telecommunications facilities in a relevant jurisdiction.

      "TERMINATION  CLAIM" has the meaning  ascribed  thereto in Section 23.3 of
the Contract.

      "TERMINATION  CLAIM  REVIEW  PERIOD" has the meaning  ascribed  thereto in
Section 23.3 of the Contract.

                                       11
<PAGE>

      "TERMINATION  FOR CONVENIENCE" has the meaning ascribed thereto in Section
23.1 of the Contract.

      "TERMINATION FOR DEFAULT" has the meaning ascribed thereto in Section 24.1
of the Contract.

      "TERMINATION  PAYMENT  (CONVENIENCE)"  has the meaning ascribed thereto in
Section 23.3 of the Contract.

      "TOTAL  COMPLETION COST" means the total amount of the Reimbursable  Costs
paid or payable to the Contractor pursuant to the Contract.

      "TOTAL  LIABILITY CAP" has the meaning ascribed thereto in Section 28.3 of
the Contract.

      "TRANSFERRED PROPERTY" has the meaning ascribed thereto in Section 36.3 of
the Contract.

      "UNANTICIPATED   SITE  CONDITION"  means  any  physical  condition  of  an
environmental, geological or other material nature (whether natural or man-made)
occurring  or existing  on,  above or below the surface of any Site,  excluding,
however, any condition:

            (a)   disclosed  or  referenced  in (i) any Owner  Specification  or
                  other Owner-or  Developer-provided  Notice,  recommendation or
                  technical  information  supplied  in  written  format  to  the
                  Contractor  prior to the effective  date of the  Contract,  or
                  (ii) any Law,  Public Notice or Codes and  Standards  existing
                  and effective as of the  effective  date of the Contract as to
                  which a prudent  contractor  performing  work identical to the
                  Work would have informed itself; or

            (b)   that is  otherwise  of a type  that,  given  the scope of Work
                  under this Contract and the Contract Documents  (including the
                  limitations  on  Site  examination  and  investigative  duties
                  referenced in the preceding clause (a) of this definition),  a
                  prudent contractor performing work identical to that described
                  in the  Network  Description  and  Project  Scope  would  have
                  undertaken,  prior to execution of a contract identical to the
                  Contract,   to   independently   gather,   examine  or  verify
                  information with respect thereto; or

            (c)   resulting  directly  from  the  willful  or  negligent  act or
                  omission of any Contractor Person.

      "UNITED STATES" means the United States of America.

      "UNUSUALLY SEVERE WEATHER  CONDITIONS" means weather conditions  occurring
at  any  Site  that  are  materially  more  severe  than  would   reasonably  be
anticipated,  based upon the weather pattern records for the most recent 10-year

                                       12
<PAGE>

period  maintained by  appropriate  Governmental  Authorities in Germany for the
time of year  and  geographical  location  at  issue,  by a  prudent  contractor
conducting work similar to the Work.

      "VALUE ADDED TAX" means any value added tax applicable to or assessable in
respect of the Work or any  portion  thereof by any  Governmental  Authority  in
Germany.

      "VENDOR"  means each supplier of  Owner-Procured  Equipment  identified in
APPENDIX 3 to the Contract.

      "VENDOR  SPECIFICATIONS"  means the  detailed  specifications  and related
technical documentation, as identified by title or other relevant description in
APPENDIX  2 to the  Contract,  prepared  by each  Vendor in  respect of items of
Owner-Procured  Equipment,  which  specifications  and  documentation  shall  be
provided by the Developer to the Contractor prior to the Contractor's  scheduled
commencement  of any Work upon or  involving  any such  items of  Owner-Procured
Equipment.

      "VIATEL" has the meaning ascribed thereto in the preamble to the Contract.

      "WARRANTY" means any General Warranty.

      "WARRANTY PERIOD" means, [REDACTED]

      "WAYLEAVE" means any right-of-way,  easement,  license,  Permit (excluding
construction  Permits),  franchise,  crossing,  joint-use  arrangement  or other
access right (but excluding  leases of existing  transmission  capacity or fiber
optic  cable  from  other  telecommunications  service  providers)  that  may be
identified by the Contractor to the Developer,  and entered into by or on behalf
of the Owners, in connection with the construction,  maintenance,  operation and
ownership of the Outside Plants along the Scheduled Route.

      "WAYLEAVE CRITERIA" means Table A of APPENDIX 5 to the Contract.

      "WAYLEAVE  OR PERMIT  FAILURE"  means any  refusal,  delay or  conditional
mandate by any Governmental Authority in Germany with respect any application by
the  Contractor,  duly submitted in full  compliance  with all applicable  Laws,
Codes and  Standards  and the  Wayleave  Criteria,  for any Public  Wayleave  or

                                       13
<PAGE>

Permit,  which  refusal,  delay or mandate (i) is contrary  to, or  inconsistent
with,   applicable  Law  or  Codes  and  Standards,   (ii)  imposes   conditions
supplemental  to, or more onerous than,  the express terms of such Laws or Codes
and Standards, or (iii) represents an arbitrary or capricious act or omission by
any relevant Governmental Authority in the conduct of its official duties.

      "WORK" has the meaning ascribed thereto in Section 4.1 of the Contract.

      "WORK RELEASE CERTIFICATE" means, in respect of each item of Work tendered
to the Developer,  each certificate issued by the Contractor's quality assurance
staff in accordance  with Section 3.2.8 of the Network  Description  and Project
Scope.

<PAGE>

                                                                       EXHIBIT 2
                                                  FORM OF CONTRACTOR SURETY BOND

                             CONTRACTOR SURETY BOND

DM  [REDACTED]                                        Performance Bond No. _____

[Date]

            KNOW ALL MEN BY  THESE  PRESENTS:  that  BECHTEL  LIMITED,  a United
Kingdom  limited   liability   company,   as  contractor   (hereinafter   called
"Contractor"),  and _______________ [INSERT FULL NAME AND ADDRESS OF LEGAL TITLE
OF SURETY], as surety  (hereinafter called "Surety"),  are held and firmly bound
unto Viatel German Asset GmbH, a GESELLSCHAFT MIT BESCHRANKTER HAFTUNG organized
under the laws of Germany,  Metromedia  Fiber Network GmbH, a  GESELLSCHAFT  MIT
BESCHRANKTER  HAFTUNG  organized  under  the laws of  Germany,  Carrier  1 Fiber
Network GmbH & Co. OHG, an OFFENE  HANDELSGESELLSCHAFT  organized under the laws
of Germany,  as obligees  (collectively,  hereinafter  called "Owners"),  in the
amount of [REDACTED] (the "Bonded Amount"),  for the payment whereof  Contractor
and Surety bind themselves, their heirs, executors,  administrators,  successors
and assigns, jointly and severally, firmly by these presents.

            WHEREAS,  pursuant to the Engineering,  Procurement and Construction
Contract (Outside Plant), dated February 19, 1999 (the "Contract"),  between and
among  Contractor,   Owners  and  ViCaMe  Infrastructure   Development  GmbH,  a
GESELLSCHAFT  MIT  BESCHRANKTER  HAFTUNG  organized  under  the laws of  Germany
("ViCaMe"),  which Contract is by reference  made a part hereof,  Contractor has
agreed to plan, supply,  install,  assemble and test the Outside Plants (as more
particularly described in the Contract, the "Outside Plants"); capitalized terms
not defined herein being used as defined in the Contract;

            WHEREAS, pursuant to Section 15.1(b) of the Contract,  Contractor is
required to secure its obligations under the Contract by obtaining a performance
and surety bond from a bonding or insurance  company meeting the requirements of
Section  15.3 of the  Contract,  and this  Performance  Bond is the  "Contractor
Surety Bond" referred to in Section 15.2;

            NOW,  THEREFORE,  at the request and for the account of  Contractor,
Surety hereby irrevocably undertakes as follows:

      (a)   Suretyshall  perform  Contractor's  payment  obligations  under  the
            Contract,  up to a  maximum  aggregate  amount  equal to the  Bonded
            Amount, upon presentation to Surety during regular business hours at
            Surety's offices at _____, New York, of an original  manually signed
            certificate issued by ViCaMe containing the following:

                  (A)   The Performance Bond Number appearing above;

                  (B)   Either one of the following statements:

                                       1
<PAGE>

                        (a)   "The Contractor has failed properly and fully to
                              perform its obligations under the Contract."; or

                        (b)   "The   Owners  have   received   notice  that  the
                              Expiration Date shall not be extended;

                  (C)   The amount  Contractor  is  obligated to pay pursuant to
                        the Contract; and

                  (D)   Payment instructions.

      (b)   Suretywill pay the amount stated in such certificate,  up to maximum
            amount equal to the Bonded  Amount,  by wire transfer of immediately
            available   funds  within  five  (5)   Business   Days  of  ViCaMe's
            presentation  of such  certificate to Surety in accordance  with the
            terms  and  conditions   contained  herein.  For  purposes  of  this
            Performance  Bond,  a  "Business  Day"  shall  mean a day  on  which
            commercial banks are not required or authorized to close in New York
            and which is not a Saturday or Sunday.

      (c)   This  Performance  Bond is effective  immediately and expires at the
            close of  business at our office in [ ]  specified  in the  preamble
            hereto upon the first (1st)  anniversary  (the "Expiry Date") of the
            date first shown above,  but it is a condition  of this  Performance
            Bond that it will be automatically  extended for a period of six (6)
            months from the Expiry Date and from each 6-month period  thereafter
            (such  date,  as  extended,  the  "Expiration  Date"),  without  any
            amendment,  unless a written Notice to the contrary is provided,  at
            least thirty (30) Days prior to the  Expiration  Date, to the Owners
            by registered  mail,  certified  mail,  or overnight  courier to the
            above-listed address, and failure to extend the Expiration Date will
            permit the Owners to receive the Bonded Amount.

      (d)   This  Performance  Bond cannot be  cancelled  for failure to pay the
            premium  or   commission   payable   to  Surety  or  be   terminated
            unilaterally by Surety.

      (e)   This  Performance  Bond  shall  be  governed  by  and  construed  in
            accordance with the laws of the State of New York.

      (f)   This  Performance Bond may not be assigned without the prior written
            consent of Surety.

                                       2
<PAGE>

            Signed and sealed this ___ day of ______, 1999.

                                        BECHTEL LIMITED
                                        Principal

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

Witness:

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

                                        [NAME OF SURETY]
                                        Surety

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

Witness:

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

<PAGE>

                                                                       EXHIBIT 3
                               FORM OF CERTIFICATE AND PAYMENT AND FINAL RELEASE

                    CERTIFICATE OF PAYMENT AND FINAL RELEASE

                               Dated _____________

                       GERMAN NETWORK DEVELOPMENT PROJECT
                                GND No. 1 System
                                       and
                                GND No. 2 System

      Reference  is  made  to  the  Engineering,  Procurement  and  Construction
Contract (Outside Plant Work), dated February 19, 1999 (as amended, supplemented
or otherwise modified from time to time, the "EPC CONTRACT"),  among and between
BECHTEL LIMITED, a United Kingdom limited liability company,  as contractor (the
"CONTRACTOR"),  ViCaMe  Infrastructure  Development  GmbH,  a  GESELLSCHAFT  MIT
BESCHRANKTER HAFTUNG organized under the laws of Germany (the "DEVELOPER"),  and
each of the  following  entities  (or such  successor  or  replacement  entities
introduced  in  accordance  with the  provisions  of  Section  2.3(a) of the EPC
Contract),  acting  severally but not jointly as an Owner (each, an "OWNER" and,
collectively, the "OWNERS") thereunder: VIATEL GERMAN ASSET GmbH, a GESELLSCHAFT
MIT BESCHRANKTER  HAFTUNG organized under the laws of Germany;  METROMEDIA FIBER
NETWORK GmbH, a GESELLSCHAFT MIT BESCHRANKTER  HAFTUNG  organized under the laws
of  Germany;   and  CARRIER  1  FIBER   NETWORK   GmbH  &  Co.  OHG,  an  OFFENE
HANDELSGESELLSCHAFT  organized under the laws of Germany. Capitalized terms used
but not otherwise defined herein shall have the meanings ascribed thereto in the
EPC Contract.

1.    RELEASE  AND  WAIVER.  In  consideration  of,  and  subject  to, the Final
      Payment,   the  Contractor  hereby  and  forever  releases,   waives,  and
      discharges:

      1.1.  any rights,  Liens or other  claims that the  Contractor  has or may
            have against the Developer or any Owner  (including any shareholder,
            Affiliate,  successor  or assign of any of them)  arising  out of or
            relating to the Outside Plants or any Work, including any materials,
            equipment or supplies  forming a part of, or furnished in connection
            with, the Work; and

      1.2.  any other legal or equitable  claim or right that the Contractor may
            have  against  any Owner  Person  in any  manner  arising  out of or
            relating to the Outside Plants or the Work.

2.    CERTIFICATIONS.  The Contractor certifies for the benefit of the Developer
      and the Owners that:

                                       1
<PAGE>

      2.1.  acceptance of the Final Payment by the  Contractor  shall  represent
            the Contractor's  complete  satisfaction with the final compensation
            for all claims and the Work;

      2.2.  there are no expected or known Liens arising out of or in connection
            with the performance by the Contractor or any  Subcontractor  of the
            Work;

2.3.        all Taxes  and  insurance  premiums  for  which  the  Contractor  is
            responsible  under the EPC  Contract  that have  accrued  to date in
            connection with the Work have been fully paid and discharged.

      IN WITNESS  WHEREOF,  the  Contractor  has executed  this  Certificate  of
Payment and Final Release as of _______________, 19___.

                                 BECHTEL LIMITED

                                 By___________________________________
                                   Name:
                                   Title:

<PAGE>

                                                                       EXHIBIT 4
                                                            FORM OF LIEN RELEASE

                                  LIEN RELEASE

                               Dated _____________

                       GERMAN NETWORK DEVELOPMENT PROJECT
                                GND No. 1 System
                                       and
                                GND No. 2 System

      Reference  is  made  to  the  Engineering,  Procurement  and  Construction
Contract (Outside Plant Work), dated February 19, 1999 (as amended, supplemented
or otherwise modified from time to time, the "EPC CONTRACT"),  among and between
BECHTEL LIMITED, a United Kingdom limited liability company (the  "CONTRACTOR"),
VICAME INFRASTRUCTURE  DEVELOPMENT GmbH, a GESELLSCHAFT MIT BESCHRANKTER HAFTUNG
organized under the laws of Germany (the "Developer"), and each of the following
entities (or such  successor or  replacement  entities  introduced in accordance
with the provisions of Section 2.3(a) of the EPC Contract), acting severally but
not jointly as an Owner (each, an "OWNER") thereunder: VIATEL GERMAN ASSET GmbH,
a GESELLSCHAFT  MIT  BESCHRANKTER  HAFTUNG  organized under the laws of Germany;
METROMEDIA FIBER NETWORK GmbH, a GESELLSCHAFT MIT BESCHRANKTER HAFTUNG organized
under the laws of  Germany;  CARRIER 1 FIBER  NETWORK  GmbH & Co. OHG, an OFFENE
HANDELSGESELLSCHAFT  organized under the laws of Germany. Capitalized terms used
but not otherwise defined herein shall have the meanings ascribed thereto in the
EPC Contract.

1.    RELEASE AND WAIVER.  In consideration  of, and subject to, the Developer's
      payment,  on behalf of each Owner to the extent of such Owner's respective
      ownership  interest in the Outside  Plants,  for the Work described in the
      Contractor  Invoice,  dated as of the date hereof (the "CURRENT CONTRACTOR
      INVOICE"),  the  Contractor  hereby  and  forever  releases,  waives,  and
      discharges any rights, Liens or other claims (other than claims arising in
      connection with dispute  resolution that are subject to mutual discussions
      in accordance with Section 39 of the EPC Contract) that the Contractor has
      or may have against the Developer or any Owner (including any shareholder,
      Affiliate,  successor or assign of any of them) arising out of or relating
      to the Outside Plants or such Work or any other Work heretofore  performed
      or delivered (collectively, the "WORK-TO-DATE"),  including any materials,
      equipment or supplies  forming a part of, or furnished in connection with,
      any Work-to-Date.

