GST TELECOMMUNICATIONS, INC.
                                  GST USA, INC.

                           GST EQUIPMENT FUNDING, INC.

                               PLACEMENT AGREEMENT

                                                                     May 8, 1997

Morgan Stanley & Co. Incorporated,
for itself and the other Placement
Agents named below
1585 Broadway
New York, New York  10036-8293

Ladies and Gentlemen:

                  GST  Equipment  Funding,  Inc., a Delaware  corporation  ("GST
Funding"),  proposes to issue and sell to the several  Placement Agents named in
Schedule I hereto (the "Placement Agents") $265,000,000  principal amount of GST
Funding's  13 1/4%  Senior  Secured  Notes Due 2007 (the  "Notes")  to be issued
pursuant  to the  provisions  of an  Indenture  dated  as of May 13,  1997  (the
"Indenture")  among GST  Funding,  GST  Telecommunications,  Inc.,  a  federally
chartered Canadian  corporation  ("GST"),  GST USA, Inc., a Delaware corporation
("GST  USA"),  and United  States  Trust  Company of New York,  as trustee  (the
"Trustee").  GST Funding will use all of the net  proceeds  from the offering of
the Notes to purchase U.S. Government  Securities (the "Pledged Securities") and
pledge the Pledged  Securities  to the Trustee for the benefit of the holders of
the Notes  pursuant  to the  provisions  of a  Collateral  Pledge  and  Security
Agreement, dated as of the date of the Indenture (the "Pledge Agreement"),  made
by GST Funding in favor of the Trustee.  On the Closing Date (as defined below),
GST  Funding  will use a portion of the net  proceeds  from the  offering of the
Notes to purchase  Pledged  Securities to fund the first six scheduled  interest
payments on the Notes.  GST Funding will use the  remaining  net proceeds of the
offering of the Notes to  purchase  Pledged  Securities  which will be sold from
time to time to acquire funds to pay the Acquired  Equipment  Cost in respect of
Acquired  Equipment  or to  refinance  on the Closing  Date up to $50 million of
indebtedness of GST USA and its subsidiaries  secured by Acquired  Equipment (as
such terms are defined in the Pledge Agreement).  All Acquired Equipment will be
subject to a first  priority  security  interest in favor of the Trustee for the
benefit  of  holders  of the  Notes.  From time to time  after the  purchase  of
Acquired Equipment, such Acquired Equipment will be sold by GST Funding to


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GST USA in exchange for Intercompany  Notes (as defined in the Pledge Agreement)
from GST USA.  Each  Intercompany  Note  will be  guaranteed  by GST (the  "Note
Guarantee"),  will be secured by a security  interest in the Acquired  Equipment
purchased with such Intercompany Note and will be pledged to the Trustee for the
benefit of holders of the Notes. On May 13, 2000, or earlier if permitted by the
terms of GST USA's and GST's outstanding  indebtedness,  GST USA will assume and
become the direct obligor on the Notes and GST will guarantee the Notes.

                  GST Funding, GST and GST USA understand that the Notes will be
offered  without being  registered  under the Securities Act of 1933, as amended
(the "Securities Act"), to qualified institutional buyers in compliance with the
exemption from  registration  provided by Rule 144A under the Securities Act, in
offshore  transactions  in reliance on  Regulation  S under the  Securities  Act
("Regulation S") and to institutional  accredited  investors (as defined in Rule
501(a)(1),  (2), (3) or (7) under the  Securities  Act) that deliver a letter in
the form annexed to the Final Memorandum (as defined below).

                  The Placement Agents and their direct and indirect transferees
will be entitled to the benefits of a Registration Rights Agreement, to be dated
the Closing Date and to be  substantially in the form attached hereto as Exhibit
A.

                  In connection with the sale of the Notes,  GST Funding and GST
have prepared a  preliminary  private  placement  memorandum  (the  "Preliminary
Memorandum") and will prepare a final private  placement  memorandum (the "Final
Memorandum" and, with the Preliminary  Memorandum,  each a "Memorandum") setting
forth or  including a  description  of the terms of the Notes,  the terms of the
offering and a  description  of each of GST  Funding,  GST and GST USA and their
business.

                  1.  REPRESENTATIONS  AND WARRANTIES.  (i) Each of GST Funding,
GST and GST USA jointly and  severally  represents  and  warrants to, and agrees
with, each of the Placement Agents that as of the date hereof:

                  (a) The Preliminary Memorandum does not contain, and the Final
Memorandum in the form used by the Placement  Agents to confirm sales and on the
Closing Date will not contain,  any untrue  statement of a material fact or omit
to state a material fact necessary to make the statements  therein, in the light
of the circumstances under which they were made, not misleading, except that the
representations and warranties set forth in this Section 1(i)(a) do not apply to
statements or omissions in either Memorandum based upon information  relating to
any Placement Agent furnished to GST Funding or GST in writing by such Placement
Agent through you expressly for use therein.

                  (b)  GST  Funding  has  been  duly  incorporated,  is  validly
existing  as a  corporation  in good  standing  under  the laws of the  State of
Delaware, has the corporate

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power and  authority to own or lease its property and to conduct its business as
described  in each  Memorandum  and is duly  qualified  or  licensed to transact
business and is in good standing as a foreign  corporation in each  jurisdiction
in which the  conduct of its  business or its  ownership  or leasing of property
requires such qualification or licensing,  except to the extent that the failure
to be so qualified or licensed or be in good standing  would not have a material
adverse effect on GST and its subsidiaries, taken as a whole.

                  (c) GST has been duly  incorporated  under the laws of Canada,
is validly  existing  as a  corporation  in good  standing  with  respect to all
filings of annual returns required to be made under the laws of Canada,  has the
corporate  power and  authority  to own or lease its property and to conduct its
business as described in each  Memorandum  and is duly  qualified or licensed to
transact  business  and is in good  standing  as a foreign  corporation  in each
jurisdiction in which the conduct of its business or its ownership or leasing of
property requires such qualification or licensing, except to the extent that the
failure to be so qualified or licensed or be in good  standing  would not have a
material adverse effect on GST and its subsidiaries, taken as a whole.

                  (d) GST USA has been duly incorporated, is validly existing as
a corporation in good standing under the laws of the State of Delaware,  has the
corporate  power and  authority  to own or lease its property and to conduct its
business as described in each  Memorandum  and is duly  qualified or licensed to
transact  business  and is in good  standing  as a foreign  corporation  in each
jurisdiction in which the conduct of its business or its ownership or leasing of
property requires such qualification or licensing, except to the extent that the
failure to be so qualified or licensed or be in good  standing  would not have a
material adverse effect on GST and its subsidiaries, taken as a whole.

