Project Development Contract

PROJECT DEVELOPMENT



CONSTRUCTION CONTRACT



BETWEEN AT&T SUBMARINE SYSTEMS, INC.





GLOBAL TELESYSTEMS LTD.

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........................................................ 11

5 Terms of Payment by Purchaser......................................... 14

6 Contract Variations................................................... 17

6A. Optional Upgrades..................................................... 18

7 Responsibilities for Permits.......................................... 19

8 Route Survey.......................................................... 20

9 Acceptance............................................................ 21

10 Warranty.............................................................. 25

11 Contractor Support.................................................... 28

12 Purchaser's Obligations............................................... 28

13 Termination for Default............................................... 29

14 Termination for Convenience........................................... 31

15 Suspension............................................................ 34

16 Title and Risk of Loss................................................ 35

17 Force Majeure......................................................... 36

18 Intellectual Property................................................. 38

19 Infringement.......................................................... 43

20 Safeguarding of Information and Technology............................ 44

21 Export Control........................................................ 45

22 Liquidated Damages.................................................... 45

23 Limitation of Liability/Indemnification............................... 46

24 Counterparts.......................................................... 47

25 Design and Performance Responsibility................................. 47

26 Product Changes....................................................... 48

27 Risk and Insurance.................................................... 48

28 Plant and Work Rules.................................................. 51

29 Right of Access....................................................... 51

30 Quality Assurance..................................................... 53

31 Documentation......................................................... 53

32 Training.............................................................. 53

33 Settlement of Disputes/Arbitration.................................... 53

34 Applicable Law........................................................ 54

35 Notices............................................................... 54

36 Publicity and Confidentiality......................................... 55

37 Assignment............................................................ 55

38 Relationship of the Parties........................................... 56

39 Successors Bound...................................................... 56

40 Article Captions...................................................... 57





Article PAGE

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

41 Severability......................................................... 57

42 Survival of Obligations.............................................. 57

43 Non-Waiver........................................................... 57

44 Language............................................................. 57

45 Entire Agreement..................................................... 57

46 Coming into Force.................................................... 58





EXHIBIT 10.2



PROJECT DEVELOPMENT AND

CONSTRUCTION CONTRACT

BETWEEN AT&T SUBMARINE SYSTEMS, INC.

AND GLOBAL TELESYSTEMS LTD.





This Project Development and Construction Contract ("Contracts) is made this 18th day of March 1997 between AT&T Submarine Systems, Inc., a corporation organized and existing under the laws of the State of Delaware, of the United States of America, and having an office at 340 Mt. Kemble Avenue, Morristown, New Jersey, 07962-1923 of the United States of America (hereinafter "Contractor") and Global Telesystems Ltd., a corporation organized an d existing under the laws of Bermuda, and having an office at Cedar House, 41 Cedar Avenue, Hamilton HM12 Bermuda (hereinafter "Purchaser").



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



WHEREAS, the System will consist of the following Segments:



Segment 1: From United Kingdom to New York, United States;



Segment 2: From New York, United States to Germany; and



Segment 3: From Germany to United Kingdom; and



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



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 on a turn-key, fixed-price basis in accordance with and subject to the terms hereof; and



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



NOW THEREFORE, IT HAS BEEN AGREED AS FOLLOWS



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



In consideration of the Contract Price and the Upgrade Prices, the Contractor agrees to undertake the Work and the Upgrade Work and to provide the Purchaser with the



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



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



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



. Technical Volume (includes Route Information), Appendix 5

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

. Provisioning Schedule, Appendix 1, Upgrade Provisioning Schedule,

Appendix 1A

. Billing Schedule, Appendix 2, Upgrade Billing Schedule, Appendix 2A

. Invoice Format, Appendix 4



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



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



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



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



ACCEPTANCE TESTING means (i) with respect to a Segment or the System,

the tests described in the 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 reasonably designed to verify that such Segment or the System

meets the applicable Performance Requirements and (ii) with respect to any

System Upgrade, the tests described in the System Commissioning and

Acceptance section of the Technical Volume or developed pursuant to such

section by mutual agreement (with 15 days prior notice to the Independent

Engineer) of the Parties and reasonably designed to verify that the System

Upgrade meets the applicable Performance Requirements.