2.    CERTIFICATIONS. The Contractor certifies that:

                                       1
<PAGE>

      2.1.  there are no expected  or known  Liens on the Outside  Plants or the
            Work arising out of or in  connection  with the  performance  by the
            Contractor or any Subcontractor of the Work-to-Date; and

      2.2.  all Taxes  (excluding  any income taxes) and insurance  premiums for
            which the Contractor is responsible under the EPC Contract that have
            accrued to date in connection with the Work-to-Date  have been fully
            paid and discharged.

      IN WITNESS  WHEREOF,  the  Contractor has executed this Lien Release as of
this ___ day of _______________________, _____.

                               BECHTEL LIMITED

                               By___________________________________
                                   Name:
                                   Title:

<PAGE>

                                                                       EXHIBIT 5
                                                            FORM OF RETAINAGE LC

                          IRREVOCABLE LETTER OF CREDIT

                          Letter of Credit No.__________________

      ViCaMe Infrastructure Development GmbH
      c/o Viatel U.K.
      Parnell House
      25 Wilton Road
      London SW1V 1EJ
      United Kingdom

      Attention:  Derek Foxwell

Ladies and Gentlemen:

      (g)   STATE AMOUNT. We,  [___________] (the "Bank"), at the request of and
            for the  account  of  Bechtel  Limited,  a  United  Kingdom  limited
            liability company,  and for the benefit of Viatel German Asset GmbH,
            a GESELLSCHAFT MIT BESCHRANKTER  HAFTUNG organized under the laws of
            Germany,   Metromedia   Fiber  Network  GmbH,  a  GESELLSCHAFT   MIT
            BESCHRANKTER HAFTUNG organized under the laws of Germany,  Carrier 1
            Fiber  Network  GmbH  &  Co.,  OHG,  an  OFFENE  HANDELSGESELLSCHAFT
            organized  under the laws of Germany  (collectively,  the "Owners"),
            hereby  establish  in your  favor as the  agent,  for the  Owners an
            irrevocable  credit  whereby you are authorized to draw on the Bank,
            Irrevocable  Letter of Credit  No._____,  available  by  draft(s) at
            sight,  an aggregate  amount not exceeding  [REDACTED] (the "Initial
            Stated  Amount")  until we receive a written notice signed by you in
            the form of Annex E, and  thereafter,  the lesser of (a)  [REDACTED]
            and (b) the  difference  between the Initial  Stated  Amount and the
            aggregate amount you have drawn under this Letter of Credit.

      (h)   TERM. This Letter of Credit is effective  immediately and expires at
            the close of banking  business at our office in [ ] designated in or
            pursuant to Paragraph 3 hereof on [insert date] (the "Expiry Date"),
            but it is a  condition  of this  Letter  of  Credit  that it will be
            automatically extended for a period of 364 days from the Expiry Date
            and from each 364 days  thereafter  (such  date,  as  extended,  the
            "Expiration  Date"),  without any amendment,  unless at least thirty

                                       1
<PAGE>

            (30) days prior to the  Expiration  Date, a written  notice,  in the
            form of Annex D, is provided to you by  registered  mail,  certified
            mail, or overnight courier to the above-listed address.

      (i)   DRAWING  DOCUMENTATION.  The Bank irrevocably authorizes you to draw
            on the Bank  under  this  Letter of Credit by  presentation  of your
            sight  draft  in the  form  of  Annex  A  accompanied  by a  drawing
            certificate  in the  form  of  either  Annex B or  Annex  C  hereto,
            appropriately completed and, in each case, signed by your authorized
            signatory.  Presentation of drafts and drawing certificates shall be
            made at [insert  address],  Attention:  [ ] or such other address as
            which may be  designated by us by written  notice  delivered to you.
            Presentation of drafts and drawing  Certificates may also be made by
            facsimile  transmission  to [ ] (or  such  other  number  as  may be
            notified to you in writing).

      (j)   DRAWING PROCEDURES.  The Bank hereby agrees with you that all drafts
            drawn  under  and in  compliance  with the  terms of this  Letter of
            Credit will be duly  honored  upon due  presentation  to the Bank as
            specified in  Paragraph 3, if presented on or before the  Expiration
            Date. If a sight draft and accompanying  drawing  certificate are in
            compliance  with the terms of this Letter of Credit and are received
            by [specify time and place] time on a Business Day,  payment will be
            made on the next  Business  Day,  by wire  transfer  of  immediately
            available funds to the account specified in the drawing certificate.
            If  such  sight  draft  and  accompanying  drawing  certificate  are
            received  after  [specify]  time on a Business Day,  payment will be
            made in immediately  available funds before 11:00 a.m. on the second
            succeeding Business Day following the date of receipt. Payment is to
            be made  in  Deutsche  Marks  or if  Deutsche  Marks  are no  longer
            available,  in Euros from the Bank's own funds.  Only you may make a
            drawing  under  this  Letter of  Credit.  As used in this  Letter of
            Credit,  the term "Business Day" means any day other than a Saturday
            or Sunday or a day in which banking  institutions in [specify place]
            are authorized or required by law or executive order to close.

      (k)   AVAILABLE AMOUNT. Multiple drawings may be made under this Letter of
            Credit;  provided,  that each drawing  honored by the Bank hereunder
            shall pro tanto  reduce the then  applicable  amount  available  for
            drawing thereafter.

      (l)   GOVERNING LAW. This Letter of Credit,  except as otherwise expressly
            stated  herein,  is subject to the Uniform  Customs and Practice for
            Documentary  Credits  (1993  Revision),   International  Chamber  of
            Commerce Publication No. 500 (the "UCP"). As to matters not governed
            by the UCP,  this Letter of Credit  shall be deemed to be a contract
            made  under the laws of the State of New York and shall be  governed
            by the internal laws of the State of New York.

      (m)   INTEGRATION.  The  Letter  of  Credit  (including  Annexes  attached
            hereto)  sets  forth  in  full  the  Bank's  undertaking,  and  such
            undertaking shall not in any way be modified,  amended, amplified or
            limited by reference to any other document,  instrument or agreement

                                       2
<PAGE>

            referred to herein (or in the Annexes attached hereto), and any such
            reference  shall  not be  deemed  to  incorporate  herein  any  such
            document, instrument or agreement.

                                                [ISSUING BANK]

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

                                       3
<PAGE>

                                                                         Annex A

                                   SIGHT DRAFT

          Irrevocable Transferable Letter of Credit No._______________

                                                               Date:____________

                               For VALUE RECEIVED

             At sight pay to the order of  ______________,  the sum of [Deutsche
     Marks  ____]  [Euro  ______]  drawn  under   [Issuing   Bank]   Irrevocable
     Transferable Letter of Credit
                                 No.: ________.

                                       ViCaMe Infrastructure Development GmbH

                                       -----------------------------------------
                                       Authorized Signatory

To:

                                       4
<PAGE>

                                                                         Annex B

             Irrevocable Transferable Letter of Credit No. ________

                       CERTIFICATE FOR DRAWING FOR PAYMENT

To:   [Issuing Bank]
      [Address]

      Attention:

            The undersigned,  ViCaMe  Infrastructure  Development  GmbH,  hereby
certifies to [Issuing Bank] (the "Bank") with respect to  Irrevocable  Letter of
Credit  No.  _________,  dated  February  ___,  1999 (the  "Letter  of  Credit")
established  by the Bank in favor of the  undersigned  at the request of and for
the account of and for the benefit of Bechtel Limited,  a United Kingdom limited
liability company (the "Contractor") that:

            Capitalized  terms used herein and not otherwise  defined shall have
 the meanings ascribed thereto in the Engineering,  Procurement and Construction
 Contract (Outside Plant),  dated February 19, 1999 (the "EPC Contract"),  among
 and between Bechtel Limited,  a United Kingdom limited  liability  company (the
 "Contractor"),  ViCaMe  Infrastructure  Development  GmbH, a  GESELLSCHAFT  MIT
 BESCHRANKTER  HAFTUNG  organized  under the laws of Germany (the  "Developer"),
 Viatel German Asset GmbH, a GESELLSCHAFT  MIT  BESCHRANKTER  HAFTUNG  organized
 under the laws of Germany,  Metromedia  Fiber Network GmbH, a GESELLSCHAFT  MIT
 BESCHRANKTER  HAFTUNG organized under the laws of Germany,  and Carrier 1 Fiber
 Network GmbH & Co. OHG, an OFFENE HANDELSGESELLSCHAFT  organized under the laws
 of Germany (collectively, the "Owners").

            The  Contractor  has  failed  properly  and  fully  to  perform  its
 obligations under the EPC Contract.

            Written  notice has been given to Contractor  pursuant to the notice
 provisions of the EPC ___ days prior to the date of this certificate.

            The  undersigned  is making a demand for payment under the Letter of
 Credit in the amount of $________.

            The  amount  of the draft  accompanying  this  Certificate  does not
 exceed the amount available under the Letter of Credit.

                                       5
<PAGE>

            Payment of the amount demanded shall be made by wire transfer to the
following account: ____________________.

            IN WITNESS WHEREOF,  the undersigned has executed and delivered this
            certificate as of the ______ day of __________, _______.

                                       ViCaMe Infrastructure Development GmbH

                                       By: _____________________________________
                                             Authorized Signatory

                                       6
<PAGE>

                                                                         Annex C

             Irrevocable Transferable Letter of Credit No. ________

        CERTIFICATE AS TO NOTIFICATION OF NON-RENEWAL OF LETTER OF CREDIT

To:   [Issuing Bank]
      [Address]

      Attention:

            The undersigned,  ViCaMe  Infrastructure  Development  GmbH,  hereby
certifies to [Issuing Bank] (the "Bank") with respect to the Irrevocable  Letter
of Credit No.  _________,  dated  February  ___,  1999 (the  "Letter of Credit")
established  by the Bank in favor of the  undersigned  at the request of and for
the account of and for the benefit of Bechtel Limited,  a United Kingdom limited
liability company, that:

            1. The undersigned is in receipt of a notice, dated _________,  from
the Bank notifying us that the Letter of Credit expires in 30 days or less.

            2. Payment of the amount  demanded shall be made by wire transfer to
the following account: ________________.

            IN WITNESS WHEREOF,  the undersigned has executed and delivered this
certificate as of the ___ day of ____, ___.

                                  ViCaMe Infrastructure Development GmbH

                                  By: __________________________________________
                                        Authorized Signatory

<PAGE>

                                                                         Annex D

                    NOTICE OF EXPIRATION OF LETTER OF CREDIT

                  Irrevocable Transferable Letter of Credit No. __________

                                    [Date]

To:  ViCaMe Infrastructure Development GmbH
      [Address]

      Attention:

Ladies and Gentlemen:

            Reference  is made to  Irrevocable  Letter of Credit  No.  ____ (the
"Letter of Credit") dated February ___, 1999, issued by us in your favor.

            This constitutes our thirty days' advance written notice to you that
the Letter of Credit is scheduled to expire on _______________  and has not been
extended.

                              Very truly yours,

                              [ISSUING BANK]

                              By ___________________________
                                 Name:
                                 Title:

                                       7
<PAGE>

                                                                         Annex E
                                      Irrevocable Letter of Credit No. _________

                        NOTIFICATION AS TO REDUCTION OF
                        STATED AMOUNT OF LETTER OF CREDIT

To:   [Issuing Bank]
      [Address]

      Attention:

            The  undersigned,  ViCaMe  Infrastructure  Development  GmbH  hereby
notifies  [Issuing  Bank] (the  "Bank") with  respect to  Irrevocable  Letter of
Credit No. _____, dated February ___, 1999 (the "Letter of Credit")  established
by the Bank in favor of the  undersigned  at the  request and for the account of
Bechtel Limited, a United Kingdom limited liability company (the  "Contractor"),
that  the  first  anniversary  of the RFS  Date  for the  second  Outside  Plant
delivered by Contractor has occurred.

                                          Very truly yours,

                                          ViCaMe Infrastructure Development GmbH

                                          By:_________________________________
                                                Authorized Signatory

<PAGE>

                                                                       EXHIBIT 6
                                                     FORM OF CORPORATE GUARANTEE

                               CORPORATE GUARANTEE

      GUARANTEE,  dated as of February  ___,  1999 (this  "GUARANTEE"),  made by
BECHTEL  CORPORATION,  a  corporation  organized  under the laws of the State of
Nevada,  U.S.A.  (the  "GUARANTOR"),  in favor of Viatel  German  Asset GmbH,  a
GESELLSCHAFT  MIT  BESCHRANKTER  HAFTUNG  organized  under the laws of  Germany,
Metromedia Fiber Network GmbH, a GESELLSCHAFT MIT BESCHRANKTER HAFTUNG organized
under the laws of Germany, and Carrier 1 Fiber Network GmbH & Co. OHG, an OFFENE
HANDELSGESELLSCHAFT  organized  under  the laws of  Germany  (collectively,  the
"OWNERS").

                                   W I T N E S S E T H :

      WHEREAS,  Bechtel Limited, a United Kingdom limited liability company (the
"CONTRACTOR"),   the  Owners  and  ViCaMe  Infrastructure  Development  GmbH,  a
GESELLSCHAFT MIT BESCHRANKTER  HAFTUNG  organized under the laws of Germany (the
"DEVELOPER"),  are  parties to the  Engineering,  Procurement  and  Construction
Contract  (Outside  Plant  Work),  dated as  February  19,  1999,  (as  amended,
restated,  supplemented  or  otherwise  modified  from  time to  time,  the "EPC
CONTRACT"); and

      WHEREAS, the Guarantor will derive substantial direct and indirect benefit
from the Contractor's role under the EPC Contract; and

      WHEREAS,  the Owners  have agreed to enter into the EPC  Contract  only if
this  Guarantee is executed by the  Guarantor  and delivered to the Owners on or
before April 15, 1999;

      NOW,  THEREFORE,  in order to  induce  the  Owners  to enter  into the EPC
Contract and to consummate the transactions  contemplated thereby, and for other
good and valuable  consideration,  receipt of which is hereby acknowledged,  the
Guarantor hereby agrees as follows:

      SECTION 1.  DEFINITIONS.  All  capitalized  terms used herein that are not
defined  herein  shall  have the  meanings  set  forth in the EPC  Contract.  In
addition, as used herein, the following terms shall have the following meanings:

      "BANKRUPTCY  CODE"  shall  mean  Title 11 of the United  States  Code,  as
amended.

            "CONTRACTOR" shall have the meaning ascribed thereto in the preamble
      hereof.

            "EPC  CONTRACT"  shall  have the  meaning  ascribed  thereto  in the
      recitals hereto.

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<PAGE>

            "GUARANTEED   OBLIGATIONS"   shall  mean  all   obligations  of  the
      Contractor which relate to the achievement of RFS Acceptance (as that term
      is defined in the EPC Contract).

            "GUARANTEE"  shall have the meaning ascribed thereto in the preamble
      hereof.

            "GUARANTOR"  shall have the meaning ascribed thereto in the preamble
      hereof.

            "OWNERS"  shall have the meaning  ascribed  thereto in the  recitals
      hereto.

            "RELEVANT   AGREEMENTS"  shall  mean  this  Guarantee  and  the  EPC
      Contract.

      SECTION  2.  GUARANTEE   TERMS.   (a)  GUARANTEE.   The  Guarantor  hereby
acknowledges  receipt  of each of the  Relevant  Agreements,  and the  Guarantor
hereby  irrevocably  and  unconditionally,  under  any  and  all  circumstances,
guarantees to the Owners and its successors, transferees and assigns the due and
punctual  payment and performance by the Contractor in accordance with the terms
and provisions of the EPC Contract of all of the Guaranteed Obligations.

