Sale Agreement - Controls and Communications Ltd., The Racal Corp., Racal Electronics PLC and Global Crossing Ltd.


                                                                CONFORMED COPY


DATED                        10     OCTOBER                            1999





                      Controls and Communications Limited                  (1)


                             The Racal Corporation                         (2)


                             Racal Electronics plc                         (3)


                             Global Crossing Ltd.                          (4)








        _______________________________________________________________


                                SALE AGREEMENT

        _______________________________________________________________


                             Lovell White Durrant
                              65 Holborn Viaduct
                                London EC1A 2DY












                                   CONTENTS

Clause                                                                    Page



1.       INTERPRETATION                                                      1

2.       CONDITIONS                                                          2

3.       SALE AND PURCHASE OF SHARES                                         4

4.       CONSIDERATION AND INTER-COMPANY DEBT                                5

5.       PRE-COMPLETION CONDUCT AND TERMINATION RIGHTS                       6

6.       NET ASSET ADJUSTMENT                                                7

7.       COMPLETION                                                          8

8.       WARRANTIES                                                         11

9.       LIMITATION OF CLAIMS                                               13

10.      INDEMNITIES                                                        19

11.      PENSIONS                                                           20

12.      NAME AND USE OF MARKS                                              20

13.      PROPERTY REORGANISATION                                            21

14.      NOT USED                                                           24

15.      PARENT GUARANTEE                                                   24

16.      GENERAL                                                            25

17.      CONFIDENTIAL INFORMATION                                           30

18.      GOVERNING LAW AND JURISDICTION                                     31

SCHEDULE I                                                                  33
         The Parties                                                        33

SCHEDULE II                                                                 34
         Definitions                                                        34



SCHEDULE III                                                                49
         Transfer Conditions                                                49

SCHEDULE IV                                                                 51
         Telecom Group                                                      51

SCHEDULE V                                                                  52
         Completion Balance Sheet                                           52
                 Part A                                                     52
                 Part B                                                     56

SCHEDULE VI                                                                 57
         Covenants and Warranties                                           57
                 Part A                                                     57
                 Part B                                                     58
                 Part C                                                     78

SCHEDULE VII                                                                80
         Pension Arrangements                                               80
                 PART A                                                     80
                 PART B                                                     81
                 PART C                                                    101

SCHEDULE VIII                                                              116
         Telecom Group Guarantees of Racal Group Members                   116

SCHEDULE IX                                                                117
         Tax Covenant and Warranties                                       117
                 Part A                                                    117
                 Part B - Tax Covenant                                     122

SCHEDULE X                                                                 144
         Conduct between exchange and completion                           144

SCHEDULE XI                                                                148
         Property Reorganisation                                           148
                 Part A:  leasehold properties to be assigned to RTL       148
                 Part B:  leasehold properties to be assigned to RPL
                          and to be sublet to RTL                          149
                 Part C:  leasehold properties to be sublet to RTL         150

SCHEDULE XII                                                               153
         Outstanding Negotiations                                          153
                 Part A                                                    153
                 Engrossments or Equivalent                                153
                 Part B                                                    156
                 Proposed Transactions                                     156



AGREED FORM DOCUMENTS                              Party Responsible

Base Line Balance Sheet                                     (LWD)
Data Room Index                                             (LWD)
Powers of Attorney                                          (LWD)
Trade Mark Licence                                          (LWD)
Transitional Services Agreement                             (LWD)
Letter of resignation for directors and secretary           (LWD)
FIRPTA Notice to IRS pursuant to Treas.
Reg.Sec.1.897-2(h)(2)                                       (LWD)
FIRPTA Statement of Racal USA to Global                     (LWD)
Reorganisation Documents                                    (LWD)
Adjusting Principles                                        (LWD)
Carve-Out Accounts                                          (LWD)


                                                                CONFORMED COPY

                                SALE AGREEMENT

THIS AGREEMENT is made 10 October 1999.

BETWEEN:

(1)  Controls and Communications Limited (registered number 314979) whose
     details are set out in Schedule I;

(2)  The Racal Corporation (registered number 59-1785-1646) whose details are
     set out in Schedule I;

(3)  Racal Electronics Plc (registered number 497098) whose details are set
     out in Schedule I ("Racal"); and

(4)  Global Crossing Ltd. a company registered in Bermuda whose details are
     set out in Schedule I ("Global").


WHEREAS:

(A)  The Sellers are the beneficial owners and the registered holders of
     those numbers of the Shares set opposite their respective names in
     Schedule IV.

(B)  The Sellers have agreed to sell and Global has agreed to purchase all
     the Shares on and subject to the terms of this Agreement.

(C)  In consideration of Global entering into this Agreement at the request
     of the Guarantor, the Guarantor has agreed to guarantee the obligations
     of Controls and Communications Limited and The Racal Corporation under
     this Agreement.



IT IS AGREED:

1.   INTERPRETATION

     1.1  In this Agreement (including the Schedules), except so far as the
          context otherwise requires, words and expressions shall have the
          meanings set out in Schedule II.



     1.2  In this Agreement, unless otherwise specified:

          (a)  references to clauses, subclauses, paragraphs, subparagraphs 
               and schedules are to clauses, subclauses, paragraphs and 
               subparagraphs of, and schedules in, this Agreement;

          (b)  headings to clauses and schedules are for convenience only 
               and do not affect the interpretation of this Agreement;

          (c)  references to a "company" shall be construed so as to include 
               any company, corporation or other body corporate, wherever 
               and however incorporated or established;

          (d)  references to a "person" shall be construed so as to include 
               any individual, firm, company, government, state or agency of 
               a state, local or municipal authority or government body or 
               any joint venture, association or partnership (whether or not 
               having separate legal personality);

          (e)  a reference to any statute or statutory provision shall be 
               construed as a reference to the same as it may have been amended,
               modified or re-enacted; 

          (f)  references to times of the day are to London time;

          (g)  references to the one gender include all genders, and references 
               to the singular include the plural and vice versa; and

          (h)  references to "material to the business of the Telecom Group" 
               shall be read as a reference to matters which are material to 
               the operation and conduct of the business of the Telecom Group 
               taken as a whole.

     1.3  The Recitals and Schedules to this Agreement form part of it.


2.   CONDITIONS

     2.1  Completion is conditional on the satisfaction (or where
          permissible, waiver) of the Transfer Conditions set out in Schedule
          III and the provisions of this clause 2.



                                      -2-



     2.2  In the event that this Agreement has been terminated in accordance
          with either clause 2.10 or clause 2.11 this Agreement shall on the
          date of termination be of no further force and effect except that
          this clause and clauses 1, 16, 17 and 18 shall continue in force
          and such termination of this Agreement shall not affect the rights
          of any parties for prior breaches of this Agreement.

     2.3  The Sellers shall use all reasonable endeavours to procure the
          satisfaction of the Transfer Conditions set out in paragraphs 1, 2,
          3 and 5 of Schedule III as soon as practicable and will on request
          keep Global informed with respect to progress in that regard.

     2.4  Global shall use all reasonable endeavours to procure the
          satisfaction of the Transfer Conditions set out in paragraphs 4 and
          5 of Schedule III as soon as practicable and will on request keep
          the Sellers informed with respect to progress in that regard.

     2.5  The parties shall as soon as reasonably practicable provide all
          information and assistance reasonably requested by any of them in
          respect of action which is required or desirable in respect of the
          satisfaction of the Transfer Conditions and shall not take any
          steps which might prejudice or might reasonably be expected to
          prejudice the satisfaction of the Transfer Conditions.  If Global
          shall not within 10 Business Days of the date of this Agreement
          make the filing which it must make to obtain the consents set out
          as paragraphs 4 and 5 of the Transfer Conditions for any reason
          other than Racal failing to provide Global with the information
          necessary for it to make the necessary filing, such conditions
          shall lapse and be treated as waived.

     2.6  At any time Global may waive the Transfer Conditions set out in
          paragraphs 2, 3, 4 and 5 of Schedule III by notice to the Sellers.

     2.7  The rights and obligations of the parties set out in Clauses 2.3 to
          2.6 shall:

          (a)  not oblige any of the relevant parties to waive any of the
               Transfer Conditions; and

          (b)  (in relation to each party's obligations) be subject to the
               directors of Racal not thereby being in breach of their 
               fiduciary duties which shall without limitation, be construed 
               as obliging the directors of Racal to make a recommendation or 
               not to withdraw their recommendation to their shareholders (or 
               any class of their shareholders) to vote in favour of the 
               Transaction (or any part of it) if, acting in good faith, 
               such directors resolve that such recommendation would not be 


                                      -3-



          in the best interests of Racal and/or its shareholders.

     2.8  If the Transfer Condition set out in paragraph 4 of Schedule III is
          the only Transfer Condition which has not been satisfied by the
          Long Stop Date or has become incapable of satisfaction in
          circumstances where the other Transfer Conditions have been
          satisfied or waived, the parties shall complete the sale and
          purchase of the Shares after taking such appropriate steps as they
          shall reasonably agree are necessary with regard to the assets or
          revenues which give rise to the need for the German Clearance such
          that the Agreement can be completed without the need for German
          Clearance.  If the parties are unable to agree any other way of
          dealing with the matter Racal shall retain the relevant assets or
          revenues and operate them for the benefit of Global.

     2.9  NOT USED

     2.10 Subject to clause 2.8, if any of the Transfer Conditions becomes
          incapable of satisfaction or has not been satisfied by the Long
          Stop Date, Global may on that date or at any time thereafter by
          notice to the Sellers terminate this Agreement, in which case the
          provisions of clause 2.2 shall apply.

     2.11 Subject to clause 2.8, if any of the Transfer Conditions becomes
          incapable of satisfaction or has not been satisfied by the Long
          Stop Date, Racal (acting on behalf of the Sellers) may on that date
          or at any time thereafter by notice to Global terminate this
          Agreement, in which case the provisions of clause 2.2 shall apply.


3.   SALE AND PURCHASE OF SHARES

     3.1  On and subject to the terms of this Agreement, the Sellers shall
          sell with full title guarantee the Shares set opposite their
          respective names in Schedule IV to Global and Global shall purchase
          all the Shares on Completion, in each case free from all charges,
          liens, equities, encumbrances, claims or restrictions whatsoever
          and together with all rights which are now, or at any time
          hereafter may become, attached to them (including without
          limitation the right to receive all dividends and distributions
          declared, made or paid on or after Completion).

     3.2  Global covenants to procure that its wholly owned subsidiary Global
          Crossing Holdings Ltd advances the monies it draws down under the
          Goldman Sachs Facility to fund the acquisition of the Shares.


                                      -4-



     3.3  Global shall not be obliged to complete the purchase of any of the
          Shares unless the sale to it of all the Shares is completed
          simultaneously and if such sale is not completed on the Completion
          Date then Global shall be entitled to rescind this Agreement
          without liability of any kind on its part, but without prejudice to
          its rights in respect of any pre-existing breach of the terms
          hereof, including any breach giving rise to such right to rescind.

     3.4  The Sellers agree to waive any rights which may have been conferred
          on them under the Articles of Association or other constitutional
          documents of each Telecom Group member whose shares are to be sold
          pursuant to clause 3.1 or otherwise or in any other way to have any
          of the Shares offered to them for purchase at any time on or before
          the transfer of the Shares pursuant to the provisions of this
          Agreement.

4.   CONSIDERATION AND INTER-COMPANY DEBT

     4.1  Prior to Completion (and not less than three Business Days prior
          thereto), Racal will notify Global of its estimate of the
          Inter-Company Net Debt plus the Finance Lease Net Debt at
          Completion.

     4.2  At Completion the parties will co-operate to ensure the discharge
          of all Inter-Company Net Debt and, in particular, Global will
          advance to such members of the Telecom Group as Racal may require
          such amounts as Racal may require (which in aggregate may not
          exceed the estimate for Inter-Company Net Debt given under clause
          4.1) to put such members in funds to permit such discharge.

     4.3  On Completion, Global shall pay to the Sellers the amount of (Pound
          Sterling)1,000,000,000 (less the amount of the Inter-Company Net
          Debt and the Finance Lease Net Debt estimated under clause 4.1)
          together with the sum of (Pound Sterling)2,100,000 in respect of
          RTL of which (Pound Sterling)10,000,000 shall be payable to The
          Racal Corporation in respect of the shares in Racal USA, and (Pound
          Sterling)10,000,000 shall be payable to Controls and Communications
          Limited in respect of the Shares in RISL the balance to be divided
          among the Sellers in the following proportions:

          (a)  60% to Racal in respect of the shares in RTL; and

          (b)  40% to Racal in respect of shares in RTNL.

     4.4  To the extent that at Completion any sum is paid by a company to
          another company under clause 4.2 in excess of the amount due, the
          excess shall be repaid.  If as a result the amount advanced by

                                      -5-



          Global under clause 4.2 is different from the amount necessary to
          discharge all Inter-Company Net Debt, the difference shall be paid
          by Global to (if it advanced insufficient sums), or to Global (if
          it has advanced too much) by, the relevant member of the Telecom
          Group.  In addition, the purchase price under clause 4.3 shall be
          adjusted upwards (if net sums are repaid to Global) or downwards
          (if net sums are payable by Global) but so that the aggregate of
          sums paid by Global under this clause 4 to the Sellers and by way
          of settlement of the Inter-Company Net Debt by members of the
          Telecom Group (as adjusted under clause 4.4) shall always be the
          sum of (Pound Sterling)1,000,000,000 less the Finance Lease Net
          Debt at Completion.
  
     4.5  Any Inter-Company Trading Debt and Inter-Company Trading
          Receivables shall be paid by or to members of the Telecom Group to
          or from all other members of the Racal Group on the date that such
          would have been paid in the ordinary course of business.

5.   PRE-COMPLETION CONDUCT AND TERMINATION RIGHTS

     5.1  Save as provided in this Agreement or otherwise with the express
          prior consent of Global, the Sellers agree that between the date of
          this Agreement and Completion, they shall procure that the Telecom
          Group shall continue to conduct its business in the ordinary course
          and shall comply with the provisions of Schedule X and shall notify
          Global immediately if they become aware of a fact or circumstance
          which constitutes a breach of Schedule X.

     5.2  The Agreement may be terminated at any time prior to Completion by
          notice:

          (a)  by Racal (acting on behalf of the Sellers) if Global is in
               material breach of its obligations under this Agreement and
               such breach has not been remedied within 10 Business Days of
               notice of such breach having been given to Global; or

          (b)  by Global on notice to the Sellers: 

               (i)  if the board of directors of Racal withdraws or
                    materially amends its recommendation of the Transaction;
                    or

               (ii) if the Sellers are in material breach or breaches of
                    their obligations which taken together are material in
                    the context of this Agreement (other than their
                    obligations under clause 8 to which sub-clause (iii)
                    below applies) under this Agreement and such breach has

                                      -6-



                    not been remedied within 10 Business Days of notice of
                    such breach having been given to the Sellers; or

               (iii)pursuant to clause 8.12.

     5.3  If this Agreement is terminated prior to Completion in accordance
          with clause 5.2 each party's further rights and obligations cease
          immediately on termination, except that termination does not affect
          a party's accrued rights and obligations at the date of termination
          and the provisions of clauses 1, 16, 17 and 18 shall remain in full
          force and effect. 

     5.4  No party shall have the right to terminate or rescind this
          Agreement after Completion or save as provided in clauses 2.7, 2.8,
          3.3, 7.9, 7.12, 8.12 or this clause 5.

     5.5  On or before Completion, Racal may procure the payment of a
          dividend by RTL to its shareholders  (the "Pre Completion
          Dividend") less than RTL's distributable reserves.  Before the
          declaration of the dividend Racal shall produce to Global accounts
          of RTL which demonstrate to Racal's satisfaction that such dividend
          is lawful.

     5.6  No earlier than 5 Business Days prior to Completion, Racal may
          shorten any existing financial period of all members of the Telecom
          Group to the same date.  Racal shall ensure that Global is given
          prior notice of such closure and the date selected.

6.   NET ASSET ADJUSTMENT

     6.1  From Completion, the parties shall give effect to Schedule V to
          agree or determine the amount of the Completion Net Assets and
          Finance Lease Net Debt at Completion.

     6.2  If the aggregate of the Completion Net Assets at Completion exceeds
          (Pound Sterling)220,365,000, Global shall pay to the Sellers an
          amount equal to the excess to be divided amongst the Sellers as
          Racal and Global may agree (or failing agreement as Racal may
          specify) as additional consideration for the shares sold by each
          such Seller.

     6.3  If the amount of the Completion Net Assets is less than (Pound
          Sterling)220,365,000, the Sellers shall pay to Global an amount
          equal to the amount by which the Completion Net Assets are less
          than (Pound Sterling)220,365,000 as a reduction in the
          consideration for the shares sold by each Seller to be apportioned

                                      -7-



          amongst the Sellers as Racal and Global may agree (or failing
          agreement as Racal may specify).

     6.4  If the amount of estimated Finance Lease Net Debt pursuant to
          clause 4.1 is less than the Finance Lease Net Debt at Completion as
          determined in accordance with Schedule V, the Sellers shall
          promptly pay to Global an amount equal to the amount by which the
          Finance Lease Net Debt exceeds the estimated Finance Lease Net Debt
          as a reduction in the consideration for the shares sold by each
          Seller.

     6.5  If the amount of estimated Finance Lease Net Debt pursuant to
          clause 4.1 is greater than the Finance Lease Net Debt at Completion
          as determined in accordance with Schedule V, Global shall promptly
          pay to the Sellers an amount equal to the amount by which the
          estimated Finance Lease Net Debt exceeds the Finance Lease Net Debt
          as additional consideration for the shares sold by each Seller.

     6.6  All payments hereunder shall be made within five Business Days
          after the agreement or determination of the amount of the
          Completion Net Assets.

     6.7  Any amount to be paid under clause 6.3 shall bear interest at one
          per cent over the base lending rate of Barclays Bank PLC from the
          Completion Date. 

7.   COMPLETION

     7.1  Completion shall take place at the offices of Racal's Solicitors
          within 5 Business Days of satisfaction or, where permitted, waiver
          of the Transfer Conditions  or at such other place and/or on such
          other date as may be agreed between the parties. 

     7.2  On Completion, the Sellers shall have delivered to Global a
          certificate in Agreed Form duly executed certifying any facts that
          would exempt the transactions contemplated hereby from withholding
          pursuant to Section 1445 of the Internal Revenue Code of 1986.

     7.3  On Completion the Sellers shall cause to be delivered to Global
          duly executed transfers of the Shares in favour of Global (or as
          it may direct) together with the share certificates relating to
          such shares.

     7.4  On Completion, the Sellers shall cause to be delivered to Global: 

          (a)  the Common Seal and Statutory Books of each Telecom Group
               member made up to the Completion Date and each certificate of
               incorporation and certificate of incorporation on change of
               name for each Telecom UK Group member;

                                      -8-



          (b)  (unless otherwise agreed by Global) an unqualified letter of
               resignation from the auditors of each Telecom UK Group member
               complying in all respects with the requirements of section 392
               Companies Act 1985 and, if there are any such auditors, an
               unqualified letter of resignation from the auditors of Racal
               USA, in each case, accompanied by a written confirmation that
               such auditors have no claims for unpaid fees or expenses;

          (c)  irrevocable powers of attorney in the Agreed Form executed by
               Racal in respect of Racal Telecom UK Group Shares and the
               Racal USA Shares in favour of Global appointing Global to be
               its lawful attorney in respect of the Shares;

          (d)  resignations in the Agreed Form from each director and
               secretary of each Telecom Group member expressed to take
               effect from the end of the meeting held pursuant to
               clause 7.5; and

          (e)  receipts for any sums advanced to or repaid by the Racal Group
               under clause 4.2 which shall be sufficient evidence of the
               discharge of such sums by the relevant Racal Group Company.

     7.5  On Completion the Sellers shall cause a board meeting of each
          Telecom Group member to be duly convened and held at which:

          (a)  the transfers of the Shares shall be approved for registration
               (subject only to their being duly stamped by, and at the cost
               of, Global);

          (b)  such persons as may be nominated by Global shall be appointed
               directors and secretary of the Telecom Group members (within
               the maximum number, if any, permitted under their respective
               constitutional documents);

          (c)  all existing instructions to the Telecom Group's bankers, bank
               mandate forms and authorities shall be revoked and shall be
               replaced with alternative instructions, bank mandates forms
               and authorities in such form as Global may require;

          (d)  the registered offices of each of the Telecom Group members
               shall be changed to places nominated by Global;

          (e)  subject to the Companies Act, the accounting reference dates
               of each of the Telecom Group members shall be changed to dates
               nominated by Global; and




                                      -9-



          (f)  the resignations of each director and secretary of each of the
               Telecom Group members shall be accepted so as to take effect
               from the end of the meeting.

     7.6  On Completion Racal shall deliver to Global the Trade Mark Licence
          and the Transitional Services Agreement executed by it and the
          Transitional Services Agreement executed by Racal Services
          (Communications) Ltd and RTL.

     7.7  On Completion Global shall deliver to Racal the Transitional
          Services Agreement executed by it. 

     7.8  On Completion, Global shall also:

          (a)  deliver to Racal the Trade Mark Licence executed by it; and

          (b)  pay or procure the payment of the Consideration to the Sellers
               in accordance with the instructions provided by the Sellers at
               least 2 Business Days prior to Completion provided that Global
               shall not be required to transfer funds to more than four
               accounts in total in the United Kingdom.

     7.9  (a)  Neither Global nor the Sellers are obliged to complete this
               Agreement unless the other complies with all its obligations
               under clause 7; and

          (b)  Global shall not be obliged to complete this Agreement unless
               the transfer of all the Shares is completed simultaneously.

     7.10 If Completion does not take place on the date set for Completion
          because the Sellers fail to comply with any of their obligations
          under clauses 7.3, 7.4 or 7.5 or Racal fails to comply with its
          obligations under clause 7.6 or if Global fails to comply with any
          of its obligations under clauses 7.7 or 7.8 Global may, if the
          Sellers have failed so to comply, or Racal (acting on behalf of the
          Sellers) if Global has failed so to comply by notice to the other
          parties:

          (a)  proceed to Completion to the greatest extent reasonably
               possible without limiting its rights under this Agreement;

          (b)  postpone Completion to 2 Business Days after the date set for
               Completion; or

          (c)  terminate this Agreement.



                                     -10-



     7.11 If any party postpones Completion to another date in accordance
          with clause 7.10 the provisions of this Agreement apply as if that
          other date is the date set for Completion.

     7.12 If Completion has not occurred by the fifth Business Day after the
          Long Stop Date any party may on that date or at any time thereafter
          by notice to the other terminate this Agreement, in which case it
          shall on that date be of no further force and effect except that
          clauses 1, 16, 17 and 18 shall continue in force and such
          termination of this Agreement shall not affect the rights of any
          parties/or prior breaches of this Agreement.


8.   WARRANTIES

     8.1  The Sellers hereby represent and warrant to Global in the terms of
          the Warranties.

     8.2  The Warranties are qualified to the extent but only to the extent
          of the facts and circumstances fairly disclosed in the Disclosure
          Letter.

     8.3  The Sellers undertake not to make any claim against a Telecom Group
          member or a director, officer or employee of a Telecom Group member
          which it may have in respect of (or seek to mitigate damages
          payable in respect of any claim made against the Sellers by Global
          by reference to) a misrepresentation, inaccuracy or omission in or
          from information or advice provided by the Telecom Group member or
          a director, officer, agent, adviser or employee of a Telecom Group
          member for the purpose of assisting the Sellers to make a
          representation, give a Warranty, enter into this Agreement or
          prepare the Disclosure Letter unless such representation,
          inaccuracy or omission was wilful.

     8.4  Each Warranty is to be construed independently and (except where
          this Agreement provides otherwise) is not limited by a provision of
          this Agreement, the Tax Covenant or another Warranty and Global
          shall have a separate Claim and right of action in respect of every
          breach of each such Warranty.

     8.5  Global confirms that it has not entered into this Agreement or any
          document entered into hereunder or referred to herein in reliance
          upon any representation, warranty or undertaking other than those
          expressly contained herein and acknowledges that it has not relied
          on, and will make no claim in respect of any such representation,
          warranty or undertaking made or supplied by or on behalf of the
          Sellers, Racal or any other person whatsoever which is not

                                     -11-



          contained herein.  Without limiting the general nature of the
          foregoing, Global confirms that it has not relied on and will make
          no claim against the Sellers, Racal or any other person whatsoever
          in respect of any budget, forecast or other projection of any
          nature made or supplied by or on behalf of any person.

     8.6  Racal and the Sellers acknowledge that Global has relied upon the
          Warranties in entering into this Agreement.

     8.7  Where any of the Warranties is expressed to be given or made to the
          best of the Sellers'  knowledge or is qualified by reference to the
          Sellers' awareness or is qualified in some other manner having
          substantially the same effect, such statement shall be deemed to be
          qualified by the additional statement that the knowledge of the
          Sellers shall be limited to the actual knowledge of the person
          listed in Part C of Schedule VI in relation to the Warranties set
          out in Schedule VI  against such person, such person having made
          reasonable diligent enquiry of other employees of the Racal Group
          in relation to the subject matter of the warranty in question.

     8.8  The provisions of Schedule VI, Part A shall have effect.

     8.9  Between the date of this Agreement and Completion, the Sellers
          shall notify Global in writing as soon as reasonably practicable
          after they become aware of a fact or circumstance which constitutes
          or which might constitute a breach of clause 8.1 or 8.13 together
          with the Sellers' best estimate of the amount of the liability. 
          The Sellers shall ensure that notification of each fact or
          circumstance which constitutes or might constitute a breach of
          clause 8.1 or 8.13 shall be given not less than two Business Days
          before Completion.

     8.10 (a) Any provision of this Agreement and agreements, certificates or
          other instruments delivered pursuant to this Agreement which is
          capable of being performed after but which has not been performed
          at or before Completion, and (b) all representations, warranties,
          covenants, indemnities, agreements and other undertakings contained
          in this Agreement, and in any agreements, certificates or other
          instruments delivered pursuant to this Agreement, shall survive and
          not be affected by Completion and shall remain in full force and
          effect.

     8.11 The Sellers shall ensure that (save if and insofar as may be
          necessary to give effect to this Agreement) neither they nor any
          member of the Telecom Group will cause or permit anything to be
          done or omitted to be done either before or at Completion which
          would constitute a material breach of any of the Warranties if

                                     -12-



          given at any time up to Completion or which would make any of the
          Warranties materially inaccurate or materially misleading if they
          were so given.

     8.12 If Global has or would have at Completion a claim or claims against
          the Sellers in aggregate of more than (Pound Sterling)75 million
          which have arisen at or prior to Completion, Global may terminate
          this Agreement by notice to the Sellers given at or before
          Completion but for the avoidance of doubt, in the event that Global
          terminates this Agreement, Global shall have no right to claim
          damages or any other remedy against any of the Sellers in respect
          of all or any part of such claim or claims other than pursuant to
          clause 16.12. If Global does not terminate this Agreement pursuant
          to this clause 8.12, Global may, subject to clause 9, claim damages
          against the Sellers and exercise any other right, power or remedy
          arising under this Agreement in respect of a claim or claims which
          have arisen at or before Completion including such claim or claims
          arising from a breach of Warranty had such Warranty been repeated
          at Completion.

     8.13 The Warranties shall be deemed to be given at the date of this
          Agreement and to be repeated (mutatis mutandis) at Completion (save
          that references to any fact, matter or thing existing, occurring or
          having occurred at or before the date of this Agreement shall be
          construed as references to at or before Completion).


9.   LIMITATION OF CLAIMS

     9.1  Global shall, on becoming aware of  any Claim, promptly notify
          Racal and the Sellers thereof, but the failure to so notify shall
          not relieve the Sellers of any liability they may have to Global to
          the extent such failure does not materially prejudice any of the
          Sellers.

     9.2  The Sellers shall have no liability in respect of any Claim unless
          Global has served on the Sellers notice on or before:

          (a)  in the case of a Claim under the Tax Warranties or a claim
               under the Tax Covenant relating to Racal USA, the expiration
               of the statute of limitation relating to the relevant Tax
               liability of Racal USA;

          (b)  in the case of any Claim under the Tax Warranties or a claim
               under the Tax Covenant other than as described in paragraph
               (a) above, six years from the Completion Date;


                                     -13-



          (c)  in the case of any Claim other than a Claim under the Tax
               Warranties or a claim under the Tax Covenant, the later of (i)
               the second anniversary of the Completion Date and (ii) the end
               of the fourth month following the end of the second audited
               financial period for each member of the Telecom Group,

          giving such reasonable details of the Claim as Global then has and, 
          if practicable, including Global's then best estimate of the amount 
          of the liability of the Sellers in respect thereof, has as soon as 
          reasonably practicable upon receipt of any further details relating 
          to the Claim disclosed such further details to Racal and has issued 
          and served proceedings in respect thereof within nine months of the 
          date of such written notice if such Claim has not previously been 
          satisfied, settled or withdrawn.

     9.3  No claim shall be made against any of the Sellers in respect of any
          Claim unless the Claim (or series of related Claims) individually 
          exceeds (Pound Sterling)250,000 and unless the aggregate amount of
          all Claims (excluding individual Claims of (Pound Sterling)250,000
          or less) exceeds (Pound Sterling)10,000,000 PROVIDED that if such
          aggregate amount does exceed (Pound Sterling)10,000,000, the
          Sellers shall be liable for the full amount of such Claim or Claims
          and not solely the amounts thereof in excess of (Pound
          Sterling)10,000,000.  For the purpose of determining whether a
          Claim exceeds the minimum individual threshold of (Pound
          Sterling)250,000 set out in this clause 9.3, Claims which consist
          of a breach of paragraph L.12 of Schedule VI and which arise from
          the unlawful exclusion (prior to the Completion Date) on grounds of
          sex of an employee or former employee of the Telecom UK Group from
          eligibility for, and/or membership of, Racal's Schemes (as defined
          in Part B of Schedule VII) ("Pensions Claims") shall be aggregated
          and treated as a single Claim.  Any recovery in respect of Pensions
          Claims shall be on an indemnity basis on the excess over (Pound
          Sterling)250,000.  Nothing in the Disclosure Letter shall be deemed
          to be disclosed for this purpose in respect of Pensions Claims
          unless individual claimants are specifically identified.