                  (e) Each  subsidiary  of GST and GST USA listed on Schedule II
hereto  (each  a   "Specified   Subsidiary",   and   together   the   "Specified
Subsidiaries") has been duly incorporated,  is validly existing as a corporation
in good standing under the laws of the  jurisdiction of its  incorporation,  has
the corporate  power and  authority to own or lease  property and to conduct its
business as described in each  Memorandum  and is duly  qualified or licensed to
transact  business  and is in good  standing  as a foreign  corporation  in each
jurisdiction in which the conduct of its business or its ownership or leasing of
property requires such qualification or licensing, except to the extent that the
failure to be so qualified or licensed or be in good  standing  would not have a
material adverse effect on GST and its subsidiaries,  taken as a whole. The only
direct subsidiaries of GST are GST USA, GST Call America,  Inc. ("Call America")
and  TotalNet  Communications,  Inc.  ("TotalNet")  and  GST  owns  all  of  the
outstanding  capital stock of such  subsidiaries,  free and clear of any claims,
liens, pledges or other encumbrance. GST USA owns all of the outstanding capital
stock of GST  Funding,  free and clear of any  claims,  liens,  pledges or other
encumbrance.  The  total  assets  and  revenues  of GST's  direct  and  indirect
subsidiaries other than the Specified Subsidiaries, in the aggregate,  comprised
less than 5% of GST's total consolidated assets and

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revenues,  respectively, at and for the year ended September 30, 1996 and at and
for the quarter ended March 31, 1997.

                  (f) This  Agreement  has been duly  authorized,  executed  and
delivered by each of GST Funding, GST and GST USA.

                  (g) The Notes have been duly  authorized  and, when  executed,
authenticated  and  delivered  to  and  paid  for  by the  Placement  Agents  in
accordance with the terms of the Indenture and this Agreement, will be (i) valid
and  binding  obligations  of GST  Funding  enforceable  against  GST Funding in
accordance  with their terms,  except as (A) the  enforceability  thereof may be
limited  by the effect of  applicable  bankruptcy,  insolvency,  reorganization,
moratorium or similar laws affecting  creditors' rights generally and (B) rights
of acceleration,  if applicable,  and the availability of equitable remedies may
be limited by equitable principles of general applicability and (ii) entitled to
the benefits of the Indenture.

                  (h)  Each  of  the  Indenture  and  the  Registration   Rights
Agreement  has been duly  authorized,  executed and delivered by, and is a valid
and binding agreement of, each of GST Funding,  GST and GST USA,  enforceable in
accordance  with its  terms,  except as (i) the  enforceability  thereof  may be
limited  by the effect of  applicable  bankruptcy,  insolvency,  reorganization,
moratorium or similar laws affecting creditors' rights generally and (ii) rights
of acceleration,  if applicable,  and the availability of equitable remedies may
be limited by equitable principles of general applicability.

                  (i) The Pledge  Agreement has been duly  authorized,  executed
and  delivered  by,  and is a valid  and  binding  agreement  of,  GST  Funding,
enforceable  in  accordance  with its  terms,  except as (i) the  enforceability
thereof  may be  limited  by the effect of  applicable  bankruptcy,  insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
and (ii) the  availability  of  equitable  remedies  may be limited by equitable
principles of general applicability.

                  (j) The execution and delivery by each of GST Funding, GST and
GST USA of, and the  performance by each of GST Funding,  GST and GST USA of its
obligations under, this Agreement (including the issuance,  sale and delivery of
the Notes),  the Indenture,  the Registration  Rights Agreement and the Notes to
which it is a party will not  contravene  any provision of applicable law or the
certificate of incorporation or by-laws of any of GST Funding, GST or GST USA or
any agreement or other instrument binding upon GST Funding,  GST or GST USA that
is material to GST and its subsidiaries taken as a whole, or any judgment, order
or decree of any governmental body, agency or court having jurisdiction over GST
Funding, GST or GST USA and no consent, approval,  authorization or order of, or
qualification  with,  any  governmental  body  or  agency  is  required  for the
performance by any of GST Funding,  GST or GST USA of its obligations under this
Agreement  (including  the  issuance,  sale  and  delivery  of the  Notes),  the
Indenture, the

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<PAGE>

Registration  Rights Agreement or the Notes to which it is a party,  except such
as may be required by the securities laws or Blue Sky laws of the various states
in  connection  with the offer and sale of the Notes or by the federal and state
securities  laws in  connection  with the  registration  obligations  under  the
Registration Rights Agreement.

                  (k) The  execution  and  delivery  by GST  Funding of, and the
performance by GST Funding of its obligations  under,  the Pledge Agreement will
not  contravene   any  provision  of  applicable  law  or  the   certificate  of
incorporation  or by-laws of GST Funding or any  agreement  or other  instrument
binding  upon  GST  Funding  or  GST  USA  that  is  material  to  GST  and  its
subsidiaries,  taken  as  whole,  or  any  judgment,  order  or  decree  of  any
governmental  body, agency or court having  jurisdiction over GST Funding or GST
USA, and no consent, approval, authorization or order of, or qualification with,
any  governmental  body or agency is required for the performance by GST Funding
of its obligations under the Pledge Agreement.

                  (l) There has not occurred any material adverse change, or any
development  involving a prospective  material adverse change, in the condition,
financial or otherwise,  or in the  earnings,  business or operations of GST and
its  subsidiaries,  taken as a whole,  from  that set  forth in the  Preliminary
Memorandum.

                  (m) There are no legal or governmental proceedings pending or,
to the best of GST Funding's, GST's or GST USA's knowledge,  threatened to which
GST Funding, GST, GST USA or any of the Specified  Subsidiaries is a party or to
which any of the properties of GST Funding, GST, GST USA or any of the Specified
Subsidiaries  is subject  other than  proceedings  accurately  described  in all
material  respects  in each  Memorandum  and  proceedings  that would not have a
material adverse effect on GST and its subsidiaries, taken as a whole, or on the
power  or  ability  of any of  GST  Funding,  GST  or  GST  USA to  perform  its
obligations  under  this  Agreement,  the  Indenture,  the  Registration  Rights
Agreement,  the  Notes  or the  Pledge  Agreement  to  which it is a party or to
consummate the transactions contemplated by the Final Memorandum.

                  (n) None of GST Funding,  GST or GST USA or any  affiliate (as
defined in Rule 501(b) of Regulation D under the Securities Act, an "Affiliate")
of GST  Funding,  GST or GST USA has  directly  or  through  any agent (i) sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the  Securities  Act) which is or will be integrated
with the sale of the Notes in a manner that would require the registration under
the  Securities  Act of the  Notes  or  (ii)  engaged  in any  form  of  general
solicitation  or general  advertising  in connection  with the offering (as such
terms are used in Regulation D under the Securities  Act) of the Notes or in any
manner  involving a public  offering  within the meaning of Section  4(2) of the
Securities Act.

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                  (o)  None of GST  Funding,  GST or GST  USA is an  "investment
company" or an entity "controlled" by an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended.

                  (p) It is not necessary in connection with the offer, sale and
delivery of the Notes to the Placement Agents in the manner contemplated by this
Agreement and each  Memorandum to register the Notes under the Securities Act or
to qualify the Indenture under the Trust Indenture Act of 1939, as amended.