      (b) OBLIGATIONS ABSOLUTE. The obligations of the Guarantor hereunder shall
be  direct  and  primary  obligations  of  the  Guarantor,  shall  be  absolute,
unconditional  and irrevocable  and shall  constitute a guarantee of performance
and  discharge  and not  merely of  collection.  Such  obligations  shall not be
subject  to  any  counterclaim,   set-off,  deduction,  diminution,   abatement,
recoupment,   suspension,   deferment,  reduction  or  defense  for  any  reason
whatsoever, and the Guarantor shall have no right to terminate this Guarantee or
to be released,  relieved or discharged from its  obligations  hereunder for any
reason whatsoever (whether or not the Guarantor or the Contractor shall have any
knowledge or notice thereof), including, without limitation:

            (i)  Any  (A)  amendment,   modification,   addition,   deletion  or
      supplement  to or other  change  in any  Relevant  Agreement  or any other
      instrument  or agreement  applicable to any of the parties to any Relevant
      Agreement,  (B) assignment,  sublease or transfer of any thereof or of any
      interest  therein  or  (C)  furnishing  or  acceptance  of  security  or a
      guarantee,  or any release,  substitution  or variation of any security or
      guarantee, for the obligations of the Contractor or any other party to any
      Relevant Agreement;

            (ii) Any failure,  omission or delay on the part of the  Contractor,
      the  Developer  or the Owners to  perform  or comply  with any term of any
      Relevant Agreement;

            (iii)  Any  waiver,  consent,  extension,  indulgence,   compromise,
      release or other  action or inaction  under or in respect of any  Relevant
      Agreement or any  obligation or liability of the Contractor or the Owners,
      or any exercise or non-exercise of any right,  remedy,  power or privilege
      under  or in  respect  of any such  instrument  or  agreement  or any such
      obligation or liability;

                                       2
<PAGE>

            (iv)  Any  bankruptcy,  insolvency,   reorganization,   arrangement,
      readjustment,  composition, liquidation or similar proceeding with respect
      to the Guarantor,  the Contractor or the Owners or any other Person or any
      of their  respective  properties or creditors,  or any action taken by any
      trustee or receiver or by any court in any such proceeding;

            (v)   Any   discharge,   termination,   cancellation,   frustration,
      irregularity, invalidity, unenforceability, illegality or impossibility of
      performance, in whole or in part, of any Relevant Agreement;

      (vi) Any  dissolution,  merger  or  consolidation  (whether  permitted  or
      otherwise)  of the  Contractor  or the  Guarantor  into or with any  other
      Person  or any  sale,  lease  or  transfer  of any  of the  assets  of the
      Contractor or the Guarantor to any other Person;

            (vii) Any change in the ownership of the Contractor;

            (viii) Any payment by the Guarantor to the  Contractor or the Owners
      pursuant to an agreement other than this Guarantee; or

            (ix)  Any  other  occurrence  or  circumstance  whatsoever,  whether
      similar or dissimilar to the foregoing,  that might otherwise constitute a
      legal or equitable  defense or discharge of the liabilities of a guarantor
      or surety or that might otherwise limit recourse against the Guarantor.

      (c) WAIVERS BY THE GUARANTOR.  To the extent  permitted by applicable law,
the Guarantor  hereby  unconditionally  waives and agrees to waive at any future
time any and all rights that the  Guarantor  may have or that now or at any time
hereafter  may  be  conferred  upon  it,  by  applicable  law or  otherwise,  to
terminate,  cancel,  quit or  surrender  this  Guarantee.  Without  limiting the
generality  of the  foregoing,  it is agreed  that,  at any time or from time to
time, the occurrence or existence of any one or more of the following  shall not
release,  relieve or discharge the Guarantor from liability  hereunder,  and the
Guarantor  hereby  unconditionally  waives  and  agrees to waive,  to the extent
permitted by applicable law:

            (i)   Notice  of  any  of the matters  referred  to  in Section 2(b)
      hereof;

            (ii)  All  notices  that  may  be  required  by  applicable  law  or
      otherwise,  now or  hereafter  in effect,  to  preserve  intact any rights
      against  the  Guarantor   including,   without  limitation,   any  demand,
      presentment and protest,  proof of notice of nonpayment under any Relevant
      Agreement,  and  notice  of any  default  or  failure  on the  part of the
      Contractor  to perform and comply with any  covenant,  agreement,  term or
      condition of the EPC Contract;

            (iii) The enforcement,  assertion or exercise against the Contractor
      of any  right,  power,  privilege  or  remedy  conferred  in any  Relevant
      Agreement or otherwise;

            (iv)  Any requirement of diligence on the part of any Person;

                                       3
<PAGE>

             (v)   Any requirement to proceed  against the  Contractor  prior to
      proceeding  against the Guarantor or any other  guarantee or to utilize or
      exhaust any remedies;

            (vi)  Acceptance of this Guarantee by the Owners; or

           (vii)  Any other  occurrence   or  circumstance  whatsoever,  whether
      similar or dissimilar to the foregoing,  that might otherwise constitute a
      legal or equitable discharge, release or defense of a guarantor or surety,
      or that might otherwise limit recourse against the Guarantor.

The  Guarantor  hereby agrees that a separate  action may be brought  against it
whether or not an action is commenced against the Contractor with respect to any
of the  Guaranteed  Obligations.  It is the intention  hereof that the Guarantor
shall remain liable as principal  until the full  performance  of the Guaranteed
Obligations.

      (d)  REINSTATEMENT  OF  GUARANTEE.  This  Guarantee  shall  continue to be
effective, or be reinstated,  as the case may be, if at any time payment, or any
part  thereof,  of  any of the  Guaranteed  Obligations  is  rescinded  or  must
otherwise be restored or returned by the recipient  thereof upon the insolvency,
bankruptcy,  dissolution,  liquidation or reorganization  of the Contractor,  or
upon or as a result of the appointment of a custodian,  receiver,  intervenor or
conservator  of, or  trustee or  similar  officer  for,  the  Contractor  or any
substantial  part of its property,  or upon any  settlement or compromise of any
claim effected by the Owners in connection with any such insolvency, bankruptcy,
dissolution, liquidation or reorganization with any claimant (including, without
limitation,  the  Contractor) or otherwise,  all as though such payments had not
been made. If any event  specified in the immediately  preceding  sentence shall
occur, and such occurrence shall prevent, delay or otherwise affect the right of
the Owners to receive any payment in respect of any Guaranteed  Obligation,  the
Guarantor  agrees  that,  for  purposes of this  Guarantee  and its  obligations
hereunder and notwithstanding the occurrence of any of the foregoing events, the
Guarantor shall  forthwith pay any such Guaranteed  Obligation at such times and
in such amounts as are specified in the EPC Contract.

      (e) NO  SUBROGATION.  Notwithstanding  anything  to the  contrary  in this
Guarantee,  the  Guarantor  hereby  irrevocably  waives all rights that may have
arisen in connection  with this  Guarantee to be subrogated to any of the rights
(whether contractual, under the Bankruptcy Code (including Section 509 thereof),
under common law or otherwise) of the Owners  against the  Contractor or against
any collateral  security or guarantee held by the Owners for the  performance of
the  Guaranteed  Obligations.  So  long  as the  Guaranteed  Obligations  remain
outstanding,  if any amount shall be paid by or on behalf of the  Contractor  to
the Guarantor on account of any of the rights waived in this Section 2(e),  such
amount shall be held by the Guarantor in trust,  segregated  from other funds of
the Guarantor,  and shall,  forthwith  upon receipt by the Guarantor,  be turned
over to the Owners in the exact form received by the Guarantor (duly indorsed by
the Guarantor to the Owners, if required),  to be applied against the Guaranteed
Obligations  in such order as the Owners may  determine.  The provisions of this
Section 2(e) shall survive the term of this Guarantee and the payment in full of
the Guaranteed Obligations.

                                       4
<PAGE>

      (f) LIMITATIONS.  Notwithstanding  the foregoing or any other provision of
this Guarantee:

            (i) The  Guarantor's  obligations  hereunder  shall  be  excused  or
      reduced  to  the  extent  that  the  Contractor's  obligations  under  the
      Guaranteed  Obligations  are excused or reduced,  whether  pursuant to the
      terms of the EPC  Contract,  or under law,  except those  available at law
      relating to the lack of validity or  enforceability  of the  obligation of
      the Contractor under or with respect to the EPC Contract; and

            (ii) Without limiting the generality of the foregoing, the Guarantor
      shall be entitled to all defenses,  set-offs,  recoupments  and deductions
      available to the  Contractor  under the EPC  Contract.  In  addition,  any
      indemnity or release given by the Owners in favor of the Contractor in the
      EPC Contract shall inure to the benefit of the Guarantor and any provision
      of the EPC Contract which limits the liability of the Contractor connected
      with any event shall  constitute  and be deemed an aggregate  limit on the
      cumulative liabilities of Contractor and Guarantor relating to such event.

            (iii) Payment or performance of any of the Guaranteed Obligations or
      other obligations, duties, liabilities,  covenants or agreements under the
      EPC  Contract  or  other  acts  which  toll  any  statute  of  limitations
      applicable  to  the  Guaranteed   Obligations  or  the  liability  of  the
      Contractor  under  the EPC  Contract,  shall  also  toll  the  statute  of
      limitations applicable to the Guarantor's liability under this Guarantee.

      SECTION 3. RIGHTS OF THIRD PARTIES.  This Guarantee shall not be construed
to create any right in any Person  other than the Owners or to be a contract  in
whole or in part for the benefit of any Person other than the Owners.

      SECTION 4. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby represents
and warrants to the Owners as follows:

      (a) ORGANIZATION; POWER AND AUTHORITY. The Guarantor is a corporation duly
      organized,  validly  existing and in good  standing  under the laws of the
      State of Nevada and is qualified  to do business in the United  States and
      has all requisite  legal power and authority to execute this Guarantee and
      to perform the terms, conditions and provisions hereof.

      (b)  AUTHORIZATION.  The  execution  and delivery by the Guarantor of this
      Guarantee have been duly authorized by all requisite corporate action.

      (c)  ENFORCEABILITY.  This  Guarantee  constitutes  the  legal,  valid and
      binding obligation of the Guarantor,  enforceable against the Guarantor in
      accordance  with its  terms,  except as  enforceability  may be limited by
      applicable  bankruptcy,  insolvency,  reorganization,  moratorium or other
      similar laws affecting  creditors' rights generally and to the extent that
      the remedies of specific performance, injunctive relief and other forms of
      equitable relief are subject to equitable defenses,  the discretion of the
      court  before  which  any  proceeding  therefor  may be  brought,  and the
      principles of equity in general.

                                       5
<PAGE>

      (d) NO CONFLICT.  Neither the  execution,  delivery or  performance by the
      Guarantor of this  Guarantee,  nor the  consummation  of the  transactions
      contemplated thereby, will result in:

            (i) A  violation  of,  or a  conflict  with,  any  provision  of the
            organizational documents of the Guarantor;

            (ii) A contravention  or breach of, or a default under,  any term or
            provision of any material contract, agreement or instrument to which
            the  Guarantor  is a party  or by which  it or its  property  may be
            bound,  which  contravention,  breach or default could be reasonably
            expected  to have a material  adverse  effect on the  ability of the
            Guarantor  to  perform  its  obligations  under  this  Guarantee  to
            consummate the transactions contemplated by this Guarantee; or

            (iii) A violation by the Guarantor of any Law.

      (e) NO  VIOLATION  OF LAW.  The  Guarantor  is not in violation of any Law
      promulgated,  or judgment entered,  by any Governmental  Authority,  which
      violations, individually or in the aggregate, would adversely affect it or
      its performance of any obligations under this Guarantee.

      (f) LITIGATION. There are no actions, suits or proceedings, now pending or
      (to its best knowledge)  threatened against the Guarantor before any court
      or  administrative   body  or  arbitral  tribunal  that  might  materially
      adversely  affect the ability of the Guarantor to perform its  obligations
      under this Guarantee.

      SECTION 5.  ASSIGNMENT.  (a)  GENERALLY.  The Guarantor may not assign its
rights and obligations under this Guarantee, directly or indirectly,  whether by
pledge,  assignment,  sale  of  assets  or the  sale  or  merger  (statutory  or
otherwise),  without  the prior  written  consent of the Owners.  The  Guarantor
acknowledges and agrees that,  without the consent of the Guarantor,  the Owners
may  assign  this  Guarantee  or its  rights or  obligations  thereunder  to any
subsidiary  or  affiliate  of the Owners.  With the  exception  described in the
previous  sentence,  neither  party may assign its rights or delegate its duties
without the  written  consent of the other  party,  which  consent  shall not be
unreasonably withheld or delayed.

      SECTION 6. DISPUTE RESOLUTION. The Guarantor shall be bound by the dispute
resolution  procedures set forth in Article 39 of the EPC Contract and agrees to
participate in such procedures if requested by the Owners.

      SECTION 7. MISCELLANEOUS. (a) REMEDIES NONEXCLUSIVE. All remedies provided
in this  Guarantee  shall be deemed  cumulative and not in lieu of, or exclusive
of,  each  other or of any other  remedy  available  to the  Owners at law or in
equity,  and the  exercise  of any  remedy,  or the  existence  herein  of other
remedies, shall not prevent the exercise of any other remedy.

                                       6
<PAGE>

      (b)  NOTICES.  All  notices to be given  herein  shall be  effective  upon
receipt  and  shall  be  in  writing  and  delivered  by  hand,  internationally
recognized  overnight  courier  service,  first  class mail  (postage  prepaid),
telegram, telecopy or other similar means (followed with a confirmation by mail)
to the Guarantor or the Owners,  as the case may be, at the following address or
such other address as may hereafter be designated, in writing, by the respective
Person in accordance with this Section 7(b):

      (i)   IF TO THE OWNERS:

            ViCaMe Infrastructure Development GmbH
            c/o Viatel U.K.
            Parnell House
            25 Wilton Road
            London  SW1V 1EJ
            UNITED KINGDOM
            Attention:  Mr. Derek Foxwell,
                         Project Manager
            Telecopy:  +44-171-828-1907

      (ii)  IF TO THE GUARANTOR:

            Bechtel Corporation
            7485 New Horizon Way
            Suite 200
            Frederick, MD 21703-8388
            Attention:  G. Conniff, Senior Vice President
            Telecopy:  +1-301-695-3262

            WITH A COPY TO:

            Bechtel Corporation
            50 Beale Street
            San Francisco, CA 94105
            Attention:  General Counsel
            Telecopy:  +1-415-768-1777

      (c)  NONWAIVER.  The Owners  shall not be deemed to have  waived any right
under this  Guarantee  unless the Owners shall have delivered to the Guarantor a
written  waiver signed by the Owners.  No failure or  successive  failure by the
Owners to enforce any covenant or agreement, and no waiver or successive waivers
by the Owners of any condition of this  Guarantee,  shall operate as a discharge
of such covenant,  agreement or condition, or render the same invalid, or impair
the Owner's right to enforce the same in the event of any  subsequent  breach or
breaches by the Guarantor.

                                       7
<PAGE>

      (d) SEVERABILITY.  If any of the terms,  covenants or conditions hereof or
the application of any such term, covenant or condition shall be held invalid as
to the Guarantor or the Owners or circumstance by any court or arbitrator having
jurisdiction,  the remainder of such terms, covenants or conditions shall not be
affected thereby, shall remain in full force and effect and shall continue to be
valid and  enforceable  in any other  jurisdiction,  and the  Guarantor  and the
Owners shall  negotiate in good faith to  substitute a term or condition in this
Guarantee to replace the one held invalid.

      (e) ENTIRE AGREEMENT.  This Guarantee constitutes the entire agreement and
contains all of the  understandings and agreements of whatsoever kind and nature
existing between the Guarantor and the Owners with respect to the subject matter
hereof and the rights, interests, understandings,  agreements and obligations of
the Guarantor and the Owners relating thereto,  and supersedes all prior written
or   oral   agreements,   commitments,   representations,   communications   and
understandings between the Guarantor and the Owners.

      (f) AMENDMENT. No amendment,  waiver or consent relating to this Guarantee
shall be effective unless it is in writing and signed by the Owners.

      (g)  BENEFITS  OF  GUARANTEE.  All of the  terms  and  provisions  of this
Guarantee  shall be binding upon and inure to the benefit of the  Guarantor  and
the Owners and their respective successors and permitted assigns. This Guarantee
is for the sole  benefit of the  Owners and is not for the  benefit of any other
third person.

      (h) DESCRIPTIVE  HEADINGS.  Descriptive  headings are for convenience only
and shall not control or affect the meaning or  construction of any provision of
this Guarantee.