     9.4  The total amount of the liability of the Sellers in aggregate in
          respect of:

          (a)  the aggregate amount of Claims arising from clause 3.1, Part A
               of Schedule VI, clause 5.1, clause 6, clause 10.1 and (in so
               far as it relates to any of the foregoing provisions) clause
               15 and any claim arising from the Tax Covenant and any claim
               referred to in clause 9.4(b) shall be limited to and in no
               event exceed (Pound Sterling)1,000,000,000; and


                                     -14-



          (b)  the aggregate amount of Claims and claims under clauses 10.2,
               10.3 and 10.5 shall be limited to and in no event exceed
               (Pound Sterling)300 million, 

          PROVIDED THAT the total amount of liability of the Sellers in 
          aggregate in respect of the Claims whether arising under paragraph 
          (a) or paragraph (b) of this clause 9.4 shall not in any 
          circumstance exceed the Consideration.

     9.5  The Sellers shall not be liable in respect of any Claim (including
          any claim under the Tax Covenant) if and to the extent that the
          loss occasioned thereby has been recovered under any other Claim
          (including any claim under the Tax Covenant).

     9.6  If the Sellers indemnify Global and/or the relevant Telecom Group
          member in respect of any amount payable by Global and/or any
          Telecom Group member by way of settlement, judgment or award in
          respect of the matter giving rise to the Claim, then insofar as the
          same would not have a detrimental effect on the business of any
          member of the Global Group, the Sellers shall be afforded every
          reasonable opportunity of resisting in the name of the relevant
          Telecom Group member any claims against any Telecom Group member
          which might constitute a breach of any of the Warranties (unless
          the claims against any Telecom Group member which might constitute
          a breach of any of the Warranties is by any member of the Racal
          Group), and the Sellers shall subject as aforesaid (if they so
          require) be allowed to have the conduct of any negotiations,
          proceedings or appeals incidental thereto (keeping Global at all
          reasonable times properly informed of the conduct) and to use
          professional advisers approved by Global (such approval not to be
          unreasonably withheld or delayed).  If  such legal advisers are
          retained, the Sellers shall not be liable to Global for any legal
          expenses of other legal advisers or any other expenses subsequently
          incurred by Global in connection with the defence of the claim,
          except that if the Sellers elect not to assume such defence or if
          legal advisers for  Global determine that there are issues which
          raise conflicts of interest between Global and the Sellers, Global
          and any Telecom Group member may retain legal advisers reasonably
          satisfactory to them, and the Sellers shall pay any reasonable fees
          and expenses of such legal advisers for Global and such members
          promptly as statements therefor are received; PROVIDED THAT the
          Sellers shall be obligated pursuant to this clause 9.6:(i) to pay
          such amounts in the case of a conflict of interest only if the
          Sellers reasonably agree that such conflict of interest existed
          between Global and the Sellers, and (ii) to pay for only one firm
          of legal advisers for Global and the Telecom Group members in any
          jurisdiction unless Global and the Sellers agree that the use of

                                     -15-



          one firm of legal advisers would present such legal advisers with a
          conflict of interest.

     9.7  If and so long as Racal exercises its rights under clause 9.6,
          Global shall, and shall procure that the relevant Telecom Group
          member shall:

          (a)  consult with the Sellers in respect of the circumstances
               giving rise to such claim, and thereafter keep the Sellers as
               informed as is reasonably practicable of all material
               developments relating to such circumstances and Claim;

          (b)  if so requested by the Sellers, subject as aforesaid, take all
               reasonable steps or proceedings as the Sellers may consider
               necessary in order to mitigate or defend any such claim and
               any adjudication in respect thereof or enforce against any
               person (other than Racal or any other member of  the Racal
               Group) the rights of the relevant Telecom Group member and
               Global in relation to the matter the subject of the claim and
               shall procure that any Telecom Group member shall act in
               accordance with any such requirements, and for this purpose
               take all appropriate proceedings in the name of the relevant
               Telecom Group member subject to being fully indemnified in
               advance by the Sellers against all costs and expenses incurred
               in connection therewith;

          (c)  at all reasonable times allow the Sellers and its agents
               reasonable access on notice to personnel of the relevant
               Telecom Group member and to inspect and take copies of all
               necessary books, correspondence and records of the relevant
               Telecom Group member which are relevant to such Claim and are
               within the power, possession or control of Global or any
               member of the Telecom Group to enable the Sellers to
               investigate the Claim (subject always to keeping the same
               confidential other than necessary disclosures in connection
               with any such action or claim); and

          (d)  save with the Sellers' prior consent, and subject as
               aforesaid, not admit liability in respect of or compromise, or
               settle any such claims as aforesaid.

     9.8  Any settlement agreed by the Sellers pursuant to clause 9.6 shall
          not include any obligation on Global or a Telecom Group member to
          take or omit to take any action.

     9.9  The Sellers shall reimburse to Global or the relevant Telecom Group
          member (as the case may be) all costs, charges, liabilities,


                                     -16-



          damages and expenses incurred by them by Global's complying with
          its obligations under paragraphs 9.6 and 9.7.

     9.10 The Sellers shall not be liable in respect of a Claim to the
          extent:

          (a)  that any amount has been included as a liability or a proper
               provision has been made in respect thereof; or

          (b)  that the value of any asset has been reduced to take account
               of the subject matter of such Claim, 

          in the Accounts of RTNL and RISL or the Completion Balance Sheet. 

     9.11 Where Global or any Telecom Group member is entitled to recover
          from some other person any sum in respect of any matter or event
          which has given rise to a Claim, Global shall and shall procure
          that the relevant Telecom Group member shall use its or his
          reasonable endeavours to recover that sum and any sum recovered
          will reduce the amount of the relevant Claim provided that the
          person so entitled shall not be obliged hereby to use such
          reasonable endeavours if so to do would have a detrimental effect
          on the business of any member of the Global Group but in such
          circumstances the parties agree that the decision by Global not to
          recover any such sum shall be relevant in considering whether its
          obligations to mitigate have been satisfied.

     9.12 Other than on the proof of fraud which is material in the context
          of the Transaction, Global shall not be entitled to rescind or
          repudiate this Agreement for any reason after Completion.

     9.13 The Sellers shall not be liable in respect of any Claim arising
          from any matters resulting from a change of accounting policy or
          practice or the length of any accounting period of Global or any
          Global Group member introduced after Completion.

     9.14 If Racal pays to Global or any Telecom Group member an amount in
          respect of any Claim and Global or any Telecom Group member (as the
          case may be) subsequently actually recovers from a third party
          (including any insurer) a sum which is directly referable to that
          Claim, Global shall repay to Racal as soon as reasonably
          practicable so much of the amount paid by Racal as does not exceed
          the Sum Recovered from the third party.  Global agrees to take all
          reasonable steps to recover any such sum from a third party as soon
          as reasonably practicable on the basis set out in clause 9.8.  For
          the purpose of this clause "Sum Recovered" means an amount equal to
          the amount recovered from such third party minus (a) any increase
          in liability to tax of a Telecom Group member and (b) the

                                     -17-



          reasonable costs and expenses incurred by the Telecom Group member
          in recovering such amount.  Nothing herein shall preclude Global
          from making a Claim for recovery of that portion of any increased
          insurance premium that are fairly attributable to Claims previously
          made hereunder whether or not such Claim is made within the period
          specified in clause 9.2.

     9.15 Nothing contained in this clause 9 shall limit Global's obligations
          or the obligation of any Telecom Group member at common law to
          mitigate any loss or damage resulting from or arising as a
          consequence of any circumstances giving rise to any Claim.

     9.16 Global acknowledges and confirms that at the time of entering into
          this Agreement it is not aware of any Claim which would arise on
          execution of this Agreement.

     9.17 If Global makes any Claim or gives notice of any Claim to Racal
          Global shall, and shall procure that any Telecom Group member shall
          promptly, on a confidential basis solely for the purpose of
          enabling Racal to assess the Claim or potential Claim:

          (a)  make available on reasonable notice to Racal and its
               representatives or advisers such reasonable access to the
               personnel of any relevant Telecom Group member and to any
               relevant records and information as Racal may request in
               connection with such Claim or potential Claim; and

          (b)  use all their endeavours to procure that the auditors (past
               and present) of any relevant Telecom Group member make
               available their audit working papers in respect of audits of
               the relevant Telecom Group member's accounts for any relevant
               accounting period in connection with such Claim or potential
               Claim, 

          in all cases, subject always to keeping the same and any information 
          obtained herefrom confidential.

     9.18 Notwithstanding any limitation in this clause 9 to the contrary, no
          claim by Global which arises by reason of any fraudulent act,
          fraudulent omission or fraudulent misrepresentation of or by any of
          the Sellers which is material in the context of the Transaction
          shall be subject to the limitations of this clause 9.

     9.19 If the Sellers or any of its successors or assigns (i) shall
          consolidate with or merge into any other corporation or entity and
          shall not be the continuing or surviving corporation or entity of
          such consolidation or merger or (ii) shall transfer all or
          substantially all of its properties and assets to any individual,
          corporation or other entity, then and in each such case, Racal or

                                     -18-



          its successors or assigns (on the case may be) shall use all
          reasonable endeavours to procure that the successors and assigns of
          the surviving corporation shall assume all of its obligations
          hereunder.


10.  INDEMNITIES

     10.1 The Sellers hereby undertake to procure that, as from Completion,
          the Telecom Group members shall be released at Completion or as
          soon as is reasonably practicable thereafter from all guarantees,
          indemnities and other actual or contingent obligations and/or
          comfort letters given or undertaken by them in respect of any and
          all actual or contingent liabilities whatsoever of any Racal Group
          member (including without limitation those specified in Schedule
          VIII) and pending such release, the Sellers shall indemnify and
          keep indemnified each Telecom Group member against any liability
          whatsoever, including all costs, damages and expenses, suffered or
          incurred by any of them in connection therewith.

     10.2 The Sellers agree to indemnify Global against all liabilities,
          losses, damages, costs and expenses (whether incurred before or
          after Completion) arising from the failure of RISL to obtain or
          maintain a registration under the Data Protection Act 1984.

     10.3 Racal agrees to indemnify Global and RTL against any cost, loss,
          claim, liability or expense arising primarily by reason of
          Railtrack PLC being entitled or having the right to terminate any
          of the Railtrack Agreements on the grounds that the Reorganisation
          and/or this Agreement involves a breach of any provision of the
          Railtrack Agreements prohibiting assignments if and only to the
          extent that such costs, losses, claims, liabilities or expenses
          exceed in the aggregate (Pound Sterling)10,000,000, provided that:

          (a)  Global shall be obliged to take all reasonable steps to
               mitigate such costs, losses, claims, liabilities or expenses
               and the extent of Racal's liability shall take account of
               savings and reduced expenditure resulting as a consequence of
               the termination of any of the Railtrack Agreements; and

          (b)  any claim hereunder must be made within two years of
               Completion.

     10.4 If Global becomes aware of any claim under clauses 10.2, 10.3 and
          10.5 it shall notify Racal as soon as practicable and shall consult
          with, and pay due regard to, Racal's views on all matters relating


                                     -19-



          thereto, giving Racal all reasonable information about such claim
          as Racal shall request.

     10.5 Racal agrees to indemnify Global and RTL for any cost, loss, claim,
          liability or expense (whether incurred before or after Completion)
          arising from the termination of the agreement with Metromedia Fiber
          Network Services Inc. referred to in B(d) of Schedule X.

     10.6 If Railtrack plc terminates the Railtrack Agreements on the grounds
          that the Reorganisation and/or this Agreement involves a breach of
          any provision of the Railtrack Agreements prohibiting assignments
          Racal agrees that BRTH or any other member of the Racal Group shall
          have no claims for termination of the Reorganisation Documents by
          RTL.


11.  PENSIONS

     The provisions of Schedule VII shall have effect in relation to the
     retirement, pension and life assurance rights and benefits enjoyed by
     the present and former employees of the Telecom Group.


12.  NAME AND USE OF MARKS

     12.1 Global agrees that the Telecom Group members will:

          (a)  (save as provided in the Trade Mark Licence) as soon as
               reasonably practicable following Completion if any of the
               Racal Marks are being used in their respective corporate names
               or as part of a business or trading name or domain name,
               change the same to a name which does not include any of the
               Racal Marks (or any mark which is confusingly similar with any
               of the Racal Marks); and

          (b)  as soon as reasonably practicable following the Completion
               Date and in any event no later than six months after the
               Completion Date, delete or remove the Racal Marks from all
               stationery, advertising material, labels, manuals, packaging,
               stocks of products and all other materials or documents in the
               possession or under the control of the Telecom Group on which
               the Racal Marks are incorporated and remove all fascia,
               hoardings and the like bearing or referring to the Racal
               Marks.

     12.2 On and with effect from Completion Racal and Global shall enter
          into the Trade Mark Licence.

                                     -20-



13.  PROPERTY REORGANISATION

     For the purposes of this clause 13, "Properties" shall mean the
     properties used by members of the Telecom Group (including without
     limitation wayleaves and easements but excluding the land over, through
     or under which the wayleave or easement passes) brief particulars of
     which are set out in the Data Room Index but in all cases excluding the
     Telecommunications Apparatus as defined in the Telecommunications Act
     1984.

     13.1 Applications for Reversioner's Consent

          (a)  Subject to Racal obtaining the Consents Racal shall procure the 
               carrying out and implementation of the Property Reorganisation 
               and shall use all reasonable endeavours to obtain the Consents 
               before or as soon as practicable following Completion and for 
               that purpose Racal, RPL or RTL (as the case may be) shall
               reasonably and promptly provide such information and assistance 
               and enter into and execute such documents as may be properly 
               required by the relevant Reversioner in relation to the grant 
               of its Consent (including where required under the terms of the
               relevant lease an authorised guarantee agreement) and shall 
               keep Global fully informed of progress in relation to the 
               applications for Consent.

          (b)  Racal shall supply Global's Property Solicitors with a copy of 
               any draft Consent as soon as received from the relevant 
               Reversioner's Solicitors.  Global's Property Solicitors shall 
               forthwith return it to Racal approved subject to any amendments 
               they may reasonably require.

          (c)  Racal shall forthwith return the amended draft Consent to the 
               relevant Reversioner's Solicitors and supply to Global's 
               Property Solicitors copies of any further correspondence or 
               further drafts of the Consent received from the Reversioner's 
               Solicitor and these provisions shall continue to apply until
               all relevant parties have agreed the form and context of each 
               relevant Consent.

          (d)  The proposed assignee or proposed underlessee shall in each 
               case where properly required enter into direct covenants with 
               the relevant Reversioner as from the date of the assurance to

                                     -21-



               pay the rents reserved by the relevant lease and perform and
               observe the covenants on the part of the lessee therein 
               contained.

          (e)  The proposed assignee or proposed underlessee where applicable 
               and any guarantor shall promptly on being supplied with an 
               engrossment of the agreed form of Consent execute the same as 
               a deed and return it unconditionally to Racal.

          (f)  Racal shall continue to use all reasonable endeavours to obtain 
               the Consents including if necessary making application to a 
               court of competent jurisdiction for a declaration to the effect 
               that Consent is being unreasonably withheld in the event that 
               any application for Consent is refused or is not granted within 
               a reasonable period of time (unless counsel of at least five 
               years' call and suitably experienced in such matters advises 
               Racal in writing that such application has no reasonable
               prospect of success and copy of such advice is given to Global's 
               Solicitors) and in such circumstances Global is to co-operate 
               with Racal and provide such information as may be required by 
               Racal in making such an application.

          (g)  Racal shall bear all costs and disbursements of all third party 
               lessors and their professional advisers in relation to the 
               obtaining of the Consents but not the stamp duty and Land 
               Registry fees in connection with the Property Reorganisation 
               which shall be borne by Global.

          (h)  Racal shall not be obliged under the above provisions to 
               guarantee as a condition of any of the Consents the performance 
               of the obligations of RPL or RTL.

     13.2 Licence to Occupy

          The proposed assignee or proposed underlessee shall between
          Completion and completion of the relevant assignment sublease or
          licence be entitled to occupy the relevant leasehold premises or part
          thereof upon the terms and subject to the obligations and covenants
          referred to and contained in Schedules XI and XII and otherwise upon
          the terms of the existing lease.



                                     -22-



     13.3 No variations or amendments to existing terms

          Neither Racal, RPL or RTL shall vary or amend or agree or apply to
          vary or amend any terms under which the Properties are held
          (including any review of rent) except as may be necessary to obtain
          the Consents (and with the prior consent of Global) or apply for any
          consent or approval under the relevant lease (other than the
          Consents) or serve any notices or counter notices or commence any
          proceedings under the Landlord and Tenant Act 1954 without the prior
          consent of Global such consent not to be unreasonably withheld or
          delayed.

     13.4 Outstanding Negotiations

          Racal shall until Completion use all reasonable endeavours to
          diligently pursue all Outstanding Negotiations at the request and
          under the direction of Global and shall keep Global fully informed of
          all progress and provide copies of all communications in respect of
          the same but Racal shall not be obliged to conclude any of the
          Outstanding Negotiations referred to in Schedule XII Part B unless
          Global has confirmed in terms satisfactory to Racal that Global will
          indemnify Racal in relation to such matters.

     13.5 Enforcement of Covenants

          Racal or RPL (as the case may be) shall at the request of  Global but
          at the cost of Racal enforce the covenants on the part of the
          relevant Reversioner contained in any relevant lease so far as may be
          necessary to obtain the Consents.
 
     13.6 Refusal of Consents

          If any of the Consents required in respect of the proposed
          sublettings or licences referred to in Schedule XI Part A is not
          obtained or if for any other reason RPL (or any company authorised by
          RPL under the terms of this agreement to occupy the whole or part of
          the relevant leasehold property) vacates any part of the leasehold
          properties referred to in that Schedule then Racal shall pay to
          Global and shall indemnify Global fully in respect of all rent and
          other sums which would otherwise have been payable by RPL (or any
          company authorised by RPL under the terms of this agreement to occupy
          the whole or part of the relevant leasehold property) whether to
          Global or to any third party had the said subletting or licence
          continued upon the terms set out in that Schedule until the date on
          which RPL (or any company so authorised) shall vacate the premises in
          question.


                                     -23-



     13.7 Arbitration

          Any disputes in relation to the terms of any sublease or licence
          required to implement the Property Reorganisation shall be referred
          to the decision of a suitably qualified Chartered Surveyor who in
          default of agreement shall be appointed by the President for the time
          being of the Royal Institution of Chartered Surveyors on the
          application of either party and such surveyor shall act as an
          arbitrator in accordance with the Arbitration Act 1996.

14.  NOT USED


15.  PARENT GUARANTEE

     15.1 In consideration of Global entering into this Agreement with the 
          Sellers at the request of Racal, Racal, as primary obligor, hereby 
          irrevocably and unconditionally guarantees to Global the full and 
          complete performance by the Sellers of all their obligations under 
          this Agreement or the Tax Covenant or both and the payment of all 
          sums when due and payable by the Sellers (or any of them) to Global 
          under or pursuant to this Agreement or the Tax Covenant or both and
          agrees to indemnify and keep indemnified Global against all losses 
          and damages sustained by it flowing from any non-payment or default 
          of any kind by the Sellers under or pursuant to the Agreement or the 
          Tax Covenant or both.

     15.2 Racal agrees that if and each time that any of the Sellers fails to 
          make any payment when it is due under or pursuant to this Agreement 
          or the Tax Covenant or both, Racal shall on demand (without requiring 
          Global first to take steps against the Sellers or any other person) 
          pay that amount to Global.

     15.3 The guarantee contained in this clause 15 is a continuing guarantee 
          and shall remain in force until all the obligations of each of the 
          Sellers under this Agreement and the Tax Covenant have been fully 
          performed and all sums payable by each of the Sellers have been 
          fully paid.

     15.4 All payments to be made by Racal shall be made in full without 
          set-off or counterclaim and free and clear of and without any 
          deduction whatsoever except to the extent required by law and if any 
          deduction or withholding must be made by law, Racal will pay that 
          additional amount which is necessary to ensure that Global receives 
          a net amount equal to the full amount which it would have received

                                     -24-



          if the payment had been made without the deduction or withholding.

     15.5 Racal shall pay interest on any amount due under this clause from the 
          date of demand until the date of payment in full as well after as 
          before any judgment) calculated on a daily basis at the rate set 
          out in clause 6.5.

     15.6 Racal's obligations under this clause shall not be affected by any 
          matter or thing which but for this provision might operate to affect 
          or prejudice those obligations including without limitation:

          (a)  any time or indulgence granted to, or composition with, the 
               Sellers or any of them or any other person;

          (b)  the taking, variation, renewal or release of, or neglect to 
               perfect or enforce this Agreement, or any right, guarantee, 
               remedy or security from or against the Sellers or any of them or 
               any other person; or

          (c)  any enforceability or invalidity of any obligation of the 
               Sellers, so that this clause shall be construed as if there were 
               no such unenforceability or invalidity.


16.  GENERAL

     Assignment

     16.1 None of the rights or obligations under this Agreement may be 
          assigned or transferred without the prior written consent of all the 
          other parties save as provided in clause 16.2.

     16.2 No party may assign or transfer a right or obligation under this 
          Agreement, save that Global may assign some or all of its rights 
          under this Agreement:

          (a)  to another member of the Global Group if (i) the assignee 
               enters into a commitment in a form reasonably satisfactory to 
               Racal to be bound by and to perform all outstanding obligations 
               under this Agreement expressed to be obligations of Global and
               (ii) Global shall guarantee the obligations of the assignee in  


                                     -25-



               the same terms as Racal has guaranteed the obligations of the 
               Seller under clause 15; and

          (b)  by way of security to the Security Trustee.

     16.3 Entire agreement

          (a)  This Agreement and the Transaction Documents constitute the 
               whole and only agreement between the parties relating to the 
               matters contemplated hereby.

          (b)  This Agreement supersedes and extinguishes any prior agreements, 
               undertakings, representations, warranties and arrangements of 
               any nature whatsoever, whether or not in writing, relating 
               thereto.

          (c)  Each party acknowledges that in entering into this Agreement 
               and the Transaction Documents or the terms set out in this 
               Agreement it is not relying upon any agreement, undertaking, 
               representation, warranty, promise, assurance or arrangement made 
               or given by any other party or any other person, whether or not
               in writing, at any time before the execution of this Agreement 
               which is not expressly set out herein or therein.

          (d)  None of the parties shall have any right of action against any 
               other party to this Agreement arising out of or in connection 
               with any agreement, undertaking, representation, warranty, 
               promise, assurance or arrangement referred to in clause 16.3(b) 
               or 16.3(c) above (except as provided in clause 16.3(b) or 
               16.3(c) above or in the case of fraud or dishonesty).

     16.4 Notices

          (a)  Any notice, consent or other communication given or made under 
               this Agreement shall be in writing.

          (b)  Any such notice or other communication shall be addressed as 
               provided in clause 16.4(d) and, if so addressed, shall be deemed 
               to have been duly given or made as follows:

               (i)  if sent by personal delivery, upon delivery at the address 
                    of the relevant party if delivered before 3.00 pm on any 

                                     -26-



                    Business Day and, in any other case, at 10.00 am on the 
                    next Business Day;

              (ii)  if sent by first class post (or, if sent overseas, by 
                    airmail), three clear Business Days (or, if sent overseas, 
                    seven Business Days) after the date of posting; and

             (iii)  if sent by facsimile, at the expiration of two hours after 
                    the time of despatch, if despatched before 3.00 pm on any 
                    Business Day and, in any other case, at 10.00 am on the 
                    Business Day following the date of despatch but only if a 
                    confirmation of the receipt by the recipient of the 
                    facsimile appears correctly at the end of the of the
                    sender's facsimile.

          (c)  Any notice or other communication to be given or made under 
               this Agreement, the Tax Covenant or the Transaction Documents 
               by Global to the Sellers shall be deemed to be given or made if 
               given to Racal for itself and on behalf of the Sellers.

          (d)  The relevant addressee, address and facsimile number of each 
               party for the purpose  of this Agreement,subject to clause 
               16.4(c), are those set out in Schedule I.

          (e)  A party shall notify the other parties to this Agreement of a 
               change to its name, relevant addressee, address or facsimile 
               number for the purposes of clause 16.4(d) provided that such
               notification shall only be of effect on:

               (i)  the date specified in the notification as the date on 
                    which the change is to take place; or

               (ii) if no date is specified or the date specified is less than 
                    three clear Business Days after the date on which the 
                    notice is given, the date falling three clear Business Days 
                    after notice of any such change has been given.


                                     -27-



     16.5 Remedies and waivers

          (a)  Subject always to the provision of clause 9, no delay or 
               omission on the part of any party to this Agreement in 
               exercising any right, power or remedy provided by law or 
               under this Agreement shall:

               (i)     impair such right, power or remedy; or

               (ii)    operate as a waiver thereof.

          (b)  The single or partial exercise of any right, power or remedy 
               provided by law or under this Agreement shall not preclude any 
               other or further exercise thereof or the exercise of any 
               other right, power or remedy.

          (c)  The single or partial exercise of any right, power or remedy 
               provided by law or under this Agreement shall not preclude any 
               other or further exercise thereof or the exercise of any other 
               right, power or remedy.

          (d)  The rights, powers and remedies provided in this Agreement are 
               cumulative and not exclusive of any rights, powers and remedies 
               provided by law.

          (e)  No variation of this Agreement shall be effective unless made in 
               writing, signed by or on behalf of the parties and expressed to 
               be such variation.

          (f)  No waiver by any party of any requirement of this Agreement or 
               of any remedy or right under this Agreement shall have effect 
               unless given by notice in writing signed by such party.  No 
               waiver of any particular breach of the provisions of this
               Agreement shall operate as a waiver of any repetition of such 
               breach.

          (g)  Any release, waiver or compromise or any other arrangement which 
               any party may give or enter into with any other party to this 
               Agreement in connection with this Agreement shall not affect 
               any right or remedy of such parties as regards any other party's
               liabilities under or in relation to this Agreement and such other
               party shall continue to be bound by this Agreement as if it 


                                     -28-



               had been the sole contracting party.

     16.6 Invalidity

          If at any time any provision of this Agreement is or becomes illegal,
          invalid or unenforceable in any respect under the law of any
          jurisdiction, that shall not affect or impair:

          (a)  the legality, validity or enforceability in that jurisdiction of 
               any other provision of this Agreement; or

          (b)  the legality, validity or enforceability under the law of any 
               other jurisdiction of that or any other provision of this
               Agreement.

     16.7 NOT USED

     16.8 No partnership

          Nothing in this Agreement and no action taken by the parties pursuant
          to this Agreement shall constitute, or be deemed to constitute, the
          parties as a partnership, association, joint venture or other
          corporate entity.

     16.9 Further assurance

          Each party shall after Completion from time to time on being
          requested to do so by any other party, do or procure the doing of all
          such acts and/or execute or procure the execution of all such
          documents in a form reasonably satisfactory to the requesting party
          and the requested party as is reasonably necessary for giving full
          effect to this Agreement.

    16.10 Announcements and confidentiality

          Any party shall only make an announcement concerning the transactions
          contemplated by this Agreement or any ancillary matter if and to the
          extent required by:

          (a)  law; or

          (b)  any securities exchange or regulatory or governmental body to 
               which such party is subject, wherever situated, including 
               (without limitation) the London Stock Exchange, GNOSTIC, 
               the Securities and Exchange Commission or the Takeover Panel,

                                     -29-



                         
               whether or not the requirement has the force of law;

          provided that any such announcement shall be made only after
          consultation with the other parties and having taken into account
          other reasonable covenants and the party has taken all reasonable
          steps to avoid the disclosure of confidential information.

    16.11 Costs and expenses

          Each party shall pay its own costs and expenses in relation to the
          negotiation, preparation and execution and carrying into effect of
          this Agreement. 

    16.12 Break-Up Fee

          Racal agrees that if this Agreement shall be terminated by Global
          pursuant to clause 5.2(b)(i) or clause 8.12 or, because of the
          failure to satisfy the Transfer Condition set out in paragraph 1 of
          Schedule III, pursuant to Clause 2.7, then Racal shall promptly pay
          to Global an amount equal to (Pound Sterling)10 million.

    16.13 Counterparts

          (a)  This Agreement may be executed in any number of counterparts, 
               and by the parties on separate counterparts, but shall not be 
               effective until each party has executed at least one 
               counterpart.

          (b)  Each counterpart shall constitute an original of this Agreement, 
               but all the counterparts shall together constitute but one and 
               the same instrument.

    16.14 Insurance

          To the extent that, prior to Completion, any of the Telecom Group
          members were reliant on Racal Group reinsurance policies, Racal
          undertakes to ensure that, at the request of the relevant members of
          the Telecom Group (the "Claimants"), it will pursue insurance claims
          under such insurance policies which the Claimant notifies to Racal
          (but at the Claimant's risk and expense) and shall account to the
          Claimant for any net payment received under such insurance policies.






                                     -30-



17.  CONFIDENTIAL INFORMATION

     17.1 Subject to the remainder of this clause 17, Racal undertakes to 
          Global that from the date of this Agreement they shall not and shall 
          procure (or in the case of advisers and agents, use all reasonable 
          endeavours to procure) that no other member of the Racal Group or any 
          director, officer or employee or adviser or agent of the Racal Group 
          shall disclose to any person other than Global or its advisers any
          Confidential Information.

     17.2 Subject to the remainder of this clause 17, Global undertakes to 
          Racal that from the date of this Agreement it shall not and shall 
          procure (or in the case of advisers and agents, use all reasonable 
          endeavours to procure) that no other member of the Global Group or 
          any director, officer or employee or adviser or agent of the Global 
          Group shall disclose to any person any Confidential Information.

     17.3 Clauses 17.1 and 17.2 do not apply to:

          (a)  disclosure of Confidential Information to, or at the request of, 
               a director, officer or employee of Global or Racal or another 
               member of the Global Group or Racal Group or to a director, 
               officer or employee of a Telecom Group member whose function 
               requires him to have the Confidential Information;

          (b)  disclosure of Confidential Information required to be disclosed 
               by law, regulation, any revenue authority, the London Stock 
               Exchange or any other relevant stock exchange or any other 
               regulatory authority;

          (c)  disclosure of Confidential Information to an adviser provided 
               that such adviser shall be made aware of the confidential 
               nature of the information and Racal's obligations under clause 
               17.1 or Global's obligations under clause 17.2; or

          (d)  Confidential Information which becomes publicly known except by 
               breach of clause 17.1 or 17.2.

