Document:

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                                                                    EXHIBIT 10.5

                             MEMORANDUM OF AGREEMENT

                      FOR THE SUPPLY OF GOODS AND SERVICES

                                  FOR THE MTPO

                     TELEPONO SA BARANGAY PHASE IA PROJECT

KNOW ALL MEN BY THESE PRESENTS:

This MEMORANDUM OF AGREEMENT made and entered into this 18th day of November,
1998 in Pasig City, Metro Manila, Philippines, by and between:

                  The DEPARTMENT OF TRANSPORTATION AND COMMUNICATIONS through
                  the Municipal Telephone Projects Office (MTPO), with address
                  at 21st Floor, Strata 100 Building, Emerald Street, Ortigas
                  Center, Pasig City, Philippines, hereinafter referred to as
                  MTPO and represented herein by Undersecretary/Project Director
                  ENRICO T. VELASCO

                                            - and -

                  SR Telecom, Inc., a corporation organized and existing under
                  the law of Canada with address at 8150 Trans Canada Highway,
                  St. Laurent, Quebec, Canada H4S IM5, hereinafter referred to
                  as SRT and represented herein by its Vice President, GARRY
                  ROBERT FORBES

                                W1TNESSETH: THAT

WHEREAS, a MEMORANDUM OF AGREEMENT was signed between MTPO and SRT on October 9,
1997 covering the Supply of Goods and Services required for the Telepono Sa
Barangay Project Phase I covering 9 Provinces, under loan No. 880-PHI-7535,
dated March 5, 1998; said CONTRACT is attached to this MEMORANDUM OF AGREEMENT
under Annex "a";

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WHEREAS, this MEMORANDUM OF AGREEMENT "TSB PHASE IA"is a continuation of the TSB
Phase 1 project and consists of the expansion of Barangay Telecommunications
Center (BTC) in the two (2) provinces of Zamboanga del Norte and Tawi-tawi under
the Phase I project and establishment of new BTCs in one (1) new province of
Misamis Occidental;

WHEREAS, this project being an expansion to the Phase I project, considers with
utmost importance the technical compatibility of the system, commonality of
technology, spares and supports;

WHEREAS, the point-to-multipoint time division multiple access (PTMT-TDMA)
microwave telephone system employed in the TSB Phase I project is a technology
whose exclusive manufacturer in Canada is SRT as certified to by the Assistant
Deputy Minister of Industry of the Canadian Government; said Certification is
attached to the TSB Phase I CONTRACT;

WHEREAS, SRT has no subdealers selling the system at lower prices, and
considering the conditions of the financing offer and the fact that SRT is the
exclusive manufacturer in Canada, no suitable substitute for the system can be
obtained at a more advantageous term to the government;

WHEREAS, the financing for the procurement, acquisition and installation of the
PTMP-TDMA system will be secured from the Export Development Corporation of
Canada (EDC) through arrangements made by SRT, and is subject to the condition
that products and services to be procured from the proceeds of the loan come
from a Canadian source and have the requisite Canadian content;

WHEREAS, under Section 1.2.2 of the IRR of Executive Order No. 302, for
MEMORANDUM OF AGREEMENTs whose financing is provided by international financing
institutions or bilateral and other sources, the loan agreements negotiated and
agreed upon shall prevail; accordingly, the financing condition that the system
be procured from a Canadian source prevails;

NOW THEREFORE, for and in consideration of the foregoing premises, and the
stipulations herein, MTPO and SRT hereby agree as follows:

                                    ARTICLE 1
                       MEMORANDUM OF AGREEMENT DOCUMENTS

1.1      The following documents listed in priority are attached to this
         MEMORANDUM OF AGREEMENT and made an integral part of the MEMORANDUM OF
         AGREEMENT as though fully written out and set forth herein:

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         Terms of Reference of the TSB Expansion Project

         a)       The Original CONTRACT of the Telepono Sa Barangay Project
                  Phase I;

         b)       Unit Price List (UPL) of TSB Expansion Project;

         c)       Price Schedules of TSB Expansion Project (including detailed
                  breakdown of same);

         d)       Technical Specifications of TSB expansion Project
                  incorporating agreements, revisions and clarifications as
                  mutually agreed by the parties;

         e)       Implementation Schedule;

         f)       Manufacturer's Warranty; and

         g)       General Terms and Conditions of the MEMORANDUM OF AGREEMENT.

                                    ARTICLE II
                        SCOPE OF WORK/UNDERTAKING OF SR

2.1      Description -- SRT shall prepare and complete the detailed engineering
         studies, the plans, specifications, and designs and submit the same for
         approval of the MTPO, supply the required equipments, part and
         materials, install the equipment and execute the construction works in
         accordance with the approved plans, specification and designs,
         implement the agreed training program and provide the maintenance
         assistance required hereunder.

2.2      Implementation -- SRT agrees and undertakes to prepare and complete the
         studies, designs, plans and specifications, supply the required parts,
         materials and equipment, perform the installation and construction
         works, provide training and assist in the maintenance of the System
         within the period specified in the Timetable, Annex "e" hereof.

                                   ARTICLE III
                          MEMORANDUM OF AGREEMENT PRICE

3.1      Consideration -- In consideration of the full and complete performance
         by SRT of its undertaking under Article II hereof, MTPO shall pay SRT
         the total MEMORANDUM OF AGREEMENT price of NINETY NINE MILLION THREE
         HUNDRED SIXTY TWO THOUSAND NINE HUNDRED SIX U.S. DOLLARS
         (US$99,362,906.00) as follows:

         3.1.1    Disbursement shall be made directly to SRT by Export
                  Development Corporation of Canada (EDC) upon presentation of
                  the appropriate documentation in accordance with the General
                  Conditions of the MEMORANDUM OF AGREEMENT, Annex "G" hereof.

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         3.1.2    FOR EQUIPMENT (Representing the amount of US Dollars Due)

                  a)       15% downpayment upon effectivity of this MEMORANDUM
                           OF AGREEMENT

                  b)       50% upon shipment

                  c)       15% upon installation

                  d)       10% upon provisional acceptance

                  e)       10% upon final acceptance

         3.1.3    FOR SERVICES (Representing the Amount of US Dollars Due)

                  a)       15% downpayment upon effectivity of this MEMORANDUM
                           OF AGREEMENT

                  b)       75% of Engineering Services upon Design Freeze on per
                           province basis.

                  c)       15% of Installation services upon Design Freeze on
                           per province basis.

                  d)       85% of Factory Training upon completion of Training.

                  e)       75% of Project Management upon shipment.

                  f)       60% of Installation services upon installation on per
                           province basis.

                  g)       75% of Provisional Acceptance Services upon
                           Provisional Acceptance on a per province basis.

                  h)       75% of Warranty and Documentation Services upon
                           Provisional Acceptance on a per province basis.

                  i)       10% of total services upon final acceptance.

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                                   ARTICLE IV
                               AMENDMENT TO ORDER

4.1      Necessary Adjustment -- MTPO, may at any time issue Amendments to Order
         in the event that necessary adjustments within the general scope of
         this MEMORANDUM OF AGREEMENT in any one or more of the following are
         required in order to fully meet the requirements of the project:

         a.       drawings, designs or specifications;

         b.       method of shipment or packing; or

         c.       place of delivery.

         If any such order increase or decrease the cost of, or the time
         required for executing any part of, the work under this MEMORANDUM OF
         AGREEMENT, an equitable adjustment in MEMORANDUM OF AGREEMENT price
         and/or delivery schedule shall be mutually agreed upon between the
         parties and the MEMORANDUM OF AGREEMENT shall accordingly be modified
         in writing.

4.2      Additional Items -- MTPO may likewise issue an Amendment to Order where
         there are additional items needed and necessary for the protection of
         the goods which were not included in this MEMORANDUM OF AGREEMENT.
         Payments for these additional items shall be based on the unit prices
         in this MEMORANDUM OF AGREEMENT. If this MEMORANDUM OF AGREEMENT does
         not contain any rate applicable to the additional item, then suitable
         prices shall be mutually agreed upon between the parties. Requests for
         payment by SRT for any additional item shall be accompanied by a
         statement with approved supporting form, giving a detailed accounting
         and record of amount for which SRT claims payment. The MEMORANDUM OF
         AGREEMENT time shall likewise be extended, if warranted, by written
         agreement of the parties.

4.3      Approval of Agency Head -- Under no circumstance shall SRT proceed to
         commence work under any Amendment to Order unless the same has been
         approved by the DOTC Secretary or his duly authorized representative.

                                   ARTICLE V
                              PERFORMANCE SECURITY

5.1      Bank Guarantee -- SRT shall, within thirty (30) days from the signing
         of this MEMORANDUM OF AGREEMENT, post a Performance Security in the
         form of a Bank Guarantee equivalent to ten (10%) percent of the total
         MEMORANDUM OF AGREEMENT price, callable on demand, to guarantee the
         faithful performance of its obligation to supply, deliver to the site,
         install,

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         commission and complete the system project in accordance with the
         agreed timetable/schedule and the terms and conditions of this
         MEMORANDUM OF AGREEMENT.

5.2      Local Bank Confirmation -- If the Bank Guarantee is issued by a
         foreign bank, the same should be confirmed by a local bank.

5.3      Additional Performance Security -- SRT shall likewise post an
         additional performance security within the time specified by MTPO, in a
         proportionate amount to cover any cumulative increase of more than ten
         (10%) percent over the original total MEMORANDUM OF AGREEMENT price as
         a result of cost adjustments and/or Amendments to Order.

5.4      Extension of Validity of Performance Security -- MTPO may likewise
         require SRT to extend the validity of its performance security/ies to
         cover approved time extensions.

5.5      Release of Performance Security -- Subject to the provisions of this
         MEMORANDUM OF AGREEMENT, the Performance security may be released after
         the issuance by MTPO of the Certificate of Acceptance of the completed
         and commissioned system; provided that there are no claims filed
         against SRT or the bank/surety company on account of the obligations of
         SRT under this MEMORANDUM OF AGREEMENT.

                                   ARTICLE VI
                     EFFECTIVITY OF MEMORANDUM OF AGREEMENT

6.1      Conditions for Effectivity -- The effectivity of this MEMORANDUM OF
         AGREEMENT shall be conditioned upon the occurrence of the following
         events:

         a)       Signing of this MEMORANDUM OF AGREEMENT by the DOTC Secretary
                  Vicente C. Rivera and / or Undersecretary Enrico T. Velasco;

         b)       Conclusion of the Loan Agreement between the Department of
                  Finance, representing the Philippine Government and SR
                  Telecom, and the execution of the Deed of Assignment by SR
                  Telecom in favor of the Export Development Corporation (EDC)
                  of Canada and the execution thereof by the Philippine
                  Government;

         c)       Issuance of a Forward Obligation Authority from the DBM or CAF
                  by the Chief Accountant of DOTC, pursuant to LOI No. 968.

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                                   ARTICLE VII
                                   WARRANTIES

7.1      Against Manufacturing and Other Defects -- SRT hereby warrants the
         workmanship and quality of the equipment, materials and the works for a
         period of two (2) years from the issuance of the Certificate of
         Acceptance on a per province basis, and accordingly assures MTPO that
         manufacturing and other defects will be corrected by SRT, or equipment
         with such defects will be replaced, or defective workmanship rectified,
         upon demand by MTPO, at the sole account of SRT.

7.2      Special Bank Guarantee -- To assure that the foregoing warranties and
         the undertakings relative thereto are complied with faithfully, SRT
         shall post, before any downpayment is made under this MEMORANDUM OF
         AGREEMENT, a Special Bank Guarantee, callable on demand, issued by a
         bank acceptable to MTPO (if issuer is a foreign bank, a local bank
         should confirm the same) equivalent to ten (10%) percent of the total
         MEMORANDUM OF AGREEMENT price. The guarantee shall cover the warranty
         period and may be released thereafter provided that the goods supplied
         and the works are free from defects and all the conditions imposed
         under this MEMORANDUM OF AGREEMENT are fully met.

7.3      Non-applicability of Warranty -- The warranty on equipment shall not
         apply if maintenance and operating procedures are not carried in
         accordance with the manufacturer's instructions given in the manual
         accompanying the equipment.

7.4      Availability of Spare parts -- SRT hereby warrants and undertakes to
         cause and maintain the availability of spare parts in sufficient number
         and of appropriate quality, for at least ten (10) years from the expiry
         of the warranty period referred to in 7.1. Breach of this warranty
         shall make SRT liable to MTPO for liquidated damages in an amount
         equivalent to ten (10%) percent of the total MEMORANDUM OF AGREEMENT
         price for every year that such spare parts are unavailable within the
         said ten (10) year period.

                                  ARTICLE VIII
                            NON-PERFORMANCE OR DELAY

8.1      Force Majeure -- SRT shall be excused from the performance of its
         obligations under this MEMORANDUM OF AGREEMENT and shall not be liable
         for delay in performance if the delay is attributable to any cause
         beyond its control, including but not limited to war, civil
         disturbance, insurrection, sabotage, act of a public enemy, labor
         difficulties or disputes (but not in its own company), fire, flood,
         storm or other acts of Gods.

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8.2      Other Causes -- Non-performance by SRT shall likewise be excused if the
         same is caused by MTPO's fault or negligence, or action or inaction of
         the Government of the Philippines including judicial or administrative
         action

8.3      Suspension of Work -- MTPO may suspend the work wholly or partly by
         written order for a certain period of time as it may deem necessary due
         to force majeure or other causes referred to above. SRT shall take all
         reasonable steps to minimize the costs allocable to the work covered by
         such order during work stoppage.

         Before the suspension order expires, MTPO shall either lift the order
         or terminate the work covered by the same. If the order is lifted, or
         if the period of the order expires, SRT shall have the right to resume
         work. The parties shall by written agreement make appropriate
         adjustments in the delivery schedule or MEMORANDUM OF AGREEMENT, or
         both, and this MEMORANDUM OF AGREEMENT shall be modified accordingly.

                                   ARTICLE IX
                               DAMAGES FOR DELAY

9.1      Liquidated Damages -- SRT shall complete the works within the time
         prescribed in this MEMORANDUM OF AGREEMENT. Should SRT incur any delay
         in its performance for reasons attributable exclusively to itself, SRT
         shall pay MTPO liquidated damages, not by way of penalty, an amount
         equal to one-tenth (1/10) of one (1%) percent of the cost of the
         delayed goods/works for every day of delay until such goods are finally
         delivered, and/or such works are completed, and accepted by MTPO. Such
         delay, however, shall not give rise to refusal or withholding of
         payment by MTPO for other completed phases.

9.2      Collection of Liquidated Damages -- The amount of liquidated damages
         shall be deducted from money due or which may become due to SRT, or
         collect the same from any securities or warranties posted by SRT,
         whichever is convenient to MTPO. Should the total sum of liquidated
         damages exceed fifteen (15%) percent of the total MEMORANDUM OF
         AGREEMENT price, MTPO shall automatically terminate this MEMORANDUM OF
         AGREEMENT and impose sanctions against SRT over and above the
         liquidated damages.