      (i) RULES OF CONSTRUCTION. In the interpretation of this Guarantee, unless
the context otherwise requires:

      (i) The  singular  includes  the plural and vice versa and, in  particular
      (but  without  limiting  the  generality  of the  foregoing),  any word or
      expression  defined in the singular has the corresponding  meaning used in
      the plural and vice versa;

      (ii)  The term "or" is not exclusive;

      (iii) The term "including" shall mean "including, without limitation";

      (iv) Any reference to any gender includes the other gender;

      (v) Any reference to any agreement, instrument, contract or other document
      (A) shall include all appendices,  exhibits and schedules  thereto and (B)
      shall be a  reference  to such  agreement,  instrument,  contract or other
      document  as  amended,  supplemented,  modified,  suspended,  restated  or
      novated from time to time;

                                       8
<PAGE>

      (vi)  Any   reference  to  any  law  shall   include  all   statutory  and
      administrative provisions  consolidating,  amending or replacing such law,
      and shall include all rules and regulations promulgated thereunder;

      (vii) Any reference to "writing"  includes printing,  typing,  lithography
      and other means of reproducing words in a visible form;

      (viii) Any reference to any Person  includes its permitted  successors and
      assigns;

      (ix)  Unless  otherwise  specified,  a  reference  to a Section  is to the
      Section of this Guarantee;

      (x) Unless otherwise specified, any right may be exercised at any time and
      from time to time;

      (xi) All  obligations  under this  Guarantee  are  continuing  obligations
      throughout the term hereof; and

      (xii)  The fact  that  counsel  to the  Owners  shall  have  drafted  this
      Guarantee  shall not affect the  interpretation  of any  provision of this
      Guarantee  in a manner  adverse to the Owners or  otherwise  prejudice  or
      impair the rights of the Owners.

      (j) GOVERNING LAW, ETC. THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED
IN  ACCORDANCE  WITH,  THE LAWS OF THE  STATE OF NEW YORK  (WITHOUT  REGARD  FOR
PRINCIPLES OF CONFLICTS OF LAWS THAT WOULD REQUIRE THE APPLICATION OF THE LAW OF
ANY OTHER  JURISDICTION)  AND SHALL BE  ENFORCED IN NEW YORK,  NEW YORK,  UNITED
STATES.  PROCESS  IN ANY  ACTION OR  PROCEEDING  HEREUNDER  MAY BE SERVED ON THE
GUARANTOR  ANYWHERE  IN THE WORLD,  WHETHER  WITHIN OR OUTSIDE  THE STATE OF NEW
YORK, BY FIRST CLASS,  CERTIFIED OR REGISTERED  MAIL,  POSTAGE  PREPAID,  RETURN
RECEIPT  REQUESTED,  OR BY ANY OTHER METHOD  ALLOWED BY LAW. IN THE EVENT OF ANY
LITIGATION WITH RESPECT TO THIS GUARANTEE OR ANY INSTRUMENT OR DOCUMENT EXECUTED
AND DELIVERED IN CONNECTION HEREWITH,  THE GUARANTOR WAIVES THE RIGHT TO A TRIAL
BY JURY.

      (k)  LANGUAGE.  The official text of this  Guarantee  shall be in English,
regardless  of any  translation  that  may be made  for the  convenience  of the
Guarantor or the Owners.  All  definitive  documents,  notices,  waivers and all
other communication,  written or otherwise, between the Guarantor and the Owners
in connection with this Guarantee shall be in English.

      (l) TERM. This Guarantee and all  guarantees,  covenants and agreements of
the Guarantor  contained herein shall terminate and be discharged on the date on
which all of the Guaranteed Obligations shall be paid or otherwise discharged in

                                       9
<PAGE>

full; PROVIDED that this Guarantee shall continue to be effective or reinstated,
as the case may be, to the extent provided in Section 2(d) hereof,  but provided
always that this Guarantee  shall not survive the expiration of Warranty  Period
(as that term is defined in the Contract.)

      (m) FURTHER ASSURANCES. The Guarantor hereby agrees to execute and deliver
all such  instruments  and take all such  action as the  Owners may from time to
time  reasonably  request  in order to  effectuate  fully the  purposes  of this
Guarantee.

      (n) RELIANCE  PRESUMED.  The Guarantor waives notice of reliance upon this
Guarantee by the Owners. Each of the Guaranteed Obligations (now or hereafter in
effect)  shall be  deemed  conclusively  to have  been  created,  contracted  or
incurred in reliance upon this Guarantee.

      IN WITNESS  WHEREOF,  the Guarantor  has caused this  Guarantee to be duly
executed and delivered as of the day and year first above written.

                                   BECHTEL CORPORATION

                                   By:___________________________
                                      Name:
                                      Title:

                                      10
<PAGE>

                                                                       EXHIBIT 7
                                                  FORM OF OWNER ESCROW AGREEMENT

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

                  UNDERTAKING AND PLEDGE AND SECURITY AGREEMENT

                          Dated as of February 19, 1999

                                     between

                     VICAME INFRASTRUCTURE DEVELOPMENT GMBH,
                                   Developer,

                            VIATEL GERMAN ASSET GMBH
                                     Owner,

                          METROMEDIA FIBER NETWORK GMBH
                                     Owner,

                     CARRIER 1 FIBER NETWORK GMBH & CO. OHG
                                     Owner,

                                BECHTEL LIMITED,
                                   Contractor,

                                       and

                            THE CHASE MANHATTAN BANK,
                                Collateral Agent

                       GERMAN NETWORK DEVELOPMENT PROJECT
                                    GND No. 1
                                       and
                                    GND No. 2

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

<PAGE>

                                TABLE OF CONTENTS

                                                                          PAGE
SCHEDULE I  - Required Amounts
EXHIBIT A   - Form of Certificate for Withdrawal by Owners
EXHIBIT B   - Form of Certificate for Withdrawal by Contractor

<PAGE>

                  UNDERTAKING AND PLEDGE AND SECURITY AGREEMENT

     UNDERTAKING AND PLEDGE AND SECURITY AGREEMENT dated as of February 19, 1999
(this   "AGREEMENT")   among  VIATEL  GERMAN  ASSET  GmbH,  a  Gesellschaft  mit
beschrankter  Haftung  organized  under the laws of  Germany,  METROMEDIA  FIBER
NETWORK GmbH, a Gesellschaft mit beschrankter  Haftung  organized under the laws
of   Germany,   CARRIER   1  FIBER   NETWORK   GmbH  &  Co.   oHG,   an   offene
Handelsgessellschaft  (collectively,  hereinafter  called  "OWNERS")  and VICAME
INFRASTRUCTURE   DEVELOPMENT  GmbH,  a  Gesellschaft  mit  beschrankter  Haftung
organized under the laws of Germany  ("DEVELOPER"),  BECHTEL  LIMITED,  a United
Kingdom limited liability company ("CONTRACTOR"),  and THE CHASE MANHATTAN BANK,
a New York banking institution ("COLLATERAL AGENT").

                                R E C I T A L S :

     WHEREAS, pursuant to that certain Engineering, Procurement and Construction
Contract  (Outside  Plant Work)  dated  February  19,  1999,  among  Contractor,
Developer,  and the Owners (the  "CONTRACT") and the  transactions  contemplated
thereby,  the Contractor will provide certain services necessary for the design,
engineering, procurement, construction,  installation and testing of the Outside
Plant for the Systems on a fixed-price, date certain basis;

     WHEREAS,  in order to induce the Contractor to enter into the  transactions
contemplated  by the Contract,  the Owners have agreed,  in accordance  with and
subject to the terms and conditions hereof, to deposit certain amounts from time
to time with the  Collateral  Agent in the amounts set forth  herein in order to
secure the Owner Payment Obligations.

     NOW,  THEREFORE,  in  consideration  of the  foregoing  and other  good and
valuable  consideration,  the  receipt  and  sufficiency  of  which  are  hereby
acknowledged, the parties hereto hereby agree as follows:

SECTION 1.  DEFINITIONS

     Except as may be otherwise  provided herein,  capitalized terms used herein
have the  respective  meanings  defined  below,  for all  purposes  hereof (such
definitions  to be equally  applicable  to both the singular and plural forms of
the terms  defined) or assigned  thereto in or by  reference to Exhibit 1 to the
Contract.  Any agreement  referred to in such Exhibit 1 means such  agreement as
amended,  supplemented  and modified  from time to time in  accordance  with the
applicable  provisions  thereof  and of the  other  Contract  Documents.  Unless
otherwise  specified,  Section  references  are to Sections  of this  Agreement.
Unless the context otherwise requires,  the terms "adverse claim,"  "entitlement
holder,"  "entitlement  order,"  "financial  asset," "good  faith,"  "investment
property,"   "securities  account,"  "securities   intermediary"  and  "security
entitlement," whenever used in this Agreement,  shall have the meanings ascribed
to such terms in the NYUCC.

     "AGREEMENT"  shall have the meaning set forth for such term in the preamble
hereto.

<PAGE>

     "BUSINESS  DAY"  shall  mean a day on which  banks  are not  authorized  or
required to be closed under  applicable law in New York, New York but shall,  in
any case, exclude a Saturday or a Sunday.

     "COLLATERAL" has the meaning specified in Section 3.2.

     "COLLATERAL ACCOUNT" has the meaning specified in Section 3.1(a).

     "COLLATERAL AGENT" has the meaning specified in the preamble hereto.

     "CONTRACT " has the meaning specified in the first WHEREAS clause hereof.

     "CONTRACT  DEFAULT" shall mean the failure of the Owners,  or the Developer
on  behalf  of the  Owners,  as the  case  may  be,  to pay  any  Owner  Payment
Obligations.

     "CONTRACTOR" has the meaning specified in the preamble hereto.

     "DEFAULT" shall mean a Contract Default or an Undertaking Default.

     "DEPOSIT DATE" shall mean each of the dates specified in Schedule I hereto.

     "DEPOSIT  DATE PERIOD" shall mean,  with respect to each Deposit Date,  the
period from and including the date of such Deposit Date, to, but excluding,  the
date of the immediately succeeding Deposit Date.

     "DEVELOPER" has the meaning specified in the preamble hereto.

     "DM" means German Deutsche Marks.

     "EURO" shall mean the common European currency.

     "EVENT  OF  DEFAULT"  has the  meaning  specified  in  Section  25.1 of the
Contract.

     "FAIR MARKET VALUE" shall mean, with respect to any Permitted  Investments,
the market bid price of such  Permitted  Investments,  as  determined  on public
exchange or any readily  identifiable market and with deduction for the cost, if
any, incurred in sale, liquidation or transfer of such Permitted Investments.

     "INDEMNIFIED PARTIES" shall have the meaning specified in Section 4.6.

     "NOTICE OF EXERCISE OF  REMEDIES"  means the  written  notice  given by the
Owners to the Contractor under Section 25.1 of the Contract.

     "NY-UCC" shall mean the Uniform  Commercial  Code as in effect in the State
of New York, as amended from time to time.

     "OWNER  PAYMENT  OBLIGATIONS"  shall mean all  payment  obligations  of the
Owners from time to time to the Contractor under the Contract.

                                     - 2 -
<PAGE>

     "PARTY" and "PARTIES" has the meaning specified in Section 6.7.

     "PAYMENT ACCOUNT" means  Contractor's  account at Citibank,  N.A.,  London,
Swift Code CITIGB2L, Account No. 3162613, Reference: JOB 24221, Attention: Ms.K.
Maycock,  telephone:  44 171 500 2386, facsimile:  44 171 500 5550 or such other
account as  Contractor  may from time to time  designate in writing to Developer
(on behalf of the Owners) and Collateral Agent.

     "PERMITTED  INVESTMENTS"  means DM or Euro  denominated (i) certificates of
deposit and time and other interest  bearing  deposits (having a maturity of one
(1) year or less) in banks which are rated at least A or higher by a  nationally
recognized rating agency,  (ii) short-term debt securities issued by or entitled
to the full faith and credit of any European  nation  participating  in the Euro
which has a credit rating at least A or higher by a nationally recognized rating
agency or any of its respective agencies or instrumentalities  which is rated at
least A or higher by a nationally  recognized  rating agency,  (iii)  commercial
paper (having a maturity of one (1) year or less) which is rated at least P-2 by
Moody's  Investors  Services A2 by Standard & Poor's  Corporation,  and (iv) any
mutual fund the portfolio of which is limited to the debt  securities  described
in clause (ii) above.

     "PROPERTY" shall mean any money, securities, commodities, assets, holdings,
investment  property,  financial  assets,  security  entitlements  or any  other
property  of any  kind or  nature  whatsoever,  real or  personal,  tangible  or
intangible, or any interest in any of the foregoing.

     "REQUIRED  AMOUNT" shall mean, as of any Deposit Date, the amount set forth
opposite such Deposit Date under the column with the heading  "Required  Amount"
on Schedule I hereto, as such Schedule is adjusted from time to time pursuant to
Section 3.14.

     "SECURED OBLIGATIONS" has the meaning specified in Section 3.2.

     "TERMINATION DATE" has the meaning specified in Section 2.3.

     "TERMINATION NOTICE" has the meaning specified in Section 3.4.

     "UNDERTAKING  DEFAULT"  shall  mean the  failure  of the  Owners to pay any
amount or make any deposit when required hereunder.

SECTION 2.  UNDERTAKING

     2.1  UNDERTAKING.  With respect to each Deposit Date, the Owners shall,  on
such Deposit Date deposit into the Collateral  Account in immediately  available
funds,  such  amounts  as are  required  to cause the Fair  Market  Value of the
Permitted Investments (and other Collateral,  if any, credited to the Collateral
Account as to which Contractor has a perfected  security interest) to be no less
than the  Required  Amount set forth  opposite  such  Deposit Date in SCHEDULE I
hereto.  Immediately upon the making of any such payment,  the Owners shall give
written notice thereof to the Contractor and the Collateral  Agent via facsimile
and  overnight  courier  in the  manner  set forth in  Section  6.1.  The Owners
understand  and  agree  that  such  undertaking  obligations  are  absolute  and

                                     - 3 -
<PAGE>

unconditional  and shall be  terminated  only in the manner set forth in Section
2.3, and shall be suspended only in the manner set forth in Section 2.4.

     2.2 PAYMENT. Any amount which is to be deposited pursuant to Section 2.1 on
day  which is not a  Business  Day  shall be  deposited  on the next  succeeding
Business Day.

     2.3  TERMINATION  OF  UNDERTAKING.  This  Agreement,  and  the  obligation,
covenants and agreements of the Owners hereunder, shall remain in full force and
effect until the earlier to occur of the  following  events:  (i) the payment in
full of all Owner Payment Obligations,  (ii) the receipt by the Collateral Agent
of a Notice of Exercise of Remedies and (iii) the date upon which all amounts on
deposit in the Collateral  Account have been transferred by the Collateral Agent
to the  Contractor  or the  Owners,  as the  case  may  be,  pursuant  to and in
accordance   with,  the  terms  of  this  Agreement  (such  earliest  date,  the
"TERMINATION DATE").

     2.4 SUSPENSION OF ADDITIONAL DEPOSITS. The obligation of the Owners to make
additional  deposits into the Collateral  Account,  as set forth in Section 2.1,
shall be  suspended  during such time,  but only so long as, an Event of Default
has occurred and is  continuing.  Such  obligation to make  additional  deposits
shall  resume  immediately,  without  any formal act or notice,  as soon as such
Event of Default shall no longer be continuing.  The Developer  shall notify the
Collateral Agent promptly of any suspension,  or resumption, as the case may be,
of making additional deposits into the Collateral Account.

SECTION 3.  COLLATERAL SECURITY

     3.1 COLLATERAL ACCOUNT.

     (a)  COLLATERAL  ACCOUNT.  The Owners shall  establish  and maintain at the
principal New York office of the Collateral Agent, for account of the Owners, an
account designated the "Viatel German Asset-GmbH,  Metromedia Fiber Network GmbH
i.G., and Carrier 1 Fiber Network GmbH & Co. oHG, Account;  Bechtel Limited,  as
secured  party" (the  "COLLATERAL  ACCOUNT").  Contractor  shall have  exclusive
dominion  and  control  over  the  Collateral  Account.  For  purposes  of  this
Agreement, the parties confirm and agree as follows:

          (i) Collateral  Agent confirms that The Chase Manhattan Bank Frankfurt
     has established a collateral  security account for the account of The Chase
     Manhattan Bank London, account number 6231400604,  attention Stuart Poyser,
     and titled as provided above.