     17.4 The restrictions contained in this clause 17 shall apply without
          limit in time.





                                     -31-



18.  GOVERNING LAW AND JURISDICTION

     18.1  This Agreement is governed by, and shall be construed in 
           accordance with, the laws of England.

     18.2  Each party submits to the jurisdiction of the English courts for 
           all purposes relating to this Agreement.











































                                     -32-



                                  SCHEDULE I

                                  The Parties



Name            Registered    Registered Office     Addressee/Fax
                Number

Controls and    314979        Western Road,         David Whittaker
Communications                Bracknell,            Fax no:  01251 815 887
Limited                       Berkshire RG12 1RG

The Racal       59-1785-1646                        c/o David Whittaker
Corporation                                         Fax no:  01251 815 887

Racal           497098        Western Road          David Whittaker
Electronics                   Bracknell             Fax No:  01251 815887
Plc                           Berkshire RG12 1RG   

Global          N/A           Wessex House,         James Gordon
Crossing Ltd.                 45 Reid Street        Fax No:
                              Hamilton, Bermuda     (001) 310 385 3700


























                                     -33-



                                  SCHEDULE II


                                  Definitions



"Accounts"                                 the statutory accounts for the
                                           year ended 31 March 1999 for RTL,
                                           RTNL and RISL

"Agreed Form"                              in relation to any document, the
                                           form of that document which has
                                           been agreed by Racal and Global
                                           (subject to such amendments as
                                           Racal and Global may agree, such
                                           agreement not to be unreasonably
                                           withheld or delayed by either
                                           party) and initialled for
                                           identification by or on behalf of
                                           Racal and Global

"Balance Sheet Date"                       23 July 1999

"Base Line Balance Sheet"                  the balance sheet of the Telecom
                                           Group in the Agreed Form at the
                                           Balance Sheet Date

"Board" or "Directors"                     as the context requires, the board
                                           of directors of Racal or the board
                                           of directors of Global

"BRTH"                                     Racal Communications (Services)
                                           Limited formerly known as BRT
                                           Holdings Limited a company
                                           registered in England under No.
                                           3132438

"Business Day"                             a day (other than a Saturday or
                                           Sunday) on which banks are open
                                           for business in London

"Carve-Out Accounts"                       has the meaning given in Schedule
                                           VI Part B (warranty A7)




                                     -34-



"Cash"                                     at the relevant time, the
                                           aggregate amount of cash held by,
                                           and the positive balances standing
                                           to the credit of the bank accounts
                                           of each member of the Telecom
                                           Group

"Claim"                                    any claim arising under this
                                           Agreement or any other document
                                           entered into hereunder or referred
                                           to herein but excluding (unless
                                           otherwise stated) any claim
                                           arising under (i) the Tax
                                           Covenant, (ii) any breach of any
                                           warranty or covenant set forth in
                                           clause 6, clause 10.1, clause 15
                                           (but only insofar as it relates to
                                           any of the foregoing provisions),
                                           (iii) the indemnities under
                                           clauses 10.2, 10.3 and 10.5, (iv)
                                           clause 3.1, (v) Part A of Schedule
                                           VI

"Companies Act"                            the Companies Act 1985, as amended
























                                     -35-



"Competing Transaction"                    any of the following (other than
                                           the transactions contemplated by
                                           this Agreement) involving any
                                           Telecom Group Member:

                                           (i)      any merger, consolidation,
                                                    share exchange, exchange
                                                    offer, business
                                                    combination,
                                                    recapitalisation,
                                                    liquidation, dissolution
                                                    or other similar
                                                    transaction involving such
                                                    person;

                                           (ii)     any sale, lease, exchange,
                                                    mortgage, pledge, transfer
                                                    or other disposition of
                                                    all or substantially all
                                                    of the shares or assets of
                                                    such person;

                                           (iii)    any public announcement of
                                                    a proposal, plan or
                                                    intention to do any of the
                                                    foregoing or any agreement
                                                    to engage in any of the
                                                    foregoing

"Completion"                               completion of the Transaction

"Completion Balance Sheet"                 has the meaning given in Schedule
                                           V

"Completion Date"                          the date on which Completion
                                           occurs

"Completion Net Assets"                    the number in the Completion
                                           Balance Sheet that corresponds to
                                           "Net Assets (Excluding Net Debt)"
                                           ((Pound Sterling)220,365,000) as
                                           at the Base Line Balance Sheet

"Confidential Information"                 all information not publicly
                                           known, insofar as it is used in or
                                           otherwise relates to the business,
                                           customers or financial or other

                                     -36-



                                           affairs of any Telecom Group
                                           member (for the purposes of
                                           clauses 17.1 and 17.3) or any
                                           member of the Racal Group (for the
                                           purposes of clauses 17.2 and
                                           17.3), including, without
                                           limitation, information relating
                                           to:

                                           (a)      the marketing of goods or
                                                    services including,
                                                    without limitation,
                                                    customer names and lists
                                                    and other details of
                                                    customers, sales targets,
                                                    sales statistics, market
                                                    share statistics, prices,
                                                    market research reports
                                                    and surveys, and
                                                    advertising or other
                                                    promotional materials; or

                                           (b)      future projects, business
                                                    development or planning,
                                                    commercial relationships
                                                    and negotiations

"Consents"                                 any approval licence or consent
                                           required from any Reversioner
                                           necessary to effect the Property
                                           Reorganisation and the expression
                                           "Consent" shall include the
                                           execution and completion of any
                                           document required by the relevant
                                           Reversioner for the purpose of or
                                           in connection with the evidencing
                                           of the grant of such approval
                                           licence or consent (whether or not
                                           incorporating other
                                           provisions)

"Consideration"                            the aggregate amount referred to
                                           in clause 4.3 as payable by Global
                                           to the Sellers


                                     -37-



"Covenantor"                               Global and/or Racal

"Data Room"                                the data room containing
                                           information relating to the
                                           Telecom Group located at the
                                           offices of the Racal Solicitors

"Data Room Index"                          the index of documents including
                                           the supplemental index in the
                                           Agreed Form relating to the
                                           information in the Data Room

"Disclosure Letter"                        the letter of the same date as
                                           this Agreement from Racal to
                                           Global referred to in clause 8

"dollars" or "$"                           US dollars

"Encumbrance"                              includes any encumbrance, charge,
                                           debenture, mortgage, pledge, lien,
                                           assignment, hypothecation,
                                           security interest, title
                                           retention, option, claim, right to
                                           acquire, right of possession,
                                           right of pre-emption, restriction
                                           or other security agreement or
                                           arrangement

"Fieldforce"                               the division of Racal Services
                                           (Communications) Ltd whose
                                           principal business as at the date
                                           of this Agreement is the
                                           installation, repair and
                                           maintenance of communications for
                                           the railway's telecommunications
                                           network and related technical
                                           equipment

"Finance Lease Debt"                       at the relevant time, the
                                           aggregate amount payable (whether
                                           or not due and including all
                                           principal, interest, charges, fees
                                           and expenses but excluding
                                           interest charges for future
                                           periods) by RTL to Railtrack plc
                                           under the Finance Lease dated 30
                                           June 1994

                                     -38-



"Finance Lease Net Debt"                   at the relevant time, the Finance
                                           Lease Debt less the Finance Lease
                                           Receivables

"Finance Lease Receivables"                at the relevant time, the
                                           aggregate amount receivable
                                           (whether or not due and including
                                           all principal, interest, charges,
                                           fees and expenses but excluding
                                           interest charges for future
                                           periods) by RTL from BRTH under
                                           the Telecommunications Services
                                           Agreement dated 23 July 1999 or
                                           any other substitute document
                                           envisaged by the Reorganisation
                                           Documents when executed

"Global Auditors"                          Arthur Andersen 

"Global Group"                             Global and its subsidiary
                                           undertakings from time to time

"Global Property Solicitors"               such solicitors as may be
                                           appointed from time to time by
                                           Global in relation to property
                                           matters

"Global Solicitors"                        Simpson Thacher & Bartlett of 99
                                           Bishopsgate, London

"Goldman Sachs Facility"                   the facility envisaged by a letter
                                           dated 8 October 1999 from the
                                           Security Trustee and another to 
                                           Global Crossing Holdings Limited

"Guarantor"                                Racal

"ICTA 1988"                                the Income and Corporation Taxes
                                           Act 1988

"Intellectual Property"                    inventions, patents, trade marks,
                                           service marks, designs (whether
                                           registered or unregistered),
                                           copyrights (including without
                                           limitation, rights in software),
                                           confidential information, know-
                                           how, customer lists, database

                                     -39-



                                           rights, business or trade names,
                                           trading goodwill and all rights
                                           and forms of protection of a
                                           similar nature or having similar
                                           or equivalent effect to any of
                                           these which may exist anywhere in
                                           the world and all applications and
                                           rights to apply for the protection
                                           of, any of the foregoing

"Intellectual Property Rights"             the Intellectual Property which is
                                           owned by Telecom Group members and
                                           which is material to the business
                                           of the Telecom Group details of
                                           which are disclosed in Sections 9,
                                           10, 11 and 12 and Index II.9, 10,
                                           11 and 12 in the Data Room Index

"Inter-Company Debt"                       at the relevant time, the
                                           aggregate amount payable (whether
                                           or not due and including all
                                           principal, interest, charges, fees
                                           and expenses) by members of the
                                           Telecom Group to all other members
                                           of the Racal Group (other than any
                                           other members of the Telecom
                                           Group) in respect of all
                                           borrowings, overdrafts,
                                           intercompany balances and
                                           outstanding indebtedness but
                                           excluding (i) all sums payable in
                                           respect of Inter-Company Trading
                                           Debt; (ii) any amounts payable
                                           under the finance lease) dated 30
                                           June 1994 between RTL and
                                           Railtrack; and (iii) any amounts
                                           payable by members of the Telecom
                                           US Group to members of the Racal
                                           Group

"Inter-Company Net Debt"                   at the relevant time, the amount
                                           of the Inter-Company Debt less the
                                           amount of the Inter-Company
                                           Receivables (which may be a
                                           positive or a negative amount)

"Inter-Company Trading Debt"               at the relevant time, the

                                     -40-



                                           aggregate amount payable (whether
                                           or not due) in the ordinary course
                                           of trading by members of the
                                           Telecom Group to all other members
                                           of the Racal Group (other than any
                                           other members of the Telecom
                                           Group)

"Inter-Company Receivables"               at the relevant time, the
                                           aggregate amount receivable
                                           (whether or not due and including
                                           all principal, interest, charges,
                                           fees and expenses) by members of
                                           the Telecom Group from all other
                                           members of the Racal Group (other
                                           than any other member of the
                                           Telecom Group) in respect of all
                                           borrowings, overdrafts,
                                           intercompany balances and
                                           outstanding indebtedness but
                                           excluding all sums to be received
                                           in respect of Inter-Company
                                           Trading Receivables

"Inter-Company Trading                     at the relevant time, the
Receivables"                               aggregate amount to be received
                                           (whether or not due) in the
                                           ordinary course of trading by
                                           members of the Telecom Group from
                                           all other members of the Racal
                                           Group (other than any other
                                           members of the Telecom Group)

"ION"                                      International Optical Network
                                           L.L.C.

"July Management Accounts"                 the management accounts for the
                                           Telecom UK Group to be prepared in
                                           accordance with Schedule X as at
                                           23 July 1999 which shall include a
                                           profit and loss account for the
                                           period commencing 1 April 1999 and
                                           ending on that date and a balance
                                           sheet as at that date

"London Stock Exchange"                    London Stock Exchange Limited


                                     -41-



"Long Stop Date"                           15 December 1999

"new PTO Licence"                          has the meaning given to it in
                                           paragraph 2 of Schedule III

"non-Railtrack Properties"                 Properties which are not located
                                           on land owned, leased or licenced
                                           by Railtrack plc or any  other 
                                           member of the Railtrack group

"Outstanding Negotiations"                 means the wayleaves, licences and
                                           leases in the process of
                                           negotiation as listed in Schedule
                                           XII Parts A and B

"Pre-Completion Dividend"                  has the meaning given to it in
                                           clause 5.5

"pounds" or "(Pound Sterling)"             UK pounds sterling

"Properties"                               except as defined for clause 13,
                                           the properties which are material
                                           to the business of the Telecom
                                           Group brief particulars of which
                                           are set out in Section 7 and Index
                                           II.7 of the Data Room Index

"Property Owner"                           in respect of each leasehold
                                           property, the person designated as
                                           the "Property Owner" in Schedule
                                           XI

"Property Reorganisation"                  (a)      the assignment to RTL of
                                                    the leasehold properties
                                                    listed in Schedule XI Part
                                                    A (where not already held
                                                    by RTL) and where
                                                    indicated in that part of
                                                    the Schedule the grant of
                                                    a sublease or licence of
                                                    part to RPL for occupation
                                                    by Field Force or
                                                    Translink on the terms set
                                                    out in that part of the
                                                    Schedule and otherwise
                                                    upon the terms of the
                                                    relevant lease; 

                                     -42-



                                           (b)      the assignment to RPL of
                                                    the leasehold properties
                                                    listed in Schedule XI Part
                                                    B and the grant of a
                                                    sublease or licence of 
                                                    part to RTL on the terms
                                                    set out in that part of
                                                    the Schedule; 

                                           (c)      the grant of a licence of
                                                    part of the property
                                                    referred to in Schedule XI
                                                    Part C on the terms set
                                                    out in that part of the
                                                    Schedule;

                                           (d)      the assignment to RTL of
                                                    the leasehold properties
                                                    listed in Schedule XI Part
                                                    D; and

                                           (e)      the assignment to RPL of
                                                    the leasehold property
                                                    listed in Schedule XI Part
                                                    E on the terms set out in
                                                    the Schedule

                                           the circular to be sent to
"Racal Circular"                           shareholders of Racal in relation
                                           to the Transaction pursuant to the
                                           Listing Rule of the London Stock
                                           Exchange

"Railtrack Agreements"                     the Finance Lease Agreement dated
                                           30 June 1994, the Grant of Use
                                           date 30 June 1994, the two Deeds
                                           of Grant dated 2 August 1995, the
                                           Management Agreement dated 31
                                           March 1995 and the National Radio
                                           Network Agreement dated 30 June
                                           1994 in each case entered into
                                           between Railtrack plc and RTL and
                                           all of the above are included at
                                           Section 9.1.1B of the Data Room


                                     -43-



                                           Index as modified, amended or
                                           supplemented from time to time

"Racal Auditors"                           Deloitte & Touche, Hill House, 1
                                           Little New Street, London EC4A 3TR

"Racal EGM"                                the Extraordinary General Meeting
                                           of Racal to be  convened in
                                           connection with the Transaction
                                           and certain steps in relation
                                           thereto, including any adjournment
                                           thereof

"Racal Group"                              Racal and its subsidiary
                                           undertakings from time to time

"Racal Marks"                              the word Racal and any other word
                                           or mark incorporating Racal

"Racal Shareholders"                       holders of Racal Shares

"Racal Solicitors"                         Lovell White Durrant of 65 Holborn
                                           Viaduct, London, EC1A 2DY

"Racal Telecom UK Group Shares"            the shares in RTL, RISL and RTNL
                                           referred to in Schedule IV

"Racal USA"                                Racal Telecommunications, Inc., a
                                           company organised under the laws
                                           of Delaware 

"Racal USA Shares"                         1000 shares of Racal USA, as
                                           specified in Schedule IV

"Reorganisation"                           the reorganisation of the Racal
                                           Group, its successors and assigns,
                                           as effected or to be effected by
                                           the Reorganisation Documents

"Reorganisation Documents"                 each of the reorganisation
                                           agreements in the Agreed Form and
                                           the Intra-Group Business Transfer
                                           Agreement executed on
                                           1 October 1999 between BRTH and
                                           RTL in relation to Fieldforce and
                                           the Intra-Group Business Transfer
                                           Agreement executed on 1 October

                                     -44-



                                           1999 between BRTH and RTL in
                                           relation to Translink

"Reversioner"                              means in respect of each leasehold
                                           property any person entitled to an
                                           interest in reversion (whether
                                           mediate or immediate) whose
                                           consent is necessary to the
                                           assignment or subletting or
                                           licence of any of the leasehold
                                           properties and relevant
                                           Reversioner shall be construed
                                           accordingly

"RISL"                                     Racal Internet Services Limited (a
                                           company registered in England
                                           under No 3231692)

"RPL"                                      Racal Properties Limited

"RTL                                       Racal Telecommunications Limited
                                           (a company registered in England
                                           under No 2089583)

"RTNL"                                     Racal Telecommunications Networks
                                           Limited, (a company registered in
                                           England under No 2089583)

"RTPA"                                     the Restrictive Trade Practice Act
                                           1976

"Security Trustee"                         Goldman Sachs International

"Sellers"                                  Racal, Controls and Communications
                                           Limited and The Racal Corporation

"Shareholder Funds"                        at the relevant time, the sum of
                                           the aggregate amount of issued and
                                           paid up share capital of each
                                           member of the Telecom Group and
                                           all of the   reserves   (whether  
                                           or   not  distributable) standing
                                           to the credit of each member of
                                           the Telecom Group less debit
                                           balances where relevant

"Shares"                                   the shares in the Telecom Group

                                     -45-



                                           listed in Schedule IV

"subsidiary undertaking"                   a subsidiary undertaking as that
                                           term is defined in section 258 of
                                           the Companies Act

"Tax"                                      has the meaning given in the Tax
                                           Covenant

"Tax Covenant"                             the covenant to be given by Racal
                                           to Global set out in Schedule IX

"Tax Warranties"                           means those warranties set out in
                                           Part C of Schedule IX

"Telecom Group" or "Telecom                RTL, RTNL, RISL and Racal USA or
Companies"                                 any one of them as the context
                                           requires and "Telecom Group
                                           member" shall be construed
                                           accordingly

"Telecom Group Shares"                     the Racal USA Shares and the
                                           Telecom UK Group Shares

"Telecom UK Group"                         the Telecom Group (excluding Racal
                                           USA) or any of such companies and
                                           "Telecom UK Group member" shall be
                                           construed accordingly

"Telecom UK Group Shares"                  the shares in the members of the
                                           Telecom UK Group as set out in
                                           Schedule IV

"Telecom US Group"                         Racal USA and ION or either of
                                           them as the context requires

"TCGA"                                     the Taxation of Chargeable Gains
                                           Act 1992

"Trade Mark Licence"                       the licence to use the Racal Marks
                                           in the Agreed Form to be granted
                                           by Racal to Global

"Transaction"                              the transfers by members of the
                                           Racal Group of their interest in
                                           the Telecom Group to Global


                                     -46-



"Transfer Conditions"                      the conditions as described in
                                           Schedule III

"Transaction Documents"                    this Agreement, the Disclosure
                                           Letter, the Trademark Licence and
                                           the Transitional Services
                                           Agreements

"Transitional Services Agreement"          the agreement in Agreed Form
                                           relating to the provision of
                                           services after Completion

"Translink"                                the division of Racal Services
                                           (Communications) Ltd whose
                                           principal business as at the date
                                           of this Agreement is the provision
                                           of infrastructure services,
                                           advanced information systems and
                                           project support for the rail and
                                           transport community

"UK GAAP"                                  United Kingdom generally accepted
                                           accounting principles and
                                           practices including applicable
                                           financial reporting standards,
                                           Statements of Standard Accounting
                                           Practice and abstracts of the
                                           Urgent Issues Task Force

"Umpire"                                   the person described in paragraph
                                           9 of Schedule V

"United Kingdom" or "UK"                   the United Kingdom of Great
                                           Britain and Northern Ireland

"United States" or "US"                    the United States of America and
                                           its territories and possessions and
                                           any other areas subject to its
                                           jurisdiction

"US GAAP"                                  United States generally accepted
                                           accounting principles and
                                           practices

"Warranties"                               the warranties set out in Part B
                                           of Schedule V and Part C of
                                           Schedule IX

                                     -47-



                                 SCHEDULE III

                              Transfer Conditions



Completion will be conditional upon:


1.   the Racal Shareholders having passed the necessary resolution at the
     Racal EGM to approve and implement the Transaction; 

2.   the granting of a national public telecommunications operators licence 
     (the "new PTO Licence") (in a standard form and on standard terms 
     (including a period of 25 years from an effective date of no earlier 
     than September 1994 and applying the Telecommunications Code contained 
     in Schedule 2 to the Act currently the subject of the consultation 
     period established by the Telecommunications Act 1984) to RTL under 
     section 7 of the Telecommunications Act 1984;

3.   the Secretary of State for Trade and Industry having:

     (a)  been duly notified in relation to each of the Telecommunications 
          Licences (as defined and referred to in paragraph J.3 of Part B 
          of Schedule VI) and the new PTO licence on the proposed change 
          in control of the Telecom Companies concerned pursuant to this 
          Agreement; and

     (b)  confirmed to the Telecom Companies and Global that such change in 
          control will not lead to the revocation of any of the 
          Telecommunications Licences or the new PTO licence (except for the 
          revocation of the closed-user group licence issued to RTL under
          section 7 of the Telecommunications Act 1984 on 13 March 1998 (the 
          "CUG licence") following the grant of the new PTO licence in 
          circumstances where the CUG licence will no longer be required by 
          RTL for the purposes of carrying on any of its businesses);

4.   the German competition authorities indicating in terms satisfactory to the 
     parties that they consent to the completion of the Transaction or any 
     applicable waiting period having expired or been terminated (the "German 
     Clearance"); and




                                     -48-



5.   any applicable waiting period under the Hart-Scott-Rodino Antitrust
     Improvements Act 1976 relating to the proposed acquisition of the Shares 
     having expired or been terminated.













































                                     -49-



                                  SCHEDULE IV

                                 Telecom Group


  Name of       Country of       Registered  Shares to be        Beneficial
  Company      Registration        Number    transferred             and
              (England unless                                    Registered
                  stated)                                          Owner 



    RTL     -                     2495998    100,000 ordinary   Racal
                                             shares

   RISL     -                     3231692    500,000 (300,000   Controls and
                                             A shares; 200,000  Communications
                                             B shares)          Limited

   RTNL     -                     2089583    19,250,000         Racal
                                             ordinary shares  

 Racal USA  USA (State of            -       1,000 shares of    The Racal
            Delaware)                        $1.00              Corporation

























                                     -50-



                                  SCHEDULE V

                           Completion Balance Sheet


                                    Part A


1.   Global shall procure that employees and members of the Telecom UK Group 
     prepare a balance sheet of the Telecom UK Group as at the Completion Date 
     (the "Completion Balance Sheet") within 30 Business Days of the Completion 
     Date and deliver it to the Racal Auditors for review by them as soon as 
     reasonably practicable and in any event to be completed by not later than 
     10 Business Days from the date of receipt by them of the draft Completion 
     Balance Sheet. Global shall procure that the Telecom UK Group permits the 
     Racal Auditors such reasonable access to the records and staff of the 
     Telecom UK Group as they may reasonably require for the purposes of the 
     Racal Auditors fulfilling their obligations contained in this Schedule.

2.   The Completion Balance Sheet shall be drawn up by the Telecom UK Group in 
     accordance with the following principles:

     (a)  under the historic cost accounting convention applying UK GAAP and on 
          the same basis and in accordance with the same accounting principles,
          policies and practices as have been applied in the preparation of the 
          Base Line Balance Sheet; and

     (b)  reflecting in any event the bases and adjustments set out in 
          paragraph 3, out so that if the provisions of paragraph 3 and the 
          provisions of this paragraph 2 conflict with each other, the 
          provisions of paragraph 3 shall prevail.

3.   For the avoidance of doubt, in the Completion Balance Sheet:

     (a)  the book values for the cost, accumulated depreciation and provisions 
          for asset impairment for fixed assets as used in the Base Line
          Balance Sheet shall be used adjusted only to reflect additions, 
          disposals and depreciation charged in the period between the Balance 
          Sheet Date and the Completion Date.  The depreciation charges used to 
          determine in the Completion Balance Sheet shall use the same rates 
          as in preparing the Base Line Balance Sheet and additions (including 
          the capitalisation of overheads) shall be calculated on the same

                                     -51-



          basis used as in preparing the Base Line Balance Sheet; 

     (b)  the same book values for cost and provisions of stocks as were used 
          in the Balance Line Balance Sheet, except as adjusted for actual 
          additions and usage during the period shall be used;

     (c)  the provision for any liability for Tax arising pursuant to s 179 
          TCGA in respect of the British Rail Board Assets as defined in the 
          Tax Covenant as a consequence of the sale contemplated by this
          Agreement (the "Section 179 Liability") shall be (Pound Sterling)
          5 million; 

     (d)  any SSAP24 asset (representing accrued over payment of pensions) will 
          be excluded;

     (e)  save as set out in paragraph (c), corporation tax balances will be 
          excluded;

     (f)  the provision for FRS 3 fundamental re-organisation shall be equal 
          to the amount of (Pound Sterling)9,300,000 less amounts actually 
          charged in respect thereof in the financial year commencing 
          1 April 1999;

     (g)  recognising the adjustment for the accounting treatment of share
          options under the heading "ESOT" in the Base Line Balance Sheet; and

     (h)  external borrowings (if any) shall be included as a liability in the 
          Completion Net Assets with the exception of the Finance Lease.

4.   If the Racal Auditors following the review conclude that the draft
     Completion Balance Sheet does not comply with the basis for preparation 
     set out in paragraphs 2 and 3 above, they may make adjustments to the 
     draft Completion Balance Sheet.

5.   A draft of the Completion Balance Sheet (reflecting such adjustments (if 
     any) made by the Racal Auditors in accordance with paragraph 4) together 
     with a draft report of the Racal Auditors in the form set out in Part B 
     of this Schedule (the "Report") shall be delivered by Racal to Global not 
     later than seven days after the same shall have been prepared and reviewed 
     and Global and the Global Auditors may review the same in order to satisfy 
     themselves that the draft Completion Balance Sheet have been prepared and 
     reviewed in accordance with the provisions of this Schedule and that the

                                     -52-



       
     details contained in the Report are correct.  

6.   For the purposes of preparing the Completion Balance Sheet and in 
     connection with any dispute arising following preparation of the
     Completion Balance Sheet, the Global Auditors shall be entitled
     access to the working papers of the Racal Auditors relating to the
     Base Line Balance Sheet and Completion Balance Sheet at reasonable
     times and on reasonable notice.

7.   Unless within 28 days of the receipt of the same (inclusive of the day 
     of receipt) Global gives notice to Racal in writing of any respect in 
     which they are not satisfied being either that the draft Completion 
     Balance Sheet have not been prepared and/or reviewed in accordance with 
     the provisions of this Schedule or that the details contained in the 
     draft Report are incorrect, the Completion Balance Sheet and the said 
     Report shall be final and binding between the parties (as they shall be 
     if within the period of 28 days Global gives written notice to Racal that 
     they are so satisfied).  

8.   If Global does give notice to Racal in writing that they are not so
     satisfied and if the matter or matters in dispute are not resolved by
     the parties within 56 days of Global receiving the draft Completion
     Balance Sheet (inclusive of the day of receipt) the matter may be
     referred by either Global or Racal to the Umpire, who shall act as an
     expert and not as an arbitrator, and the decision of the Umpire as to
     any matter so in dispute and as to the proper contents of the
     Completion Balance Sheet and of the said Report shall be final and
     binding between the parties in the absence of manifest error.  The
     provisions of paragraphs 9 and 10 of this Schedule shall apply in
     relation to any reference to such Umpire.

9.   The Umpire shall be a Chartered Accountant or firm of Chartered
     Accountants agreed on by Racal and Global or, if they cannot agree on
     such within seven days of any party giving notice in writing to the
     other that it desires an Umpire to be appointed, such Chartered
     Accountant or firm of Chartered Accountants as may be nominated on
     the application of any of them by the President or other senior
     officer for the time being of the Institute of Chartered Accountants
     in England and Wales.

10.  The parties hereby agree and undertake that if any disagreement or
     dispute under this Agreement is referred to the Umpire:

     (a)  the parties will each use all reasonable endeavours to co-operate 
          with the Umpire in resolving such disagreement or dispute, and for 
          that purpose will provide to him all such information and

                                     -53-



                        
          documentation as he may reasonably require;

     (b)  the Umpire shall have the right to seek such professional assistance 
          and advice as he may require in fulfilling his duties; and

     (c)  the fees of the Umpire (and any professional fees incurred by him) 
          shall be borne as to half by Global and as to half by Racal unless 
          the Umpire directs otherwise provided that if either party fails to 
          pay its share of any such fee within seven days of the relative 
          invoice being rendered to the parties or either of them the other 
          party shall be entitled to pay the full amount of the fee and 
          thereupon to recover one half thereof from the first-mentioned
          party as a debt due and payable on demand.  

11.  Upon the resolution of any dispute concerning the contents of the draft 
     Completion Balance Sheet or the draft Report (howsoever resolved) the 
     draft Completion Balance Sheet and the draft Report shall be amended to 
     accord with the resolution of any such dispute and such Completion Balance 
     Sheet and such Report so amended shall be final and binding between the 
     parties.

























                                     -55-



                                    Part B

                                FORM OF REPORT

     To:      Racal 

              Global 

     1.       We confirm that we have reviewed (without carrying out an
              audit) the combined balance sheet of members of the Telecom
              UK Group to the Completion Date.  These accounts are the
              Completion Balance Sheet referred to in the Agreement entered
              into between, amongst others, your respective companies on 10
              October 1999 relating to the transfer to Global of the
              Telecom Group (the "Agreement").  The Completion Balance
              Sheet is attached. 

     2.       In our opinion the Completion Balance Sheet have been drawn
              up in accordance with the provisions of Schedule V to the
              Agreement. 

     3.       Based on the Completion Balance Sheet we confirm that the
              Completion Net Assets (as defined in the Agreement) is (Pound
              Sterling)   *** and the amount of Finance Lease Net Debt (as
              defined in the Agreement) is (Pound Sterling)   ***.


Signed   .......................
        [Racal Auditors]


















                                     -56-



                                  SCHEDULE VI

                           Covenants and Warranties

                                    Part A

                                   COVENANTS


     Each party (the "Covenantor") warrants to the other parties in the
following terms:

     (a)  the Covenantor is a company duly incorporated and validly existing 
          under the laws of its place of incorporation and possesses the 
          capacity to sue in its own name and has the corporate power and
          authority to carry on, in all material respects, its own business 
          as now being conducted and to own, lease and operate its property 
          and other assets;

     (b)  subject to the terms and conditions of this Agreement, the Covenantor 
          has the legal right and the necessary corporate power and authority 
          to enter into and perform this Agreement and any other documents 
          to be executed by it pursuant hereto;

     (c)  subject to the terms and conditions of this Agreement, this Agreement 
          and the other documents which are to be executed by it pursuant 
          hereto will, when executed and subject to any necessary shareholder 
          approvals and assuming the due authorisation, execution and delivery 
          thereof by the other parties, constitute valid and binding
          obligations of the Covenantor;

     (d)  subject to the terms and conditions of this Agreement, the 
          execution and delivery of, and the performance by the 
          Covenantor of its obligations under, this Agreement and any 
          other documents to be executed by it pursuant hereto will not:

          (i)  result in a breach of any provision of the constitutional 
               documents of the Covenantor;

          (ii) result in a breach of or give any third party a right to 
               terminate or modify, or result in the creation of any

                                     -57-



               encumbrance or constitute a default under any agreement,
               licence or other instrument or result in a breach of any order, 
               judgment or decree of any court, governmental agency or 
               regulatory body to which the Covenantor is a party except where 
               any such matter or occurrence would not have a material 
               adverse effect on the Covenantor and its group companies 
               taken as a whole;

         (iii) except as otherwise stated herein or therein, require the 
               consent of its shareholders or the shareholders of any of
               its parent undertakings; or

         (v)   save as provided herein or therein, require any governmental or 
               third party approvals or the consent of any other person which
               has not been obtained.