                  (q) GST Funding,  GST, GST USA and the Specified  Subsidiaries
have all necessary permits, licenses, authorizations, consents and approvals and
have made all necessary  filings  required  under any federal,  state,  local or
foreign  supranational,  national or regional law,  regulation or rule, and have
obtained  all  necessary  authorizations,  consents  and  approvals  from  other
persons,  material to the conduct of their respective  businesses,  in each case
except  to the  extent  that the  failure  to  obtain  such  permits,  licenses,
authorizations,  consents or approvals or to make such filings would not, singly
or in the aggregate,  have a material adverse effect on the properties,  assets,
prospects,  condition, financial or otherwise, business or operations of GST and
its  subsidiaries,  taken as a whole;  except  as  accurately  described  in all
material  respects  in each  Memorandum,  GST  Funding,  GST,  GST USA and their
subsidiaries have not received any notice of proceedings which remain unresolved
relating  to the  revocation  or  modification  of any such  permits,  licenses,
authorizations,  consents or approvals,  nor is GST Funding, GST, GST USA or any
of the Specified  Subsidiaries  in violation of, or in default  under,  any such
license,  authorization,  consent or approval or any  federal,  state,  local or
foreign  supranational,  national or  regional  law,  regulation  or rule or any
decree, order or judgment applicable to GST Funding,  GST, GST USA or any of the
Specified  Subsidiaries the effect of which could have a material adverse effect
on  the  properties,  assets,  prospects,  condition,  financial  or  otherwise,
business or operations of GST and its subsidiaries, taken as a whole.

                  (r) GST Funding,  GST, GST USA and the Specified  Subsidiaries
(i) are in compliance with any and all applicable  foreign,  federal,  state and
local  laws and  regulations  relating  to the  protection  of human  health and
safety,  the environment or hazardous or toxic substances or wastes,  pollutants
or contaminants ("Environmental Laws"), (ii) have received all permits, licenses
or other  approvals  required  of them under  applicable  Environmental  Laws to
conduct their  respective  businesses and (iii) are in compliance with all terms
and  conditions  of any such  permit,  license or  approval,  except  where such
noncompliance  with  Environmental  Laws,  failure to receive required  permits,
licenses or other  approvals or failure to comply with the terms and  conditions
of such  permits,  licenses  or  approvals  would  not,  individually  or in the
aggregate, have a material adverse effect on GST and its subsidiaries,  taken as
a whole.

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                  (s) Each of GST Funding, GST and GST USA has complied with all
provisions  of  Section  517.075,  Florida  Statutes  (Chapter  92-198,  Laws of
Florida).

                  (t) None of GST Funding, GST, GST USA, their Affiliates or any
person  acting on its or their  behalf  (other  than the  Placement  Agents) has
engaged in any directed  selling  efforts (as such term is defined in Regulation
S) with respect to the Notes and GST Funding, GST, GST USA, their Affiliates and
any person acting on its or their behalf (other than the Placement  Agents) have
complied with the offering restrictions requirement of Regulation S.

                  (u) The terms of the Notes and the  Indenture  conform  in all
material  respects to the description  thereof contained in the Final Memorandum
under the heading "Description of the Notes."

                  (v) The  financial  statements  contained  in each  Memorandum
comply with the  requirements  of Regulation  S-X of the Securities and Exchange
Commission.

                  (w)  Upon  delivery  to the  Trustee  of the  certificates  or
instruments,  if any,  representing  the Pledged  Securities  (as defined in the
Final  Memorandum) and the filing of financing  statements,  if any, required by
the Uniform Commercial Code in the appropriate offices in the State of New York,
the pledge of and grant of a security interest in the Pledged Securities for the
benefit of the  Trustee  and the  holders of the Notes will  constitute  a first
priority security interest in the Pledged Securities, enforceable as against all
creditors  of GST Funding  (and any persons  purporting  to purchase  any of the
Pledged Securities from GST Funding).

                  (x) The $35 million  principal  amount  Promissory Note, dated
the Closing  Date,  made by GST USA for the benefit of GST Funding (the "Initial
Note") has been duly  authorized,  executed and delivered by, and is a valid and
binding agreement of, GST USA,  enforceable in accordance with its terms, except
as (i) the  enforceability  thereof  may be limited by the effect of  applicable
bankruptcy,  insolvency,  reorganization,  moratorium or similar laws  affecting
creditors' rights generally and (ii) rights of acceleration,  if applicable, and
the availability of equitable remedies may be limited by equitable principles of
general applicability.

                  (y) The Promissory  Note,  dated the Closing Date, made by GST
USA  for the  benefit  of GST  Funding  (the  "Initial  Intercompany  Note")  to
refinance  certain  intercompany  indebtedness on the Closing Date has been duly
authorized,  executed and delivered by, and is a valid and binding agreement of,
GST  USA,   enforceable  in  accordance  with  its  terms,  except  as  (i)  the
enforceability  thereof may be limited by the effect of  applicable  bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting

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creditors' rights generally and (ii) rights of acceleration,  if applicable, and
the availability of equitable remedies may be limited by equitable principles of
general applicability.

                  (z)  The  Intercompany  Security  Agreement,  dated  as of the
Closing Date, made by GST USA for the benefit of GST Funding (the  "Intercompany
Security Agreement") has been duly authorized, executed and delivered by, and is
a valid and binding  agreement of, GST USA,  enforceable in accordance  with its
terms, except as (i) the enforceability  thereof may be limited by the effect of
applicable bankruptcy,  insolvency,  reorganization,  moratorium or similar laws
affecting  creditors'  rights  generally and (ii) the  availability of equitable
remedies may be limited by equitable principles of general applicability.

                  (aa) Each of the Guaranty, dated the Closing Date, made by GST
for the benefit of GST Funding with  respect to the Initial  Note (the  "Initial
Note  Guaranty") and the Guaranty,  dated the Closing Date, made by GST for with
benefit of GST  Funding  with  respect  to the  Initial  Intercompany  Note (the
"Intercompany  Note Guaranty") has been duly authorized,  executed and delivered
by, and is a valid and binding agreement of, GST, enforceable in accordance with
its terms, except as (i) the enforceability thereof may be limited by the effect
of applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting  creditors'  rights  generally and (ii) the  availability of equitable
remedies may be limited by equitable principles of general applicability.

                  (bb)  Schedule A to the  Certificate  of  Responsible  Officer
dated May 13, 1997 signed by John Warta and  delivered  in  connection  with the
opinion of Swidler & Berlin delivered  pursuant to Section 4(c) hereof lists all
of the telecommunications services provided by the Specified Subsidiaries (other
than NACT  Telecommunications,  Inc. and Wasatch International Network Services,
Inc.),  other than services which are not, singly or in the aggregate,  material
to GST and its subsidiaries, taken as a whole.

                  (ii) Each of the Placement Agents  represents and warrants to,
and  agrees  with,  GST  Funding,  GST,  GST  USA  and  each  of  the  Specified
Subsidiaries that as of the date hereof:

                  (a) each of the Placement  Agents has the necessary  power and
         authority  to  enter  into  this   Agreement  and  to  consummate   the
         transactions contemplated hereby.

                  (b)  each  of  the  Placement  Agents  will  deliver  to  each
         purchaser,  prior to any  submission  by such person of a written offer
         relating to the purchase of Notes, a copy of the Final Memorandum.

                  2.  OFFERING.  Each of the  Placement  Agents has  advised GST
Funding, GST and GST USA that it will make an offering of the Notes purchased by
it hereunder on

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the terms set forth in the Final  Memorandum as soon as  practicable  after this
Agreement is entered into as in its judgment is advisable.

                  3. PURCHASE AND DELIVERY. GST Funding hereby agrees to sell to
the several  Placement Agents,  and the Placement Agents,  upon the basis of the
representations  and warranties  contained  herein but subject to the conditions
stated herein,  agree,  severally and not jointly, to purchase from GST Funding,
the respective principal amount of Notes set forth in Schedule I hereto opposite
their names at a purchase price of 96.75% of the principal amount thereof,  plus
accrued interest, if any, from May 13, 1997 to the date of payment and delivery.