          (ii)  Collateral  Agent  agrees  that  the  Collateral  Account  is  a
     "securities account" within the meaning of Section 8501 of the NYUCC.

          (iii) Collateral Agent confirms that it is a "securities intermediary"
     as  defined  in  Section  8102(a)(14)  of  the  NY-UCC  and  a  "Securities
     Intermediary" as defined in Book-Entry Regulations.

          (iv)  Collateral  Agent  agrees to treat the other  parties  hereto as
     entitled to exercise the rights that comprise any financial  asset credited
     to or carried in the Collateral Account.

                                     - 4 -
<PAGE>

          (v) Upon the  delivery  or transfer of any  Collateral  to  Collateral
     Agent,  Collateral  Agent shall indicate by book entry that such Collateral
     has been credited to the Collateral  Account or accept such  Collateral for
     credit to the Collateral Account, as appropriate.

          (vi) The parties  hereto agree that each item of Property  credited to
     or carried in the Collateral  Account shall be treated as a financial asset
     under Articles 8 and 9 of the NYUCC.

          (vii) Each party  hereto  agrees that the  "securities  intermediary's
     jurisdiction"  of  Collateral  Agent is the  State of New York and that New
     York  law  shall  be  the  local  law  of  the  "securities  intermediary's
     jurisdiction" for purposes of Section 9103(6) of the NYUCC.

          (viii) If at any time  Collateral  Agent shall receive an  entitlement
     order given by  Contractor  and relating to the  Collateral  Account or any
     financial   asset  credited   thereto  or  carried  therein  or  any  other
     Collateral,  the  Owners  hereby  agree  that  Collateral  Agent  may,  and
     Collateral Agent agrees that it shall,  comply with such entitlement  order
     without further consent of the Owners or any other Person.

          (ix) Each of the  Owners  agree  that it shall have no right to demand
     any  withdrawal  of  Collateral  from the  Collateral  Account  (except  as
     expressly  set forth in Section  3.5(a)) or to give any  entitlement  order
     with respect to any  Collateral  credited or required to be credited to the
     Collateral  Account.  Collateral  Agent  agrees  that  it  shall  take  all
     entitlement  orders with respect to the Collateral Account or any financial
     asset  credited  thereto or  required to be  credited  thereto  solely from
     Contractor  and that it will not transfer or release any  Collateral to the
     Owners or any other Person,  except in accordance with an entitlement order
     from Contractor.

          (x) Collateral Agent represents,  warrants and agrees that it does not
     currently  hold, and during the existence of this Agreement shall not hold,
     any "adverse interest", by way of security, setoff or otherwise, in (A) the
     Collateral  Account or in any financial  asset credited  thereto or carried
     therein,  or (B) in other  Collateral,  and hereby  waives and releases any
     such interest which it may have in any of the foregoing.  Without prejudice
     to the  preceding  sentence  in the  event  that  Collateral  Agent  has or
     subsequently obtains by agreement, operation of law or otherwise a security
     interest in the  Collateral  Account or any security  entitlement  credited
     thereto  or carried  therein,  Collateral  Agent  hereby  agrees  that such
     security  interest shall be subordinate  to the security  interest  granted
     herein to the Contractor.  The financial assets and other items credited to
     or  carried in the  Collateral  Account  will not be subject to  deduction,
     setoff, banker's Lien, or any other right in favor of any Person other than
     Contractor.

          (xi)  Except for the claims and  interests  of  Contractor  and of the
     Owners in the Collateral Account,  Collateral Agent represents and warrants
     that it does not know of any claim  to,  or  interest  in,  the  Collateral
     Account or in any  financial  asset  credited  thereto or carried  therein.
     Collateral  Agent  will  not (A)  permit  any of its  creditors  to  obtain

                                     - 5 -
<PAGE>

     "control"  (as such term is defined in Articles 8 and 9 of the NYUCC ) over
     the Collateral  Account or any financial asset credited  thereto or carried
     therein, or (B) enter into any agreement, arrangement or understanding with
     any other  Person  relating to any part of the  Collateral  Account and the
     financial  assets  credited  or to be  credited  thereto  or to be  carried
     therein pursuant to which it has agreed to comply with  entitlement  orders
     of such Person. If any Person asserts any Lien or adverse claim against the
     Collateral  Account  or any  financial  asset  credited  thereto or carried
     therein,  and  Collateral  Agent has actual  notice of such Lien or adverse
     claim,  Collateral Agent shall promptly notify Contractor and the Developer
     (on behalf of the Owners) thereof.

          (xii)  Collateral  Agent shall promptly send copies of all statements,
     confirmations and other correspondence concerning the Collateral Account or
     any financial asset credited thereto or carried therein  simultaneously  to
     Contractor and Developer (on behalf of the Owners) at the address set forth
     in Section 6.1.

          (xiii) By this  Agreement  the  parties  hereto  intend and agree that
     Contractor has obtained "control" (within the meaning of Section 8106(d) of
     the NY-UCC) of the Collateral  Account,  the financial  assets  credited or
     required to be credited to the Collateral Account and any other Collateral.

          (xiv)  Collateral  Agent  confirms and agrees that the first  priority
     security  interest of Contractor with respect to the Collateral is and will
     remain reflected in its books and records.

          (xv) By this  Agreement  the  parties  hereto  intend and  agree,  and
     Collateral  Agent  confirms,  that Contractor is the  "entitlement  holder"
     (within the meaning of Section  8102(a)(7) of the NY-UCC) of the Collateral
     Account and all financial  assets held by Collateral Agent hereunder as the
     securities intermediary.

     (b)  NOTICE  OF  SECURITY  INTEREST.   Collateral  Agent  (i)  acknowledges
Contractor's   security  interest  in  the  Collateral  Account  and  the  other
Collateral  granted by the Owners pursuant to Section 3.2, (ii) shall record the
pledge of the  Collateral  Account and the other  Collateral  made hereby on its
books and  (iii)  agrees to  execute  and  deliver  such  acknowledgments  as is
customary in its business or as Contractor may reasonably request.

     3.2. COLLATERAL; PLEDGE; NO LIENS; TITLE

     (a) PLEDGE.  As collateral  security for the prompt payment when due of all
amounts from time to time payable by the Owners to  Contractor  under  Section 2
and 3.12 of this Agreement and of all Owner Payment  Obligations  (collectively,
the "SECURED  OBLIGATIONS"),  the Owners  hereby  pledge,  hypothecate,  assign,
transfer, set over and deliver unto Contractor, and grant to Contractor, a first
priority  security  interest  in,  Lien  upon and right of set off  against  the
following (collectively, the "COLLATERAL"):

          (i) the Collateral Account,  including any credit or other balances of
     account  credited  thereto or carried  therein or other  amounts  otherwise
     transferred thereto;

                                     - 6 -
<PAGE>

          (ii) all investment property,  cash,  Permitted  Investments and other
     instruments  or amounts  or other  Property  deposited  or  required  to be
     deposited  from time to time in, or  credited to or required to be credited
     from  time to time to,  the  Collateral  Account  and held or to be held by
     Collateral Agent hereunder and all income therefrom;

          (iii) the Owners' securities entitlement with respect to the financial
     assets  credited  or  required  to be  credited  from  time  to time to the
     Collateral Account;

          (iv) all rights,  claims and causes of action, if any, that the Owners
     may have against any Person in respect of the foregoing; and

          (v) all proceeds of any or all of the foregoing.

     TO HAVE AND TO HOLD the  Collateral,  together  with  all  rights,  titles,
interests,  powers, privileges and preferences pertaining or incidental thereto,
unto Contractor,  its successors and assigns,  forever; subject, however, to the
terms, covenants and conditions hereinafter set forth.

     (b) LIENS,  ETC.  The Owners  agree not to  withdraw  (except as  expressly
provided for pursuant to Section  3.5(a)),  liquidate,  sell,  convey,  endorse,
negotiate,  or in any way dispose of, or create,  incur,  or permit to exist any
pledge, mortgage, Lien, charge,  encumbrance or security interest whatsoever, or
cause  any  of  the  foregoing  to  occur  in or  with  respect  to,  any of the
Collateral,  any  interest  therein  or any  cash or  other  property  held  and
maintained in or credited to the Collateral  Account.  The Owners agree at their
own expense, to defend  Contractor's  security interest in and to the Collateral
against the claims of any Person and to ensure that  Contractor has at all times
a first  priority  perfected  Lien on and security  interest in the  Collateral,
subject to no prior or equal Lien whatsoever.

     (c) TITLE.  The Owners hereby  represent and warrant to Contractor that the
Owners have good title to the Collateral and the cash or other property held and
maintained  in or  credited  to the  Collateral  Account,  free and clear of all
Liens,  other than the Lien created  hereby,  and that this Agreement  grants to
Contractor  a first  priority  perfected  Lien on and  security  interest in the
Collateral, subject to no prior or equal Lien whatsoever.

     3.3. INVESTMENTS.

     (a)  GENERALLY.  The Owners and Contractor  agree that all funds  deposited
into the  Collateral  Account shall be invested and  reinvested,  and Contractor
hereby  instructs  Collateral  Agent to so invest  and  reinvest  such  funds in
Permitted Investments.  All earnings on such investment or reinvestment shall be
paid  to the  Collateral  Account  as  part of the  Collateral.  Contractor  and
Collateral Agent shall have no liability for any losses or liabilities  incurred
as a result  of such  investments  (excluding  losses  resulting  from the gross
negligence or willful misconduct of Contractor or Collateral Agent).

     (b) INVESTMENT OF COLLATERAL. All interest,  dividends and distributions of
property on or in respect of the Collateral,  whether constituting  scheduled or

                                     - 7 -
<PAGE>

unscheduled  payments and whether received in exchange for the Collateral or any
part thereof or as a result of any merger,  consolidation,  acquisition or other
exchange of assets or on the liquidation,  whether voluntary or involuntary,  of
any issuer of the Collateral, or otherwise, and all amounts received pursuant to
Section 3.7, shall constitute Collateral  hereunder,  shall be promptly credited
to the  Collateral  Account  and shall be  applied  to the  prompt  purchase  of
Permitted Investments. Contractor hereby instructs Collateral Agent to invest in
such  Permitted  Investments as shall be directed by Developer (on behalf of the
Owners) from time to time until such time that  Contractor  otherwise  instructs
Collateral Agent. Contractor shall not instruct Collateral Agent to not act upon
Developer's  direction (on behalf of the Owners) in connection with investing in
Permitted Investments so long as no Default has occurred and is continuing.

     3.4  TERMINATION  OF  COLLATERAL  ACCOUNT.  At the request of Developer (on
behalf of the Owners)  given to  Contractor  on or after the  Termination  Date,
Contractor shall deliver prompt written notice of such termination to Collateral
Agent (a "TERMINATION NOTICE"),  whereupon the Collateral shall be released from
the Lien of this  Agreement,  and  Collateral  Agent shall  promptly  deliver to
Developer  (on behalf of the Owners) or its  designee  each of the  certificates
evidencing  the  Collateral,  as  well as any  other  instruments  or  documents
delivered to Contractor pursuant to this Agreement.

     3.5 RELEASE OF COLLATERAL

     (a)  PERIODIC  RELEASE.  If at any time during any Deposit  Date Period the
Fair Market Value of the Permitted  Investments  (and other  Collateral,  if any
credited to the  Collateral  Account as to which the  Contractor has a perfected
security  interest) is greater than the Required  Amount set forth  opposite the
Deposit Date for such  Deposit  Date Period,  as set forth in SCHEDULE I hereto,
and the  Collateral  Agent has not received a notice that a Default has occurred
and is continuing, then, upon delivery of a certificate in the form of EXHIBIT A
executed  by a person  whose  authority  to  execute  such  certificate  for the
Developer  (on  behalf  of the  Owners)  is  evidenced  by an  extract  from the
Handelsregister,  the  Contractor  hereby  instructs  the  Collateral  Agent  to
transfer the amount of such excess to the account identified in such certificate
within two Business Days and shall sell any such Permitted Investments as may be
required in order to make such transfer. The Collateral Agent shall send written
notice of such transfer via facsimile  and overnight  courier to the  Contractor
and the Developer immediately upon such transfer.

     (b)  PAYMENT  AMOUNT.  If at any  time  the  Collateral  Agent  receives  a
certificate  in the form of EXHIBIT B executed  by a person  purporting  to be a
duly authorized signatory of the Contractor, it shall transfer the amount stated
in such  certificate as being due and owing,  to the Payment  Account within two
Business Days and shall sell any such  Permitted  Investments as may be required
in order to make such transfer.  The Collateral  Agent shall send written notice
of such transfer via facsimile and overnight  courier to the  Contractor and the
Developer immediately upon such transfer.

     3.6 REMEDIES.

     (a) SECURED OBLIGATIONS.  Upon the occurrence of a Default,  Contractor may
take any action permitted herein with respect to the Collateral.

                                     - 8 -
<PAGE>

     (b)  REMEDIES.  If  a  Default  shall  have  occurred  and  be  continuing,
Contractor may from time to time:

          (i) sell,  assign,  transfer,  endorse  and deliver the whole or, from
     time to time,  any part of the  Collateral  at public or private sale or on
     any securities exchange,  for cash, upon credit or for other property,  for
     immediate  or future  delivery,  and for such  price or prices  and on such
     terms as Contractor in its reasonable  discretion  shall deem  appropriate;
     and (ii) instead of exercising  its remedy under clause (i) of this Section
     3.6(b), have any or all of the Collateral registered in its name or that of
     its  nominee  and/or  any cash or other  property,  transferred  to it.  To
     effectuate the foregoing, Contractor may notify Collateral Agent in writing
     that  Contractor  wishes to register or transfer the Collateral and or such
     cash or other  property to  Contractor,  whereupon  Collateral  Agent shall
     cause the same to be so  registered or  transferred  without the consent of
     the Owners or any other Person.  Whether or not the  Collateral  shall have
     been  registered  in the name of  Contractor or its nominee or such cash or
     other property shall have been transferred to Contractor, Contractor or its
     nominee shall have the right to exercise sole dominion and control over the
     Collateral,  such cash and such other property, to liquidate the Collateral
     and to receive  all  proceeds  thereof,  to receive  all such cash or other
     property  and to  exercise  all  voting  rights,  if any,  as to all of the
     Collateral, all other rights and all conversion, exchanged, subscription or
     other rights,  privileges or options  pertaining  thereto as if it were the
     absolute  owner  thereof,  including,  without  limitation,  the  right  to
     exchange  or  redeem  any  or  all  of  the  Collateral  upon  the  merger,
     consolidation,  reorganization,  recapitalization  or other readjustment of
     the issuer  thereof,  or upon the  exercise  by the  issuer  thereof of any
     right,  privilege,  or option pertaining to any of the Collateral,  and, in
     connection  therewith,  to deliver any of the  Collateral to any committee,
     depository,  transfer agent, registrar or other designated agency upon such
     terms and conditions as it may determine,  all without  liability except to
     account for property  actually received by it, but Contractor shall have no
     duty to exercise any of the  aforesaid  rights,  privileges  or options and
     shall not be responsible for any failure to do so or any delay in so doing;
     and

          (iii)  exercise any and all of the rights and remedies with respect to
     all or any part of the Collateral of a secured party under the NYUCC and or
     under other applicable law;

          provided,  however,  that nothing  herein shall be deemed to allow the
     Contractor to sell or foreclose upon any portion of the Collateral  that is
     in excess of the Secured Obligations.

     (c) SALES TO PURCHASERS UNDER  SECURITIES ACT OF 1933.  Contractor shall be
authorized  at any  sale (if it deems it  advisable  to do so) to  restrict  the
prospective  bidders or purchasers to persons who will  represent and agree that
they are purchasing the Collateral for their own account in compliance with, and
otherwise  satisfy the  requirements of, the Securities Act of 1933, as amended,

                                     - 9 -
<PAGE>

and upon  consummation  of any such  sale,  Contractor  shall  have the right to
assign, transfer, endorse and deliver to the purchaser or purchasers thereof the
Collateral so sold.