                                    ARTICLE X
                                   ARBITRATION

10.1     In the event of any dispute, claim or difference of opinion, the
         parties hereto shall do their best to settle the same amicably by
         negotiation. In the event settlement by negotiation is not achieved,
         such dispute shall, at the request of either party hereto, be first
         arbitrated without recourse to court action, under the Rules of
         Philippines Arbitration Law (R.A. No. 876) and any amendments thereto.

<PAGE>

10.2     Arbitration shall be initiated by one party hereto giving thirty (30)
         calendar days notice in writing to the other party, of the desired
         commencement of arbitration proceedings.

10.3     Thereupon, a board of three (3) arbitrators shall be appointed, one of
         whom shall be chosen by the MTPO, one by SRT and a third by agreement
         of the parties, hereafter referred to as the Third Arbitrator. If
         either party fails to choose its arbitrator within fourteen (14) days
         after receiving a notice of the commencement of arbitration
         proceedings, the Third Arbitrator shall appoint the arbitrator required
         to complete the board.

10.4     The decision by a majority of this board shall be final and binding
         upon the parties hereto, who shall be fully liable therefor. Execution
         of such decisions, may be applied for in the proper courts of Pasig
         City, Metro Manila, exclusively, should resort thereto become
         necessary, the cost thereof to be borne by the losing party.

                                   ARTICLE XI
                                  TERMINATION

11.1     Breach of MEMORANDUM OF AGREEMENT -- Either party may terminate this
         MEMORANDUM OF AGREEMENT immediately upon notice in writing to the other
         party if such party shall breach any provisions in this MEMORANDUM OF
         AGREEMENT in any material respect and such breach remains unremedied
         within thirty (30) days after written notice from the non-breaching
         party.

11.2     Termination of Convenience -- MTPO may, when the interest of the
         Government so requires, terminate this MEMORANDUM OF AGREEMENT in whole
         or in part, for the convenience of Government, by giving SRT a written
         notice of the termination specifying the parts of the MEMORANDUM OF
         AGREEMENT terminated and when the termination becomes effective. SRT
         should incur no further obligations in connection with the terminated
         work, and on the date set in the notice of termination it shall stop
         work to the extent specified. SRT should also terminate outstanding
         orders and subcontractors as they relate to the terminated work and
         shall settle the liabilities and claims arising therefrom. With regards
         to the work not terminated, however, SRT shall be obliged to complete
         the same and may accordingly incur obligations as are necessary to do
         so.

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                                   ARTICLE XII
                                   ASSIGNMENT

12.1     Written Consent -- Neither party shall assign this MEMORANDUM OF
         AGREEMENT in whole or in part without the written consent of either
         party. Such consent shall not be unreasonably withheld.

12.2     Assignee Acceptable to MTPO -- SRT may assign this MEMORANDUM OF
         AGREEMENT, wholly or partly, to any entity acceptable to MTPO. For this
         purpose, MTPO may require prior to its giving of consent, the
         submission of documents and other evidence of the proposed assignee's
         legal, technical and financial qualifications.

                                  ARTICLE XIII
                                ENTIRE AGREEMENT

13.1     Contents of Documents -- This MEMORANDUM OF AGREEMENT contains the
         entire agreement between the parties hereto as of the date hereof, and
         supersedes any and all previous understanding, commitments, agreements
         or representations whatsoever, whether oral, written or implied,
         between the parties with respect to the subject matter hereof. No
         modification, deletion of, or addition to the terms or provisions
         herein shall be binding on either party unless made in writing and duly
         signed by both parties through their duly authorized representatives.

                                   ARTICLE XIV
                          WARRANTY AGAINST CORRUPTION

14.1     No Offer of Consideration or Commission -- SRT hereby warrants that it
         or its representatives did not offer any government or MTPO official or
         employee any consideration or commission for this MEMORANDUM OF
         AGREEMENT, and it or its representatives did not exert or utilize any
         corrupt or unlawful influence to secure or solicit this MEMORANDUM OF
         AGREEMENT for any consideration or commission.

         SRT shall not subcontract any portion of the works under this
         MEMORANDUM OF AGREEMENT to any person known by SRT to be an official or
         employee of MTPO, or to the relatives within the third degree of
         consanguinity or affinity of any MTPO official or employee directly or
         indirectly involved in the project presentation or MEMORANDUM OF
         AGREEMENT award. SRT shall disclose the name of the person to whom a
         commission is paid or to be paid, and the amount thereof.

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14.2     Violation -- Any violation of this warranty shall be sufficient ground
         for termination of this MEMORANDUM OF AGREEMENT and the deduction from
         the MEMORANDUM OF AGREEMENT price of the commission paid without
         prejudice to the filing of civil or criminal action against SRT and its
         representatives and MTPO officials and employees under the Anti-Graft
         and Corrupt Practices Law and other laws.

<PAGE>

IN WITNESS WHEREOF, the parties hereto affix their signatures on the date and
place first above written.

DEPARTMENT OF TRANSPORTATION
AND COMMUNICATIONS (DOTC) THROUGH                         SR TELECOM, INC.
THE MUNICIPAL TELEPHONE PROJECTS OFFICE (MTPO)

by:                                                   by:

/s/ DR. ENRICO T. VELASCO                             /s/ GARRY ROBERT FORBES
-------------------------                             ------------------------
DR. ENRICO T. VELASCO                                 GARRY ROBERT FORBES
   UNDERSECRETARY                                       VICE PRESIDENT

                           SIGNED IN THE PRESENCE OF:

  LEONCIA EVANGELISTA (APD MTPO)          JOHN TRELEAVEN (AMBASSADOR OF CANADA)
---------------------------------         -------------------------------------

<PAGE>

IN WITNESS WHEREOF, the parties hereto affix their signatures on the date and
place first above written.

DEPARTMENT OF TRANSPORTATION
AND COMMUNICATIONS (DOTC) THROUGH                         SR TELECOM, INC.
THE MUNICIPAL TELEPHONE PROJECTS OFFICE (MTPO)

by:                                          by:

/s/ DR. ENRICO T. VELASCO                     /s/ GARRY ROBERT FORBES
-----------------------------                -----------------------------------
DR. ENRICO T. VELASCO                         GARRY ROBERT FORBES
  UNDERSECRETARY                                VICE PRESIDENT

                           SIGNED IN THE PRESENCE OF:

/s/ LEONCIA EVANGELISTA                      /s/ JOHN TRELEAVEN
------------------------------------         -----------------------------------
LEONCIA EVANGELISTA                          JOHN TRELEAVEN
    APD MTPO                                 AMBASSADOR OF CANADA

<PAGE>

                       GENERAL TERMS AND CONDITIONS OF THE
                            MEMORANDUM OF AGREEMENT

I.       DEFINITIONS

         In this MEMORANDUM OF AGREEMENT Document, terms hereinafter set forth
         shall have the following meanings, unless otherwise stated:

1.1      GOVERNMENT means the Government of the Republic of the Philippines

1.2      DOTC means the Department of Transportation and Communications.

1.3      SECRETARY means the Secretary of the DOTC.

1.4      MTPO means the Municipal Telephone Projects Office, which is duly
         authorized by DOTC to implement the project, and through which the DOTC
         acts in this MOA; also referred to herein as MTPO.

1.5      THE PROJECTS DIRECTOR means the head of the MTPO designated by DOTC to
         supervise the implementation of the Municipal Telephone Project.

1.6      PROJECT OFFICER means the MTPO staff duly authorized to act in the
         implementation of the Project personally or through authorized
         assistants.

1.7      INSPECTOR means any staff of MTPO duly authorized to undertake all the
         necessary inspection of the work performed or being performed, or of
         goods and services (as hereinafter defined respectively).

1.8      PROJECT means the Municipal Telephone Project Office "Telepono sa
         Barangay Phase IA" Expansion Project to be implemented under this MOA.

1.9      CONTRACTOR means SR Telecom Inc. of St. Laurent, Quebec, Canada, or
         SRT, as referred to in the MEMORANDUM OF AGREEMENT.

1.10     SUBCONTRACTOR means any party or parties having a direct MOA or
         contracts with the Contractor for the performance of any part or parts
         of the work to be executed under the MEMORANDUM OF AGREEMENT.

1.11     MEMORANDUM OF AGREEMENT (MOA) means the written agreement covering the
         supply of goods and services and the performance of the work. The MOA
         shall include any and all supplemental agreements and amendment to
         orders which may be executed to complete the work in accordance with
         the intent

<PAGE>

         of the MOA. This written agreement shall include the following MOA
         documents:

         (1)      Unit Price List (UPL)

         (2)      Technical Specifications incorporating agreements, revisions
                  and clarifications as mutually agreed by both parties

         (3)      Price Schedule

         (4)      Implementation Schedule

         (5)      Financing

         (6)      Manufacturer's Warranty

         (7)      General Terms and Conditions of the MOA

1.12     GOODS means all kinds of machinery, apparatus, materials, equipment,
         articles, and necessary spare parts to be provided by the Contractor to
         MTPO in the implementation of the project, under this MOA.

1.13     WORK or WORKS means the provision of goods and services by the
         Contractor, necessary for the implementation of the Project as defined
         in the Technical specifications.

1.14     SERVICES means services ancillary to the supply of the Goods, such as
         transportation and insurance and any other incidental services, such as
         installation, commissioning, provision of technical assistance,
         training and other such obligations of the Contractor covered under the
         MOA;

1.15     TECHNICAL SPECIFICATIONS means the specifications which include
         Technical Requirements, Equipment specifications, the Contractor's
         Statements of Compliance and all other revisions, clarifications
         mutually agreed upon by both parties.

1.16     SITE means the actual place where Goods are to be delivered and where
         the Work is to be done by the Contractor.

1.17     CONTRACTOR'S GOODS means the equipment, tools and machinery brought to
         the site by the Contractor for the execution of the Work in the
         Philippines, but not part of the Goods as defined in par. 1.1 2.

<PAGE>

1.18     PROVISIONAL ACCEPTANCE means acceptance of all the goods and services
         as defined in the Technical Requirements (See.TR5/3.0).

1.19     FINAL ACCEPTANCE means acceptance of all the goods and services as
         defined in the Technical Requirements (Sec.TR5/4.0).

1.20     DESIGN REVIEW MEETING or DRM means a meeting with MTPO and the
         Contractor's representatives that shall be held upon completion of the
         site survey of each system in order to finalize and freeze the system
         design. At the end of each DRM, a revised Bill of Quantities (BOQ) and
         minutes of meeting shall be signed by both parties and shall form
         integral parts of the Contract.

1.21     SYSTEM means all the equipment supplied and installed per province,
         which form part of a contiguous network interfacing with the National
         Public Switched Telephone Network (PSTN) at a single designated
         connection point (per province basis).

1.22     PROJECT IMPLEMENTATION SCHEDULE means the schedule for implementing
         work starting from the Effective Date of the MOA and ending on the Date
         of Provisional Acceptance of the last System.

1.23     NOTICE TO PROCEED means a letter from the MTPO informing the Contractor
         to commence the implementation of the Project.

1.24     LENDER/S means SR Telecom Inc. and Export Development Corporation
         (EDC).

2.       LANGUAGE AND UNIT STANDARD

         All drawings, design, specifications, manuals, name plates, markings,
         instructions, schedules, notices, documents and all written
         communications between MTPO and Contractor concerning the Work shall be
         in the English language. The metric symbol of weights and measures
         shall be used unless otherwise specified or required by MTPO.

3.       AUTHORIZED REPRESENTATIVES AND NOTICES

3.1      The Projects Director of the MTPO shall be duly authorized to act on
         behalf of the MTPO with respect to the implementation of the project.

3.2      The representative of the Contractor shall be duly authorized to act on
         behalf of the Contractor with respect to any or all matters relating to
         the implementation of

<PAGE>

         the MOA, and shall be stationed in the Philippines during the period
         commencing not later than two (2) months prior to the commencement of
         the construction/installation work and shall leave one month after the
         Provisional Acceptance of the last system. He shall give full technical
         information to MTPO at its request.

3.3      Contractor, immediately after the signing of the Contract, shall
         appoint its duly authorized representative who has professional
         knowledge and experience in the telecommunications field and notify
         MTPO for approval thereof. The biodata of the Contractor's
         representative and key personnel to be dispatched to the Philippines
         shall also be submitted to MTPO for approval.

3.4      All notices required to be given by one of the parties to the other
         during the implementation of the Work shall be in writing and sent by
         telegraph, telefax, or telex or given either by personal delivery or by
         registered mail to the party concerned at the address specified below.
         In general, notices shall be effective upon receipt by any of the
         parties.

         Purchaser: Project Director, MTPO, 21st Floor, Strata 100 Bldg. Emerald
                  Street, Pasig, Metro Manila, Philippines; Fax: 632-04-55 /
                  Telephone nos. 632-0453, 632-0454

         Contractor: SR Telecom Inc., TEXTRON Bldg. 4/F 168 Luna Mencias St.,
                  San Juan Metro Manila.

4.       USE OF LOCAL PERSONNEL

         Contractor shall utilize Filipino personnel whenever possible, and
         Contractor's personnel shall be limited only to engineers, specialized
         technicians and administrative personnel.

5.       CONTRACTOR'S RISK RESPONSIBILITY

5.1      Contractor shall take upon itself the whole risk of executing the Work
         in compliance with the provisions of the MOA Documents, and all the
         Goods obtained for the purpose of the MOA shall be its responsibility
         until the date of the Provisional Acceptance of each portion of the
         Work subject to the provisions on Warranty under thus MOA.

5.2      Contractor or MTPO shall not take advantage of any apparent error or
         omission in the MOA Documents. In the event Contractor or MTPO
         discovers any apparent

<PAGE>

         error or discrepancy in the MOA documents, it shall immediately notify
         the other party for a joint evaluation and resolution.

5.3      Contractor shall pay due attention to the Work and shall cooperate in
         every possible way with the Project Officer and Inspector, and further
         with other contractors of the Government having connection with the
         execution of the Project.

5.4      Any approvals made by MTPO shall not relieve the Contractor from its
         obligation and responsibilities under the MOA.

6.       RESPONSIBILITY OF PROJECT OFFICER

6.1      The duties of the Project Officer are to supervise the Work and examine
         the workmanship employed in its execution. The Project Officer shall
         have no authority to relieve the Contractor of any of its duties or
         obligations under the Contract.

6.2      Any written instruction or approval given by the Project Officer to the
         Contractor within the terms of such delegation shall bind Contractor as
         if it had been given by MTPO.

7.       ENVIRONMENTAL CONDITIONS

         Subject to the Technical Specifications, the Contractor must take every
         precaution in the design and construction of the telecommunications
         systems and ancillary facilities taking into account the environmental
         conditions prevailing in the Philippines, and in particular, typhoons
         and earthquake hazards.

8.       PROVISION OF GOODS AND LABOR BY CONTRACTOR

         Unless otherwise specifically stipulated herein, Contractor shall
         provide and pay for all labor, materials, equipment, tools,
         construction equipment and machinery, water, electricity, oil fuel,
         utilities, transportation and other facilities and services, as well as
         any temporary offices and other structures necessary for proper
         execution and completion of the Work.

