LOAN AND SECURITY AGREEMENT

                          Dated as of September 4, 1996

                                 By and Between

                            SIEMENS STROMBERG-CARLSON

                                     LENDER

                                       AND

                               GST SWITCHCO, INC.

                                    BORROWER


<PAGE>
                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----

LOAN AND SECURITY AGREEMENT.................................................. 1

RECITALS .....................................................................1

ARTICLE I.....................................................................1
    DEFINITIONS...............................................................1
         1.1   DEFINITIONS....................................................1

ARTICLE II....................................................................9
    LOANS.....................................................................9

         2.1   AGREEMENT TO LEND..............................................9
         2.2   THE NOTE......................................................12
         2.3   TERM LOANS....................................................12
         2.4   INTEREST ON LOANS.............................................13
         2.5   TERM LOAN PAYMENTS............................................13
         2.6   DEFAULT RATE OF INTEREST......................................14
         2.7   OPTIONAL PREPAYMENT OF NOTE; MANDATORY PREPAYMENT OF NOTE.....14
         2.8   PAYMENT, ETC..................................................14
         2.9   MAXIMUM LAWFUL INTEREST RATE..................................15
         2.10  INDEMNIFICATION FOR FAILURE TO BORROW.........................15
         2.11  ADDITIONAL EQUIPMENT..........................................15
         2.12  LEASES........................................................15
         2.13  SECURITY AGREEMENT............................................15
         2.14  EXTENSION.....................................................15

ARTICLE III..................................................................16
    REPRESENTATIONS AND WARRANTIES...........................................16
         3.1   ORGANIZATION; POWERS..........................................16
         3.2   AUTHORIZATION BY BORROWER.....................................16
         3.3   FINANCIAL STATEMENTS..........................................17
         3.4   NO MATERIAL ADVERSE CHANGE....................................17
         3.5   LITIGATION....................................................17
         3.6   TAX RETURNS...................................................17
         3.7   NO DEFAULTS...................................................17
         3.8   PROPERTIES....................................................18
         3.9   LICENSES, ETC.................................................18
         3.10  COMPLIANCE WITH LAWS..........................................18
         3.11  ERISA.........................................................19
         3.12  INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT....19
         3.13  FEDERAL RESERVE REGULATIONS...................................19

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<PAGE>
         3.14  COLLATERAL....................................................19
         3.15  CHIEF PLACE OF BUSINESS.......................................20
         3.16  OTHER CORPORATE NAMES.........................................20
         3.17  INSURANCE.....................................................20
         3.18  CAPITALIZATION................................................20
         3.19  ARTICLES OF INCORPORATION; BY-LAWS............................20
         3.20  REAL PROPERTY LEASES AND EASEMENTS............................21
         3.21  INTELLECTUAL PROPERTY.........................................21
         3.22  FISCAL YEAR...................................................21
         3.23  NO MATERIAL MISSTATEMENTS.....................................21
         3.24  BUSINESS PLAN.................................................21

ARTICLE IV...................................................................21
    CONDITIONS FOR LOANS.....................................................21
         4.1   ON OR PRIOR TO THE EFFECTIVE DATE.............................22
         4.2   ALL LOANS.....................................................23

ARTICLE V....................................................................25
    AFFIRMATIVE COVENANTS....................................................25
         5.1   CORPORATE EXISTENCE; LICENSES AND TRADE NAMES.................25
         5.2   COMPLIANCE WITH LAWS. ETC.....................................25
         5.3   MAINTENANCE OF PROPERTIES.....................................25
         5.4   INSURANCE.....................................................26
         5.5   TAXES.........................................................26
         5.6   FINANCIAL STATEMENTS, REPORTS, ETC............................26
         5.7   LITIGATION AND OTHER NOTICES..................................28
         5.8   LANDLORD CONSENTS AND AGREEMENTS..............................28
         5.9   ERISA.........................................................28
         5.10  ACCESS TO PREMISES, RECORDS AND NETWORK.......................29
         5.11  ENVIRONMENTAL NOTICES.........................................29
         5.12  AMENDMENT OF ORGANIZATION DOCUMENT............................29
         5.13  FURTHER ASSURANCES............................................29
         5.14  ENVIRONMENTAL PERMITS, LICENSES, ETC..........................30
         5.15  PAYMENT RESERVE...............................................30

ARTICLE VI...................................................................31
    NEGATIVE COVENANTS.......................................................31
         6.1   LIENS, ETC....................................................31
         6.2   SALE OF ASSETS; CONSOLIDATION, MERGER, ETC....................31
         6.3   GUARANTEES; THIRD-PARTY SALES AND LEASES......................32
         6.4   INVESTMENTS...................................................32
         6.5   PERMITTED ACTIVITIES..........................................33
         6.6   TRANSACTIONS WITH AFFILIATES..................................33
         6.7   INDEBTEDNESS..................................................33

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<PAGE>
         6.9   CORPORATE NAMES...............................................33
         6.10  SALE OF COLLATERAL............................................34
         6.11  SALARIES AND COMPENSATION.....................................34

ARTICLE VII..................................................................34
    COLLATERAL SECURITY......................................................34
         7.1   COLLATERAL SECURITY...........................................34
         7.2   PRESERVATION OF COLLATERAL AND PERFECTION OF SECURITY INTERESTS
               THEREIN.......................................................34

ARTICLE VIII.................................................................34
    EVENTS OF DEFAULT; REMEDIES..............................................34
         8.1   EVENTS OF DEFAULT.............................................34
         8.2   TERMINATION OF COMMITMENT; ACCELERATION.......................37
         8.3   WAIVER OF DEMAND..............................................37
         8.4   RIGHTS AND REMEDIES GENERALLY.................................37
         8.5   ENTRY UPON PREMISES AND ACCESS TO INFORMATION.................37
         8.6   SALE OR OTHER DISPOSITION OF COLLATERAL BY LENDER.............38
         8.7   LENDER NOT LIABLE.............................................38

ARTICLE IX...................................................................39
    MISCELLANEOUS............................................................39
         9.1   NOTICES.......................................................39
         9.2   NO WAIVERS; AMENDMENTS........................................40
         9.3   GOVERNING LAW AND JURISDICTION................................41
         9.4   EXPENSES; DOCUMENTARY TAXES...................................41
         9.5   EQUITABLE RELIEF..............................................41
         9.6   INDEMNIFICATION; LIMITATION OF LIABILITY......................41
         9.7   SURVIVAL OF AGREEMENTS, REPRESENTATIONS AND WARRANTIES, ETC...42
         9.8   SUCCESSORS AND ASSIGNS........................................43
         9.9   SEVERABILITY..................................................43
         9.10  COVER PAGE; TABLE OF CONTENTS AND SECTION HEADINGS............43
         9.11  COUNTERPARTS..................................................43
         9.12  MARSHALLING; PAYMENTS SET ASIDE...............................43
         9.13  SERVICE OF PROCESS............................................44
         9.14  WAIVER OF JURY TRIAL..........................................44
         9.15  ENTIRE AGREEMENT, ETC.........................................44

                                       iii

<PAGE>
                                    EXHIBITS

         Exhibit A   --    Form of Guaranty
         Exhibit B   --    Form of Note
         Exhibit C   --    Form of Notice of Borrowing
         Exhibit D   --    Borrower's Balance Sheet
         Exhibit E   --    [INTENTIONALLY DELETED]
         Exhibit F   --    Form of Opinion of Borrower's Counsel
         Exhibit G   --    [INTENTIONALLY DELETED]
         Exhibit H   --    Form of Lessee Security Agreement
         Exhibit I   --    Form of Landlord/Mortgagee's Waiver
         Exhibit J   --    Form of Lease
         Exhibit K   --    Form of Escrow Agreement
         Exhibit L   --    Form of Officer's Certificate and Support Affidavit


                                       iv

<PAGE>
                                    SCHEDULES

         Schedule 1.1    --   Approved Third-Party Product
         Schedule 1.1(a) --   IXC Toll Tandem Features
         Schedule 3.2    --   Governmental Consents, Filings, Registrations and
                              Approvals
         Schedule 3.5    --   Pending Litigation
         Schedule 3.17   --   Insurance
         Schedule 3.18   --   Capitalization
         Schedule 3.19   --   Articles of Incorporation; Bylaws
         Schedule 3.20   --   Real Property Leases and Easements
         Schedule 3.21   --   Intellectual Property


                                        v

<PAGE>
                           LOAN AND SECURITY AGREEMENT

         THIS  LOAN  AND  SECURITY  AGREEMENT  (this  "AGREEMENT"),  dated as of
September 4, 1996 is entered into by and between  SIEMENS  STROMBERG-CARLSON,  a
Delaware general  partnership  ("LENDER"),  and GST SWITCHCO,  INC. a Washington
corporation ("BORROWER").

                                    RECITALS

         WHEREAS, Borrower is a special purpose corporation recently formed to
own and lease equipment to be used in alternate access communications networks;
and

         WHEREAS, Borrower has requested that Lender extend a line of credit to
Borrower for the purpose of enabling Borrower to purchase Equipment required by
Borrower in connection with its business; and

         WHEREAS,  Lender is willing to extend  such line of credit to  Borrower
subject to, and on the terms and  conditions  of, this Agreement and in reliance
on the Guaranty executed by Guarantor;

         Accordingly,  in  consideration of the foregoing and for other good and
valuable consideration, the receipt, adequacy and sufficiency of which is hereby
acknowledged by the parties, the parties hereto agree as follows:

                                    ARTICLE I

                                   DEFINITIONS

         1.1  DEFINITIONS.  As used in this  Agreement,  the following words and
terms shall have the meanings specified below:

         "ADEQUATE  CASH"  means  accounts  in the  names  of  Guarantor  and/or
Affiliates of Guarantor consisting of cash or cash equivalents.

         "AFFILIATE"  means  any  Person  directly  or  indirectly  controlling,
controlled by or under common control with Borrower,  and any officer,  director
or shareholder of such Person or Borrower.

         "APPLICABLE RATE" means with respect to the Note the interest rate then
in effect with  respect to the Interim  Loans or the Term Loan,  as  applicable,
evidenced thereby.

                                       1

<PAGE>

         "APPROVED  THIRD-PARTY  PRODUCT"  means (i) all product  identified  in
SCHEDULE 1.1 hereto as "Approved  Product" (as such Schedule may be amended from
time to time by  Borrower  and  Lender)  and (ii) any  other  product  or future
product for the provision of communication  services that may be mutually agreed
to between Borrower and Lender from time to time based on good faith discussions
between  Borrower  and  Lender;   PROVIDED,   HOWEVER,  that  Lender  shall  not
unreasonably  withhold its approval of the  designation  of any such products as
"Approved   Third-Party   Product."   Notwithstanding  the  preceding  sentence,
"Approved  Third-Party  Product"  shall not include any  product  identified  in
SCHEDULE 1.1 hereto as  "Non-Approved  Product." It is understood by the parties
that Lender will not finance third-party products which Lender also manufactures
and/or sells and that performs essentially the same application as a Third-Party
Product for which Borrower may request financing.

         "BALANCE SHEET" has the meaning set forth in SECTION 3.3.

         "BANKRUPTCY  CODE" means the  Bankruptcy  Reform  Act,  Title 11 of the
United States Code, as amended from time to time, or any successor statute.

         "BORROWER  AFFILIATE"  shall mean any  Affiliate to which  Borrower has
leased a portion of the Equipment pursuant to a Lease.

         "BUSINESS"  means  the  business  of  acquiring,  holding  and  leasing
alternate access communications  equipment and all operations related thereto or
in support thereof.

         "BUSINESS DAY" means any day not a Saturday, Sunday or legal holiday in
the State of New York,  on which banks are open for  business  in New York,  New
York.

         "BUSINESS PLAN" means that certain Business Plan of Borrower dated July
22, 1996 which has been delivered to Lender.

         "CABLE" means Siecor fiber optic cable and miscellaneous hardware.

         "CABLE COMMITMENT AMOUNT" means Five Million Dollars ($5,000,000),  for
the purchase of Siecor fiber optic cable.

         "CODE"  has the meaning set forth in SECTION 1.3.

         "COLLATERAL"  means all property and interests in property now owned or
hereafter  acquired by Borrower  in or upon which a security  interest,  lien or
mortgage  is  granted to Lender by  Borrower  pursuant  to  Section  7.1 of this
Agreement.

         "COMMITMENT"  means Lender's  agreement to lend as set forth in SECTION
2.1 hereof.

         "COMMITMENT  TERMINATION  DATE"  means,  for both  Phase I and Phase II
Loans, the date that is seven (7) years from the Effective Date.

                                       2

<PAGE>
         "COMMUNICATIONS  ACT" means the  Communication Act of 1934, as amended,
and all rules, regulations and policies promulgated thereunder.

         "CONTAMINANT" means any waste,  pollutant,  hazardous substance,  toxic
substance,  hazardous  waste,  special  waste,  petroleum  or  petroleum-derived
substance or waste, or any constituent of any such substance or waste.

         "CONVERSION DATE" means the first Business Day of each calendar quarter
during the term hereof.

         "DEBT"  means,  with respect to any Person,  (i)  indebtedness  of such
Person for borrowed money,  (ii)  obligations of such Person evidenced by bonds,
debentures, notes or other similar instruments, (iii) obligations of such Person
which arise under conditional sale agreements  relating to property purchased by
such Person  (including,  without  limitation,  obligations  to pay the deferred
purchase  price of property or services),  excluding  trade payables and accrued
expenses incurred in the ordinary course of business, (iv) obligations as lessee
under  leases  which  shall  have been or should  be, in  accordance  with GAAP,
recorded as capital leases and (v) all Guarantees of such Person.

         "EFFECTIVE  DATE" means the date on which this  Agreement has been duly
executed by and delivered to all parties hereto.

         "EQUIPMENT" has the meaning set forth in SECTION 7.1 hereof.

         "ERISA" means the Employee  Retirement  Income Security Act of 1974, as
the same may be amended.

         "ERISA  AFFILIATE"  means any (i) corporation  which is a member of the
same controlled group of corporations  (within the meaning of IRC ss. 414(b)) as
Borrower,   (ii)  partnership  or  other  trade  or  business  (whether  or  not
incorporated)  under common control  (within the meaning of IRC ss. 414(c)) with
Borrower,  and (iii) member of the same  affiliated  service  group  (within the
meaning of IRC ss. 414(m)) as Borrower,  any corporation described in clause (i)
above or any partnership or trade or business described in clause (ii) above.

         "ESCROW ACCOUNT" means the escrow account maintained in accordance with
the Escrow  Agreement  into which the Reserve  Amount is  deposited or withdrawn
from time to time.

         "ESCROW  AGENT" means the person  serving as escrow agent in accordance
with the Escrow Agreement, as selected by Borrower and Lender, and such person's
successors.

         "ESCROW AGREEMENT" means the escrow agreement in substantially the form
of EXHIBIT L hereto among Borrower, Lender and Escrow Agent.

                                       3

<PAGE>

         "EVENT OF DEFAULT"  has the meaning  given to such term in ARTICLE VIII
hereof.

         "FCC"  means the Federal  Communications  Commission  or any  successor
commission or agency.

         "FCC LICENSE" means each and every license, permit or authorization, if
any, duly issued by the FCC required by the Borrower to conduct the Business.

         "FINANCING  FEE AMOUNT"  has the  meaning  set forth in SECTION  2.1(F)
hereof.

         "FISCAL YEAR" means the year ending September 30.

         "GAAP" means  generally  accepted  accounting  principles in the United
States of America (as such principles may change from time to time) applied on a
consistent   basis  (except  for  changes  in   application  to  which  Lender's
independent certified public accountants concur), applied both to classification
of items and determination of amounts.

