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Mr Larry Bautista
Michaelmas House
9 Dover Close
Knotty Green
Beaconsfield
Buckinghamshire
HP9 1XZ
                                                                    13 July 2001

                                                               WITHOUT PREJUDICE
                                         SUBJECT TO THE APPROVAL OF THE BOARD OF
                                                   FLAG TELECOM HOLDINGS LIMITED
                                                         AND SUBJECT TO CONTRACT

Dear Larry

Following our recent discussions, set out below are the terms of the agreement
(this "Agreement") between you and FLAG Telecom Holdings Limited ("the Company")
regarding the conclusion of your employment with the FLAG Group and the
cessation of all offices held by you in the FLAG Group.

1.    Your employment with FLAG Group will end on 31 January 2002 or such
      earlier date you commence new employment, or such earlier date notified by
      you to the Company (such notice to be in writing to the Company's HR
      Department) on which you wish your employment to cease (the "End Date").
      Your employment contract or contracts shall cease to apply effective as of
      the End Date except for those clauses that expressly survive and apply
      thereafter (including without limitation Appendix 5 of the Employee
      Handbook: Protection of Material, Non-Public and other Confidential
      Information and Prevention of Insider Trading and Tipping; Appendix 5b of
      the Employee Handbook: Company Policies and Procedures concerning
      Protection of Material, Non-Public and other Confidential Information and
      Prevention of Insider Trading and Tipping) as amended by this Agreement.

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2.    Up to 9 August 2001 you will be required to attend the Company's offices
      and you will put in good order all those matters and areas for which you
      are responsible. During this period you will assist in an orderly transfer
      of your duties, by answering queries raised by employees or officers of
      the Company and any Associated Company and by providing timely assistance
      to the new Chief Financial Officer. From 9 August to 1 October 2001 ("the
      Separation Date") you will not be required to attend the Company's'
      offices but will continue to assist in the transfer of your duties as set
      out above, and you will provide telephone assistance while you are away
      from London. Between the Separation Date and the End Date you will be on
      "garden leave" and will not be required to attend the office, but you are
      required to provide reasonable assistance to the FLAG Group as set out in
      paragraph 19.

SALARY AND BENEFITS

3.    You will be paid your current salary (of US$18,750 per month) to the End
      Date and will receive benefits to the Separation Date. Payment of the
      final instalment of your salary is conditional upon you having complied
      with paragraph 28.7 of this Agreement Save as otherwise provided for in
      this Agreement, all benefits extended to you including, but not limited to
      insurance benefits, accommodation, travel and car allowances, payment of
      education costs for your children, and pension contributions will cease as
      of the Separation Date and your salary payments will cease on the End
      Date. You will receive payment on the Separation Date of US$8,653 for
      accrued and unused vacation earned through the Separation Date. Vacation
      will not accrue between the Separation Date and the End Date and you will
      receive no further payment in respect of unused vacation. All payments and
      benefits will be subject to the tax equalisation arrangements referred to
      in paragraph 7 below.

PAYMENTS

4.1   As additional benefits to you and in consideration for your obligation
      under paragraph 26 of this Agreement and the provisions of paragraphs 26
      and 27, the Company will pay to you on the Separation Date the sum of
      US$431,306

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      (less such payments you will receive as your current salary from the
      Separation Date through the End Date) which sum is subject to the tax
      equalisation arrangements referred to in paragraph 7 ("the Compensation
      Payment");

4.2   The Company will pay you the sum of US$200,000 within 7 days of the
      execution of this Agreement in accordance with the letter to you from J R
      B Scholes dated 17 March 1999 regarding minimum guarantee payments and you
      acknowledge that there are no further sums due to you under this letter.
      This amount will not be subject to the tax equalisation arrangements
      referred to in paragraph 7.

4.3   The payments in this paragraph 4 will be subject to actual and/or
      hypothetical tax and social security withholdings as appropriate.

4.4   For the avoidance of doubt if the End Date is earlier than 31 January 2002
      the balance of current salary that would have been paid for the period
      ending on 31 January 2002 will be paid in a lump sum at the end of the
      month in which the actual End Date occurs subject to your having complied
      with paragraph 28.7 at the end of the month in which the actual End Date
      occurs.

OTHER COMPENSATION OR BENEFITS

5.    You hereby acknowledge and agree that, except as expressly provided in
      this Agreement, you will not receive any additional compensation,
      severance or benefits after the End Date.

RELOCATION

6.    The Company will pay the following costs associated with your repatriation
      to the US or relocation elsewhere. If you relocate elsewhere the Company
      will pay a sum equivalent to the costs of repatriation to the US. Payment
      under this paragraph is subject to the production of receipts or other
      documentary evidence of the costs to the Company's satisfaction. The costs
      which will be met by the Company are:

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      (i)   Package, transportation, and air-freight costs of your personal
            effects to the US (subject to your providing two competitively
            priced quotations for such services)

      (ii)  Business class one way direct route air tickets for you, your spouse
            and your children to the city of your choice in the United States of
            America

      (iii) Reasonable hotel accommodation for a maximum period of 30 nights
            while you arrange local accommodation.

TAXATION

7.    In respect of payments and benefits made or accruing up to the End Date
      and relocation costs under paragraph 6 and the provision of
      PricewatehouseCoopers assistance in accordance with this paragraph 7, you
      shall continue to benefit from the operation of the tax equalisation
      arrangement (which includes tax and social security withholdings) which
      has previously been operated in the usual way (which for the avoidance of
      doubt excludes tax relating to share options) and the Company will pay the
      fees of PricewaterhouseCoopers to assist in the preparation of your US and
      UK tax returns for the fiscal tax years 2000-2001 and 2001-2002 (UK) and
      calendar tax years 2000, 2001 and 2002 (US) up to a maximum of(pound)3,500
      per year.

8.    (i)   Except as provided in this Agreement and following the End Date
            you will stop receiving any payments from the Company and will
            consequently cease suffering hypothetical tax withholding.

      (ii)  After the preparation of your US and foreign tax returns as detailed
            in paragraph 7 above, PricewaterhouseCoopers will continue to
            prepare tax equalisation calculations to ensure that you only suffer
            the equivalent tax on income in the US that you would have received
            had the foreign assignment not occurred.