9.       QUALITY OF GOODS AND WORKMANSHIP

<PAGE>
         The Contractor warrants that the Goods and Services supplied shall
         conform with the Technical Specifications of the Contract. The
         Contractor further warrants that all materials and equipment are new
         and of good quality, free from faults and defects. If required by MTPO,
         Contractor shall furnish satisfactory evidence as to the kind and
         quality of materials and equipment supplied.

10.      CONSTRUCTION AND INSTALLATION PROCEDURES

         Contractor shall execute the Work, using its best skill and attention.
         It shall be solely responsible unless otherwise directed by MTPO for
         all construction and installation means, methods, techniques, sequences
         and procedures and for coordinating all portions of the Work under the
         MOA until the date of Provisional Acceptance.

11.      OPERATION AND MAINTENANCE INSTRUCTIONS

         Contractor shall furnish MTPO on the date of Provisional Acceptance,
         the Operation and Maintenance Instructions together with the as-built
         drawings with sufficient detail to enable MTPO employees to maintain
         and adjust all plans of the system as needed during the Provisional
         Acceptance Period. The Work shall not be considered turned over under
         the terms of Paragraph 30 if such Operation and Maintenance
         Instructions have not been turned over to MTPO. Final as-built drawings
         shall be supplied by Contractor not later than the date of Final
         Acceptance.

12.      SUBCONTRACTORS

         The Contractor shall notify the MTPO in writing of the names of its
         subcontractors under the MOA if not already specified in the proposal.
         Such notification shall not relieve the Contractor from any obligation
         or liability under the Contract. The Contractor shall be responsible
         for acts, defaults and negligence of its subcontractors, servants and
         workmen as if they were the acts of the Contractor provided however
         that the provision of labor on a piecework basis shall not be deemed to
         be subcontracting under this paragraph.

13.      CONTRACTOR'S EMPLOYEES

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13.1     Employees of the Contractor for the execution of the Work under this
         MOA shall at all times be idealized and recognized as the employees of
         the Contractor under its administrative control and supervision and
         shall at no time be identified as employees of MTPO or DOTC.

13.2     Contractor, shall with the assistance of MTPO if required, obtain and
         furnish necessary personnel passports, visas, security clearances,
         permits, licenses, authorizations and other documents for its personnel
         under this Contract.

13.3     At all limes under this Contract, Contractor shall exercise complete
         administrative control and supervision over its employees. Contractor
         and its employees shall conform with all applicable local laws,
         regulations and ordinances, and shall promptly correct any violations
         brought to its attention.

13.4     Contractor shall be responsible for the professional and technical
         competence of its employees and do its best to select and employ only
         those persons who in its judgment shall be reliable and competent and
         who shall comply with local laws and customs and conform to a high
         standard of moral and ethical conduct.

13.5     Contractor agrees, upon written request from MTPO and after mutual
         agreement, to terminate the work assignment of any of its employees
         performing the work under this Contract, if MTPO considers that such
         termination is necessary to protect the interest of the Government.
         Contractor shall bear all expenses necessary for such termination of
         work assignment and shall provide replacement of equal or better
         qualifications and acceptable to MTPO, within a reasonable period of
         lime, at its own expense.

14.      GOVERNING LAWS

         Any work done in the Philippines by Contractor shall comply with all
         the laws of the Philippines and the regulations, orders and rulings in
         force therein.

15.      PATENT RIGHTS, ROYALTIES AND INDEMNITY

15.1     Contractor shall indemnify the MTPO against all third party claims of
         infringement of patent, trademark or industrial design which arise from
         use of the Goods or any part thereof in the manner specified in the
         specifications or drawings. MTPO shall promptly notify the Contractor
         of any pending suit and upon such notification, Contractor shall take
         sole responsibility for the defense and/or settlement of the dispute.

<PAGE>

15.2     If the Purchaser shall be prevented by permanent injection from the use
         of any equipment in the System, the Contractor shall substitute, at no
         additional cost to the MTPO, such equipment or parts thereof with
         other equally suitable equipment or parts.

15.3     The Purchaser agrees to indemnify the Contractor against claims
         incurred by the Contractor by reason of infringement of any registered
         patent or copyright arising out of:

         a.       the manufacture, sale, or use of the work from designs,
                  models, plans furnished by the MTPO and

         b.       Contractor's compliance with MTPO's instructions directing
                  changes to the work which leads to the infringement; provided
                  that Contractor shall timely warn MTPO of any infringement or
                  possibility thereof resulting from changes to the Work upon
                  MTPO's instructions.

16.      PRICES

16.1     All payments and other financial terms regarding the MOA price shall
         be in US Dollars.

17.      TERMS OF PAYMENT

17.1     Equipment

a.       Downpayment

         15% downpayment upon effectivity of MOA

b.       Shipment

         50% of the price of the Goods shall be paid within 30 days from the
         date of shipment of each delivery against presentation to the
         Lender/MTPO or MTPO of a copy of the following documents:

(1)      Ocean bill of lading or airway bill

(2)      Commercial invoice

(3)      Packing List

(4)      Insurance Certificate

(5)      Factory Inspection Certificate of Equipment

(6)      Delivery Certificate (for local portion only)

<PAGE>

c.       Installation

         15% of the price of the Goods shall be paid within 30 days upon
         installation of Goods at Site (per site basis) against presentation to
         the Lender/MTPO of certificates from the MTPO confirming the
         installation of goods at site and a Contractor's Invoice.

         However, if the installation cannot be achieved because of MTPO's
         fault, payment shall be claimed after delivery and inspection of the
         equipment at site and shall not be unduly withheld In such case,
         payment shall be made against a delivery certificate issued by MTPO as
         soon as decision not to install has been mutually agreed by both
         parties.

d.       Provisional Acceptance

         10% of the price of the Goods shall be paid within 30 days after the
         completion of the Provisional Acceptance of each system or other items
         not related to any system such as NMC spares or training system and
         against presentation to the Lender/MTPO of a Provisional Acceptance
         Certificate and Contractor's invoice.

         If Provisional Acceptance Certificate is not received within 30 days
         from completion of the Provisional Acceptance for reasons not
         attributed to the Contractor as Section 3.12/TR5 of the Technical
         Specifications, Annex "E", of the Contract, Provisional Acceptance
         shall be deemed to have occurred.

e.       Final Acceptance

         10% of the price of the Goods shall be paid within thirty (30) days
         after the date of Final Acceptance of each system and/or other items
         not related to any system such as NMC spares or training system and
         against presentation to the Lender/MTPO of a Final Acceptance
         Certificate and Contractor's invoice.

         If Final Acceptance Certificate is not received within 30 days from
         completion of the Final Acceptance for reasons not attributed to the
         Contractor as Section 3.12/TR5 of the Technical Specifications, Annex
         "E", of the Contract, Final Acceptance shall be deemed to have
         occurred.

17.2     Services

a.       Downpayment

<PAGE>

         15% downpayment upon effectivity of MOA

b.       Engineering Services upon Design Freeze

         75% of the MOA Price, of the Services for Engineering Services shall be
         paid after design freeze of each province duly approved by the MTPO and
         Contractor's invoice to the Lender/MTPO.

c.       Installation Services upon Design Freeze

         15% of the MOA Price of the Services for Installation Services shall be
         paid after design freeze of each province duly approved by the MTPO and
         Contractor's invoice to the Lender/MTPO.

d.       Factory Training

         85% of the MOA Price of the Services for Factory Training shall be paid
         within 30 days from the completion of said training against
         presentation to the Lender/MTPO of a Contractor's invoice countersigned
         by the Purchaser.

e.       Project Management

         75% of the MOA Price of the Services for Project Management services
         shall be paid upon initial shipment of goods against submission of
         corresponding report to the Purchaser and Contractor's invoice to the
         Lender/MTPO.

f.       System Services upon Installation

         60% of the MOA Price of the Services for System Services upon
         installation for each province shall be paid within 30 days upon
         completion of said services upon presentation of a certificate from the
         MTPO of such completion and Contractor's invoice to Lender/MTPO.

g.       Provisional Acceptance Services

         75% of the MOA Price of the Services for Provisional Acceptance
         Services shall be paid upon the issuance of a Provisional Acceptance
         Certificate from the MTPO on a per province basis against presentation
         to the Lender/MTPO of Contractor's invoice.

         If Provisional Acceptance Certificate is not received within 30 days
         from completion of the Provisional Acceptance for reasons not
         attributed to the Contractor as Section 3.12/TR5 of the Technical
         Specifications, Annex "E", of the Contract, Provisional Acceptance
         shall be deemed to have occurred.

<PAGE>

h.       Warranty and Documentation Services

         75% of the MOA Price of the Services for the Warranty and Documentation
         Services shall be paid upon issuance of a Provisional Acceptance
         Certificate on a per province basis against presentation to the
         Lender/MTPO of Contractor's invoice.

i.       Final Acceptance

         10% of the price of the Services shall be paid within 30 days from the
         date of Final Acceptance of each province and NMC spares and/or
         training system and against presentation to the Lender/MTPO of a Final
         Acceptance Certificate and Contractor's invoice.

         If Final Acceptance Certificate is not received within 30 days from
         completion of the Final Acceptance for reasons not attributed to the
         Contractor as Section 3.12/TR5 of the Technical Specifications, Annex
         "E", of the Contract, Final Acceptance shall be deemed to have
         occurred.

18.      SECURITIES

18.1     Performance security

         Within one month upon signing of the Contract, the Contractor shall
         furnish the MTPO with a Performance Security in the form of a Bank
         Guarantee equivalent to 10% (ten percent) of the total MOA Price
         callable on demand, to guarantee the faithful performance of its
         obligations to supply, deliver to the site, install, commission and
         complete the system/project in accordance with the agreed
         timetable/schedule and the terms and conditions of this Contract.

19.      SHIPMENT

19.1     Delivery

         Items to be shipped or delivered under this MOA shall be limited to
         Goods and Contractor's Equipment required for the execution of the
         Contract.

<PAGE>

         Delivery shall be considered to be made FOB Port/Airport of loading
         and then CIF site under Contractor shipping instructions and MTPO
         acting as the IMPORTER (CONSIGNEE).

         The terms and conditions of FOB and CIF shall be in compliance with the
         trade of "INCOTERMS 1990 with relevant Amendments" being accepted as
         the International Rules by the International Chamber of Commerce
         (I.C.C.).

         Contractor may ship Goods to the Philippines either by air or by sea at
         its discretion. The airway bill shall be considered as the bill of
         lading.

         Upon the shipment of Goods, Contractor shall notify Purchaser and the
         Insurance Company by fax or telex of the full details of shipment, Port
         of discharge etc., and shall send the following documents to MTPO by
         international courier service, which should be received by MTPO at
         least 10 days prior to arrival of shipment so that MTPO can take the
         necessary actions and make necessary arrangements with the Philippine
         authorities concerned for exemption from taxes, duties and all
         impositions to be levied on Goods in the Philippines:

         a)       Commercial Invoice    :    Five (5) copies

         b)       Packing List          :    Five (5) copies

         c)       Non-negotiable
                  Bill of lading or     :    Five (5) copies
                  House Air Waybill

         d)       Insurance Certificate :    Two (2) copies

         e)       Manufacturer's
                  Guarantee Certificate :    Five (5) copies

         f)       Inspection Certificate:    Five (5) copies

19.2     Partial Shipment

         Partial shipment is acceptable, as well as transhipment.

20.      PACKING OF GOODS

         With respect to packing, Contractor shall give particular attention to
         the following:

<PAGE>

(1)      Goods to be supplied by Contractor shall be securely fastened and
         packed to avoid damage during transportation to their destinations or
         storage for reasonable period of time in any warehouse. Contractor
         shall give particular attention to the protection of Goods for
         transportation by sea and handling on land under tropical climatic
         conditions. Such packing must be sufficient to ensure safe arrival at
         destination and to withstand such hazards as rough handling and
         possible corrosion by exposure to salty seawater spray.

(2)      The destination of Goods, crate identification, etc., shall be
         indicated clearly on the external surface of each bale or package as
         shown below:

         To: Republic of the Philippines/ "Telepono sa Barangay" Project

                  MOA No.     :

                  License No. :

                  Name of Station :

                  Port of Destination :

                  Case No. a/b/c/: A/B (see Remarks hereinafter)

                  Net Weight   :

                  Gross Weight :

                  Dimension of Case:

                  Remarks     A = Serial number of case
                              B = Total number of cases in batch

21.      INSURANCE

         Without limiting its obligations and responsibilities under this
         Contract. Contractor shall effect the following insurance against all
         loss and damage from whatever cause for which it is responsible under
         the terms of the Contract:

21.1     Freight Insurance

<PAGE>

         Contractor shall arrange for an all-risks overseas and inland
         transportation insurance from the port of loading to the Site covering
         all Goods to be supplied under the MOA to the full CIF value.

21.2     Erection All-Risks Insurance

         The Contractor shall also secure Erection All-Risks Insurance to cover
         against all risks (except war risk, nuclear risk, and other risks
         normally excluded from such policies) during the Work against physical
         loss of or damage to all Goods and the Work to the full value until the
         effective date of Provisional Acceptance of each relevant system.

21.3     The Contractor shall replace or repair the damaged, lost or destroyed
         Goods until their Provisional Acceptance upon the written direction of
         the MTPO. If any loss, damage, or destruction of the Goods causes an
         increase in the time required for the Contractor's performance of any
         part of the work under the Contract, the Project Implementation
         Schedule shall be extended accordingly by written agreement of the
         parties.

21.4     Workmen's Compensation Insurance

         Prior to commencement of physical work under this Contract, Contractor
         shall obtain, pursuant to Philippine Laws, Workmen's Compensation
         Insurance for all personnel employed by it in connection with the Work
         under this MOA and maintain the same during the MOA Period, as security
         for compensation benefits against work-related injury or employer's
         liability.

22.      INLAND TRANSPORTATION AND STORAGE

22.1     The MTPO shall act as the Importer (CONSIGNEE) in this Project. The
         Contractor shall undertake to secure the customs clearance of goods
         with the assistance of the MTPO. The Government shall shoulder all
         relevant taxes and duties and shall accomplish applicable import
         documents. The Project Implementation Schedule is predicated upon the
         timely release of goods from the Philippines Customs. To the extent the
         Contractor, with the assistance of the MTPO, is unable to obtain the
         release of the Goods within the time set forth in Annex "G" of the
         Contract, the Project Implementation Schedule shall be extended
         accordingly by written agreement of the parties.

22.2     Goods shall be stored in Contractor's warehouses under its
         responsibility before delivery to the sites.

22.3     Contractor shall be responsible for the handling and safe movements of
         Goods in off-loading from the on-loading to its transport at the
         storage areas well as at Site.

<PAGE>

22.4     Contractor shall be responsible for payment of expenses for execution
         and arrangements of clearing Goods through ports/airports of
         destination, storage and transportation to site, exclusive of
         applicable taxes and duties.

23.      TARIFFS, DUTIES AND TAXES

23.1     Export tariffs, duties or other taxes or charges, if any, levied
         outside the Philippines shall be paid by Contractor, and Contractor
         shall not demand reimbursement from the Government for payments made
         for those tariffs, duties and taxes.

23.2     All taxes, value added tax, Philippine duties, license fees, and other
         such levies imposed, directly or indirectly by or inside the
         Philippines on any Goods, materials, equipment, vehicles and Services,
         purchased or acquired for, or related to the Project shall, unless the
         Contractor is exempted from same, be paid for by the MTPO.