     (d) PRIVATE SALES.  The Owners hereby  acknowledge  and agree that a public
sale of the Collateral might require the filing of registration  statements with
the Securities and Exchange Commission and various state securities authorities.
Accordingly,  the Owners  hereby  expressly (i) authorize any sale of Collateral
under  this  Agreement  to be made in such a manner  as to avoid  the  foregoing
registration  requirements,  and (ii) acknowledge that such sales may be made in
one or more  privately  negotiated  transactions  without public offer which may
result in a lower overall sales price for the Collateral  than could be obtained
in a public  offering of the  Collateral.  Each such  purchaser at any such sale
shall hold the property sold absolutely free from any claim or right on the part
of Owners,  and the Owners  hereby  waive (to the extent  permitted  by law) all
rights of redemption,  stay and/or appraisal which the Owners now have or may at
any time in the future have under any law now existing or hereafter enacted.

     (e) NOTICE AND CONDUCT OF SALES. The Owners  acknowledge and agree that the
Collateral  is  of  a  type  customarily  sold  on  a  recognized   market  and,
accordingly,  to the extent  permitted  by law, the Owners  expressly  waive any
notice by  Contractor  or any other Person of sale or other  disposition  of the
Collateral  and all  other  rights or  remedies  of the  Owners  or  formalities
prescribed by law relative to sale or  disposition of the Collateral or exercise
of any other right or remedy of Contractor, and to the extent any such notice is
required and cannot be waived,  the Owners agree that if such notice is given in
the manner  provided  in Section 6.1 at least one day before the time of sale or
disposition,  such notice shall be deemed reasonable and shall fully satisfy any
requirement  for the giving of such  notice.  At any sale,  the  Collateral,  or
portion thereof to be sold, may be sold in one lot as an entirety or in separate
parcels,  as  Contractor  may in its sole  and  absolute  discretion  determine.
Contractor shall not be obligated to make any sale of the Collateral if it shall
determine  not to do so,  regardless  of the  fact  that  notice  of sale of the
Collateral may have been given.  Contractor may,  without notice or publication,
adjourn any public or private sale or cause the same to be  adjourned  from time
to time by announcement at the time and place fixed for sale, and such sale may,
without further  notice,  be made at the time and place to which the same was so
adjourned.  In case  the sale of all or any  part of the  Collateral  is made on
credit  or for  future  delivery,  the  Collateral  so sold may be  retained  by
Contractor until the sale price is paid by the purchaser or purchasers  thereof,
but  Contractor  shall not incur any  liability  in case any such  purchaser  or
purchasers shall fail to take up and pay for the Collateral so sold and, in case
of any such failure,  such Collateral may be sold again upon like notice. At any
public or private sale made pursuant to this  Agreement,  Contractor may bid for
or purchase,  free from any right of  redemption,  stay and/or  appraisal on the
part of the Owners (all said rights being also hereby waived and released to the
extent permitted by law), all or any part of the Collateral offered for sale and
may make payment on account thereof by using any amounts then due and payable to
Contractor  from  the  Owners  as a  credit  against  the  purchase  price,  and
Contractor may, upon compliance with the terms of sale, hold, retain and dispose
of such property  without further  accountability  to the Owners  therefor.  For
purposes hereof, a written notice by Contractor of purchase by Contractor or any
other  Person of all or any part of the  Collateral  shall be  treated as a sale
thereof.  As an alternative  to exercising  the power of sale herein  conferred,
Contractor  may proceed by suit or suits at law or in equity to  foreclose  this
Agreement and sell the Collateral or any portion thereof pursuant to judgment or
decree of a court or courts having competent jurisdiction.

                                     - 10 -
<PAGE>

     (f) ELECTION TO RETAIN  COLLATERAL.  The Owners  acknowledge and agree that
the exercise by  Contractor of any or all of its rights  hereunder  shall not be
deemed an  election  to retain the  Collateral  in  satisfaction  of any Secured
Obligations  secured  hereby and that any election to retain the  Collateral  in
satisfaction of any Secured Obligations secured hereby (in lieu of sale pursuant
to this Section 3.6 and application of proceeds  pursuant to Section 3.7 hereof)
shall only be deemed to have  occurred  if  Contractor  expressly  notifies  the
Owners of such election and the Owners do not object thereto.

     (g) COMPLIANCE  WITH LAW. The Owners hereby agree that any sale pursuant to
this Section 3.6 conforms to  commercially  reasonable  standards as provided in
the NYUCC.

     3.7  APPLICATION OF PROCEEDS.  The proceeds of any sale pursuant to Section
3.6 hereof of all or any part of the  Collateral  and all or any part of amounts
credited to the Collateral Account from time to time shall be paid by Collateral
Agent to Contractor upon the written request of Contractor and such amount shall
be applied by Contractor as follows:

          FIRST, to the payment of any fees due and payable to Collateral Agent;

          SECOND,  to the payment of all reasonable costs and expenses  incurred
     by Collateral  Agent and Contractor in connection  with the  enforcement of
     this Agreement, including, but not limited to, all court costs and the fees
     and  disbursements  of  counsel  for  Contractor  and  Collateral  Agent in
     connection with such enforcement;

          THIRD, to the payment in full to Contractor of all Secured Obligations
     then due and owing in such order as Contractor may determine; and

          FOURTH, following any such termination pursuant to Section 3.4 hereof,
     the  remainder,  if any,  to the  Owners  (or as the  Owners  or a court of
     competent jurisdiction may direct).

     3.8 CONTINUING SECURITY INTEREST.  This Agreement shall create a continuing
security  interest  in the  Collateral  and shall (i)  remain in full  force and
effect until termination pursuant to Section 3.4 hereto and (ii) be binding upon
the Owners and their respective  successors and assigns.  Upon such termination,
the  Owners  shall be  entitled  to the  prompt  return  of any  portion  of the
Collateral that shall not have been sold or otherwise  disposed of by Contractor
pursuant to the terms hereof.

     3.9 DELIVERY OF PERMITTED INVESTMENTS.

     (a)  CERTIFICATED  SECURITIES.  To  the  extent  that  any  portion  of the
Collateral constitutes certificated securities,  all certificates or instruments
evidencing  the same shall be in registered  form and  specifically  indorsed to
Contractor  by an effective  indorsement  and delivered  into the  possession of
Collateral Agent, to be held by Collateral Agent on behalf of Contractor for the
purpose of perfecting  the security  interests  granted to Contractor  hereunder
with  respect to such  Collateral  and disposed of pursuant to the terms of this
Agreement.

     (b)  UNCERTIFICATED  SECURITIES.  To the  extent  that any  portion  of the
Collateral  constitutes  an  uncertificated   security,   other  than  Permitted

                                     - 11 -
<PAGE>

Investments   credited  to  the  Collateral  Agent  pursuant  to  3.9(a),   such
uncertificated  security shall be registered in the name of the Collateral Agent
and credited by the Collateral Agent to the Collateral Account.

     3.10  FURTHER  ASSURANCES.  The  Owners  agree  that  they  will  join with
Contractor  in  executing  and  will  file or  record  such  notices,  financing
statements  or other  documents as may be necessary  for the  perfection  of the
security  interests  granted to Contractor  hereunder,  and as Contractor or its
counsel may  reasonably  request,  such  instruments to be in form and substance
satisfactory to Contractor. The Owners also agree that they will do such further
acts  and  things  and  execute  and  deliver  to  Contractor   such  additional
conveyances,  assignments,  agreements and  instruments as Contractor may at any
time reasonably request in connection with the administration and enforcement of
this  Agreement or relative to the Collateral or any part thereof or in order to
assure and confirm unto Contractor its rights, powers and remedies hereunder.

     3.11 ATTORNEY-IN-FACT. Contractor is hereby appointed the attorneyinfact of
the Owners (i) for any period,  for the purpose of signing  documents and taking
other action to perfect its security  interest in the Collateral and (ii) during
any period during which a Default has occurred and has been continuing,  for the
purpose of carrying out the  provisions of this  Agreement and taking any action
and executing any instruments  which  Contractor may deem necessary or advisable
to accomplish  the purposes  hereof,  which  appointment  as  attorneyinfact  is
irrevocable and coupled with an interest. Without limiting the generality of the
foregoing,  during any such period  described  in clause (ii) above,  Contractor
shall have the right and power to  receive,  endorse and collect all checks made
payable to the order of the Owners  representing  any  payment in respect of the
Collateral or the cash or other  property held and  maintained in or credited to
the  Collateral  Account  or any part of any of the  foregoing  and to give full
discharge for the same.

     3.12 EXPENSES.

     (a)  EXPENSES OF  CONTRACTOR.  The Owners  agree to pay to  Contractor  all
reasonable costs and expenses (including  reasonable expenses for legal services
of every  kind) of, or  incident  to,  the  enforcement  of,  or  protection  or
preservation of any right under, any of the provisions of this Agreement, or any
actual or attempted sale, or any exchange, enforcement,  collection,  compromise
or  settlement  in  respect  of any of the  Collateral,  and for the care of the
Collateral and defending or asserting rights and claims of Contractor in respect
thereof,  by  litigation or  otherwise;  and all such expenses  shall be Secured
Obligations secured under this Agreement.

     (b) EXPENSES OF COLLATERAL  AGENT. The Owners agree to pay Collateral Agent
its fees and expenses for acting  hereunder,  as Developer and Collateral  Agent
may separately agree.

     3.13 TAXES.  Any Taxes  payable on or with respect to the  Collateral,  the
delivery thereof or any earnings  therefrom shall be the  responsibility  of the
Owners,  and the Owners  hereby  agree to indemnify  on an aftertax  basis,  the
Collateral estate,  Contractor,  and its respective  Affiliates from and against
any Taxes  arising out of or otherwise  attributable  to the  Collateral  or any
earnings therefrom.

                                     - 12 -
<PAGE>

     3.14  ADJUSTMENTS  TO  SCHEDULES.  Developer  (on behalf of the Owners) and
Contractor  hereby agree to work together,  in good faith,  to make promptly any
necessary  adjustments  to  SCHEDULE I hereto  from time to time to reflect  any
adjustments to Appendix 10 of the Contract.  Developer (on behalf of the Owners)
and  Contractor  may deliver to the  Collateral  Agent a  substitute  SCHEDULE I
reflecting any such agreed to adjustments thereto.

SECTION 4.  COLLATERAL AGENT

     4.1 APPOINTMENT.  Contractor hereby appoints  Collateral Agent as its agent
for  purposes  of holding the  Collateral  on the terms and  conditions  of this
Agreement.  Collateral  Agent hereby accepts such  appointment.

     4.2 REMOVAL AND RESIGNATION.

     (a) Collateral  Agent or any successor  Collateral  Agent may resign at any
time  without  cause  by  giving  at  least 60 days'  prior  written  notice  to
Contractor,  with copies thereof to Developer,  such resignation to be effective
upon the  acceptance  of  appointment  by the successor  Collateral  Agent under
Section 4.2(b) hereof. In addition, Contractor may at any time remove Collateral
Agent without cause by an instrument in writing  delivered to Collateral  Agent,
with  copies  thereof  to  Developer,  such  removal  to be  effective  upon the
acceptance of appointment by the successor Collateral Agent under Section 4.2(b)
hereof.  In  the  case  of the  resignation  or  removal  of  Collateral  Agent,
Contractor may appoint a successor  Collateral Agent by an instrument  signed by
Contractor,   which  successor,  if  no  Default  shall  have  occurred  and  be
continuing,  shall  be  approved  by  Developer  (which  approval  shall  not be
unreasonably  withheld or delayed).  If a successor  Collateral  Agent shall not
have been  appointed  within 30 days after the giving of written  notice of such
resignation  or the  delivery of the  written  instrument  with  respect to such
removal,  Collateral  Agent,  Contractor  or Developer may apply to any court of
competent jurisdiction to appoint a successor Collateral Agent to act until such
time, if any, as a successor  shall have been appointed as above  provided.  Any
successor  Collateral  Agent so  appointed by such court shall  immediately  and
without further act be superseded by any successor Collateral Agent appointed as
above provided within one year from the date of the appointment by such court.

     (b) ACCEPTANCE OF  APPOINTMENT.  Any successor  Collateral  Agent,  however
appointed,  shall execute and deliver to the predecessor  Collateral Agent, with
copies  thereof to  Contractor  and  Developer,  an  instrument  accepting  such
appointment, and thereupon such successor Collateral Agent, without further act,
shall become vested with all the estates, properties, rights, powers, duties and
trusts of the  predecessor  Collateral  Agent in the trust  hereunder  with like
effect as if originally named Collateral Agent herein;  but  nevertheless,  upon
the  written  request  of such  successor  Collateral  Agent,  such  predecessor
Collateral  Agent shall execute and deliver an instrument  transferring  to such
successor  Collateral Agent, all Collateral held by such predecessor  Collateral
Agent.  Upon  any  such  transfer  by  a  predecessor   Collateral  Agent,  such
predecessor  Collateral  Agent shall  provide the  successor  Collateral  Agent,
Developer and Contractor an accounting of Collateral hereunder.

     (c) QUALIFICATION. Any successor Collateral Agent, however appointed, shall
be a bank  incorporated and doing business within the United States and having a

                                     - 13 -
<PAGE>

combined  capital  and  surplus  of at least  $100,000,000,  if there be such an
institution  willing,  able and  legally  qualified  to  perform  the  duties of
Collateral Agent hereunder upon reasonable or customary terms.

     4.3 WAIVER OF OFFSET RIGHTS.  Collateral  Agent hereby expressly waives any
right of  offset,  banker's  lien or other  similar  rights  that it might  have
against,  or any assignment,  security  interest or other interest that it might
have in, the Collateral.

     4.4 DEFAULT.  Collateral Agent shall have no responsibility for determining
whether a Default  shall have  occurred  and shall be  entitled to rely upon any
notice thereof delivered to it by Contractor.

     4.5 DUTIES. The duties and  responsibilities  of Collateral Agent hereunder
shall be determined solely by the express  provisions of this Agreement,  and no
other or further duties or responsibilities  shall be implied.  Collateral Agent
shall  not have any  liability  under,  no duty to  inquire  into the  terms and
provisions  of any  agreement  or  instructions,  other than as outlined in this
Agreement.  Anything in this  Agreement to the contrary  notwithstanding,  in no
event shall  Collateral  Agent be liable for special,  indirect or consequential
loss or  damage  of any  kind  whatsoever  (including  but not  limited  to lost
profits),  even if Collateral  Agent has been advised of the  likelihood of such
loss or damage and regardless of the form of action.  Collateral  Agent confirms
that it shall carry out all duties  placed  upon it  hereunder,  but  Collateral
Agent shall have no  responsibility  for  determining  whether  Contractor has a
first  priority  perfected  Lien on and  security  interest  in the  Collateral.
Collateral  Agent in its capacity as escrow agent  hereunder  shall not have any
liability for any loss sustained as a result of any investment  made pursuant to
the  instructions of the parties hereto or as a result of any liquidation of any
investment  prior to its  maturity  or for the  failure  of the  parties to give
Collateral  Agent  instructions  to invest or  reinvest  the  Collateral  or any
earnings  thereon.  Any  corporation  into  which  the  Collateral  Agent in its
individual  capacity  may  be  merged  or  converted  or  with  which  it may be
consolidated,  or any  corporation  resulting  from any  merger,  conversion  or
consolidation to which the Collateral Agent in its individual  capacity shall be
a party,  or any  corporation  to which  substantially  all the corporate  trust
business of the Collateral Agent in its individual  capacity may be transferred,
shall be the Collateral Agent under this Agreement without further act.

     4.6 INDEMNIFICATION.  The Owners shall release,  indemnify, defend and hold
harmless  Collateral Agent and each of its officers,  directors,  affiliates and
employees  (collectively  "INDEMNIFIED  PARTIES")  from and  against  any claim,
liability,  loss, damage or expense  (including  reasonable outside counsel fees
and  disbursements  of such  Indemnified  Parties)  of any  nature,  directly or
indirectly  arising  out of or  relating  to  any  act or  omission  under  this
Agreement, except for any such claim, liability, loss, damage or expense arising
out of an  Indemnified  Party's  gross  negligence or willful  misconduct.  This
provision shall survive the termination of this Agreement.