ACCESS RIGHTS means all ownership, easement and/or other property

rights necessary to access and occupy the sites for cable stations in order

to own, operate and maintain the System.



ACTUAL KNOWLEDGE means the actual knowledge of any executives with

management responsibility for the Contract.



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



BANKRUPTCY EVENT means an event specified in Sub-Article 13(A)(3) or

13(A)(4) with Contractor as the "other Party".



BILLING SCHEDULE means a billing schedule attached hereto as Appendix



CAPACITY PURCHASE AGREEMENT means the Capacity Purchase Agreement

substantially in the form agreed by the Parties on the date this Contract

comes into force in accordance with Article 46.



CERTIFICATE OF COMMERCIAL SERVICE means a certificate issued by

Purchaser to Contractor certifying that a Segment, the System or a System

Upgrade is Ready for Commercial Service.



CERTIFICATE OF FINAL ACCEPTANCE means a certificate issued by

Purchaser 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 to Contractor certifying that a Segment, the System or a System

Upgrade is Ready for Provisional Acceptance.



CIBC COMMITMENT LETTER means the Atlantic Crossing 1 Commitment Letter

to be entered into among the Purchaser, CIBC Wood Gundy Securities Corp.

and CIBC Inc. providing for loans to Purchaser in an aggregate amount of

$410,000,000.



COMMISSIONING REPORT has the meaning 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 agreed by the Parties on the date this

Contract comes into force in accordance with Article 46.



CONTINGENCY ACCOUNT means the Contingency Account to be created under

the Escrow and Security Agreement.



CONTRACT means this agreement, specifically consisting of the

documents described in Article 2, and shall be deemed to include any

amendments thereto or Contract Variations pursuant to Article 6 (Contract

Variations).



CONTRACTOR means the entity that has executed this Contract as the

Contractor (AT&T Submarine Systems, Inc.) 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.



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).



DATE OF COMMERCIAL SERVICE, PROVISIONAL ACCEPTANCE OR FINAL ACCEPTANCE

means the date that Purchaser receives a Commissioning Report or an Upgrade

Commissioning Report, as the case may be, demonstrating that a Segment or

the System or a System Upgrade, as the case may be, is Ready for Commercial

Service, Ready for Provisional Acceptance or Ready for Final 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 TECHNICAL MATERIAL has the meaning set forth in Sub-

Article 18(B).



DISPUTE ACCOUNT means the Dispute Account to be created under the

Escrow and Security Agreement.



ESCROW AGENT means The Chase Manhattan Bank, in its capacity as escrow

agent and security agent under the Escrow and Security Agreement, and its

successors in such capacity.



ESCROW AND SECURITY AGREEMENT means that Escrow and Security Agreement

to be entered into by and among AT&T Submarine Systems, Inc., Global

Telesystems Ltd. and The Chase Manhattan Bank, as amended from time to



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



EXCLUDED TAX means (i) any franchise, excess profits, net worth,

capital or capital gains Tax, as well as any Tax on doing business or

imposed on net or gross income or receipts (including minimum and

alternative minimum Taxes measured by any items of Tax preference), but in

each case excluding Taxes that are or are in the nature of sales, use,

excise, license, stamp, rental, ad valorem, value added or property Taxes;

(ii) any Taxes imposed by a jurisdiction other than one in which (a) the

Contractor is or is treated as engaged in activities contemplated by or in

fulfillment of



the Contract or (b) the Purchaser or its affiliates has a nexus to such

jurisdiction and the Tax imposed is attributable to that nexus, (iii) Taxes

imposed on the Contractor as a result of Contractor's gross negligence or

willful misconduct and (iv) any import duty, other import related charges,

sales or use tax, VAT or property tax imposed by the United States or any

political subdivision thereof or Taxing authority therein in respect of

Supplies brought into the United States for testing, modification or other

similar purposes prior to being installed or used outside the United



FINAL COMMISSIONING REPORT has the meaning set forth in the System

Commissioning and Acceptance section of the Technical Volume.