                                    Part B

                                  WARRANTIES

Except where the context otherwise requires references in this Part B to the
Company shall be construed as references to each member of the Telecom Group.


A.   Financial information

A.1  The copies of the statutory accounts for the year ended 31 March 1999
     for RTL, RTNL and RISL annexed to the Disclosure Letter are each a
     true and complete copy.  Such accounts each:

     (a)  give a true and fair view of the financial position and state of 
          affairs of RTL, RTNL and RISL as appropriate at 31 March 1999 as 
          at the dates stated and of its profit or loss for the period to 
          which they relate;

     (b)  have been prepared in accordance with UK GAAP at 31 March 1999, 
          with the Companies Act and other applicable statutes; and




                                     -58-



     (c)   have been prepared, unless otherwise expressly stated therein, 
           on a basis consistent with the basis applied in the corresponding 
           accounts for the preceding financial year.

A.2.  The July Management Accounts will be prepared on a basis consistent
      with UK GAAP applied on a consistent basis with the Carve-Out
      Accounts with due care and attention, and will show a reasonably
      accurate view of the state of affairs of the Telecom UK Group as at
      the date and the results for the period ended on that date in respect
      of which they will be prepared, but it is hereby acknowledged that
      they will not be prepared on a statutory basis.  Such management
      accounts will include a balance sheet which is consistent with the
      column headed "Revised Management Accounts" in the Base Line Balance
      Sheet prior only to reflecting the column headed "Purchase
      Consideration" and reclassifying the group loan accounts in the
      columns headed "Transfer Fieldforce" and "Transfer Translink".

      The July Management Accounts will report sales in the profit and loss
      account of not less than (Pound Sterling)58.9 million and a loss
      before interest, exceptional items and taxation of not more than
      (Pound Sterling)6.6 million.

      The July Management Accounts will not include any "exceptional" items
      as that term is used in FRS3 other than a provision for costs
      "fundamental reorganisation" which commenced in the financial year
      ended 31 March 1999.

A.3   The 31 March Balance Sheet (contained in the Carve-Out Accounts) has
      been prepared in accordance with UK GAAP and provides an accurate
      view of the combined state of the affairs of the Telecom Group as
      reflected in the Racal Group financial statements as at those dates
      and as adjusted to show the affairs of that group as if the
      transactions referred to in the Reorganisation Documents had taken
      place on 1 April 1996 (by reference, where applicable to the
      equivalent assets to those referred to in the Reorganisation
      Documents) and on the basis set out in the notes thereto as further
      detailed in the adjustment principles in the Agreed Form (the
      "Adjusting Principles").

A.4   The judgements identified in the Adjusting Principles in preparing
      the 31 March Balance Sheet and the Base Line Balance Sheet were made
      in good faith such that the presentation based on the exercise of
      those judgements was reasonable.

A.5   The Base Line Balance Sheet was prepared as set out in Warranty A.3
      (substituting 23 July, 1999 for the date set out therein) other than
      in respect of adjustments for recognition of pension surplus on

                                     -59-



      acquisition of BRTH, related deferred tax, the reversal of the ESOT
      accrual and the balances relating to RNS BV as reflected in the Racal
      Group financial statements which were reflected in the 31 March
      Balance Sheet, but not in the Base Line Balance Sheet and was
      prepared in a manner consistent with the basis of preparation of the
      31 March Balance Sheet.  The Base Line Balance Sheet reflects the
      balance sheet contained in the July Management Accounts (headed
      "Revised Management Accounts") adjusted in respect of purchase
      consideration (and the related reclassification of the related Group
      Loans of Translink and Fieldforce), tax, SSAP24, ESOT Deferred Tax
      and Completion Dividend.

A.6   The "External turnover" line on page 7 (note 4) of the Carve-Out
      Accounts is substantially an accurate reflection of the "revenue" of
      the Telecom Group for each of the previous three (3) years after
      appropriately excluding the businesses transferred under the
      Reorganisation Documents.

A.7   The Finance Director of Racal, having made enquiries of his senior
      staff, is aware of no matter which would cause the proforma profit
      and loss accounts of the Telecom Group and the related footnotes in
      the Agreed Form (the "Carve-Out Accounts") to be materially altered
      if they were to be required to be published for the purposes of a
      shareholder circular seeking approval of the transactions
      contemplated hereby at the date hereof.

A.8   At the Balance Sheet Date, the Telecom Group had no indebtedness for
      borrowed money other than intra group indebtedness and the Finance
      Lease.

B.   Business since the Balance Sheet Date

B.1  Since the Balance Sheet Date the Company has carried on its business
     in the ordinary course and so as to maintain the same as a going
     concern without any material interruption or alteration in the
     nature, scope or manner of such business and there has been no
     material adverse change in the financial or trading position of the
     Company.

B.2  Since the Balance Sheet Date:

     (a)  no member of the Telecom Group has:

          (i)  acquired or disposed or any material business or assets, 
               made any material capital  expenditure or incurred any
               material capital commitments, in each case outside the

                                     -60-



               ordinary course of its business; or

          (ii) entered into any material contract, obligation or other 
               arrangement outside the ordinary course of its business; or

         (iii) incurred any liability, contingent or otherwise, for any 
               brokers' fees or break-up, termination or similar fees or 
               expenses; or

          (iv) incurred any indebtedness for borrowed money other than intra 
               group indebtedness; or

           (v) paid or declared any dividend.

     (b)  there has been no material damage, destruction or loss with respect
          to any material asset or property owned, leased or otherwise used by 
          any member of the Telecom Group (whether or not covered by 
          insurance).

     (c)  contracted for or otherwise obligated itself to provide dark fibre, 
          IRUs (indefeasible rights of use) or transfers of network capacity 
          which such contracts or obligations purport to generate aggregate 
          revenue prior to Completion in excess of (Pound Sterling)30 million.

C.   Share Capital and constitution

C.1  The register of members of the Company contains complete and accurate
     records of its members and all issues and transfers of shares in the
     capital of the Company have been registered in accordance with the
     Articles of Association of the Company from time to time in force and
     have in relation to Racal USA been registered in accordance with the
     by-laws of Racal USA .

C.2  The Company has complied in all material respects with the provisions
     of the Companies Act and Racal USA has complied in all material
     respects with the provisions of Delaware law and all returns,
     particulars, resolutions and other documents required under any
     legislation to be delivered on behalf of the Company to the Registrar
     of Companies or to any other authority whatsoever have been properly
     made and delivered.



                                     -61-



C.3  The copy of the Memorandum and Articles of Association of each
     Telecom UK Group member and the constitutional documents of Racal USA
     disclosed in the Data Room is up to date, true and complete.

C.4  The Telecom UK Group Shares and the Racal USA Shares constitute all
     the shares in issue in the capital of the Telecom Companies and have
     been properly allotted and issued and are fully paid.  There is no
     outstanding option or right to acquire any interest whatsoever in any
     share in the capital of the Company.  Neither Racal USA nor any
     Telecom UK Group member has any outstanding debentures or loan notes.


D.   Subsidiary Undertakings and related operations

     References in this paragraph D to any procedures under English law
     shall in the case of Racal USA be deemed to be references to
     applicable US laws.

D.1  The Telecom UK Companies are limited companies incorporated under
     English law.  Racal USA is a corporation incorporated under the laws
     of the State of Delaware and is in good standing.

D.2  Other than as referred to in warranty D.11 no Telecom Group member is
     the holder or beneficial owner of any shares or securities of any
     other person (whether incorporated in the United Kingdom or
     elsewhere) and none has agreed to acquire any such shares or
     securities.

D.3  Other than as referred to in Warranty D.11 no Telecom Group member is
     or has agreed to become a member of any partnership, joint venture,
     consortium or other incorporated or unincorporated association and no
     Telecom UK Group member has a branch, agency, place of business or
     establishment outside the United Kingdom.  Racal USA has no branches,
     agency, place of business or establishment outside the United States
     of America.

D.4  No order has been made or petition presented for the purpose of
     winding up the Company or for the appointment of any provisional
     liquidator or for any administration order to be made in relation to
     the Company.  No receiver (including any administrative receiver or
     manager) has been appointed in respect of the whole or any part of
     the property of the Company nor has any distress, execution or other
     process been levied against the Company.

D.5  No voluntary arrangement has been proposed under Section 1 of the
     Insolvency Act 1986 in respect of the Company and save as
     contemplated by this Agreement no compromise or arrangement has been

                                     -62-



     proposed under Section 425 of the Companies Act in respect of the
     Company.

D.6  So far as the Sellers are aware the Company has not at any time
     during the two years immediately prior to the date of the Agreement:

     (a)  entered into a transaction with any person at an undervalue (as 
          referred to in Section 238(4) of the Insolvency Act 1986); or

     (b)  been given a preference by any person as referred to in Section 
          239(4) of the Insolvency Act 1986.

D.7  The Company has not given a power of attorney or other authority by
     which a person may enter into an agreement, arrangement, or
     obligation on the Company's behalf (other than in authority for a
     director or employee to enter into an agreement in the usual course
     of that person's duties).

D.8  No action is being taken by the Registrar of Companies to strike the
     Company off the Register under Section 652 of the Companies Act. 

D.9  The Company is not insolvent or unable to pay its debts within the
     meaning of section 123 of the Insolvency Act 1986.  The Company
     has not stopped paying its debts as they fall due.

D.10 No person is entitled to receive a finders fee, brokerage or
     commission from the Company in connection with this Agreement.

D.11 Racal USA has no assets or liabilities other than those arising out
     of its holding of shares in ION or those associated with maintaining
     a corporation of good standing.  Racal USA has no material liability,
     contingent or otherwise, except for intercompany indebtedness which
     such intercompany indebtedness shall be either capitalised or waived
     prior to Completion.

E.   Assets

E.1  Save for assets held by the Company 

     (a)  subject to retention of title or similar arrangements arising in 
          the ordinary course of the business of the Company; or

     (b)  which are leased assets or assets hired or rented on hire purchase 
          in the ordinary course of the business details of which are contained 
          in the Data Room;

                                     -63-



     the Company is the legal and beneficial owner of all the material
     assets  used in its business (excluding the Properties).  The assets
     owned by the Company together with those it has the right to use (or
     has a contract for capacity for) are all the assets necessary for the
     effective operation of the business.  Save as aforesaid, no person
     has the right to call for any payment in respect of any of those
     assets and the Company has not created or agreed to create any
     Encumbrance over any part of its undertaking or assets (other than
     Encumbrances arising by the operation of law in the ordinary course
     of business of the Company) nor so far as the Sellers are aware are
     such assets subject to any Encumbrance howsoever created.

E.2  Maintenance contracts are in force for all the material assets of the
     Company where it is both normal to have such assets maintained by 
     independent or specialist contractors, and the Company is obliged to 
     maintain or repair under a leasing or similar agreement.  So far as 
     the Sellers are aware such assets have been regularly maintained in 
     accordance with

     (a)  safety regulations required to be observed in relation to them 
          (including, without limitation, in accordance with any railway 
          safety code); and

     (b)  the provisions of the applicable lease or similar agreement.

E.3  No debts shown in the Base Line Balance Sheet will, if all
     appropriate collection action is taken, be realisable at less than
     their book value, subject to bad debt provisions reflected on the
     Base Line Balance Sheet in accordance with Racal's policy, practices
     and judgments referred to in warranty A.1.  

F.   Properties 

F.1  The Properties comprise all of the land and premises owned, occupied
     or otherwise used by the Telecom UK Group for the purpose of its
     business and the Telecom UK Group are or (following completion of the
     Property Reorganisation) will be the legal and beneficial owner of
     all of the Properties (including the Rights as granted by the Deeds
     of Grant) free from any financial incumbrances and all deeds and
     documents necessary to prove title to each Property are in possession
     of the Sellers and/or the Telecom UK Group or are the subject of
     acknowledgements for production.

F.2  The Telecom UK Group has not entered into any agreement to acquire or
     dispose of any land or premises or any interests therein which has
     not been completed.


                                     -64-



F.3  The Properties are not subject to any outgoings other than uniform
     business rate (except rating surcharge), water rates and insurance
     premiums and also in the case of the leasehold properties, rent and
     service charges and any other payments referred to in the relevant
     leases or licences and neither the Sellers nor the Telecom UK Group
     are in arrears with any such outgoings.

F.4  Neither the Sellers nor the Telecom UK Group have received any
     written notice of material breach of any  agreements, covenants,
     restrictions or other matters to which the Properties are subject.

F.5  Neither the Sellers nor the Telecom UK Group have received any
     claims or notices of disputes or orders or notices affecting the
     Properties.

F.6  Neither the Sellers nor the Telecom UK Group have received any
     written notice that the present use of any of the Properties or any
     development carried out on, is in material breach of any  relevant
     planning legislation and building regulations applicable thereto.

F.7  Neither the Sellers nor the Telecom UK Group have received any
     written notice of material non- compliance with any applicable
     statutory and by-law requirements with respect to the Properties.

F.8  The Properties are served by all means of access, services and other
     facilities necessary for their current use.  No right or easement is
     restricted in any way or is capable of being lawfully interrupted or
     terminated by any person.

F.9  None of the Properties has a book value in excess of (Pound
     Sterling)1,000,000.

F.10 Neither the Sellers nor the Telecom UK Group have received any
     written notice of breaches of tenant covenants of a material nature
     in the case of any of the leasehold properties.  Neither the Sellers
     nor the members of the Telecom UK Group have received any notices or
     complaints alleging such breaches.

F.11 Subject to the Property Reorganisation taking place, there is no
     person in possession or occupation of, or who has or claims a right
     or interest of any kind in, the Properties adverse to the interest in
     them of the Telecom UK Group.

F.12 No fact or circumstance exists which materially and adversely affects
     the use or enjoyment of the Properties or casts doubt on the Telecom
     UK Group's right or title to the Properties.

                                     -65-



F.13 Where the Properties are subject to leases, tenancies or licences the
     tenant or licensee has in all material respects complied with its
     obligations under the lease, tenancy or licence.

F.14 Except in relation to the Properties the Telecom UK Group has no
     liability arising out of the conveyance, transfer, lease, tenancy,
     licence, agreement or other documents relating to land, premises or
     an interest in land or premises.

F.15 Neither the Sellers nor the Telecom UK Group require access to any
     land owned by Railtrack PLC or the British Railways Board ("BRB") in
     order to maintain its SDH network, other than as disclosed by the
     documents in the Data Room.

F.16 The Telecom UK Group has the exclusive benefit of all of the Rights
     (as defined in the Deeds of Grant (as defined below) which it is
     hereby acknowledged are not exclusive Rights) in respect of easements
     over certain property of Railtrack PLC and BRB in England, Wales and
     Scotland granted to BR Telecommunications Limited by the four Deeds
     of Grant (Document: 7.16.1.1, 7.16.2.1, 7.16.3.1 and 7.16.4.1 in the
     Data Room) (the "Deeds of Grant").

G.   Insurance

G.1  Particulars of all current insurance policies relating to the assets
     and business of the Company have been disclosed to Global and are
     adequately summarised in or otherwise disclosed in the Data Room. 
     All premiums due in respect of such policies have been paid.  Details
     of all material claims within the last 3 years are contained in the
     Data Room. 

G.2  So far as the Sellers are aware, there are no circumstances which
     could reasonably be expected to lead to any liability under such
     insurance being avoided by the relevant insurers or the premiums
     being increased and there is no claim outstanding under any such
     policy and, so far as the Sellers are aware, there are no
     circumstances likely to give rise to such a claim.

H.   Commercial agreements and arrangements

H.1  There have been disclosed in the Data Room to Global:

     (a)  all contracts, commitments and obligations of the Company  
          which are material to the business of the Telecom Group 
          (including those with the top 20 customers of the Telecom 
          Group by revenue over the last 12 months) and which are 
          now outstanding or which will become capable of giving 

                                     -66-



          rise to such a contract by an order or acceptance by another party
          or parties;

     (b)  copies of all material agency, distribution or licence agreements or 
          arrangements to which the Company is a party. 

     (c)  details of all discounts, overriders, rebates, allowances and other 
          special terms or similar arrangements which are outside the ordinary 
          course of business offered or granted to the Company by its suppliers 
          or granted by the Company to its customers;

     (d)  all contracts entered into other than in the usual course of business,
          including all joint venture, partnership or similar agreements;

     (e)  all contracts with clauses permitting the counterparty to terminate 
          such agreement on a change of control of the Company;

     (f)  all agreements (other than relating to Properties) which can only be 
          terminated by the Company in accordance with its terms on giving 
          12 months' notice or more; and

     (g)  any contracts entered into under or pursuant to the Private Finance 
          Initiative or subject to Private Finance Initiative terms and
          conditions.


H.2  There are no outstanding liabilities or commitments of the Company
     arising from the disposal of any interest in shares or other assets
     (other than in respect of the disposal of assets in the ordinary
     course of business) previously owned by the Company.

H.3  The Company has not given any covenants limiting or excluding its
     right to do business and/or compete in any area or field (whether
     limited by reference to a geographical area or type of business) with
     any other person nor is it a party to any agreement or arrangement
     which would infringe any provision of the Competition Act 1998, if
     such provision were now in force, or Articles 81 or 82 (formerly
     Articles 85 and 86) of the European Community Treaty, the United
     States Sherman Antitrust Act of 1890 (as amended) or the United
     States Robinson-Patman Act of 1938 (as amended).


                                     -67-



H.4  Neither the Company nor so far as the Sellers are aware any other
     party to any agreement or arrangement with the Company which is
     either (i) one of the top 20 customers of the Telecom Group as a
     whole by revenue over the last 12 months or (ii) one of the top 20
     suppliers to the Telecom Group as a whole by expenditure over the
     last 12 months or (iii) material to the business of the Company, is
     in default to any material extent thereunder such that (in the case
     of (iii)) the relevant agreement or agreements could be terminated in
     advance of its stated term, or there is a contractual right which if
     exercised would result in a material reduction in income or material
     increase in the cost of providing services.

H.5  The Intra-Group Business Transfer Agreement executed on 1 October
     1999 between BRTH and RTL in relation to Fieldforce and the Intra-
     Group Business Transfer Agreement executed on 1 October 1999 between
     BRTH and RTL in relation to Translink are in effect.

H.6  The Reorganisation Documents other than those referred to in H.5
     above, will be duly executed prior to Completion and, upon execution
     in accordance with Schedule X, be in effect.

I.   Intellectual Property Rights

I.1  The Company identified in the first column of paragraph I.1 of the
     Disclosure Letter is the legal and beneficial owner, free from
     Encumbrances of the Intellectual Property Rights appearing opposite
     its name in the second column of such Document.

I.2  The Company identified in the first column of paragraph I.2 of the
     Disclosure Letter is the registered proprietor of the registered
     Intellectual Property Rights appearing opposite its name in the
     second column and all renewal and maintenance fees and taxes due and
     payable prior to the Completion Date in respect of the registered
     Intellectual Property Rights have been paid in full.  So far as the
     Seller is aware each other action required to maintain and protect
     the registered Intellectual Property Rights has been taken. 

I.3  So far as the Sellers are aware, there is no subsisting infringement
     of any of the Intellectual Property Rights by any third party and no
     claims concerning such infringement or potential infringement have
     been made or considered by any Telecom Group member and so far as the
     Sellers are aware, no fact or circumstance exists which might give
     rise to such a claim.

I.4  The Company identified in the first column of paragraph I.4 of the
     Disclosure Letter is the applicant for the registration of the
     Intellectual Property Rights appearing opposite its name in the

                                     -68-



     second column and the Company has not been notified of any grounds
     for refusing an existing application for registration of any of such
     Intellectual Property Rights and so far as the Sellers are aware no
     such grounds exist.

I.5  So far as the Sellers are aware, the activities of each Telecom Group
     Company and the use of the Intellectual Property Rights by any
     Telecom Group Member do not infringe the rights of any third party.

I.6  No member of the Telecom Group has granted or is obliged to grant
     licences and no Company is obliged to enter into assignments,
     undertakings, security interests or other rights in respect of any of
     the Intellectual Property Rights to any third party outside the
     ordinary course of business for a period of longer than three (3)
     years and which are not on arm's length terms.

I.7  All the material Confidential Information is adequately and properly
     documented in accordance with good business practice to enable Global
     to acquire and retain its full benefit.

I.8  The Company has not disclosed and is not obliged to disclose
     Confidential Information where the  disclosure could have a material
     adverse effect on the business except on condition that the
     disclosure is to be treated as being of a confidential nature.

I.9  The Intellectual Property Rights and the Company's ownership interest
     in them will not be adversely affected by the transaction
     contemplated by this Agreement.

I.10 So far as the Sellers are aware, no member of the Racal Group uses
     any Intellectual Property owned or licensed by any member of the
     Telecom Group.  No member of the Telecom Group uses any Intellectual
     Property owned or licensed by any member of the Racal Group.

I.11 The Intellectual Property Rights owned by and licensed to each member
     of the Telecom Group is all the Intellectual Property that is
     necessary to carry on the business of each such member in the same
     manner that it is presently carried on.

J.   Compliance and litigation

J.1  The members of the Telecom UK Group have conducted their businesses
     in all material respects in accordance with all applicable laws and
     regulations of the United Kingdom and the terms of the
     Telecommunications Licences referred to in J.3 below and Racal USA
     has conducted its business in all material respects in accordance
     with all applicable laws and regulations of the United States or any

                                     -69-



     state thereof and there is no order, decree or judgment of any Court
     or any governmental agency of the United Kingdom or, so far as the
     Sellers are aware, any foreign country outstanding against any
     Telecom Group member which may have a material adverse effect upon
     the assets or  businesses of the Company (and no notice has been
     received threatening any of the same).

J.2  Save as claimant in proceedings for the collection of, so far as the
     Sellers are aware, debts (not exceeding (Pound Sterling)50,000 in the
     aggregate) arising in the ordinary course of its business, no member
     of the Telecom Group is engaged in any litigation or arbitration
     proceedings.  There are no litigation or arbitration proceedings
     pending or threatened by or against members of the Telecom Group, no
     injunction has been granted against members of the Telecom Group and
     members of the Telecom Group, and the Sellers are not aware of
     circumstances which may give rise to such proceedings.  The Company
     has not given any undertaking to any court or to any third party
     arising out of any legal proceedings.

J.3  The members of the Telecom Group have been granted all licences under
     the Telecommunications Act 1984 and the Wireless Telegraphy Act 1949
     that are necessary for their current operations and businesses
     ("Telecommunications Licences") and these continue to be in full
     force and effect and no Telecom Group member has been notified of any
     ground for revoking, or not renewing, or of any proposal for amending
     or of any proceedings which may be taken in relation to, any of the 
     existing Telecommunications Licences.

J.4  The Director General of Telecommunications ("DG") has not made any
     determination or taken any action under any of the Telecommunications
     Licences for the purposes of enforcing compliance with their terms
     which relates specifically and exclusively to any Telecom Group
     member rather than being of general industry effect, against any
     Telecom Group member and is not in the process of doing so and, so
     far as the Sellers are aware, no Telecom Group member has acted in a
     manner that would cause it to be the subject of a Determination by
     the Director General.  For the purposes of this paragraph,
     Determination shall be defined as a formal response by the DG
     resulting from a specific investigation undertaken by Oftel in
     accordance with its duties under the Telecommunications Act 1984.

J.5  No member of the Telecom Group is in violation of its respective
     Memorandum or Articles of Association or Certificate of Incorporation
     or By-laws or equivalent constitutive documents.  




                                     -70-



K.   Employees

K.1  The basis of the remuneration payable to officers and employees of
     each Telecom Group member at the date hereof is the same as that in
     force at the Balance Sheet Date and no Telecom Group member is under
     any contractual or other obligation to increase the rates of
     remuneration of or make any redundancy, severance, bonus, commission
     or incentive or other similar payment to any of its officers or
     employees at any future date in connection with their employment or
     the termination of their employment which has not been disclosed in
     the Data Room.

K.2  There are no employees of any Telecom Group member employed under
     contracts which cannot be terminated on six months' notice or less
     without payment of compensation (other than the statutory rights to
     payments of compensation) which have not been disclosed in the Data.

K.3  Copies of the consultancy contracts and contracts of service of all
     officers and employees of the Company earning in excess of (Pound
     Sterling)50,000 per annum and of any person who has been offered
     employment, consultancy or secondment and of all collective
     agreements of the Company with trade unions, staff associations or
     other body representing a material number of employees of the Company
     have been disclosed in the Data Room.  Accurate particulars of the
     full-time and part-time employees are disclosed in the Data Room
     together with the standard terms of employment of each grade of
     employee of the Company.

K.4  No Telecom Group member is engaged or involved in any dispute
     relating to employees or any person referred to in K.3 above, and so
     far as the Sellers are aware, there are no circumstances which could
     reasonably be expected to give rise to any such dispute which have
     not been disclosed in the Data Room.

K.5  There has not during the past two years been any actual or threatened
     strike, work stoppage, work to rule, lock out or overtime ban or any
     other form of industrial action which has disrupted the businesses of
     any member of the Telecom Group and so far as the Sellers are aware
     no fact or circumstance exists which might give rise to a dispute
     with a trade union, staff association or body representing a material
     number of its employees.

K.6  There is no agreement between any Telecom Group member and an
     employee or former employee with respect to this employment, his
     ceasing to be employed or his retirement which is not included in
     written terms of his employment or previous employment.



                                     -71-



K.7  Within the year ending on the date of this Agreement, no Telecom
     Group member has:

     (a)  given notice of redundancies to the Secretary of State and
          started consultations with a trade union under chapter II of
          Part IV the Trade Union and Labour Relations (Consolidation)
          Act 1992 or failed to comply with its obligations thereunder;

     (b)  failed to comply with any duty to inform and consult a trade
          union or appropriate representatives under the Transfer of
          Undertakings (Protection of Employment) Regulations 1981.

K.8  Subject to normal staff turnover, the employees referred to in
     warranty K3 are all those necessary to operate the businesses of the
     Telecom Companies and prior to  1 October 1999 were engaged primarily
     in those businesses.

K.9  There is no term of employment for any employee of any member of the
     Telecom Group which provides that a change in control of any member
     of the Telecom Group shall entitle the employee to treat the change
     of control as amounting to a breach of the contract or entitling him
     to any payment or benefit whatsoever or entitling him to treat
     himself as redundant or otherwise dismissed or released from any
     obligation.

K.10 No officer or employee of any member of the Telecom Group earning in
     excess of (Pound Sterling)50,000 has given notice terminating his or
     her employment or is under notice of dismissal.

K.11 Each member of the Telecom Group has at all relevant times complied
     in all material respects with all its obligations under statute and
     otherwise concerning the health and safety at work of its employees.

K.12 Racal USA has at no time employed any person under a contract of
     employment. 

K.13 All the directors other than David Whittaker, Andrew Wood, Brian
     Jones, Clive O'Donnel are employed by the Telecom Group.

L.   Pension warranties

     The Warranties in paragraphs L.1 to L.12 are only given in respect of
     the Telecom Group at the date on which the Warranties are given in
     respect of the period before that date and for the purposes of the
     Warranties in paragraphs L1 to L12 the following defined terms shall
     have the following meanings:


                                     -72-



     "Benefit"                means pension, lump sum, gratuity or other
                              like benefit given or to be given on
                              retirement or death;

     "Disclosed Scheme"       means any of Racal's Schemes (as defined in
                              Part B of Schedule VII), the RS(C) Section
                              (as defined in Part C of Schedule VII) and
                              the British Railways Superannuation Fund and
                              "Disclosed Schemes" means all of them;

      "Employee"              means any employee, director, former employee or 
                              former director of a Telecom Group member and 
                              "Employees" means all of them;

      "Trustees of the        means the trustees of each of Racal's
       Disclosed Schemes"     Schemes, the trustees of the Railways
                              Pension Scheme insofar as it relates to the
                              RS(C) Section and the trustees of the
                              British Railways Superannuation Fund.

L.1  Apart from under the Disclosed Schemes, no Telecom Group member has
     (a) participated in a scheme which provides Benefits or (b) any legal
     obligation to provide or contribute to or make any other payment in
     respect of the provision of any Benefit for or in respect of any
     Employee.

L.2  There have been no claims in the last three years under the
     Disability Insurance Plan referred to in document 2(a) of the index
     of documents relating to the Racal Executive Pension Plan (as defined
     in Part B of Schedule VII).

L.3      Material particulars of the Disclosed Schemes and the benefits
         payable thereunder have been disclosed in the Data Room including but
         not limited to the current trust deed and rules, the most recent
         explanatory booklet, other relevant documents which contain details
         of the current benefits (including those which may not be reflected
         in the trust deed, rules or explanatory booklet) as well as a
         schedule of all the employees of the Telecom UK Group members who are
         members of or have any rights to benefits under the Disclosed Schemes
         (disclosed at document 8 of each index of documents relating to
         Racal's Schemes in the Data Room and document 119 of Appendix I to
         the Disclosure Letter (the "Schedule of Members")) and such
         particulars are true, complete and up to date at the date stated. 
         The Schedules of Members contains complete and accurate details


                                     -73-



         relevant to the Relevant Employees (as defined in Part B of Schedule
         VII) of the Disclosed Schemes.

L.4      Each lump sum benefit (except a refund of contributions) payable
         under each Disclosed Scheme on the death in service before normal
         retirement age of a member of the Disclosed Scheme is at the date of
         this Agreement fully insured under a policy effected with an
         insurance company.

L.5      No plan, proposal or intention to amend, discontinue (in whole or in
         part) or exercise a discretion in relation to a Disclosed Scheme
         which constitutes a binding legal commitment has been communicated to
         a Relevant Employee (as defined in Part B of Schedule VII) who is a
         member of the Disclosed Scheme and the Disclosed Scheme is not in the
         process of being wound-up.

L.6      The actuarial method and assumptions as contained in the Actuary's
         letter referred to in Part B of Schedule VII to this Agreement which
         are being used to calculate the Unadjusted Transfer Amount for the
         purposes of Part B of Schedule VII in respect of Racal's Schemes are
         the same method and assumptions used in the latest actuarial
         valuations of Racal's Schemes as at 1 April 1998.