     4.7 TAX  IDENTIFICATION  NUMBERS.  Developer shall provide Collateral Agent
with Tax  Identification  Number (TIN) of the Owners as assigned by the Internal
Revenue Service.  All items of income,  gain, expense and loss recognized in the
Collateral  Account  shall be reported  to the United  States  Internal  Revenue
Service and all state and local taxing authorities under the name and TIN of the
Owners.

                                     - 14 -
<PAGE>

SECTION 5.  REPRESENTATIONS AND WARRANTIES

     5.1 THE OWNERS, DEVELOPER AND CONTRACTOR. In order to induce each other and
Collateral  Agent to enter into this  Agreement  and  transactions  contemplated
hereby, each of the Owners,  Developer and Contractor hereby makes the following
representations and warranties to each other and Collateral Agent:

          (a) it is validly  existing and, if  applicable  under the laws of its
     jurisdiction  of  incorporation,  in good  standing  under  the laws of its
     jurisdiction  of  incorporation  and has all requisite  corporate power and
     authority to enter into and perform its  obligations  under this  Agreement
     and the transactions contemplated hereby;

          (b) the execution,  delivery and performance of this Agreement by such
     party have been duly  authorized by all necessary  corporate  action on the
     part of such party and no other  corporate  proceedings  are  necessary  in
     connection  therewith;  this Agreement has been duly executed and delivered
     by such party, and, assuming the due authorization, execution, and delivery
     by each other party hereto, this Agreement constitutes the legal, valid and
     binding  obligation  of such  party,  enforceable  against  such  party  in
     accordance with the terms hereof;

          (c) neither the  execution,  delivery or  performance by such party of
     this  Agreement,   nor  the   consummation  of  any  of  the   transactions
     contemplated  hereby,  will  contravene any law applicable to or binding on
     such party, or any provision of the charter or bylaws of such party; and

          (d) neither the  execution,  delivery or  performance by such party of
     this  Agreement,  nor  the  consummation  by  such  party  of  any  of  the
     transactions  described  herein,  requires  the consent or approval of, the
     giving of notice to, the registration  with, the recording or filing of any
     documents  with,  or the  taking of any other  action in  respect  of,  any
     governmental  authority,  any  trustee or holders  of any  indebtedness  or
     obligations  of such  party,  any  stockholder  of such  party or any other
     Person, other than those which shall have been obtained.

     5.2 COLLATERAL  AGENT.  Collateral Agent hereby  represents and warrants to
the Owners, Developer and Contractor that:

          (i)  Collateral  Agent is a New York State  banking  institution  duly
     organized, validly existing and in good standing under the laws of New York
     and has full power, corporate and otherwise,  and authority to carry on its
     business  as  currently  being  conducted,  to own or hold under  lease all
     properties  owned  or  leased  by it and to  enter  into  and  perform  its
     obligations under this Agreement.

          (ii) The  execution  and  delivery  by  Collateral  Agent of,  and the
     performance by Collateral  Agent of its obligations  under,  this Agreement
     have been duly authorized by all necessary  corporate action on the part of
     Collateral Agent, and this Agreement constitutes a legal, valid and binding
     obligation of Collateral  Agent,  enforceable  against  Collateral Agent in
     accordance with its terms.

                                     - 15 -
<PAGE>

          (iii)  Collateral  Agent is a bank  which in the  ordinary  course  of
     business maintains security accounts such as the Collateral Account defined
     herein.

          (iv)  Neither the  execution or delivery by  Collateral  Agent of this
     Agreement  nor the  performance  by  Collateral  Agent  of its  obligations
     hereunder,  (a)  conflicts or will  conflict with or violate in any respect
     any  currently  existing  law  or  governmental  rule,  regulation,  or any
     judgment  or order  or any  judicial  or  administrative  order  or  decree
     applicable to or binding upon  Collateral  Agent or any of its  properties,
     (b)   conflicts  or  will   conflict   with  or  violate  the  articles  of
     incorporation  or  by-laws  of  Collateral  Agent,  (c)  conflicts  or will
     conflict  with,  or  contravene,  violate  or  result in a breach  of,  any
     indenture, mortgage, loan agreement or any other agreement or instrument to
     which  Collateral  Agent is a party or by which  any of its  properties  is
     bound, in any such case which does or will materially  adversely affect the
     financial  condition or the business or assets of  Collateral  Agent or its
     ability to perform its obligations  under this  Agreement,  (d) requires or
     will require,  on the part of Collateral Agent, the consent or approval of,
     the giving of notice to, the registration  with, or the taking of any other
     action  in  respect  of,  any  governmental  or public  commission,  board,
     authority  or agency,  except for  filings,  if any,  made  pursuant to any
     notice  reporting  requirement  applicable  to it, or (e)  requires or will
     require  the  consent or  approval  of its  shareholders  or any trustee or
     holders of any currently existing indebtedness or obligations of Collateral
     Agent.

          (v) There are no actions, suits or proceedings pending, or to the best
     knowledge of Collateral Agent,  threatened before any court or by or before
     any other federal,  state or local government or public commission,  board,
     authority  or agency,  or any  arbitrator,  domestic or foreign,  which can
     reasonably  be expected to have a materially  adverse  effect on Collateral
     Agent's  ability to perform its  obligations  under this Agreement or which
     call into question the validity of any such agreement or instrument.

          (vi) As of the date hereof, Collateral Agent has received no notice of
     any  Lien  on any of the  Collateral  other  than  the  lien  in  favor  of
     Contractor. Collateral Agent agrees to give prompt notice to Contractor and
     Developer of any such Lien of which it receives  written  notice  hereunder
     and under  other  similar  agreements,  at the  address of  Contractor  and
     Developer set forth in Section 6.1.

SECTION 6.  MISCELLANEOUS

     6.1. NOTICES. All notices,  requests,  demands,  offers, consents and other
communications  in  connection  with  this  Agreement  shall be  effective  when
received by the party to which the same is sent and only if delivered in writing
and by hand,  private  express  courier  service or  facsimile  to the  relevant
attention and address or facsimile number set forth below:

                                     - 16 -
<PAGE>

     (a) If to Developer, to:

             ViCaMe Infrastructure Development GmbH
             Hanauer Lanstrabe 187-189
             60314 Frankfurt a.m. Germany
             Telephone: 011 4969 94 99 4102
             Facsimile:  011 4969 94 99 4100
             with a copy to:

             ViCaMe Infrastructure Development GmbH
             c/o Viatel U.K.
             Parnell House
             25 Wilton Road
             London SW1V 1EJ
             United Kingdom
             Attention:  Mr. Derek Foxwell, Project Manager

             Telephone:  +44-171-802-9000
             Facsimile:  +44-171-828-1907

             WITH A COPY TO:

             Viatel, Inc.
             685 Third Avenue
             New York, New York 10017
             United States of America
             Attention:  General Counsel

             Telephone:  +1-212-350-9200
             Facsimile:  +1-212-350-9520

     (b) If to Contractor, to:

             Bechtel Limited
             245 Hammersmith Road
             P.O. Box 739
             London W6 8DP
             United Kingdom
             Attention:  Mr. William W. West, Project Manager
             COPY:  Mr. George B. Baber

             Telephone: +44-181-846-4483
             Facsimile:  +44-181-846-4938

                                     - 17 -
<PAGE>

     (c) If to Collateral Agent, to:

             The Chase Manhattan Bank
             450 West 33rd Street, 15th Floor
             New York, New York  10001
             United States of America
             Attention:  Capital Markets Fiduciary
                         Services, International/
                         Project Finance Team

             Telephone:  +1-212-946-3017
             Facsimile:  +1-212-946-8177/8178

or to such other attention or address (or facsimile  number) as may be specified
by notice to the other parties thereto.  All notices required to be given by the
parties  hereto to the Owners  shall be deemed to have been given by notice duly
provided to the Developer pursuant to this Section 6.1.

     6.2.  INTEGRATION;  AMENDMENT.  This  Agreement  (and,  with respect to the
Contractor,  the Developer and the Owners only, the Contract)  constitute(s) the
complete  agreement  of the parties  hereto with  respect to the subject  matter
hereof.  This  Agreement  shall not be varied in its terms by oral  agreement or
representation  or otherwise than by an agreement in writing dated subsequent to
the date hereof,  executed and delivered by duly authorized  representatives  of
each party,  except that Section 2 hereof (and the definitions  related thereto)
may be amended by an agreement in writing between Developer and Contractor, with
a copy thereof to Collateral Agent at the address set forth in Section 6.1.

     6.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon, and inure
to the benefit of the respective  successors and assigns of the parties  hereto;
PROVIDED,  no  party  may  assign  any of its  rights,  or  delegate  any of its
obligations, hereunder without the prior written consent of the other parties.

     6.4  HEADINGS.  The  descriptive  headings  of  the  several  sections  and
subsections of this Agreement are inserted for the convenience of reference only
and shall not in any way affect the meaning or  construction of any provision of
this Agreement.

     6.5 COUNTERPARTS,  EFFECTIVENESS. This Agreement (a) may be executed in any
number  of  counterparts  and  by  the  different  parties  hereto  on  separate
counterparts, each of which when so executed and delivered shall be an original,
but all such counterparts shall together constitute one and the same instrument,
and (b)  shall  become  effective  when each of the  parties  has  executed  and
delivered a counterpart hereof. A complete set of counterparts of this Agreement
shall be delivered to each party hereto.

     6.6. NO WAIVER; REMEDIES CUMULATIVE. No failure or delay on the part of any
party in  exercising  any right,  power or privilege  hereunder and no course of
dealing  between or among any parties  shall  operate as a waiver  thereof;  nor
shall any single or partial exercise of any right, power or privilege  hereunder
preclude  any other or further  exercise  thereof or the  exercise  of any other
right,  power or privilege  hereunder.  The rights and remedies herein expressly

                                     - 18 -
<PAGE>

provided are  cumulative  and not exclusive of any rights or remedies  which any
party would otherwise have in respect of the subject matter of this Agreement.

     6.7  JURISDICTION.  Each of the  Owners,  Developer  and  Contractor  (each
individually a "PARTY" and collectively,  the "PARTIES") (i) hereby  irrevocably
submits itself to the  non-exclusive  jurisdiction of the United States District
Court for the  Southern  District  of New York and,  if such court does not have
jurisdiction, to the courts of the State of New York in New York County, for the
purposes of any suit,  action or other proceeding  arising out of this Agreement
or the subject matter thereof brought by any Party or its successors or assigns;
PROVIDED, HOWEVER, that the foregoing submission to jurisdiction shall not limit
the availability of any other forum with respect to enforcement of any judgment,
and (ii) to the extent  permitted by applicable law,  hereby waives,  and agrees
not to assert,  by way of motion,  as a defense,  or  otherwise,  any such suit,
action  or  proceeding   that  such  action  or  proceeding  is  brought  in  an
inconvenient forum, that the venue of the suit, action or proceeding is improper
or that this Agreement or the subject matter hereof may not be enforced in or by
such court.  Each Party agrees that its submission to  jurisdiction  is made for
the express  benefit of each of the other Parties.  Final  judgment  against any
Party in any suit in any court of competent  jurisdiction  shall be  conclusive,
and may be enforced in other jurisdictions by suit on the judgment,  a certified
or true copy of which shall be conclusive evidence of the fact and of the amount
of any  indebtedness  or liability of such Party  therein  described;  PROVIDED,
always that the  plaintiff  may at its option  bring suit,  or  institute  other
judicial  proceedings,  to enforce any such judgment against any Party or any of
its  assets in the  courts of any  country  or place  where  such  Party or such
assets,  as the case may be, may be found. All parties hereto waive their rights
to a trial by jury in connection  with any disputes  arising in connection  with
this  Agreement.  The  Developer,  and each of the  Owners,  hereby  irrevocably
appoints  Viatel,  Inc.  at the  address  set forth in Section 6.1 hereof as its
agent for  service  of  process  in  connection  with any suit,  action or other
proceeding  arising out of this Agreement or the subject matter hereof or any of
the transactions contemplated hereby and agrees that it will at all times during
the term of this Agreement  maintain a duly authorized  agent to receive service
of process.  Any and all service of  process,  and any other  notice in any such
action,  shall be given  personally  or by  registered  mail or certified  mail,
return receipt  requested,  or by any other means of mail that requires a signed
receipt,  postage  prepaid,  mailed  to  (i)  with  respect  to  Contractor  and
Collateral  Agent, at their  respective  address as provided in Section 6.1, and
(ii) with  respect to  Developer  and each  Owner,  to its agent for  service of
process at the address as identified above.

     6.8 GOVERNING LAW. This Agreement and all rights and obligations  hereunder
shall be governed by the laws of the State of New York.

     6.9 SEVERABILITY. Any provision of this Agreement which is invalid, illegal
or  unenforceable  in  any  jurisdiction  shall,  as to  such  jurisdiction,  be
ineffective  to the extent of such  invalidity,  illegality or  unenforceability
without invalidating,  prohibiting the observance of or rendering  unenforceable
the  remaining  provisions  hereof,  and  any  such  invalidity,  illegality  or
unenforceability  in  any  jurisdiction  shall  not  invalidate,   prohibit  the
observance of or render unenforceable such provision in any other jurisdiction.

     6.10  FURTHER  ASSURANCES.  Each of the  parties  hereto  shall cause to be
promptly and duly taken,  executed,  acknowledged and delivered all such further

                                     - 19 -
<PAGE>

acts,  documents  and  assurances  as the  other  party  may  from  time to time
reasonably  request  in order  to carry  out more  effectively  the  intent  and
purposes of this Agreement and the transactions contemplated hereby and thereby.

     6.11 WAIVER OF IMMUNITY. Each Owner, to the extent that it has or hereafter
may acquire any immunity (sovereign or otherwise) from any legal action, suit or
proceeding,  from  jurisdiction of any court or from setoff or any legal process
(whether service or notice,  attachment prior to judgment,  attachment in aid of
judgment,  attachment in aid to execution of judgment or otherwise) with respect
to itself or any of its  property,  whether or not held for its own account,  to
the  fullest  extent   permitted  by  applicable  law  hereby   irrevocably  and
unconditionally waives and agrees not to plead or claim such immunity in respect
of its obligations under this Agreement.

     6.12 THIRD PARTIES.  This Agreement shall not be deemed to create any right
in any person or entity  other than the  parties  hereto,  and their  respective
successors  and  assigns,  nor be  construed  in any respect to be a contract in
whole or in part for the benefit of any person or entity  other than the parties
hereto, and their respective successors and assigns.

     IN WITNESS  WHEREOF,  the parties hereto have caused their duly  authorized
officers or representatives to execute and deliver this Agreement as of the date
first above written

                                     - 20 -
<PAGE>

Developer:                          VICAME INFRASTRUCTURE DEVELOPMENT GmbH

                                    By:_________________________________________
                                       Name:
                                       Title:

Owner:                              VIATEL GERMAN ASSET GmbH

                                    By:_________________________________________
                                       Name:
                                       Title:

Owner:                              METROMEDIA FIBER NETWORK GmbH

                                    By:_________________________________________
                                       Name:
                                       Title:

Owner:                              CARRIER 1 FIBER NETWORK GmbH & Co.
                                    oHG
                                    By:  Carrier 1 Holding GmbH

                                    By:_________________________________________
                                       Name:
                                       Title:

Contractor:                         BECHTEL LIMITED

                                    By:_________________________________________
                                       Name:
                                       Title:

Collateral Agent:                   THE CHASE MANHATTAN BANK

                                    By:_________________________________________
                                       Name:
                                       Title:

                                     - 21 -
<PAGE>

                                                                      SCHEDULE I

                                REQUIRED AMOUNTS

                                   [REDACTED]

                                     - 22 -
<PAGE>

                                                                       EXHIBIT A

                  FORM OF CERTIFICATE FOR WITHDRAWAL BY OWNERS

To:  The Chase Manhattan Bank

     The undersigned, ViCaMe Infrastructure Development GmbH hereby certifies to
The  Chase  Manhattan  Bank  (the  "COLLATERAL   AGENT")  with  respect  to  the
Undertaking  and Pledge and  Security  Agreement,  dated as of February 19, 1999
(the "UNDERTAKING AGREEMENT"),  among the Collateral Agent, Bechtel Limited (the
"CONTRACTOR"),  Viatel German Asset GmbH, Metromedia Fiber Network GmbH, Carrier
1 Fiber Network GmbH & Co. oHG, (collectively,  hereinafter called "OWNERS") and
ourselves that:

     1. Capitalized terms used without definition have the means assigned in the
Undertaking Agreement.

     2. No Default has occurred and is continuing.

     3. Pursuant to Section 3.5(a) of the Undertaking Agreement, the Fair Market
Value of the Permitted Investments (and other Collateral, if any credited to the
Collateral Account as to which the Contractor has a perfected security interest)
is greater  than the  Required  Amount set forth  opposite the Deposit Date most
recently  occurring (i.e., the Deposit Date falling on  _______________,  _____)
and such excess amount should be  transferred  to the  Developer's  account,  on
behalf  of the  Owners,  at  [INSERT  NAME OF BANK],  ABA No.  ________________,
Account   No.   _______________,    Reference:   ________________,    Attention:
_______________.

