Document:

<PAGE>

                                                                 Exhibit 10.30

Supply Contract No. 22-1078 of 1999

Parties

The parties to this Supply Contract No. 22-1078 dated as of 30 December 1999
(the "Effective Date") are:

"iBasis, Inc.", a company incorporated under the laws of the state of Delaware,
United States of America, with registered offices at 20 Second Avenue,
Burlington, MA 01803 USA, U.S. Taxpayer Identification No. 04-3332534,
hereinafter referred to as Customer, duly represented by Ofer Gneezy, in his
capacity as Chief Executive Officer ("CEO")

and

"Belle Systems A/S", a company incorporated under the laws of Denmark, whose
registered office is situated at Ahlgade 3, 4300 Holbaek, VAT No. DK 15 99 09
88, hereinafter referred to as Supplier, duly represented by Hasse Rasmussen, in
his capacity as CEO,

(each, a "Party"; together, the "Parties").

Acceptance of Terms

Supplier licenses the System (hereinafter defined) to Customer on the terms and
conditions set forth herein, which terms and conditions each Party shall be
deemed to accept by execution of this Contract.

Article 1 Definitions

In this Contract the following words and expressions shall have the meanings
hereby assigned to them, except where otherwise expressly defined:

"Active User" means a voice debit card in the IMS Master Database after it has
been activated and before it has expired;

"Additional Software and/or Hardware" mean the SilverStream products and any
other software and/or hardware listed in Enclosure 2;

"Confidential Technical Information" means without limitation; any and all
technical information disclosed to Supplier by or on behalf of Customer, whether
prior to or after the date of this Contract whether communicated orally, in
writing or in any other recorded form including without limitation, all
technical and other information data, designs, and software;

"Day" means calendar day;

"Enclosure(s)" means any and all of the Enclosures listed in Article 19 herein;
"Error" means a deficiency or bug in or a malfunction of the System;

"Error List" means a complete listing of all deficiencies, bugs, malfunctions or
errors occurring in the System as reported by Customer;

"Force Majeure Event" means any circumstance neither foreseeable at the date of
this Contract nor within the reasonable control of the Party in question
including, without limitation, governmental actions; actions of any public
authority, civil commotion or disorder, riot, invasion, war, threat of war, or
preparation for war, fire, explosion, storm, flood, earthquake, epidemic or
other natural physical disaster;

"IMS" means the Internet Management System as defined in the IMS Description,
which may be amended from time to time when Supplier releases a new Version;

"Intellectual Property Rights" means any and all patents, copyrights, registered
designs, design rights, trade marks, trade names, service marks, know how and
any other industrial or intellectual property rights subsisting in the System;
<PAGE>

"IP" means Internet Protocol;

"Logical Bombs" means built-in or use-driven destructive mechanisms, injurious
or damaging algorithms, time bombs, or other software that is created to destroy
any of Customer's data or other software, other than licence keys that limit
Customer's access to the functionality of the software for which a licence fee
is paid;

"Master Database" means the database maintained by Customer in respect of the
Customer's customers, accounting information and network configuration for the
System;

"System" means IMS plus any Additional Software and/or Hardware as defined in
Enclosures 1 and 2;

"System Delivery" means delivery of the System to Customer's place of business;

"Total Contract Price" means all monies paid by the Customer to the Supplier
pursuant to this Contract;

"VoIP" means Voice over IP as provided for via IMS;

"Warranty Period" means one (1) year starting from 1 January 2000;

"writing" means any hand-written, type-written, or printed communication,
including telegram, telex and telefax (but not including electronic
communication).

In this Contract:

            (a) any reference to one gender shall include all genders;

            (b) the singular includes the plural and vice versa;

            (c) any reference to a person shall include natural persons and
            partnerships, firms and other such unincorporated bodies and all
            other legal persons of whatever kind and however constituted;

            (d) any reference in this Contract to any statutory decree or
            statutory instrument or other regulation having the force of law
            shall be deemed to include any lawful modification thereto or
            re-enactments thereof, made after the Effective Date;

            (e) article headings and the list of contents are for reference only
            and shall not effect the interpretation of this Contract and
            references to Articles, and Enclosures are references to articles
            and enclosures (respectively of this Contract);

            (f) each of the Enclosures shall have effect as if set out in this
            Contract, and in the event of any conflict between the Enclosures
            and the Contract, the terms, conditions and provisions of the
            Contract shall prevail.