         "GUARANTEE"  means any  obligation,  contingent  or  otherwise,  of any
Person guaranteeing any indebtedness of any other Person (the "Primary Obligor")
in any manner,  whether directly or indirectly,  and including any obligation of
such Person,  direct or  indirect,  (i) to purchase or pay (or advance or supply
funds for the  purchase or payment of) such  indebtedness  or to purchase (or to
advance or supply  funds for the  purchase  of) any  security for the payment of
such  indebtedness;  (ii) to purchase  property,  securities or services for the
purpose  of  assuring  the owner of such  indebtedness  of the  payment  of such
indebtedness;  or (iii) to maintain  working  capital,  equity  capital or other
financial statement condition of the Primary Obligor so as to enable the Primary
Obligor to pay such indebtedness.

         "GUARANTOR" means GST USA, Inc. a Delaware  corporation,  together with
its successors and assigns.

         "GUARANTY" means the Guaranty in the form attached hereto as EXHIBIT A.

         "INTEREST  PERIOD"  means (i) with  respect to each Interim  Loan,  the
period  commencing on the date that such Interim Loan is advanced  hereunder and
terminating  on the date that such Interim Loan is converted into a Term Loan in
accordance with the terms hereof,  and (ii) with respect to each Term Loan, each
six (6) month  period  commencing  on the date that  such Term Loan  comes  into
existence in accordance  with the terms hereof until the date that the principal
of such Term Loan is repaid in full.

         "INTERIM LOANS" means each of the Loans  constituting Phase I Loans and
Phase II Loans made by Lender  pursuant  to  Sections  2.1(a) and 2.1(b) of this
Agreement.

         "INTERIM  LOAN RATE" means with respect to each Interim  Loan,  for the
Interest Period with respect thereto, a rate equal to the three (3) months LIBOR
on a date two (2) Business

                                       4

<PAGE>

Days prior to the  commencement  of such  Interest  Period PLUS four hundred and
fifty (450) basis points.

         "INVESTMENT" in any Person means any direct or indirect  advance,  loan
or other extension of credit (including,  without  limitation,  any Guarantee or
similar arrangement,  but excluding advances to customers in the ordinary course
of business that are, in conformance with GAAP,  recorded as accounts receivable
on the balance  sheet of Borrower) or capital  contribution  to (by means of any
transfer of cash or other  property  to others or any  payment  for  property or
services  for the  account or use of other) or any  purchase  of capital  stock,
bonds, notes, debentures or other similar instruments issued by, such Person.

         "IRC" means the Internal  Revenue Code of 1986, as amended from time to
time, and the rules and regulations  promulgated  thereunder,  and any successor
statutes or rules and regulations.

         "IRS" means the Internal Revenue Service or any successor agency.

         "IXC TOLL TANDEM FEATURES" means the features directly  associated with
the Switch for the purpose of  providing  long  distance  switched  services and
identified in Schedule 1.1(a) hereto.

         "LEASE" means any lease  between  Borrower,  as lessor,  and a Borrower
Affiliate,  as lessee,  pursuant to which  Borrower  has leased a portion of the
Equipment to such Borrower Affiliate,  substantially in the form attached hereto
as EXHIBIT J.

         "LENDER  EQUIPMENT" means all Siemens  Stromberg-Carlson  equipment and
products (including software),  including, but not limited to, fiber optic cable
("CABLE"),  Siemens  Optiset  telephone sets  ("OPTISETS"),  Switches,  Upgraded
Switches  and  upgrades  or growth to such  Switches or  Upgraded  Switches,  as
applicable,   purchased  by  Borrower   from  Lender  and  invoiced  by  Siemens
Stromberg-Carlson.

         "LENDER  EQUIPMENT LOAN" means each Interim Loan to the extent that the
proceeds  of which are used  exclusively  to pay the  invoice  price for  Lender
Equipment,  which price shall include any related  charges  (including,  but not
limited to, applicable installation and shipping charges).

         "LIBOR" means London  Interbank  Offered Rate, as quoted in the Eastern
Edition of THE WALL STREET JOURNAL (or any successor publication).

         "LIEN"  means  any  mortgage,  pledge,  deed of trust,  assignment  for
security,  lien, charge,  encumbrance or other security interest of any kind, or
the interest of a vendor or lessor under any conditional sale agreement, capital
lease or other title retention agreement, but excluding easements, rights of way
or similar encumbrances on the real property

                                       5

<PAGE>

which are in the ordinary course of business and which do not materially  affect
the value, use and insurability of title of such real property.

         "LOAN" means any Interim Loan or Term Loan, as applicable.

         "LOAN DOCUMENTS"  means,  collectively,  this Agreement,  the Note, the
Guaranty,  each Security  Agreement,  each Lease,  the Escrow  Agreement and the
Officer's Certificate delivered pursuant to Section 4.1(n) hereof, including all
schedules, amendments,  exhibits, attachments,  modifications and supplements of
or to all such documents.

         "MATERIAL  ADVERSE  EFFECT"  means a material  adverse  effect upon the
condition  (financial or  otherwise),  operations,  or properties of Borrower or
Guarantor or upon the ability of Borrower or Guarantor to perform under the Loan
Documents.

         "NETWORK" means any alternate access communications  facility installed
or  maintained  by  Borrower  or  a  Borrower  Affiliate,   within  any  Network
Location(s),  as expanded and  developed  from time to time,  together  with all
Switches,  Upgraded  Switches,  upgrades  and growth to  Switches  and  Upgraded
Switches,  and  equipment,  rights  of  access,  easements,  leasehold  and  fee
interests in real property,  and all related patents,  trademarks,  licenses and
certificates, and all replacements, enhancements or additions thereto.

         "NETWORK LOCATION(S)" means any city and any municipality, metropolitan
area,  or  unincorporated  jurisdiction  within  the United  States,  Mexico and
Canada,  in which Borrower or any Borrower  Affiliate has deployed or intends to
deploy a Switch or Upgraded  Switch,  as applicable,  financed  pursuant to this
Agreement,  including  without  limitation,  any areas in which any Equipment is
located which supports such Switch or Upgraded Switch, as applicable.

         "NON-LENDER  EQUIPMENT"  means all  equipment,  products  and  software
(including related software licenses),  Approved Third-Party Product, peripheral
equipment, air conditioning equipment, fire suppression equipment,  transmission
and cable equipment purchased by or provided to Borrower from vendors other than
Lender or Siecor for use in any Network.

         "NOTE" has the meaning set forth in SECTION 2.2 hereof.

         "OBLIGATIONS"  means (i) all  amounts  due or to  become  due under the
Note;  (ii) the  performance  of all  obligations  of Borrower  now or hereafter
existing under this Agreement, the Note and all other Loan Documents whether for
principal,  interest,  fees, expenses,  indemnification or otherwise;  (iii) all
extensions, renewals,  modifications,  amendments and refinancings of any of the
foregoing;  and (iv) all loans,  advances,  indebtedness,  and other obligations
owed by  Borrower  to  Lender  of every  description  whether  now  existing  or
hereafter  arising  (including  those owed by Borrower to others and acquired by
Lender by purchase,  assignment,  or otherwise)  and whether direct or indirect,
primary or as guarantor

                                       6

<PAGE>

or surety,  absolute  or  contingent,  liquidated  or  unliquidated,  matured or
unmatured, whether or not secured by additional collateral.

         "OPTISET COMMITMENT AMOUNT" means One Million Dollars  ($1,000,000) for
the purchase of Siemens Optisets.

         "PBGC" means the Pension Benefit Guaranty  Corporation  referred to and
defined in ERISA.

         "PERMITTED LIENS" has the meaning set forth in SECTION 6.1 hereof.

         "PERSON"  means  any  natural  person,   corporation,   division  of  a
corporation,  business trust, joint venture, association,  company, partnership,
unincorporated organization or other legal entity, or a government or any agency
or political subdivision thereof.

9         "PHASE I CAP" has the meaning set forth in SECTION 2.1(A) hereof.

         "PHASE II CAP" has the meaning set forth in SECTION 2.1(B) hereof.

         "PHASE I  COMMITMENT  AMOUNT"  means One Hundred  Ten  Million  Dollars
($110,000,000).

         "PHASE II  COMMITMENT  AMOUNT"  means One Hundred  Ten Million  Dollars
($110,000,000).

         "PHASE I LOAN" means any Interim Loan made pursuant to SECTION  2.1(A),
together with any Term Loan relating to such Interim Loan.

         "PHASE II LOAN" means any Interim Loan made pursuant to SECTION 2.1(B),
together with any Term Loan relating to such Interim Loan.

         "RELEASE" means release, spill, emission,  leaking, pumping, injection,
deposit, disposal,  discharge,  dispersal, leaching or migration into the indoor
or outdoor environment or into or out of any property, including the movement of
Contaminants  through  or in the,  air,  soil,  surface  water,  groundwater  or
property.

         "REGULATION  D" means  Regulation  D of the Board of  Governors  of the
Federal Reserve System,  as the same may be amended or supplemented from time to
time.

         "REMEDIAL ACTION" means actions required to (1) clean up, remove, treat
or in any other way address  Contaminants in the indoor or outdoor  environment;
(2) prevent the Release or threat of Release or minimize the further  Release of
Contaminants  so they do not migrate or endanger or threaten to endanger  public
health or welfare or the indoor or outdoor

                                        7

<PAGE>
environment;   or  (3)  perform  pre-remedial  studies  and  investigations  and
post-remedial monitoring and care.

         "RESERVE  AMOUNT" means an amount  calculated as of any Conversion Date
following the making of the initial  Interim Loan  hereunder  equal to the total
amount of principal and interest  that will become due and payable  (assuming no
Event of Default has occurred) on the next two  succeeding  Conversion  Dates in
respect of all Term Loans  outstanding on the next day following such Conversion
Date. For purposes of calculating the Reserve Amount as of any Conversion  Date,
it will be assumed  that any and all amounts of  principal  and interest due and
payable on such Conversion Date have been paid in full.

         "RESERVE  NOTICE" means the written notice to be delivered by Lender in
accordance  with  SECTION  5.15 at least  five (5)  Business  Days  prior to any
Conversion  Date  following  the making of the initial  Interim Loan  hereunder,
which notice shall set forth the Reserve Amount as of such  Conversion  Date and
the calculation thereof.

         "SCHEDULED  SHIP  DATE,"  with  respect  to the  applicable  Switch  or
Upgraded Switch, has the meaning set forth in SECTION 2.1(D) hereof.

         "SECURITY  AGREEMENT" means any Security Agreement between Lender and a
Borrower Affiliate in the form attached hereto as EXHIBIT H.

         "SIECOR" means Siecor Corporation and its successors and assigns.

         "SOLVENT"  means with respect to any person on a particular  date, that
on such date (i) the fair value of the  property of such person is greater  than
the total  amount of  liabilities,  including,  without  limitation,  contingent
liabilities,  of such person,  (ii) the present fair salable value of the assets
of such  person is not less than the  amount  that will be  required  to pay the
probable  liability  of such  person on its debts as they  become  absolute  and
matured,  (iii) such  person  does not intend to, and does not  believe  that it
will,  incur debts or  liabilities  beyond such person's  ability to pay as such
debts and liabilities  mature and (iv) such person is not engaged in business or
a  transaction,  and is not about to engage in  business or a  transaction,  for
which such persons's  property would  constitute an unreasonably  small level of
capitalization.  The  amount  of  contingent  liabilities  at any time  shall be
computed  as the  amount  that,  in light  of all the  facts  and  circumstances
existing at such time,  represents the amount that can reasonably be expected to
become an actual or matured liability.

         "SWITCH" means a Siemens  Stromberg-Carlson  EWSD host switching system
and associated  remotes (including related  engineering  services,  installation
costs, ancillary OEM equipment, software licenses and peripheral equipment).

         "TERM LOAN" has the meaning set forth in  SECTION 2.3 hereof.

                                       8

<PAGE>
         "TERM LOAN RATE" means with respect to each Term Loan for each Interest
Period with respect thereto, a rate equal to the six (6) month LIBOR on the date
two (2) Business Days prior to the  commencement  of such  Interest  Period PLUS
three hundred and fifty (350) basis points.

         "TOTAL  COMMITMENT  AMOUNT"  means  the sum of the  Phase I  Commitment
Amount,  the Phase II Commitment  Amount,  the Cable  Commitment  Amount and the
Optiset Commitment Amount.

         "UNDELIVERED  LENDER  EQUIPMENT"  has the  meaning set forth in SECTION
2.1(D) hereof.

         "UPGRADED  SWITCH"  means a Switch  manufactured  with a combined  EWSD
platform  containing both local and long-distance  exchange services,  including
IXC Toll Tandem Features.

         "VENDOR  ADVANCE"  means each  Interim  Loan to the extent that (i) the
proceeds  thereof are used  exclusively  to  reimburse  Borrower for the invoice
price, which price shall include any related charges (including, but not limited
to, applicable installation and shipping charges) for Non-Lender Equipment to be
used at any Network Location.

         1.2 ACCOUNTING TERMS. Except as otherwise herein specifically provided,
each accounting term used herein shall have the meaning given to it under GAAP.

         1.3 OTHER TERMS DEFINED IN NEW YORK UNIFORM  COMMERCIAL CODE. All other
terms  contained in this  Agreement  (and which are not  otherwise  specifically
defined herein) shall have the meanings provided by the Uniform  Commercial Code
of the State of New York (the "CODE") to the extent the same are used or defined
therein.

                                   ARTICLE II

                                      LOANS

         2.1 AGREEMENT TO LEND.

             (a)  AGREEMENT TO LEND -- PHASE I.  Provided no Event of Default as
defined in Article VIII hereof, or any occurrence that would constitute an Event
of Default with the giving of notice or the lapse of time, or both, has occurred
and is continuing,  and subject to the terms and conditions  herein,  unless the
Commitment  shall have been  terminated  in  accordance  with the terms  hereof,
Lender agrees,  upon Borrower's  request, to make one or more loans (which shall
constitute  Phase I  Loans)  to  Borrower  from  time to  time on or  after  the
Effective Date and until the Commitment  Termination  Date;  PROVIDED,  HOWEVER,
that Lender shall be obligated to make its initial Phase I Loan to Borrower only
if Borrower has provided to Lender a firm irrevocable  purchase  order(s) (which
purchase order(s) need

                                       9

<PAGE>

not include the proposed delivery  dates(s)),  in form acceptable to Lender, for
eleven (11) Switches  scheduled to be delivered within thirty-six (36) months of
the Effective  Date within  Network  Locations  with the purchase  price of each
Switch  and  related  Equipment  being not less than One  Million  Five  Hundred
Thousand  Dollars  ($1,500,000).  Borrower  covenants and agrees to deliver such
foregoing  described  purchase  order(s) in  conjunction  with its execution and
delivery of this  Agreement.  The amount of any  proposed  Interim  Loan made to
Borrower  pursuant  to this  SECTION  2.1(A),  may not exceed the sum of (i) the
Phase I  Commitment  Amount;  (ii) the Cable  Commitment  Amount;  and (iii) the
Optiset  Commitment  Amount (the "PHASE I CAP"),  LESS the  aggregate  principal
balance of the Phase I Loans advanced  hereunder to Borrower through the date of
such proposed Interim Loan.  Notwithstanding the foregoing, the aggregate amount
of Phase I Loans  available for financing the purchase of Cable shall not exceed
the  Cable  Commitment  Amount;  and the  aggregate  amount of the Phase I Loans
available  for  financing  of Siemens  Optisets  shall not  exceed  the  Optiset
Commitment Amount.