24.      WORK PERMIT, CERTIFICATE AND OTHER AUTHORIZATION

24.1     MTPO shall assist the Contractor to obtain in the Philippines any of
         the required authorizations, including entry visa and work permits for
         Contractor's employees. For this purpose, Contractor shall submit to
         MTPO the list of Contractor's personnel to be dispatched on a full-time
         basis for the Work, one (1) month before their arrival in the
         Philippines.

24.2     MTPO shall issue identification cards and other Certificates for
         Contractor's personnel, when necessary for execution of the Work.

24.3     MTPO shall allow Contractor to use, free of charge, during the
         execution of the Work the tools, cards or measuring equipment, etc., to
         be supplied under this Contract. In case damage or losses should occur
         on such tools, cards or measuring equipment, they shall be repaired or
         replaced with non-defective ones by Contractor as soon as possible at
         no cost to the MTPO. Furthermore, measuring equipment shall be checked
         and calibrated by Contractor before returning to MTPO.

25.      LICENSES AND PERMITS

<PAGE>

         Licenses and Permits shall be obtained by the Contractor with the
         assistance of MTPO pursuant to the Technical Requirements of the
         Contract.

         The Contractor shall maintain an Office in the Philippines for the
         purpose of performing its obligations under this MOA and other
         contracts involving this Project. To this effect, the MTPO shall assist
         the Contractor in obtaining any governmental license or permit for the
         maintenance of such Project Office.

26.      ACCEPTANCE OF WORK

26.1     Provisional Acceptance

(1)      Provisional Acceptance Test

Provisional Acceptance Test shall be carried on a province per province basis as
         follows:

(a)      When all the construction and installation works have been completed,
         the Provisional Acceptance Test shall be executed by the Contractor in
         the presence of and under the direction of the Project Officer in
         accordance with the Technical Specifications.

         Prior to initiating the test procedures, Contractor shall submit for
         approval to MTPO the test or commissioning procedures. MTPO shall have
         thirty (30) days from receipt of the procedures to register its
         observations in writing to Contractor. Should MTPO fail to inform
         Contractor of its observations within that period, the said documents
         shall then be considered as approved.

(b)      Contractor shall give MTPO at least three (3) weeks prior written
         notice of the date on which the Provisional Acceptance Test shall be
         conducted. Unless otherwise agreed upon within seven (7) days from the
         receipt of said notice the Provisional Acceptance Tests shall take
         place at the date proposed by the Contractor in his written notice.

(c)      Contractor shall supply necessary labor, materials, equipment,
         apparatus, instruments, power, fuel and the like necessary for the
         execution of the Provisional Acceptance Test.

(d)      If Contractor and MTPO disagree on the interpretation of a test result
         each shall give a statement of its findings to the other within
         fourteen (14) days after such disagreement arises. The statement shall
         be accompanied by all relevant evidence.

<PAGE>

(e)      The tests shall be conducted according to the procedures abovementioned
         and shall be declared completed as soon as the equipment satisfies the
         said procedures as indicated in the Technical Specifications.

(f)      It is understood that the tests shall be considered as valid even if
         the nominal values for which the equipment is designed are not reached
         at the time of the testing period due to conditions beyond Contractor's
         control (such as smaller number of subscribers actually connected or no
         connection available with other external networks).

(g)      The Work shall be considered accepted when:

                  All Acceptance Tests have been carried out and results show
         that all tests meet the Acceptance criteria as per the Technical
         Specifications;

                  The MTPO shall notify the Contractor in writing of such
         Acceptance. If the MTPO fails to notify the Contractor within ten (10)
         working days from the date when results of the Acceptance Tests shall
         have been issued as greed upon, the Provisional Acceptance Certificate
         shall be deemed to have been issued as of the date when results of the
         Acceptance Tests meet the objectives. In the event that the system
         fails to meet the Acceptance criteria due to causes not imputable to
         the Contractor, Acceptance of the work shall be deemed to have taken
         place on the date of completion of Acceptance Tests, and any extra work
         required to correct any such performance deficiencies shall be for the
         account of MTPO.

(2)      Provisional Acceptance Certificate

         Provisional Acceptance Certificate shall be delivered on a per province
         basis.

a.       After the Provisional Acceptance Tests shall have been completed but
         not later than 15 days thereafter, satisfying all the relevant
         requirements under the MOA except minor defects not affecting the
         overall operation of the said system, MTPO shall issue the Provisional
         Acceptance Certificate for that province.

b.       Before the issuance of the Provisional Acceptance Certificate,
         Contractor shall hand over and submit to MTPO the spare parts, units,
         materials, test equipment, tools, instruction handbooks and other
         information necessary for the operation and the maintenance of the
         system.

c.       If for reasons beyond Contractor's control, such as but not limited, to
         Force Majeure, some stations of a system cannot be entirely installed,
         the acceptance tests for that system shall be conducted by Contractor,
         attended by MTPO representative on the partially installed system.
         Contractor shall deliver the

<PAGE>
         equipment of the station(s) that cannot be installed to the appropriate
         MTPO storage area.

         A Delivery Certificate shall be drawn up and signed by MTPO and
         Contractor. This Certificate shall constitute the provisional
         acceptance of the stations concerned, thus permitting the issue of the
         Provisional Acceptance Certificate for the relevant system. Contractor
         is however not relieved of its responsibility to install the relevant
         portion of the system should its installation become possible.

d.       Upon issuance of the Provisional Acceptance Certificate, that system
         shall be deemed to have been turned over to MTPO. In case a decision is
         made not to install such equipment or facility, then an appropriate
         deduction on the installation cost shall be made.

e.       In case the Purchaser puts any portion(s) of the Work executed by the
         Contractor into commercial service the portion(s) shall be deemed to
         have been provisionally accepted at the time of such commercial service
         and the Purchaser shall issue the Provisional Acceptance Certificate
         for the said portion(s) within seven (7) days after the start-up of
         commercial service.

26.2     Final Acceptance Certificate

         MTPO shall issue the Final Acceptance Certificate on a per province
         basis upon confirmation by the Project Director that all the duties of
         the Contractor under the MOA relevant to that system have been
         completed against the notification presented by Contractor stating that
         all defects and faults have been cleared.

27.      WARRANTY

27.1     The Contractor warrants that the Goods supplied and the Work shall
         conform with the Technical Specifications. The Contractor further
         warrants that the Goods supplied under this MOA shall be free of front
         failure due to defective material or faulty workmanship and the Work
         performed in accordance with the designs, specifications and
         internationally accepted standards for the same or similar services for
         a period of twenty four (24) months from the date of Provisional
         Acceptance.

27.2     The MTPO shall promptly notify the Contractor in writing of any claims
         arising under this warranty.

27.3     This warranty does not apply to:

<PAGE>

         a)       Equipment or components normally consumed in operation or
                  which have a normal life inherently shorter than twelve (12)
                  months.

         b)       Equipment or parts which have been:

                  (i)      misused, altered, abused, or dated in any way by the
                           MTPO;

                  (ii)     improperly stored, or operated or maintained not in
                           accordance with the written instructions of the
                           Contractor; or

         (c)      Equipment used in conjunction with or connected to
                  non-Contractor supplied equipment which does not perform in
                  accordance with the Technical Specifications; or

         (d)      Equipment repaired by others without the Contractor's written
                  consent or not in accordance with the Contractor's written
                  consent or not in accordance with the Contractor's
                  instructions.

27.4     Provided that written notice of defect is promptly given to the
         Contractor, within the applicable warranty period, the Contractor shall
         within a reasonable period repair or replace the defective goods
         thereof at no cost to the Purchaser. If Contractor fails to make good
         any defects within a reasonable time, MTPO may proceed to make good the
         same at Contractor's expense after a thirty (30) day written notice to
         the Contractor.

27.5     Repairs or replacement shall not interrupt or extend the Contractor's
         warranty period. Any equipment replaced under the Contractor's warranty
         shall be subject to the manufacturer's warranty. No equipment shall be
         repaired or replaced pursuant to the warranty provisions hereof without
         the Contractor's written authorization and instructions, which shall
         not be unreasonably withheld.

27.6     The MTPO under the supervision of Contractor shall be responsible for
         detecting the origin of the faults and identifying the faulty parts,
         shipping them to Contractor's premises within two (2) weeks of fault
         discovery, at the expense of Contractor which shall replace them with
         brand new spare parts taken out from the spare parts lot, and shall
         restart the system in accordance with the 2nd level maintenance
         procedures detailed in the Technical Specifications.

27.7     The total liability of the Contractor and its suppliers of every type
         on any and all claims shall not exceed the price allocated to the
         equipment, or part thereof which gave rise to the claims, except as
         otherwise provided herein.

<PAGE>

27.8     Until the expiration of the warranty period or any extension thereof,
         Contractor shall have access to the project sites, at its own risk and
         expense, at all reasonable times.

27.9     Contractor warrants to make available and provide to MTPO at reasonable
         prices, terms and conditions. The same type of components and spare
         parts or their equivalents needed for the operation and maintenance of
         the system at any time during a period of ten (10) years from the date
         of issuance of the Final Acceptance Certificate.

27.10    The spare parts buffer of MTPO shall be replenished up to the normal
         level of inventory by the Contractor at its expense before the expiry
         of the warranty period.

28.      TIME OF COMPLETION

28.1     Completion of the Work up to Provisional Acceptance of all systems
         shall be within twenty-four (24) months after effectivity of the
         Contract.

28.2     Should performance by the Contractor be delayed or should the
         Contractor be unable to comply with its duties and responsibilities for
         reasons attributable to Paragraphs 30, 31 and 33 the completion dale
         shall be extended accordingly.

28.3     Should performance by the Contractor be delayed or should the
         Contractor fail to comply with its duties and responsibilities for
         reasons not attributable to the Contractor such as but not limited to
         reasons attributable to the Government or reasons attributable to Force
         Majeure, extensions of the Project Implementation Schedule shall be
         granted to the Contractor and these extensions shall be equal in time
         to the duration of the delays incurred.

29.      AMENDMENT TO ORDER

29.1     MTPO may at any time issue Amendments to Order in the event that the
         necessary adjustments within the general scope of this MOA in any one
         or more of the following are required in order to fully meet the
         requirements of the project:

         a.       drawings designs or specifications;

         b.       method of shipment or packing; or

         c.       place of delivery.

<PAGE>

         If any such order increases or decreases the cost of, or the time
         required for executing any part of the work under this contract, an
         equitable adjustment in MOA price and/or delivery schedule shall be
         mutually agreed upon between the parties concerned and the MOA shall
         accordingly be modified in writing.

29.2     MTPO may likewise issue an Amendment to Order where there are
         additional items needed and necessary for the protection of the goods
         which were not included in this Contract. Payments for these additional
         items shall be based on the unit prices in this Contract. If this MOA
         does not contain any rate applicable to the additional item then
         suitable prices shall be mutually agreed upon between the parties.
         Requests for payment by SRT for any additional item shall be
         accompanied by a statement with the approved supporting form, giving a
         detailed accounting and record of amount for which SRT claims payment.
         The MOA time shall likewise be extended if warranted by written
         agreement of the parties.

29.3     Under no circumstance shall SRT proceed to commence work under any
         Amendment to Order unless the same has been approved by the DOTC
         Secretary or his duly authorized representative.

30.      FORCE MAJEURE

30.1     Contractor shall not be responsible for delay of the MOA completion
         date or non-performance of its contractual obligations due to Force
         Majeure such as Acts of God, of a public enemy, insurrection, civil
         war, social unrest, acts of Government in its sovereign capacity,
         fires, floods, earthquakes, landslide, natural disasters and other
         conditions, epidemics, restrictions, strikes, lockouts, sabotage,
         combination of workmen and freight embargoes, etc. which cause failure
         to perform the MOA and in which case are beyond control of the
         Contractor

30.2     In case of such Force Majeure, this MOA may be amended or extended or
         terminated wholly or partially by mutual agreement of both parties.

30.3     If any damage or loss has been caused to any Work done or to Goods by
         Force Majeure as defined in Paragraph 31.1 for which neither of the
         parties is responsible Contractor shall promptly notify MTPO of the
         event and shall if possible make good such damage or loss if required
         by MTPO to do so at mutually agreed prices.

         If such damage is covered by Insurance the amount of its coverage shall
         be deducted from the amount of damage to be borne by the Government.

30.4     Likewise, Contractor shall not be held responsible for damages to the
         equipment and works caused by unforseeable external occurences such as
         but not limited to:

<PAGE>

         -        Earthquakes, volcanic eruptions, typhoons flooding.

         -        Blasting and the likes resulting from war combat, mining.

31.      SUSPENSION OR TERMINATION OF CONTRACT

31.1     In case of Force Majeure

         In case of Force Majeure as stipulated in Section 30 Contractor shall
         be entitled to suspend the execution of the MOA for the period such
         Force Majeure shall last. In this case Contractor shall properly
         protect and secure the Work during this Suspension period.

         If such protection and securing of the Work are deemed impossible, the
         Contractor shall notify MTPO in writing, giving the reasons, and the
         matter shall be settled through negotiation between the parties hereto.
         Should such suspension last for a period exceeding six (6) months,
         either of the parties hereto shall be entitled unless otherwise agreed
         upon to terminate this MOA with respect to the remaining Work and shall
         give Notice of Termination by registered mail to the other party. In
         case of such termination the MTPO shall pay within one month therefrom
         to the Contractor the value of all equipment already shipped to the
         Philippines and the cost of the Work executed prior to the date of
         termination.

         For all the other expenses to be made by Contractor or its
         subcontractors for the termination of MOA equitable solutions shall be
         found through negotiations between the parties.

31.2     In case of Contractor's Default

         If Contractor should fail to perform the MOA with due diligence and/or
         refuse or neglect to comply with any reasonable orders of MTPO with
         respect to the MOA or contravene any provision of the Contract, MTPO
         may give a notice to Contractor to make good the said failure, neglect
         or contravention.

         Should Contractor fail to comply with the said notice within 30 days
         from receipt of such notice, the MTPO may terminate the MOA by giving
         notice of termination by registered mail to Contractor. In this event
         the MTPO shall be entitled to retain the balance due to the Contractor
         in order to pay for the costs to be incurred for the due completion of
         the Works.

31.3     In case of Default of MTPO

<PAGE>

         In the event the MTPO is in default of its obligations under this
         Contract, the Contractor may give the MTPO a written notice of default.
         If the MTPO fails to remedy the condition of default within a period of
         thirty (30) days from receipt of such notice the Contractor may
         terminate the MOA without prejudice to its other remedies under the
         Contract.

32.      SECURITY OF THE PERSONNEL

32.1     The security of the personnel of the Contractor and its Subcontractor/s
         shall be respected as the most important factor during the execution of
         the Contract.

32.2     Before the commencement of installation, MTPO shall ensure that the
         sites have been made available for Contractor's works.

         MTPO shall in accordance with the time schedule, grant Contractor free
         access to the sites in order to carry out all its obligations during
         the whole period of the Project under the Implementation Schedule of
         the contract.