FINAL SURVEY REPORT means the final survey report described in Section

1.1.4.2 of the Route Survey, Cable Loading and Marine Operations section of

the Technical Volume.



FINANCING DOCUMENTS means the agreements relating to the financing

referred to in Sub-Article 37(C), including without limitation the

financing, security and related documentation referred to in the CIBC

Commitment Letter and the Holding Company Note Purchase Agreement and

related documents.



FINANCING EVENT OF DEFAULT means any event, condition or occurrence

which would permit any party or parties to a Financing Document to

terminate its commitments thereunder or accelerate Purchaser's obligations



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



*



HOLDING COMPANY means Global Telesystems Holdings Ltd., a corporation

organized and existing under the laws of Bermuda.



HOLDING COMPANY NOTE PURCHASE AGREEMENT means a Note Purchase

Agreement to be entered into between the Holding Company and the purchasers

named therein providing for $150,000,000 in loans to Holding Company, as

amended from time to time.



INDEPENDENT ENGINEER means Conexart Technologies, Inc. or a similarly

qualified successor in the capacity as the engineer to the financing

sources specified in Sub-Article 37(C) who has agreed to be bound by the

confidentiality provisions of this Contract and who is not affiliated with

a competitor of Contractor.



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



INITIAL CONTRACT PRICE has the meaning set forth in Sub-Article

4(A)(1).





* MATERIAL OMITTED AND SEPARATELY FILED WITH THE COMMISSION UNDER AN APPLICATION

FOR CONFIDENTIAL TREATMENT.







INITIAL UPGRADE PRICE has the meaning set forth in Sub-Article

4(A)(2).



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



LAWS means any laws, ordinances, regulations, rules, orders,

proclamations, requirements of governmental authorities or treaties.



MANUFACTURING MATERIALS has the meaning set forth in Sub-Article

13(B).



NEXUS TAX means any Tax imposed by way of withholding in respect of or

in lieu of an Excluded Tax, but only to the extent such Tax would not have

been imposed but for the nexus (other than as a consequence of the

activities of the Contractor) of the Purchaser or its affiliate to the

jurisdiction imposing the Tax.



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



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



OPERATIONS, ADMINISTRATION AND MAINTENANCE AGREEMENT means the

Operations, Administration and Maintenance Agreement to be entered into

between AT&T Submarine Systems, Inc. and Global Telesystems Ltd., as

amended from time to time.



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



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



PAYMENT ACCOUNT means the Payment Account to be created under the

Escrow and Security Agreement.



PAYMENT ESCROW DATE means the first date after the date hereof on

which no funds remain in the Payment Account (or on which Contractor has

invoiced an aggregate amount equal to the lesser of $275,000,000 and the

aggregate amount deposited into the Payment Account and such amount has

been paid (or deposited into the Dispute Account) or is due (or required to

be deposited into the Dispute Account)).



PERFORMANCE REQUIREMENTS means (i) with respect to a Segment or the

System, the applicable System Performance Requirements set forth or to be

developed by mutual agreement pursuant to the Transmission Performance

section of the System Description section of the Technical Volume, (ii)

with respect to any System Upgrade, the System Performance Requirements set

forth in or to be developed by mutual agreement pursuant to the Technical

Volume or (iii) in each case, such other Segment, System or System Upgrade

performance levels as mutually agreed by the Parties, including impairment





PERMITS means all Access Rights, permits, pipeline and cable crossing

agreements, approvals, "no objections", permissions-in-principle,

authorizations, consents, customs clearances, registrations, certificates,

rights-of-way, certificates of occupancy, licenses, including without

limitation, landing licenses, orders, vessel and crew authorizations/visas,

permission for the operation of navigational aids and radio systems and

similar authorizations necessary to complete the Work and operate and

maintain the System (other than any of the foregoing (i) relating to the

ownership, operation and maintenance of the System and not necessary until

after the System is Ready for Final Acceptance, (ii) which is or would be

needed by Purchaser to engage in any business outside the business of

developing, owning and operating a submarine cable system or (iii) which is

or would be needed at any time by any purchaser or lessee of capacity on

the System).