             (b) AGREEMENT TO LEND -- PHASE II. Provided (i) no Event of Default
as defined in Article VIII hereof,  or any occurrence  that would  constitute an
Event of Default  with the giving of notice or the lapse of time,  or both,  has
occurred  and is  continuing  and  (ii)  Lender  has  determined,  in  its  sole
discretion,  that it desires to make such  loans,  and  subject to the terms and
conditions  hereof,  and unless the  commitment  shall have been  terminated  in
accordance with the terms hereof,  Lender shall, upon Borrower's  request (which
shall be made to Lender within  twenty-four (24) months of the Effective Date or
six (6) months  after  general  availability  of the IXC Toll  Tandem  Features,
whichever occurs last),  make one or more loans (which shall constitute Phase II
Loans) to Borrower  from time to time on or after the  Effective  Date and until
the  Commitment  Termination  Date,  for the purpose of  purchasing  Switches or
Upgraded  Switches to be deployed in any  Network  location,  with the  purchase
price of each Switch or Upgraded  Switch and  related  Equipment  being not less
than One Million Five Hundred  Thousand  Dollars  ($1,500,000).  The amount of a
proposed Interim Loan made to Borrower pursuant to this SECTION 2.1(B),  may not
exceed the sum of (i) the Phase II Commitment Amount;  (ii) the Cable Commitment
Amount  (less the  aggregate  balance of the Cable  Commitment  Amount  advanced
hereunder  to  Borrower  in  connection  with the Phase I Loans);  and (iii) the
Optiset  Commitment Amount (less the aggregate balance of the Optiset Commitment
Amount advanced hereunder to Borrower in connection with the Phase I Loans) (the
"PHASE II  CAP"),  LESS the  aggregate  balance  of the Phase II Loans  advanced
hereunder  to  Borrower   through  the  date  of  such  proposed  Interim  Loan.
Notwithstanding  the  foregoing,  the  aggregate  amount  of the  Phase II Loans
available  for the  financing  of Cable  shall not exceed  the Cable  Commitment
Amount (less the aggregate amount of the Cable Commitment Amount used to finance
Cable as part of the Phase I Loans);  and the  aggregate  amount of the Phase II
Loans  available  for the  financing  of Siemens  Optisets  shall not exceed the
Optiset  Commitment Amount (less the aggregate amount of the Optiset  Commitment
Amount used to finance Optisets as part of the Phase I Loans).

                                       10

<PAGE>

             (c) USE OF LOAN  PROCEEDS.  Borrower  covenants and agrees that the
proceeds  of each  Interim  Loan  shall be used  solely  to  finance  Borrower's
purchase  of (i) Lender  Equipment  to be used  solely in any  Network  and (ii)
Borrower's purchase of Non- Lender Equipment to be used solely in a Network.

             (d)  LIMITATION  ON  VENDOR  ADVANCES;  ADVANCE  DATE  FOR  INTERIM
NON-LENDER  EQUIPMENT LOAN. The proceeds of any Vendor Advance used  exclusively
to  reimburse  Borrower  for  Non-Lender  Equipment  to be used  at any  Network
Location,  when  aggregated  with  all  prior  Vendor  Advances  used to pay for
Non-Lender Equipment for all Network Locations, as of the date such proceeds are
advanced,  shall not exceed the  aggregate  amount of the Loans made to Borrower
hereunder for the acquisition of Lender  Equipment for all Network  Location(s).
An Interim Loan, to the extent that it  constitutes a Vendor  Advance,  shall be
deemed  advanced to Borrower  hereunder,  and interest  shall commence to accrue
with  respect to such Vendor  Advance,  on the date that Lender has (i) received
from Borrower and accepted in accordance  with SECTION  4.2(J)  hereof:  (A) the
invoice  for the  Non-Lender  Equipment  financed  thereby  and (B) the proof of
payment of such  invoice,  and (ii)  advanced  such Vendor  Advance  proceeds to
Borrower in accordance with the instructions described in subsection (h) of this
Section;  PROVIDED,  HOWEVER,  that no Vendor  Advance shall be made to Borrower
more than six (6) months  prior to the  "SCHEDULED  SHIP  DATE" of the  relevant
Switch or Upgraded  Switch as set forth in the firm  irrevocable  purchase order
relating to said Switch or Upgraded Switch.  If, for any reason,  Borrower fails
or refuses to take  delivery of any Switch or  Upgraded  Switch on or before its
Scheduled Ship Date  ("UNDELIVERED  LENDER  EQUIPMENT")  and Lender has made any
Vendor  Advance(s) to Borrower for the  acquisition of Non-Lender  Equipment for
the Network to which the Undelivered  Lender Equipment was to be delivered,  the
Interim  Loan  relating  to the  Undelivered  Lender  Equipment  shall be deemed
advanced to  Borrower on the  Scheduled  Ship Date for such  Undelivered  Lender
Equipment. Lender shall transport and store such Undelivered Lender Equipment on
behalf of Borrower at Borrower's  expense.  All the terms and conditions of this
Agreement and all obligations and  responsibilities  of Borrower relating to the
delivered  Lender  Equipment  (except  those  terms and  conditions  relating to
possession and maintenance by Borrower of Lender Equipment after delivery) shall
be  applicable  to such  Undelivered  Lender  Equipment  and the  Loan  relating
thereto.

             (e) ADVANCE  DATE FOR INTERIM  LENDER  EQUIPMENT  LOAN.  An Interim
Loan, to the extent that it is a Lender Equipment Loan, shall be deemed advanced
to Borrower  hereunder,  the Lender  Equipment to be financed  thereby  shall be
deemed paid for,  and  interest  shall  commence to accrue with  respect to such
Interim Loan,  thirty (30) days after shipment of such Lender  Equipment and the
date the invoice for such Lender  Equipment is issued to Borrower or thirty (30)
days  after the date of  invoice  for  engineering,  installation  and  services
relating to such Lender Equipment is issued to Borrower, whichever occurs last.

             (f)  FINANCING  FEE.  With respect to each Vendor  Advance,  Lender
shall fully earn,  concurrent  with the  disbursement  thereof,  a financing fee
equal to one percent (1%) the amount of such Vendor Advance.  The amount of each
financing fee earned by

                                       11

<PAGE>

Lender (the  "FINANCING  FEE AMOUNT") shall be paid by Borrower to Lender within
thirty (30) days after the Advance Date of the related Interim Loan.

             (g) PROCEDURE  FOR PROPER  REQUEST.  Borrower  shall give Lender at
least  five (5)  Business  Days'  prior  written  notice  of each  Interim  Loan
requested to be made.  In each case,  such notice shall be in the form  attached
hereto as EXHIBIT C  ("NOTICE"),  shall be  irrevocable  and shall  specify  the
aggregate  amount of the proposed Interim Loan, the intended use of such Interim
Loan proceeds, and the specific bank account (including the identity of the bank
and the account  number) to which  Lender  shall  transfer  the  proceeds of the
Vendor Advance portion, if any, of the proposed Interim Loan. Such Notice, to be
effective,  must be received by Lender not later than 12:00 noon,  Eastern Time,
on the fifth (5th)  Business Day prior to the borrowing  date  specified in such
Notice.  In the event and to the extent that any such Notice relates to proceeds
of an Interim  Loan to be used to purchase  Non-Lender  Equipment  that does not
constitute  Approved  Third-Party  Product  identified  in SCHEDULE  1.1 hereto,
Lender shall  promptly  determine and notify  Borrower  within five (5) Business
Days whether it is prepared to recognize such  Non-Lender  Equipment as Approved
Third-Party  Product  and  finance the  purchase  of such  Non-Lender  Equipment
through a Vendor Advance. Lender and Borrower agree to use their best efforts in
good faith to resolve any  disagreement  as to whether any Non-Lender  Equipment
constitutes Approved Third-Party Product.  Lender shall make the proceeds of any
Vendor Advance available to Borrower at the bank account specified in the Notice
in U.S. dollars in immediately available funds.

             (h) ADEQUATE CASH.  Notwithstanding  the provisions of this Section
2.1,  Lender shall be obligated to advance any Interim Loan only if, at the time
such Interim Loan is to be advanced,  Guarantor  has Adequate Cash in the amount
of not less than  Twenty-Five  Million Dollars  ($25,000,000).  If the amount of
Adequate  Cash is  insufficient  as  provided in this  subparagraph,  and if the
Interim Loan was to be a Lender  Equipment  Loan,  Borrower shall be relieved of
its  obligation to purchase the related Lender  Equipment and, if delivered,  it
shall be returned to Lender at the direction of Lender at  Borrower's  sole cost
and expense.

         2.2 THE NOTE. The Loans shall be evidenced by a promissory  note in the
form of EXHIBIT B hereto (the "NOTE").  Lender is hereby  authorized by Borrower
to  endorse  on the  schedule  attached  to the  Note  an  appropriate  notation
evidencing  the date  and  amount  of each  Interim  Loan,  and the date and the
principal  amount of each  Term Loan  thereunder;  PROVIDED,  HOWEVER,  that the
failure of Lender to provide such endorsement, and other information on the Note
or schedule shall not in any manner affect the obligation of Borrower to repay a
Loan in accordance with the terms of the Note.

         2.3 TERM LOANS.  Each Interim Loan shall be converted  into a term loan
(a "TERM LOAN") on the next Conversion Date after the date of such Interim Loan.
Such Term Loan shall continue to be evidenced by the Note.


                                        12

<PAGE>
         2.4 INTEREST ON LOANS.

             (a)  INTERIM  LOAN  INTEREST  RATE.  Subject to the  provisions  of
SECTION 2.9 hereof,  each Interim Loan shall bear interest  during each Interest
Period therefor at the Interim Loan Rate for such Interest  Period.  The Interim
Loan Rate shall be  computed on the basis of the actual  number of days  elapsed
over a year of 360 days. Interest accrued with respect to any Interim Loan shall
be due and payable by Borrower on the first  Conversion  Date following the date
of the making of the Lender  Equipment Loan or Vendor  Advance  relating to such
Interim Loan.

             (b) TERM LOAN INTEREST  RATE.  Subject to the provisions of SECTION
2.9  hereof,  the  outstanding  principal  amount of each Term Loan  shall  bear
interest from the date of its conversion  from an Interim Loan to a Term Loan at
the Term Loan  Rate.  The Term Loan Rate shall be  computed  on the basis of the
actual  number of days  elapsed over a year of 360 days and Term Loan Rate shall
be adjusted semi-annually on the last business day prior to January 1 and July 1
of each year during the term of such Term Loan,  which  adjustment  dates may be
changed by mutual written agreement of Lender and Borrower.

         2.5 TERM LOAN PAYMENTS.

             (a) TERM LOAN INTEREST  PAYMENTS.  Interest accrued with respect to
any Term Loan shall be due and payable by Borrower on the last  Business  Day of
each calendar quarter during the term thereof. Borrower shall make interest only
payments  in  respect  of any Term  Loan for the  four (4)  succeeding  quarters
following the related Conversion Date. Thereafter, interest accrued with respect
to the Term Loans and the Term Loan principal amounts outstanding under the Note
shall be due and payable by Borrower on the last  Business Day of each  calendar
quarter  during  the term  hereof as set  forth in this  SECTION  2.5(A)  AND IN
SECTION 2.5(B) BELOW.

             (b) TERM LOAN PRINCIPAL PAYMENTS.  The outstanding principal amount
of each Term Loan under the Note shall be payable  by  Borrower  in  twenty-four
(24)  consecutive  quarterly  installments  commencing on the same date that the
fifth (5th) consecutive  quarterly  installment of interest with respect to such
Term Loan is payable on the Note,  with the amount of principal  due and payable
on each such  quarterly  installment  date pursuant to this SECTION 2.5(B) to be
equal to the following  percentage of the original principal amount of such Term
Loan  (PROVIDED  that the last such payment shall be in an amount  sufficient to
repay in full the principal amount of such Term Loan):

                                              Percentage of Original
                  Quarterly Installment           Principal Amount
                  ---------------------           ----------------

                  5 through 12                         3.5%
                  13 through 20                        4.0%
                  21 through 28                        5.0%

                                       13

<PAGE>

         2.6 DEFAULT RATE OF INTEREST.  If Borrower shall default in the payment
of the  principal of or interest on the Note,  Borrower  shall,  on demand,  pay
interest  on any  amount  overdue  on the  Note at a rate  that is  equal to the
Applicable  Rate with respect to the Note plus two percent  (2%),  from the date
such payment is due to the date of actual payment.  If Borrower shall default in
the payment of any amount  payable by it hereunder  (other than principal of and
interest on any of the Loans),  Borrower shall,  on demand,  pay interest on any
such  overdue  amount at a rate that is equal to the  average of the  Applicable
Rates on all Loans then  outstanding  plus two percent (2%),  from the date such
payment is due to the date of actual payment.

         2.7 OPTIONAL PREPAYMENT OF NOTE; MANDATORY PREPAYMENT OF NOTE.

             (a) Borrower shall have the right at any time to prepay any Note of
Borrower,  in whole or in part,  without premium or penalty,  upon at least five
(5) Business Day's prior written notice to Lender, in integral  multiples of one
hundred  thousand  dollars  ($100,000).  Any  prepayment of less than the entire
aggregate  outstanding  balance  of the  Loans  should be  applied  first to the
payment of all accrued  interest on the amount so prepaid to and  including  the
date of  prepayment,  and  second to the  payment  of the  required  payment  of
principal  due  under  the  Note in the  inverse  order of the  maturity  of the
installments hereof.

             (b) Each notice of prepayment  pursuant to  subsection  (a) of this
section shall specify the principal amount to be prepaid and the prepayment date
on which such principal shall be prepaid,  shall be irrevocable and shall commit
the Borrower giving such prepayment notice to prepay such principal amount. Upon
any  prepayment  pursuant  to this  section,  Borrower  shall not be entitled to
reborrow from Lender hereunder the principal amount prepaid.

             (c) If (i) the aggregate outstanding principal balance of the Phase
I Loans exceeds the Phase I Cap or (ii) if the aggregate  outstanding  principal
balance of the Phase II Loans  exceeds the Phase II Cap, then in each such case,
Borrower is obligated to immediately  repay to Lender,  upon notice from Lender,
(i) the  amount by which the  aggregate  outstanding  principal  balance  of the
related Loans  exceeds the Phase I Principal  Cap or Phase II Principal  Cap, as
applicable,  plus (ii) all accrued and unpaid interest on such excess  principal
up to the date of repayment.

         2.8 PAYMENT, ETC. All payments by Borrower hereunder and under the Note
shall be made to Lender by wire transfer or other electronic payment method to
such bank accounts as Lender may designate, for the account of Lender in U.S.
dollars in immediately available funds by 12:00 p.m., Eastern time, on the date
on which such payment shall be due. Interest in respect of any Loan hereunder
shall accrue from the first day following such Loan up to and including the date
on which such Loan is paid in full.

                                       14

<PAGE>

         2.9 MAXIMUM LAWFUL INTEREST RATE.  Notwithstanding any provision to the
contrary  contained  herein,  the total  liability  of  Borrower  for payment of
interest  pursuant  hereto and the Note,  including  any other  charges or other
amounts, to the extent such charges and other amounts are deemed to be interest,
shall not exceed the  maximum  amount of such  permitted  by law to be  charged,
collected,  or received  from  Borrower.  If any  payments  by Borrower  include
interest in excess of such a maximum  amount,  Lender shall apply such excess to
the reduction of the unpaid principal amount due pursuant hereto,  or if none is
due, such excess shall be refunded to Borrower.