L.7      The normal retirement date for all Employees under the Racal Staff
         Pension & Life Assurance Scheme and the Racal Executive Manager and
         Senior Manager Pension Scheme (both as defined in Part B of
         Schedule VII) who commenced employment with the Racal Group on or
         after 1 January 1988 is age 65 for both men and women.

L.8      All contributions and other amounts due and payable at the Completion
         Date to the Trustees of the Disclosed Schemes from the Telecom UK
         Group members in respect of any of the Employees have been paid. 
         Employee contributions have been paid to the Trustees of the
         Disclosed Schemes within the time limits prescribed by the Pensions
         Act 1995 and underlying regulations.

L.9      Racal's Schemes and the Railways Pension Scheme and the British
         Railways Superannuation Fund are approved as exempt approved schemes
         (within the meaning of Chapter I of Part XIV ICTA 1988) and there is
         in force a contracting-out certificate (as defined in the Pension
         Schemes Act 1993) in relation to the Telecom UK Group members in
         respect of Racal's Schemes and in relation to Racal
         Telecommunications Ltd in respect of the RS(C) Section and the
         British Railways Superannuation Fund and nothing has been done or
         omitted to be done which will or may result in Racal's Schemes
         ceasing to be exempt approved schemes or in any contracting-out
         certificate being cancelled, surrendered or varied.

                                     -74-



L.10     There are no actions, claims or suits (other than routine claims for
         benefits) outstanding against the trustees of Racal's Schemes or
         against the Telecom UK Group members in respect of any act, event or
         omission or other matter arising out of or in connection with Racal's
         Schemes in relation to the provision of any Benefit to or in respect
         of the Employees and so far as the Sellers are aware, no such actions
         claims or suits have been threatened.

L.11     So far as the Sellers are aware, no notice has been received by RTL
         of any actions, claims or suits (other than routine claims for
         benefits) outstanding, pending or threatened against RTL in respect
         of the RS(C) Section (as defined in Part C of Schedule VII) or
         against the Trustee of the Railways Pension Scheme in respect of any
         act, event or omission or other matter arising out of or in
         connection with the RS(C) Section in relation to the provision of any
         Benefit to or in respect of the Employees.

L.12     So far as the Sellers are aware, the Disclosed Schemes have at all
         times been operated in accordance with all applicable laws and
         regulatory requirements (including without limitation the
         requirements of Article 141 of the Treaty of Rome relating to equal
         benefits and admission to membership but excluding any requirement to
         equalise the guaranteed minimum pensions) and the Telecom UK Group
         Members have complied with Article 141 of the Treaty of Rome as it
         applies to the eligibility of an Employee to join, contributions made
         to and the provision of Benefit.

M.       Records

M.1      None of the records, systems, data or information of any Telecom
         Group member is recorded, stored, maintained, operated or otherwise
         wholly or partly dependent on or held or accessible by any means
         which are not under the exclusive ownership and direct control of the
         Company or covered by the Reorganisation Documents or Transitional
         Services Agreement.

M.2      The Company's statutory books and accounting records which it is
         required to maintain by law have been completed in all material
         respects in accordance with the law.

N.       Suppliers and customers

N.1      During the year ending on the date of this Agreement no supplier or
         customer of the Telecom Group as a whole (who accounts for more than
         5% of the expenditure of revenue) has:



                                     -75-



         (a)     stopped or given written notice of intention to stop trading
                 with the Telecom Group;

         (b)     substantially reduced or given written notice of intention
                 to substantially reduce trading with the Telecom Group; or

         (c)     changed or given written notice of intention to change
                 substantially the terms on which it trades with the Telecom
                 Group.

O.       Environment

O.1      So far as the Sellers are aware the Company has not disposed of, kept
         or stored in or under any of the Properties nor in water or the
         ground or groundwater on or under the Properties any Hazardous
         Substances in breach of Environmental Laws.

O.2      So far as the Sellers are aware the condition of any of the
         Properties (based on their current use) is not such that any
         investigation, treatment or remediation of Hazardous Substances are
         or could be required under Environmental Law.

P.       Year 2000

P.1      In relation to the year 2000 compliance program described in the
         documents disclosed as document 7A in Section 11.7 and documents I
         11.7A and I 11.7.1 to I 11.7.11 of the Data Room ("Y2K Program"), so
         far as of the Sellers are aware:

         (a)     the Company has sufficient resources and skilled personnel
                 at its disposal in order to complete the Y2K Program in
                 accordance with its terms; and

         (b)     completion of the Y2K Program in accordance with its terms
                 will enable the business of the Company to continue
                 uninterrupted notwithstanding the century date change;

P.2      If the Y2K Program is fully implemented then the Company will not be
         in breach of any statements regarding year 2000 compliance given to
         any third party.

Q.       Reorganisation

Q.1      There has been disclosed in the Data Room true and complete copies of
         all the Reorganisation Documents and Railtrack Agreements.



                                     -76-



Q.2      There is no contract or arrangement which is other than on arm's
         length terms outstanding between any member of the Telecom Group (on
         the one hand) and any member of the Racal Group or any of its
         associates (on the other hand).












































                                     -77-



                                    Part C

          Name of Person                  Warranties

          Martin Lea                      All

          Mark Rogers                     All

          Bob Bartlett                    Section A

          Mike Seabrook                   Sections C and D

          Peter Brown                     Sections F and O and
                                          Warranty E1

          Paul Wooldridge                 Sections F and O

          Margaret Piran                  Section H and Warranties D3
                                          and E2

          Martin Pagnamenta               Section H and Warranties D3,
                                          D6 and D7

          Rob Obee                        Section I

          Catriona Cairns                 Warranties J1, J2 and K4

          Dougald Robinson                Warranties J3 and J4

          Brian Jones                     Section K

          Fiona Richards                  Section L

         For the purposes of this Schedule the following definitions shall
apply:

         "Environment"                     all or any of the following media
                                           namely air, water or land
                                           including without limitation such
                                           media within buildings or other
                                           natural man made structures above
                                           or below ground, any living
                                           organisms or systems;

         "Environmental Laws"              all or any international,
                                           European, national or local, civil
                                           or criminal law, common law,
                                           statutes, statutory instruments,
                                           regulation, directive, statutory


                                     -78-



                                           guidance and regulatory codes of
                                           practice, order, decree,
                                           injunction or judgment which
                                           relate to the Environment or
                                           Environmental Matters and which is
                                           in force or enacted (including
                                           without limitation, the
                                           Environment Act 1995 as if the
                                           provisions of which were fully in
                                           force and the first full set of
                                           statutory guidance as is brought
                                           into force thereunder) as at
                                           Completion or which were in force
                                           at an earlier date, are no longer
                                           in force but under which the
                                           Company still has obligations and
                                           liabilities;

         "Environmental Matters"           (i)      pollution or contamination
                                                    of the Environment;

                                           (ii)     the generation,
                                                    manufacture, processing,
                                                    handling, storage,
                                                    distribution, use,
                                                    treatment, removal,
                                                    transport, disposal,
                                                    release, spillage, deposit
                                                    or discharge of Hazardous
                                                    Substances;

                                           (iii)    the exposure of any worker
                                                    to Hazardous Substances;
                                                    or 

                                           (iv)     the creation of any noise,
                                                    vibration, radiation,
                                                    common law or statutory
                                                    nuisance or other material
                                                    adverse impact on the
                                                    Environment;

         "Hazardous Substances"            any substance capable of causing
                                           pollution or contamination of the
                                           Environment including any waste.



                                     -79-



                                 SCHEDULE VII

                             Pension Arrangements


                                    PART A


1.       Application of this Schedule

         1.1     Part B of this Schedule shall apply to those of Racal's
                 Schemes which are the Racal Executive Pension Plan, the
                 Racal Executive Manager and Senior Manager Pension Scheme
                 and the Racal Staff Pension & Life Assurance Scheme (as
                 respectively defined in paragraph 2 below).  Part B of this
                 Schedule comprises the detailed provisions agreed between
                 Racal and Global for the temporary continued participation
                 of the Telecom UK Group in Racal's Schemes, for the
                 establishment of Global's Scheme to take effect thereafter
                 and sets out the agreed basis for transfers in respect of
                 certain of the Telecom UK Group's employees' accrued rights
                 under Racal's Schemes to be made to Global's Scheme.

         1.2     Part C of this Schedule shall apply to that one of Racal's 
                 Schemes which is the RS(C) Section (Racal Services
                 (Communications) Limited having prior to Completion become
                 the Designated Employer thereunder in place of  Racal
                 Telecommunications Limited) of the Railways Pension Scheme
                 (as respectively defined in paragraph 11 below).  Racal
                 Telecommunications Limited will be withdrawn from the RS(C)
                 Section with effect from the Completion Date and will
                 thereupon establish a new Shared Cost Section of the
                 Railways Pension Scheme.  Part C of this Schedule comprises
                 the provisions agreed between Racal and Global for the
                 apportionment or transfer of assets (on a Share of Fund
                 basis) from the RS(C) Section to The New Racal
                 Telecommunications Limited Section (as defined in Part C of
                 this Schedule).









                                     -80-



                                    PART B

2.       Definitions

         In this Part B of this Schedule the definitions and rules of
         interpretation set out or referred to in clause 1 shall apply and in
         addition the following words and expressions shall unless the context
         otherwise requires have the meanings set opposite them:

         "Actuary's Letter"                the letter of even date from
                                           Racal's Actuary to Global's
                                           Actuary a copy of which letter is
                                           set out in Appendix 1 to this
                                           Schedule; 

         "Actuarial Assumptions"           the actuarial methods and
                                           assumptions set out in the
                                           Actuary's Letter;

         "Final Transfer Amount"           the Unadjusted Transfer Amount
                                           relating to Transferring Members
                                           adjusted in accordance with the
                                           Actuary's Letter in respect of the
                                           period from the Completion Date to
                                           the Payment Date;

         "Global's Actuary"                Mr Charles Young of Towers Perrin
                                           or such other actuary as Global
                                           may for the time being appoint for
                                           the purposes of this Part B of
                                           this Schedule;

         "Global's Scheme"                 the retirement benefits scheme or
                                           schemes nominated, established or
                                           to be established by or at the
                                           instance of Global in accordance
                                           with paragraph 4 of this Schedule;

         "Interest"                        interest at an annual rate being 2
                                           per cent above the base lending
                                           rate from time to time of Barclays
                                           Bank plc such interest to accrue
                                           daily and be compounded monthly;



                                     -81-



         "Interim Period"                  the period from (and including)
                                           the Completion Date up to (and
                                           excluding) the Partition Date;

         "Partition Date"                  the earlier of:

                                           (a)      the date which is six
                                                    months after the
                                                    Completion Date or such
                                                    earlier or later date as
                                                    Racal and Global shall
                                                    agree in writing for this
                                                    purpose;

                                           (b)      the date of termination of
                                                    participation arising as a
                                                    result of Racal exercising
                                                    its powers under
                                                    paragraphs 3(c) or 3(i)
                                                    below;  

                                           (c)      the date with effect from
                                                    which the Inland Revenue
                                                    shall require the Telecom
                                                    UK Group's participation
                                                    in Racal's  Schemes to
                                                    cease; or

                                           (d)      the date notified by
                                                    Global to Racal in writing
                                                    as the date on which the
                                                    participation of the
                                                    Telecom UK Group in
                                                    Racal's Schemes is to
                                                    cease, such date not
                                                    falling less than one
                                                    month after such notice is
                                                    given;

         "Payment Date"                    the date which is one month after
                                           the earliest date on which all of
                                           the following are and remain
                                           satisfied:

                                           (a)      the calculation of the
                                                    Unadjusted Transfer Amount
                                                    is either agreed by

                                     -82-



                                                    Global's Actuary in
                                                    accordance with
                                                    paragraph 5 of this
                                                    Schedule or determined by
                                                    the independent actuary in
                                                    accordance with
                                                    paragraph 8 of this
                                                    Schedule; 

                                           (b)      Global's Scheme is either
                                                    approved as an exempt
                                                    approved scheme (under
                                                    ICTA 1988, section 592) by
                                                    the Board of  Inland
                                                    Revenue or permitted by
                                                    the Board of Inland
                                                    Revenue to receive payment
                                                    of transfer values from
                                                    Racal's Schemes
                                                    notwithstanding that
                                                    Global's Scheme is not an
                                                    exempt approved scheme;  

                                           (c)      the trustees of Racal's
                                                    Schemes and the trustees
                                                    of Global's Scheme have
                                                    received the approval of
                                                    the Board of Inland
                                                    Revenue to the payment by
                                                    the trustees of Racal's
                                                    Schemes and the receipt by
                                                    the trustees of Global's
                                                    Scheme of the Final
                                                    Transfer Amount (which
                                                    approvals Racal and Global
                                                    shall use their respective
                                                    reasonable endeavours to
                                                    obtain as soon as
                                                    practicable after the
                                                    Partition Date); 

                                           (d)      each member of the Telecom
                                                    UK Group holds or is named
                                                    in a contracting-out
                                                    certificate in respect of
                                                    Global's Scheme;


                                     -83-



                                           (e)      the trustees of Global's
                                                    Scheme have confirmed to
                                                    the trustees of Racal's
                                                    Schemes that they are able
                                                    and willing to receive the
                                                    Final Transfer Amount;

                                           (f)      the trustees of Racal's
                                                    Schemes have received the
                                                    original forms of request
                                                    or consent to transfer for
                                                    each Transferring Member
                                                    and a transfer agreement
                                                    executed (conditional only
                                                    on receipt of the payment
                                                    due under paragraph 6 of
                                                    this Schedule) by the
                                                    trustees of Global's
                                                    Scheme in the form annexed
                                                    to this Schedule;

                                           (g)      the Transferring Members
                                                    have been admitted to
                                                    Global's Scheme on the
                                                    terms referred to in
                                                    paragraph 4 of this
                                                    Schedule;

         "Racal's Actuary"                 Mr Peter Bowers of William M
                                           Mercer Limited or such other
                                           actuary as Racal may for the time
                                           being appoint for the purposes of
                                           this Part B of this Schedule;

         "Racal Executive Pension          the retirement benefits scheme
         Plan"                             known as the Racal Group Executive
                                           Pension Plan which is currently
                                           governed by a trust deed dated
                                           9 November 1983 as amended;

         "Racal Executive Manager          the retirement benefits scheme
         and Senior Manager Pension        known as the Racal Group
         Scheme"                           Executive Manager & Senior Manager
                                           Pension Scheme which is currently
                                           governed by a trust deed dated
                                           29 May 1987 as amended;


                                     -84-



         "Racal's Schemes"                 for the purpose of this Part B of
                                           this Schedule each of the Racal
                                           Executive Pension Plan, the Racal
                                           Executive Manager and Senior
                                           Manager Pension Scheme and the
                                           Racal Staff Pension & Life
                                           Assurance Scheme;

         "Racal Staff Pension & Life       the retirement benefits scheme
         Assurance Scheme"                 known as the Racal Group Staff
                                           Pension & Life Assurance Scheme
                                           which is currently governed by a
                                           trust deed dated 29 May 1987 as
                                           amended including liabilities in
                                           respect of the Racal Group
                                           Retirement Benefits Scheme;

         "Relevant Employees"              those employees of the Telecom UK
                                           Group who immediately before the
                                           Completion Date are either active
                                           members of Racal's Schemes or who
                                           are eligible to become active
                                           members of Racal's Schemes on or
                                           after the Completion Date, and who
                                           in either case remain employed by
                                           the Telecom UK Group and in active
                                           membership of Racal's Schemes on
                                           the Completion Date or at any
                                           relevant time during the Interim
                                           Period;

         "Service Credits"                 means in respect of each
                                           Transferring Member the period of
                                           pensionable service calculated and
                                           verified in accordance with
                                           paragraphs 5.1 and 5.2 of this
                                           Schedule (or determined in
                                           accordance with paragraph 8 of
                                           this Schedule) by equating the
                                           value of benefits in respect of
                                           credited service in Global's
                                           Scheme with the value of benefits
                                           under Racal's Schemes in respect
                                           of pensionable service to the
                                           Partition Date this being
                                           calculated in accordance with the
                                           Actuarial Assumptions using the

                                     -85-



                                           method specified in the Actuary's
                                           Letter.

         "Transferring Members"            those of the Relevant Employees:

                                           (i)      who have not ceased to be
                                                    active members of Racal's
                                                    Schemes during the Interim
                                                    Period; and

                                           (ii)     who become members of
                                                    Global's Scheme with
                                                    effect on and from the
                                                    Partition Date pursuant to
                                                    the offer of membership
                                                    referred to in paragraph 4
                                                    below; and

                                           (iii)    who in accordance with the
                                                    invitation issued under
                                                    paragraph 4 of this
                                                    Schedule consent to or
                                                    request a payment or
                                                    transfer from Racal's
                                                    Schemes to Global's Scheme
                                                    in respect of the benefits
                                                    under Racal's Schemes for
                                                    and in respect of them and
                                                    who before the Payment
                                                    Date have not either
                                                    withdrawn his or her
                                                    consent or request or
                                                    ceased to be active
                                                    members of Global's
                                                    Scheme.

         "Unadjusted Transfer Amount"      such amount as shall be calculated 
                                           by Racal's Actuary and verified by
                                           Global's Actuary in accordance
                                           with paragraph 5 of this Schedule
                                           (or in the absence of verification
                                           by him determined in accordance
                                           with paragraph 8 of this Schedule)
                                           as is equal to the value
                                           (calculated and adjusted in
                                           accordance with the Actuarial
                                           Assumptions) as at the Completion

                                     -86-



                                           Date of the accrued benefits
                                           (other than those referred to in
                                           paragraph 7 of this Schedule)
                                           prospectively and contingently
                                           payable to and in respect of the
                                           Transferring Members under Racal's
                                           Schemes by reference to
                                           pensionable service up to the
                                           Completion Date and pensionable
                                           earnings at that time (making
                                           allowance in accordance with the
                                           Actuarial Assumptions for
                                           projected increases in final
                                           pensionable earnings of the
                                           Transferring Members from the
                                           Completion Date to the assumed
                                           date of retirement or earlier
                                           death or withdrawal from service).

                                           For the purpose of this definition
                                           and wherever referred to in this
                                           Part B of this Schedule
                                           "pensionable earnings", "final
                                           pensionable earnings" and
                                           "pensionable service" and cognate
                                           expressions shall have the
                                           meanings respectively adopted by
                                           that one of Racal's  Schemes as is
                                           relevant to the Relevant Employee
                                           or Transferring Member concerned.


3.       Interim Period

         It is hereby agreed that:

                 (a)      subject to the approval of the Board of Inland
                          Revenue (which approval Racal and Global hereby
                          undertake to use their respective reasonable
                          endeavours to obtain before or as soon as
                          practicable after the Completion Date) Racal will
                          use its reasonable endeavours to procure that each
                          member of the Telecom UK Group is permitted to
                          continue to participate in Racal's Schemes in
                          respect of Relevant Employees during the Interim
                          Period on the terms set out in this Part B of this


                                     -87-



                          Schedule.  Global agrees that such participation
                          shall cease on the day before the Partition Date;

                 (b)      Racal and Global shall use their respective
                          reasonable endeavours to procure that each member of
                          the Telecom UK Group shall continue to be covered by
                          the holding company contracting-out certificates in
                          relation to Racal's Schemes, that the Relevant
                          Employees remain in contracted-out employment
                          (within the meaning of the Pension Schemes Act 1993)
                          by reference to Racal's Schemes during the Interim
                          Period and that each member of the Telecom UK Group
                          is removed from the holding company contracting-out
                          certificates with effect from the Partition Date. 
                          If any member of the Telecom UK Group is required to
                          apply for the issue to it of contracting-out
                          certificates in relation to Racal's Schemes, Global
                          shall procure that the member of the Telecom UK
                          Group shall issue the necessary notices to the
                          Relevant Employees and shall make the necessary
                          elections to the National Insurance Contributions
                          Office;

                 (c)      Global shall procure that each member of the Telecom
                          UK Group discharges all of its obligations as a
                          participating employer under Racal's Schemes and
                          shall during the Interim Period and by not later
                          than the second working day of the month following
                          that to which the payment relates on a calendar
                          monthly basis pay (or procure payment by each member
                          of the Telecom UK Group) to the trustees of Racal's
                          Schemes; 

                          (i)     member contributions (if any) of the
                                  Relevant Employees under the rules of
                                  Racal's Schemes made from time to time
                                  (including additional voluntary
                                  contributions);  

                          (ii)    employer contributions in respect of each
                                  Relevant Employee from time to time at the
                                  following rates of pensionable earnings: 

                                  (aa)     29.6% in respect of Relevant
                                           Employees who are members of the
                                           Racal Executive Pension Plan;


                                     -88-



                                  (bb)     14.3% in respect of the Relevant
                                           Employees who are members of the
                                           Racal Executive Manager and Senior
                                           Manager Pension Scheme; and

                                  (cc)     10.1% in respect of the Relevant
                                           Employees who are members of the
                                           Racal Staff Pension & Life
                                           Assurance Scheme;

                          or, following the receipt of one month's prior
                          notice of a change in the rate of employer
                          contributions, such other rates as the trustees of
                          Racal's Schemes from time to time require on advice
                          from Racal's Actuary acting as the actuary to
                          Racal's Schemes and certified by him as being
                          determined on the relevant basis applicable
                          generally to Racal's Schemes where such variation is
                          due either to acts or omissions of Global or the
                          Telecom UK Group during the Interim Period other
                          than any acts or omissions which give rise to
                          payments by Global or the Telecom UK Group to the
                          trustees of Racal's Schemes under paragraphs 3(d) to
                          (h) inclusive or where such variation is due other
                          than to acts or omissions of Racal in relation to
                          persons who are not Relevant Employees; and

                          (iii)   on the first payment of contributions under
                                  paragraph 3(c)(ii), an additional amount
                                  equal to (Pound Sterling)100 multiplied by
                                  the number of Relevant Employees
                                  immediately before the Completion Date.

                 If any member of the Telecom UK Group or Global fails to pay
                 any of the contributions set out in this paragraph 3(c) by
                 the due date, Global shall in addition pay (or procure
                 payment by the Telecom UK Group) to the trustees of the
                 relevant Racal's Schemes Interest on the unpaid
                 contributions from the latest due date to the actual date of
                 payment together with all costs, fines, levies, liabilities
                 or penalties incurred by the trustees of Racal's Schemes by
                 reason of such late payment and if any contribution remains
                 unpaid for more than five days Racal shall have the right to
                 terminate without notice the participation in Racal's
                 Schemes of any or all of the members of the Telecom UK Group
                 with effect from the last day of the period in respect of
                 which contributions have been received by Racal's Schemes;

                                     -89-



                 (d)      Racal shall procure that there shall, during the
                          Interim Period, be no material amendment or
                          termination of Racal's Schemes in respect of the
                          Relevant Employees without the prior agreement of
                          Global (which agreement will not unreasonably be
                          withheld or delayed) provided that nothing contained
                          in this paragraph 3(d) shall prevent such
                          alterations and modifications as Racal may from time
                          to time require to be made to Racal's Schemes to
                          comply with legislation or as Racal's Schemes'
                          actuaries advise to be necessary or prudent or in so
                          far as the same do not materially affect the
                          obligations, liabilities, rights and interests of
                          the Telecom UK Group or the Relevant Employees
                          thereunder;

                 (e)      Global shall procure that each member of the Telecom
                          UK Group:

                          (i)     shall not exercise any power or discretion
                                  conferred on it under any of Racal's
                                  Schemes (except either a power to permit
                                  voluntary early retirement on cost neutral
                                  terms as calculated by Racal's Schemes'
                                  actuaries or to permit early retirement in
                                  accordance with paragraph 3(g) of this Part
                                  B of this Schedule) without in any such
                                  case the prior written approval of Racal
                                  (which approval may be given on such terms
                                  as to payment by the relevant member of the
                                  Telecom UK Group of additional
                                  contributions under Racal's Schemes and
                                  otherwise as Racal may determine); and

                          (ii)    shall irrevocably appoint Racal as its
                                  representative for the purpose of every
                                  provision of the Pensions Act 1995 which
                                  either requires the employers under Racal's
                                  Schemes to be consulted by the trustees or
                                  enables another employer to represent it
                                  for any other purpose; and

                          (iii)   shall not before the Partition Date suffer
                                  any event which is or would lead to the
                                  happening in relation to any member of the
                                  Telecom UK Group of a relevant insolvency


                                     -90-



                                  event (as defined for the purpose of the
                                  Pensions Act 1995, section 75); and

                          (iv)    in the case of those of the Relevant
                                  Employees who are members of the Racal
                                  Staff Pension & Life Assurance Scheme,
                                  shall not before the Partition Date
                                  increase the rate of or otherwise pay any
                                  remuneration to any Relevant Employee which
                                  either alone or in aggregate would have the
                                  effect of increasing the aggregate of those
                                  Relevant Employees' pensionable earnings or
                                  final pensionable earnings under the Racal
                                  Staff Pension & Life Assurance Scheme
                                  during the Interim Period by more than the
                                  rate specified for those Relevant Employees
                                  in the Actuarial Assumptions; and

                          (v)     in the case of those of the Relevant
                                  Employees who are members of the Racal
                                  Executive Manager and Senior Manager
                                  Pension Scheme or the Racal Executive
                                  Pension Plan, shall not before the
                                  Partition Date increase the rate of or
                                  otherwise pay any remuneration to any
                                  Relevant Employee which either alone or in
                                  aggregate would have the effect of
                                  increasing the Relevant Employee's
                                  pensionable earnings or final pensionable
                                  earnings under Racal's Schemes during the
                                  Interim Period by more than the rate
                                  specified for that Relevant Employee in the
                                  Actuarial Assumptions; and

                          (vi)    shall not do or omit to do during the
                                  Interim Period any act or thing which would
                                  prejudice the status of Racal's Schemes as
                                  exempt approved schemes or contracted-out
                                  schemes.

                 (f)      if notwithstanding paragraph 3(e)(i), (iv) or (v)
                          the liability of Racal's Schemes in relation to any
                          Relevant Employee is increased by the exercise by
                          any member of the Telecom UK Group of any discretion
                          exercisable by them or if the pensionable earnings
                          or final pensionable earnings of  Relevant Employees
                          is increased by more than the amount permitted under

                                     -91-



                          paragraph 3(c)(iv) or (v), Global shall (or shall
                          procure that the Telecom UK Group shall) immediately
                          pay to the trustees of Racal's Schemes such amount
                          calculated by Racal's Actuary and certified by him
                          as being determined on the basis of the Actuarial
                          Assumptions as is equal to the increase in the value
                          of the liabilities of Racal's Schemes together with
                          Interest from the date being five days after
                          delivery to Global of Racal's Actuary's calculation
                          and certificate;

                 (g)      if any Relevant Employee retires from service with
                          any member of the Telecom UK Group and for any
                          reason becomes entitled to an immediate early
                          retirement pension from Racal's Schemes Global shall
                          (or shall procure that the Telecom UK Group shall)
                          immediately pay to Racal's Schemes:

                          (1)     such amount as Racal's Actuary shall
                                  calculate and certify as being (on the
                                  basis of the Actuarial Assumptions) the
                                  additional cost of providing the immediate
                                  early retirement benefits payable to and in
                                  respect of the Relevant Employee over and
                                  above:

                                  (aa)     in the case of early retirement on
                                           ill health or redundancy grounds
                                           that part of the Final Transfer
                                           Amount that would have been paid by
                                           the Racal's Schemes to Global's
                                           Scheme if the Relevant Employee had
                                           become a Transferring Member but
                                           calculated on the basis that the
                                           Relevant Employee's retirement date
                                           is the Partition Date and Payment
                                           Date; 

                                  (bb)     in all other cases the cost of
                                           providing benefits payable upon
                                           voluntary early retirement (on cost
                                           neutral terms as advised by Racal's
                                           Scheme's actuary); and

                          (ii)    the capital value as calculated by Racal's
                                  Actuary and certified by him as being
                                  determined on the basis of the Actuarial

                                     -92-



                                  Assumptions of the cost to Racal's Schemes
                                  of providing such continued life cover (if
                                  any) as may fall to be provided in respect
                                  of such Relevant Employee under the
                                  provisions of Racal's Schemes;

                 together with Interest from the date being five days after
                 delivery to Global of Racal's Actuary's calculation and
                 certificate;

                 (h)      if any of Global or the Telecom UK Group breaches
                          any of the provisions of this Part B of this
                          Schedule and such breach results in the creation of,
                          or increase in, any liability on the part of any of
                          Racal's Schemes the trustees or the directors of the
                          trustees of Racal's Schemes, Global shall (save
                          where a payment or contribution is due in respect of
                          that breach under another paragraph of this Part B
                          of this Schedule) immediately pay to the trustees of
                          Racal's Scheme an amount equal in value to any such
                          liability (where appropriate calculated by Racal's
                          Actuary and certified by him as being determined on
                          the basis of the Actuarial Assumptions) together
                          with Interest from the date being five days after
                          delivery to Global of Racal's Actuary's calculation
                          and certificate;

                 (i)      Global shall (or shall procure that the Telecom UK
                          Group shall) in addition to all other sums due from
                          it and the Telecom UK Group  under this Schedule pay
                          to the trustees of Racal's Schemes for all actuarial
                          work by or on behalf of the trustees of Racal's
                          Schemes carried out by third parties pursuant to a
                          request to the trustees of Racal's Schemes by Global
                          or the Telecom UK Group in respect of  any Relevant
                          Employee (such work to include that related to early
                          retirement cases but not voluntary early retirement
                          on cost neutral terms) on and after the Completion
                          Date.  The trustees of Racal's Schemes shall submit
                          an invoice to Global or the Telecom UK Group  and
                          Global shall settle (or procure settlement of) such
                          invoice within five working days of receiving the
                          invoice.  The charges for the work shall be
                          calculated on a time/cost basis using rates which
                          are calculated on the same basis as applies to other
                          like work for Racal's Schemes.  If Global or the
                          Telecom UK Group fail to pay the invoice within

                                     -93-



                          five days of its receipt, Global shall in addition
                          pay (or procure the payment of) Interest on the
                          amount of the invoice to the trustees of Racal's
                          Schemes from the due date to the date of payment and
                          Racal shall have the right to terminate, without
                          notice, any member of the Telecom UK Group's
                          participation in Racal's Schemes with effect from
                          the last day of the period for which contributions
                          have been received;

                 (j)      Racal and Global shall give all such consents and
                          execute all such documents in their power as may be
                          required to give effect to this paragraph 3 and each
                          of them shall provide the other with all such
                          information and data as shall reasonably be required
                          for the purposes of this paragraph 3 and for the
                          purpose of the calculation of the Unadjusted
                          Transfer Amount and the Final Transfer Amount;

                 (k)      If any member of the Telecom UK Group or Global is
                          required to make a payment to the trustees of
                          Racal's Schemes in excess of the payment required
                          under the relevant provision of this Part B of this
                          Schedule and Global has not consented in writing to
                          the payment, Racal shall (subject to Global and the
                          Telecom UK Group not being in breach of their
                          obligations under this Part B of this Schedule) on
                          Global's written demand reimburse Global or the
                          Telecom UK Group for the additional payment actually
                          paid by any member of the Telecom UK Group or Global
                          in excess of the payment due under the relevant
                          provision of this Part B of this Schedule.  If Racal
                          fails to pay any of the amounts set out in this
                          paragraph 3(k) within ten working days of a written
                          demand made by Global (such demand to be made after
                          payment by Global or the Telecom UK Group of the
                          payment in question), Racal shall in addition pay
                          Global Interest on the unpaid amount from the date
                          of the sixth business day after the demand to the
                          actual date of payment.  Global holds the benefit of
                          this paragraph 3(k) for itself and as trustee for
                          each member of the Telecom UK Group.