Article 2 Scope of the Contract

Supplier shall supply, deliver and install the System and shall licence Customer
to use the System with VoIP only, with no more than 100,000 Active Users and no
more than one Master Database in accordance with the terms, conditions and
provisions set forth herein. The System shall include prepaid and postpaid
capabilities for VoIP, while wholesale for VoIP shall be governed by a seperate
contract.

Should the number of Active Users exceed 100,000, Customer shall pay an
additional license fee according to the Price List and Payment Terms.

Article 3 IMS Description

The IMS Description shall be as set out in Enclosure 1.

Customer shall, where requested to do so by Supplier, without undue delay supply
all further information reasonably requested by Supplier to assist Supplier in
preparation of the System for Customer's specific requirements.

Supplier shall, on receipt of such further information requested by it, notify
Customer of any proposed amendments to the IMS Description, which amendments
shall be effective when approved by Customer in writing.
<PAGE>

Article 4 Licenses

Supplier shall provide Customer with a perpetual, non-transferable, not
re-sellable, and non-exclusive right to use IMS according to the terms,
conditions and provisions of the Belle Systems' standard Software license
Agreement (contained in Enclosure 1), subject to the proviso that where any
term, condition or provision of the Belle Systems standard Software license
Agreement conflicts with this Contract, the terms of this Contract shall
prevail.

Customer gains no title to IMS and acknowledges that all Intellectual Property
Rights and or any other rights to the software and the associated documentation
remain the property of Supplier.

Supplier certifies that its know-how and the equipment and software to be
supplied do not constitute any infringement of any Intellectual Property Rights
belonging to third parties, subject to the relevant provisions in this Contract
relating to the use of third party software (as set out in Enclosure 2).

Supplier does not own the Intellectual Property Rights in the Additional
Software and/or Hardware, which is sublicensed to Customer on the terms set out
in Enclosure 2, and on signature of this Contract, Customer shall be deemed to
have accepted those third party licence terms. Customer hereby agrees to
indemnify Supplier in full against all claims, costs, demands, losses and
expenses (including all legal expenses on a full indemnity basis) incurred by
Supplier as a result of any direct or indirect breach by Customer of the terms,
conditions and provisions of the licence to the Customer of any Additional
Software and/or Hardware.

Article 5 Change Management

Should Customer request that Supplier provide assistance that is outside the
scope of assistance to which Customer is entitled under this Contract or under
any other agreement between Customer and Supplier (the "Extra Assistance")
Supplier shall provide Customer with a quotation for the price of and time
required to provide such Extra Assistance, which price and time shall be
reasonable in light of the Extra Assistance requested and shall not exceed the
lowest prices charged by Supplier to any other customer for the delivery of like
quantities of the same or similar assistance.

Supplier shall use its best endeavours to provide such Extra Assistance but
shall not in any circumstances be bound to do so

Article 6 Warranty

Provided that Supplier has delivered and installed INS, Supplier warrants for
the duration of the Warranty Period that the System as a whole shall perform
substantially in accordance with the specifications of Enclosures 1 and 2.

Supplier's sole and exclusive obligation under this warranty shall be to
exercise commercially reasonable efforts to implement appropriate error
corrections in response to Customer's reports of errors within the Warranty
Period. Product support via the telephone is not included in this warranty. If
Customer so wishes, a supplementary contract concerning product support via the
telephone could be concluded.

Supplier represents and warrants that the prices for each product or service
provided or to be provided by Supplier to Customer under this Contract will not
exceed the lowest prices offered by Supplier to any of its customers for the
delivery of the same or similar products (in equal or lesser quantities) or
services. If Supplier does offer to another customer prices that are lower than
those in this Contract for the delivery of the same or similar products (in
equal or lesser quantities) or services, Supplier shall, within fifteen (15)
days after such offer, reinvoice Customer at the reduced price or rebate to
Customer the amount by which the amount paid exceeds the reduced price, as
applicable.

However, it should be noted that the above MFN clause only is valid for Voice
over IP products.