      (iii) Please note that if you continue to reside in the foreign country
            after you leave the Company, the Company's or any Associated
            Company's

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            share of any foreign and or US income and social tax
            liability (and any subsequent calculation of `grossed up' taxes)
            earned during your employment, will be computed as if you had
            relocated to the US immediately after the End Date. Your decision to
            remain in such foreign country or subsequently to return to that
            country or another foreign location is personal and any increase in
            the rate or level of tax will be your responsibility.

9.    FOREIGN TAX CREDIT

      (i)   While on overseas assignment from the US, the Company has been
            paying foreign taxes on your behalf which may then be taken as a
            credit on your actual US tax return. It may not have been possible
            to take a full credit for those foreign taxes paid and in those
            circumstances the `excess foreign tax credits' are `carried forward'
            to offset taxes payable on foreign source income received in future
            years. This credit can be carried forward for up to five years.

      (ii)  Any tax benefits related to the use of foreign tax credits generated
            while on foreign assignment with the Company or any Associated
            Company will accrue to the Company or such Associated Company.
            Accordingly, PricewaterhouseCoopers will notify the Company of any
            remaining foreign tax credit carry forwards when the last assignment
            related income tax return is prepared.

      (iii) If any foreign tax credits carried forward are used subsequently to
            your departure from the Company, you will be required to submit the
            tax return to PricewaterhouseCoopers who will determine at the
            Company's expense the tax benefit derived from the foreign tax
            credit. This amount will be payable by you to the Company.

      REFUNDS

      (iv)  You may receive US and foreign tax refunds in a period after the End
            Date that may relate to a period when you were covered by the tax
            equalisation policy. All foreign tax refunds must be returned to the

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            Company on receipt. Any US tax refunds will be considered as part of
            the final reconciliation calculation and may be payable back to the
            Company.

      AUDITS

      (v)   The Internal Revenue Service and foreign country tax authorities
            may, on occasion, examine your tax return relating to a period where
            you received overseas allowances as a result of your overseas
            assignment. After the examination, the final reconciliation
            calculation for that year will be re-computed by
            PricewaterhouseCoopers at the Company's expense to account for any
            adjustments. In addition they may be called upon at the Company's
            cost to represent you in any tax examination related to a year of
            assignment.

EXPENSES

10.   You hereby acknowledge and agree that within 3 months of the Separation
      Date you will submit your final documented expense reimbursement statement
      reflecting those business expenses reasonably incurred through the
      Separation Date, for which you seek reimbursement. The Company will
      promptly reimburse these expenses.

SUMS OWED TO COMPANY

11.   The parties agree that no sums are owed by you to the Company or any
      Associated Company with respect to holiday taken in excess of your
      pro-rata entitlement, any outstanding loan, or any advance of salary or
      training costs made to you by the Company or any Associated Company.

SUMS OWED TO EMPLOYEE

12.   You hereby acknowledge and agree that, save as set out in this Agreement,
      there are no sums owed to you by the Company or any Associated Company
      including any payments under any bonus, incentive, share option or similar
      scheme (including, but not limited to the FLAG Telecom Holdings Limited
      Long-Term Incentive Plan ("the Plan")) and that neither the Company nor
      any

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      Associated Company nor the trustees of any such scheme is or shall be
      liable to make any payment or provide you with any shares under any such
      scheme.

PENSION

13.   As an additional benefit on the Separation Date the Company shall pay the
      sum of US$35,958 to a pension scheme nominated by you.

MEDICAL, DENTAL AND LIFE INSURANCE

14.   The Company will continue to provide you (and your immediate family if
      provided under the current arrangements) with and will pay for medical,
      dental and life insurance cover until the End Date subject to the terms of
      these schemes from time to time in force. Thereafter the Company will
      continue to provide you (and your immediate family if provided under the
      current arrangements) with medical and dental cover subject to your
      continued payment of the premiums or contributions which shall be notified
      to you and subject to the terms of the schemes until you find new
      employment providing equivalent cover.

SHARE OPTIONS

15.   Subject to Appendix 5b of the Employee Handbook and notwithstanding the
      terms of any award certificate you shall be entitled for a period of one
      year following the Separation Date to exercise such options granted to you
      under the Plan as have vested prior to the Separation Date in accordance
      with the terms of the Plan and illustrated by the vesting schedule
      attached at Schedule 1. Pursuant to the Plan all unvested options will
      lapse as at the End Date. In addition, 66,667 vested options granted on 1
      July 1998 will lapse as of the date of execution of this Agreement.

RESIGNATION AS A DIRECTOR AND AUTHORISED SIGNATORY

16.   You will remain Chief Financial Officer of the Company until 9 August
      2001. On execution of this Agreement you will execute a letter in the form
      of Schedule 2 resigning as Chief Financial Officer with effect from 9
      August 2001. You hereby acknowledge and agree that you hold no offices and

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      authorities for signature in or on behalf of the Company or any Associated
      Company. You undertake to execute all documents and do such further things
      (at the expense of the Company) as may be necessary to effect your
      resignation from any office in the FLAG Group.

17.   You hereby acknowledge and agree that from the 9 August 2001 to the
      Separation Date and continuing thereafter you shall not hold yourself out
      as authorised to make any financial statements on behalf of the FLAG
      Group, to incur fees, expenses or liabilities of any kind or pledge credit
      on behalf of the Company or any Associated Company in respect of any third
      party (including but not limited to auditors, legal advisers, investment
      banks and houses and suppliers).

18.   The Company shall ensure that cover shall continue for you in respect of
      your acts and omissions as a director or officer of the Company and any
      Associated Companies to the extent such cover is available under the terms
      of the Company's and Associated Companies' Directors' and Officers'
      Liability Insurance policy. For the avoidance of doubt, no waivers or
      releases referred to in paragraphs 27 and 28 given by you herein or
      pursuant hereto shall extend to any indemnities of the Company and any
      Associated Company contained in the by-laws of the Company or any
      Associated Company or approved by any board resolution of the Company or
      any Associated Company in connection with you being a director or officer
      of the Company or any Associated Company or your involvement with the
      Company's initial public offering or any capital raising activities of the
      Company or any Associated Company.

REASONABLE ASSISTANCE

19.1  You agree that subject to paragraph 19.2 at the request of the Company
      from the date of execution of this Agreement, including following the
      termination of your employment you will provide the Company and any
      Associated Company with such assistance as it may reasonably require in
      the conduct of legal proceedings or any inquiry or investigation in
      respect of which the Company and/or any Associated Company or its or their
      legal advisers believe you may

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      be able to provide assistance. In the event such assistance is requested,
      the Company will reimburse you for reasonable out-of-pocket expenses in
      accordance with the Company's travel and reimbursement policy.