                  Payment  for the Notes shall be made  against  delivery of the
Notes at a closing  (the  "Closing")  to be held at the  offices  of  Shearman &
Sterling, 599 Lexington Avenue, New York, New York, at 9:00 A.M., local time, on
May 13,  1997,  or at such other time on the same or such other date,  not later
than May 28, 1997,  as shall be  designated in writing by you. The time and date
of such payment are herein  referred to as the "Closing  Date".  Payment for the
Notes  shall be made to GST Funding by wire  transfer  to an account  previously
designated  to the  Placement  Agents by GST  Funding in  immediately  available
funds.

                  Certificates  for the Notes  shall be in  definitive  form and
registered  in such  names and in such  denominations  as you shall  request  in
writing  not less than one full  business  day prior to the  Closing  Date.  The
certificates  evidencing the Notes shall be delivered to you on the Closing Date
for the respective  accounts of the several Placement Agents,  with any transfer
taxes  payable in  connection  with the  transfer of the Notes to the  Placement
Agents duly paid, against payment of the purchase price therefor.

                  4.  CONDITIONS  TO  CLOSING.  The several  obligations  of the
Placement  Agents under this  Agreement to purchase the Notes will be subject to
the following conditions:

                  (a)  Subsequent to the date of this Agreement and prior to the
Closing Date,

                  (i) there shall not have occurred any  downgrading,  nor shall
         any notice have been given of any intended or potential  downgrading or
         of any  review  for a  possible  change  that  does  not  indicate  the
         direction of the  possible  change,  in the rating  accorded any of GST
         Funding's,  GST's or GST USA's securities by any "nationally recognized
         statistical rating  organization," as such term is defined for purposes
         of Rule 436(g)(2) under the Securities Act; and

                  (ii)  there  shall  not  have  occurred  any  change,  or  any
         development involving a prospective change, in the condition, financial
         or otherwise, or in the earnings,

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         business or operations, of GST and its subsidiaries,  taken as a whole,
         from  that  set  forth  in the  Preliminary  Memorandum  that,  in your
         judgment,  is material and adverse and that makes it, in your judgment,
         impracticable  to  market  the  Notes on the  terms  and in the  manner
         contemplated in the Final Memorandum.

                  (b) The  Placement  Agents shall have  received on the Closing
Date  certificates,  dated the  Closing  Date and  signed,  respectively,  by an
executive  officer of GST  Funding,  GST and GST USA, to the effect set forth in
clause (a)(i) of this Section 4 and to the effect that the  representations  and
warranties of GST Funding,  GST and GST USA contained in this Agreement are true
and correct in all material respects as of the Closing Date and that each of GST
Funding,  GST and GST USA has complied in all material  respects with all of the
agreements  and satisfied in all material  respects all of the conditions on its
part  to  be  performed  or  satisfied  in  connection  with  the   transactions
contemplated hereby or by the Memorandum on or before the Closing Date.

                  The officers signing and delivering such certificates may rely
upon the best of their knowledge as to proceedings threatened.

                  (c) You shall have  received on the  Closing  Date an opinion,
dated the Closing Date, of (i) Olshan Grundman Frome & Rosenzweig  LLP,  counsel
for GST Funding, GST and GST USA, in the form attached hereto as Exhibit B, (ii)
O'Neill & Company,  Canadian  counsel  for GST, in the form  attached  hereto as
Exhibit C, (iii)  Thorsteinssons,  Canadian  tax  counsel  for GST,  in the form
attached  hereto as  Exhibit  D,  (iv)  Swidler  &  Berlin,  Chartered,  special
regulatory counsel for GST Funding, GST and GST USA, in the form attached hereto
as Exhibit E and (v) local  regulatory  counsel in the forms attached  hereto as
Exhibit F.

                  (d) You shall have  received on the Closing Date an opinion of
Shearman & Sterling,  counsel for the Placement Agents,  dated the Closing Date,
with respect to such matters as you may reasonably request.

                  (e) You shall have  received,  on each of the date  hereof and
the  Closing  Date,  a  letter  dated  the date  hereof  and the  Closing  Date,
respectively,  in form and substance satisfactory to you, from KPMG Peat Marwick
LLP,  independent public accountants,  containing  statements and information of
the type ordinarily  included in accountants'  "comfort letters" to underwriters
with  respect to the  financial  statements  and certain  financial  information
contained in the Final Memorandum.

                  (f) GST Funding,  GST and GST USA shall have complied with the
provisions of subsection  (a) of Section 5 hereof with respect to the furnishing
of  Final  Memoranda  on the  business  day  next  following  the  date  of this
Agreement, in such quantities as you shall have reasonably requested.

                                       10

<PAGE>

                  (g) GST  Funding  shall have  received  from GST USA a capital
contribution in cash of a least $1 million.

                  (h)  You  shall  have  received   such  other   documents  and
certificates as are reasonably requested by you or your counsel.

                  5.  COVENANTS  OF GST  FUNDING,  GST AND GST USA.  In  further
consideration  of the  agreements  of the  Placement  Agents  contained  in this
Agreement, each of GST Funding, GST and GST USA covenants as follows:

                  (a) To  furnish  to you,  without  charge,  during  the period
         mentioned  in  subsection  (c) of this Section 5, as many copies of the
         Final Memorandum and any supplements and amendments  thereto as you may
         reasonably  request  and to use its best  efforts  to  deliver  as many
         copies of the Final  Memorandum  as you may request to you by 5:00 P.M.
         (New York City time) on the business day next  following  the execution
         of this Agreement.

                  (b) Before amending or  supplementing  either  Memorandum,  to
         furnish to you a copy of each such proposed amendment or supplement and
         not to use any such  proposed  amendment  or  supplement  to which  you
         reasonably object.

                  (c) If,  during such period after the date hereof and prior to
         the  date  on  which  all of the  Notes  shall  have  been  sold by the
         Placement  Agents,  any event shall occur or condition shall exist as a
         result of which it is necessary in your reasonable judgment to amend or
         supplement  the  Final  Memorandum  in  order  to make  the  statements
         therein,  in the light of the  circumstances  when such  Memorandum  is
         delivered  to a purchaser,  not  misleading,  or if, in the  reasonable
         opinion of counsel to the Placement Agents, it is necessary to amend or
         supplement such Memorandum to comply with applicable law,  forthwith to
         prepare and  furnish,  at its own  expense,  to the  Placement  Agents,
         either  amendments  or  supplements  to such  Memorandum  so  that  the
         statements in such Memorandum as so amended or  supplemented  will not,
         in the light of the circumstances  when such Memorandum is delivered to
         a purchaser,  be misleading or omit to state a material fact or so that
         such  Memorandum,  as so  amended or  supplemented,  will  comply  with
         applicable law.

                  (d) To  endeavor to qualify the Notes for offer and sale under
         the securities laws or Blue Sky laws of such jurisdictions as you shall
         reasonably request;  PROVIDED that none of GST Funding,  GST USA or GST
         shall be  required  to (A)  qualify  as a foreign  corporation  or as a
         dealer in securities in any  jurisdiction  where it would not otherwise
         be required to qualify but for this paragraph (d), (B) file any general
         consent to service of process or (C) subject  itself to taxation in any
         such jurisdiction if it is not otherwise so subject.