32.3     The Contractor may suspend the execution of the MOA subject to
         consultation and agreement with MTPO if the security of any of its
         personnel is threatened by possible or actual civil commotion,
         hostilities, terrorism, bomb threat, guerrilla activity, warfare,
         rebellion, murder, sabotage, extortion, unexplained industrial
         accidents, kidnapping or any other social unrest or upheaval. In case
         of emergency the representatives of the Contractor and MTPO shall make
         the decision to suspend the execution of the Contractor to ensure the
         security of the personnel, and the Contractor shall notify MTPO as soon
         as possible.

32.4     MTPO in case of threat to the security of the Contractor's personnel,
         shall render all possible assistance and cooperation to the Contractor
         to endure their safety, well-being, medical care and safe evacuation
         out of the unsecured area.

32.5     The implementation of the MOA if suspended due to the above situation
         shall be resumed from the date mutually agreed upon by both parties.
         The Project Implementation Schedule shall likewise be accordingly
         adjusted by agreement of the parties.

33.      PROTECTION OF TELECOMMUNICATION ACTIVITY

         During the installation period, Contractor shall pay special attention
         to the protection of the existing telecommunications facilities from
         damage, interference or trouble.

<PAGE>

         If such damage, interference or trouble should occur, Contractor shall
         immediately suspend the Work and ask MTPO for instructions.

34.      PREVENTION OF DAMAGE

34.1     Contractor shall, at its expense, provide facilities necessary to
         prevent damage to the Work, Goods and adjacent structures of a third
         party until the Work shall have been completed and accepted.

34.2     At existing stations the Contractor shall take all possible precautions
         against disturbance to operational equipment, and shall in no respect
         impede the work of MTPO.

34.3     The Contractor shall maintain the work places at each site in an
         orderly condition, and shall remove all combustible materials from the
         vicinity of the station.

34.4     Contractor shall, whenever it considers it especially necessary to do
         so for the prevention of accidents, take proper measures at its own
         cost, and notify Project Officer of the measures taken.

34.5     Contractor shall not, for any purpose, enter other properties than
         those belonging to the Project, without obtaining the permission of the
         person in charge or Project Officer.

34.6     MTPO shall assist Contractor to clear the locations (above and
         underground) where the work and equipment related to the microwave
         stations, are to be erected and constructed. Contractor shall not be
         held responsible for any encroachment into any private or public
         property related thereto or for any trespassing into third party
         estates if MTPO has failed to acquire the necessary land and to keep
         Contractor informed of the same.

35.      DAMAGE TO THIRD PARTY

35.1     Contractor shall be responsible for all direct damages only, to the
         property of any person resulting from any neglect, or misconduct in its
         manner or method of executing the Work, or defective Work or materials,
         or acts of its employees, and the said responsibility shall not be
         released until the Work shall have been completed and accepted. In the
         case of such damage, Contractor shall restore the damaged property, at
         its own expense, to the condition equivalent to that existing before
         such damage or injury.

<PAGE>

35.2     In case it is difficult for Contractor to settle the matters mentioned
         above by itself, the MTPO shall cooperate with Contractor. However,
         expenses needed for such measures shall be borne by Contractor.

35.3     Contractor shall indemnify and keep the MTPO indemnified against all
         losses and claims for such injuries or direct damages as mentioned
         above, and all claims, demands, proceedings, damages, cost, charges and
         expenses in respect or in relation thereto. No extension of lime shall
         be made in connection therewith.

35.4     Contractor shall not be responsible for any damage or injury
         attributable to the Government or any third party.

36.      ARBITRATION

         In the event of any dispute, claim or difference of opinion, the
         parties hereto shall do their best to settle the same amicably by
         negotiation. In the event settlement by negotiation is not achieved,
         such dispute shall, at the request of either party hereto, be first
         arbitrated without recourse to court action, under the Rules of the
         Philippines Arbitration Law (R A. No. 876) and any amendments thereto.

         Arbitration shall be initiated by one party hereto giving thirty (30)
         calendar days notice in writing to the other party of the desired
         commencement of arbitration proceedings.

         Thereupon, a board of three (3) arbitrators shall be appointed, one of
         whom shall be chosen by the MTPO, one by the Contractor and a third by
         agreement of the parties hereafter referred to as the Third Arbitrator.
         If either party fails to choose its arbitrator within fourteen (14)
         days after receiving a notice of the commencement of arbitration
         proceedings, the Third Arbitrator shall appoint the arbitrator required
         to complete the board.

         The decision by a majority of this board shall be final and binding
         upon the parties hereto, who shall be fully liable therefor. Execution
         of such decisions may be applied for in the proper courts of Pasig
         City, Metro Manila, exclusively, should resort thereto become
         necessary, the cost thereof to be borne by the losing party.

37.      MONTHLY PROGRESS REPORT

         Contractor shall submit to the MTPO "Monthly Progress Reports" the Work
         executed for each month, within the first ten (10) days of the
         following month and in a form and number of copies to be determined by
         MTPO. The MTPO shall

<PAGE>

         confirm in writing the quantity of the Work stated in the report within
         ten (10) days after its submission. In case confirmation or objection
         to the quantity of the Work is not given within the said ten (10)
         working days, the Monthly Progress Report shall be considered approved
         by MTPO.

38.      CLEANING-UP

         Contractor shall at all times pay due attention to sanitation at the
         Site and shall keep it free from accumulation of waste materials or
         garbage caused by its operations.

         Upon completion of the Work it shall remove all the surplus materials
         and garbage from the site as well as its tools, equipment, machinery,
         and waste materials within the time designated by MTPO.

39.      MATTERS NOT STIPULATED IN CONTRACT

         All matters not stipulated in the MOA shall be determined by
         negotiation between the MTPO and Contractor as required, and no
         agreement or understanding shall be binding on either of the parties
         hereto unless in writing and signed by authorized representatives of
         both parties.

40.      EFFECTIVE DATE OF THE MEMORANDUM OF AGREEMENT (MOA)

         The Effective Date of this MOA is the date when all of the following
         conditions are fulfilled:

         a.       Signing of this MOA by the DOTC Secretary Vicente C. Rivera
                  and/or Undersecretary Enrico T. Velasco;

         b.       Conclusion of the Loan Agreement between the Department of
                  Finance, representing the Philippine Government and SR
                  Telecom, and the execution of the Deed of Assignment by SR
                  Telecom in favor of the Export Development Corporation of
                  Canada (EDC) and also the execution thereof by the Philippine
                  Government;

         c.       Issuance of a Forward Obligation Authority from the DBM or CAF
                  by the Chief Accountant of DOTC, pursuant to LOI 968.

<PAGE>

41.      CONFIDENTIALITY

         Both parties shall treat all proprietary information concerning the
         Project as private and confidential.

42.      WORKING HOURS

         The normal working hours of Contractor are eight (8) hours/day from of
         8:00 a.m. - 5:00 p.m. except Saturdays, Sundays, and legal holidays.

43.      LIQUIDATED DAMAGES

43.1     SRT shall complete the works within the time prescribed in this
         Contract. Should SRT incur any delay in its performance for reasons
         attributable exclusively to itself, SRT shall pay MTPO liquidated
         damages, not by way of penalty, an amount equal to one -tenth (1/10) of
         one percent (1%) of the cost of the delayed goods /works for every day
         of delay until such goods are finally delivered, and/or such works are
         completed, and accepted by MTPO. Such delay, however, shall not give
         rise to refusal or withholding of payment by MTPO for other completed
         phases.

43.2     The amount of liquidated damages shall be deducted from money due or
         which may become due to SR, or collect the same from any securities or
         warranties posted by SR, whichever is convenient to MTPO. Should the
         total sum of liquidated damages exceed fifteen percent (15%) of the
         total MOA price, MTPO shall automatically terminate this MOA and
         impose sanctions against SRT over and above the liquidated damages.<PAGE>

                                                                    EXHIBIT 10.6

[SRT LOGO]                                           [STAMP OF SAUDI TELECOM CO]

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

                            MASTER PURCHASE AGREEMENT

                                       FOR

                                  450K PROJECT

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

<PAGE>

SAUDI TELECOM COMPANY       [STAMP OF SAUDI TELECOM CO]

NO   :

Date :

                                      S.R.T

<TABLE>
<S>                                <C>
---------------------------------------------
1 600K NETWORK EXPANSION TENDER    14/5/2001
---------------------------------------------
2 450K NETWORK EXPANSION TENDER    20/5/2001
---------------------------------------------
3 450K NETWORK EXPANSION TENDER    21/5/2001
---------------------------------------------
4    TEP450K PROJECT TENDER        21/5/2001
   NETWORK AND PRICING PROPOSAL
---------------------------------------------
5 450K NETWORK EXPANSION TENDER    23/5/2001
---------------------------------------------
6 SRS BEST AND FINAL WITH STC      24/5/2001
---------------------------------------------
7 SRS BEST AND FINAL WITH STC      25/5/2001
---------------------------------------------
</TABLE>

<PAGE>

SAUDI TELECOM COMPANY       [STAMP OF SAUDI TELECOM CO]

NO   :

DATE :

<PAGE>

MASTER PURCHASE AGREEMENT FOR TELEPHONE NETWORK EXPANSION

PROJECT NO. 221145

THIS CONTRACT has been entered into in Riyadh city this      day corresponding
to   between:

First: SAUDI TELECOM COMPANY, A Saudi Company registered at Riyadh Commercial
Registration under number (1010150269), represented in signing this Contract by
its President Eng. Khaled Bin Abdullah Al-Mulhem Hereafter referred to as the
Company - First Party

Second: SRTELECOM (SRT), a Canadian company established under the laws of Canada
and having its branch office in the Kingdom of Saudi Arabia rabia at the address
P.O. Box (89), Riyadh 11351 and represented in the signature of this Contract by
Mr Makar Barsoum, its Regional Vice President.

Hereinafter referred to as the Contractor - Second Party.

<PAGE>

WHEREAS the Company intends to carry out an expansion of its SRS network and has
invited tenders for the supply of these Works

and

WHEREAS the Contractor has submitted his offer to carryout and complete these
works after reviewing the tender conditions, specifications and all attached
documents,

And

WHEREAS the Company accepted the offer submitted by the Contractor,

NOW, THEREFORE, the parties agree as follows:

ARTICLE (1): PURPOSE OF THE CONTRACT:

This Contract is a Master Purchase Agreement that provides the terms and
conditions and Unit Prices under which the Company may order and the Contractor
shall supply Works as may be specified from time to time in Purchase Orders in
connection with Company's requirements for the expansion of its SRS network.

<PAGE>

The Scope of Work Schedule attached to this Contract specifies the Works to be
supplied under Purchase Order No. 1 of this Contract for the Total Ceiling Value
stipulated in Article (6) of this Schedule, based on the Unit Prices and
estimated Bill of Quantities.

ARTICLE (2): CONTRACT DOCUMENTS

2.1.     This Contract shall consist of the following schedules:

         A.       This Main Contract Document.

         B.       Special Contract Conditions

         C.       General Contract Conditions

         D.       The Scope of Work

         E.       The Unit Price Schedule

         F.       Bill of Quantities

         G.       Project Implementation Plan

         H.       The Company's Generic Specifications

         I.       The Company's Letter of Award (LOA) No. 393 date 21/03/1422H

         J.       The Contractor's OfferNo. (SRQ-B222) dated 04/11/2000G and
                  Contractor's subsequent letters referenced in the Letter of
                  Award and the agreed negotiation documents.

         K.       Project Technical Specifications

<PAGE>

2.2.     These documents shall constitute an integral unit and each document
         shall be considered part of the Contract so they explain and complement
         each other.

2.3.     In case of any contradiction between the Contract documents the
         precedent document shall prevail over the one following it in the order
         stated in Article (2.1) above. In case of different versions of the
         same document, the most recent document agreed by both parties shall
         prevail.

ARTICLE (3) : TOTAL CONTRACT PERIOD

Without prejudice to Articles 35 and 36 of the General Conditions:

3.1.     The Total Contract Period shall commence on the Effective Date of the
         Contract and end sixty (60) Gregorian months after the Effective Date
         but in no event expire before Final Acceptance of the last part of any
         Works supplied under this Contract. The Effective Date shall be the
         date of the first Site Hand Over.

3.2      The Contractor shall supply all Works described in Contract Purchase
         Orders within a period of forty eight (48) Gregorian months from the
         effective Date of the Contract, which shall be

<PAGE>

         termed the Total Contract Implementation Period. The Implementation
         Period shall commence on the Effective Date and be completed by
         Provisional Acceptance of all Works supplied under this Contract.

3.3      The Contractor shall supply all Works described under Purchase Order
         No.l within a period of eighteen (18) Gregorian months from the
         Effective Date of the Contract. This period shall be termed the
         Implementation Period of Purchase Order No.l.

3.4      Works may be ordered to be supplied by further Purchase Orders during
         the Contract Implementation Period defined in (3.2) above in accordance
         with the terms and conditions of Article (3) of the Special Contract
         Conditions.

3.5      Provisional Acceptance shall be followed by a minimum period of twelve
         (12) Gregorian months during which each accepted SRS System or Part of
         System (as the case may be) is taken under approval and maintained
         under Warranty by the Contractor in accordance with this Contract, but
         in no event shall this period expire before the Final Acceptance of
         each SRS System or Part of System. In this period, during which the
         accepted SRS System may be put in service, Technical Maintenance
         support services for each accepted SRS System

<PAGE>

         or Part of System shall be provided by the Contractor as specified in
         other Contract documents.

3.6      In case of goods, which are designated for delivery to warehouse only,
         their Acceptance shall be followed by a Warranty in accordance with
         this Contract for a period of twelve (12) months unless otherwise
         stated to be longer in other Contract documents.

3.7      Taking into account circumstances beyond the Contractor's reasonable
         control and expectation, if the Contractor fails to supply the Works of
         a Purchase Order within the periods mentioned in its Project
         Implementation Plan or relevant MoPs, he shall be subject to the delay
         penalty stipulated in Article (39) of the General Contract Conditions
         and the supervision costs stipulated in Article (40) applied to the
         delayed SRS Systems or parts thereof.

ARTICLE (4): WARRANTY PERIOD

The Contractor shall guarantee that all Works are in accordance with the
Contract and its documents for the period commencing from the Provisional
Acceptance date and expiring on the Final Acceptance date except as otherwise
specifically stated to be longer in other Contract documents taking into account
Article (41) of the General

<PAGE>

Contract Conditions and Article (27) of the Special Contract Conditions.

ARTICLE (5): PERFORMANCE GUARANTEE

A Performance Guarantee (5% of the Total Purchase Order Value) stipulated in
Article (9) of the General Conditions shall be provided by the Contractor to the
Company within 10 days of Contract Signature for Purchase Order No. 1 and within
10 days of Purchase Order signature for any subsequent Purchase Order as
security for his proper execution of the Contract. The Guarantee shall remain
valid and shall not be released until the Final Acceptance of the last part of
the Works supplied under the relevant Purchase Order which shall be after the
Contractor has executed and completed the Works and remedied any defects therein
in accordance with the Contract. If at any stage during the period of the
Contract, the Contractor fails to abide by the Contract satisfactorily, the
Performance Guarantee may be called. Termination of the Contract due to a
failure on the Contractor's part will automatically be grounds for surrender of
the Guarantee.

