Construction Contract

EAST ASIAN CROSSING


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


PROJECT DEVELOPMENT


AND


CONSTRUCTION CONTRACT


BETWEEN


KDD SUBMARINE CABLE SYSTEMS INC.


AND


ASIA GLOBAL CROSSING LTD.


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DATED AS OF DECEMBER 17, 1999


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TABLE OF CONTENTS


GENERAL TERMS AND CONDITIONS


Article PAGE ------- ---- 1 Provision of System.................................................................................... -1- 2 Documents Forming the Entire Contract.................................................................. -2- 3 Definitions............................................................................................ -2- 4 Contract Price........................................................................................ -16- 5 Terms of Payment by Purchaser......................................................................... -20- 6 Contract Variations................................................................................... -23- 6A Optional Upgrades..................................................................................... -25- 7 Responsibilities for Permits; Compliance with Laws; Hong Kong Cable Station........................... -29- 8 Route Survey.......................................................................................... -31- 9 Acceptance............................................................................................ -32- 10 Warranty.............................................................................................. -36- 11 Contractor Support; Use of Segment for Restoration Protection......................................... -41- 12 Purchaser's Obligations............................................................................... -42- 13 Termination for Default............................................................................... -43- 14 Termination for Convenience........................................................................... -45- 15 Suspension............................................................................................ -47- 16 Title and Risk of Loss................................................................................ -48- 17 Force Majeure......................................................................................... -48- 18 Intellectual Property................................................................................. -49- 19 Infringement.......................................................................................... -55- 20 Safeguarding of Information and Technology............................................................ -56- 21 Export Control........................................................................................ -57- 22 Liquidated Damages.................................................................................... -57- 23 Limitation of Liability/Indemnification............................................................... -58- 24 Counterparts.......................................................................................... -60- 25 Design and Performance Responsibility; Subcontractors................................................. -60- 26 Product Changes....................................................................................... -61- 27 Risk and Insurance.................................................................................... -62- 28 Plant and Work Rules.................................................................................. -65- 29 Right of Access and Review............................................................................ -65- 30 Quality Assurance; First Application.................................................................. -66- 31 Documentation......................................................................................... -67- 32 Training.............................................................................................. -67- 33 Settlement of Disputes/Arbitration/Litigation......................................................... -67- 34 Applicable Law........................................................................................ -69- 35 Notices............................................................................................... -69- 36 Publicity and Confidentiality......................................................................... -70- 37 Assignment............................................................................................ -71- 38 Relationship of the Parties........................................................................... -72-


-i- 3 Article PAGE ------- ---- 39 Successors Bound...................................................................................... -73- 40 Article Captions; Joint Drafting...................................................................... -73- 41 Severability.......................................................................................... -73- 42 Guarantor............................................................................................. -73- 43 Survival of Obligations............................................................................... -73- 44 Non-Waiver............................................................................................ -73- 45 Language.............................................................................................. -74- 46 Entire Agreement...................................................................................... -74-


Exhibit A Network Configuration Exhibit B Form of Parent Guaranty Exhibit C Form of Consent and Agreement Exhibit D-1 Form of Opinion for Contractor Exhibit D-2 Form of Opinion for Guarantor Exhibit E Form of Escrow Agreement Exhibit F First Office Applications Exhibit G Subcontractors Exhibit H Intellectual Property Exhibit I Landing Licenses Exhibit J Examples of Contractor Permits Exhibit K Examples of Owner Permits Exhibit L Form of Supplement Exhibit M Form of Indemnity and Confirmation Agreement


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PROJECT DEVELOPMENT AND
CONSTRUCTION CONTRACT


This Project Development and Construction Contract ("Contract") is made as of the 17th day of December, 1999 between KDD Submarine Cable Systems Inc., a Japanese corporation organized and existing under the laws of Japan, and having its principal office in Tokyo, Japan (hereinafter "Contractor") and Asia Global Crossing Ltd., a corporation organized and existing under the laws of Bermuda, and having its principal office in Hamilton, Bermuda (hereinafter "Purchaser").


WHEREAS, Purchaser desires to establish a fiber optic cable system, to be known as the East Asian Crossing Cable System (hereinafter, and as more fully defined herein, the "System"), which will be used to provide service among the Segments as described in Exhibit A hereto;


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


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


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


NOW, THEREFORE, in consideration of the premises and for other good and valuable considerations, receipt of which is hereby acknowledged, it has been agreed as follows:


ARTICLE 1 PROVISION OF SYSTEM


In consideration of the Contract Price and the Upgrade Prices, the Contractor hereby agrees to perform the Work and the Upgrade Work, on a turn-key, fixed price basis, and to provide Purchaser with the System meeting the System Performance Requirements on or before the Scheduled RFS Date(s) and the System Upgrades meeting the requirements of Article 6A, all in accordance with the terms hereof.