                                       11

<PAGE>

                  (e) To use the net  proceeds  received by GST Funding from the
         sale of the Notes in the manner specified in the Final Memorandum under
         the heading "Use of Proceeds."

                  (f)  Whether  or not  the  transactions  contemplated  by this
         Agreement are  consummated or this Agreement is terminated,  to pay all
         costs and expenses incident to the performance of its obligations under
         this Agreement,  including,  without limitation: (i) the preparation of
         each  Memorandum and all amendments and supplements  thereto,  (ii) the
         preparation, issuance and delivery of the Notes, including any transfer
         or other taxes payable thereon, (iii) the fees and disbursements of GST
         Funding's,  GST's and GST USA's  counsel  and  accountants  required to
         provide  "comfort  letters"  hereunder and the Trustee and its counsel,
         (iv) the  qualification  of the Notes under securities laws or Blue Sky
         laws in  accordance  with the  provisions  of Section  5(d),  including
         filing fees and the fees and disbursements of counsel for the Placement
         Agents in connection  therewith and in connection  with the preparation
         of any Blue Sky or legal  investment  memoranda,  (v) the  printing and
         delivery to the  Placement  Agents in  quantities  as herein  stated of
         copies  of the  Final  Memorandum  and any  amendments  or  supplements
         thereto,  (vi) the costs and expenses of GST  Funding,  GST and GST USA
         relating to investor  presentations  on any "road show"  undertaken  in
         connection  with  the  marketing  of  the  Notes,  including,   without
         limitation,  expenses  associated  with the production of the road show
         slides and graphics, fees and expenses of any consultants engaged, with
         the approval of GST Funding,  GST and GST USA, in  connection  with the
         road  show   presentations,   travel  and   lodging   expenses  of  the
         representatives  and officers of GST  Funding,  GST and GST USA and any
         such consultants,  and the cost of any aircraft chartered in connection
         with the road show, (vii) all document  production charges and expenses
         of counsel to the Placement  Agents (but not  including  their fees for
         professional  services)  in  connection  with the  preparation  of this
         Agreement and the Pledge  Agreement  and the  documents and  agreements
         contemplated thereby, (viii) the fees and expenses, if any, incurred in
         connection  with the  admission  of the Notes for trading in PORTAL and
         any other  appropriate  market system and (ix) the  preparation  of the
         Pledge  Agreement  and  the  Intercompany  Security  Agreement  and the
         instruments,  documents and agreements contemplated thereby,  including
         the fees and  disbursements  of  counsel  for the  Placement  Agents in
         connection therewith.

                  (g)  None of GST  Funding,  GST  and  GST USA or any of  their
         Affiliates  will  sell,  offer  for sale or  solicit  offers  to buy or
         otherwise  negotiate  in respect  of any  security  (as  defined in the
         Securities Act) which could be integrated with the sale of the Notes in
         a manner which would require the registration  under the Securities Act
         of the Notes.

                                       12

<PAGE>
                  (h) Not to solicit any offer to buy or offer or sell the Notes
         by means of any form of general solicitation or general advertising (as
         such terms are used in Regulation D under the Securities Act) or in any
         manner  involving a public  offering within the meaning of Section 4(2)
         of the Securities Act.

                  (i) While any of the Notes  remain  outstanding,  GST Funding,
         GST and GST USA shall make  available,  upon request,  to any seller of
         such  Notes the  information  specified  in Rule  144A(d)(4)  under the
         Securities Act, unless GST Funding, GST and GST USA, as applicable,  is
         then subject to Section 13 or 15(d) of the  Securities  Exchange Act of
         1934, as amended (the "Exchange Act").

                  (j)  To use  its  best  efforts  to  permit  the  Notes  to be
         designated   PORTAL   securities  in  accordance  with  the  rules  and
         regulations adopted by the National  Association of Securities Dealers,
         Inc. relating to trading in the PORTAL Market.

                  (k) None of GST Funding, GST, GST USA, their Affiliates or any
         person acting on its or their behalf (other than the Placement  Agents)
         will engage in any directed selling efforts (as such term is defined in
         Regulation S) with respect to the Notes, and GST Funding, GST, GST USA,
         their  Affiliates  and each person acting on its or their behalf (other
         than the Placement  Agents) will comply with the offering  restrictions
         of Regulation S.

                  (l) As soon as  permissible  under  all  agreements  of GST in
         existence  on the date  hereof,  GST will  transfer  all of the capital
         stock of Call  America and  TotalNet to GST USA,  and  thereafter  such
         companies will be wholly owned subsidiaries of GST USA.

                  (m) To use its best  efforts  to have the Notes  listed on the
         Luxembourg Stock Exchange as soon as practicable after the date hereof.

                  6.  OFFERING  OF NOTES;  RESTRICTIONS  ON  TRANSFER.  (a) Each
Placement  Agent,  severally and not jointly,  represents and warrants that such
Placement Agent is a qualified institutional buyer as defined in Rule 144A under
the Securities Act (a "QIB").  Each Placement Agent,  severally and not jointly,
agrees with GST  Funding,  GST and GST USA that (i) it will not  solicit  offers
for, or offer or sell, the Notes by any form of general  solicitation or general
advertising (as such terms are used in Regulation D under the Securities Act) or
in any manner  involving a public offering within the meaning of Section 4(2) of
the  Securities Act and (ii) it will solicit offers for the Notes only from, and
will offer the Notes only to,  persons that it reasonably  believes to be (A) in
the case of offers inside the United States, (1) QIBs or (2) other institutional
accredited  investors  (as defined in Rule 501(a) (1), (2), (3) or (7) under the
Securities Act)  ("institutional  accredited  investors")  that,  prior to their
purchase of any Notes, deliver to such Placement Agent a letter containing

                                       13

<PAGE>

the  representations and agreements set forth in Annex A to the Final Memorandum
and (B) in the case of offers outside the United  States,  to persons other than
U.S. persons  ("foreign  purchasers",  which term shall include dealers or other
professional  fiduciaries in the United States acting on a  discretionary  basis
for foreign  beneficial  owners  (other than an estate or trust))  that, in each
case,  in  purchasing  such Notes are deemed to have  represented  and agreed as
provided in the Final Memorandum under the heading "Transfer Restrictions."

                  (b)  Each   Placement   Agent,   severally  and  not  jointly,
represents,  warrants,  and agrees with respect to offers and sales  outside the
United States that:

                  (i) it understands that no action has been or will be taken in
         any  jurisdiction  by GST  Funding,  GST or GST USA that would permit a
         public  offering of the Notes,  or possession or distribution of either
         Memorandum or any other offering or publicity  material relating to the
         Notes, in any country or jurisdiction  where action for that purpose is
         required;

                  (ii) such Placement Agent will comply with all applicable laws
         and  regulations  in each  jurisdiction  in which it acquires,  offers,
         sells or delivers Notes or has in its possession or distributes  either
         Memorandum or any such other material, in all cases at its own expense;

                  (iii) the Notes have not been and will not be registered under
         the  Securities  Act and may not be offered  or sold  within the United
         States or to, or for the account or benefit of, U.S.  persons except in
         accordance  with  Regulation  S or  pursuant to an  exemption  from the
         registration requirements of the Securities Act;