     IN WITNESS  WHEREOF,  the  undersigned  has  executed  and  delivered  this
certificate this __________ day of _______, ___.

                                    ViCaMe Infrastructure Development GmbH

                                    By:_________________________________________
                                                  Authorized Signatory

cc:  Bechtel Limited

<PAGE>

                                                                       EXHIBIT B

                FORM OF CERTIFICATE FOR WITHDRAWAL BY CONTRACTOR

To:  The Chase Manhattan Bank

     The undersigned,  Bechtel Limited (the  "CONTRACTOR"),  hereby certifies to
The  Chase  Manhattan  Bank  (the  "COLLATERAL   AGENT")  with  respect  to  the
Undertaking  and Pledge and  Security  Agreement,  dated as of February 19, 1999
(the  "UNDERTAKING  AND PLEDGE AND SECURITY  AGREEMENT"),  among the  Collateral
Agent, Viatel German Asset GmbH,  Metromedia Fiber Network GmbH, Carrier 1 Fiber
Network  GmbH  &  Co.  oHG  (collectively,   "OWNERS"),   ViCaMe  Infrastructure
Development GmbH (the "DEVELOPER") and the Contractor that:

     1. Capitalized terms used without definition have the means assigned in the
Undertaking Agreement.

     2. The amount of  $_______________  (the "PAYMENT AMOUNT") is due and owing
to the  Contractor  from the Owners  pursuant  to the terms of the  Engineering,
Procurement and Construction  Contract (Outside Plant),  dated February 19, 1999
(the "CONTRACT"), among Contractor, the Owners and the Developer.

     3. The  Contractor  has  notified  the  Developer  and each  Owner that the
Developer has failed to pay the Payment  Amount on behalf of the Owners,  within
the  period  specified  for such  payment,  an  amount  due and  payable  to the
Contractor in respect of a Contractor  Invoice duly  submitted by the contractor
in accordance with Section 13 of the Contract,  and at least three Business Days
have elapsed since such notice was duly given without  payment being made to the
Contractor of the Payment Amount.

     4. No Event of Default  nor any other  event  entitling  the  Developer  to
withhold payment to the Contractor has occurred and is continuing.

     IN WITNESS  WHEREOF,  the  undersigned  has  executed  and  delivered  this
certificate this __________ day of _______, ___.

                                 Bechtel Limited

                                 By:____________________________________________
                                                Authorized Signatory

<PAGE>

                       GERMAN NETWORK DEVELOPMENT PROJECT
                                   APPENDIX 1
                               REIMBURSABLE COSTS

                                   [REDACTED]

<PAGE>

                       GERMAN NETWORK DEVELOPMENT PROJECT
                                   APPENDIX 2
                      NETWORK DESCRIPTION AND PROJECT SCOPE

                                   [REDACTED]

<PAGE>

                       GERMAN NETWORK DEVELOPMENT PROJECT
                                   APPENDIX 3
                            OWNER-PROCURED EQUIPMENT

                                   [REDACTED]

<PAGE>

                       GERMAN NETWORK DEVELOPMENT PROJECT
                                   APPENDIX 4
                               MILESTONE SCHEDULE

                                   [REDACTED]

<PAGE>

                       GERMAN NETWORK DEVELOPMENT PROJECT
                                   APPENDIX 5
                          WAYLEAVE APPLICATION PROCESS

                                   [REDACTED]

<PAGE>

                       GERMAN NETWORK DEVELOPMENT PROJECT
                                   APPENDIX 6
                                    INSURANCE

----------------------------------------------------------------------------
               POLICY TYPE                     MINIMUM COVERAGE AMOUNT

----------------------------------------------------------------------------
(a) Worker's Compensation and               Amount and coverage required by
    Employer's Liability                    laws of country, province or
                                            territory in which the Work is
                                            performed.

----------------------------------------------------------------------------
(b) Disability Benefits and Employee        Amount and coverage required by
    Benefits                                laws of country, province or
                                            territory in which the Work is
                                            performed.

----------------------------------------------------------------------------
(c) Commercial General Liability and
    Professional                            US$ [REDACTED] per occurrence
    Liability
                                            Maximum Deductible:
    (Including bodily injury, property           US$ [REDACTED] per loss
    damage, premises operations, "XCU,"
    products/completed operations,
    blanket contractual liability, broad
    form  property damage and independent
    contractor's insurance or the
    equivalent.)

----------------------------------------------------------------------------
(d) Comprehensive Automobile Liability      Bodily Injury
                                                 US$ [REDACTED] per occurrence

    (Including bodily injury and property   Property Damage:
    damage liability with with respect           US$ [REDACTED] per occurrence
    to vehicles  owned  or  hired  by the
    Contractor.)

----------------------------------------------------------------------------
(e) Contractor All risk Insurance           Limit:

    Covering all risk of physical loss or   [REDACTED]
    damage to the Contract Works for
    their full replacement value.           Deductible:
                                                 US$ [REDACTED] per loss
----------------------------------------------------------------------------

                                        1
<PAGE>

                       GERMAN NETWORK DEVELOPMENT PROJECT
                                   APPENDIX 7
                           PERFORMANCE TEST STANDARDS

                                   [REDACTED]

<PAGE>

                       GERMAN NETWORK DEVELOPMENT PROJECT
                                   APPENDIX 8
                         STORAGE AND MARKING PROCEDURES

SECTION I   DEFINITION

"PHYSICAL ITEM" shall have the meaning  ascribed thereto in ss. 90 of the German
Civil  Code  (BURGERLICHES  GESETZBUCH);  i.e.  an  item  of  physical  identity
("KORPERLICHER  GEGENSTAND")  which is not built into or otherwise linked to any
other  item  of  personal  or  real  property  in a way  that  would  make it an
inseparable part ("WESENTLICHER  BESTANDTEIL") of such other item of personal or
real  property  within the  meaning of ss.ss.  93 and 94,  respectively,  of the
German Civil Code.

SECTION II  MARKING OBLIGATIONS

(1) The  Contractor  shall,  and shall  cause all  Subcontractors  to, mark each
Physical Item of supply,  equipment,  material and other Work, including but not
limited to all  ducts,  cables and joints  (each an  "Item"),  in a manner  that
clearly identifies the Designated Owner of such Item.

(2) Each Item designated to be installed within the four Cable Links, except for
the HDPE ducts  described in Appendix 2, Section  3.2.2.  of this  Contract (for
which  sub-section  (3) shall apply),  shall bear a clearly legible imprint or a
securely  and durably  fixed tag with the name of the  Designated  Owner of such
Item:  Each Item  designated  to be  installed  within the first  Cable Link for
Viatel  German Asset GmbH shall bear an imprint or name tag reading  "Viatel 1".
Each Item  designated  to be  installed  within the second Cable Link for Viatel
German  Asset GmbH shall bear an imprint or name tag  reading  "Viatel  2". Each
Item  designated  to be  installed  within the Cable Link for  Metromedia  Fiber
Network  GmbH  shall  bear an  imprint  or name tag  reading  "MFN".  Each  Item
designated  to be  installed  within the Cable Link for Carrier 1 Fiber  Network
GmbH & Co. oHG shall bear an imprint or name tag reading "Carrier 1".

(3) Each of the HDPE ducts  described  in Appendix  2,  Section  3.2.2.  of this
Contract  (each a "Duct")  shall be  color-coded  in a way that  identifies  the
Designated  Owner of each Duct. The Duct  designated to be installed  within the
first  Cable  Link for  Viatel  German  Asset  GmbH shall be of light gray color
(color code:  gray). The Duct designated to be installed within the second Cable
Link for Viatel German Asset GmbH shall be of light gray and green striped color
(color code:  green).  The Duct designated to be installed within the Cable Link
for Metromedia Fiber Network GmbH shall be of light gray and black striped color
(color code:  black).  The Duct designated to be installed within the Cable Link
for  Carrier 1 Fiber  Network  GmbH & Co.  oHG shall be of light gray and yellow
striped color (color code: yellow).

(4) In order to identify the Designated  Owner of each manhole,  the entrance to
each manhole  shall be marked by clearly  visible gray,  green,  black or yellow
color spots of a minimum  diameter of 80 mm in accordance  with the  color-codes
provided in sub-section (3) above.

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<PAGE>

(5) Each Item, Duct and manhole shall be marked in accordance with  sub-sections
(1), (2), (3) and (4) above prior to being invoiced to its respective Designated
Owner pursuant to Sections 37.3 and 37.7,  respectively.  To ensure a timely and
cost-effective marking procedure,  each Item, Duct and manhole should be marked,
to the extent  possible  and  economically  reasonable,  during the stage of its
production  or assembly.  Since the Fiber Optic Cables will be supplied by or on
behalf of the  Developer  in  accordance  with  Appendix 3 hereof,  the  marking
obligations  with respect to such Fiber Optic Cables are primarily  borne by the
Developer, subject to sub-section (6) below.

(6) In order to ensure a clear  identification  of the Designated  Owner of each
Fiber Optic Cable, the Contractor shall verify,  upon the delivery of each Fiber
Optic  Cable by or on behalf of the  Developer,  that such Fiber Optic Cable has
been marked in accordance  with either  sub-section (2) above or the color codes
provided  in  sub-section  (3) above.  If such Fiber  Optic  Cable is not marked
accordingly upon such delivery,  the Contractor shall mark it in accordance with
either  sub-section  (2) or the color codes provided in  sub-section  (3) above,
whichever is more economical,  at the expense of the respective Designated Owner
prior to its assembly and installation within the respective Cable Link.

                                        2
<PAGE>

                       GERMAN NETWORK DEVELOPMENT PROJECT
                                   APPENDIX 9
                   PAYMENT METHODOLOGY [INTENTIONALLY OMITTED]

                             [intentionally omitted]

                                        1
<PAGE>

                       GERMAN NETWORK DEVELOPMENT PROJECT
                                   APPENDIX 10
                              OWNER ESCROW SCHEDULE

                                   [REDACTED]

                                        1
<PAGE>

                       GERMAN NETWORK DEVELOPMENT PROJECT
                                   APPENDIX 11
                          INDEPENDENT EXPERT PROCEDURES

PROPOSAL TO REFER OR NOMINATE.  Proposals  shall be raised and considered in the
following manner:

     o    the appropriate senior-management  representative of the Party wishing
          to refer a matter to, nominate a candidate to serve as, an Independent
          Expert  shall give notice to that effect to the senior  management  of
          the other  Party and,  with such  notice,  shall  give  details of the
          reason for the  nomination  of, and the matter to be referred  to, the
          Independent Expert, whereupon

     o    the  Parties  shall meet and  endeavor in good faith to agree upon (i)
          referral of the relevant matter to an Independent Expert, and (ii) the
          person to serve as the Independent Expert;  PROVIDED,  that, if within
          ten (10) Days from the date of the notice given in accordance with the
          foregoing  paragraph,  the  Parties  have  failed  to  agree  upon  an
          Independent  Expert,  the matter  shall  forthwith  be referred to the
          dispute resolution procedures set forth in Section 38 of the Contract.

CONFIRMATION OF APPOINTMENT. Upon a person being appointed as Independent Expert
under the foregoing provisions,

     o    the Parties  forthwith  shall notify the relevant  appointee of his or
          her selection and shall request that such person  confirm  within five
          (5)  Business  Days  whether or not he or she is  willing  and able to
          accept an appointment as Independent Expert, and, to the extent that

     o    the first nominee so proposed is either  unwilling or unable to accept
          the  appointment  to act as  Independent  Expert,  or  shall  not have
          confirmed  his  or  her   willingness   and  ability  to  accept  such
          appointment  within the said period of five (5)  Business  Days,  then
          (unless the Parties are able to agree upon the  appointment of another
          Independent Expert), the matter shall be referred (by either Party) to
          the  dispute  resolution  procedures  set forth in  Section  39 of the
          Contract.

DISQUALIFICATION.  No person shall be appointed as an  Independent  Expert under
the Contract:

     o    unless he or she is qualified by education, experience and training to
          determine the matter in dispute; or

     o    if he or she has an interest or duty which would  materially  conflict
          with his or her role (including being a director, officer, employee or
          consultant to a Party or its Affiliates).

                                        2
<PAGE>

PRESENTATION AND REVIEW OF RELEVANT INFORMATION.  The following provisions shall
apply to the Independent Expert's determination:

     o    each Party shall supply to the Independent  Expert, not later than ten
          (10) Business Days after such  Independent  Expert's  confirmation  of
          appointment, all such information,  records, statements and other data
          for which  such  Party  desires  review,  and each  Party  shall  make
          available to the Independent Expert all such additional information as
          the Independent Expert may request;

     o    the  Independent   Expert  shall  ignore  any  data,   information  or
          submissions  supplied and made after the ten (10)  Business Day period
          noted above,  unless the same are  furnished in response to a specific
          request from him or her;

     o    the  Independent  Expert  shall  make his or her  decision  as soon as
          reasonably  practicable  after receipt of sufficient  information from
          the Parties (but, in no event,  more than ten (10) Business Days after
          the  deadline  above for the Parties'  submissions  or the date of the
          Independent Expert's last request for supplemental  information),  the
          failure to so render a decision  shall  entitle  either Party to refer
          the matter to the dispute  resolution  procedures set forth in Section
          38 of the Contract;

     o    the  Independent  Expert shall be entitled to obtain such  independent
          professional  and/or  technical  advice  as he or she  may  reasonably
          require  and to obtain  any  necessary  secretarial  assistance  as is
          reasonably necessary; and

     o    all  communications  between the Parties  and the  Independent  Expert
          shall be made in writing and a copy thereof provided simultaneously to
          the other Party.  No meeting  between the  Independent  Expert and the
          Parties or either of them,  shall take place unless all Parties have a
          reasonable opportunity to attend any such meeting.

DECISION-MAKING PROCEDURES. The following provisions shall apply:

     o    the  determination  of the Independent  Expert shall be in writing and
          shall provide full written reasons for his or her decisions;

     o    if either Party disagrees with the Independent Expert's determination,
          such dispute shall be finally  settled in accordance  with the dispute
          resolution  procedure in accordance  with the  procedures set forth in
          Section 38 of the Contract; and

     o    the  Independent  Expert shall be deemed not to be an arbitrator,  but
          shall  render his or her decision as an expert and the law relating to
          arbitration  shall not apply to the  Independent  Expert or his or her
          determination or the procedure by which he or she reaches a decision.

ALLOCATION  OF COSTS AND  EXPENSES.  The Parties shall share equally in all fees
charged by the Independent Expert in respect of any referral thereto. Each Party
shall bear the costs of providing all data, information and submissions given by

                                        2
<PAGE>

it, and the costs and expenses of all counsel,  witnesses and employees retained
by it, but (unless the Independent Expert shall make any award of such costs and
expenses,  which  award,  if  made,  shall be part of the  Independent  Expert's
decision) the costs and expenses of the  Independent  Expert and any independent
advisers to the Independent Expert shall be equally borne by the Parties.

                                        3

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