ARTICLE (6): TOTAL PURCHASE ORDER VALUE

6.1.     The Total Ceiling Value of Purchase Order No.l is SAR 87,200,000
         (Eighty Seven Million Two Hundred Thousand Saudi Arabian Riyals).

<PAGE>

6.2.     The Total Value of any Purchase Order is subject to increase and
         decrease based on any change in the Scope of Work to be supplied by the
         Contractor in accordance with the Contract and its documents, and based
         on the additional and complementary Works and amendments made on the
         request of the Company within the limits stated in the Contract's
         Conditions.

6.3.     The Total Value of any subsequent Purchase Order shall be determined in
         accordance with the terms and conditions of Article (3) of the Special
         Contract Conditions.

ARTICLE (7): PAYMENT

The Company shall pay the Contractor for Works supplied by him in fulfillment of
his obligations under this Contract according to its terms and conditions and as
stipulated in the Special Contract Conditions Articles (2) and (4) and the
General Contract Conditions Article (50).

ARTICLE (8): DISCLOSURE

Without prejudice to the provisions of other regulations the Contractor shall
acknowledge that he did not pay and will not pay any money or

<PAGE>

give any other value, or promise anything to obtain this Contract. If proven
otherwise, any amount already paid or promised to be paid shall be deducted from
the Contractor's payments due and the Company shall have the right to terminate
the Contract without any compensation and the Contractor and its employees shall
be held responsible for such acts.

ARTICLE (9): APPLICABLE LAW

This Contract shall be subject to the prevailing laws and regulations of the
Kingdom. It shall be interpreted, implemented, and its disputes settled
according to such regulations.

ARTICLE (10): ENTIRE AGREEMENT

This Contract and its documents constitute the entire agreement of the parties
with respect to the subject matter hereof. This Contract may only be amended by
an agreement in writing signed by both parties hereto.

<PAGE>

In Witness hereof this Contract has been signed at the place and time stated
above.

    For/First Party                             For/Second Party

/s/ Khaled Bin Abullah AI-Mulhem            /s/ Mr. Makar Barsoum
    Eng./khaled Bin Abullah AI-Mulhem           Mr. Makar Barsoum
    President, Saudi Telecom Company            SR Telecom
                                                Vice President

<PAGE>

SPECIAL CONTRACT CONDITIONS

1-       DEFINITIONS AND ABBREVIATIONS

1-I      Definitions

         Goods:
         Any equipment, products or materials including licensed materials
         (e.g. software, etc) supplied under this Contract

         Services:
         Any type of labor or work (e.g. installation, etc) supplied under
         this Contract.

         Works:
         Goods, services or any combination of goods and complementary services
         as specified in the Scope of Work of a Purchase Order.

         Supply:
         Implement or deliver Works as appropriate under this Contract.

         Unit Price:
         A Unit Price is the stated price of a single Contract Unit or in case
         it is stated as a percentage it is a derived price calculated as a
         percentage of other Unit prices.

         Contract Unit:
         Any item in the Unit Price Schedule which has a unique description,
         defined deliverable and a Unit Price.

Page 1 of 40

<PAGE>

         Bill of Quantities:
         A list of Contract Units, with quantities and Unit Prices the total
         cost of each Contract Unit and the total cost of all items.

         Lump Sum:
         Any value in the Contract which does not represent deliverables defined
         in terms of a Bill of Quantities.

1-2      Abbreviations
         The following abbreviations, wherever mentioned in the Contract
         documents, shall have the associated corresponding meaning:

         CU               Contract Unit
         CUL              Contract Unit List
         FA               Final Acceptance
         FAC              Final Acceptance Certificate
         FT                 Factory Test
         MOP              Method of Procedure
         MPA              Master Purchase Agreement
         PIP              Project Implementation Plan
         OIL              Outstanding Item List
         O&M              Operations and Maintenance
         PA               Provisional Acceptance
         PAC              Provisional Acceptance Certificate
         PAT              Provisional Acceptance Test
         PO               Purchase Order
         RFP              Request for Purchases
         SASO             Saudi Arabian Standards Organization
         TM               Technical Maintenance support

Page 2 of 40

<PAGE>

2-       CURRENCY, PRICING AND PAYMENT PRINCIPLES

2-1      All prices (unit and total prices) shall be stated in Saudi Riyal (SR)
         only, without any correlation with the exchange rate of any other
         currency.

2-2      The payment between the Company and the Contractor shall be carried out
         according to the actually implemented works which have been approved by
         the Company both at the planning stage and in their execution, i.e. the
         value of the actually implemented works shall be calculated according
         to their quantities used in the implementation multiplied by the unit
         prices as included in the Contract.

2-3      The Unit Prices shall cover all costs incurred by the Contractor in
         pursuance of the implementation of the tasks of the Contract with him
         including the taxes, customs duties, customs clearance charges, other
         local dues, transportation and storage charges, social insurance
         installments, and any obligations the Contractor may bear in pursuance
         of the implementation of the tasks of the Contract.

2-4      Unit Prices (including discount formulas) stated in this Contract shall
         remain fixed for the whole Contract Period.

Page 3 of 40

<PAGE>

2-5      Embedded Costs

          The value of all overheads, indirect expenses, Project Management,
          Planning, Survey, Design and Engineering, SRS Network Integration
          Documentation and Administration costs are embedded into the Contract
          Unit Prices. These embedded costs exclude the costs of COM/IS
          Integration and Survey, Engineering and Administration Services for
          Equipment supplied by the Company which are payable in accordance with
          the relevant sections of Article (4) of this Schedule.

2-6      Interpretation of Tender Models

          The Contract Units included in the Contractor's Offer in response to
          each of the Models described in the Tender Scope of Work shall be
          considered as the only necessary Contract Units to implement any
          equivalent model functionality or part of model functionality under
          this Contract.

3-       PURCHASE ORDERS UNDER THE MPA

3-1      Terms and Conditions for Purchase Orders

          All Works under this Contract shall be supplied by Purchase Order and
          shall be subject to all the terms and conditions prevailing in this
          Contract.

3-2      Purchase Order No. 1

          Purchase Orders shall be sequentially numbered starting with Purchase
          Order No.l. Purchase Order No.l is considered to be contained in this
          signed Contract wherein the Works to be supplied are described in the
          Scope of Work and Bill of Quantities Schedules and an Implementation
          Period and Total Value are specified in Schedule A.

Page 4 of 40

<PAGE>

3-3      Request for Purchases

          Prior to any Purchase Order being placed with the Contractor
          subsequent to Purchase Order No.l, the Company shall issue a Request
          for Purchases (RfP) to be delivered over a stipulated period. The
          Contractor shall respond with a complete offer within 30 days of
          receiving said request.

3-4      Contents of Offer

          The offer shall include the following:

          -    An estimated Bill of Quantities using Contract Units and their
               Unit Prices taking into consideration all applicable discounts.

          -    The estimated amounts to be invoiced against each of the Payment
               terms of Article 4.2.2 of this Schedule.

          -    A full description of the Scope of Work.

          -    Delivery times for Works.

          -    A detailed Project Implementation Plan.

          -    Any new Contract Units and their Unit Prices necessary to supply
               or implement any new Scope of Work of a type essentially
               different from that anticipated at the time of Contract Signature
               so that existing Unit Prices cannot be applied. Full description
               and justification shall be provided. The inclusion of such
               Contract Units and Unit Prices in the Contract shall be dependent
               on an approved Change Order.

3-5      Delivery Times

          Offered delivery times in any subsequent Purchase Orders shall be
          consistent with and shall not exceed those committed to in Purchase
          Order No. 1 for the delivery of similar Works.

Page 5 of 40

<PAGE>

3-6      Acceptance of Offer

          The Company shall notify the Contractor in writing upon its approval
          and acceptance of his offer. The approved documents shall constitute
          the documents of the relevant Purchase Order.

          The documents of any approved Purchase Order following Purchase Order
          No. 1 shall be attached to the Contract as annexes to the relevant
          Contract Schedules.

          Acceptance of any offer shall not relieve the Contractor of any of his
          obligations under this Contract. Any terms and conditions, which are
          added expressly or implicitly in a Purchase Order shall be considered
          void and have no effect.

3-7      Authorized Signatories

          Purchase Orders will be approved upon signature by both Presidents of
          the Company and the Contractor or their authorized representatives
          thereof.

3-8      Effective Date of Purchase Order

          The date of written approval by the Company shall be considered as the
          Effective Date of the Purchase Order, except for Purchase Order No.l,
          which shall have the Effective Date of this Contract. The overall
          delivery time mentioned in the accepted offer shall then become the
          relevant Implementation Period for the Purchase Order which shall
          commence on the Effective Date of the Purchase Order.

3-9      Determination of Works

          All Works to be supplied within the specified period of a Purchase
          Order shall be determined in MOPs issued during the Implementation
          Period of the Purchase Order.

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3-10     Total Purchase Order Period

          Every Purchase Order shall have a Total Period stipulated from its
          effective date until Final Acceptance of its related Works. The Total
          Period of any Purchase Order shall not fall outside the Total Contract
          Period.

3-11     Implementation Period

          Every Purchase Order shall have an Implementation Period stipulated
          from its Effective Date until Provisional Acceptance of its related
          Works.

          In no event shall any Purchase Order Implementation Period fall
          outside the Contract Implementation Period.

3-12     No Obligation to Make Purchases

          Following Purchase Order No. 1, there shall be no obligation on the
          Company to make any further purchases nor shall there be a minimum
          value on further individual Purchase Orders.

3-13     Cancellation and Termination

          In case the Company decides not to make any further purchases under
          the Contract the Company shall promptly give notice to the Contractor
          that this Contract shall terminate on Final Acceptance of all work
          under any current Purchase Order.

4 -      TERMS OF PAYMENT FOR THE CONTRACTOR'S ENTITLEMENTS

4-1       After scrutinization of the amounts due, against the supplied Works
          under the Contract, and certified by the Company's representative,
          cheques shall be prepared and issued by the Company with the amounts
          to be paid according to the payment program directly drawn on a Saudi
          Bank.

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4-2      The Company shall pay the Contractor's entitlements as follows:

4-2-1      The Contractor shall invoice the Company based on Contract Unit
         Prices and supplied quantities in accordance with the Contract Terms
         and Conditions, and Specifications.

4-2-2    Actually supplied Works shall be invoiced as follows:

         A)       Imported Goods

                  The Contractor has the sole responsibility to match the
                  imported equipment with the requested (PIP) work.

                  Payment on Delivery

                  Imported goods cleared through customs shall be invoiced at
                  30% of their Contract value as contained in the detailed Bill
                  of Quantities (BoQ) of an approved MoP once the MoP has been
                  approved. The company representative will only certify that
                  this type of equipment is defined in the Contract and/or its
                  amendments.

                  In case of any spare parts, test equipment and any other goods
                  specified for delivery to designated Company warehouse only,
                  these shall be invoiced at 100% of their value based on a
                  receipt signed by the company ("Proof of Delivery")and
                  supported by a certificate from the Company's representative.

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                  Payment on Acceptance

                  The remaining 70% of the value of imported goods shall be
                  invoiced after a successful PAT certified by the signed
                  Acceptance Test Report and an agreed as-built Contract Unit
                  List.

                  By the end of the Implementation Period of the relevant
                  Purchase Order, original shipping documents and customs
                  clearance documents shall be supplied for all imported goods.

         B)       Locally Purchased Goods

                  The Contractor has the sole responsibility to match the
                  locally purchased goods with the requested (PIP) work.

                  Payment on Delivery

                  Locally purchased goods shall be invoiced at 30% of their
                  contract value as contained in the detailed Bill Of Quantities
                  (BOQ) of an approved MOP once the MOP has been approved. The
                  company representative will only certify that this type of
                  equipment is defined in the contract and/or its amendments.

                  In case of any spare parts, test equipment and any other goods
                  specified for delivery to designated Company warehouse only,
                  these shall be invoiced at 100% of their value based on a
                  receipt signed by the company ("Proof of Delivery")and
                  supported by a certificate from the Company's representative.

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                  Payment on Acceptance

                  The remaining 70% of the value of the locally purchased goods
                  shall be invoiced after a successful PAT certified by the
                  signed Acceptance Test Report and an agreed as-built Contract
                  Unit List.

         C)       Installation Services

                  Installation services shall be invoiced after successful PAT
                  certified by the signed Acceptance Test Report and an agreed
                  as-built Contract Unit List.

         D)       Civil Works, Buildings, Building Works, Building and Civil
                  Installation and Construction Due amounts of Civil Works,
                  Buildings, Building Works, Building and Civil Installation and
                  Construction, shall be invoiced in monthly progress payments
                  based on the work completed at the site during the month in
                  accordance with the Contract and based on a certificate from
                  the Company's representative.

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<PAGE>

                from the Company's representative.

         E)       Training

                  Value of Training shall be invoiced upon delivery of the
                  training based on a certificate from the Company evidencing
                  the completion of the training services invoiced.

         F)       Technical Maintenance

                  Value of Technical Maintenance support shall be invoiced in
                  monthly installments during the first twelve (12) months of
                  the applicable period which shall be from the date of
                  Provisional Acceptance to the date of Final Acceptance. A
                  monthly installment shall cover an elapse of days equivalent
                  to one calendar month.

         G)       Survey, Engineering and Administration Services for
                  Equipment supplied by the Company

                  The value of Survey, Engineering and Administration services
                  for equipment supplied by the Company shall be invoiced upon
                  the approval of the related design document (MoP) supported by
                  a certificate from the Company's representative.

         H)       COM/IS System Integration

                  Each phase of the COM/IS integration project under Purchase
                  Order No. 1 shall be invoiced as follows:

                  1.   Value of Project Definition phase shall be invoiced upon
                       the Company's approval of the Project Definition document
                       prepared by the Contractor supported by a certificate
                       from the Company's representative.

                  2.   Value of Detailed Design and Development phase shall be
                       invoiced upon the Company's approval of the detailed
                       design and development document prepared by the
                       Contractor supported by a certificate

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                  from the Company's representative.

                  3.   Value of Integration and System Acceptance phase shall be
                       invoiced upon the successful completion of the
                       Integration and System Acceptance tests as defined in the
                       approved Project Definition and Detailed Design and
                       Development documents certified by the signed Acceptance
                       Test Report.

         I)       Commercial Power Connection

                  The costs of connecting commercial power shall be reimbursed
                  to the Contractor on presentation to the Company of valid site
                  related invoices attaching original receipts from the relevant
                  power company or its appointed Contractor.

         J)       Lump Sums

                  Any lump sums included in this Contract shall not be
                  considered as Contract Unit Prices for payment purposes.

         K)       Discounts

                  At the end of the Implementation Period of a Purchase Order,
                  any outstanding accrued discounts due to the Company shall be
                  promptly credited to the Company.

4-2-3    Invoices

         Payment of Contractor's invoices shall be made within the calendar
         month following the month in which the invoice was submitted to the
         Company's representative. If within such a period the invoice documents
         are found not to be correct, the invoices shall be returned to the
         Contractor with the reasons for the rejection stated. It is required
         that invoices be issued on a site related basis where applicable.