                  (iv) such Placement Agent has offered the Notes and will offer
         and sell the Notes (A) as part of its  distribution at any time and (B)
         otherwise  until 40 days  after  the later of the  commencement  of the
         offering  and the Closing  Date,  only in  accordance  with Rule 903 of
         Regulation S or another exemption from the registration requirements of
         the  Securities  Act.  Accordingly,  no such Placement  Agent,  nor any
         Affiliates of such  Placement  Agent,  nor any persons acting on its or
         their  behalf  have  engaged  or will  engage in any  directed  selling
         efforts (within the meaning of Regulation S) with respect to the Notes,
         and any such Placement  Agent, its Affiliates and any such persons have
         complied and will comply with the offering restrictions requirements of
         Regulation S;

                  (v) each Placement Agent  represents and, during the period of
         six months from the date hereof,  agrees that (i) it has not offered or
         sold and will not  offer or sell any  Notes to  persons  in the  United
         Kingdom  except to persons whose  ordinary  activities  involve them in
         acquiring,  holding, managing or disposing of investments (as principal
         or agent) for the purposes of their businesses or otherwise in

                                       14

<PAGE>
         circumstances  which have not  resulted and will not result in an offer
         to the public in the United  Kingdom  within the  meaning of the Public
         Offers of Securities Regulations 1995 (the "Regulations");  (ii) it has
         complied  and  will  comply  with  all  applicable  provisions  of  the
         Financial  Services  Act  1986  and the  Regulations  with  respect  to
         anything  done by it in  relation  to the Notes in,  from or  otherwise
         involving the United Kingdom; and (iii) it has only issued or passed on
         and will only issue or pass on to any person in the United  Kingdom any
         document  received by it in  connection  with the issue of the Notes if
         that person is of a kind  described in Article  11(3) of the  Financial
         Services Act 1986 (Investment  Advertisements)  (Exemptions) Order 1996
         or is a person to whom such document may  otherwise  lawfully be issued
         or passed on;

                  (vi) such Placement Agent  understands that the Notes have not
         been and will not be registered  under the  Securities and Exchange Law
         of Japan,  and  represents  that it has not offered or sold, and agrees
         that it will not offer or sell,  any Notes,  directly or  indirectly in
         Japan or to any  resident of Japan  except (A) pursuant to an exemption
         from the  registration  requirements of the Securities and Exchange Law
         of Japan and (B) in compliance with any other  applicable  requirements
         of Japanese law; and

                  (vii)  such  Placement  Agent  agrees  that,  at or  prior  to
         confirmation  of  sales  of the  Notes,  it  will  have  sent  to  each
         distributor,  dealer or person receiving a selling  concession,  fee or
         other  remuneration  that  purchases  any  Notes  from  it  during  the
         restricted  period  a  confirmation  or  notice  to  substantially  the
         following effect:

                           "The Notes  covered  hereby have not been  registered
                     under  the U.S.  Securities  Act of 1933  (the  "Securities
                     Act") and may not be  offered  and sold  within  the United
                     States  or to,  or for the  account  or  benefit  of,  U.S.
                     persons  (i) as part of their  distribution  at any time or
                     (ii)  otherwise  until  40  days  after  the  later  of the
                     commencement  of the offering and the closing date,  except
                     in either case in  accordance  with  Regulation  S (or Rule
                     144A, if available)  under the  Securities  Act. Terms used
                     above have the meaning given to them by Regulation S."

                  Terms used in this Section 6 have the  meanings  given to them
by Regulation S.

                  7. INDEMNIFICATION AND CONTRIBUTION.  (a) Each of GST Funding,
GST and GST USA agrees,  jointly and  severally,  to indemnify and hold harmless
each Placement Agent, and each person, if any, who controls such Placement Agent
within the meaning of either  Section 15 of the  Securities Act or Section 20 of
the Exchange Act, or is under common  control  with,  or is controlled  by, such
Placement  Agent,  from and  against  any and all  losses,  claims,  damages and
liabilities  (including,   without  limitation,  any  legal  or  other  expenses
reasonably incurred by any Placement Agent or any such controlling or affiliated

                                       15

<PAGE>

person in connection with defending or  investigating  any such action or claim)
caused by any untrue  statement or alleged  untrue  statement of a material fact
contained in either  Memorandum (as amended or  supplemented  if GST Funding and
GST shall have furnished any amendments or  supplements  thereto),  or caused by
any omission or alleged  omission to state therein a material fact  necessary to
make the statements therein in light of the circumstances  under which they were
made  not  misleading,  except  insofar  as  such  losses,  claims,  damages  or
liabilities  are caused by any such  untrue  statement  or  omission  or alleged
untrue  statement or omission based upon  information  relating to any Placement
Agent furnished to GST Funding or GST in writing by such Placement Agent through
you expressly for use therein.

                  (b) Each Placement Agent agrees, severally and not jointly, to
indemnify and hold harmless GST Funding, GST and GST USA, their directors, their
officers  and each person,  if any,  who  controls  GST Funding,  GST or GST USA
within the meaning of either  Section 15 of the  Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from GST Funding,
GST and GST USA to such Placement  Agent, but only with reference to information
relating to such Placement  Agent  furnished to GST Funding or GST in writing by
such Placement  Agent through you expressly for use in either  Memorandum or any
amendments or supplements thereto.

                  (c)  In  case  any  proceeding   (including  any  governmental
investigation)  shall be  instituted  involving  any  person in respect of which
indemnity may be sought pursuant to either subsection (a) or (b) of this Section
7, such  person  (the  "indemnified  party")  shall  promptly  notify the person
against whom such indemnity may be sought (the "indemnifying  party") in writing
and the indemnifying  party, upon request of the indemnified party, shall retain
counsel  reasonably  satisfactory  to the  indemnified  party to  represent  the
indemnified  party and any others the  indemnifying  party may designate in such
proceeding and shall pay the fees and  disbursements  of such counsel related to
such proceeding.  In any such proceeding,  any indemnified  party shall have the
right to retain its own counsel, but the fees and expenses of such counsel shall
be at the expense of such indemnified  party unless (i) the  indemnifying  party
and the  indemnified  party shall have mutually  agreed to the retention of such
counsel  or (ii)  the  named  parties  to any  such  proceeding  (including  any
impleaded parties) include both the indemnifying party and the indemnified party
and  representation  of both parties by the same counsel would be  inappropriate
due to actual or potential  differing  interests  between them. It is understood
that the  indemnifying  party shall not, in  connection  with any  proceeding or
related  proceedings  in the  same  jurisdiction,  be  liable  for the  fees and
expenses of more than one separate  firm (in addition to any local  counsel) for
all such  indemnified  parties  and that all  such  fees and  expenses  shall be
reimbursed  as they are  incurred.  Such firm shall be  designated in writing by
Morgan Stanley & Co. Incorporated in the case of parties indemnified pursuant to
subsection (a) above and by GST Funding,  GST and GST USA in the case of parties
indemnified  pursuant to subsection (b) above. The indemnifying  party shall not
be liable for any settlement of any proceeding effected without

                                       16

<PAGE>

its written  consent,  but if settled  with such  consent or if there be a final
judgment for the  plaintiff,  the  indemnifying  party  agrees to indemnify  the
indemnified  party  from and  against  any loss or  liability  by reason of such
settlement or judgment.  Notwithstanding the foregoing sentence,  if at any time
an indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel as contemplated by the second
and third sentences of this subsection (c), the  indemnifying  party agrees that
it shall be liable for any  settlement of any  proceeding  effected  without its
written  consent if (A) such  settlement is entered into more than 30 days after
receipt  by such  indemnifying  party  of the  aforesaid  request  and (B)  such
indemnifying party shall not have reimbursed the indemnified party in accordance
with such request prior to the date of such  settlement.  No indemnifying  party
shall,  without the prior written consent of the indemnified  party,  effect any
settlement  of any  pending  or  threatened  proceeding  in respect of which any
indemnified  party is or could have been a party and  indemnity  could have been
sought hereunder by such indemnified party,  unless such settlement  includes an
unconditional  release of such  indemnified  party from all  liability on claims
that are the subject matter of such proceeding.