Supplier further guarantees that as at the date of delivery, the System is free
from viruses, Trojan Horses and Logical Bombs.
<PAGE>

The express terms of this Contract are in lieu of all warranties, conditions,
terms, undertakings and obligations implied by statute, common 1aw, custom,
trade usage, course of dealing or otherwise, all of which are hereby excluded to
the fullest extent permitted by law.

Article 7 Service and Support Contract

The Service and Support Contract at Enclosure 3 shall be effective upon System
Delivery. Supplier shall perform general service and support of the System
according to the terms, conditions and provisions of the Service and Support
Contract.

Article 8 Documentation

Supplier shall deliver to Customer the documentation as set out in Enclosure 4
(the "System Documentation"). All System Documentation shall be in English.

Article 9 Delivery and Acceptance

System Delivery and installation will take place in accordance with the dates
specified in the Time Schedule, Enclosure 5.

Within the Test Period (as defined in Enclosure 5) Customer shall test and
examine the System and report in writing any Errors in the System to Supplier as
soon as reasonably possible. Within or immediately following termination of the
Test Period, Customer shall either (i) provide Supplier with written
notification that the System has been accepted, or (ii) provide Supplier with
written notification that the System has been rejected and specify with
reasonable particularity the reasons for rejection, subject to the proviso that
if, notwithstanding certain Errors, the System substantially conforms to the
System Description, then Customer will not reject the System and Supplier will
use its best endeavours to correct the reported Errors without undue delay.
Should Customer fail to provide Supplier with any written notification Customer
shall be deemed to have accepted the System.

If Customer rejects the System, Supplier shall re-deliver a conforming System
within the applicable Repair Period (as defined in the Time Schedule), such
Repair Period commencing upon receipt of notice from Customer of
nonconformities, which will be no later than termination of the Test Period.
Upon re-delivery, Customer shall re-test the System during a period equal to the
Test Period. If Customer accepts the System, it shall so notify Supplier in
writing.

If Customer rejects the System a second time, Supplier shall for the second time
re-deliver a conforming System within the applicable Repair Period, commencing
upon receipt of notice from Customer of nonconformities. Upon re-delivery,
Customer shall for the second time re-test the System during a period equal to
the Test Period. If at the end of such period Customer accepts the System,
Customer shall so notify Supplier in writing. If at the end of such period the
System does not substantially conform to the System Description, Customer may
(i) terminate this Contract and, upon return or destruction of the System and
System Documentation, obtain a full refund of all amounts paid to Supplier in
respect of the Contract, or (ii) afford Supplier (a) further Repair Period(s),
each one to be followed by a period equal to or greater than the Test Period,
insofar as it elects to do so before accepting the System or terminating this
Contract in accordance with this Article 9.

During the Repair Period(s) Supplier shall test the System as needed to correct
the Errors identified, so long as such testing does not interfere with the
business of Customer, and Customer shall take all reasonable steps to assist
Supplier with such testing.

System Acceptance shall be subject to the proviso that System Acceptance
notwithstanding nonconformities (material or otherwise) in the System or System
Documentation shall not relieve Supplier of the obligation to cure such
nonconformities as promptly as possible after the nonconformity has been brought
to the attention of Supplier.

Under all circumstances the System is considered to be accepted in the event
that Customer wholly or partially sets the System in production and uses it as
part of its commercial activities.
<PAGE>

Article 10 Prices and Terms of Payment

In consideration of the Supplier supplying the System to the Customer in
accordance with the dates specified in the Time Schedule, as amended by the
Parties from time to time, and provided that the System substantially conforms
with the System Description, the Customer shall pay the Total Contract Price.

In the event that Supplier falls to supply Customer with substantially all of
the features identified in the System Description in accordance with the dates
specified in the Time Schedule, as amended by the Parties from time to time,
Customer's payment obligations under this Contract shall cease to accrue for so
long, as Supplier fails to meet its supply obligations.

The prices and terms of payment are set out in Enclosure 6.

The Supplier reserves the right to request details of the Customer's financial
status. Where, following submission of such information by the Customer, the
Supplier, in its sole discretion (acting reasonably) considers it appropriate,
the Supplier reserves the right to require that the Customer arranges the supply
of a third party guarantee of the Customer's obligations under this Contract.