         2.10  INDEMNIFICATION FOR FAILURE TO BORROW.  Borrower agrees to pay to
Lender,  upon the Lender's  request,  such amount or amounts as shall compensate
the Lender for any loss,  cost or expense  incurred by the Lender (as reasonably
determined  by the  Lender) as a result of any  failure by Borrower to borrow an
Interim Loan on the date for such  borrowing  specified  in the relevant  Notice
under SECTION 2.1(G) hereof,  such compensation to include,  without limitation,
an amount  equal to any loss or  expense  incurred  by Lender in respect of such
proposed  Interim Loan during the period from the date of receipt by Borrower of
such  Notice to the last day of such  Interest  Period,  if the rate of interest
obtainable  by the Lender upon the  redeployment  of an amount of funds equal to
the  amount of such  proposed  Interim  Loan is less  than the rate of  interest
applicable  to such  Interim  Loan or such Term Loan,  as  applicable,  for such
Interest Period;  provided,  however, that Borrower shall not be responsible for
any such loss if the  failure to borrow is caused by any willful act or omission
of Lender, including,  Lender's unreasonable failure to make any Interim Loan in
accordance  with Section  2.1(g) or 2.1(h).  The Lender's  determination  of the
amount  of any such  loss or  expense,  when set  forth in a  written  notice to
Borrower,  containing  the Lender's  calculation  thereof in reasonable  detail,
shall be conclusive, absent manifest error.

         2.11 ADDITIONAL  EQUIPMENT.  Lender agrees to amend this Agreement from
time to time (to the extent  necessary) to permit Lender's new products (as such
products become available),  including, without limitation,  Newbridge ATM/Frame
relay,  to the  type  of  Lender  Equipment  to be  financed  pursuant  to  this
Agreement.

         2.12 LEASES. Borrower covenants and agrees that all Equipment purchased
by Borrower and financed pursuant to this Agreement, to the extent that the same
shall  be  operated  and  maintained  by a  Borrower  Affiliate  rather  than by
Borrower,  shall be operated and  maintained  by such  Borrower  Affiliate  only
pursuant to the terms of a Lease between  Borrower and such Borrower  Affiliate,
which Lease shall be substantially in the form attached hereto as EXHIBIT J.

         2.13  SECURITY  AGREEMENT.  Borrower  covenants and agrees that it will
cause each Borrower  Affiliate to enter into the Security  Agreement in favor of
Lender, substantially in the form attached hereto as EXHIBIT H.

         2.14 EXTENSION.  Lender and Borrower agree that in the year immediately
preceding the Commitment Termination Date they will discuss the possibility of a
three (3)-year

                                       15

<PAGE>

extension of the Commitment  Termination  Date, which extension shall occur only
if the parties mutually agree upon the terms and conditions thereof.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

         Borrower  represents  and  warrants to Lender that as of the  Effective
Date:

         3.1 ORGANIZATION; POWERS.

             (a) It (i) is a corporation duly organized, validly existing and in
good  standing  under the laws of the state of its  incorporation,  (ii) is duly
qualified to do business and is in good standing in each jurisdiction  where the
failure to qualify could have a Material Adverse Effect;

             (b) It has the power and authority to own its properties,  to carry
on its  business  as now  conducted  or as  presently  contemplated  and to own,
operate and maintain the Network; and

             (c) It has the power and  authority  to  execute  and  deliver  and
perform this  Agreement and the other Loan  Documents to which it is a party and
to borrow hereunder.

         3.2 AUTHORIZATION BY BORROWER. The execution,  delivery and performance
of this Agreement and the other Loan  Documents to which it is a party,  if any,
to be delivered subsequent to the date hereof, and the Loans hereunder:

             (a) have been duly authorized by Borrower's Board of Directors and,
if necessary, Borrower's shareholders;

             (b) do not  violate  (i)  any  provision  of  law or any  rules  or
regulations applicable to Borrower or the Business,  (ii) Borrower's Articles of
Incorporation  or  By-laws,  (iii)  any  applicable  order of any court or other
governmental  authority,  or (iv) any indenture,  agreement for borrowed  money,
bond, note or other similar  instrument or any other agreement to which Borrower
is a party or by which Borrower or any of Borrower's  property is bound, in each
case in a manner which could have a Material Adverse Effect;

                                       16

<PAGE>

             (c) do not conflict with, result in a breach of or constitute (with
due  notice  or lapse of time or both) a  default  under  any  bond,  indenture,
agreement  for borrowed  money,  bond,  note or similar  instrument  or material
agreement to which Borrower is a party or by which Borrower or any of Borrower's
property is bound in a manner which could have a Material Adverse Effect;

             (d) do not result in the creation or  imposition of any Lien of any
nature  whatsoever  upon any property or assets of Borrower  other than the Lien
granted pursuant to ARTICLE VII hereof;

             (e) constitute  legal,  valid and binding  obligations of Borrower,
enforceable against Borrower in accordance with their respective terms, subject,
as to  enforcement,  to applicable  bankruptcy,  reorganization,  insolvency and
similar laws affecting  creditors'  rights generally and to moratorium laws from
time to time in effect; and

             (f) do not, as of the execution  hereof,  require any  governmental
consent,  filing,  registration or approval except as set forth on SCHEDULE 3.2,
the lack of which could have a Material Adverse Effect.

         3.3  FINANCIAL  STATEMENTS.  Borrower has furnished to Lender a balance
sheet,  dated as of August 31, 1996 (the "BALANCE  SHEET"),  attached  hereto as
EXHIBIT D. As of the Effective  Date,  (a) the Balance  Sheet fairly  represents
Borrower's  assets,  liabilities  and  financial  condition  as of such date and
indicates the equity  contributions  made by Borrower's  shareholders as of such
date  according to GAAP;  and (b) there are no  misrepresentations  or omissions
from the Balance Sheet or any other facts or circumstances  not reflected in the
Balance Sheet which are material.

         3.4 NO MATERIAL  ADVERSE  CHANGE.  There has been no  material  adverse
change in the condition  (financial or  otherwise),  operations or properties of
Borrower since the date of the Balance Sheet.

         3.5  LITIGATION.  Except as set  forth on  SCHEDULE  3.5,  there are no
actions,  suits  or  proceedings  at  law  or in  equity  or by  or  before  any
governmental instrumentality or other agency now pending or, to the knowledge of
Borrower,  threatened against or affecting Borrower or any property or rights of
Borrower  as  to  which  there  is  a  reasonable   possibility  of  an  adverse
determination and which, if adversely  determined,  would individually or in the
aggregate  materially  impair the right of Borrower to carry on its  business or
would result in any Material Adverse Effect.

         3.6 TAX RETURNS.  Borrower has filed or caused to be filed all Federal,
state and local tax returns, if any, which are required to be filed and has paid
or caused  to be paid all  taxes,  if any,  as shown on such  returns  or on any
assessment received by it to the extent that such taxes have become due.

         3.7 NO  DEFAULTS.  Borrower is not in default  (i) with  respect to any
judgment,  writ,  injunction,  decree,  rule or regulation  of any  governmental
instrumentality  or other agency which could have a Material Adverse Effect,  or
(ii) in the  performance,  observance or fulfillment of any of the  obligations,
covenants or  conditions  contained in any material  agreement or  instrument to
which  Borrower  is a party or by which its assets  are bound in a manner  which
could have a Material Adverse Effect.

                                       17

<PAGE>

         3.8  PROPERTIES.   Borrower  has  good  and  marketable  title  to  all
properties  and assets owned by it and all  Collateral  is free and clear of all
Liens of any nature whatsoever, except Permitted Liens.

         3.9  LICENSES,  ETC.  Borrower  has  obtained  any  and  all  licenses,
authorizations,  certificates,  permits and  approvals of any Federal,  state or
local governmental agency, authority or instrumentality having jurisdiction over
Borrower  necessary  and  appropriate  for  Borrower to own, use and operate the
properties of Borrower.  Borrower has all FCC Licenses necessary for Borrower to
operate  the  Business.  Any such FCC  Licenses  are in full  force and  effect;
Borrower has fulfilled and performed all of its  obligations  as a holder of any
such FCC Licenses;  and no event has occurred which permits or, after notice,  a
lapse of time,  or both,  would permit  revocation  or  termination  of such FCC
Licenses or result in any other  material  impairment  of the rights of Borrower
therein.

         3.10 COMPLIANCE WITH LAWS.

             (a) Borrower's  operations comply in all material respects with all
applicable  Federal,  state or local laws and  regulations,  including,  without
limitation applicable municipal laws with respect to communications, real estate
and  easements  and all ERISA,  environmental,  health and safety  statutes  and
regulations.  None of the properties owned, leased, used or operated by Borrower
or the  operations  or  business  of  Borrower  is  subject to any  judicial  or
administrative  proceeding alleging the violation of any Federal, state or local
laws,  or  regulations  or  ordinances  (including,   without  limitation,   any
communications,  utilities, environment, health or safety statute, regulation or
order) which, if resolved  adversely to Borrower,  could have a Material Adverse
Effect.

             (b) To the  knowledge  of  Borrower,  none  of  the  operations  or
business  of  Borrower  is the  subject of any  Federal  or state  investigation
evaluating  whether any Remedial Action is needed to respond to a Release of any
Contaminant into the indoor or outdoor  environment.  Borrower has not filed any
notice  under any  Federal or state law  indicating  past or present  treatment,
storage  or  disposal  of a  hazardous  waste  or  reporting  a  Release  of any
Contaminant  into the  indoor or  outdoor  environment.  There is no  contingent
liability of Borrower of which Borrower has knowledge or reasonably  should have
knowledge in connection with any Release of any  Contaminant  into the indoor or
outdoor environment.

             (c)  Borrower  has made or caused to be made all  submissions  with
respect to the Business (including, but not limited, to registration statements,
and  equal  employment   opportunity   reports),  if  any,  required  under  the
Communications  Act and relevant to the conduct and  operation of the  Business,
and Borrower and the Business are in compliance with the  Communications  Act in
all  material  respects.  Without  limiting  the  generality  of the  foregoing,
Borrower,  to the extent  required  under rules and  regulations of the FCC, has
filed  appropriate  notices  with  the  FCC  relating  to the  operation  of the
Business. The execution,  delivery and performance of the Loan Documents, do not
require the approval of any FCC,

                                       18

<PAGE>

will not result in any violation of the  Communications  Act, and will not cause
any forfeiture or impairment of any FCC Licenses issued for the operation of the
Business.

         3.11 ERISA.  Borrower and its ERISA  Affiliates,  if any, has fulfilled
their  obligations  under the minimum funding standards of ERISA and the IRC, if
any,  with  respect  to  employee  benefit  plan  subject  to  ERISA  and are in
compliance in all material respects with the applicable  provisions of ERISA and
the IRC, and have not incurred any  liability to the PBGC or any such plan under
Title IV of ERISA and no "prohibited transaction" or "reportable event", as such
terms are defined in ERISA, has occurred with respect to any such plan.

         3.12  INVESTMENT  COMPANY  ACT;  PUBLIC  UTILITY  HOLDING  COMPANY ACT.
Borrower is not an "investment  company", as that term is defined in, and is not
otherwise  subject to  regulation  under,  the  Investment  Company Act of 1940.
Borrower  is not a "holding  company",  as that term is  defined  in, and is not
otherwise subject to regulation under, the Public Utility Holding Company Act of
1935.

         3.13 FEDERAL RESERVE REGULATIONS.  Borrower is not engaged principally,
or as one of its important  activities,  in the business of extending credit for
the purpose of  purchasing  or carrying any margin stock  (within the meaning of
Regulation  G of the Board of Governors  of the Federal  Reserve  Network of the
United States),  and no part of the proceeds of the Loans hereunder will be used
to purchase or carry any such margin stock or to extend credit to others for the
purpose of  purchasing or carrying any such margin stock or for any purpose that
violates,  or is inconsistent with, the provisions of Regulation G, T, U or X of
said Board of Governors.

         3.14  COLLATERAL.  With  respect  to  Collateral  located in the United
States,  the security  interest  granted by ARTICLE VII hereof and  accompanying
financing  statements,  when (i)  duly  filed  in the  appropriate  governmental
offices  in  accordance  with  the  Uniform  Commercial  Code in  effect  in the
applicable jurisdictions and (ii) Borrower has acquired an ownership interest in
the Collateral, shall create a valid and perfected first priority Lien in and to
the  Collateral,  enforceable  against  (x) other  Persons in all  jurisdictions
securing the payment of the Obligations  without  penalty  (subject to Permitted
Liens) and (y) Liens such as carrier's,  warehousemen's  and  mechanic's  liens,
which arise in the ordinary  course of business with respect to obligations  not
yet due or being  contested  in good faith by  appropriate  proceedings  and for
which  Borrower  shall have set aside reserves on its books as required by GAAP.
Without  limiting  the  foregoing,  upon filing such  financing  statements,  no
further  action will be required to perfect fully the Lien of Lender in any such
Collateral. With respect to Collateral located in Mexico or Canada, the security
interest  granted by ARTICLE VII hereof when,  the  appropriate  action has been
taken in accordance with  appropriate  statutes and regulations in effect in the
applicable jurisdictions, and Borrower has acquired an ownership interest in the
Collateral, shall create a valid and perfected first priority Lien in and to the
Collateral,  enforceable against (x) other Persons in said jurisdiction securing
the payment of the Obligations  without penalty (subject to Permitted Liens) and
(y) Liens such as carrier's,

                                       19

<PAGE>

warehouseman's  and  mechanic's  liens,  which arise in the  ordinary  course of
business  with  respect to  obligations  not yet due or being  contested in good
faith by appropriate proceedings and for which Borrower shall set aside reserves
on its books as required by GAAP.

         3.15 CHIEF PLACE OF BUSINESS. As of the execution hereof, the principal
place of  business  and chief  executive  office of  Borrower is located at 4317
North East  Thurston Way,  Vancouver,  Washington  98662.  If any change in such
location  occurs,  Borrower at such time shall notify  Lender  thereof not later
than ten (10) days after the occurrence thereof. As of the execution hereof, the
books and records of Borrower  and all chattel  paper and all records of account
of Borrower are located at its principal  place of business and chief  executive
office.  If any  change in such  location  occurs,  Borrower  at such time shall
notify Lender thereof not later than ten (10) days after the occurrence thereof.

         3.16 OTHER  CORPORATE  NAMES.  Borrower  has not used any  corporate or
fictitious  names other than  Borrower's  corporate name, as shown in Borrower's
Articles of Incorporation.

         3.17  INSURANCE.  SCHEDULE 3.17 contains a description of all insurance
which  Borrower or any  Affiliate  of  Borrower  maintains  with  respect to the
Business. All of such insurance policies are in full force and effect.

         3.18 CAPITALIZATION. SCHEDULE 3.18 sets forth the following information
with respect to Borrower,  as of the Effective Date: each class of capital stock
of Borrower,  and the related par value,  authorized  and issued  shareholder of
shares of  capital  stock of  Borrower,  indicating  the amount and type of such
capital stock held by such holder,  and the date(s) of acquisition  and purchase
price of such capital stock.  All of the outstanding  shares of capital stock of
Borrower as of the Effective  Date are duly and validly  issued,  fully paid and
nonassessable, and none of such issued and outstanding shares, equity securities
or  beneficial  interests has been issued in violation of, or is subject to, any
pre-emptive or subscription rights. Except as set forth on SCHEDULE 3.18 hereto,
there are no:  (A)  outstanding  shares  of  capital  stock or other  securities
convertible  into or  exchangeable  for equity  securities of Borrower as of the
Effective  Date, or (B) outstanding  rights of  subscription,  warrants,  calls,
options,  contracts or other agreements of any kind, issued,  made or granted to
or with  any  Person  under  which  Borrower  as of the  Effective  Date  may be
obligated to issue,  sell,  purchase,  retire or redeem or otherwise  acquire or
dispose of any equity securities of Borrower.

         3.19  ARTICLES OF  INCORPORATION;  BY-LAWS.  Attached as SCHEDULE  3.19
hereto is a true, complete and correct copy of the Articles of Incorporation and
By-laws of  Borrower as of the  Effective  Date,  as in effect on the  Effective
Date,  and the Board of Directors of Borrower has not passed any  resolution  or
made any  determination  to  amend,  modify  or  annul  Borrower's  Articles  of
Incorporation and By-laws or any provision therein.