                                     -94-



4.       Global's Scheme

         4.1     Global hereby undertakes that with effect from a date not
                 later than the Partition Date it will have nominated or
                 established one or more retirement benefits schemes:

                 (a)      in which each member of the Telecom UK Group
                          participates;

                 (b)      each of which is approved or capable of approval
                          under Chapter I of Part XIV of the ICTA 1988; 

                 (c)      each of which is a contracted-out scheme on a salary
                          related basis (as defined in the Pension Schemes Act
                          1993);

                 (d)      each of which is a final salary scheme; and

                 (e)      to which the trustees of each of Racal's Schemes can
                          make a transfer of cash and/or assets without
                          prejudicing the approval of Racal's Schemes as
                          exempt approved schemes.

         Global shall as soon as practicable and not later than two months
         before the Partition Date provide to Racal such information in
         relation to Global's Scheme as Racal shall reasonably require for the
         purposes of this Schedule.

         4.2     Global shall not later than two months before the Partition
                 Date submit to Racal drafts of notices to be issued to the
                 Relevant Employees who are members of Racal's Schemes on the
                 Partition Date.  Such notices shall offer membership of
                 Global's Scheme with effect from the Partition Date and
                 shall require such offer of membership to be accepted within
                 30 days of the date of the offer.  The offer of membership
                 shall be on terms which meet the requirements of paragraph
                 4.4 and shall include a request or an invitation to consent
                 to the transfer of benefits from Racal's Schemes to Global's
                 Scheme and an option form and an explanatory statement (to
                 be issued by the Telecom UK Group  on behalf of Racal's
                 Schemes) of the options available to them in relation to
                 their rights under Racal's Schemes and shall be in such form
                 and shall include such discharges as the trustees of Racal's
                 Schemes may reasonably require and shall contain a statement
                 that the consent or request to transfer shall be given or
                 made by a date not later than 45 days after the date of the
                 notice.



                                     -95-



         If Global's Scheme provides benefits which are (in the opinion of
         Racal's Actuary) other than materially the same as those provided
         under Racal's Schemes such that the Service Credits will not be year
         for year the issue of the request or invitation to consent to
         transfer referred to in this paragraph may be deferred pending
         calculation and verification of the Service Credits in accordance
         with paragraphs 5.1 and 5.2 of this Schedule (or determined in
         accordance with paragraph 8 of this Schedule).  The request or
         invitation to consent to transfer shall thereafter be issued to each
         Relevant Employee and shall include reference to the Service Credit
         to be granted under Global's Scheme if the Relevant Employee becomes
         a Transferring Member and a statement that the consent or request to
         transfer shall be given or made by a date not later than 45 days
         after the date of the notice.

         4.3     As soon as practicable after the notices have been agreed
                 Global shall procure that such notices are issued to each of
                 the Relevant Employees at the time of issue and Global shall
                 forthwith confirm in writing to Racal that such notices have
                 been issued and shall list the Relevant Employees to whom
                 they are issued.

         4.4     Global shall procure (subject to receipt by the trustees of
                 Global's Scheme of the Final Transfer Amount and in default
                 thereof any amount due from Racal to Global under paragraph
                 6(b)) that Global's Scheme shall provide benefits for and in
                 respect of each Transferring Member in respect of his
                 pensionable service under Racal's Scheme in the form of
                 Service Credits such that the benefits under Global's Scheme
                 shall in Global's Actuary's opinion (and agreed by Racal's
                 Actuary) be no less favourable overall than the benefits
                 under Racal's Schemes in respect of each Transferring
                 Member's pensionable service thereunder up to the Partition
                 Date on the terms of Racal's Schemes applicable to the
                 Transferring Member in force immediately prior to the
                 Partition Date and calculated on the basis of the Actuarial
                 Assumptions.

         4.5     Global shall procure that at the Payment Date Global's
                 Actuary shall provide to Racal a certificate confirming that
                 to the best of his knowledge and belief at the Payment Date,
                 Global's Scheme has no liabilities or, if it has
                 liabilities, that the liabilities are fully funded for on
                 the basis prescribed for the purposes of s56 of the Pensions
                 Act 1995.



                                     -96-



5.       Determination of Transfer Amount

         5.1     On or immediately after the Partition Date

                 (a)      Racal shall procure that Racal's Actuary will
                          calculate the Unadjusted Transfer Amount and (within
                          90 days after the later of the Partition Date or the
                          date on which sufficient data for the purpose of
                          calculating the Unadjusted Transfer Amount has been
                          provided by Global to Racal's Actuary) submit his
                          findings together with such data and other
                          information as is, in the reasonable opinion of
                          Racal's Actuary, necessary to verify the calculation
                          to Global's Actuary for verification by him; and

                 (b)      Global shall procure that Global's Actuary shall
                          within 30 days of the submission to him of Racal's
                          Actuary's calculation or, if later, within 90 days
                          of the submission to him of the data necessary to
                          carry out verification, verify that the calculation
                          of the Unadjusted Transfer Amount is in accordance
                          with this Part B of this Schedule; and 

                 (c)      Global shall procure that Global's Actuary shall
                          calculate the Service Credits and within 30 days of
                          the submission to him of the calculation of the
                          Unadjusted Transfer Amount submit the Service
                          Credits as so calculated with all material details
                          of the applicable benefits under Global's Scheme to
                          Racal's Actuary for verification by him.

         5.2     If Global's Actuary is able (within 30 days of the
                 submission to him of the findings of Racal's Actuary or
                 within 60 days, if Global's Actuary has within that 30 days
                 raised any objection to Racal's Actuary's calculation) to
                 verify that the calculation of the Unadjusted Transfer
                 Amount is mathematically correct and in accordance with this
                 Part B of this Schedule, Global's Actuary shall immediately
                 notify Racal's Actuary in writing to that effect and the
                 Unadjusted Transfer Amount as so verified shall be the
                 Unadjusted Transfer Amount.  If Global's Actuary is unable
                 to verify Racal's Actuary's calculations the matter shall be
                 referred to an independent actuary pursuant to paragraph 8
                 below.

         5.3     If Racal's Actuary is able (within 30 days of the submission
                 to him of the findings of Global's Actuary or within 60

                                     -97-



                 days, if Racal's Actuary has within that 30 days raised any
                 objection to Global's Actuary's calculation) to verify that
                 the calculation of the Service Credits is mathematically
                 correct and in accordance with this Part B of this Schedule,
                 Racal's Actuary shall immediately notify Global's Actuary in
                 writing to that effect and the  Service Credits as so
                 verified shall be the Service Credits.  If Racal's Actuary
                 is unable to verify Global's Actuary's calculations the
                 matter shall be referred  to an independent actuary pursuant
                 to paragraph 8 below.

         5.4     If the issue to Relevant Employees of the request or
                 invitation to consent to transfer is deferred in accordance
                 with paragraph 4.2 of this Schedule, the calculations in
                 paragraphs 5.1 and 5.2 shall be done in respect of each
                 Relevant Employee on the assumption that he or she will
                 become a Transferring Member but for the avoidance of doubt
                 the Unadjusted Transfer Amount shall be that part only of
                 the amount calculated and verified in accordance with
                 paragraphs 5.1 and 5.2 (or determined in accordance with
                 paragraph 8) of this Schedule as relates to those Relevant
                 Employees who become Transferring Members.


6.       Payment of Transfer Amount

         Subject to Global and to each member of the Telecom UK Group having
         performed each of their obligations under this Part B of this
         Schedule (provided that neither Global nor any member of the Telecom
         UK Group shall be regarded as not having performed an obligation
         where any failure to perform an obligation has prior to the Payment
         Date been remedied to Racal's satisfaction)  and to all of the
         conditions in the definition of Payment Date having been and
         remaining fulfilled:

         (a)     Racal shall use its reasonable endeavours to procure that on
                 the Payment Date the trustees of Racal's Schemes make a
                 payment to the trustees of Global's Scheme of an amount
                 equal to the Final Transfer Amount.  The Final Transfer
                 Amount shall be paid by way of a transfer of such assets of
                 Racal's Schemes (excluding property) as Racal, Global and
                 the trustees of Racal's Schemes and the trustees of Global's
                 Scheme shall agree having a mid market value on the last
                 business day before the Payment Date equal to the Final
                 Transfer Amount.  In the event of failure by the date which
                 is seven days before the Payment Date to agree on the assets
                 to be transferred, the Final Transfer Amount shall be

                                     -98-



                 satisfied by Racal's Schemes paying an amount in cash equal
                 to the Final Transfer Amount and that amount shall be the
                 Final Transfer Amount in the case of such a transfer in
                 cash;

         (b)     If by the date falling seven business days after the Payment
                 Date the trustees of Racal's Schemes have paid to the
                 trustees of Global's Scheme an amount which is either nil or
                 is less than the Final Transfer Amount (such excess of the
                 Final Transfer Amount over the amount paid being the
                 "Shortfall"), Racal shall forthwith on Global's written
                 demand pay in cash to Global an amount equal to 69% of the
                 Shortfall and Global shall immediately pay an amount equal
                 to the Shortfall to the trustees of Global's Scheme together
                 with Interest on the Shortfall from the Payment Date to the
                 actual date of payment of the Shortfall.


7.       Additional voluntary contributions

         7.1     Any additional voluntary contributions made for the
                 acquisition of money purchase benefits by the Transferring
                 Members to Racal's Schemes together with the accrued
                 investment return thereon shall be disregarded for the
                 purposes of determining the Unadjusted Transfer Amount or
                 the Final Transfer Amount.

         7.2     Racal shall use its reasonable endeavours to procure that on
                 the Payment Date the trustees of Racal's Schemes shall
                 procure the payment or transfer to the trustees of Global's
                 Scheme in addition to the Final Transfer Amount any sums or
                 policies as at the Payment Date which under Racal's Schemes
                 relate to the additional voluntary contributions referred to
                 in paragraph 7.1 and, that the trustees of Racal's Schemes
                 notify the trustees of Global's Scheme of the respective
                 entitlement of each Transferring Member in relation thereto.

         7.3     Global shall procure that each Transferring Member in
                 respect of whom a transfer is made under this paragraph 7
                 shall be entitled under Global's Scheme to money purchase
                 benefits equivalent on the date of transfer to the amount
                 transferred.






                                     -99-



8.       Disputes

         Any dispute between Racal's Actuary and Global's Actuary concerning
         the calculation of the Unadjusted Transfer Amount, the Final Transfer
         Amount or the Service Credits in accordance with this Part B of this
         Schedule and/or the Actuary's Letter shall, in the absence of
         agreement between them, be referred at the option of Racal or Global
         to an independent actuary agreed by Racal and Global or, failing such
         agreement within 14 days of one party calling upon the other in
         writing so to agree, appointed by the President for the time being of
         the Institute of Actuaries.  Any such independent actuary shall reach
         his decision on the basis of the provisions of this Part B of this
         Schedule and the Actuary's Letter and shall act as an expert and not
         as an arbitrator and his decision shall (in the absence of manifest
         error) be final and binding.  The charges and expenses of the
         independent actuary in respect of any such reference shall be borne
         as the independent actuary directs.


9.       Assistance by Global

         Global undertakes that during and after the Interim Period no action
         will be taken by it or any person controlled by Global either
         directly or indirectly which would result in Racal's Schemes being
         required to pay to Global's Scheme amounts larger than the aggregate
         of the Final Transfer Amount and any amounts due under paragraph 7 of
         this Schedule. 


10.      Global's protection 

10.1     Immediately following the Partition Date, Racal shall instruct
         Racal's Schemes' Actuary to state in writing whether, in his opinion,
         any of Racal's Schemes is likely at or immediately before the
         Partition Date to have been less than 100% funded on the basis
         prescribed for the purposes of Section 56 of the Pensions Act 1995.  

         (a)     If Racal's Schemes' Actuary is of the opinion that that
                 which is or are relevant of Racal's Schemes is or are 100%
                 or more than 100% funded on that basis, Racal shall procure
                 that the trustees of Racal's Schemes notify Global in
                 writing that on the basis of actuarial advice they are of
                 the view that no debt is treated as due under s75 of the
                 Pensions Act 1995 in respect of the cessation of
                 participation of the Telecom UK Group in Racal's Schemes at
                 the Partition Date;


                                     -100-



         (b)     If Racal's Schemes' Actuary is unable to give an opinion as
                 described in (a) above Racal shall instruct him to produce
                 and copy to Global an actuarial valuation of those Racal's
                 Schemes as at or immediately before the Partition Date (the
                 "First Valuation") on the basis prescribed for the purposes
                 of Section 56 of the Pensions Act 1995.  The First Valuation
                 shall be at the expense of the trustees of Racal's Schemes.

10.2     If the First Valuation reports a deficit in the assets of Racal's
         Schemes giving rise to a debt due from the Telecom UK Group to the
         trustees of Racal's Schemes under Section 75 of the Pensions Act 1995
         at or immediately before the Partition Date, Global shall pay or
         procure that the Telecom UK Group shall pay that debt to the trustees
         of Racal's Schemes on their demand in accordance with the relevant
         provisions of the Pensions Act 1995 and regulations made thereunder. 

10.3     Forthwith upon payment by Global or the Telecom UK Group of the debt
         referred to in paragraph 10.2 Racal shall pay to Global by way of
         adjustment of the Consideration payable by Global under this
         Agreement an amount equal to 69% of A minus B, where;

         A       is the amount of the debt actually paid by Global or the
                 Telecom UK Group to Racal's Schemes; and

         B       is the amount, if any, quantified in his reasonable opinion
                 by Racal's Actuary and agreed by Global's Actuary as
                 represents the part of the increase, if any, in the debt
                 actually paid over that which would have been paid by the
                 Telecom UK Group if it had ceased to participate in Racal's
                 Schemes on the Completion Date as is both attributable to
                 the Relevant Employees during the Interim Period and to any
                 change after the Completion Date in: 

                 (i)      the basis prescribed for the purposes of s 56 of the
                          Pensions Act 1995; or

                 (ii)     market conditions.


                                    PART C


11.      Definitions

         In this Part C of this Schedule the definitions and rules of
         interpretation set out or referred to in clause 1 shall apply and in


                                     -101-



         addition the following words and expressions shall unless the context
         otherwise requires have the meanings set opposite them:

         "Actuarial Assumptions"  the actuarial methods and assumptions
                                  adopted for the purpose of the actuarial
                                  valuation as at 31 December 1998 of the
                                  Railways Pension Scheme Shared Cost
                                  Section;

         "RS(C) Section"          the Racal Telecommunications Shared Cost
                                  Section of the Railways Pension Scheme
                                  under which Racal Services (Communications)
                                  Limited is the Designated Employer; 

         "The New Racal           the Shared Cost Section of the Railways
         Telecommunications       Pension Scheme to be established with
         Limited Section"         effect from the Completion Date by Racal
                                  Telecommunications Limited;

         "Railways Pension        the retirement benefits scheme known as the
         Scheme"                  Railways Pension Scheme which is currently
                                  governed by a deed of amendment and
                                  consolidation dated 14 November 1994 as
                                  amended;

         "Racal's Actuary"        Mr Peter Bowers of William M Mercer Limited
                                  or such other actuary as Racal may for the
                                  time being appoint for the purposes of this
                                  Part C of this Schedule;

         "Relevant Employees"     those persons who are either 

                                  (i)      employees of Racal
                                           Telecommunications Limited who are
                                           active members of the RS(C) Section
                                           immediately before the Completion
                                           Date; or

                                  (ii)     employees of a member of the
                                           Telecom UK Group immediately before
                                           the Completion Date who have a
                                           right to a deferred pension under
                                           the RS(C) Section;




                                     -102-



         "Trustee"                Railways Pension Trust Company Limited
                                  being the trustee of the Railways Pension
                                  Scheme.


12.      The New Racal Telecommunications Limited Section

         12.1    Global hereby acknowledges that with effect from the
                 Completion Date Racal Telecommunications Limited will
                 establish a new Shared Cost Section of the Railways Pension
                 Scheme.

         12.2    Global shall as soon as practicable and by not later than
                 the date which is two months following the Completion Date,
                 submit to Racal and to the Trustee drafts of notices to be
                 issued to the Relevant Employees.  Such notices shall offer
                 membership of The New Racal Telecommunications Limited
                 Section with effect from the Completion Date and shall be on
                 terms which meet the requirements of the Trustee and Racal. 
                 The notices shall, if any consent to transfer is required by
                 the Trustee, include a request or an invitation to consent
                 to the transfer of benefits from the RS(C) Section to The
                 New Racal Telecommunications Limited Section and an option
                 form and an explanatory statement (to be issued by Racal
                 Telecommunications Limited on behalf of the Trustee) of the
                 options available to them in relation to their rights under
                 the RS(C) Section and shall be in such form and shall
                 include such discharges as the Trustee may reasonably
                 require.  The notice shall in any event disclose the effect
                 and duration of those provisions of the RS(C) Section which
                 require or permit Share of Fund transfers (as described in
                 paragraph 13 of this Schedule).  Racal and Global shall use
                 their reasonable endeavours to procure that the request or
                 invitation to consent to transfer shall be made or given by
                 a date to be agreed with the Trustee as soon as practicable
                 after the Completion Date.

         12.3    Global shall (or shall procure that Racal Telecommunications
                 Limited shall) immediately pay to the Trustee for the
                 account of Racal Services (Communications) Limited or the
                 RS(C) Section such sums due in respect of any fees, costs,
                 expenses, liabilities or other charges (where appropriate,
                 calculated by the Trustees' actuary or its representatives
                 on the basis of the Actuarial Assumptions) which are
                 chargeable or recoverable from Racal Services
                 (Communications) Limited or the RS(C) Section which relate
                 to the Relevant Employees and any period after the

                                     -103-



                 Completion Date or in connection with the Trustee's
                 determination of the apportionment or transfer from the
                 RS(C) Section to The New Racal Telecommunications Limited
                 Section.  If Global or Racal Telecommunications Limited
                 fails to pay any amount within five days of Racal's
                 direction to pay that amount, Global shall in addition pay
                 (or procure payment of) Interest on the amount due from the
                 due date to the date of payment.

         12.4    Global undertakes that after the Completion Date no action
                 will be taken by it or any person controlled by Global
                 either directly or indirectly which would result in:

                 (a)     the apportionment to The New Racal Telecommunications
                         Limited Section exceeding that referred to in this
                         Part C of this Schedule; or

                 (b)     any person claiming to be entitled to membership or
                         continued membership of the RS(C) Section on or after
                         the Completion Date.


13.      Determination and payment of transfers between the RS(C) Section
         and The New Racal Telecommunications Limited Section

         Racal and Global shall use all reasonable endeavours to procure that
         as soon as practicable after the Completion Date the Trustee shall in
         respect of each Relevant Employee who consents to or requests a
         transfer from the RS(C) Section to The New Racal Telecommunications
         Limited Section transfer or apportion assets from the RS(C) Section
         to The New Racal Telecommunications Limited Section on a Share of
         Fund basis (as defined in the Railways Pension Scheme).  Racal shall
         procure that Racal Services (Communications) Limited shall, during
         such period after the Completion Date as Racal determines to be
         reasonable, give any consent needed by the Trustee in order to make
         Share of Fund transfers in respect of any Relevant Employee not
         entitled thereto (otherwise than by virtue of Racal Services
         (Communications) Limited's consent).










                                     -104-



                                  APPENDIX 1
                               Actuary's Letter

   (All references to Ranger are to Racal and all references to Ghost are to
                                    Global)











































                                     -105-



10 October 1999

                                           Direct tel       0181-666 8325
                                           Direct fax       0181-688 3278

                                 PROJECT GHOST
                      ACTUARY'S LETTER (for DB Transfer)

Dear Sirs

Seller's Schemes

This is the Actuary's Letter as defined in Part B of Schedule VII to the Sale
Agreement between Ranger and Ghost.  Terms defined in Part B of Schedule VII
have the same meanings in this letter.

The Unadjusted Transfer Amount at the Completion Date will be based on rates
of earnings as at the Completion Date.  These figures will include the annual
review as at 1st July 1999 and the first projected increase in these earnings
is therefore assumed to take place on 1st July 2000.  The Unadjusted Transfer
Amount at the Completion Date will be calculated as the market adjusted value
of the past service reserve as follows:

                            k%
past service reserve x    ----- 
                           NDY%

where NDY% is the percentage net dividend yield on the FT-SE All Share Index
at the close of business on the Completion Date and k% has the following
values:

                                                                      k%
Ranger Group Staff Pension & Life Assurance Scheme ("Ranger         2.480
Staff Scheme")

Ranger Group Executive Manager & Senior Manager Pension Scheme      2.489
("Ranger EM & SM Scheme")

Ranger Group Executive Pension Plan ("Ranger EPP")                  2.502

The past service reserve at the Completion Date of the benefits prospectively
and contingently payable to and in respect of each Transferring Member will
be calculated as the present value of benefits accrued at the Completion Date
(based on projected final pensionable earnings) using the actuarial
assumptions set out below.  The benefits valued will be the pensions and
dependant's benefits payable on retirement, death or withdrawal, including
the 6%/12% reserve to cover early retirements.  Provision will be made for

                                     -106-



pension benefits payable on death in service only to the extent that they are
calculated by reference to pensionable service actually completed or credited
prior to the Completion Date proportioned to total pensionable service to
normal retirement age.  No provision will be included in respect of lump sum
benefits prospectively payable on death in service.

The Final Transfer Amount at Payment Date will be the adjusted value of the
following:

         A + B

Item A is the Unadjusted Transfer Amount, calculated as described above,
adjusted for Fund Return (as described below) for the period between
Completion Date and Payment Date.

Item B is the joint contributions received after the Completion Date in
respect of Transferring Members at rates (a) and (b) below (or such other
rates as shall be required under paragraph 3(c) of the Schedule) and any
amounts received under paragraph 3(f) in respect of Transferring Members less
deductions for (c) death benefits and (d) expenses.  These deductions will be
calculated as a percentage of Pensionable Earnings of the Transferring
Members and will be adjusted for Fund Return between the dates the
contributions are paid and Payment Date.

                         Ranger Staff     Ranger EM & SM    Ranger EPP
                            Scheme

                              %                 %               %

(a)   Employer               10.1              14.3            29.6
      Contributions

(b)   Employees             3.5/5                5              5
      Contributions

(c)   Death Benefits         0.9                 1             1.5

(d)   Expenses               0.7                0.7            0.8



Fund Return will be:

(i)      for complete quarters (which commence 1 January, 1 April, 1 July and
         1 October), the return achieved by the main portfolio manager for
         each of the Ranger Schemes (as set out below) on the assets they
         manage within the relevant Ranger Scheme as calculated and published
         by Combined Actuarial Performance Services Limited ("CAPS").

                                     -107-



         Ranger Scheme                     Main Portfolio Manager

         Ranger Staff Scheme               Mercury Asset Management Limited

         Ranger EM & SM Scheme             Deutsche Asset Management Morgan
                                           Grenfell

         Ranger EPP                        Mercury Asset Management Limited

(ii)     in respect of the periods (a) from Completion Date to the next
         quarter commencement day (as detailed in (i) above) and (b) from (and
         including) the next quarter commencement day following the end of the
         final complete quarter between Completion Date and Payment Date and
         ending 1 week prior to Payment Date, the change in the FTSE All Share
         Index (Total Return); and

(iii)    in respect of the one week period ended on Payment Date, Interest.

If Ghost or any member of the Telecom UK Group establishes identical schemes,
Service Credits will be calculated on a "year for year" basis.  If the
benefits are different, the Service Credits will be calculated such that the
benefits granted are actuarially equivalent in respect of each Transferring
Members, using the assumptions specified in this letter, to the value of the
benefits accrued in the relevant Ranger Scheme to Partition Date based on
pensionable service to, and pensionable earnings at that date.

The assumptions to be used in calculating the past service reserve are as
follows:

Interest                          :        7.5% p.a.

Salary Growth                     :        5.5% p.a. (Ranger Staff Scheme,
                                           Ranger EM & SM Scheme)

                                           6.5% p.a. (Ranger EPP)

Earnings Cap                      :        3.5% p.a.

Pension Increases                 :        As guaranteed.  Limited Price
                                           Indexation (LPI) valued as 3.2%
                                           p.a.  Greater of LPI and 4% p.a.
                                           valued as 4.1% p.a.

Revaluation in deferment on GMPs  :        Fixed rate revaluation as per
                                           statutory specifications.



                                     -108-



Leaving Service Revaluation on    :        3.5% p.a.
benefits in excess of GMPs

Commutation                       :        All members' exercise their
                                           retirement option to cash lump sums
                                           as per the scheme rules.

Mortality

         Pre-retirement           :        Males A67/70 Ult - 3 years, females
                                           FA75/78 Ult - 3 years

         Post-retirement          :        Males PMA80 (C=1995), females PFA80
                                           (C=1995)

Marital Status                    :        At normal retirement age 90% of
                                           males are married, 80% of females
                                           are married.
                                           Male members are assumed to have
                                           wives aged 3 years younger.
                                           Female members are assumed to have
                                           husbands aged 2 years older.

Withdrawals (not applicable to    :        Independent age related rates as
Ranger EPP members where nil               per the attached Table.
withdrawal is assumed)

Retirements                       :        All retirements are assumed to take
                                           place at normal retirement age.

Redundancy Loading                :        6% (Ranger EM & SM Scheme, Ranger
                                           EPP) or 12% (Ranger Staff Scheme)
                                           of the liability attributable to
                                           those members expected (on the
                                           basis of these decrements) to
                                           retire from active service at
                                           normal retirement age.
Yours faithfully
/s/ Peter Bowers
Peter Bowers MA FIA ASA
Principal Account Director
W M Mercer






                                     -109-



                            The Ranger Staff Scheme
                        The Ranger Group EM & SM Scheme
                             Withdrawal Decrements


          Age                     Males                  Females

                                    %                       %

           16                      18.8                   24.4

           20                       15                    19.5

           25                      12.8                   16.6

           30                      10.5                   13.7

           35                       9                     11.7

           40                      8.3                    10.7

           45                      6.8                     8.8

           50                      5.3                     6.8

           55                       3                      3.9

           59                       -                       -


There are no withdrawals assumed for the Ranger EPP.



















                                     -110-



                                   ANNEXURE
                       Agreed Form of Transfer Agreement

                                 Schedule VII

THIS TRANSFER AGREEMENT is made the     day of      2000  

BETWEEN

(1)      Racal STAFF TRUSTEE LIMITED (registered number 1989848) whose
         registered office is at Western Road, Bracknell, Berkshire RG12 1RG
         (the "Transferring Trustee")

(2)      [Global'S SCHEME TRUSTEES LIMITED] (registered number [          ]) 
         whose registered office is at [                                  ]
         (the "Receiving Trustee").


RECITALS

(A)      Agreement

         This Transfer Agreement is made following an Agreement (the
         "Agreement") dated [                      ] 1999 made between (1)
         Racal Electronics Plc ("Racal") and (2) [Global] ("Global")  under
         which Racal agreed to transfer certain of its then subsidiaries to
         Global.

(B)      The Racal Group Staff Pension & Life Assurance Scheme

         The Transferring Trustee is the present trustee of the Racal Group
         Staff Pension & Life Assurance Scheme (the "Racal Scheme") currently
         governed by the provisions of a deed dated 29 May 1987 as amended
         (the "Transferring Trust Deed").

(C)      The [Global] Pension & Life Assurance Scheme

         The Receiving Trustee is the present trustee of the [Global] Pension
         & Life Assurance Scheme (the "Receiving Scheme") which is currently
         governed by the provisions of a deed dated [                   ] (the
         "Receiving Trust Deed").  The Receiving Scheme is an exempt approved
         scheme for the purposes of Chapter I of part XIV of the Income and
         Corporation Taxes Act 1988 and is contracted-out for the purposes of
         the Pension Schemes Act 1993.



                                     -111-



(D)      Transferring Scheme Transfer-out provisions

         Clause 7 of the Transferring Trust Deed provides, in effect, that the
         Transferring Trustee shall be entitled to transfer from the Racal
         Scheme such assets representing the value of the benefits applicable
         to each employee as determined by the Transferring Scheme's Actuary
         and subject to the consent of Racal.

         Under the Agreement, Racal (the Principal Employer of the
         Transferring Scheme) agreed to use its reasonable endeavours to
         procure that the Transferring Trustee would transfer to the Receiving
         Trustee in respect of the Transferring Members (as defined in
         Recital (H) below) an agreed amount.  Racal has requested that the
         Transferring Trustee transfer the said agreed amount in respect of
         the Transferring Members to the Receiving Trustee.  The Transferring
         Trustee has considered Racal's request and after consulting the
         Transferring Trustee's Actuary has determined to pay the agreed
         amount which will be calculated in accordance with Schedule VII to
         the Agreement (the "Final Transfer Amount").

(E)      Approval of the PSO

         Clause 7 of the Transferring Trust Deed further provides that the
         Transferring Trustee may secure benefits by transferring to another
         retirement benefits scheme which complies with certain conditions (in
         particular the relevant approval of the Inland Revenue).  The
         Agreement also requires the approval of the PSO to the making of the
         transfer payment provided for by this Transfer Agreement.  The
         approval of the PSO has been obtained. 

(F)      Determination by the Transferring Trustee to transfer

         Subject to the execution of this Transfer Agreement, the Transferring
         Trustee has determined to transfer the Final Transfer Amount in
         respect of the Transferring Members (as defined in recital (H) below)
         to be held by the Receiving Trustee under the trusts of the Receiving
         Scheme.  The actuarial basis for the calculation for the Final
         Transfer Amount has been agreed with the Actuary to Global(being the
         basis set out in the Agreement) and the Final Transfer Amount will be
         so calculated.