19.2  From the Separation Date until 6 months following the End Date you may be
      asked to provide assistance for up to 10 hours in any month. If above 10
      hours work is required or if assistance is required following six months
      following the End Date you will be paid for your assistance on a mutually
      agreed basis. You agree to provide occasional telephone assistance and
      such assistance will not be taken into account in computing the 10 hours
      referred to above.

RETURN OF PROPERTY

20.   You hereby acknowledge and agree that on or before the Separation Date you
      will return in good condition and without modification all books,
      documents, correspondence, computer disks, papers, materials, laptop
      computer, mobile telephone, credit or charge and telephone cards and keys,
      including all copies thereof, and all other property of or relating to the
      business or affairs of the Company or any Associated Company or any
      officer, employee, customer, supplier or agent of the Company or any
      Associated Company, to the Company's premises save for public documents,
      copies of forms and precedents and other materials that may be required to
      fulfil your obligations pursuant to paragraphs 2 and 19. You further
      acknowledge and agree that on or before the Separation Date you will
      delete any information belonging to the Company or any Associated Company
      from any personal computer that you may have at home or elsewhere other
      than the Company's offices without retaining any copies of any such
      information, in electronic or other format save for public documents,
      copies of forms and precedents and other materials that may be reasonably
      required to fulfil your obligations pursuant to paragraphs 2 and 19. You
      acknowledge and agree that you have notified the Company of any passwords
      used by you in relation to its computer system.

REFERENCE

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21.   The Company will on any reasonable request by a prospective employer or
      employment agency in the UK provide a written reference with respect to
      your employment with the FLAG Group (subject in each case to any material
      information which may subsequently come to the attention of the FLAG
      Group).

CONFIDENTIALITY AND NON-DISPARAGEMENT

22.   You and the Company agree that you, the Company and the Associated
      Companies will hold the provisions of this Agreement and the circumstances
      leading to the termination of your employment in strictest confidence and
      will not, except with the prior written consent of the other party,
      directly or indirectly, publicize or disclose in any manner whatsoever the
      provisions of this Agreement or the circumstances leading to the
      termination of your employment; PROVIDED, HOWEVER, that you may disclose
      this Agreement to your immediate family; and that each party (including
      any Associated Company) may disclose this Agreement: (a) in confidence to
      their attorneys, accountants, auditors, tax preparers, and financial
      advisors (provided they have themselves agreed to maintain the
      confidentiality of such communications); and (b) insofar as such
      disclosure may be necessary to enforce the terms of this Agreement or as
      otherwise required by law. In particular, and without limitation, both
      parties (including any Associated Company) agree not to disclose the terms
      of this Agreement to any current or former employee of the FLAG Group.

23.   You hereby agree not to disparage the Company or any Associated Company or
      any of their respective officers, directors, employees, shareholders,
      attorneys and agents, in any manner likely to be harmful to them or their
      business, business reputation or personal reputation and the Company will
      not and agrees to procure that its Associated Companies and the officers
      of the Company and of FLAG Limited will not disparage you in any manner
      likely to be harmful to you or your business, business reputation or
      personal reputation and will use reasonable endeavours to prevent the
      officers and employees of the FLAG Group from disparaging you in any
      manner likely to be harmful to you or your business, business reputation
      or personal reputation; PROVIDED, HOWEVER, that you and the FLAG Group may
      respond

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      accurately and fully to any question, inquiry or request for information
      when required by legal process.

PROPRIETARY INFORMATION OBLIGATIONS

24.   You hereby acknowledge that you signed and agree to continue to be bound
      by the provisions of the non-compete and proprietary information
      agreement, and also by Appendices 5 and 5b of the Employee Handbook,
      copies of which are attached to this Agreement at Schedule 3 (except as
      amended by this Agreement).

ASSIGNMENT OF INVENTIONS

25.   You hereby irrevocably assign to the Company all right, title and interest
      in and to any and all inventions (whether or not patentable), copyrights,
      trademarks, know-how, proprietary techniques and trades secrets or similar
      proprietary rights that you developed in the course of your employment by
      the FLAG Group, or during working hours, or using Company tools,
      materials, resources, or equipment or which you might otherwise own which
      would be needed by the Company in order to develop and sell its products
      and operate its business. You hereby waive and quitclaim to the Company
      any and all claims, of any nature whatsoever, which you now have or may
      hereafter have for infringement of any patents or copyrights resulting
      from any such application for letters, patents, copyright registrations
      assigned hereunder to the Company.

RESTRICTIVE COVENANTS

26.   Subject to the provisions of this Agreement you agree that the provisions
      contained in the non-compete and proprietary information agreement
      attached in Schedule 3 Part 2 as modified by this Agreement shall continue
      to apply and be binding upon you to the End Date and thereafter save that
      in consideration of and subject to your receipt of the Compensation
      Payment you agree that such non-compete and proprietary information
      agreement shall be amended so that the non-compete covenant (at clause 1)
      shall be deleted and replaced with the non-compete covenant attached at
      Schedule 3 Part 1

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      and the non-compete and proprietary information agreement at Parts 1 and 2
      of Schedule 3 shall be subject to English law and the non-exclusive
      jurisdiction of the English courts and tribunals.

FULL AND FINAL SETTLEMENT

27.   In consideration of and subject to the receipt of the Compensation Payment
      and in further consideration of the other items described herein, on
      behalf of yourself, your heirs, spouse, assigns, attorneys and agents, you
      hereby release, acquit and forever discharge the Company and any
      Associated Company and its or their officers, directors, agents, servants,
      employees, attorneys, shareholders, predecessors, successors, assigns and
      affiliates, and the Company and its Associated Companies hereby release
      acquit and forever discharge you of and from any and all claims,
      liabilities, demands, causes of action, costs, expenses, attorneys' fees,
      damages, indemnities and obligations of every kind and nature, in law,
      equity, or otherwise, known and unknown, suspected and unsuspected,
      disclosed and undisclosed, ("Claims") arising out of or in any way related
      to any agreement, event, conduct, act, omission or circumstance that has
      occurred or will occur at any time prior to and including the End Date,
      (except for the New UK Statutory Claims and New Personal Injury Claims
      referred to in paragraph 28.6 below) directly or indirectly arising out of
      or in any way connected with your employment with the FLAG Group, the
      termination of that employment (even though this occurs after the date of
      execution of this Agreement), or any office held by you by virtue of your
      employment or the loss of any such office; including but not limited to
      Claims related to salary, bonuses, commissions, stock, stock options, or
      any other ownership interests in the Company, vacation pay, fringe
      benefits, expense reimbursements, severance pay, or any other form of
      compensation; tort law; contract law; wrongful discharge; discrimination;
      harassment; fraud; defamation; or emotional distress (whether arising
      under common law, statute, European Union law or otherwise, whether in the
      United Kingdom or elsewhere in the world and whether contemplated or not)
      and you (in consideration of and subject to the receipt of the
      Compensation Payment and in further consideration of the other items
      described herein) and the Company and its Associated Companies will
      refrain from instituting or