                                       20

<PAGE>

         3.20 REAL PROPERTY LEASES AND EASEMENTS.  Set forth on SCHEDULE 3.20 is
a list of (i) all real  property,  if any, owned by Borrower as of the Effective
Date (the "OWNED REAL PROPERTY"),  (ii) all real property leased by Borrower, if
any, as of the  Effective  Date (the  "LEASED REAL  PROPERTY)"  and the material
terms and provisions thereof,  (iii) an easements,  licenses,  rights of way and
similar rights,  if any, with respect to real property  granted to Borrower (the
"EASEMENTS") and the material terms and provisions thereof.

         3.21  INTELLECTUAL  PROPERTY.  SCHEDULE  3.21  contains a complete  and
accurate list of all trade names, trademarks,  copyrights and other intellectual
property,  if any,  owned or licensed by Borrower as of the  Effective  Date and
Borrower's interests in such intellectual  property,  if any, are sufficient for
purposes of Borrower  conducting  and operating  the  Business.  Borrower has no
knowledge  of any  conflict  with the business  property  rights of others,  the
resolution of which could have a Material  Adverse Effect on Borrower.  Borrower
possesses  rights to use all  copyrights,  trademarks,  service  marks,  service
names, trade names, and patents,  if any, necessary to operate the Business.  To
the best of Borrower's  knowledge,  Borrower is not  infringing  any  copyright,
trademark, trademark rights, service marks, service names, trade names, patents,
patent  rights,  license,  trade secrets,  or franchises  owned by any Person or
Persons,  and there is no such claim or action  pending,  or to the knowledge of
Borrower threatened, with respect thereto.

         3.22 FISCAL YEAR. As of the Effective Date,  Borrower's fiscal year for
both tax and accounting purposes is from October 1 to September 30.

         3.23 NO MATERIAL MISSTATEMENTS. No report, financial statement, exhibit
or schedule  furnished by or on behalf of Borrower to Lender in connection  with
the Loan  Documents  or included  herein or therein,  nor any other  information
required to be furnished hereby or thereby,  contains any material  misstatement
of fact or omits to state any material  fact  necessary  to make the  statements
therein not materially  misleading as of the date of delivery  thereof to Lender
or as of the Effective Date.

         3.24 BUSINESS PLAN.  The Business  Plan, in the  reasonable  opinion of
Borrower,   fairly  presents  good  faith   projections  based  upon  reasonable
assumptions at the time of its preparation;  provided,  however,  that (i) there
can be no assurance that said projections will be realized or that actual events
will not result in variations  from such  projections and (ii) the Business Plan
does not address the effect of deployment of wireless communication services.

                                   ARTICLE IV

                              CONDITIONS FOR LOANS

         Lender's   obligation  to  make  Loans  hereunder  is  subject  to  the
satisfaction of the following conditions:

                                       21

<PAGE>
         4.1 ON OR PRIOR TO THE  EFFECTIVE  DATE.  On or prior to the  Effective
Date:

             (a) All then  applicable  legal matters  incident to this Agreement
and the other Loan Documents shall be satisfactory to counsel for Lender.

             (b) Lender shall have received the Business Plan.

             (c) Lender shall have  received  certificates,  dated the Effective
Date, of the Secretary or Assistant  Secretary of each of Borrower and Guarantor
as of the Effective  Date,  certifying (i) the names and true  signatures of the
officers authorized to sign each Loan Document to which Borrower or Guarantor is
a party and (ii) the  resolutions  of the Board of Directors of each of Borrower
and Guarantor approving the transactions contemplated by the Loan Documents.

             (d) Lender shall have  received the  favorable  written  opinion of
counsel for Borrower  and  Guarantor,  dated the  Effective  Date,  addressed to
Lender and substantially in the form of EXHIBIT F attached hereto.

             (e) Lender shall have received  certificates of appropriate  public
officials  of the  jurisdiction  of the  organization  of each of  Borrower  and
Guarantor and of the  jurisdictions  in which each of Borrower and Guarantor are
required  to be  qualified,  dated not more than  thirty  (30) days prior to the
Effective Date, as to the legal existence or qualification  and good standing of
each of Borrower and Guarantor.

             (f) Lender  shall have  received a copy of  Borrower's  Articles of
Incorporation,  as amended,  modified or  supplemented  to the  Effective  Date,
certified  to be true,  correct and  complete by the  Secretary  of State of the
State of Borrower's and Guarantor's incorporation.

             (g) Lender shall have received loss payable  endorsements in a form
reasonably  satisfactory to Lender with respect to Borrower  insurance  policies
relating to the Collateral pledged by Borrower.

             (h) Lender shall have received the fully executed Guaranty.

             (i) Lender shall have received the duly executed Note.

             (j) Lender shall have received the Balance Sheet.

             (k) Lender shall have received all of the  financial  statements of
Guarantor  required to be  delivered  pursuant to the  Guaranty on or before the
Effective Date.

             (l) Each of Borrower and Guarantor  shall have performed all of its
obligations to be performed hereunder on or before the Effective Date.

                                       22

<PAGE>

             (m) Borrower  shall have paid closing fees to Lender  including due
diligence  fees,  transportation  costs,  credit  reports fees,  filing fees and
Lender's  legal  fees  (which  legal  fees  shall not be in excess of  $100,000)
incurred by Lender for the negotiation and preparation of the Loan Documents.

             (n) Lender shall have received an Officer's Certificate in the form
of EXHIBIT L from each of Borrower and Guarantor.

             (o) Lender shall have  received  the  purchase  order(s) for eleven
(11) switches referred to in Section 2.1(a).

             By its execution of this Agreement, Lender acknowledges that all of
the  conditions  set forth in this  Section  4.1 either have been  satisfied  or
waived by Lender.

         4.2 ALL LOANS. In the case of each Interim Loan hereunder:

             (a) The  representations  and  warranties of Borrower and Guarantor
set forth in SECTIONS 3.1, 3.2, 3.4, 3.9, 3.11, 3.12, 3.13, 3.14, 3.15, 3.16 AND
3.23 OF ARTICLE III shall be true and correct in all material respects on and as
of the date of such Loan.

             (b) Each of Borrower and Guarantor  shall have performed all of its
obligations to be performed  hereunder or under any other Loan Document or on or
before the date of such Loan.

             (c) On the date of, and after  giving  effect  to,  each such Loan,
Borrower,  each Borrower Affiliate and Guarantor,  and each of them, shall be in
compliance  with all the terms and  provisions  set forth herein or in any other
Loan Document on its part to be observed or performed,  and no Event of Default,
nor any event which upon notice or lapse of time or both would  constitute  such
an Event of Default, shall have occurred and be continuing.

             (d) On the date of, and after giving  effect to, each such Loan, no
event shall have occurred  which has a Material  Adverse  Effect with respect to
Borrower or Guarantor.

             (e)  Such  Loan,  when  combined  with  Loans  previously  made  to
Borrower, shall not exceed the sum of the Total Commitment Amount.

             (f) Such Loan,  to the extent it  finances  the  purchase of Cable,
when combined with Loans  previously made to Borrower to finance the purchase of
Cable, shall not exceed the Cable Commitment Amount.

                                       23

<PAGE>

             (g) Such Loan,  to the extent it finances  the  purchase of Siemens
Optisets,  when combined with loans  previously  made to Borrower to finance the
purchase of Siemens Optisets, shall not exceed the Optiset Commitment Amount.

             (h) All  other  legal  matters  incident  to such Loan and the Loan
Documents shall be satisfactory to counsel for Lender.

             (i) Lender shall have received a Notice from  Borrower  pursuant to
SECTION  2.1(G)  requesting  the Loan,  signed by  Borrower's  President,  Chief
Financial Officer, Chief Accounting Officer or Treasurer regarding the requested
Loan  and  the  representations,  warranties,  absence  of  default,  and use of
proceeds, all as set forth on EXHIBIT C hereto.

             (j) As a  condition  precedent  to the  disbursement  of such  Loan
proceeds with respect to Non-Lender  Equipment the acquisition of which is to be
financed  with the Loan  proceeds,  Lender shall have  received and approved the
invoices  for such  Non-Lender  Equipment  and the  proofs  of  payment  of such
invoices, which acceptance by Lender shall not be unreasonably withheld.

             (k) With respect to Collateral located in the United States, Lender
shall have received  satisfactory  evidence  that its security  interests in the
Collateral  pledged hereunder have been properly  perfected and constitute first
and prior security interests subject only to Permitted Liens including,  but not
limited  to, (i) the filing  and, or  recording  of UCC- 1 Financing  Statements
signed by Borrower, as debtor, (ii) UCC-1 Financing Statements and signed by the
Borrower Affiliate,  if any, that it will be leasing the subject Collateral,  as
debtor, with the applicable Secretary of State and/or County Recorder.

             (l)  Lender  shall  have   received  such   additional   supporting
documents, certificates and assurances with respect to Borrower and Guarantor as
Lender shall reasonably determine are material to Borrower's compliance with the
conditions  to  Lender's  extension  of such Loan  hereunder  and to  Borrower's
fulfillment of its obligations  hereunder,  which  documents,  certificates  and
assurances shall be approved by Lender as to form and substance,  which approval
shall not be unreasonably withheld.

             (m) Lender shall have received a fully executed Escrow Agreement.

             (n) Lender shall have received a fully executed Security  Agreement
from the Borrower Affiliate to whom Borrower will be leasing the Equipment which
is being financed pursuant to such Loan.

             (o) Lender shall have received a copy of the fully  executed  Lease
between Borrower and the Borrower Affiliate to whom Borrower will be leasing the
Equipment which is being financed pursuant to such Loan.

                                       24

<PAGE>

             (p)  With  respect  to any  Loan  which  finances  Equipment  to be
deployed in a Network Location in Mexico or Canada, (i) Borrower shall have paid
all reasonable costs and expenses,  including,  without  limitation,  attorneys'
fees and expenses,  related to negotiation,  structuring,  transfer and creation
and  perfection  of the security  interest with respect to such Loan (ii) Lender
shall have  received  satisfactory  evidence  that its security  interest in the
Collateral  pledged hereunder have been properly  perfected and constitute first
and prior security  interests  subject only Permitted  Liens; and (iii) Borrower
shall have provided evidence satisfactory to Lender in its sole discretion, that
the  remedies and rights of  enforcement  that would be available to Lender with
respect to Collateral to be located in such countries are reasonably  comparable
in  substance,  scope and timing to those  that are  available  to Lender  under
applicable laws of the United States with respect to Collateral to be located in
the United States.

                                    ARTICLE V

                              AFFIRMATIVE COVENANTS

         Borrower covenants and agrees with Lender that so long as the Agreement
shall  remain in effect or any  Obligations  hereunder or under any of the other
Loan Documents are unpaid:

         5.1 CORPORATE EXISTENCE; LICENSES AND TRADE NAMES. Borrower shall:

             (a)  preserve  and  maintain  its  corporate   existence,   rights,
franchises and privileges in the jurisdiction of its  organization,  and qualify
and remain qualified as a foreign  corporation in all jurisdiction in which such
qualification  is necessary in view of its business and operations and property;
and

             (b)  preserve,  protect  and  keep in full  force  and  effect  its
material  rights and its  licenses and  certificates,  if any, and do all things
necessary to maintain and operate the Business.

         5.2 COMPLIANCE WITH LAWS. ETC.  Borrower shall comply with all laws and
regulations applicable to it and all material contractual obligations applicable
to it and shall obtain and maintain all material governmental consents, filings,
registrations and approvals.  Borrower shall maintain,  in full force and effect
the FCC  Licenses,  if any,  required for the Business and shall comply with, or
cause to be complied with, all applicable rules and regulations of the FCC.

         5.3 MAINTENANCE OF PROPERTIES.  Borrower shall at all times maintain in
good repair, working order and condition,  excepting ordinary wear and tear, all
of its properties  material to its operations and make all appropriate  repairs,
replacements and renewals  thereof,  in each case consistent with sound business
practices.

                                       25

<PAGE>
         5.4 INSURANCE. Borrower shall:

             (a) maintain or cause to be  maintained in full force and effect on
the Collateral property casualty insurance in an amount equal to the replacement
value of the Collateral.

             (b)  maintain  or cause to be  maintained  in full force and effect
public  liability  insurance  against  claims  for  personal  injury or death or
property  damage  occurring upon, in, about or in connection with the use of any
properties  owned,  occupied  or  controlled  by  Borrower  in such  amounts  as
customarily maintained by similar businesses of similar size;

             (c)  cause  each  such  insurance  policy  (i)  pertaining  to  the
Collateral,  to name  Lender as an  "additional  insured",  if such  policy is a
liability  policy,  (ii) to name Lender as a "loss payee" and include a standard
lender's  loss  payable  endorsement  in favor of  Lender  in a form  reasonably
satisfactory to Lender if such policy is a property  insurance policy, and (iii)
to provide that Lender shall be notified of any  proposed  cancellation  of such
policy at least thirty (30) days in advance of such proposed cancellation; and

             (d)  promptly   deliver  to  Lender  copies  of  all  loss  payable
endorsements  issued  by  Borrower's  insurers  with  respect  to  the  policies
described above.

         5.5  TAXES.  Borrower  shall  pay and  discharge  promptly  all  taxes,
assessments  and  governmental  charges  or levies  imposed  upon it or upon its
income or profits or in respect of its property, before the same shall become in
default,  as well as all lawful  claims for labor,  materials  and  supplies  or
otherwise which, if unpaid, might become a Lien upon such properties or any part
thereof;  PROVIDED,  HOWEVER,  that  Borrower  shall not be  required to pay and
discharge  or to cause  to be paid and  discharged  any  such  tax,  assessment,
charge,  levy or  claim  so long as the  validity  or  amount  thereof  shall be
contested  in good faith by  appropriate  proceedings  diligently  pursued,  and
Borrower shall set aside on its books such reserves as are required by GAAP with
respect to any such tax, assessment, charge, levy or claim so contested.

         5.6  FINANCIAL  STATEMENTS,  REPORTS,  ETC.  Borrower  shall furnish to
Lender:

             (a) within five (5) days after any  corresponding  periodic filings
with the U.S. Securities and Exchange Commission by GST Telecommunications, Inc.
with respect to the end of each Fiscal Year, an annual  unaudited  balance sheet
and income  statement  for Borrower for such fiscal year,  which  balance  sheet
shall fairly represent Borrower's assets, liabilities and financial condition as
of such date according to GAAP and shall indicate the equity  contributions made
by Borrower's  shareholders  as of such date according to GAAP and shall contain
no misrepresentations or omissions of any other facts or circumstances which are
material;

                                       26

<PAGE>

             (b) within five (5) days after any  corresponding  periodic  filing
with the U.S. Securities and Exchange Commission by GST Telecommunications, Inc.
with respect to each of the first three financial  quarters of each Fiscal Year,
(i) an unaudited  balance sheet and income  statement for Borrower as of the end
of each such quarter and for the then elapsed portion of such Fiscal Year, which
balance  sheet  shall  fairly  represent  Borrower's  assets,   liabilities  and
financial  condition as of such date  according  to GAAP and shall  indicate the
equity  contributions made by Borrower's  shareholders as of such date according
to GAAP and shall contain no  misrepresentations or omissions of any other facts
or circumstances which are material and (ii) a copy of the then current Business
Plan;

             (c) concurrently with any financial statements provided pursuant to
SECTION 5.6(A) and SECTION  5.6(B) above, a certificate of Borrower  executed on
its behalf by its chief financial officer, chief accounting officer or treasurer
to the effect  that such  financial  statements  present  fairly  the  financial
position and results of operations  of Borrower,  in each case subject to normal
year-end audit adjustments;

             (d) promptly upon their becoming available,  copies of any periodic
or special documents, statements or other information, if any, filed by Borrower
with the FCC or with any other Federal,  state or local  governmental  agency or
authority in connection with the  construction  and/or operation of the Business
or with respect to the  transactions  contemplated by any of the Loan Documents,
and copies of any material  notices and other material  communications  from the
FCC or from any other Federal, state or local governmental agency or authority;

             (e) immediately upon obtaining  knowledge of any condition or event
which either  constitutes an Event of Default or which, after notice or lapse of
time or both,  would  constitute  an Event of Default,  or which  constitutes  a
breach of any covenant herein,  or which renders any  representation or warranty
contained  herein  materially  false or  misleading,  a certificate of Borrower,
signed by an authorized officer of Borrower, specifying in reasonable detail the
nature and period of existence  thereof and what corrective  action Borrower has
taken or proposes to take with respect thereto;

             (f) within  ninety (90) days after the end of each Fiscal  Year,  a
certificate of Borrower, executed for and on its behalf by an authorized officer
of  Borrower,  stating  that there does not exist any  condition  or event which
either  constitutes an Event of Default or which,  after notice or lapse of time
or both, would constitute an Event of Default,  or which constitutes a breach of
any covenant  hereunder or which renders any  representation  or warranty herein
materially false or misleading;

             (g) promptly from time to time such other information regarding the
operations,  business affairs and condition (financial or otherwise) of Borrower
or the Business as Lender may reasonably request.