PHASE 2 SEGMENT means Segment 2 or Segment 3.



PROVISIONING SCHEDULE means the price schedule attached hereto in

Appendix 1.



PURCHASER means Global Telesystems Ltd. and shall include its

permitted successors and assigns.



READY FOR COMMERCIAL SERVICE means (i) for any Segment, that (a) such

Segment has the ability to carry commercial traffic between the two landing

points of such Segment (at 5 Gb/s per fiber pair in the case of Segment 1

and at 10 Gb/s per fiber pair in the case of a Phase 2 Segment) meeting

performance criteria of ITU-T G.826 as defined in the System Performance

section of the Technical Volume and has line monitoring and protection

switching capability, (b) Contractor has tested and provided for STM-1

interconnectivity capability to the Segment terminal equipment according to

ITU-T G.826, (c) Contractor has substantially performed its obligations

under Article 18 (Intellectual Property) then required to be performed by

it, (d) all Permits are obtained for such Segment, and (e) unless both

Parties agree otherwise, with respect to a Phase 2 Segment, the other Phase

2 Segment shall have satisfied the conditions set forth above, (ii) for the

System, that the System has the ability to carry commercial traffic

throughout the System (at 10 Gb/s per fiber pair) meeting performance

criteria of ITU-T G.826 as defined in the System Performance section of the

Technical Volume with self healing ring protection capability and per

Segment protection capability, has line monitoring and per Segment

protection switching capability and has network management capability, (b)

Contractor has tested and provided for STM-1 interconnectivity capability

to the System terminal equipment according to ITU-T G.826, (c) Contractor

has substantially performed its obligations under Article 18 (Intellectual

Property) then required to be performed by it, (d) an interconnect

agreement is in place with a bona fide carrier at each landing point, and

(e) all Permits are obtained for the System and (iii) for any System

Upgrade, the System is Ready for Commercial Service at the capacity

specified for such System Upgrade.



READY FOR FINAL ACCEPTANCE means (i) for the System, that (a)(l) the

System has successfully and continuously (other than by reason of Force

Majeure in which case the test period shall be extended for a time period

equal to the time period of such Force Majeure) functioned in compliance

with the System Performance Requirements during the period of ninety (90)

consecutive days after the Date of Provisional Acceptance or (II) if the

System shall have failed to meet the System Performance Requirements at any

time during such period (other than by reason of Force Majeure), the

Contractor has corrected such failure and the System has successfully and

continuously (other than by reason of Force Majeure in which case the test

period shall be extended for a time period equal to the time period of such

Force Majeure) functioned in compliance with the System Performance

Requirements for such additional period of time not to exceed ninety (90)

days (and not to end prior to the date 90 days after the Date of

Provisional Acceptance) as reasonably determined by the Independent

Engineer as being sufficient to confirm that such failure has been

corrected and that no other failures are likely to appear and (b) all

deficiencies noted in the Certificate of Provisional Acceptance have been

corrected (other than minor deficiencies which will not affect the

operation of the System, in respect of which an equitable adjustment to the

Contract Price will be made) and (c) Contractor has complied in all

material respects with Article 18 (Intellectual Property) and (ii) for any

System Upgrade, that (a)(l) the System Upgrade has successfully functioned

in compliance with the System Performance Requirements during the period of

ninety (90) days after the Date of Provisional Acceptance of the System

Upgrade or (II) if the ...