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      continuing and will forthwith withdraw any legal proceedings or complaint,
      including without limitation any complaint before or to an employment
      tribunal or administrative agency. You and the Company both acknowledge
      that there are or may be Claims which are not contemplated (whether on the
      facts known to the parties or on the law as it is known) at the date of
      this Agreement by the parties or either of them but that the waiver
      contained in this paragraph waives and releases any and all such claims
      (except for the New UK Statutory Claims and New Personal Injury Claims
      referred to in paragraph 28.6 below). For the avoidance of doubt the
      provisions of this Agreement remain fully enforceable as between the
      parties and are not affected by the terms of this waiver and release.

28.

28.1  You hereby warrant that before signing this Agreement you received
      independent legal advice from Michael Cole of Penningtons, Highfield,
      Brighton Road, Godalming, Surrey, GU7 1NS ("Legal Adviser"), a qualified
      lawyer, as to its terms and effect on, in particular, your ability to
      bring a statutory claim, including but not limited to any claim for:

      (i)   unfair dismissal;

      (ii)  a redundancy payment;

      (iii) unlawful deductions from wages;

      (iv)  unequal treatment contrary to the provisions of the Equal Pay Act
            1970;

      (v)   race discrimination or victimisation under the Race Relations Act
            1976;

      (vi)  sex discrimination or victimisation under the Sex Discrimination Act
            1975;

      (vii) disability discrimination or victimisation under the Disability
            Discrimination Act 1995;

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      (viii) breach of the Transfer of Undertakings (Protection of Employment)
            Regulations 1981;

      (ix)  breach of the Working Time Regulations 1998;

      (x)   breach of the Trade Union and Labour Relations (Consolidation) Act
            1992; and

      (xi)  breach of the Transnational Information and Consultation of
            Employees Regulations 1999.

28.2  You agree that subject to paragraph 28.6 below to the extent you have or
      may have any such complaints, the waiver and release in paragraph 27 above
      expressly relates to each and every one of those complaints.

28.3  In consideration of and subject to your receipt of the Compensation
      Payment you waive and release all other complaints or Claims of any nature
      against the Company or any Associated Company under the Employment Rights
      Act 1996, the Equal Pay Act 1970, the Race Relations Act 1976, the Sex
      Discrimination Act 1975, the Disability Discrimination Act 1995, the Trade
      Union and Labour Relations (Consolidation) Act 1992, the Transfer of
      Undertakings (Protection of Employment) Regulations 1981, the Working Time
      Regulations 1998, the Transnational Information and Consultation of
      Employees Regulations 1999 except for the New UK Statutory Claims referred
      to in paragraph 28.6 below.

28.4  Your Legal Adviser confirms that he has advised you on the claims set out
      in paragraph 28.1 above by signing the certificate addressed to the
      Company at Schedule 4.

28.5  The parties agree that all conditions regulating compromise agreements
      contained in any of the legislation referred to at sub-paragraphs 28.1 and
      28.3 above have been satisfied.

28.6  The waivers and releases of claims and complaints in paragraphs 27 and 28
      do not include statutory claims referred to in paragraphs 28.1 and 28.3
      above or personal injury claims in each case arising out of entirely new
      acts or

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      omissions which are currently unknown and not contemplated by the
      parties as at the date of execution of this Agreement and which occur
      between the date of execution of this Agreement and the End Date ("the New
      UK Statutory Claims" and "the New Personal Injury Claims" respectively),
      but for the avoidance of doubt the waivers and releases in paragraphs 27
      and 28 do include all Claims (other than the New UK Statutory Claims, New
      Personal Injury Claims and claims for breach of this Agreement) relating
      to the future cessation of your employment with the FLAG Group on the End
      Date as provided for in this Agreement.

28.7  On the termination of your employment on the End Date you agree to execute
      a further waiver and release in the terms of Schedule 6 within 7 days of
      the End Date. The final salary payment (including the full amount of any
      accelerated payment of salary arising as a result of the End Date
      occurring earlier than 31 January 2002) is conditional upon you executing
      and delivering to the Company this form of waiver and release.

29.   Each of the parties is entering into this Agreement in reliance upon the
      acknowledgements and agreements and warranties in this Agreement.

INJUNCTIVE RELIEF

30.   The parties hereto hereby agree that damages would be an inadequate remedy
      for the Company its Associated Companies or you in the event of a breach
      or threatened breach of paragraphs 22, 23, 24, 25 or 26 of this Agreement
      and, in the event of any such breach or threatened breach, the Company its
      Associated Companies or you may, either with or without pursuing any
      potential damage remedies, obtain and enforce an injunction prohibiting
      you, the Company or the Associated Companies from violating this Agreement
      and requiring you, the Company or the Associated Companies to comply with
      the terms of this Agreement.

GOVERNING LAW AND JURISDICTION

31.   This Agreement will be deemed to have been entered into and will be
      construed and enforced in accordance with the laws of England and Wales

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      without regard to principles of conflict of laws. The parties hereby agree
      to submit to the non-exclusive jurisdiction of the English courts and
      tribunals for any action to enforce this Agreement or to seek equitable
      relief.

MISCELLANEOUS

32.   This Agreement constitutes the complete, final and exclusive embodiment of
      the entire agreement between you and the FLAG Group with regard to this
      subject matter. It is entered into without reliance on any promise or
      representation, written or oral, other than those expressly contained
      herein, and it supersedes any other such promises, warranties or
      representations. This Agreement may not be modified or amended except in
      writing signed by you and a duly authorized officer of the Company.