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<PAGE>

         5.7  LITIGATION  AND OTHER  NOTICES.  Borrower shall give Lender prompt
written  notice of the  following:  (a) all  events of default or any event that
would  become an event of default upon notice or lapse of time or both under any
of the terms or provisions of any note, or of any other evidence of indebtedness
or agreement or contract  governing  the borrowing of money,  of Borrower  which
would have a Material  Adverse Effect;  (b) any levy,  attachment,  execution or
other  process  against any of the  property  or assets,  real or  personal,  of
Borrower  which  would  have a  Material  Adverse  Effect;  (c)  the  filing  or
commencement  of any action,  suit or  proceeding  by or before any court or any
Federal,  state,  municipal  or  other  governmental   department,   commission,
instrumentality or agency which, if adversely determined against Borrower, would
materially impair Borrower's right to carry on the Business substantially as now
conducted or contemplated or result in a Material Adverse Effect; (d) any letter
or other correspondence, oral inquiry, communication or request of any kind from
the FCC  relating  to any FCC  License  held or  required to be held by Borrower
which would or is reasonably  likely or foreseeable  to have a Material  Adverse
Effect on such  Network,  the  Business or  Borrower's  financial  condition  or
operations;  and (e) any  matter  which  has  resulted  in,  or  which  Borrower
reasonably believes will result in, a Material Adverse Effect.

         5.8 LANDLORD CONSENTS AND AGREEMENTS.

             (a) Borrower  shall use its best efforts  (which  efforts shall not
require Borrower to expend any funds) to obtain from each owner of real property
in respect of which a Borrower  Affiliate  has entered into a Lease prior to the
Effective Date at which Collateral is to be located a landlord/mortgage's waiver
in  substantially   the  form  of  Exhibit  I  hereto  and  shall  deliver  such
landlord/mortgagee's waiver to Lender.

             (b)  Borrower  shall  obtain  from each owner of real  property  in
respect  of which a  Borrower  Affiliate  has  entered  into a Lease (an  "OWNER
LEASE")  after  the  Effective  Date at  which  Collateral  is to be  located  a
landlord/mortgagee's  waiver in  substantially  the form of Exhibit I hereto and
shall deliver such waiver to Lender.  Each such Owner Lease shall contain a form
of such landlord/mortgagee's waiver as an exhibit or attachment thereto.

             (c) In the event any Owner  Lease  referred  to in  Section  5.8(b)
above has been recorded with the appropriate  officer of the county in which the
related real property is located,  Borrower  agrees to cause the related  waiver
also to be recorded with the such officer of such county.

         5.9  ERISA.  Borrower  shall  comply  and  shall  cause  each  Borrower
Affiliate to comply, in all material respects with the applicable  provisions of
ERISA,  including the minimum funding  requirements of ERISA with respect to any
employee benefit plans subject to ERISA and shall not permit a Reportable Event,
as defined in ERISA, or a Prohibited Transaction,  as defined in ERISA, to occur
with respect to any employee benefit plans subject to ERISA.

                                       28

<PAGE>

         5.10 ACCESS TO  PREMISES,  RECORDS AND NETWORK.  Borrower  shall permit
representatives  of Lender to have access to Borrower's books and records and to
the Collateral and the premises of Borrower at reasonable  times upon reasonable
notice and to make such excerpts from such records as such  representatives deem
necessary  and to inspect the  Collateral.  Borrower  shall grant or shall cause
each Borrower Affiliate to grant,  Lender access to the Networks for the purpose
of inspecting the Collateral and monitoring any  construction,  modification  or
expansion thereof.

         5.11 ENVIRONMENTAL NOTICES. If Borrower shall:

             (a) receive  notice that any  material  violation  of any  Federal,
state or local  environmental  law or regulation  may have been  committed or is
about to be committed by Borrower;

             (b) receive  notice that any  material  administrative  or judicial
complaint  or order  has been  filed  or is about to be filed  against  Borrower
alleging any material  violations of any Federal,  state or local  environmental
law or  regulation  or  requiring  Borrower  to  take  any  material  action  in
connection  with any  Release  of any  Contaminant  into the  indoor or  outdoor
environment; or

             (c) receive any notice from a federal, state, or local governmental
agency or private party alleging that Borrower may be liable or responsible  for
costs associated with a material response to or material cleanup of a Release of
any Contaminant  into the indoor or outdoor  environment or any material damages
caused thereby;

Borrower  shall provide,  or shall cause to provide,  Lender with a copy of such
notice within fifteen (15) days of receipt thereof.  Within fifteen (15) days of
Borrower having learned of the enactment or  promulgation of any federal,  state
or local  environmental  law/or  regulation  which may  result  in any  Material
Adverse Effect, Borrower shall provide Lender with notice thereof.

         5.12 AMENDMENT OF ORGANIZATION  DOCUMENT.  Borrower shall notify Lender
of any  amendment to its Articles of  Incorporation  within ten (10) days of the
occurrence of any such event,  and provide  Lender with copies of any amendments
certified by the secretary of Borrower and of all other relevant  documentation.
Borrower will promptly deliver to Lender such financing  statements  executed by
Borrower which Lender may request to continue  Lender's first priority  security
interest in the Collateral as a result of any such event.

         5.13  FURTHER  ASSURANCES.  Borrower  agrees to execute  and deliver to
Lender such additional  assignments,  agreements and instruments,  at Borrower's
expense, as Lender may reasonably require or deem advisable to carry into effect
the purposes of this  Agreement  and the Loan  Documents or to better assure and
confirm unto Lender its rights, powers and remedies hereunder and thereunder.

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<PAGE>

         5.14 ENVIRONMENTAL  PERMITS,  LICENSES,  ETC. Borrower shall obtain all
permits,  licenses, and other authorizations which are required under, and shall
be  in  material  compliance  with,  all  federal,  state  and  local  laws  and
regulations   relating  to   pollution,   reclamation,   or  protection  of  the
environment,  including  laws  relating to Releases  or  threatened  Releases of
Contaminants or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, or handling of Contaminants.

         5.15 PAYMENT  RESERVE.  Within fifteen (15) days  following  receipt by
Borrower  from Lender of the Reserve  Notice  relating to any  Conversion  Date,
Borrower will deposit or cause to be deposited with Escrow Agent the amount,  if
any, required so that the aggregate amount held in the Escrow Account equals the
Reserve Amount  calculated by Lender in the exercise of its reasonable  judgment
for such Conversion Date as set forth in such Reserve Notice. To the extent that
the amount on deposit in the Escrow Account on any  Conversion  Date exceeds the
Reserve  Amount  calculated  for such  Conversion  Date,  so long as no Event of
Default has occurred  and is  continuing,  Borrower may require  Escrow Agent to
remit the amount of such excess to Borrower.  Upon the occurrence and during the
continuation  of any Event of Default,  Lender may require Escrow Agent to remit
any amounts  held in the Escrow  Account for  application  to the payment of any
Obligation of Borrower to Lender then due and payable under this Agreement.

         5.16 MAINTENANCE OF COLLATERAL;  RISK OF LOSS. Borrower shall and shall
cause each  Borrower  Affiliate  to  maintain  the  Collateral  in good  repair,
condition   and  working   order   (subject  to  ordinary   wear  and  tear  and
obsolescence),  and shall  furnish  any and all parts,  mechanisms,  and devices
required to keep the  Collateral  in good repair,  condition  and working  order
(subject  to  ordinary  wear and  tear or  obsolescence),  at the sole  cost and
expense of  Borrower  and/or  each  Borrower  Affiliate.  Borrower  and/or  each
Borrower Affiliate shall bear the entire risk of loss for theft, destruction, or
other injury to the Collateral from any and every cause whatsoever. In the event
of damage or loss to such Collateral (or any part thereof),  and irrespective of
payment from any insurance  coverage  maintained by Borrower,  but applying full
credit  therefor,  Borrower  shall at the  option  of  Lender,  (a)  place  such
Collateral  in good repair,  condition  and working  order;  or (b) replace such
Collateral (or any part thereof) with like  equipment in good repair,  condition
and working order and grant to Lender a first priority security interest in such
replacement  equipment.  In the event Borrower is required to restore any of the
Collateral to good repair,  condition  and working  order,  Borrower  shall have
thirty (30) days after notice from Lender to commence and diligently pursue said
repairs;  provided,  however, if, within ninety (90) days after Lender's notice,
such  Collateral  is not placed in good repair,  condition  and working order or
replaced  with like  equipment  in good  repair,  condition  and  working  order
(through  no fault of  Lender),  Borrower  shall  promptly  prepay to Lender the
principal  amount of any Loan to the extent that the  proceeds of such Loan were
used to acquire such Collateral.  The terms of this Section 5.16 shall in no way
limit or restrict any rights that Borrower may have against Lender (by reason of
warranty  or any  other  agreement  between  Lender  and  Borrower)  arising  in
connection  with Borrower's  purchase of Collateral  from Lender.  Nor shall the
terms of this Section 5.16 in any way modify or expand  Lender's

                                       30

<PAGE>

obligations  to Borrower (by reason of warranty or any other  agreement  between
Lender and  Borrower)  arising in  connection  with  Borrower's  purchase of the
Collateral.

                                   ARTICLE VI

                               NEGATIVE COVENANTS

         Borrower  covenants  and  agrees  with  Lender  that  so  long  as this
Agreement  shall remain in effect or the  Obligations  hereunder or under any of
the Loan Documents shall be unpaid, without the prior written consent of Lender:

         6.1 LIENS,  ETC.  Borrower  shall not and shall not permit any Borrower
Affiliate to create,  incur, assume or suffer to exist,  directly or indirectly,
any Lien upon or with respect to the Collateral, now owned or hereafter acquired
except for the following "PERMITTED LIENS":

             (1) Liens granted pursuant to the Loan Documents;

             (2) Liens for taxes,  assessments or governmental charges or levies
on  property  of  Borrower  if the same shall not at the time be  delinquent  or
thereafter can be paid without  penalty,  or are being  diligently  contested in
good faith and by appropriate  proceedings and for which Borrower shall have set
aside reserves on its books as required by GAAP;

             (3) Liens such as carrier's,  warehousemen's  and mechanic's  liens
and other  similar  liens,  which arise in the ordinary  course of business with
respect  to  obligations  not yet  due or  being  contested  in  good  faith  by
appropriate  proceedings and for which Borrower shall have set aside reserves on
its books as required by GAAP;

             (4) Liens  arising  out of  pledges  or  deposits  under  workmen's
compensation laws,  unemployment  insurance,  old age pensions,  or other social
security benefits other than any Lien imposed by ERISA; and

             (5)  Liens  consisting  of  extensions  or  renewals  of the  Liens
referred  to in  clause  (4) of this  section,  provided  that the  indebtedness
secured  thereby  shall not be  increased  or  refinanced  pursuant  to any such
extension or renewal and no such extension or renewal shall extend any such Lien
to additional Collateral.

         6.2 SALE OF ASSETS; CONSOLIDATION, MERGER, ETC. Borrower shall not:

             (1) consolidate with or merge into any other Person, or acquire all
or  substantially  all of the assets of any of the capital  stock of any Person;
PROVIDED,  HOWEVER, that Borrower may merge or consolidate with any affiliate of
Borrower if, but only if:

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<PAGE>

                 (a)  Borrower  shall have  delivered to Lender  written  notice
thereof   not  later  than  thirty  (30)  days  prior  to  any  such  merger  or
consolidation, together with a reasonably detailed description thereof;

                 (b) Borrower shall be the surviving entity and, if appropriate,
shall have duly filed appropriate  Uniform Commercial Code Financing  Statements
in the applicable  Secretary of State and County Recorder's  Offices in order to
enable  Lender to perfect and  preserve its Lien on the  Collateral  theretofore
owned by the merged or consolidated  Borrower,  and,  concurrently with any such
merger or  consolidation,  delivered to Lender  acknowledgment of copies thereof
evidencing such filing;

                 (c) After giving effect to any such merger or consolidation, no
Event of  Default  or any event  which,  with the giving of notice or passage of
time, would constitute an Event of Default shall have occurred and be continuing
or shall exist hereunder.

             (2) sublease, transfer or otherwise dispose of all or substantially
all of its assets in any  transaction or series of related  transaction,  except
for the Leases,  the Security  Agreements,  and other sales and subleases in the
ordinary course of business, which shall include dispositions of assets that are
obsolete, surplus or replaced;

             (3)   liquidate,   dissolve   or  effect  a   recapitalization   or
reorganization in any form of transaction; or

             (4) become  subject to any  agreement  or  instrument  which by its
terms would  restrict  Borrower's  rights or ability to perform in any  material
respect  any of its  obligations  to  Lender  pursuant  to the terms of the Loan
Documents.

         6.3 GUARANTEES;  THIRD-PARTY SALES AND LEASES.  Except for endorsements
of negotiable instruments,  Borrower shall not directly or indirectly (i) assume
any  obligation or  indebtedness  of another  Person (other than an Affiliate of
Borrower)  (ii) make or assume any Guarantee,  or (iii) finance any  third-party
sales or leases,  except  for leases of  Collateral  in the  ordinary  course of
business.

         6.4 INVESTMENTS.  Borrower shall not, directly or indirectly,  make any
Investments except:

             (1)  Investments  in  obligations  issued by, or guaranteed by, the
United States of America or any agency or instrumentality thereof, provided that
such  obligations  mature within three hundred and sixty-five  (365) days of the
date of acquisition thereof; or

             (2) Investments in  certificates of deposit,  money market or other
cash management accounts,  bankers acceptances and Eurodollar time deposits with
financial  institutions  having a long  term  deposit  rating of at least A from
Moody's Investors Service, Inc. or Standard & Poor's Corporation,  respectively;
or

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<PAGE>

             (3)  Investments  in  commercial  paper  rated Pl or Al by  Moody's
Investor's Service, Inc. or Standard & Poor's Corporation, respectively.

         6.5 PERMITTED ACTIVITIES.  Borrower shall not engage in any business or
activity other than the operation of the Business.

         6.6 TRANSACTIONS WITH AFFILIATES.  Except for the Leases,  the Security
Agreement and any other agreements contemplated by the Loan Documents,  Borrower
shall not directly or indirectly, enter into any transaction, including, without
limitation,  leases or other  agreements for the purchase or use of any goods or
services,  with any Affiliate,  except in the ordinary course of and pursuant to
reasonable  requirements  of  Borrower's  business and upon fair and  reasonable
terms no less  favorable to Borrower than it would obtain in a comparable  arm's
length transaction with an unaffiliated Person.