         Free of Charge items shall be invoiced as for payable items but shall
         not be paid.

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4-24     Retention

         Payment of Contractor's entitlements under this Article (4) shall be
         subject to the following:

         Company shall only pay the Contractor up to 90% of the Total Value of
         the relevant Purchase Order, until the Contractor clears his tax
         position with the Zakat and Income Tax Authority against all
         activities. Upon presentation of a clearance certificate from the Zakat
         and Income Tax Authority certifying that the Contractor has settled the
         Zakat or income Tax due on Works of the relevant Purchase Order, the
         Company shall pay the remaining value of Contractor's entitlements.

5-       FACTORY TEST AND INSPECTION

5-1        The Company shall have the right to inspect and test examples of all
         equipment, materials and instruments manufactured for the Contract
         prior to shipment. The Contractor shall provide the Company or its
         representatives with all the required facilities and assistance to
         observe the above testing without any additional charges to the
         Company. The Company shall pay the travel and expenses of their
         representatives.

5-2      The Contractor shall submit to the Company the manufacturing and
         shipment schedules for all equipment and/or materials at least one
         month prior to the time of packing for shipment as long as the lead
         time available is sufficient or such shorter period as may fit the
         actual circumstances. Should the Company's representatives fail to
         attend on the specified date for inspection, the Contractor shall

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<PAGE>

         carry out the relevant tests itself and proceed with shipment. The
         Contractor shall provide the Company with a copy of the recorded
         factory results made under its cognizance before shipment.

5-3      If the test results show that the equipment and/or materials do not
         comply with the specifications, such non-complying equipment and/or
         materials shall be rejected and shall not be shipped until repaired or
         replaced and tested again. In such case the Contractor shall be held
         liable for any resulting delay.

5-4      In all cases, the Contractor shall be responsible for the Compliance of
         his equipment and materials with the Contract's specifications.

5-5      The Company and the Contractor shall conclude an agreement on the
         factory test and inspection procedures within two weeks from the
         Contract signing.

6-       DOCUMENTATION

6-1      The Contractor shall prepare the documentation relating to all of the
         project's Works (e.g. design, plans, manuals, etc) and their related
         computer software and he shall maintain them in a way which secures
         their safety until officially handed over to the Company.

6-2      The Contractor shall provide complete sets of the installation and O&M
         manuals for the civil works and telecom systems prior to Provisional
         Acceptance and according to the applicable requirements in the Project
         or Generic Specifications.

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6-3      Complete plans for all civil works including those parts relating to
         the new buildings, modifications of the existing buildings, shelters,
         power systems, calculations of the towers' design and lighting shall be
         included in separate manuals in addition to the construction and cable
         installation plans.

6-4      Notwithstanding anything else stated in this Contract to the contrary,
         Documentation and related software developed by the Contractor
         specifically for the project shall be the sole property of the Company.

6-5      All documentation shall be provided as both hard copy and data stored
         on digital storage media together with any necessary software to access
         the data on either the work stations supplied under this Contract or on
         the Company's existing work stations.

         7        COSTS OF THE CONSUMABLES

7-1      The Contractor shall bear the costs of all consumables, such as the
         water, electricity and fuel, needed during the implementation of a site
         up to the date of its Provisional Acceptance.

         8        SPARE PARTS

8-1      Spare parts required for normal operation and maintenance of all
         Project Elements shall be included. The quantities of the various spare
         parts required shall be based on the fault rates of the equipment,
         repair strategy, organization, etc., and shall be dimensioned
         sufficient to fulfill the requirements of the O & M activities for each
         of the Project Elements after the date of

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         Provisional Acceptance until Final Acceptance. In case no such
         calculation can be performed, an amount equivalent to 3% of the total
         value of equipment, materials and software supplied for each of the
         Project Elements shall be included.

8-2      The Contractor shall, during the first two months of the Implementation
         Period, finalize the dimensioning of this part of the deliveries,
         supported by the required scientific calculations, and submit his
         proposal to the Company for approval.

8-3      Spare parts consumed before Final Acceptance shall be replenished at no
         cost to the Company.

9-       TEST AND MEASUREMENT INSTRUMENTS AND SPECIAL WORK TOOLS

         Test and measurement instruments and the work tools for the whole
         elements of the project shall be included at the rate of 2% of the
         total value of the equipment, materials and software imported from
         abroad for each of the Project Elements. The Contractor shall, during
         the first two months of the Implementation Period, determine the
         equipment to be delivered and submit his proposal for approval by the
         Company.

10-      FUTURE AVAILABILITY OF SPARES

10-1     The Contractor shall guarantee the availability of the spare parts as
         well as the test and measurement instrumentation and the special work
         tools for the complete parts of the project and that he shall
         manufacture them or their equivalent alternatives for the periods
         stated in paragraph 10.2 below.

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The guarantee periods, for providing the spare parts, the instrumentation and
tools stated in paragraph 10.1 above, shall be as follows:

<TABLE>
<CAPTION>
                                                          GUARANTEED PERIOD OF
TYPE                                                      AVAILABILITY IN YEARS
-------------------------------------------------------------------------------
<S>                                                      <C>
Telephone exchange equipment                                      15
Transmission equipment                                            15
Power equipment                                                   15
Fire prevention equipment                                         15
Alarm equipment                                                   15
Building equipment, e.g., elevators & water pumps                 15
Traditional batteries                                             18
Air-conditioning equipment                                        10
Operations software                                               10
Card phones                                                       10
Terminals                                                          7
Vehicles                                                           7
Solar energy batteries                                             5
</TABLE>

Different type of cables:

                          The life span duration of all type of cable
                          shall be 15 years except as otherwise stated
                          in the Contract.

NOTE:          The said periods shall be effective from the date of Final
               Acceptance.

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         10-3 During the periods specified for the availability of the spare
         parts, instrumentation and tools described in paragraph 10.2 above and
         for the items so stipulated, the Contractor shall guarantee to supply
         goods against any purchase order within a period not exceeding six
         months from the date of the order made by the Company.

         10-4 The Contractor shall provide in this Contract the method of
         determining the future price of the above mentioned spare parts,
         instrumentation and tools by a scientific formula with official
         references for setting the said price otherwise the prices of the
         Contract shall apply.

         10-5 All replacement spare parts or replacement system parts shall
         provide the same or equivalent functionality. The Contractor shall give
         6 months notice in writing of any item, not manufactured by the
         Contractor, in which production is about to cease.

11-      OBTAINING PASSES AND PERMITS

         The Contractor shall be responsible for obtaining all passes and
         permits required by local authorities before the implementation of any
         of the Contract's work. The Contractor shall bear any fees or charges
         which may be required by those authorities against the issuance of such
         passes or permits. The Company's role in this regard shall be
         restricted providing the Contractor with every possible assistance to
         facilitate the Project execution.

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12-      LAWS, REGULATIONS, CUSTOMS & TRADITIONS

         This Contract shall be subject to all laws, regulations, customs and
         traditions prevailing in the Kingdom of Saudi Arabia. The Contractor
         shall be aware of all these laws, regulations, customs and traditions
         and shall not be excused for ignorance of them.

13-      LIMITATION OF LIABILITY

         The Contractor and its subcontractors or suppliers shall be liable for
         direct damages and losses only and neither Contractor nor its
         subcontractors or suppliers shall be liable for any indirect damages or
         losses. The Company releases Contractor and its subcontractors and
         suppliers from any such indirect damages except as may arise for third
         party personal injury caused by Contractor or its subcontractor's
         negligent acts or omissions. Notwithstanding any other provision of
         this Contract, Contractor's total liability to the Company for all
         damages and losses arising out of this Contract shall not exceed the
         total Contract Value.

14-      CALENDAR

         The Gregorian calendar shall be used for all periods and dates referred
         to in any of the Contract documents.

15-      CONFIDENTIALITY

         All business and technical information and data, software and related
         documentation, in whatever form provided, recorded or unrecorded, which
         the parties may furnish or have furnished to each other is considered
         confidential and shall be treated as follows:

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<PAGE>

         a.       shall be used solely for the purpose for which it was
                  furnished;

         b.       shall be treated in strict confidence and shall not be
                  provided to third parties;

         c.       shall not be reproduced, except as necessary for its
                  authorized use;

         d.       shall be returned to the other party, together with all copies
                  thereof, when no longer needed.

         The obligations of confidentiality and restricted use are not
         applicable to those portions of information that, free of any
         obligation to keep confidential, were previously known to, or that fall
         into the public domain without the fault of the disclosing party, or
         those subject to its control, or to which the parties agree need not be
         kept confidential.

16-      FORCE MAJEURE AFFECTING THE IMPLEMENTATION

         Neither party shall be liable for any loss, damage, delay or failure of
         performance resulting from any force majeure, that is, any cause beyond
         its reasonable control and which was unforeseen at Contract signature
         or which is unavoidable, including acts of God, wars, invasion,
         military operations, civil disturbance, earth quakes and volcanoes.

         A party claiming the existence of force majeure shall notify the other
         party within fifteen days of the force majeure and shall submit
         evidence of its existence.

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         If the force majeure delays the implementation of the Project Works for
         a period not exceeding six (6) months, the implementation period shall
         be extended up to a length of time resulting from the incident after
         taking the actions required with the Company in accordance with the
         applicable regulations. If the force majeure exists for a period of
         more than six (6) months, both parties shall agree on the appropriate
         measures to be taken.

17-      RIGHT TO SUBSTITUTE ENHANCED PRODUCT

         During the term of the Contract, telecommunications products, equipment
         and software to be provided under this Contract shall be subject to
         continuous modifications, upgrades and enhancements. In his performance
         of the Works, the Contractor is required to substitute, where available
         at the time of delivery, enhanced or upgraded products provided that
         such substitute products provide, or exceed, the function to be
         provided by the products identified in the Contract. The Contractor
         shall also provide the Company with complete technical information
         describing such enhancement, update or upgrade in the substitute
         product and obtain the Company's approval for those products before
         substitution at the same or less cost.

18-      CONTRACT LANGUAGE

         This Contract (and all its documents) shall be in both the Arabic and
         English Languages. All invoices and contractual correspondence between
         the parties shall be in both Arabic and English. In case of
         contradiction, the Arabic version shall always prevail. All other
         Contract correspondences and documents shall only be in English.

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19-      ACCEPTANCE

         Without prejudice to Articles (51) and (52) of the General Contract
         Conditions:

19-1     Provisional Acceptance Tests (PATs) shall be carried out in respect of
         each System or Part of System as the case may be.

19-2     The PATs are designed to verify that the System or Part of a System
         will operate and perform in accordance with the Contract. PATs shall
         also include visual inspections as necessary to verify compliance with
         the Contract conditions.

19.3     The sequence and interrelation of the PATs shall be in accordance with
         the Project Implementation Plan and the corresponding approved Design
         documents.

19-4     The Contractor shall notify the Company in writing at the Date of
         Completion, and minimum 5 working days prior to the PAT start date,
         that the System or Part of the System, as the case may be, is ready for
         a complete PAT of the System or Part of the System.

19-5     When the PATs have been performed with a successful result, the date
         when all the tests were completed shall be the "PAT Completion Date".
         This date shall be the date reflected in the Provisional Acceptance
         Certificate (PAC).

19-6     The Contractor, witnessed by the Company and/or its Consultant, shall
         carry out and complete the PATs, the result of which shall be accounted
         for in a jointly signed protocol, Acceptance Test Report, designed to
         clearly verify whether the PATs requirements are met or not.

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19-7     Within fifteen (15) days from completion of the PATs, the Company or
         its Consultant shall give the Contractor a written or facsimile notice
         stating whether or not the System or Part of System (as the case may
         be), has successfully passed the tests. When the PAT requirements are
         met, the System or Part of System shall be deemed accepted.

19-8     If the System or Part of System is not accepted by the Company due to
         the fact that the PAT results verify that the System or Part of System
         does not fulfill the requirements of the PATs, the above mentioned
         written notice shall specify the particulars of the alleged deviation
         from the PATs requirements and where the same is alleged to exist or to
         have occurred. Contractor shall with all reasonable speed under the
         circumstances and at his own expense remedy the deviation and the PATs
         Procedure for the relevant or affected part shall, unless waived by the
         Company, be repeated in accordance with the provisions of this Article
         (19).

19-9     When the results of the PATs verify that the System or Part of System
         operate and function in accordance with the PATs requirements, then the
         System or Part of System shall be deemed to also operate and function
         in accordance with the Specification unless otherwise proven.

19-10    Provisional Acceptance of the System or Part of System shall not be
         refused because of minor deviations and/or shortages, which do not
         prevent the System or Part of System to be put into operation (i.e.
         non-service affecting items). However, this will not relieve Contractor
         from his obligation to remedy said deviations without undue delay and
         in no event later than three (3) months from the date of Provisional
         Acceptance (PAC).

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In case the said remedying takes longer than three months the Warranty Period
and any applicable Technical Maintenance Periods shall be extended by the same
period that the rectification work was delayed. These minor deviations and
shortages shall be listed in an Outstanding Items List (OIL) and attached to the
PAT Report. An OIL Clearance Certificate shall be issued by the Contractor and
approved by the Company as soon as these outstanding items have been cleared.

19-11    If the Contractor has not received the said written or facsimile notice
         from the Company or its representative stating whether or not the
         System or Part of System has successfully passed the PATs, within
         fifteen (15) days from completion of the PATs, the System or Part of
         System shall be deemed accepted as of the last day of said period of
         fifteen (15) days.

19-12    If the Company should take over or use the System or Part of System
         prior to or without the above mentioned PATs, such take over or use
         shall be deemed as Acceptance of the System or Part of System on that
         date. Provided always that such System or Part of System is capable of
         operating independently and constitutes a fully operational entity and
         that non-functioning or partially functioning associated components
         shall be excluded from such Acceptance. Such Acceptance shall be
         verified with the satisfactory results of a later PAT for the System or
         Part of System. The requirement for a later successful PAT shall be
         waived only at the discretion of the Company. Such deemed
         Acceptance shall not limit the responsibility of the Contractor to
         finalize any outstanding work or remedy any deviations found.

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19-13 The Contractor shall require a signed authorization from the Company for
the specific System or Part of System before it is put into commercial service.

19-14 When according to the above, the System or Part of System is accepted or
deemed accepted, such acceptance shall be confirmed by the signature of the
Company on a PAC submitted by the Contractor. The PAC shall be signed and
returned without undue delay after Contractor's written request.

19-15 Provisional Acceptance of goods specified only for delivery to warehouse
shall occur on delivery to the Company's designated warehouse in Saudi Arabia
provided such goods are new and of merchantable quality on delivery and provided
that a receipt signed by the Company ("Proof of Delivery") has been obtained
supported by a certificate from the Company's representative. Final Acceptance
of such goods shall be deemed to occur on expiry of the twelve (12) month
Warranty period.

         Definitions for this Article (19):

         Provisional Acceptance Certificate (PAC): means the written
         confirmation of acceptance by the Company in accordance with this
         Article (19).

         PAT: means the test(s) to be carried out in accordance with this
         Article (19) and the Generic Specification GS07.