33.   This Agreement will bind the heirs, personal representatives, successors
      and assigns of you and the FLAG Group, and inure to the benefit of you and
      the FLAG Group, and your and their heirs, successors and assigns. In the
      event of your death prior to the payment in full of all amounts payable to
      you pursuant to this Agreement, amounts that would otherwise have been
      payable to you will be payable to your estate.

34.   The Contracts (Rights of Third Parties) Act 1999 shall apply to this
      Agreement. Any of the Associated Companies (as defined at paragraph 38
      below) shall be entitled to enforce the benefits conferred by this
      Agreement. No consent of any such Associated Company will be required for
      the variation or termination of this Agreement, even if that variation or
      termination affects the benefits conferred on such Associated Company.
      Except as provided in this paragraph 34 , a person who is not a party to
      this Agreement has no right under the Contracts (Rights of Third Parties)
      Act 1999 to enforce any term of this Agreement but this does not affect
      any right or remedy of a third party which exists or is available apart
      from that Act.

35.   If any provision of this Agreement is determined to be invalid or
      unenforceable, in whole or in part, this determination will not affect any
      other provision of this Agreement and the provision in question will be
      modified by the court so as to be rendered enforceable.

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36.   The parties understand that each party is responsible for bearing its or
      his own costs and attorney's fees incurred in connection with matters
      released in this Agreement, the preparation and negotiation of this
      Agreement, and all other matters or events between the parties up to the
      time of this Agreement.

37.   If either party brings an action to enforce the terms of this Agreement,
      the prevailing party shall be entitled to reasonable attorneys' fees and
      costs.

38.   As used herein, "Associated Company" means the companies listed at
      Schedule 5 and any other company directly or indirectly controlled by FLAG
      Telecom Holdings Limited.

39.   As used herein, "foreign" means non United States, "US" means the United
      States of America and "UK" means the United Kingdom.

40.   References in this Agreement to the provisions of any statute or
      subordinate legislation shall be deemed to refer to the same as in force
      including any amendment or re-enactment from time to time.

41.   The headings in this Agreement are for ease of reference only and shall
      not affect interpretation.

42.   The FLAG Group means FLAG Telecom Holdings Limited and all of the
      Associated Companies.

43.   The Company will cause its Associated Companies to honour this Agreement
      and will be responsible for any default on the part of any of the
      Associated Companies.

Please confirm your acceptance of the above terms by signing, dating and
returning to me the enclosed copy of this Agreement, together with the
Solicitor's Certificate signed and dated by your Legal Adviser, whereupon the
terms of this Agreement, although marked without prejudice and subject to
contract shall become binding upon the parties subject to this Agreement having
been approved by the Board of Directors of the Company.


                                       17
<Page>


Yours sincerely

FOR AND ON BEHALF OF
FLAG TELECOM HOLDINGS LIMITED ON ITS OWN BEHALF
AND ON BEHALF OF THE ASSOCIATED COMPANIES

/s/ Andres Bande
Chairman and CEO
Duly authorized by resolution of the Board

I understand and accept the terms of this Agreement.

Signed:
/s/ Larry Bautista
------------------------------------
LARRY BAUTISTA

Date:

                                       18
<Page>

                                   SCHEDULE 1

                                VESTING SCHEDULE

<Table>
<Caption>
GRANT DATE       PLAN           PRICE     GRANTED   EXERCISED   LAPSED    VESTED    UNVESTED
<S>          <C>              <C>         <C>               <C>      <C> <C>         <C>
30/9/1999    International    US$ 6.42     10,000           0        0   10,000           0

10/4/2000    International    US$22.50     44,000           0        0   22,000      22,000

14/9/2000    International    US$12.00     22,000           0        0   11,000      11,000

10/4/2001    International    US$ 2.75     22,000           0        0         0     34,000

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

                                          164,667           0        0   43,000     67,000
</Table>

Note the 66,667 options granted on 1 July 1998 are not shown in this Schedule as
under the terms of this Agreement they lapse.

                                       19
<Page>

                                   SCHEDULE 2


The Board of Directors
Flag Telecom Holdings Limited ("the Company")


Dear Sirs

I hereby resign from my position as Chief Financial Officer of the Company with
effect from 9 August 2001 without prejudice to any of my rights under the
agreement between the Company and me of today's date.


                                    Yours sincerely


                                    Larry Bautista


                                       20
<Page>

                                   SCHEDULE 3

                                     PART 1

The Executive acknowledges that in the course of his employment he has had
access to confidential and proprietary information belonging to the Company and
Affiliated Companies and has knowledge of and influence over the Company's and
Affiliated Company's clients and that he is in possession of knowledge and
information which is not available other than to the Company and Affiliated
Companies and would be detrimental to the Company and Affiliated Companies if
known to the Company's and Affiliated Companies' competitors.

1)    PROHIBITION AGAINST COMPETITIVE ACTIVITIES

      The Executive, without the prior written consent of the Board of Directors
      of the Company (or any successor governing body of the Company) shall not
      either alone or jointly with others as an individual, partner,
      shareholder, officer, director, principal, agent, employee, consultant or
      in any other capacity whether directly or indirectly through any other
      person, firm or company and whether or not for Executive's own benefit:

      (i)   During the period of Executive's employment with the Company or any
            other Affiliated Company, and for a period of twelve months
            following the Separation Date work for, or provide services to, or
            accept any employment, appointment or engagement or become
            interested in, any company or entity within the Tycom, Level 3,
            Global Crossing, or 360 Networks group of companies provided however
            that nothing herein shall prevent the Executive from acquiring
            securities of a publicly traded company so long as the Executive's
            equity interest in any such company is less than 5% of the
            outstanding capital stock of such company;

      (ii)  During the period of Executive's employment with the Company or any
            other Affiliated Company, and for a period of twelve months
            following the Separation Date, in competition with the Company
            and/or any of

                                       21
<Page>

            the Affiliated Companies in any geographic area where the Company or
            any other Affiliated Company conducts business (or at the time of
            the Separation Date, had a board-approved business plan under which
            it planned to conduct business and about which the Executive had
            knowledge) engage in commercial or professional activities relating
            to the sale, marketing, construction, building, operation,
            maintenance and installation of submarine telecommunications cable
            capacity ("Competitive Activities") provided, however, that nothing
            herein shall prevent the Executive from acquiring securities of a
            publicly-traded company so long as the Executive's equity interest
            in any such company is less than 5% of the then outstanding capital
            stock of such company;

      (iii) During the period of Executive's employment with the Company or any
            other Affiliated Company, and for a period of twelve months
            following the Separation Date, interfere with the relations of the
            Company or any other Affiliated Company with any of its employees,
            agents, representatives, suppliers or vendors under contract, or
            joint ventures, where any such person or entity co-operates with or
            supports the Company or any other Affiliated Company; or

      (iv)  During the period of Executive's employment with the Company or any
            other Affiliated Company, and for a period of twelve months
            following the Separation Date, induce or solicit, otherwise
            encourage any employee of the Company or any other Affiliated
            Company to terminate his or her employment with the Company or any
            other Affiliated Company or for a period of six months from the
            Separation Date employ or offer employment to any person who was
            employed by the Company or any Affiliated Company at the Separation
            Date or in the four months prior to the Separation Date.