         6.7  INDEBTEDNESS.  Borrower  shall not  create or suffer to exist,  or
permit any of its subsidiaries to create or suffer to exist, any Debt except:

             (1) the Obligations;

             (2) Guarantees and third party financing permitted by SECTION 6.3;

             (3) purchase money Debt secured by Liens permitted by clause (5) of
SECTION 6.1;

             (4) obligations under capital or operating leases;

             (5) Debt which is  subordinated  to payment of the  Obligations  on
terms approved by Lender, in its sole discretion, prior to the incurrence of, or
execution of any agreement with respect to incurrence of, such Debt; and

             (6) Debt to any Affiliate of Borrower.

         6.8  MARGIN  REGULATION.  Borrower  shall not use or  permit  any other
Person to use any  portion of the  proceeds  of any credit  extended  under this
Agreement in any manner which might cause the extension of credit made by Lender
or the  application  of such proceeds to violate the  Securities  Act of 1933 or
Securities  Exchange  Act of 1934  (each as amended  from time to time,  and any
successor statute) or to violate Regulation G, Regulation U, or Regulation X, or
any other  regulation of the Federal Reserve Board, in each case as in effect on
the date or dates of such extension of credit and such use of proceeds.

         6.9 CORPORATE NAMES. Borrower shall not use any corporate or fictitious
names  other  than  the  corporate  name as  shown  in  Borrower's  Articles  of
Incorporation.

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<PAGE>

         6.10 SALE OF  COLLATERAL.  Borrower shall not, and shall not permit any
Borrower  Affiliate  to, sell,  transfer,  lease  (except for Leases to Borrower
Affiliates  as permitted  hereby),  sublease or otherwise  dispose of any of the
Collateral without the prior written consent of Lender, in its sole discretion.

         6.11  SALARIES  AND  COMPENSATION.  Borrower  shall  not  pay,  whether
directly  or  indirectly,  any  salary or other  compensation,  including  fees,
bonuses,  profit-sharing and distributions, to any of its officers, directors or
shareholders  who are not involved in the  management  and/or  operations of the
Business.

                                   ARTICLE VII

                               COLLATERAL SECURITY

         7.1  COLLATERAL  SECURITY.  To secure  payment and  performance  of the
obligations,  Borrower  hereby  grants to Lender  (to the  extent  permitted  by
applicable law) a continuing security interest in and to the following property,
whether now owned or hereafter acquired by Borrower and wheresoever  located, to
the extent  acquired by Borrower  with the proceeds of any Loan:  (i) Lender and
Non-Lender Equipment (collectively,  "EQUIPMENT") and (ii) all software licenses
and  computer  programs,  accessories,  parts,  attachments,  and  appurtenances
appertaining   or  attached  to  any  of  the   Equipment   (collectively,   the
"COLLATERAL")   together  with  all  substitutions,   trade-ins,   renewals  and
replacements of, and  improvements  and accessions to the Collateral,  including
Collateral classified as Borrower's inventory.

         7.2  PRESERVATION  OF COLLATERAL AND  PERFECTION OF SECURITY  INTERESTS
THEREIN.  Borrower shall execute and deliver to Lender at any time and from time
to time at the request of Lender,  all  financing  statements  or other  similar
documents  (and pay the  cost of  filing  or  recording  the same in all  public
offices deemed necessary by Lender), as Lender may reasonably request, in a form
satisfactory to Lender,  to perfect and keep perfected the security  interest in
the  Collateral  granted  by  Borrower  to Lender or to  otherwise  protect  and
preserve such Collateral and Lender's  security  interest  therein or to enforce
Lender's  security  interests in such Collateral in a manner consistent with the
Loan Documents.  Should Borrower fail to do so, Lender is authorized to sign any
such financing  statements as Borrower's  agent.  Borrower further agrees that a
carbon,  photographic or other  reproduction of this Agreement or of a financing
statement is sufficient as a financing statement.

                                  ARTICLE VIII

                           EVENTS OF DEFAULT; REMEDIES

         8.1 EVENTS OF DEFAULT.  The following  events shall each  constitute an
"EVENT OF DEFAULT":

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<PAGE>

             (a) Borrower  shall fail to pay the principal of or interest on the
Note,  when due,  whether  as  scheduled,  at a date  fixed for  prepayment,  by
acceleration  or  otherwise  and such failure  shall  continue for ten (10) days
after the due date thereof; or

             (b)  Borrower,  a Borrower  Affiliate  or  Guarantor  shall fail to
observe or perform any other covenant,  condition or agreement to be observed or
performed  pursuant to the terms of the Loan Documents (other than a covenant in
SECTION  5.14) and such  failure  is not cured  within  thirty  (30) days  after
receipt by Borrower of written notice thereof; or

             (c) Any  representation  or warranty  made by Borrower,  a Borrower
Affiliate  or  Guarantor  in  connection  with this  Agreement or any other Loan
Document  shall prove to have been false or misleading  in any material  respect
when made or delivered or when deemed made in  accordance  with the terms hereof
or thereof; or

             (d) Borrower or Guarantor as the case may be, shall fail to pay any
principal,  premium or interest on any Debt,  which Debt exceeds two hundred and
fifty  thousand  dollars  ($250,000)  (in the case of  Borrower) or five million
dollars ($5,000,000) (in the case of Guarantor) when due and payable (whether by
scheduled maturity, required prepayment,  acceleration, demand or otherwise) and
such failure shall continue after the applicable grace period, if any, specified
in the  agreement  or  instrument  relating to such  indebtedness;  or any other
default  or  event  under  any  agreement  or  instrument  relating  to any such
indebtedness  or any other  event,  shall  occur and  shall  continue  after the
applicable grace period,  if any,  specified in any such agreement or instrument
if the effect of such  default or event is to  accelerate,  the maturity of such
indebtedness;  or any such indebtedness  shall be declared to be due and payable
or  required  to be  prepaid  (other  than  by a  regularly  scheduled  required
prepayment)  prior to the stated maturity  thereof as a result of any such event
of default; or

             (e)  Borrower  or  Guarantor  shall (i) apply for or consent to the
appointment of a receiver, trustee, custodian,  sequestrator or similar official
for Borrower or Guarantor or for a substantial part of its property, (ii) make a
general assignment for the benefit of creditors,  (iii) involuntarily  dissolve,
liquidate  or wind up its  affairs,  or (iv)  take  action  for the  purpose  of
effecting any of the foregoing; or

             (f) A voluntary  proceeding  under any bankruptcy,  reorganization,
arrangement of debts,  insolvency or  receivership  law is filed by Borrower,  a
Borrower  Affiliate  or  Guarantor  or an  involuntary  proceeding  is commenced
against Borrower,  a Borrower  Affiliate or Guarantor and such proceeding is not
dismissed within sixty (60) days after filing (or Borrower, a Borrower Affiliate
or  Guarantor  consents  to such  filing at any  time),  or  Borrower,  Borrower
Affiliate  or  Guarantor  takes any  action to  authorize  any of the  foregoing
matters; or

             (g)  Borrower or  Guarantor is not Solvent and such party shall not
cure such condition  within thirty (30) days of receipt of notice from Lender to
such effect; or

                                       35

<PAGE>

             (h) Any FCC License or any other  certificate or license  necessary
for the  operation  by Borrower of the  Business  shall not be obtained or shall
cease to be in full force and  effect,  which in respect of a license of the FCC
shall occur when an order revoking or  terminating  such license shall be issued
which is no longer subject to further administrative and judicial review, or the
FCC or any  other  governmental  authority  having  jurisdiction  over  any such
certificate or license shall, prior to the termination  thereof,  decide,  which
decision shall not be subject to further  administrative or judicial review, not
to renew such certificate or license; or

             (i) For any reason any Loan Document shall not be in full force and
effect or shall not be enforceable in accordance with its terms, or any security
interest or lien granted pursuant thereto shall fail to be perfected, other than
as a result of an act or omission  of Lender,  or any party  thereto  other than
Lender shall contest the validity of any Lien granted under,  or shall disaffirm
its obligations under, any Loan Document; or

             (j) A judgment or  judgments  for the payment of money in excess of
Two Hundred  Fifty  Thousand  Dollars  ($250,000)  individually  or Five Hundred
Thousand  Dollars  ($500,000)  in the  aggregate at any one time shall have been
rendered  against  Borrower or a judgment or  judgments  for payment of money in
excess  of Two  Millon  Dollars  ($2,000,000)  at any one time  shall  have been
rendered  against the Guarantor  and/or Borrower  Affiliate,  and the same shall
have remained unsatisfied  undischarged,  unvacated,  unbonded or unstayed for a
period of forty-five (45) days during which no stay of execution shall have been
obtained; or

             (k) For any  reason,  Borrower or  Guarantor  ceases to operate the
Business; or

             (l) Either Borrower or Guarantor is enjoined,  restrained or in any
way prevented by the order of any court or  administrative  or regulatory agency
from  conducting  any  material  portion of their  respective  business and such
injunction,  restraining  order or other order is not  vacated or stayed  within
thirty (30) days; or

             (m)  Borrower  or  Guarantor  becomes  subject to any  liabilities,
costs, expenses,  damages, fines or penalties which could reasonably be expected
to have a Material  Adverse Effect arising out of or related to (i) any Remedial
Action in response  to a Release or  threatened  Release at any  location of any
Contaminant  into  the  indoor  or  outdoor  environment  or (ii)  any  material
violation of any environmental, health or safety requirement of law; or

             (n) Either Borrower or Guarantor fails to comply with any provision
of the  Communications Act or any other FCC regulation or policy, and the effect
of such  failure is likely to result in a sanction by the FCC which could have a
Material  Adverse  Effect  on the  operations  and  conditions  of  Borrower  or
Guarantor, financial or otherwise; or

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<PAGE>

             (o) Ownership of any Borrower Affiliate shall have been transferred
so that it is no longer wholly owned by Borrower or an Affiliate.

         8.2 TERMINATION OF COMMITMENT; ACCELERATION. Upon the occurrence and at
any time during the continuance of any Event of Default, Lender may:

             (a)  by  notice  to  Borrower,  terminate  Lender's  Commitment  to
Borrower to make Loans hereunder; and

             (b) declare the  Obligations  to be  immediately  due and  payable,
whereupon the Obligations shall be immediately due and payable without notice of
any kind;  PROVIDED,  HOWEVER,  that if an Event of Default described in SECTION
8.1(E)  OR  8.1(F)  shall  exist  or  occur,   all  of  the  Obligations   shall
automatically, without declaration or notice of any kind, be immediately due and
payable.

         8.3  WAIVER OF  DEMAND.  Demand,  presentment,  protest  and  notice of
nonpayment  are hereby  waived by Borrower.  Borrower also waives the benefit of
all  valuation,  appraisal  and  exemption  laws  to  the  extent  permitted  by
applicable law.

         8.4  RIGHTS AND  REMEDIES  GENERALLY.  If an Event of  Default  occurs,
Lender shall have,  in addition to any other  rights and  remedies  contained in
this  Agreement  or in any of the other  Loan  Documents,  all of the rights and
remedies  of a secured  party under the Code and other  applicable  laws and all
other rights and  remedies by law,  all of which  rights and  remedies  shall be
cumulative,  and  non-exclusive,  to the extent permitted by law. In addition to
all such  rights  and  remedies,  the sale,  lease or other  disposition  of the
Collateral,  or any part thereof,  by Lender after the occurrence of an Event of
Default  may be for cash,  credit or any  combination  thereof,  and  Lender may
purchase  all or any part of the  Collateral  at public sale held in  compliance
with the procedures set forth in the Code, or, if permitted by law, private sale
held in compliance  with the  procedures  set forth in the Code,  and in lieu of
actual payment of such purchase  price,  may set off the amount of such purchase
price against the  Obligations  then owing.  Any sales of the  Collateral may be
adjourned  from time to time with or without  notice.  Lender  may,  in its sole
discretion,  cause  the  Collateral  to  remain  on  Borrower's  or  a  Borrower
Affiliate's premises,  at Borrower's expense,  pending sale or other disposition
of the  Collateral.  Lender  shall  have the  right  to  conduct  such  sales on
Borrower's  or a  Borrower  Affiliate's  premises,  at  Borrower's  expense,  or
elsewhere,  on such occasion or occasions as Lender may see fit. Lender's rights
under this Section shall be  enforceable  to the extent  permitted by applicable
law.

         8.5 ENTRY  UPON  PREMISES  AND  ACCESS TO  INFORMATION.  Following  the
occurrence and during the continuance of an Event of Default,  Lender shall have
the right to enter upon the premises of Borrower where the Collateral is located
(or is believed to be located) without any obligation to pay rent to Borrower or
a Borrower  Affiliate,  or any other  place or places  where the  Collateral  is
believed to be located and kept,  and render the  Collateral  unusable or remove
the Collateral  therefrom to the premises of Lender or any agent of

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<PAGE>

Lender,  for such time as Lender may desire,  in order effectively to collect or
liquidate  the  Collateral,  and/or  Lender may  require  Borrower or a Borrower
Affiliate to assemble the  Collateral and make it available to Lender at a place
or places to be  designated  by  Lender.  Lender  shall have the right to obtain
access to Borrower's data processing equipment or a Borrower Affiliate, computer
hardware and software  relating to the Collateral  during normal  business hours
and to use all of the foregoing  and the  information  contained  therein in any
manner Lender deems  reasonably  appropriate in connection  with the exercise of
its rights and remedies. Lender's rights under this Section shall be enforceable
to the extent permitted by applicable law.

         8.6 SALE OR OTHER  DISPOSITION  OF  COLLATERAL  BY  LENDER.  Any notice
required to be given by Lender of a sale,  lease or other  disposition by Lender
pursuant  to  ARTICLE  VIII  with  respect  to any of the  Collateral  which  is
deposited  in the  United  States  mails,  certified  postage  prepaid  and duly
addressed to Borrower and Guarantor and, each of them, at the address  specified
in SECTION 9.1 below,  at least five (5)  Business  Days prior to such  proposed
action shall constitute fair and reasonable  notice to Borrower and Guarantor of
any such action. The net proceeds realized by Lender upon any such sale or other
disposition, after deduction for the expense of retaking, holding, preparing for
sale, selling or the like and the reasonable  attorneys' fees and legal expenses
incurred by Lender in connection therewith,  shall be applied as provided herein
toward satisfaction of the Obligations. Lender shall account to Borrower for any
surplus realized upon such sale or other disposition,  and Borrower shall remain
liable for any deficiency.  The commencement of any action,  legal or equitable,
or the rendering of any judgment or decree for any  deficiency  shall not affect
Lender's security interest in the Collateral. Borrower agrees that Lender has no
obligation to preserve  rights to the Collateral  against any other Persons.  In
connection with the exercise of any remedies pursuant to this section, Lender is
hereby  granted a license  or other  right to use,  without  charge,  Borrower's
labels,  patents,  copyrights,  rights of use of any name, trade secrets,  trade
names,  trademarks,  service marks and advertising  matter, or any property of a
similar  nature,  as it  pertains  to the  Collateral,  and,  to the  extent not
prohibited  by the terms of any  applicable  license  or  franchise  agreements,
Borrower's rights under all licenses and all franchise agreements shall inure to
Lender's  benefit until the Obligations are paid in full.  Lender's rights under
this Section shall be enforceable to the extent permitted by applicable law.

         8.7 LENDER NOT LIABLE.  Lender shall not be  responsible  or liable for
any  shortage,  discrepancy,  damage,  loss or  destruction  of any  part of the
Collateral or of any instrument  received in payment therefor or for any damages
resulting therefrom (except to the extent such loss shall be finally adjudicated
or otherwise conclusively determined to have been caused by the gross negligence
or willful  misconduct of Lender).  Lender shall not, under any circumstances or
in any event  whatsoever,  have any  liability  for any error or omission of any
kind made in the  settlement,  collection  or payment  of any of the  Collateral
(except  to the  extent  such loss shall be  finally  adjudicated  or  otherwise
conclusively  determined to have been caused by the gross  negligence or willful
misconduct of Lender). The costs of collection and enforcement,  including,  but
not limited to, reasonable counsel fees and out-of-

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<PAGE>
pocket  expenses,  shall be  borne  solely  by  Borrower,  whether  the same are
incurred by Lender or Borrower.