Article 11 Changes and Modifications of the System

In the event that (i) without the prior written consent of Supplier, Customer
allows any person other than Supplier to directly or indirectly change or modify
the System (the "Unauthorized Changes"), and (ii) those Unauthorized Changes
seriously influence the proper functions of the System, then Supplier shall be
released from its warranty that the System substantially conforms to the System
Description. Changes caused by ordinary user input to the System shall in no
event be Unauthorised Changes.

Supplier's warranty that the System substantially conforms to the System
Description will recommence when and if Customer arranges for the Unauthorised
Changes to be reversed to the satisfaction of Supplier, subject to the proviso
that before such warranty recommences Supplier may (i) test or require Customer
to test the System to verify that the Unauthorised Changes have been reversed
and (ii) charge Customer a reasonable fee for such testing.

Should Customer request Supplier to change, modify or enhance the System in ways
that, if implemented, would prevent Supplier from performing its obligations
under this Contract, Supplier shall inform Customer as soon as possible after
receipt of Customer's request Should Customer then uphold the request Supplier
shall be released from its obligations under this Contract to the extent
reasonable considering the changes, modifications or enhancements.

Where Customer supplies Confidential Technical Information or any other required
information (together the "Information") to Supplier pursuant to Contract No.
22-1078, on which Supplier will rely in tailoring the IMS or any other product
to Customer's requirements, Customer warrants that such Information is, to the
best of its knowledge and reasonable belief, accurate in all respects. Customer
hereby waives in full any claim, which it may have against Supplier for breach
of contract to the extent that such breach results from Suppliers reliance on
any Information supplied by Customer to Supplier.

Article 12 Contact Persons

Customer shall designate, via written notice to Supplier, one member of its
senior management group as its primary point of contact (the "Primary Contact
Person") with the Supplier and one or more members of its systems group as (a)
secondary point(s) of contact (the "Secondary Contact Person(s)") (together, the
"Contact Persons"). Customer shall inform Supplier immediately in writing in the
event of a change in Contact Persons. The Contact Persons will handle the future
communication in relation to the subject of this Contract, notwithstanding the
fact that no modification to this Contract shall be effective in the absence of
a written amendment

Supplementary information and information about the Contact Person or Persons is
found in the Project Manual, Enclosure 7.
<PAGE>

Article 13 Limitation of Liability

Supplier shall indemnify Customer and keep Customer fully and effectively
indemnified on demand against any loss of or damage to any property or injury to
or death of any person caused by any negligent act or omission or wilful
misconduct of Supplier, its employees, agents or sub-contractors.

Supplier shall indemnify Customer to the same extent that Supplier receives
indemnification from SilverStream and Oracle, who as of the Effective Date are
the two suppliers of the Additional Software.

Customer shall indemnify Supplier and keep Supplier fully and effectively
indemnified on demand against any loss of or damage to any property or injury to
or death of any person caused by any negligent act or omission or wilful
misconduct of Customer, its employees, agents or sub-contractors.

Except in respect of injury to or death of any person (for which no limit
applies), breach of the Non-Disclosure Agreement, and infringement of any
third-party patent, copyright, trademark, industrial design or other
intellectual property or privacy right, the respective liability of Supplier and
Customer under paragraphs (1) and (2) above of this Article 13 in respect of
each event or series of connected events shall not exceed 150 per cent. of the
Total Contract Price.

Notwithstanding anything else contained in this Contract, Supplier shall not be
liable to Customer for loss of profits, business interruptions, loss of business
information or contracts or other indirect or consequential loss whether arising
from negligence, breach of contract or howsoever.

Supplier shall not be liable to Customer for any loss arising out of any failure
by Customer to keep full and up-to-date security copies of the computer programs
and data it uses in accordance with best computing practice.

To receive the benefit of indemnification under this Article 13, the party
seeking indemnification must promptly notify the other party in writing of a
claim or suit and provide reasonable cooperation (at the indemnifying party's
expense) and tender to the indemnifying party (and its insurer) full authority
to defend or settle the claim or suit. Neither party has any obligation to
indemnify the other party in connection with any settlement made without the
indemnifying party's written consent. The party seeking indemnification has the
right to participate at its own expense in the claim or suit and in selecting
counsel therefor. The party seeking indemnification shall cooperate with
indemnifying party (and its insurer), as reasonably requested, at indemnifying
party's cost and expense.