                  (d)  To  the  extent  the  indemnification   provided  for  in
subsection (a) or (b) of this Section 7 is  unavailable to an indemnified  party
or insufficient in respect of any losses, claims,  damages or liabilities,  then
each  indemnifying  party under such  subsection,  in lieu of indemnifying  such
indemnified party thereunder,  shall contribute to the amount paid or payable by
such  indemnified  party  as  a  result  of  such  losses,  claims,  damages  or
liabilities  (i) in such  proportion as is  appropriate  to reflect the relative
benefits  received by GST  Funding,  GST and GST USA,  on the one hand,  and the
Placement  Agents,  on the other hand, from the offering of the Notes or (ii) if
the allocation  provided by clause (i) above is not permitted by applicable law,
in such  proportion as is appropriate to reflect not only the relative  benefits
referred to in clause (i) above but also the relative fault of GST Funding,  GST
and GST USA on the one  hand  and the  Placement  Agents  on the  other  hand in
connection  with the  statements  or  omissions  that  resulted in such  losses,
claims,  damages  or  liabilities,  as  well  as any  other  relevant  equitable
considerations.  The relative benefits received by GST Funding,  GST and GST USA
on the one hand and the Placement  Agents on the other hand in  connection  with
the  offering  of  the  Notes  shall  be  deemed  to be in the  same  respective
proportions as the net proceeds from the offering of the Notes (before deducting
expenses)  received by GST Funding,  GST and GST USA and the total discounts and
commissions  received by the  Placement  Agents in respect  thereof  bear to the
aggregate  offering price of the Notes.  The relative fault of GST Funding,  GST
and GST USA on the one hand and of the Placement  Agents on the other hand shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information  supplied by GST Funding, GST and GST USA
or by the Placement Agents and the parties' relative intent,  knowledge,  access
to information and opportunity to correct or prevent such statement or omission.
The Placement Agents' respective obligations to contribute pursuant to this

                                       17

<PAGE>

Section 7 are  several  in  proportion  to the  respective  principal  amount at
maturity of Notes they have purchased hereunder, and not joint.

                  (e) GST  Funding,  GST and GST USA, and the  Placement  Agents
agree that it would not be just or  equitable if  contribution  pursuant to this
Section 7 were determined by PRO RATA allocation  (even if the Placement  Agents
were  treated  as one  entity  for  such  purpose)  or by any  other  method  of
allocation that does not take account of the equitable  considerations  referred
to in  subsection  (d) of this  Section  7. The  amount  paid or  payable  by an
indemnified  party as a result of the losses,  claims,  damages and  liabilities
referred  to in  subsection  (d) of this  Section 7 shall be deemed to  include,
subject  to the  limitations  set  forth  above,  any  legal or  other  expenses
reasonably  incurred by such indemnified party in connection with  investigating
or defending any such action or claim.  Notwithstanding  the  provisions of this
Section 7, no  Placement  Agent shall be required  to  contribute  any amount in
excess of the amount by which the total price at which the Notes resold by it in
the initial  placement of the Notes were offered to investors exceeds the amount
of any damages that such  Placement  Agent has otherwise been required to pay by
reason of such  untrue or  alleged  untrue  statement  or  omission  or  alleged
omission. No person guilty of fraudulent  misrepresentation  (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to  contribution  from
any  person  who  was  not  guilty  of such  fraudulent  misrepresentation.  The
indemnity  and  contribution  provisions  contained  in this  Section  7 and the
representations and warranties of GST Funding, GST and GST USA and the Placement
Agents  contained in this Agreement shall remain operative and in full force and
effect   regardless  of  (i)  any  termination  of  this  Agreement,   (ii)  any
investigation  made  by or on  behalf  of the  Placement  Agents  or any  person
controlling the Placement  Agents or by or on behalf of GST Funding,  GST or GST
USA, their officers or directors or any person  controlling GST Funding,  GST or
GST USA and (iii)  acceptance of and payment for any of the Notes.  The remedies
provided for in this Section 7 are not  exclusive and shall not limit any rights
or remedies which may otherwise be available to any indemnified  party at law or
in equity.

                  8. TERMINATION. This Agreement shall be subject to termination
by notice  given by you to GST Funding and GST, if (a) after the  execution  and
delivery of this  Agreement and prior to the Closing Date (i) trading  generally
shall have been  suspended or  materially  limited on or by, as the case may be,
any of the New York Stock Exchange,  the American Stock  Exchange,  the National
Association of Securities Dealers,  Inc., the Chicago Board of Options Exchange,
the Chicago  Mercantile  Exchange,  the Chicago  Board of Trade or the Vancouver
Stock  Exchange,  (ii) trading of any securities of GST Funding,  GST or GST USA
shall have been  suspended  on any exchange or in any  over-the-counter  market,
(iii) a general  moratorium on commercial  banking  activities in New York shall
have been declared by either Federal or New York State authorities or (iv) there
shall have occurred any outbreak or escalation of  hostilities  or any change in
financial markets or any calamity or crisis that, in your judgment,  is material
and adverse and (b) in the case of any of the events

                                       18

<PAGE>

specified in clauses (a)(i) through (iv),  such event  individually  or together
with any other such event makes it, in your  judgment,  impracticable  to market
the Notes on the terms and in the manner contemplated in the Final Memorandum.

                  9.  MISCELLANEOUS.  (a)  If,  on the  Closing  Date,  any  one
Placement  Agent  shall  fail or  refuse  to  purchase  Notes  that it agreed to
purchase  hereunder on such date,  and the principal  amount of Notes which such
defaulting  Placement Agent agreed but failed or refused to purchase is not more
than  one-tenth  of the total  principal  amount of the Notes to be purchased on
such date, the other  Placement  Agents shall be obligated to purchase the Notes
which such  defaulting  Placement Agent agreed but failed or refused to purchase
on such date; PROVIDED that in no event shall the principal amount of Notes that
any  Placement  Agent has agreed to purchase  pursuant to Section 3 be increased
pursuant to this Section 9 by an amount in excess of one-ninth of such principal
amount of Notes without the written consent of such Placement  Agent. If, on the
Closing Date any  Placement  Agent or  Placement  Agents shall fail or refuse to
purchase  Notes which it or they have agreed to purchase  hereunder on such date
and the principal  amount of Notes with respect to which such default  occurs is
more than  one-tenth  of the  principal  amount of Notes to be purchased on such
date  and  arrangements  satisfactory  to you  and GST  Funding  and GST for the
purchase  of such Notes are not made within 36 hours  after such  default,  this
Agreement shall terminate  without  liability on the part of any  non-defaulting
Placement Agent or of GST Funding,  GST and GST USA. In any such case either you
or GST Funding and GST shall have the right to postpone the Closing Date, but in
no event for longer than seven days, in order that the required changes, if any,
in the  Final  Memorandum  or in any  other  documents  or  arrangements  may be
effected.  Any  action  taken  under  this  subsection  shall  not  relieve  any
defaulting  Placement  Agent from  liability  in respect of any  default of such
Placement Agent under this Agreement.