         8.8 RIGHT OF SET-OFF. Upon the occurrence and during the continuance of
any Event of Default,  Lender is hereby  authorized at any time and from time to
tine, to the fullest  extent  permitted by law, to set off and apply any and all
deposits (general or special, time or demand,  provisional or final) at any time
held and other  indebtedness or other obligations at any time owing by Lender to
or for  the  credit  or the  account  of  Borrower  against  any  and all of the
obligations of Borrower now or hereafter existing under this Agreement.

                                   ARTICLE IX

                                  MISCELLANEOUS

         9.1 NOTICES. Notices and other communications provided for herein shall
be in writing and shall be delivered by a courier service of recognized standing
or mailed (or, if by telex,  graphic  scanning or other  telegraphic or telecopy
communications  equipment of the sending  party,  delivered  by such  equipment)
addressed

If to Borrower, to:

                           GST Switchco, Inc.
                           4317 North East Thurston Way
                           Vancouver, Washington 98662

                           Attention: Clifford  V. Sander
                                      Vice President and Treasurer

                           Facsimile: (360) 604-2878

with copy to:

                           Olshan, Grundman, Frome & Rosenzweig LLP
                           505 Park Avenue
                           New York, New York 10022-1170
                           Attention: Stephen Irwin, Esq.
                                      Daniel J. Gallagher, Esq.
                           Facsimile: (212) 755-1467

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<PAGE>

and if to Lender to:

                           Siemens Stromberg-Carlson
                           900 Broken Sound Parkway
                           Boca Raton, Florida 33487

                           Attention: Mr. Wayne Pitman
                           Facsimile: (407) 955-8771

with copy to:

                           Siemens Corporation
                           1301 Avenue of the Americas
                           New York, New York 10019

                           Attention: Martin V. Schwartz, Esq.
                           Facsimile: (212) 767-0581

with additional copy to:

                           Cooper, White & Cooper
                           201 California Street
                           17th Floor
                           San Francisco, California 94111
                           Attention: Jeffrey J. Wong, Esq.
                           Facsimile: (415) 433-5530

         All  notices  and other  communications  given to any  party  hereto in
accordance  with the provisions of this  Agreement  shall be deemed to have been
given (a) three (3) days after  mailing  when sent by  registered  or  certified
mail,  postage prepaid,  return receipt  requested,  or (b) upon receipt,  if by
courier service or any telegraphic  communications  equipment of the sender,  in
each case  addressed to such party as provided in this Section or in  accordance
with the latest unrevoked direction from such party.

         9.2 NO WAIVERS; AMENDMENTS.

             (a) No failure or delay of Lender to exercise  any right  hereunder
or under any other Loan Document  shall operate as a waiver  thereof,  nor shall
any single or partial exercise of any such right,  preclude any other or further
exercise  thereof or the exercise of any other right. No waiver of any provision
of this  Agreement or any other Loan  Document  nor consent to any  departure by
Borrower  therefrom shall in any event be effective  unless the same shall be in
writing and signed by Lender, and then such waiver or consent shall be effective
only in the specific  instance and for the purpose for which given. No notice or
demand on  Borrower in any case shall  entitle  Borrower to any other or further
notice or demand in similar or other circumstances.

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<PAGE>

             (b) Neither  this  Agreement  nor any other Loan  Documents  may be
amended or modified  except  pursuant to an agreement or  agreements  in writing
executed by Borrower and Lender.

         9.3 GOVERNING LAW AND  JURISDICTION.  THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS  SHALL BE  CONSTRUED IN  ACCORDANCE  WITH AND GOVERNED BY THE INTERNAL
LAWS OF THE STATE OF NEW YORK,  WITHOUT  GIVING  EFFECT TO ANY CONFLICTS OF LAWS
PRINCIPLES.  BORROWER AND LENDER CONSENT TO THE JURISDICTION OF ANY LOCAL, STATE
OR FEDERAL COURT LOCATED IN NEW YORK CITY IN THE STATE OF NEW YORK AND WAIVE ANY
OBJECTION  RELATING TO IMPROPER  VENUE OR FORUM NON CONVENIENS TO THE CONDUCT OF
ANY PROCEEDING BY SUCH COURT.

         9.4 EXPENSES; DOCUMENTARY TAXES. Borrower shall be obligated to pay all
reasonable  out-of-pocket expenses incurred by Lender in connection with (i) the
creation,  perfection,  priority or protection  of the Liens in the  Collateral,
including the  reasonable  attorneys'  fees incurred both prior to and after the
Effective Date to perfect the Lien in the  Collateral,  and (ii) the enforcement
of Lender's rights in connection  with this Agreement,  any other Loan Documents
or the Collateral, including all reasonable attorneys' fees and related expenses
and costs;  provided,  however,  that  Borrower  shall not be  obligated  to pay
expenses incurred by Lender on or prior to the Effective Date to the extent that
they  exceed  $100,000.  Borrower  agrees to  indemnify  Lender from and hold it
harmless  against any  documentary  taxes,  assessments  or charges  made by any
governmental authority by reason of the execution and delivery of this Agreement
or any other Loan Document.

         9.5  EQUITABLE  RELIEF.  Borrower  recognizes  that,  in the event that
Borrower  fails to  perform,  observe or  discharge  any of its  obligations  or
liabilities under this Agreement,  or any other Loan Document, any remedy at law
may prove to be inadequate  relief to Lender;  therefore,  Borrower  agrees that
Lender,  if Lender so  requests,  shall be entitled to temporary  and  permanent
injunctive  relief in any such case  without  the  necessity  of proving  actual
damages.

         9.6 INDEMNIFICATION; LIMITATION OF LIABILITY.

             (a) Borrower agrees to protect,  indemnify and hold harmless Lender
and each of its  officers,  directors,  employees,  attorneys,  consultants  and
agents (collectively the "INDEMNITIES") from and against any and all liabilities
(including  tort,  negligence  and  strict  liabilities),  obligations,  losses,
damages,  penalties,  actions,  judgments,  suits, claims,  costs,  expenses and
disbursements of any kind or nature whatsoever  (including,  without limitation,
the reasonable  fees and  disbursements  of counsel for and  consultants of such
Indemnities in connection  with any  investigative,  administrative  or judicial
proceeding,  whether  or not  such  Indemnities  shall  be  designated  a  party
thereto),  which may be  imposed  on,  incurred  by, or  asserted  against  such
Indemnities (whether direct, indirect, or consequential and whether

                                       41

<PAGE>

based on any federal or state laws or other  statutory  regulations,  including,
without   limitation,   securities,   environmental   and  commercial  laws  and
regulations, under common law or at equitable cause or on contract or otherwise)
in any manner  relating to or arising out of this  Agreement or any of the other
Loan Documents,  or any act, event or transaction  related or attendant thereto,
the agreements of Lender contained  herein,  the making of Loans, the management
of such Loans or the Collateral (including any liability under federal, state or
local  environmental  laws or  regulations)  or the use or  intended  use of the
proceeds of such Loans  hereunder  (collectively,  the  "INDEMNIFIED  MATTERS");
provided that neither  Borrower nor Guarantor  shall have any  obligation to any
Indemnitee  hereunder with respect to Indemnified Matters caused by or resulting
from the willful  misconduct  or gross  negligence  of such  Indemnitee.  To the
extent that the undertaking to indemnify, pay and hold harmless set forth in the
preceding  sentence may be  unenforceable  because it is violative of any law or
public  policy,  Borrower shall  contribute  the maximum  portion which they are
permitted  to  pay  and  satisfy  under  applicable  law,  to  the  payment  and
satisfaction of all Indemnified Matters incurred by the Indemnities.

             (b) To the extent permitted by applicable law, no claim may be made
by  Borrower  or any  other  Person  against  Lender  or any of its  affiliates,
directors,  officers,  employees,  agents,  attorneys  or  consultants  for  any
special, indirect, consequential or punitive damages in respect of any claim for
breach of contract or any other theory of liability arising out of or related to
the transactions  contemplated by any of the Loan Documents or any act, omission
or event occurring in connection therewith; and Borrower hereby waives, releases
and  agrees  not to sue upon any  claim  for any such  damages,  whether  or not
accrued  and  whether or not known or  suspected  to exist in its favor,  to the
extent  permitted by applicable  law.  Neither Lender nor any of its affiliates,
directors, officers, employees, agents, attorneys or consultants shall be liable
for any action taken or omitted to be taken by it or them under or in connection
with any of the Loan Documents,  except for its or their own gross negligence or
willful misconduct.

             (c) If Borrower  fails to pay promptly when due to any other Person
monies which it is required to pay by reason of any provision in this Agreement,
Lender may, but need not, pay the same and Borrower agrees to promptly reimburse
Lender for such  payment;  PROVIDED,  HOWEVER,  Lender  may not pay any  amounts
described  in this  sentence the validity of which  Borrower is  contesting,  in
proceedings  which are being  diligently  pursued,  and for which  Borrower  has
created reserves therefor which are satisfactory to Lender. Any payments made by
Lender shall not constitute: (i) an agreement by Lender to make similar payments
in the future, or (ii) a waiver by Lender of any Event of Default.

         9.7 SURVIVAL OF AGREEMENTS,  REPRESENTATIONS  AND WARRANTIES,  ETC. All
warranties,  representations,  indemnities and covenants made by Borrower in any
Loan Document survive the execution and delivery of this Agreement and the other
Loan  Documents  and the  making  of the  Obligations  and shall  survive  until
repayment in full in immediately available funds of all Obligations (after which
period Lender shall only have a right of  indemnification  from Borrower for any
breach of any such warranties,  representations  and covenants during the

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<PAGE>

period for which such warranties,  representations and covenants are in effect);
PROVIDED, HOWEVER, that if the Lender for any reason is required to disgorge any
payment  with  respect  to  the  Obligations  after  the  date  that  all of the
Obligations  are  repaid  in full  in  immediately  available  funds,  then  all
warranties, representations and covenants made by Borrower or Guarantor shall be
reinstated  as though such full payment had not  occurred and shall  continue in
effect until repayment in full in immediately available funds of all Obligations
that are restored and/or created as a result of such payment disgorgement.

         9.8 SUCCESSORS AND ASSIGNS.  Borrower may not assign or transfer any of
its rights or obligations  hereunder  without  Lender's  prior written  consent.
Lender may not assign or transfer any of its rights or obligations  hereunder to
any Person (other than to Siemens Credit Corporation),  without Borrower's prior
written  consent,  which consent shall not be unreasonably  withheld or delayed.
Borrower  agrees  that it will not assert  against  any  permitted  assignee  of
Lender,  including  Siemens Credit  Corporation,  any defense,  counterclaim  or
off-set that  Borrower may have against  Lender and that upon notice of any such
assignment or transfer,  it will pay all Obligations due under this Agreement to
such  assignee or  transferee.  Borrower  acknowledges  that any  assignment  or
transfer by Lender shall not materially  change Borrower's duties or obligations
under this  Agreement  nor shall it  materially  increase  the  burdens or risks
imposed on Borrower.

         9.9 SEVERABILITY.  In case any one or more of the provisions  contained
in this  Agreement  or any other  Loan  Document  shall be  invalid,  illegal or
unenforceable in any respect,  the validity,  legality and enforceability of the
remaining  provisions  contained  herein  and  therein  shall  not in any way be
affected or impaired thereby.

         9.10 COVER PAGE;  TABLE OF CONTENTS  AND  SECTION  HEADINGS.  The cover
page,  Table of Contents and section headings used herein are for convenience of
reference  only,  are not  part  of this  Agreement  and are not to  affect  the
construction of or be taken into consideration in interpreting this Agreement.

         9.11  COUNTERPARTS.  This Agreement may be signed in counterparts  with
the same  effect as if the  signatures  thereof  and  hereto  were upon the same
instrument.

         9.12  MARSHALLING;  PAYMENTS  SET  ASIDE.  Lender  shall  be  under  no
obligation  to  marshall  any assets in favor of  Borrower or any other party or
against  or in  payment of any or all of the  Obligations.  Notwithstanding  any
other provision  hereof, to the extent that Borrower makes a payment or payments
to Lender or Lender  enforces its security  interests or exercises its rights of
setoff,  and such  payment or payments or the  proceeds of such  enforcement  or
setoff  or  any  part  thereof  are  subsequently  invalidated,  declared  to be
fraudulent or preferential, set aside and/or required to be repaid to a trustee,
receiver  or any other  party under any  bankruptcy  law,  Federal or state law,
common  law or  equitable  cause,  then  to the  extent  of such  recovery,  the
obligation or part thereof originally  intended to be satisfied shall be revived
and  continued  in full force and effect as if such payment had not

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<PAGE>

been made or such enforcement or setoff had not occurred.  Lender's rights under
this Section shall be enforceable to the extent permitted by applicable law.

         9.13  SERVICE  OF  PROCESS.  BORROWER  WAIVES  PERSONAL  SERVICE OF ANY
PROCESS  UPON IT AND,  CONSENTS  THAT ALL  SERVICE OF  PROCESS  SHALL BE MADE BY
REGISTERED MAIL, RETURN RECEIPT REQUESTED,  DIRECTED TO BORROWER, AT THE ADDRESS
INDICATED  IN  SECTION  9.1  HEREOF  AND  SERVICE  SO MADE SHALL BE DEEMED TO BE
COMPLETED  FIVE (5)  BUSINESS  DAYS  AFTER  SAME  SHALL  HAVE BEEN (1) POSTED AS
AFORESAID OR (2) DELIVERED BY ANY OTHER PROCESS PERMITTED BY APPLICABLE LAW.

         9.14 WAIVER OF JURY TRIAL.  BORROWER AND LENDER EACH WAIVE ANY RIGHT TO
HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE,  WHETHER SOUNDING IN CONTRACT,
TORT, OR OTHERWISE,  BETWEEN LENDER AND BORROWER ARISING OUT OF, CONNECTED WITH,
RELATED  TO OR  INCIDENTAL  TO THE  RELATIONSHIP  ESTABLISHED  BETWEEN  THEM  IN
CONNECTION  WITH  THIS  AGREEMENT  OR ANY  OTHER  LOAN  DOCUMENT  OR  ANY  OTHER
INSTRUMENT,  DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH
OR THE TRANSACTIONS  RELATED THERETO.  BORROWER AND LENDER EACH HEREBY AGREE AND
CONSENT THAT ANY SUCH CLAIM, DEMAND,  ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL  WITHOUT A JURY AND THAT EITHER MAY FILE AN ORIGINAL  COUNTERPART
OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

         9.15 ENTIRE AGREEMENT, ETC. This Agreement (including all schedules and
exhibits referred to herein),  the Note and all other Loan Documents  constitute
the entire  contract  between  the parties  hereto  with  respect to the subject
matter  hereof and thereof and shall  supersede  and take the place of any other
instrument  purporting to be an agreement of the parties hereto relating to such
subject matter.

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<PAGE>
         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly  executed  by their duly  authorized  officers as of the day and year first
above written.

                                  GST SWITCHCO, INC., Borrower

                                  By:/s/ John Warta
                                     -----------------------------------------
                                         John Warta
                                         President and Chief Executive Officer

                                  SIEMENS STROMBERG-CARLSON, Lender

                                  By: SIEMENS COMMUNICATIONS SYSTEMS INC.
                                      Its General Partner

                                  By: /s/ Frederick R. Fromm
                                      -----------------------------------------
                                          Frederick R. Fromm
                                          President and Chief Executive Officer


                                       45