      For the purposes of this Schedule 3:

                                       22
<Page>

      (i)   "The Company", "Affiliated Company" and "Separation Date" shall have
            the same meanings respectively as "the Company", "Associated
            Company" and "Separation Date" in the Agreement to which this forms
            Schedule 3 Part I and

      (ii)  "the Executive" means Larry Bautista

      (iii) any employee means any person who was employed by the Company or any
            other Affiliated Company with whom the Executive personally dealt
            and who was or is employed in a managerial sales or technical
            capacity.

The Company shall send the Executive written notice in the event that the
Company believes that Executive has violated any of the prohibitions of this
Schedule 3; provided, however, that any failure by the Company to give notice
under this provision or to enforce its rights under this Agreement in any one or
more instances shall not be a bar to the Company giving notice and taking action
to enforce its rights under this Agreement at any later time.

The provisions in this clause are intended to be separate, severable and
enforceable as such.


                                       23
<Page>

                                     PART 2

         COPY APPENDICES TO EMPLOYEE HANDBOOK AND NON-COMPETE AGREEMENT

                                       24
<Page>

                                   SCHEDULE 4

                             SOLICITOR'S CERTIFICATE


I hereby certify as follows:

1.    I am a Solicitor of the Supreme Court of England and Wales holding a
      current practising certificate.

2.    I have advised Larry Bautista of the terms and effect under English law of
      the Agreement between FLAG Telecom Holdings Limited and him dated
      _________________________________ 2001 and, in particular, its effect on
      his ability to pursue his rights before an employment tribunal following
      its signing.

3.    I am not acting (and have not acted) in relation to this matter for FLAG
      Telecom Holdings Limited or any Associated Companies (as defined in the
      Agreement).

4.    There is in force and was in force when I gave the advice referred to
      above, cover under a contract of insurance, or an indemnity provided for
      members of a profession or professional bodies relating to the risk of a
      claim by Larry Bautista in respect of loss arising from such advice.


SIGNED:

SOLICITOR:

FIRM NAME:

ADDRESS:

                                       25
<Page>


                                   SCHEDULE 5

                              ASSOCIATED COMPANIES
<Table>

-------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                            <C>                            <C>           <C>
FLAG Telecom Holdings Limited        Cedar House,                   Suite 770,                     Bermuda       26044
                                     41 Cedar Avenue                48 Par-la-Ville Road
                                     Hamilton HM12, Bermuda         Hamilton HM11
                                                                    Bermuda
-------------------------------------------------------------------------------------------------------------------------------
FLAG Limited                         Cedar House,                   Suite 770,                     Bermuda       EC/17928
                                     41 Cedar Avenue                48 Par-la-Ville Road
                                     Hamilton HM12, Bermuda         Hamilton HM11
                                                                    Bermuda
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Development Limited     Cedar House,                   Suite 770,                     Bermuda       E26206
                                     41 Cedar Avenue                48 Par-la-Ville Road
                                     Hamilton HM12, Bermuda         Hamilton HM11
                                                                    Bermuda
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Development Services    16 Hussein Wassef St.,         Safir Suites Hotel,            Egypt         N/A
Company LLC                          Messaha, Dokki                 Suite 701
                                     Cairo 12311,                   21 Mohammad Mazhar Street
                                     Egypt                          Zamalek, Cairo
                                                                    Egypt
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Network Services        Hardwicke House, 2/F            Same as registered office     Ireland       301430
Limited                              Hatch Street
                                     Dublin 2
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Ireland Limited         Hardwicke House, 2/F           Same as registered office      Ireland       300330
                                     Hatch Street
                                     Dublin 2
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Japan Limited           Izumi Kojimachi Building, 5/F  Same as Registered Office      Japan         038860
                                     10 Kojimachi 1-chome
                                     Chiyoda-ku
                                     Tokyo 102-0083
                                     Japan
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Espana SA               Po Castellana, 141 Planta 20   C/ Juan Bravo, 3C Planta 5     Spain         N/A
                                     Edificio Cuzco IV              28006 Madrid
                                     28046 Madrid Spain
                                     Spain
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Ireland Services        Hardwicke House, 2/F           Same as registered office      Ireland       309573
Limited                              Hatch Street
                                     Dublin 2

-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Ireland Network         Hardwicke House, 2/F           Same as registered office      Ireland       311268
Limited                              Hatch Street
                                     Dublin 2
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Network USA Limited     Corporation Trust Centre       Suite 150, 8045 Leesburg       USA           3227686
                                     1209 Orange Street             Pike, Vienna, Virginia 22182
                                     Wilmington, County of New USA
                                     Castle
                                     Delaware 19801 USA
-------------------------------------------------------------------------------------------------------------------------------
</Table>

                                       26
<Page>

<Table>

-------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                            <C>                            <C>           <C>
FLAG Telecom Nederland Network B.V.  Strawinskylaan 3051             Same as Registered Office     The           34147123
                                     1077 ZX Amsterdam, The                                        Netherlands
                                     Netherlands

-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Servizi Italia SPA      Via Pompeo Magno 4             Same as Registered Office      Italy         N/A
                                     00192, Rome
                                     Italy
-------------------------------------------------------------------------------------------------------------------------------
FLAG Access India Private Ltd        The Surya Hotel, Office Floor  Same as Registered Office      India         55-107573
                                     Business Centre,
                                     New Friends Colony
                                     New Delhi 110065
                                     India
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Group Services Limited  Cedar House                    Suite 770                      Bermuda       26157
                                     41 Cedar Avenue                48 Par-la-Ville Road
                                     Hamilton HM12                  Hamilton HM11
                                     Bermuda Bermuda