(G)      Receiving Scheme transfer-in provisions

         Rule [  ] of the Receiving Trust Deed and Rules provides that the
         Receiving Trustee will [at the request of the Receiving Scheme's
         Principal Employer] accept into the Receiving Scheme a transfer
         payment from a previous pension arrangement. 

                                     -112-



(H)      The transfer offer

         The Agreement provided that Global would use its reasonable
         endeavours to procure the Receiving Scheme would (subject as provided
         in the Agreement) provide in respect of each of the Transferring
         Members benefits in respect of his Pensionable Service before the
         Partition Date (as defined in the Agreement) in the form of Service
         Credits as agreed pursuant to the Agreement.

         On [date] 2000 an announcement letter (the "Announcement Letter") was
         issued to (amongst others) all [          ] employees in the
         Transferring Scheme.  The Announcement Letter gave details (inter
         alia) of the benefits which would be provided for and in respect of
         them if they agreed to a transfer being made from the Transferring
         Scheme to the Receiving Scheme.  A copy of the Announcement Letter is
         annexed to this Transfer Agreement as Appendix 1.

         Certain of those employees being the employees whose names are set
         out in Appendix 2 (the "Transferring Members") have agreed to such
         transfers from the Transferring Scheme to the Receiving Scheme.


OPERATIVE PROVISIONS

1.       Transfer

         The Transferring Trustee shall, on the Payment Date (as defined in
         the  Agreement) transfer the Final Transfer Amount to the Receiving
         Trustee (to be held by it upon the trusts of the Receiving Scheme and
         with and subject to the powers and provisions for the time being
         applicable to other property held upon the trusts of the Receiving
         Scheme).  The form of the Final Transfer Amount shall be determined
         in accordance with Schedule VII to the Agreement.

2.       Receiving Trustee's agreement

         The Receiving Trustee hereby agrees that (in consideration of the
         transfer referred to in clause 1 above) it will grant to and in
         respect of each Transferring Member the applicable benefits described
         in the Announcement Letter.

3.       Transferring Trustee's discharge

         The transfer to be made under clause 1 above shall operate as a
         complete discharge to the Transferring Trustee in respect of the
         benefits to which the Final Transfer Amount relates.


                                     -113-



4.       Receipt

         Within five working days of receipt of the transfer referred to in
         clause 1 above the Receiving Trustee shall write to the Transferring
         Trustee acknowledging receipt of such.

5.       Successors to be bound

         References in this Transfer Agreement to the Receiving Trustee and
         the Transferring Trustee include their respective successors in
         office as trustees of the Receiving Scheme and the Transferring
         Scheme. 

6.       Governing law

         This Transfer Agreement shall be governed by the law of England and
         the parties hereto submit to the exclusive jurisdiction of the
         English courts in relation to all matters pertaining hereto.

7.       Heading to clauses

         The heading to the recitals and clauses of this Transfer Agreement
         shall not affect its interpretation.


IN WITNESS whereof these presents were entered into the day and year first
before written.


EXECUTED as a deed by the affixing of the )
Common Seal of Racal Staff Trustee Limited )
in the presence of:- )



         Director


         Director/Secretary





EXECUTED as a deed by the affixing of the )
Common Seal of [                ] Limited )
in the presence of:- )



                                     -114-



         Director


         Director/Secretary












































                                     -115-





                                 SCHEDULE VIII

                Telecom Group Guarantees of Racal Group Members


1.       RTL is a guarantor under a Facility Agreement dated 29 March 1999 for
         Racal for the provision of credit facilities up to (Pound
         Sterling)370 million. 

2.       RTL is a guarantor under a 1992 ISDA Master Agreement dated 25 April
         1997 between Racal and Barclays Bank Plc. 

3.       RTNL is a guarantor under a Facility Agreement dated 29 March 1999
         for Racal Electronics Plc for the provision of credit facilities up
         to (Pound Sterling)270 million. 

4.       RTNL is a guarantor under a 1992 ISDA Master Agreement dated 12
         January 1996 between Racal Electronics Plc and Chemical Bank. 

5.       RTNL is a guarantor under a 1992 ISDA Master Agreement dated 25 April
         1997 between Racal Electronics Plc and Barclays Bank Plc.



























                                     -116-



                                  SCHEDULE IX

                          Tax Covenant and Warranties

       The Warranties in Part C of this Schedule are the Tax Warranties

                             Part A - Definitions


1.   In this Schedule:

     (a)  the following words and expressions have the meanings respectively
          set opposite them:

          "British Rail Board     the assets acquired in April 1994 by RTL
          transfer Assets"        pursuant to a scheme under section 85
                                  and/or section 86 Railway Act 1993;

          "Covenantor's Relief"   means a Relief which arises to the Company
                                  on or before Completion and is not a
                                  Deferred Relief;

          "Deferred Relief"       means any Relief which:

                                  (i)   is taken into account in computing
                                        any provision for deferred tax
                                        which appears in the Completion
                                        Balance Sheet or in eliminating
                                        such a provision; or

                                  (ii)  is taken into account in the
                                        Completion Balance Sheet as an
                                        asset;

          "Demand"                any document issued or any claim made or
                                  action taken whether before or after the
                                  date hereof by or on behalf of any person,
                                  authority or body whatsoever (whether of
                                  the United Kingdom or elsewhere in the
                                  world) from which it appears to Global or
                                  the Company that the Company has or may
                                  have a Tax liability;

          "Event"                 any transaction, act, event or omission of
                                  whatever nature including, without
                                  limitation, a receipt or accrual of income
                                  or gains, distribution, failure to

                                     -117-



                                  distribute, acquisition, disposal,
                                  transfer, payment of any loan or advance
                                  and also including Completion;

          "FA"                    Finance Act;

          "Group Relief"          (a) relief the subject of a surrender
                                      or claim pursuant to Chapter IV of
                                      Part X ICTA 1988;

                                  (b) advance corporation tax the subject
                                      of a surrender or claim pursuant to
                                      s 240 ICTA 1988; and

                                  (c) any tax refund the subject of a
                                      surrender or claim pursuant to
                                      s 102 FA 1989;

          "Relief"                any relief, allowance, deduction in
                                  computing profits, credit or right to
                                  repayment of Tax (including repayment
                                  supplement or interest thereon) granted by
                                  or pursuant to any legislation or otherwise
                                  for Tax purposes whether of the United
                                  Kingdom or elsewhere in the world; 

          "Tax"                   any and all forms of taxes, levies,
                                  imposts, contributions, duties and charges
                                  in the nature of taxation (including all
                                  instalment payments in respect thereof) and
                                  all withholdings or deductions in respect
                                  thereof of whatever nature whenever imposed
                                  whether of the United Kingdom or the United
                                  States or elsewhere, (including, without
                                  limitation, for the avoidance of doubt,
                                  National Insurance contribution liabilities
                                  in the United Kingdom and corresponding
                                  obligations elsewhere, taxes on gross or
                                  net income, profits or gains and taxes on
                                  receipts, sales, use, property, occupation,
                                  franchise, ad valorem, transfers or value
                                  added and customs duties and stamp tax) and
                                  whether directly or primarily chargeable
                                  against, recoverable from or attributable
                                  to the Company or any other person
                                  including all fines, penalties, charges and
                                  interest relating to the same;

                                     -118-



          "TCGA"                  the Taxation of Chargeable Gains Act 1992;

     (b)  references to income or profits or gains shall include any other 
          measure by reference to which Tax is computed;

     (c)  references to income or profits or gains earned, accrued, arising or 
          received by any person shall include income or profits or gains which 
          are for the purposes of any Tax treated as earned, accrued, arising 
          to or received by such person;

     (d)  references to income or profits or gains earned, accrued, arising or 
          received on or before a particular date (including, without limita-
          tion, Completion) or in respect of a particular period shall include 
          income or profits or gains which are for the purposes of any Tax 
          treated as earned or accrued, arising or received on or before that 
          date or in respect of that period; 

     (e)  references to the occurrence of Events on or before a particular date
          (including without limitation, Completion) or in respect of a 
          particular period shall include Events which are for the purposes
          of any Tax treated as having occurred or existed at or before that 
          date or in respect of that period;

     (f)  references to any Tax liability of the Company shall include:

          (i)  payments of or in respect of Tax by the Company since the 
               Balance Sheet Date;

          (ii) liabilities of the Company to make payments of or in 
               respect of Tax;

     (g)  references to the "Company" shall mean and include each member 
          of the Telecom Group as if each were referred to 


                                     -119-



          expressly in place of the Company and references to the "Covenantor" 
          shall mean, in relation to each member of the Telecom Group, the 
          company agreeing to sell the shares in such member or in such company 
          of which the member is a subsidiary (as defined in Section 736 of the 
          Companies Act 1985);

     (h)  for the purposes of this Covenant a Tax liability shall be deemed to 
          have become due and payable by the Company if such Tax liability 
          would have been due and payable by the Company but for the
          utilisation of any Relief other than a Covenantor's Relief;

     (i)  for the purposes of this Covenant, a payment of Tax deemed to be made
          in accordance with the provisions of paragraph (h) above shall be 
          deemed to be due on the date on which that Tax would have been due
          (assuming that an assessment or other notification of the Tax had
          been made at the earliest permissible time and no appeal had been 
          made against the assessment or notification) but for the availability 
          of the Relief concerned;

     (j)  references to paragraphs are to paragraphs of Part B of this Covenant 
          unless otherwise stated;

     (k)  This Covenant shall have effect mutatis mutandis as if ION were a 
          Company in relation to which The Racal Corporation was the Covenantor 
          on the following basis:

     (i)  to reflect the fact that The Racal Corporation has only a 50% 
          interest in ION (so that, the liability of The Racal Corporation is 
          limited to 50% of the amount for which it would otherwise have been 
          liable, the amount of any Over Provision taken into account under 
          clause 6 shall be 50% of the amount which


                                     -120-



          would otherwise be taken into account, and so on); and

          (ii) to the extent that The Racal Corporation or Global undertake 
               obligations in relation to ION, they will only be required to 
               use reasonable endeavours to comply with those obligations 
               having regard to the provisions of any shareholder or similar 
               agreement relating to ION.




































                                     -121-



                             Part B - Tax Covenant



1.   Covenant

     Subject as hereinafter expressly provided, the Covenantor hereby
     covenants, with effect from Completion, to pay (such payment to be by
     way of reduction, to the extent possible, of the purchase price payable
     to such Covenantor hereunder), to Global (whether or not the Company is
     or may be entitled to claim reimbursement of the payment from any person)
     an amount equal to:

          (a)  any Tax liability of the Company arising in respect of or as a
               consequence of any Event or Events occurring on or before 
               Completion or in respect of or by reference to any income, 
               profits or gains earned, accrued, arising or received on or 
               before Completion; and

          (b)  without prejudice to the generality of 1(a) above, any Tax 
               liability of the Company under s179 TCGA in respect of the 
               British Rail Board Assets and arising as a consequence of 
               entering into Completion of this Agreement; and

          (c)  any repayment of Taxation to the extent that the repayment has 
               been taken into account as an asset in the Completion Balance 
               Sheet but is not available or is lost, reduced or cancelled; and

          (d)  any payment of Taxation made or to be made by the Company under
               Section 132 FA 1988 by virtue of the relationship on or at any 
               time before Completion of the Company with a "migrating company" 
               (within the meaning of that section); and

          (e)  any payment of Taxation which would not have been made but for a
               Deferred Relief not being available or being lost, reduced or
               cancelled; and

          (f)  any liability of the Company to repay (other than to another 
               member of the Telecom Group) the whole or any part of any payment
               made to the Company on or before Completion for the surrender of 
               Group Relief or advance corporation tax;


                                     -122-



          (g)  any liability of the Company in respect of VAT which is not 
               Telecom VAT and which arises as a result of the Company having 
               been a member of the Pre-Sale VAT Group (defined terms being 
               used in paragraph 12);
               and

          (h)  all reasonable out-of-pocket legal and accounting costs and 
               expenses properly incurred by Global and/or the Company in 
               connection with any Tax liability, repayment, payment or 
               liability as is referred to in any of paragraphs 1(a) - (g) in 
               respect of which the Covenantor is liable under this Covenant 
               or in connection with any action taken in avoiding, resisting or 
               settling such Tax liability, repayment, payment or liability or 
               in consequence of any successful claim made by Global under this 
               Covenant.


2.   Limitations and exclusions

     2.1  Such limitations in Clause 9 of this Agreement as are expressly
          stated to apply to this Covenant shall do so as if set out herein.

     2.2  The Covenantor shall not be liable under this Covenant in respect of
          any Tax liability of the Company:

          (a)  save in the case of a Tax liability of Racal USA, to the extent
               that such Tax liability arises or is increased or that any
               provision or reserve which has been made in the Completion
               Balance Sheet is insufficient by reason of the imposition of
               Tax or any increase in rates of Tax or any change made after
               Completion in law or in Inland Revenue or Customs and Excise or
               other Tax authority's published practice or procedure or in a
               judicial interpretation of the law where such change in judicial
               interpretation takes the form of either the House of Lords or
               the Court of Appeal overruling a decision of an inferior court
               (which for the purposes of the House of Lords shall include the
               Court of Appeal); or 

          (b)  to the extent that it would not have arisen but for a voluntary
               act, omission, transaction or arrangement of Global (or its
               successors in title to the Shares) or of the Company, or of any

                                     -123-



               company controlled by Global, or of a person or persons
               controlling Global or of directors or employers of Global or any
               company mentioned in this paragraph (b), in each case, occurring
               after Completion which:

               (i)  is not in the ordinary course of its business as carried on
                    at Completion; and

               (ii) is not pursuant to any legally binding agreement entered
                    into before Completion; 

          (c)  to the extent that the Tax liability would not have arisen or
               would have been reduced or eliminated but for the failure or
               omission on the part of any Company to comply with a written
               request of the Covenantor or its duly authorised advisers to
               make any valid claim, election, surrender or disclaimer, to give
               any valid notice or consent, or to do any other thing under the
               provisions of any enactment or regulation relating to Tax after
               Completion, the making, giving or doing of which was taken into
               account in computing the provisions for Tax in the Completion
               Balance Sheet; or

          (d)  to the extent that any Relief is available to the Company to set
               against or otherwise mitigate the Tax liability, other than
               (a) any Relief taken into account as an asset or in reducing any
               provision for Tax in the Completion Balance Sheet; and (b) any
               Relief arising from an Event occurring, or from income, profits
               or gains arising after Completion; or

          (e)  to the extent that the Tax liability would not have arisen or
               would have been reduced or eliminated but for any claim,
               election, surrender or disclaimer made or notice or consent
               given after Completion by the Company or Global or any of its
               subsidiary undertaking or any person connected with any of them
               under provisions of any enactment or regulation relating to Tax
               other than any claim, election, surrender, disclaimer, notice or
               consent assumed to have been made, given or done in computing
               the amount of any allowance, provision or reserve in the
               Completion Balance Sheet or which is made at the prior request
               of the Covenantor pursuant to paragraph 5; or

                                     -124-



          (f)  to the extent that the Company or Global obtains the benefit of
               a Relief in an accounting period ending before Completion for an
               expenditure, reserve or provision which was recognised in the
               Completion Balance Sheet but was not, in preparing the
               Completion Balance Sheet, treated as deductible or allowable for
               Tax purposes and which is not treated as a deferred tax asset in
               preparing the Completion Balance Sheet; or

          (g)  to the extent that the Tax liability arises or is increased as a
               result of a change in accounting policy or practice of the
               Company as used for the purposes of the Accounts otherwise than
               to comply with generally accepted accounting practice, or from
               a change in the length of an accounting period of the Company,
               in either case, introduced after Completion; or

          (h)  to the extent that the Tax liability would not have arisen but
               for a failure on the part of Global or the Company to comply
               with its obligations under paragraph 3 or 5; or

          (i)  to the extent that provision or reserve for such Tax liability
               is made in the Completion Balance Sheet; or

          (j)  to the extent that such Tax liability would not have arisen but
               for any election made pursuant to paragraph 13.


3.   Manner of making and conduct of claims

     3.1  If Global or the Company shall become aware of any Demand (other than
          by the Covenantor giving notice thereof to Global under this
          paragraph 3.1) which may give rise to a liability on the part of the
          Covenantor under this Covenant or the Tax Warranties Global shall as
          soon as reasonably practicable give notice thereof to the Covenantor
          setting out reasonable details of the Demand.  If the Covenantor
          becomes aware of any such Demand it shall as soon as reasonably
          practicable give notice thereof to Global.

     3.2  If the Covenantor shall, within 30 days of the date of any notice
          given to it under paragraph 3.1 or of it otherwise becoming aware

                                     -125-



          of any such Demand, indemnify and secure Global and the Company to
          Global's reasonable satisfaction against all losses, costs and
          expenses which may be incurred thereby and secure Global and the
          Company to Global's reasonable satisfaction against any further
          liability to Tax which may be so  incurred, then Global shall procure
          that the Company will take such action as the Covenantor may
          reasonably and promptly by written notice request to avoid, dispute,
          resist, appeal or compromise any Demand, and in connection with any
          action so requested by the Covenantor:

          (a)  the appointment of solicitors and other professional advisers to
               the Company shall be subject to the prior written approval of
               Global, such approval not to be unreasonably withheld or delayed;

          (b)  the Covenantor shall ensure that no substantive correspondence,
               pleading or other document is sent, transmitted, issued, entered
               into or in any way published in connection with the relevant
               Demand by the Covenantor or its advisers without the prior
               approval of Global, such approval not to be unreasonably
               withheld or delayed;

          (c)  the Covenantor shall submit no computations or returns, nor make
               any settlement or compromise of the subject matter of the Demand,
               nor agree any matter in the conduct of any dispute in relation
               thereto which is likely to affect the amount of the Demand, or
               the future liability of the Company to Tax, without the prior
               written approval of Global, such approval not to be unreasonably
               withheld or delayed;

          (d)  if any dispute arises between Global and the Covenantor as to
               whether any Demand should at any time be settled in full, or
               contested in whole or in part, such dispute shall be referred
               for determination to a Barrister, of at least ten years
               call at the English Bar with relevant experience, appointed by
               agreement between Global and the Covenantor or (if they do not
               agree) upon the application by either party to the President for
               the time being of The Law Society, whose determination shall be
               final.  The Barrister so appointed shall be asked to advise
               whether, in his opinion (acting as an expert and not as an
               arbitrator) there is a reasonable case for appealing against the

                                     -126-



               Demand and shall be instructed, if the dispute relates to a
               Demand issued by a Tax authority outside the United Kingdom, to
               obtain such advice from professional advisers of the relevant
               jurisdiction as he thinks necessary in order to arrive at his
               opinion, and also to determine how the costs of obtaining his
               opinion should be allocated between the parties hereto.  If, but
               only if, such opinion is in the affirmative shall an appeal be
               made and that Demand not then settled.  Any further dispute
               arising between the parties as to whether any further appeal
               should be pursued following determination of an earlier appeal
               (whether or not in favour of the Company) shall be resolved in
               a similar manner; and

          (e)  save as otherwise expressly provided herein, Global shall
               procure that the Company shall give the Covenantor all
               reasonable co-operation and assistance for the purposes of
               taking such action as aforesaid.

     3.3  Global and the Company shall be free to pay or settle any Demand on
          such terms as they may in their absolute discretion think fit and
          without prejudice to their rights and remedies under this Covenant
          if, within 30 days of the date of any notice given to it under
          paragraph 3.1 or of it otherwise becoming aware of any such Demand,
          the Covenantor fails to request the action to be taken as stated in
          paragraph 3.2.


4.   Mitigation

     The Covenantor may by notice in writing to Global elect to mitigate or
     eliminate any liability under this Covenant by surrendering or procuring
     the surrender to the Company of any Relief other than a Deferred Relief to
     the extent permitted by law but without any payment being made in
     consideration of the surrender, and the Covenantor shall be absolved from
     all liability under this Covenant to the extent of the amount of Tax
     liability relieved by such surrender.  Global shall procure that the
     Company takes all such steps as the Covenantor may reasonably require to
     permit and effect any such surrender.




                                     -127-



5.   Tax Returns and computations

     5.1  Subject to paragraph 5.2 below, the Covenantor or its duly authorised
          agents shall at the Covenantor's expense be responsible for, and have
          the conduct of preparing, submitting to and agreeing with all
          relevant Tax authorities all Tax returns and computations of the
          Company and determining the amount of any instalment payment of
          corporation tax to be made by the Company, including (without
          limitation) claims and/or surrenders by way of Group Relief, for all
          Tax accounting periods of the Company ending on or before Completion
          subject to all such returns, computations, documents and substantive
          correspondence relating thereto and the proposed amount of any
          instalment payments being submitted in draft form to Global or its
          duly authorised agents for comment.  Global or its duly authorised
          agent shall comment within 21 days of such submission.  If the
          Covenantor has not received any comments within 21 days, Global and
          its duly authorised agents shall be deemed to have approved such
          draft documents.  The Covenantor is not obliged to take into account
          any comments or suggestions made by Global save for comments or
          suggestions which the Covenantor considers (acting in good faith) to
          be reasonable.  Global shall each respectively afford (or procure the
          affordance) to the Covenantor or its duly authorised agents of
          information and assistance which may reasonably be required to
          prepare, submit and agree all such outstanding Tax returns and
          computations.  Global undertakes to procure that the Company shall at
          the request of the Covenantor sign and submit to the relevant Tax
          authority all such notices of claim, surrender or consent to
          surrender (including provisional or protective notices of claim,
          surrender or consent to surrender in cases where any relevant Tax
          computations have not yet been agreed) and all such other documents
          and returns as the Covenantor shall reasonably request, consistently
          with the provisions of this Covenant, to give effect to the foregoing
          provisions PROVIDED THAT neither the Covenantor nor its agents shall
          be entitled to require the Company:

          (a)  to take any action under this paragraph 5.1 which could result
               in the Company incurring a Tax liability or making a payment of
               Tax in respect of which Global could have a claim under this
               covenant or could have had a claim but for the provisions of
               paragraph 9.2 of this Agreement; or

          (b)  to sign any return, computations, documents or correspondence
               which are not true and accurate in all material respects.

     5.2  The Covenantor or its duly authorised agents shall be responsible
          for, and have exclusive conduct of all outstanding matters relating

                                     -128-



          to agreeing with the Inland Revenue (and any other relevant Tax
          authority) the amount of any Tax liability referred to in paragraph
          1(b) of this Covenant  including (without limitation) submitting all
          forms of claims, correspondence, amendments or appeals in respect
          thereof and conducting the negotiation, agreement and settlement of
          all issues and disputes relating thereto with the relevant Tax
          authority and determining the amount of any instalment of corporation
          tax to be made by the Company in relation thereto.  The Covenantor
          shall notify Global as soon as is reasonably practicable in writing
          of any claims, amendments, appeals in respect of any Tax liability
          referred to in this paragraph 5.2 and shall keep Global informed (to
          the extent possible) of all negotiations and shall submit in draft
          form to Global for comment all substantive correspondence relating
          thereto before submitting such correspondence to the relevant Tax
          authority.  Global or its duly authorised agent shall comment within
          21 days of such submission.  If the Covenantor has not received any
          comments within 21 days, Global and its duly authorised agents shall
          be deemed to have approved such draft documents.  If Global or its
          duly authorised agents have any comment or suggestion, the Covenantor
          shall adopt any such comment or suggestion only to the extent it
          considers (acting in good faith) that it is appropriate to do so. 
          The Covenantor and Global shall each respectively afford (or procure
          the affordance) to the other or their duly authorised agents of
          information and assistance which may reasonably be required to
          prepare, submit and agree all such outstanding issues relating to the
          Tax liability referred to in this paragraph 5.2.  Global undertakes
          to procure that the Covenantor shall sign, execute and submit such
          correspondence, claims, returns and appeals relating thereto save to
          the extent that Global or the Covenantor reasonably consider that the
          same are not complete and accurate in all material respects.

     5.3  Global and its duly authorised agents shall be responsible for, and
          have the conduct of preparing, submitting to and agreeing with all
          relevant Tax authorities all Tax returns and computations of Racal
          USA for the Tax accounting periods during which Completion takes
          place; provided that Global shall procure that all such returns,
          computations, documents and substantive correspondence relating
          thereto are submitted in draft form to the Covenantor or its duly
          authorised agents for comment.  The Covenantor or its duly authorised
          agents shall comment within 21 days of such submission.  If Global
          has not received any comments within 21 days, the Covenantor and its
          duly authorised agents shall be deemed to have approved such draft
          documents.  If the Covenantor or its duly authorised agents have any
          comment or suggestion with respect to such part of the return;
          computation or document as relates to the period prior to Completion,
          Global shall procure that the Company shall not unreasonably refuse
          to adopt such comment or suggestion.  The Covenantor shall afford (or

                                     -129-



          procure the affordance) to Global or its duly authorised agents of
          information and assistance which may reasonably be required to
          prepare, submit and agree all such Tax returns and computations.

     5.4  To the extent that the Covenantor has or is entitled to documents or
          information which are/is relevant in determining any liability to Tax
          of members of the Telecom UK Group in respect of periods ending after
          Completion, the Covenantor shall afford (or procure the affordance)
          to Global or its duly authorised agents access to such documents or
          information at reasonable times (subject to reasonable notice having
          been given).


6.   Over Provisions

     6.1  The Covenantor may request the auditors for the time being of the
          Company (not later than six years after Completion) to certify at the
          Covenantor's request and expense, whether any provision in the
          Completion Balance Sheet has proved to be an over provision (the
          amount by which there is an over provision being referred to in this
          paragraph 6 as the "Over Provision") and Global shall, on receipt of
          such request and at the expense of the Covenantor, procure that the
          Company provides any information or assistance reasonably required in
          order to allow the auditors to provide that certificate.

     6.2  The amount of any Over Provision shall be calculated without taking
          into account:

          (a)  a retrospective change in the law of Taxation announced after
               Completion; or

          (b)  any Relief other than a Covenantor's Relief; or

          (c)  any act of Global or the Company carried out after Completion
               other than in the ordinary course of business as carried on at
               Completion.

     6.3  If any amount shall be certified by the auditors in accordance with
          paragraph 6.1 above to be an Over Provision (other than in respect of
          the Section 179 Liability) in respect of the Company, then:

          (a)  the Over Provision shall first be set off against any payment
               then due from the Covenantor under this Covenant or the Tax
               Warranties; and

          (b)  to the extent there is an excess, a refund of the excess shall
               be made to the Covenantor (within five Business Days of the

                                     -130-



               certificate being given) of any previous payment or payments
               made by the Covenantor under this covenant or the Tax Warranties
               (and not previously refunded under this Covenant or the Tax
               Warranties) up to the amount of such excess; and

          (c)  if the payment mentioned in paragraph 6.3(b) above do not
               exhaust the excess, or if there are no such payments, the
               remainder of that excess shall be carried forward to be set
               off against any payment which may in the future become due
               from the Covenantor under this Covenant or the Tax
               Warranties.

     6.4  If any amount shall be certified by the auditors  in accordance with
          paragraph 6.1 above to be an Over Provision in respect of the Section
          179 Liability, then the amount of such Over Provision shall be paid
          by Global to the Covenantor by way of a reduction, to the extent
          possible, of the purchase price hereunder, within five Business Days
          of such certificate being given.

     6.5  Where a certificate has been provided by the auditors in accordance
          with paragraph 6.1 or 6.4 above, either the Covenantor or Global may
          (at the expense of the requesting party), request the auditors to
          review the certificate in the event that there are relevant
          circumstances or facts of which it was not aware and which were not
          taken into account at the time when such certificate was produced,
          and to certify whether in the light of those circumstances, the
          amount of the certification remains correct or whether ir should be
          amended.

     6.6  If following a request under paragraph 6.5 above the certificate is
          amended, the revised amount of the Over Provision shall be
          substituted for the purposes of paragraph 6.3 or 6.4 (as the case may
          be) and any adjusting payment that is required shall be made within
          five Business Days of the amendment of the certificate.

     6.7  For the purposes of this paragraph 6, "Section 179 Liability" shall
          be as defined in paragraph 3 of Schedule V of this Agreement.


7.   Payment of Claims

     7.1  Payments by the Covenantor pursuant to the covenants in paragraph 1
          shall be made on the days specified in paragraph 7.2 below.




                                     -131-



     7.2  The days referred to in paragraph 7.1 are as follows:

          (a)  if the Tax liability giving rise to claim under this Covenant
               involves an actual payment of Tax by the Company, the day which
               is the later of five Business Days after demand is made therefor
               by or on behalf of the Claimant, and three Business Days before
               the date on which that Tax becomes due and payable to the
               relevant Tax authority;

          (b)  if the Tax liability giving rise to a claim under this Covenant
               does not involve an actual payment of Tax but involves the
               denial, loss, use or setting off in whole or in part of a Relief
               which is a right to repayment of Tax, the day which is the later
               of five Business Days after demand is made therefor by or on
               behalf of the Claimant, and the day on which such Tax would
               otherwise have been repaid;

          (c)  in any other case five Business Days after demand is made
               therefor by or on behalf of the Claimant.

     7.3  For the purposes of this paragraph, references to the day on which an
          amount of Tax becomes due and payable to the relevant Tax authority
          shall be interpreted as follows:

          (a)  if, pursuant to paragraph 3, the Company disputes or appeals
               against a Demand in respect of such Tax, but the Company is
               nevertheless required by law, as a condition to pursuing
               such dispute or appeal, to pay such Tax, the last day on
               which such Tax is so required to be paid without the Company
               incurring any penalty or liability for interest in respect
               thereof, provided that the provisions of paragraph 8 shall
               apply to reimburse the Covenantor for any repayment
               (including interest or repayment supplement) to which the
               Company is entitled;

          (b)  if, pursuant to paragraph 3, the Company disputes or appeals
               against a Demand for such Tax, and the Company is not so
               required, the day on which the Tax in question is finally
               determined to be due and payable by the Company, pursuant to
               an agreement under s 54, Taxes Management Act 1970, or any
               legislative provision corresponding to that section, or
               pursuant to a decision of a court or tribunal from which
               either no appeal lies, or in respect of which no appeal is
               made within the prescribed time limit; or




                                     -132-



          (c)  in any other case, the first day on which such Tax needs to be
               paid in order to avoid, incurring any penalty or liability for
               interest in respect thereof.

     7.4  If the Covenantor or Global (as the case may be) fails to pay any sum
          due from them under this covenant on the due date for payment it
          shall pay interest on that sum from the due date until actual payment
          at the rate of 3% per annum above the base rate for the time being of
          National Westminster Bank plc compounded monthly save, in the case of
          a payment by the Covenantor, to the extent that Global is compensated
          for late payment by the liability under paragraph 1 extending to
          interest.