                  This  Agreement  may be signed in any number of  counterparts,
each of which shall be an  original,  with the same effect as if the  signatures
thereto and hereto were upon the same instrument.

                  (b) If this  Agreement  shall be  terminated  by the Placement
Agents,  or any of them,  because  of any  failure or refusal on the part of GST
Funding,  GST or GST USA to  comply  with  the  terms or to  fulfill  any of the
conditions of this Agreement,  or if for any reason GST Funding,  GST or GST USA
shall be unable to perform its obligations  under this  Agreement,  GST Funding,
GST and GST USA will reimburse such Placement  Agents as have so terminated this
Agreement with respect to themselves,  severally, for all out-of-pocket expenses
(including the fees and disbursements of their counsel)  reasonably  incurred by
such  Placement  Agents  in  connection  with  this  Agreement  or the  offering
contemplated hereunder.

                  (c)  Each  of  GST  Funding,  GST,  and  GST  USA  hereby  (i)
acknowledges  that it has irrevocably  designated and appointed  Olshan Grundman
Frome & Rosenzweig

                                       19

<PAGE>

LLP, 505 Park Avenue,  New York, New York 10022,  Attention:  David Adler,  Esq.
(together with any successor, the "Process Agent"), as its authorized agent upon
which process may be served in any suit, action or proceeding  arising out of or
relating  to  this  Agreement  or  the  transactions  contemplated  herein,  the
Indenture, the Registration Rights Agreement, the Pledge Agreement, the Notes or
the Note  Guarantee  that may be instituted in any federal or state court in the
State of New York,  or brought  under  federal  or state  securities  laws,  and
acknowledges that the Process Agent has accepted such  designation,  (ii) agrees
that  service of  process  upon the  Process  Agent and  written  notice of such
service to GST Funding,  GST or GST USA, as the case may be (mailed or delivered
to GST's Chief Executive Officer at GST's principal office at 4317 N.E. Thurston
Way,  Vancouver,  Washington 98662),  shall be deemed in every respect effective
service of process upon GST Funding,  GST or GST USA, as the case may be, in any
suit,  action  or  proceeding  and  (iii)  agrees  to take  any and all  action,
including the execution and filing of any and all such documents and instruments
as may be necessary to continue such  designation and appointment of the Process
Agent in full force and effect so long as any of the Notes shall be outstanding.
Each of GST Funding, GST and GST USA hereby agrees to submit to the nonexclusive
jurisdiction  of any federal or state court in the State of New York in any such
suit,  action or proceeding  arising out of or relating to this Agreement or the
transactions   contemplated  herein,  the  Indenture,  the  Registration  Rights
Agreement, the Pledge Agreement, the Notes or the Note Guarantee.

                  (d) To the extent  that GST has or  hereafter  may acquire any
immunity  from  jurisdiction  of any  court or from any legal  process  (whether
through service of notice,  attachment  prior to judgment,  attachment in aid of
execution  or  otherwise)  with  respect  to itself or its  property,  it hereby
irrevocably  waives  such  immunity  in  respect of its  obligations  under this
Agreement,  the  Indenture,  the  Registration  Rights  Agreement  or  the  Note
Guarantee, to the extent permitted by law.

                  (e) This  Agreement  shall be  governed  by and  construed  in
accordance with the laws of the State of New York.

                  (f) The headings of the sections of this  Agreement  have been
inserted for  convenience  of  reference  only and shall not be deemed a part of
this Agreement.

                  (g) Any notice  required or  permitted  to be given  hereunder
shall be given in writing and shall be deemed effective three days after deposit
in the United States mail (certified or registered,  return receipt  requested),
postage prepaid, or when received if personally delivered, addressed as follows:

                                       20

<PAGE>

To the Placement Agents:                    To GST Funding, GST or GST USA:

         Morgan Stanley & Co.               GST Telecommunications, Inc.
         Incorporated                       4317 N.E. Thurston Way
         1585 Broadway                      Vancouver, Washington  98662
         New York, New York  10036          Attention:  Chief Executive Officer
         Attention:  James Avery

         with a copy to:                    with a copy to:

         Shearman & Sterling                Olshan Grundman Frome &
         599 Lexington Avenue               Rosenzweig LLP
         New York, New York  10022          505 Park Avenue
         Attention:  Jerry V. Elliott, Esq. New York, New York  10022-1170

                                            Attention:  Stephen Irwin, Esq.

or to such other address of which written notice is given to the other.

                                       21

<PAGE>

                  Please  confirm your  agreement to the foregoing by signing in
the space  provided  below for that  purpose and  returning to us a copy hereof,
whereupon this Agreement shall constitute a binding agreement between us.


                                    Very truly yours,

                                    GST EQUIPMENT FUNDING, INC.

                                    By:  /S/ STEPHEN IRWIN
                                         ------------------------------------
                                         Name: Stephen Irwin
                                         Title: Senior Vice President

                                    GST TELECOMMUNICATIONS, INC.

                                    By:  /S/ STEPHEN IRWIN
                                         ------------------------------------
                                         Name: Stephen Irwin
                                         Title: Senior Vice President

                                    GST USA, INC.

                                    By:  /S/ STEPHEN IRWIN
                                         ------------------------------------
                                         Name: Stephen Irwin
                                         Title: Senior Vice President

Agreed as of the date first above written

MORGAN STANLEY & CO. INCORPORATED

Acting severally on behalf of itself
and the several Placement Agents named
herein.

By Morgan Stanley & Co. Incorporated

By: /S/ JAMES AVERY
    --------------------------
    Name: James Avery
    Title: Vice President


<PAGE>

                                   SCHEDULE I

                                                   Principal Amount
                PLACEMENT AGENT                    TO BE PURCHASED
                ---------------                    ---------------

Morgan Stanley & Co. Incorporated..............   $206,700,000
Dillon, Read & Co. Inc.........................   $  45,050,000
TD Securities (USA) Inc........................   $  13,250,000


                         Total.................   $265,000,000
                                                  ============



<PAGE>

                                   SCHEDULE II

                             Specified Subsidiaries


GST Telecom Inc., a Delaware corporation

GST Pacific Lightwave, Inc., a Washington corporation

GST Pacwest Telecom Hawaii Incorporated, a Hawaii corporation

GST Telecom Hawaii, Inc., a Hawaii corporation

GST Tucson Lightwave, Inc., an Arizona corporation

GST Telecom New Mexico, Inc., a New Mexico corporation

GST Telecom California, Inc., a Delaware corporation

NACT Telecommunications, Inc., a Delaware corporation

Wasatch International Network Services, Inc., a Utah corporation

GST Net, Inc., a Delaware corporation

International Telemanagement Group, Inc., an Ohio corporation

TotalNet Communications, Inc., a Texas corporation

GST Call America, Inc., a California corporation

GST USA, Inc., a Delaware corporation

Tri Star Residential Communications Corp., a Washington corporation

GST EquipCo, Inc., a Washington corporation

GST Internet, Inc., a Delaware corporation