-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Limited                 9 South Street                 Same as Registered Office      UK            3506159
                                     London W1K 2XA
                                     UK
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom USA LTD.                1209 Orange Street             Suite 150, 8045 Leesburg Pike  USA           2900162
                                     City of Wilmington             Vienna, Virginia 22182
                                     County of New Castle           USA
                                     State of Delaware
                                     USA
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Asia Limited            Suite 3305-6                   Same as Registered Office      Hong Kong     645513
                                     One International Finance
                                     Centre
                                     1 Harbour View Street
                                     Central, Hong Kong
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom France Services EURL    25, rue Greffulhe              Same as Registered Office      France        R.C.S.
                                     92300 Levallois-Perret                                                      Nanterre
                                     France                                                                      B431 829 134

-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Deutschland GmbH        Mainzer Landstrasse 47          Same as Registered Office     Germany       HRB 48284
                                     60329  Frankfurt
                                     Germany
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Services Italia SRL     Via XX Settembre No. 1         Via Pompeo Magno 4             Italy         N/A
(in liquidation)                     Rome, Italy                    00192, Rome
                                                                    Italy
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Nederland B.V.          Strawinskylaan 3051, 1077 ZX    Same as Registered Office     The           34147133
                                     Amsterdam, The Netherlands                                    Netherlands
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Global Network Limited  Cedar House                    Suite 770                      Bermuda       28625
                                     41 Cedar Avenue                48 Par-la-Ville Road
                                     Hamilton HM12                  Hamilton HM11
                                     Bermuda                        Bermuda
-------------------------------------------------------------------------------------------------------------------------------
FLAG Pacific Holdings Limited        Cedar House                    Suite 770                      Bermuda       28118
                                     41 Cedar Avenue                48 Par-la-Ville Road
                                     Hamilton HM12                  Hamilton HM11
                                     Bermuda                        Bermuda
-------------------------------------------------------------------------------------------------------------------------------
FLAG Pacific Limited                 Cedar House                    Suite 770                      Bermuda       28120
                                     41 Cedar Avenue                48 Par-la-Ville Road
                                     Hamilton HM12                  Hamilton HM11
                                     Bermuda                        Bermuda

-------------------------------------------------------------------------------------------------------------------------------
</Table>

                                       27
<Page>

<Table>
-------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                            <C>                            <C>           <C>
FLAG Pacific USA Limited             Corporation Trust Centre       N/A                            USA           3246409
                                     1209 Orange Street
                                     Wilmington,
                                     County of New Castle
                                     Delaware 19801
                                     USA
-------------------------------------------------------------------------------------------------------------------------------
FLAG Pacific Canada Limited          P O Box 7289, Stn. "A"         N/A                            Canada        512377
                                     44 Chipman Hill, 10th Floor
                                     Saint John
                                     N.B. E2L 4S6
                                     Canada
-------------------------------------------------------------------------------------------------------------------------------
FLAG Pacific Japan Limited           Izumi Kojimachi Building, 5/F  Same as  Registered Office     Japan         N/A
                                     10 Kojimachi 1-chome
                                     Chiyoda-ku
                                     Tokyo 102-0083
                                     Japan
-------------------------------------------------------------------------------------------------------------------------------
FLAG Asia Holdings Limited           Cedar House                    Suite 770                      Bermuda       28213
                                     41 Cedar Avenue                48 Par-la-Ville Road
                                     Hamilton HM12                  Hamilton HM11
                                     Bermuda                        Bermuda
-------------------------------------------------------------------------------------------------------------------------------
FLAG Asia Limited                    Cedar House                    Suite 770                      Bermuda       28214
                                     41 Cedar Avenue                48 Par-la-Ville Road
                                     Hamilton HM12                  Hamilton HM11
                                     Bermuda                        Bermuda
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Deutschland Network     Mainzer Landstrasse 47         Same as Registered Office      Germany       HRB 52228
GmbH                                 60329  Frankfurt
                                     Germany
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Korea Limited           Suite 2303, 23rd Floor, City   Same as Registered Office      Korea         N/A
                                     Air Tower 159-9
                                     Samsung-Dong, Kangnam-Ku
                                     Seoul 135-973
                                     Korea
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Singapore Pte..         8 Shenton Way                  Same as Registered Office      Singapore     20002702N
Limited                              #33-01 Temasek Tower
                                     Singapore 068811
-------------------------------------------------------------------------------------------------------------------------------
FLAG Atlantic Holdings Limited       Cedar House                    Suite 770                      Bermuda       25863
                                     41 Cedar Avenue                48 Par-la-Ville Road
                                     Hamilton HM12                  Hamilton HM11
                                     Bermuda                        Bermuda
-------------------------------------------------------------------------------------------------------------------------------
FLAG Atlantic Limited                Cedar House                    Suite 770                      Bermuda       25854
                                     41 Cedar Avenue                48 Par-la-Ville Road
                                     Hamilton HM12                  Hamilton HM11
                                     Bermuda                        Bermuda
-------------------------------------------------------------------------------------------------------------------------------
FLAG Atlantic UK Limited             9 South Street                 Sovereign Court, 635 Sipson    United        3765265
                                     London W1K 2XA                 Road, West Drayton, Middlesex  Kingdom
                                     UK                             UB7 0JE,
                                                                    UK
-------------------------------------------------------------------------------------------------------------------------------
FLAG Atlantic USA Limited            615 South DuPont Highway       Sovereign Court, 635 Sipson    USA           3016237
                                     Dover                          Road, West Drayton,
                                     Delaware 19901                 Middlesex
                                     USA                            UB7 0JE,
                                                                    UK
-------------------------------------------------------------------------------------------------------------------------------
FLAG Atlantic France S.A.R.L.        25, rue Greffulhe              Same as Registered Office      France        RCS Nanterre
                                     92300 Levallois-Perret                                                      B 423 843
                                     France                                                                      143 ((2001
                                                                                                                 B01913)
-------------------------------------------------------------------------------------------------------------------------------
</Table>