     7.5  All sums payable by the Covenantor or Global hereunder shall be paid
          free of and without any rights of counterclaim or set off, and
          without deduction or withholding on any ground whatsoever, save only
          as may be required by law.  If any such deduction or withholding is
          required by law the payer shall be obliged to pay to the payee such
          amount as will ensure that, after any such deduction or withholding
          has been made, the payee shall have received a sum equal to the
          amount that it would otherwise have received in the absence of any
          such deduction or withholding, as reduced by any credit to which the
          payee may be entitled on account of such deduction or withholding.

     7.6  If any competent authority for Tax purposes charges to Tax any sum
          paid (the "original payment") to the Covenantor or Global hereunder
          the payer shall be obliged to pay to the payee such additional amount
          (the "additional payment") as will ensure that, after the payment of
          the Tax so charged on the original payment and any Tax chargeable on
          the additional payment, there shall remain a net sum equal to the
          amount of the original payment, such additional payment to be paid
          three Business Days after the payee has served notice that Tax on the
          original payment has become due and payable.


8.   Corresponding savings and refunds

     8.1  If any Tax liability which has resulted in a payment having been made
          by the Covenantor under this Covenant or for breach of any of the Tax
          Warranties has given rise to a Relief for the Company or Global which
          would not otherwise have arisen, then

          (a)  Global shall procure that full details of such Relief are
               given to the Covenantor as soon as reasonably practicable; and



                                     -133-



          (b)  to the extent that the liability of Global or the Company to
               make an actual payment of or in respect of Tax is reduced by
               reason of such Relief from the amount that such liability
               would have been but for the availability of such Relief,
               Global shall, on or as soon as reasonably practicable after
               the date when Global or the Company would have been under an
               obligation to pay the Tax liability so reduced, make a
               repayment to the Covenantor of an amount equal to the lower
               of the amount by which such liability is so reduced and the
               amount of the payment referred to at the beginning of this
               paragraph 8.1 made by the Covenantor.

     8.2  If the Covenantor at any time pays to Global an amount pursuant to a
          claim under this Covenant or under the Tax Warranties and before the
          seventh anniversary of Completion Global or the Company is or becomes
          entitled to recover from some other person (other than the Company or
          Global, but including any Tax authority) any sum in respect of the
          matter giving rise to such claim (other than by reason of any Relief
          which arises in respect of an Event occurring after Completion or
          which was taken into account in fixing the amount of the Tax
          provision (or in determining that no Tax provision was necessary) in
          the Completion Balance Sheet), Global, if so required by the
          Covenantor, will (and will procure that the Company will), at the
          cost of the Covenantor and upon the Covenantor providing security to
          the reasonable satisfaction of Global against all costs which may
          thereby be incurred, take all reasonable steps to enforce such
          recovery and Global shall promptly following such recovery repay to
          the Covenantor the lesser of: 

          (a)  the sum so recovered by Global or the Company from such
               other person (including sums recovered in respect of costs
               and any interest or repayment supplement received in respect
               of the sum recovered, but less any costs of recovery not
               previously reimbursed, and less any Tax chargeable on the
               sum recovered); and 

          (b)  the amount referred to above paid by the Covenantor to Global.


9.   Global's further obligations

     9.1  Global undertakes that it will procure that the Company preserves,
          and affords to the Covenantor reasonable access to, all documents,
          records, correspondence, accounts and other information whatsoever in
          respect of or relevant for the purpose of determining the liability
          of the Company to Tax in respect of periods ending on or before

                                     -134-



          Completion until such time as the Covenantor shall cease to have any
          liability or contingent liability under the terms of this Covenant.

     9.2  Global hereby undertakes to the Covenantor that it will procure that
          the Company duly pays and discharges each and every amount of Tax in
          respect of which provision was made in the Completion Balance Sheet,
          or which was taken into account in computing the amount of any such
          provision, and which, in either case, had not been paid and
          discharged at Completion.

     9.3  Global hereby agrees with the Covenantor that it will not, and will
          procure that the Company will not, without the prior written consent
          of the Covenantor, disclaim any Relief claimed by the Company on or
          prior to Completion or claim any Relief in relation to an accounting
          period ending on or before Completion which has not been claimed by
          the Company on or prior to Completion.

     9.4  Global shall procure that the Company shall refrain from doing any
          act or thing (including, in particular, the carry-back of losses from
          accounting periods ending after Completion) in relation to periods
          ending after Completion which:

          (a)  would affect the Company's ability to make claims for
               allowances or Reliefs, in respect of accounting periods
               ending on or before Completion; or

          (b)  would reduce or extinguish any Relief or allowance available
               in accounting periods ending on or before Completion.


10.  Surrender of Reliefs

     10.1  Global shall procure that, to the extent that it can lawfully do so
           without incurring any liability to Tax within the scope of paragraph
           1 of this Covenant, the Company:

           (a)  accepts from the Covenantor, or any other company not
                included in the definition of the Company hereunder and
                specified by the Covenantor, the surrender of any Group
                Relief as the Covenantor may direct in respect of an
                accounting period of the Company commencing before
                Completion; and

           (b)  surrenders any Group Relief to any company not included in
                the definition of the Company hereunder, specified by the
                Covenantor, in respect of any accounting period of the
                Company ending on or before Completion.

                                     -135-



     10.2  Subject to paragraph 10.3, for a surrender under paragraph 10.1(a),
           Global shall procure that the Company pays to the Covenantor, or as
           the Covenantor directs, an amount equal to the Tax saved by the
           Company in consequence of such surrender on the date such Tax would
           otherwise have been payable to the Tax authority.

     10.3  The total payments made by the Company under paragraph 10.2, when
           added to any corporation tax actually payable by the Company, shall
           not exceed the amount of corporation tax taken into account in
           calculating the provision for Tax in the Completion Balance Sheet in
           respect of the Company.

     10.4  Payment under paragraph 10.2 shall be made on the later of the date
           that the corporation tax saved as a result of the surrender is, or
           but for the surrender would have been, due and payable, and five
           Business Days after demand is made therefor by or on behalf of the
           Covenantor.

     10.5  No payment shall be made for a surrender under paragraph 10.1(b).


11.  Global's warranty and indemnity

     11.1  Global warrants and represents to each Covenantor and its successors
           in title that Global does not intend to permit the corporation tax
           liabilities of the Company, to the extent provided for in the
           Completion Balance Sheet and to the extent payable by the Company to
           remain undischarged, and that it is not entering into this
           transaction on the assumption referred to in s 767AA(2) ICTA 1988.

     11.2  Global hereby covenants with each Covenantor that is will indemnify
           such Covenantor and keep it indemnified against any liability
           arising pursuant to:

           (i)   s 767A ICTA 1988, in circumstances where the taxpayer
                 company (as defined in s 767(1)) is the Company; or

           (ii)  s 767AA ICTA 1988, in circumstances where the relevant
                 transferred company or associated company as defined in
                 s 767AA is the Company; or

           (iii) s 132 FA 1988, in circumstances where the Company ceases to
                 be resident in the United Kingdom after Completion; or

           (iv)  s 190 TCGA 1992, in circumstances where the unpaid tax
                 referred to in s 190(1) is first assessed on the Company;


                                     -136-



           to the extent that the corporation tax to which the liability
           relates:

           (a)  has been the subject of a claim by Global hereunder which
                has been satisfied; or

           (b)  is one in respect of which the Covenantor has (disregarding
                any limit on the amount of such liability) no liability
                hereunder

12.  VAT

     12.1  In this paragraph:

           (a)  "Pre-Sale VAT Group" means the group of bodies corporate of
                which the members of the Telecom UK Group are at Completion
                members for the purposes of section 43 VATA 1994, and of
                which Racal plc is the representative member;

           (b)  "Telecom VAT" means output tax (as defined in section 24 VATA
                1994) (and related interest or penalties), attributable to
                supplies, acquisitions and imports made by the Telecom Group
                less input tax deductible from it on supplies to and
                acquisitions and imports made to the Telecom UK Group;

           (c)  "Telecom Repayment VAT" means the amount of input tax (as
                defined in section 24 VATA 1994) deductible in relation to
                supplies to and acquisitions and imports made by the
                Telecom UK Group to the extent that it exceeds both output
                tax (and related interest or penalties) attributable to
                supplies, acquisitions and imports made to the Telecom Group
                and any other penalty or interest imposed for VAT purposes
                in respect of any previous VAT deductions or claims
                attributable to supplies, acquisitions and imports by the
                Telecom UK Group.

     12.2  In determining for the purposes of paragraph 12.1 by or to whom a
           supply, acquisition or import is made, section 43(1)(b) of the Value
           Added Tax Act 1994 shall be ignored and it shall be assumed that
           each member of the Telecom UK Group is separately registered for VAT
           purposes.  In determining supplies, acquisitions and imports for the
           purposes of the definitions in paragraph 12.1 (b) and (c), those
           falling within section 43(1)(a) VATA 1994 shall be ignored.

     12.3  Racal shall procure that each member of the Telecom UK Group shall
           leave the Pre-Sale VAT Group as of Completion, insofar as it is a
           member of the Pre-Sale VAT Group at the date of this Agreement and 

                                     -137-



           Global shall procure that the members of the Telecom UK Group provide
           reasonable assistance required by Racal to ensure the same.

     12.4  Global shall pay (or procure that the relevant member of the Telecom
           UK Group pays) to Racal or as Racal directs, the amount of any
           Telecom VAT which is provided for in the Completion Balance Sheet,
           such payment to be made in cleared funds not later than three
           Business Days before it is due to the relevant taxation authority to
           the extent that no member of the Telecom UK Group has already paid
           such amounts to Racal or a member of the Pre-Sale VAT Group which is
           not a member of the Telecom UK Group.

     12.5  Racal shall pay to Global or as Global directs, the amount of any
           Telecom Repayment VAT shown in the Completion Balance Sheet, such
           payment to be made in cleared funds not later then 30 days after the
           end of the prescribed period current at Completion to the extent
           such amount has not already been paid to Global or any member of
           Telecom UK Group.

     12.6  Global shall on request provide or procure to be provided to
           Racal (or as it directs) any information and copies of documents in
           the possession, custody or power of Global or Racal or any member of
           the Telecom UK Group required by any company in the Pre-Sale VAT
           Group in connection with calculating the VAT liability of the Pre-
           Sale VAT Group or complying with any requirement to submit an EC
           sales list or Intrastat declarations.


13.  Racal USA

     At or after Completion, the Covenantor agrees if Global notifies the
     Covenantor in writing of its intention to make an election with respect
     to a member of the Telecom UK Group to be classified as a disregarded
     entity or otherwise for US federal income tax purposes, to join with
     Global in making such election.  Such election shall, at the option of
     Global, be retroactive to a pre-Completion period.  Global shall indemnify
     the Covenantor and any subsidiaries of the Covenantor against all costs
     and expenses, including without limitation all Taxes (including reasonable
     attorneys' and accountants' fees and other reasonable out-of-pocket
     expenses incurred in connection therewith) arising solely as a direct
     result of the filing of such election. 






                                     -138-



                            Part C - Tax Warranties


1.   TAX WARRANTIES

     1.1  General

          1.1.1  Each member of the Telecom Group is and has at all times
                 been resident only in its place of incorporation for all Tax
                 purposes.  No member of the Telecom Group is liable to pay
                 nor has at any time incurred any liability to Tax chargeable
                 under the laws of any jurisdiction other than its place of
                 incorporation.

          1.1.2  Each member of the Telecom Group has paid all Tax which it
                 has become liable to pay and no member of the Telecom Group
                 has any liability to pay any penalty, surcharge, fine or
                 interest in connection with Tax.

          1.1.3  Each member of the Telecom Group has within applicable time
                 limits made all returns, provided all information and
                 maintained all records in relation to Tax as it is required
                 to make, provide or maintain and has fully complied on a
                 timely basis with all notices served on it and any other
                 requirements lawfully made of it by any Tax authority.  All
                 returns are true, accurate and complete and no return (and
                 nothing in a return), is disputed or is yet to be determined
                 by, or is subject to agreement with, a Tax authority.

          1.1.4  Each member of the Telecom Group has complied in all
                 material respects with its obligations under any statutory
                 provisions requiring the deduction or withholding of Tax
                 from amounts paid or received by such member, whether on its
                 own behalf or as agent, and has complied with all reporting
                 requirements in relation to the Tax deducted and has
                 properly accounted for any Tax so deducted or withheld to
                 any relevant Tax authority (other than amounts which have
                 not yet become due to be paid).

          1.1.5  No member of the Telecom Group is nor does any member of the
                 Telecom Group expect to be involved in a dispute or audit in
                 relation to Tax.  No Tax authority has investigated or
                 indicated that it intends to investigate any Tax affairs of
                 any member of the Telecom Group. 

          1.1.6  Other than as described in the Disclosure Letter, no Tax
                 authority has agreed to operate any special arrangement

                                     -139-



                 (that is, an arrangement which is not based on a strict
                 application of all relevant Tax legislation, published
                 extra-statutory concessions and published statements of
                 practice) in relation to the affairs of any member of the
                 Telecom Group.  With respect to any special arrangement
                 described in the Disclosure Letter, the availability of any
                 such arrangement will not be prejudiced as a result of the
                 acquisition or change of control of any member of the
                 Telecom Group resulting from this Agreement, and each
                 relevant member of the Telecom Group has acted in accordance
                 with the terms of any such arrangement.

     1.2  Arm's length dealings

          Except as disclosed in the Disclosure Letter, no member of the
          Telecom Group is and no member of the Telecom Group expects to be a
          party to any transaction, agreement or arrangement otherwise than by
          way of a bargain at arm's length which will be binding on such member
          after Completion, or any transaction, agreement or arrangement
          (whether or not by way of a bargain at arm's length) under which it
          has been or is or may be required after Completion to make any
          payment for any goods, services or facilities provided to it which is
          in excess of the market value of such goods, services or facilities
          or under which it has been, or is or may be required after Completion
          to provide goods, services or facilities for a consideration which is
          less than the market value of such goods, services or facilities
          and/or in consequence of which it will be liable to Tax in respect of
          any amount deemed for Tax purposes to be income or gains of the
          relevant member of the Telecom Group but not actually income or gains
          of the member of the Telecom Group.  No material adjustment or
          investigation has been made or threatened in writing to any member of
          the Telecom Group under the transfer pricing legislation  of any
          jurisdiction.

     1.3  Chargeable gains

          The Disclosure Letter contains details of each claim under section
          152 or 153 of the TCGA (replacement of business assets) made before
          the date of this Agreement to which section 154 of the TCGA (new
          assets which were depreciating assets) applies and which affects any
          asset owned by any member of the Telecom UK Group on or after the
          Balance Sheet Date (except where the held-over gain is treated as
          having accrued before the Balance Sheet Date).





                                     -140-



     1.4  Loan relationships

          1.4.1  In respect of every loan relationship (as defined by section
                 81 of the Finance Act 1996) to which any member of the
                 Telecom UK Group is a party and to which it will remain a
                 party after Completion the relevant member of the Telecom UK
                 Group has used in its statutory accounts an accruals basis
                 of accounting which is an authorised accounting method for
                 the purposes of Chapter II of Part IV of that Act.

          1.4.2  No member of the Telecom UK Group is and no member of the
                 Telecom UK Group has since the Balance Sheet Date been a
                 party to a loan relationship which has or had an unallowable
                 purpose for the purposes of paragraph 13 of Schedule 9 to
                 the Finance Act 1996.

     1.5  Value added tax

          1.5.1  No member of the Telecom UK Group is a member of a group of
                 companies for the purpose of section 43 of the VATA (groups
                 of companies) other than the group of companies of which the
                 representative member is Racal plc.  Racal has made, given,
                 obtained and kept up-to-date, full and accurate records,
                 invoices and documents appropriate or required for the
                 purposes of the VATA and has complied in all respects with
                 all other applicable VAT legislation and in particular has
                 filed all returns and made all payments of VAT on a timely
                 basis and no member of the Telecom UK Group has been
                 required by a Tax authority to give security under the VATA.

          1.5.2  No member of the Telecom UK Group owns an asset which is a
                 capital item, the input tax on which may be subject to
                 adjustment in accordance with Part XV of the Value Added Tax
                 Regulations 1995 (capital goods scheme).

          1.5.3  No member of the Telecom UK Group, nor any company of which
                 a member of the Telecom UK Group is a relevant associate
                 within the meaning of paragraph 3(7) of Schedule 10 to the
                 VATA (election to waive exemption), has elected to waive
                 exemption under paragraph 2 of Schedule 10 in relation to
                 any land except as disclosed in the Disclosure Letter.  Each
                 election of that type disclosed in the Disclosure Letter has
                 effect.

          1.5.4  No member of the Telecom UK Group is and no member of the
                 Telecom UK Group agreed to become an agent, manager or
                 factor for the purposes of section 47 of the VATA (agents,
                 etc.) of a person not resident in the United Kingdom.


                                     -141-



     1.6  Stamp Duty

          All documents by virtue of which each member of the Telecom UK Group
          has any right or in the enforcement of which the relevant member of
          the Telecom UK Group is interested have been duly stamped.

     1.7  Group Relief

         Except as reflected in the Completion Balance Sheet no member of the
         Telecom UK Group is nor  will it be under any obligation to make or
         have any entitlement to receive in respect of any period ending on or
         before Completion any payment for group relief as defined in section
         402(6) Taxes Act 1988 or any payment for the surrender of the benefit
         of an amount of Advance Corporation Tax or a repayment of such
         payment.


2.   TAX WARRANTIES RELATING TO RACAL USA

     2.1  General

          2.1.1  There is no contract or agreement, plan or arrangement by
                 Racal USA entered into on or before Completion covering any
                 person that, individually or collectively, could give rise
                 to the payment of any amount after Completion that would not
                 be deductible by such member by reason of Section 280G of
                 the Internal Revenue Code of 1986, as amended (the "Code"),
                 as now in effect.

          2.1.2  No consent under Section 341(f) of the Code has been filed
                 with respect to Racal USA.

          2.1.3  No closing agreement pursuant to Section 7121 of the Code
                 (or any similar provision of state, local or foreign law)
                 has been entered into by or with respect to Racal USA.

          2.1.4  Racal USA is not a party to any Tax allocation or sharing
                 agreement nor has in the last six years been a member of any
                 group filing a combined or consolidated Tax return (other
                 than a group the common parent of which was a member of the
                 Telecom Group) nor has any liability to a Tax authority for
                 the Taxes of any person (other than of any member of the
                 Telecom Group) under U.S. Treasury regulation
                 Section 1.1502-6 (or any similar provision of the laws of
                 any other jurisdiction) or as a transferee or successor.




                                     -142-



          2.1.5  No claim for unpaid Taxes has become a lien against the
                 property of Racal USA or is being asserted against Racal
                 USA.

          2.1.6  There are no outstanding agreements, waivers or arrangements
                 extending the statutory period of limitation applicable to
                 any claim for, or the period for the collection or
                 assessment of, Taxes due from or with respect to Racal USA
                 for any taxable period.

          2.1.7  No assessment in relation to any alleged deficiency in Taxes
                 has been proposed in writing against Racal USA.

          2.1.8  Ion is and at all times since its formation has been
                 classified as a partnership for US federal income tax
                 purposes.
































                                     -143-



                                  SCHEDULE X

                    Conduct between exchange and completion


The Sellers shall ensure that (unless it has obtained the prior consent of
Global as provided in clause 8.3) each Telecom Group member will:

1.   not create, allot, issue, acquire, repay or redeem any share or loan
     capital or agree, arrange or undertake to do any of those things or
     acquire or agree to acquire, an interest in a corporate body;

2.   operate its business in the ordinary course, including (without
     limitation) not accelerating sales or collection of amounts due (from
     debtors or otherwise) or deferring expenditures or payment of
     obligations;

3.   except in the ordinary course of business not acquire or dispose of,
     or agree to acquire or dispose of, a material asset or assume or
     incur, or agree to assume or incur, a material liability, obligation
     or expense (actual or contingent) and for the purposes of this
     paragraph 3 material means an asset with a value of (Pound Sterling)5
     million or which generates income exceeding (Pound Sterling)5 million
     and a liability or expense of (Pound Sterling)5 million;

4.   not make, or agree to make, any single item of capital expenditure
     exceeding in total (Pound Sterling)10 million (or its equivalent at
     the time) or incur, or agree to incur, a commitment or commitments
     involving capital expenditure exceeding in total (Pound Sterling)5
     million (or its equivalent at the time);

5.   not declare, pay or make any dividend or distribution save for the
     Pre-Completion Dividend;

6.   not pass a shareholders resolution;

7.   not make a claim under section 152 or 153 of TCGA (as defined in
     Schedule XII) which affects an asset owned by a Telecom Group member;

8.   not create, or agree to create, an Encumbrance over any of the
     Properties or any other asset;

9.   not enter into, terminate or amend a material long-term, onerous or
     unusual agreement, arrangement or obligation ("long term" for this
     purpose meaning unlikely to have been fully performed in accordance
     with its terms within 12 months and a material agreement, arrangement


                                     -144-



     or obligation means such an agreement, arrangement or obligation
     under which payment of (Pound Sterling)5 million can be made);

10.  (except in the usual course of its business) not amend the terms of
     employment or engagement of a director, other officer or any class of
     employees or provide, or agree to provide, a gratuitous payment or
     benefit to a director, officer or any class of employees (or any of
     their dependants) or employ or dismiss any officer, director or
     employee where amendments exceed (Pound Sterling)50,000; 

11.  not amend, or agree to amend, the terms of its borrowing or
     indebtedness in the nature of borrowing or create, incur, or agree to
     create or incur, borrowing or indebtedness in the nature of borrowing
     other than through inter company indebtedness or the Finance Lease.

12.  except in the usual course of its business not give, or agree to
     give, a guarantee, indemnity or other agreement to secure, or incur
     financial or other obligations with respect to, another person's
     obligation;

13.  not commence, compromise or settle any litigation or arbitration
     proceedings or release, discharge or compound any liability or claim
     if to do so would have a material impact on the Telecom Group outside
     the ordinary course of business;

14.  conduct its business in all material respects in accordance with all
     applicable legal and administrative requirements in any jurisdiction;

15.  maintain insurance cover for the Telecom Group on the basis
     subsisting on the date hereof;

16.  keep Global properly informed of all material matters relating to
     businesses, assets and affairs of the Telecom Group and, subject to
     Racal's being given reasonable prior notice, afford to Global and its
     representatives reasonable access at reasonable intervals to the
     properties, directors and senior management and the documents, books
     and records of the Telecom Group which are in its possession provided
     that such access may be terminated or withheld by Racal if such
     interferes or is likely to interfere in any way with the normal day
     to day operation of the Company;

17.  not to modify any of the rights attached to any Shares;

18.  except as required by law or regulation (including without limitation
     any requirement of the London Stock Exchange to publish a press
     announcement or circular to shareholders) not knowingly initiate,
     solicit or encourage, nor will any member of the Racal Group

                                     -145-



     knowingly initiate, solicit, or encourage through any officer,
     director, employee or agent of any thereof (including by way of
     furnishing information), or take any other action to facilitate
     knowingly, any inquiries or the making of any proposal that
     constitutes, or would reasonably be expected to lead to, any
     Competing Transaction; 

19.  except as expressly provided for in the existing terms of the
     Reorganisation Documents and the Railtrack Agreements, not contract
     or engage or engage in any other arrangement between any member of
     the Telecom Group (on the one hand) and any member of the Racal group
     or any of its affiliates (on the other hand) other than on arm's
     length terms;

20.  not amend, modify, waive or supplement any of the existing terms of
     the Reorganisation Documents or the Railtrack Agreements;

21.  not invest in, lend to or otherwise transfer to any property or
     assets to Racal USA or ION;

22.  not permit Racal USA to incur any liability, contingent or otherwise;

23.  not enter into new contracts or commitments for the sale, lease or
     transfer of network capacity, including dark fibre and IRUs;

24.  to procure that all payments to be made by the Telecom Group in
     respect of the amount under the heading "ESOT" in the Base Line
     Balance Sheet ((Pound Sterling)1,811,000) have been made on or prior
     to Completion so that the Telecom Group shall have no further
     liability or obligations in respect of that amount.


     A.  In addition to the above, pending Completion, Racal shall procure
         that a circular (the "Circular") be sent to Racal's shareholders
         convening an extraordinary general meeting of shareholders of Racal
         and containing a unanimous recommendation of the board of directors
         of Racal to vote in favour of the necessary resolution to approve and
         implement the Transaction and the Circular will be despatched to
         those entitled to receive the same within ten Business Days of the
         date of this Agreement and, prior to the despatch of the Circular,
         Global shall be entitled to review and comment on the Circular and
         any drafts thereof.

     B.  Racal shall procure:

         (a)  to the extent any of the Reorganisation Documents have not
              been executed then they are executed by the relevant parties

                                     -146-



              as soon as reasonably practicable and in any event no later
              than ten Business Days from the date of this Agreement. Any
              breach of this undertaking shall entitle Global to terminate
              this Agreement pursuant to clause 5.2(b)(ii);

         (b)  all reasonable assistance requested by Global is provided to
              enable Global to obtain consent to changes of control of any
              government contracts;

         (c)  it shall provide all reasonable assistance and access to its
              accountants and employees (i) to enable the Telecom UK Group
              to consider (and to the extent permitted by the Companies
              Act) to enable its members to provide financial assistance
              under sections 151-158 of the Companies Act and (ii) to
              enable the Telecom Group to be in a position to prepare
              accounts complying with US GAAP; and

         (d)  to cause Racal USA to terminate the Backhaul Services
              Agreement - Product Order, dated 4 October 1999, between
              Metromedia Fiber Network Services Inc. and Racal Telecom,
              Inc.

     C.  Racal consents to Global's retention of Deloitte & Touche for the
         purpose of assisting in the preparation of audited accounts for the
         Telecom Group and the issuance of a report thereon.

     D.  Racal undertakes to prepare and furnish to Global the July Management
         Accounts promptly, and in any event within ten Business Days of the
         date of this Agreement.  Any breach of this undertaking shall entitle
         Global to terminate this Agreement pursuant to clause 5.2(b)(ii).


















                                     -147-



                                  SCHEDULE XI

                            Property Reorganisation

                Part A:  leasehold properties to be assigned to RTL

[Schedule not included]









































                                     -148-



   Part B: leasehold properties to be assigned to RPL and to be sublet to RTL

[Schedule not included]













































                                     -149-



            Part C:  leasehold properties to be sublet to RTL

[Schedule not included]













































                                     -150-



            Part D: leasehold properties to be assigned to RTL

[Schedule not included]












































                                     -151-



       Part E: leasehold properties to be assigned to RPL and sublet

[Schedule not included]













































                                     -152-



                                 SCHEDULE XII

                           Outstanding Negotiations

                                    Part A

                          Engrossments or Equivalent


Data Room Reference        Property address


7.2.5                      Beckenham Junction

7.2.8                      Ardley Tunnel, Bicester

7.2.15                     Hills Road, Cambridge

7.2.18                     Crown Street, Carlisle

7.2.21                     Near Colchester Station

7.2.23                     Quinton Road, Coventry

7.2.29                     Cleveland Street, Doncaster

7.2.35                     Red Cow Crossing, Exeter

7.2.37                     Askew Road, Gateshead

7.2.39                     Suite 3/1 Skypark, Glasgow (not engrossment)

7.2.40                     Suites 4/5 Skypark, Glasgow (not engrossment)

7.2.55                     66 Porchester Road, London

7.2.58                     Clerkenwell Green, London

7.2.61                     Rail House, Manchester

7.2.71                     Penzance (section 106 Agreement only)

7.2.74                     Farlington Junction, Portsmouth


                                     -153-



7.2.94                     Gorse Hill, Swindon

7.2.104                    Wrottesley Road/Harrow Road, Willesden

7.2.108                    Hudson House, York (part property, holding over)

7.5.1                      Quayside Tower, Birmingham







































                                     -154-



             Wayleaves and Licences in the process of negotiation

Party                     Address                           Purpose

British Waterways         South Quay, Docklands             Connection to
                                                            highway

Landlord                  Prince Regent Road, Belfast       Diverse cable
                                                            entries

Landlord                  Units 17/18 Chelmsley             Diverse cable
                          Wood Ind Estates                  entries

Canary Wharf              Canary Wharf, Dockland            Drop from viaduct
Management Co                                               to ground
                                                           

British Railways Board    John Peyton House, Nottingham     Diverse cable
                                                            entries

Unknown (as yet)          Selsdon Way, Docklands            Cable chamber

St Boniface College       Marsh Mills, Plymouth             Connection to
                                                            highway to railway

Telehouse                 London                            Additional rack
                                                            space and cable
                                                            access wayleaves

Telecity                  London                            Additional rack
                                                            space

London switch             London                            Rack space















                                     -155-



                                    Part B

                             Proposed Transactions

Property

Unit A2 [1-4]                              Surrender of existing Lease of
Sandy Court                                Unit A2 [1-2] by RPL.  Grant of
Moss Industrial Estate                     new FRI Lease of Unit A2 [1-4] to
Leigh                                      RTL for term of 15 years at rent
                                           of (Pound Sterling)34,320 p.a.
                                           exclusive subject to 3 yearly
                                           upward only reviews.

Chineham Gate                              Grant of 4 FRI leases to RTL of
Crockford Lane                             four main office floors of
Chineham                                   Chineham Gate, Chineham,
Basingstoke                                Basingstoke for term expiring in
                                           June 2013 at total rent of (Pound
                                           Sterling)595,000 p.a. exclusive
                                           subject to 5 yearly upward only
                                           reviews.

Satec House                                Purchase of freehold for (Pound
Weston Road                                Sterling)775,000 by RPL.  Grant of
Crewe                                      FRI lease by RPL to RTL for term
                                           of 25 years at rent of (Pound
                                           Sterling)82,500 p.a. exclusive
                                           subject to 5 yearly upward only
                                           reviews.

2-7 Clerkenwell Green                      Grant of underlease of part of
London EC1                                 yard at rear of building by RTL to
                                           London Electricity for electrical
                                           transformer chamber for term of 25
                                           years (less 3 days) at rent of
                                           5p. p.a.











                                     -156-



SIGNED by David Whittaker                  )
on behalf of                               )       David Whittaker
Controls and Communications Limited        )






SIGNED by David Whittaker                  )
on behalf of                               )       David Whittaker
The Racal Corporation                      )






SIGNED by Sir Ernest Harrison              )
on behalf of                               )       Sir Ernest Harrison
Racal Electronics Plc                      )





SIGNED by Thomas Casey                     )
on behalf of                               )       Thomas Casey
Global Crossing Ltd.                       )



















                                     -157-