Contractor understands that parts of the System comprising portions of the cable stations in Qingdao, China, and Shima, Japan, are intended to be installed by other contractor(s) (the components of the System described in this sentence are herein referred to as the "Other Facilities"). The Contractor agrees to reasonably cooperate with Purchaser and such other contractor(s), as necessary, including with respect to (i) formulating and carrying out installation, (ii) Contractor's and each such other contractor's obligation to formulate testing procedures and (iii) ensuring that the System properly interoperates with the Other Facilities to which it will be connected; provided that the Contractor shall not be responsible for problems with interoperability within the System caused by equipment installed by such other contractors so 5
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long as Contractor has complied with the provisions of this Agreement and of the Technical Volume regarding interoperability, such equipment and such other contractors.


ARTICLE 2 DOCUMENTS FORMING THE ENTIRE CONTRACT


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


- Provisioning Schedule, Appendix 1, Upgrade Provisioning
Schedule, Appendix 1A


- Billing Schedule, Appendix 2, Upgrade Billing Schedule,
Appendix 2A


- Plan of Work, Appendix 3, Upgrade Plan of Work, Appendix 3A


- Invoice Format, Appendix 4, Form of Contractor's Certificate,
Appendix 4A


- Progress Schedule, Appendix 5, Upgrade Progress Schedule,
Appendix 5A


- Technical Volume (includes Route Information), Appendix 6


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


ARTICLE 3 DEFINITIONS


Terms used herein which are not defined herein, but which have common meanings when used in the telecommunications industry, shall have such common meanings when used herein. Definitions are as described in the specific Articles. Except as otherwise defined the following definitions shall apply throughout the Contract:


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


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


ACCESS RIGHTS means all ownership, easement, wayleaves and/or
other property rights, from both private and governmental entities,
both on land and below the surface of the water (including, without
limitation, agreements to use borepipes, conduits and ducts, install
manholes and to lease space in cable stations) necessary to access, use
and occupy cable stations and the sites for cable stations (including,
without limitation, to land and 6
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install the submarine cable and related equipment and to bring such
cable from the ocean to the cable stations) in order for the Purchaser
to own, operate and maintain the System.


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


AJIGAURA CABLE STATION means the System cable station to be
located in Ajigaura, Japan to be built on land to be provided by the
Purchaser.


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


BANK ESCROW AGENT means The Chase Manhattan Bank or Deutsche
Bank, New York Branch, as chosen by Purchaser, in its capacity as
escrow agent under the Payment Escrow Agreement, and its successors in
such capacity.


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


BILLING MILESTONES means the billing milestones set forth in
Appendix 6.


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


BRANCHING UNIT 1 means the branching unit in Segment B
attached to the System off the coast of Taiwan, which would allow the
System to be connected to the Shar Fu Cable Station at a location
capable of interconnecting with major telecommunications carriers, as
more specifically described in the Technical Volume.


BRANCHING UNIT 2 means the branching unit in Segment E
attached to the System off the coast of Taiwan which would allow the
System to be connected to the Shar Fu Cable Station at a location
capable of interconnecting with major telecommunications carriers, as
more specifically described in the Technical Volume.


BRANCHING UNIT 3 means the branching unit in Segment H
attached to the System off the coast of Korea, which would allow the
System to be connected to the Taean Cable Station at a location capable
of interconnecting with major telecommunications carriers, as more
specifically described in the Technical Volume.


BRANCHING UNIT 4 shall mean the branching unit in Segment J
attached to the System off the coast of Korea, which would allow the
System to be connected to the Taean Cable Station at a location capable
of interconnecting with major telecommunications carriers, as more
specifically described in the Technical Volume.


CERTIFICATE OF COMMERCIAL ACCEPTANCE means a certificate
issued by Purchaser in accordance with Sub-Article 9(D) to Contractor
certifying that a Segment, a Phase, the System or a System Upgrade is
Ready for Commercial Acceptance. 7
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CERTIFICATE OF FINAL ACCEPTANCE means a certificate issued by
Purchaser in accordance with Sub-Article 9(E) to Contractor certifying
that the System or a System Upgrade is Ready for Final Acceptance.


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


CIF means cost, insurance and freight, as defined in
Incoterms.


CODE means the Internal Revenue Code of 1986, as amended from
time to time.


COMMISSIONING REPORT means a written report from Contractor
demonstrating that the System (or a Segment, if Purchaser agrees to
accept it) is Ready for Commercial Acceptance or Provisional
Acceptance, as the case may be, and has passed all Acceptance Testing
and all other acceptance and performance requirements set forth in the
System Commissioning and Acceptance section of the Technical Volume.