                                       28
<Page>

<Table>
-------------------------------------------------------------------------------------------------------------------------------
<S>                                  <C>                            <C>                            <C>           <C>
FLAG Telecom Belgium Network SA      c/o Arthur Andersen            Zwaluwstraat 9                 Belgium       112.955
                                     Montagne du Parc 4             3920 Lommel
                                     1000 Bruxelles                 Belgium
                                     Belgium
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Switzerland Network AG  C/o Lenz & Staehelin           N/A                            Switzerland   TBA
                                     Aktiengesellschaft
                                     Bleicherweg 58
                                     8027 Zurich
                                     Switzerland
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Hellas A.E.             5 Livini Street                Room 302                       Greece        48637/01/B/
                                     Athens                         60 Vasilissis Sophias Avenue                 01206
                                     Greece                         Athens 11528
                                                                    Greece
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom Norway Network AS       C/o Advokatfirmaet Hjort DA    N/A                            Norway        TBA
                                     Akersgaten 2
                                     0105 Oslo
                                     Norway
-------------------------------------------------------------------------------------------------------------------------------
FLAG Telecom France Network SAS      25, rue Greffulhe              Same as Registered Office      France        R.C.S2001B02879
                                     92300 Levallois-Perret
                                     France (
-------------------------------------------------------------------------------------------------------------------------------
</Table>

                                       29
<Page>

                                   SCHEDULE 6

                              COMPROMISE AGREEMENT

Dear Larry

      Further to the terms of the agreement dated [ ] between FLAG Telecom
Holdings Limited ("the Company") and yourself ("the Agreement"), you and the
Company have agreed to enter into this further Compromise Agreement ("Compromise
Agreement") as follows:

 1.   In consideration of and subject to your receipt of your final salary
      payment ("the Final Salary Payment") in accordance with paragraphs 3 and
      4.4 of the Agreement, on behalf of yourself, your heirs, spouse, assigns,
      attorneys and agents, you hereby release, acquit and forever discharge the
      Company and any Associated Company and its or their officers, directors,
      agents, servants, employees, attorneys, shareholders, predecessors,
      successors, assigns and affiliates, from any and all claims, liabilities,
      demands, causes of action, costs, expenses, attorneys' fees, damages,
      indemnities and obligations of every kind and nature, in law, equity, or
      otherwise, known and unknown, suspected and unsuspected, disclosed and
      undisclosed ("Claims"), arising out of or in any way related to any
      agreement, event, conduct, act, omission or circumstance that has occurred
      as at the date of execution of this Compromise Agreement directly or
      indirectly arising out of or in any way connected with your employment
      with the FLAG Group, the termination of that employment, or any office
      held by you by virtue of your employment or the loss of any such office;
      including but not limited to Claims related to salary, bonuses,
      commissions, stock, stock options, or any other ownership interests in the
      Company, vacation pay, fringe benefits, expense reimbursements, severance
      pay, or any other form of compensation; tort law; contract law; wrongful
      discharge; discrimination; harassment; fraud; defamation; or emotional
      distress (whether arising under common law, statute, European Union law or
      otherwise, whether in the United Kingdom or elsewhere in the world and
      whether contemplated or not) and you will refrain from instituting or
      continuing and will

                                       30
<Page>

      forthwith withdraw any legal proceedings or complaint, including without
      limitation any complaint before or to an employment tribunal or
      administrative agency. You acknowledge that there are or may be Claims
      which were not contemplated (whether on the facts known to the parties or
      on the law as it was known) at the date of the Compromise Agreement by the
      parties or either of them but that the waiver contained in this paragraph
      waives and releases any and all such Claims (if any). For the avoidance of
      doubt the provisions of the Agreement remain fully enforceable as between
      the parties and are not affected by the terms of this Compromise
      Agreement.

2.

2.1   You hereby warrant that before signing this Compromise Agreement you
      received independent legal advice from Michael Cole of Penningtons,
      Highfield, Brighton Road, Godalming, Surrey GU7 1NS ("Legal Adviser"), a
      qualified lawyer, as to its terms and effect on, in particular, your
      ability to bring a statutory claim, including but not limited to any claim
      for:

      (i)   unfair dismissal;

      (ii)  a redundancy payment;

      (iii) unlawful deductions from wages;

      (iv)  unequal treatment contrary to the provisions of the Equal Pay Act
            1970;

      (v)   race discrimination or victimisation under the Race Relations Act
            1976;

      (vi)  sex discrimination or victimisation under the Sex Discrimination Act
            1975;

      (vii) disability discrimination or victimisation under the Disability
            Discrimination Act 1995;

      (viii) breach of the Transfer of Undertakings (Protection of Employment)
            Regulations 1981;

      (ix)  breach of the Working Time Regulations 1998;

                                       31
<Page>

      (x)   breach of the Trade Union and Labour Relations (Consolidation) Act
            1992;

      (xi)  breach of the Transnational Information and Consultation of
            Employees Regulations 1999; and

      (xii) any other claims related to your employment, or its termination that
            could be brought under English law;

2.2   You agree that to the extent you have or may have any such complaints, the
      waiver and release of Claims in paragraph 1 above expressly relates to
      each and every one of those complaints.

2.3   In consideration of and subject to your receipt of the Final Salary
      Payment you waive all other complaints or claims of any nature against the
      Company or any Associated Company under the Employment Rights Act 1996,
      the Equal Pay Act 1970, the Race Relations Act 1976, the Sex
      Discrimination Act 1975, the Disability Discrimination Act 1995, the Trade
      Union and Labour Relations (Consolidation) Act 1992, the Transfer of
      Undertakings (Protection of Employment) Regulations 1981, the Working Time
      Regulations 1998, the Transnational Information and Consultation of
      Employees Regulations 1999 or similar statutory or common laws of the US
      or otherwise,

2.4   Your Legal Adviser confirms that he has advised you on the claims set out
      at paragraph 2.1 above by signing a Solicitor's Certificate addressed to
      the Company in the form set out in Schedule 4 of the Agreement with the
      amendments necessary to refer to this Compromise Agreement.

2.5   The parties agree that all conditions regulating compromise agreements
      contained in any of the legislation referred to at sub-paragraphs 2.1 and
      2.3 above have been satisfied.

3.    For the purposes of this Compromise Agreement "the Company", and
      "Associated Company", shall have the meanings respectively as "the
      Company", and "Associated Company" have in the Agreement.

                                       32
<Page>

Yours sincerely


For and on behalf of
FLAG Telecom Holdings Limited
on its own behalf and on behalf
of the Associated Companies


I understand and accept the terms of this Compromise Agreement

Signed

Larry Bautista

                                       33