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<PAGE>

System: means either:

-        The Hardware and Software to be supplied and installed for each new
         complete SRS System which shall consist of one Central Station, the
         appropriate number of Repeaters and Outstations as specified in the
         relevant approved design document and all associated equipment and
         works; or

-        The complete COM/IS system to be supplied and installed for the SRS
         Network

Part of System: means the Hardware and Software to be supplied and installed in
an existing SRS System which shall consist of the appropriate number of
Repeaters and/or Outstations as specified in the relevant approved design
document and all associated equipment and works.

Project Implementation Plan: means the time schedule agreed upon between the
Parties for the Implementation of the System or Part of System.

Implementation: means all the work performed in accordance with the Contract up
to Provisional Acceptance.

Date of Completion: means the date(s) specified in the Project Implementation
Plan and relevant Design document on which the System or Part of System, as the
case may be, shall be implemented and be notified ready for a complete PAT,
taking into account all appropriate extensions or postponements.

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20-      NETWORK INTEGRATION

         The Contractor shall be responsible to provide for the integration of
         all equipment delivered under this Contract into the existing network
         and associated systems. SRS Provisional Acceptance Certificates (PACs)
         shall not be issued unless the equipment is fully integrated and
         operational in the network.

         The COM/IS System PAC shall be issued upon successful completion of the
         COM/IS Integration and System Acceptance tests as defined in the
         approved Project Definition and Detailed Design and Development
         documents as certified by the signed Acceptance Test Report. If the
         Integration cannot be fully implemented due to the unavailability of
         the Company's COM/IS system then Provisional Acceptance shall be
         granted on the basis of performing the appropriate agreed upon tests to
         demonstrate that the integration requirements have been fully met.

         The Contractor shall be responsible for identifying any work to be
         completed by the Company or by any other Contractor which is required
         to allow integration of his equipment into the network, and shall plan
         and schedule his work to allow for these dependencies. The Contractor
         shall ensure that the necessary coordination with other Contractors is
         effected.

21-      CHANGE ORDERS

         Subject to Articles 43 and 44 of the General Contract Conditions, the
         only valid mechanism provided between the parties for contract
         amendments are Change Orders, which shall be used in the following
         cases:

         a.       A change to the Implementation Period of a Purchase Order or
                  to the Total Contract Implementation Period;

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         b.       A change to the Total Value of a Purchase Order;

         c.       A new Unit Price to be introduced for work which is new and
                  for which it could not be reasonably anticipated that such a
                  Contract Unit would be required at the time of Contract
                  signature;

         d.       A change to Contract Terms and Conditions.

         A Change Order shall not be approved by the Company unless it is
         satisfied that it has been given, by the Contractor, complete and
         accurate financial and technical information, including full technical
         and contractual justification, in the contents of the Change Order such
         that the cost impact on the work affected is accurately known. Change
         Orders shall be submitted prior to the implementation of the related
         work.

22-      TITLE

         Title for all goods and services supplied under the Contract shall pass
         in perpetuity to the Company upon Provisional Acceptance of same.

23-      CONTRACTOR'S RESPONSIBILITY FOR PLANNING, ENGINEERING AND DESIGN

23-1     Except as noted otherwise in Contract documents the Contractor shall be
         responsible for engineering and design which includes site surveys,
         drawings and plans, etc. This shall be subject to review and approval
         by the Company and/or its Consultant before implementation. Such
         approval shall not relieve the Contractor from his obligations to
         implement the Works in accordance with this Contract.

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The Contractor's plans shall always be provided with good and detailed estimates
    of the costs of the planned work and accumulated costs after its completion,
    good technical justification, and, where necessary, good contractual
    justification.

All planned work shall be for complete systems capable of being implemented
    within the allowed budgets. Systems unable to be completed due to poor
    planning by the Contractor within the limits set by the Contract shall not
    be accepted and nor shall any payment be made for uncompleted systems.

The Contractor shall submit quarterly audits of all the work completed
    (as-built) in the project with detailed and accurate information on
    accumulated costs up to the end of the relevant quarter. The audits shall
    also include the details and total cost of work in progress.

Work plans shall always use the latest project audit results as the baseline for
    future work.

The work shall be planned efficiently in a sequential manner so that all
    necessary parts of the network shall be put in place to support the next
    part coming into operation.

24-      PROJECT SPECIFIC DRAWINGS, DATA COLLECTION AND PLANS

          Regardless of anything else contained in this Contract, the copyright
          to any drawings, data collection or plans (such as but not limited to
          network plans and transmission plans) produced by the Contractor
          specifically for the performance of this Contract and only usable for
          that purpose and excluding any

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          material or part thereof which was produced prior to the signing of
          this Contract without relation to this Contract by the Contractor or
          any of its sub-Contractors, shall belong to the Company. It is
          provided that the Company allows the Contractor the right to use, for
          the Contractor's performance of this Contract, such drawings, data
          collections and plans as well as any other documents of the same
          nature that is in the possession of the Company.

          Nothing contained in this Contract shall prevent the Company
          disclosing such material mentioned above, after Provisional
          Acceptance, to third parties that are to perform complementary work on
          the Company's network.

25-      METHOD OF PROCEDURE (MOP)

25-1     A MoP is a design document which shall contain all necessary plans and
         engineering data relevant to a site's function relative to the overall
         system design and site's practical construction. It shall contain a
         time schedule for starting and completing the work.

25-2     A separate MoP shall be provided for each complete SRS system design
         and it shall need to be submitted and approved prior to any subsystem
         MoP related to it including civil works MoPs.

25-3     Any approved Method of Procedure (MoP) document shall include a priced
         and detailed Contract Unit List with quantities and a total cost to do
         the work. All MoPs shall contain committed dates for Provisional
         Acceptance Testing of the works described therein and if not meeting
         those dates the Contractor shall be subject to Article 39 of the
         General Contract Conditions, Delay Penalty.

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26-      LICENCES

26-1     Subject to the terms and conditions set forth in this Article (26), the
         Company is hereby granted a non-exclusive, irrevocable, transferable
         and restricted license to use the Software and Documentation, for the
         Company's own operation and maintenance of the System or Part of System
         in accordance with this Contract.

26-2     Unless otherwise stated in this Contract and except for any software
         developed by the Contractor solely under this Contract which shall be
         the sole property of the Company, it is understood that the Company
         receives no title or ownership rights to the Software or Documentation,
         and all such rights shall remain with Contractor or its suppliers.

26-3     In pursuance of the foregoing, except as provided otherwise in this
         Contract, the Company shall:

26-4     only make copies of supplied software and documentation for itself
         sufficient to use the works or materials supplied under this Contract;

26-5     when making permitted copies transfer to the copy/copies any copyright
         or other marking on the Software or Documentation;

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26-6     not modify, de-compile, translate, adapt, arrange or error correct or
         make any other alteration of the Software or Documentation;

26-7     not use the Software or Documentation for any other purpose than
         permitted in this Article;

26-8     grant the Contractor the right to use and modify software solely
         developed for this Contract.

26-9     The Company and any successor to the Company's title to the Hardware or
         part of Hardware, shall have the right without further consent of
         Contractor to transfer this license to a third party which acquires the
         System or Part of System, provided any such third party agrees in
         writing to abide by all the terms and conditions of this license.

26-10    The obligations of the Company under this Article (26), shall survive
         the termination or expiration of this Contract for any reason.

26-11    Software means any such computer program, software module or package
         or any part thereof in binary code form and included in the System

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27-      WARRANTY

         Without prejudice to the periods of extended warranty to be provided
         for various categories of deliverables as required by the Generic
         Specification, GS06, etc.:

27-1     The System Or Part Of System

27-1-1   Contractor warrants to repair, correct or replace the System or Part of
         System, for a period from its Provisional Acceptance to its Final
         Acceptance, if the System or Part of System would not conform to and
         function and operate in accordance with the Contract conditions by
         reason of defective material, design or workmanship, as appropriate.

27-2     Hardware And Spare Parts

27-2-1   Contractor shall, for a period from its Provisional Acceptance to its
         Final Acceptance, at his option repair or replace, without expense to
         the Company, any part of the Hardware or Spare Parts found not to be in
         conformity with the Contract by reason of defective material, design or
         workmanship

27-2-2   Such repairs or replacements of the Hardware or Spare Parts shall be
         made without undue delay from the date the Company notifies any defect
         to the Contractor in writing before Final Acceptance.

27-2-3   Any repaired or replaced Hardware or Spare Parts will be warranted for
         the remainder of the original warranty period.

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         Software

         Contractor shall, for a period from its Provisional Acceptance to its
         Final Acceptance, at his option correct or replace, without expense to
         the Company, any part of Software found measurably not to function in
         conformity with the Contract by reason of defective design.

27-3-2   Such corrections or replacements (by the supply of Software Updates) of
         the Software shall be made without undue delay from the date the
         Company notifies any defect to the Contractor in writing before its
         Final Acceptance.

27-3-3   In the event of non-conformity of an Emergency character,Contractor
         shall perform temporary corrections or replacements, as the case may
         be, without undue delay after the Company's notification thereof to
         Contractor. Definitive corrections or replacements (by the supply of
         Software Updates), shall thereafter be performed in accordance with the
         above.

27-3-4   Any corrected or replaced Software will be warranted for the remainder
         of the original warranty period.

27-3-5   During the warranty period the implementation of corrections and/or the
         implementation of replacement Software Updates shall be made by
         Contractor without expense to the Company.

27-3-6   Documentation of corrected or replacement Software Updates will be
         furnished without expense to the Company.

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27-3-7   For additional software, the same Software warranty shall apply as
         described in this Article with the exception that the warranty shall
         only apply with respect to new functions in the additional software (as
         specified in the additional software specification) and that the
         warranty period is calculated from the receipt by the Company of the
         additional software.

27-3-8   Software Updates means corrections of the Software based on
         Contractor's and users fault reports and which are issued as Software
         Updates by Contractor. The Software Update shall contain the
         appropriate load file, implementation instructions and user
         documentation.

27-4     General

         Any warranty above in this Article (27), shall apply only if:

27-4-1   The System or Part of System is used under normal conditions and in
         accordance with the Documentation, information and advice furnished by
         Contractor and the Training provided under this Contract

27-4-2   The Company has given Contractor notice of such defects,
         non-conformities or deviations before the expiration of the applicable
         warranty period

27-4-3   Such defect, non-conformity or deviation was not caused by
         inter-working equipment not supplied under this Contract or any
         engineering or implementation not carried out by Contractor

27-4-4   The Company has given Contractor every opportunity to inspect and
         remedy such defect, non-conformity and deviation

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27-4-5   The warranty given in this Article (27), shall not apply to any failure
         caused by modification of the Hardware or Software without Contractor's
         written approval.

27-4-6   All transportation costs and risk of loss incurred with respect to the
         repair and/or replacement of defective goods shall be borne by the
         Contractor.

27-4-7   The Company undertakes to comply with Contractor's instructions
         concerning disposal of defective Hardware and Software. The warranty
         given in this Article (27), shall survive inspection and acceptance.

28-      INTELLECTUAL PROPERTY RIGHTS INFRINGEMENT

              Article 21 of the General Contract Conditions, Patent Rights and
              its Possession, shall apply subject to the following:

              The Contractor shall promptly, at his option and own expense,
              either;

         28-1 procure for the 'Company and its customer the rights for continued
         use of the System, or

         28-2 replace or modify the System so that it no longer infringes any
         such rights, where in all cases the functionality of the replaced or
         modified system shall not be substantially inferior to the originally
         supplied system, or

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         28-3 if such remedies are not reasonably or economically feasible,
         Contractor may request the Company to return the System and refund to
         the Company the purchase price, provided always:

         28-4 that the System is properly used in accordance with the
         Documentation and the purposes contemplated by this Contract; and

         28-5 that the Company without delay informs Contractor in writing of
         any claim made by reason of alleged infringement as aforesaid and
         refrains from acting on account of such claim without previous approval
         of Contractor; and

         28-6 that the Company without delay informs Contractor in writing if
         legal action is taken by any third party on account of such claim and
         that Contractor shall have full authority to defend or settle the same
         through its counsel; and

         28-7 that Contractor is informed of all circumstances which may be of
         relevance to the legal action taken and the Company refrains from all
         steps in relation to the legal action taken which may prejudice
         Contractor; and

         28-8 that the Company gives Contractor every reasonable assistance
         which may be required to settle or defend the legal action taken; and

         28-9 that the infringement or alleged infringement is not arising out
         of the use of the System in combination or conjunction with any other
         item or the use thereof not supplied or manufactured by

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         Contractor; and

         that the infringement or alleged infringement is not arising out of any
         modifications of the System by the Company not approved by Contractor.

29-      LOSS OF SERVICE PENALTY.

         If any System or Part of System fails to operate according to the
         Contract between Provisional Acceptance and Final Acceptance such that
         service is interrupted, and it is proven that such interruption is not
         due to operational reasons or is not due to normal system or equipment
         failures or reasons not under the Contractor's control, then the
         Contractor shall compensate the Company at the rate:

         SR 10 per day per out of service subscriber voice connection or per 64
         Kb/s subscriber data connection

         SR 3,750 per day per out of service 2 Mb/s end to end circuit capacity

         up to a maximum of five percent (5%) of the Total Purchase Order Value.

30-      WAIVER OF RIGHTS

         If any rights under this Contract have not been exercised by the
         Company or the Contractor then this shall not set a precedent that any
         such rights shall be waived thereafter.

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31-      ASSIGNMENT

         The Contractor shall have no right to release this Contract or any part
         thereof, or any profit or advantage as a result of it, without
         obtaining the prior written approval from the Company. The Parties
         agree however that, subject to the last sentence of this Article (31),
         such approval shall be given in case Contractor wishes to assign this
         contract or any part thereof to a subsidiary in the Kingdom of Saudi
         Arabia. However, the Contractor shall fulfill all obligations and meet
         all liabilities of this Contract jointly and severally with the party
         to whom the Contract is released towards the Company, in the execution
         of this Contract.

32-      RE-EXPORT CONTROL

         The Company shall not re-export any of the products supplied under this
         Contract to any other country without first obtaining written consent
         from the Contractor.

33-      TERMINATION

         Either party may terminate this Contract for any of the reasons set
         forth hereunder:

         33-1 Either party becomes bankrupt or insolvent, or is declared
         bankrupt, or is unable to pay its creditors, or submits a petition for
         insolvency or compounds with its creditors.

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         33-2 If the Contractor gives or attempts to give any gift, loan, reward
         or advantage whatsoever to any officer, director or employee of the
         Company or any Government official or servant who has any relation
         direct or indirect with the performance of this Contract.

         If either party, in spite of a notice given to it by the non-breaching
         party in writing, commits a substantial breach of the provisions of
         this Contract.

         If the breaching party fails to cure such breach, or fails to take
         steps to cure such breach, then the non-breaching party may cancel the
         Contract by a further notice in writing sent by fax, hand delivered or
         by registered mail to the notice party address as designated in this
         Contract without summons, court order or any further formality. The
         consequences of such cancellation shall be:

                  A. The Company may call the performance guarantee if the
                  breaching party is the Contractor.

                  B. The breaching party shall be responsible to the non-
                  breaching party for any damages or losses subject to the terms
                  and conditions of this Contract.

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