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


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


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


CONTRACT COUNTRIES means Taiwan, Hong Kong, S.A.R., China, the
People's Republic of China, the Republic of Korea and Japan, or any
political subdivision thereof or taxing authority therein.


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


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


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


CONTRACTOR means the entity that executed this Contract as the
Contractor and that will be responsible for the performance of the Work
(and if applicable, Upgrade Work) under this Contract and shall include
its permitted successors and/or assigns. 8
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CONTRACTOR PERMITS means (i) all permits that the Contractor
needs to conduct its business, (ii) all Permits which the Contractor
must obtain in order to carry out its operations to perform the Work
and (iii) minor and routine construction and building Permits such as
licenses to install electricity and plumbing. Exhibit J hereto contains
a list of sample Contractor Permits; provided that such list is not
meant to be complete or exclusive.


DATE OF COMMERCIAL ACCEPTANCE, PROVISIONAL ACCEPTANCE OR FINAL
ACCEPTANCE means the date set forth in the Certificate of Commercial
Acceptance, Certificate of Provisional Acceptance or Certificate of
Final Acceptance, as the case may be; provided, that for purposes of
Article 22 (Liquidated Damages) only, such date shall be deemed to be
the date that Purchaser receives a complete Commissioning Report or an
Upgrade Commissioning Report, as the case may be, demonstrating that a
Segment, a Phase, the System or a System Upgrade, as the case may be,
is Ready for Commercial Acceptance, Ready for Provisional Acceptance or
Ready for Final Acceptance in accordance with Article 9 (Acceptance).


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


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


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


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


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


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


EXCLUDED TAX means a Tax described in any of the following
clauses:


(i) any franchise, excess profits, net worth, capital or
capital gains Tax, as well as any Tax on doing business or imposed on
net or gross income or receipts (including minimum and alternative
minimum Taxes measured by any items of Tax preference), but in each
case excluding Taxes that are or are in the nature of sales, use,
excise, license, stamp, rental, ad valorem, value added or property
Taxes (other than property taxes on property owned by the Contractor
and not intended to be incorporated into the System);


(ii) any Taxes imposed by a jurisdiction other than one in
which (a) the Contractor is or is treated as engaged in activities
contemplated by or in fulfillment of the Contract or (b) the Purchaser
or its affiliates has a nexus to such jurisdiction and the Tax imposed
is attributable to that nexus; 9
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(iii) Taxes imposed on the Contractor as a result of
Contractor's gross negligence or willful misconduct; or


(iv) any import duty, other import related charges, sales or
use tax, VAT, consumption tax or property tax imposed by any
Non-Contract Country in respect of Supplies brought into such
Non-Contract Country for testing, modification or other similar
purposes prior to being installed or used outside such Non-Contract
Country.


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


FINAL COMMISSIONING REPORT AND FINAL UPGRADE COMMISSIONING
REPORT means a written report from Contractor demonstrating that the
System (or a Segment, if Purchaser agrees to accept it) is Ready for
Final Acceptance and has passed all Acceptance Testing and all other
acceptance and performance requirements set forth in the System
Commissioning and Acceptance section of the Technical Volume.


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


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


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


GLOBAL MARINE means Global Marine Systems Ltd.


GUARANTOR means KDD Corporation, a Japanese corporation and
the ultimate parent company of the Contractor.


GUARANTY means the guaranty to be entered into by the
Guarantor in favor of the Purchaser, to be substantially in the form of
Exhibit B hereto.


HONG KONG CABLE STATION means the System cable station to be
located in Hong Kong, S.A.R., China.


INCOTERMS means the International Chamber of Commerce, Guide
to Incoterms (1990).


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


INFORMATION has the meaning set forth in Sub-Article 20(A). 10
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INITIAL CONTRACT PRICE has the meaning set forth in
Sub-Article 4(A)(1).


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


INSTALLATION INTERVAL has the meaning set forth in Sub-Article
6A(L)(1).


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


LANDING COUNTRY(IES) means each country in which the System
connects to a cable station.


LANDING LICENSES means those licenses comparable to a License
to Land and Operate a Submarine Cable System pursuant to the Submarine
Cable Landing Act, 47 U.S.C. 34-39, which licenses are specifically
described in Exhibit I hereto.


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


LUCENT means Lucent Technologies Inc.


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


NON-CONTRACT COUNTRIES means all countries, or any political
subdivision thereof or taxing authority therein, other than the
Contract Countries.


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


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


OWNER PERMITS means all Permits required to be obtained from
governmental authorities pursuant to Laws that the Purchaser needs to
own and operate the System and which the Purchaser would have had to
obtain if it were constructing the System itself. Exhibit K contains a
sample list of Owner Permits; provided that such list is not meant to
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