Article 14 Force Majeure

A Party shall not be liable for a failure to perform any of his obligations to
the extent that he proves that the failure was due to a Force Majeure Event.

A Party seeking relief shall, as soon as practicable after the impediment and
its effects upon his ability to perform became known to him, give notice to the
other Party of the Force Majeure Event and its effects upon his ability to
perform. Notice shall also be given when the ground of relief ceases.

Should such an impediment have been effective for more than ninety (90) Days,
then the Party whose performance is not affected by the Force Majeure Event is
entitled to terminate the Contract.

Article 15 Non-Disclosure

The Parties agree to comply with their obligations under the Non-Disclosure
Agreement, Enclosure 8. The obligations as to confidentiality shall survive any
termination of this Contract

Article 16 Source Materials Escrow

The source code to IMS including the corresponding documentation will, subject
to the parties entering into a separate escrow agreement, be deposited with an
escrow agent chosen by Supplier, but this shall be at Customer's expense.
<PAGE>

Article 17 Entire Agreement

This Contract together with the Enclosures constitutes the entire agreement and
understanding between the Parties and supersedes any and all previous
agreements, warranties, representations or statements made between the Parties
relating to the subject matter of this Contract.

The Parties acknowledge and agree that in entering into this Contract they do
not rely on and shall have no remedy in respect of any statement,
representation, warranty or understanding (whether negligently or innocently
made) of any person (whether a Party to this Contract or not) other than as
expressly set out in this Contract.

Nothing in this Article shall, however, operate to limit or exclude any
liability for fraud.

Article 18 Applicable Law and Jurisdiction

This Contract shall be governed by and construed in accordance with English Law.

All disputes arising out of or in connection with the present Contract shall be
finally settled under the Rules of Arbitration of the International Chamber of
Commerce by one or more arbitrators appointed in accordance with the said Rules.

The arbitration proceedings will take place in London and will be conducted in
the English language and the award shall be in English.

Article 19 Miscellaneous

Supplier understands and agrees that (i) the System licensed to Customer under
this Contract is critical to Customer's operations and that under no
circumstances may Supplier seek to cancel or otherwise limit or terminate
Customer's access to use the System or Customer's access to any warranty or
Service and Support services; and (ii) Supplier's sole and exclusive remedy for
any breach of this Contract by Customer is limited to money damages. Supplier
hereby waives its right to seek injunctive relief against Customer in connection
with any such breach that has the effect of interrupting Customer's access to
any product or service; provided, nothing contained herein shall prohibit either
Party from obtaining injunctive relief with respect to unauthorised disclosure
of confidential information. However, should Customer fail to the entire amount
of any invoice of Supplier on or before the 9Oth day after such amount is due
and payable under the Parties' ordinary payment terms, and should Supplier's
Chief Financial Officer ("CFO") send to Customer's CFO two (2) or more demand
letters with respect to such invoice during or after such ninety (90) days, then
unless such invoice is subject to a bona fide dispute between Customer and
Supplier, the above limitation of Supplier's remedies shall not apply, i.e.
Supplier shall e.g. be allowed to discontinue any and all Service and Support
services.

No forbearance, delay or granting of time by either party in or before enforcing
this Contract shall operate as a waiver of that party's rights under this
Contract nor shall operate to bar the enforcement or exercise of that party's
rights under this Contract.

Any waiver or amendment of any term, condition or provision of this Contract
shall only be effective if made in writing and signed by or on behalf of both
parties. Any such waiver or amendment shall not be construed as a waiver or
amendment of any other term, condition or provisions of this Contract.

The illegality, invalidity or unenforceability of any terms, conditions or
provisions of this Contract shall not affect the legality, validity or
enforceability of the remaining terms, conditions and provisions. If any terms,
conditions or provisions are found by any competent court, arbitrator or
authority to be illegal, invalid or unenforceable the parties agree that they
will substitute provisions in a form as similar to the offending provisions as
is possible without rendering them illegal, invalid or unenforceable.

The rights and remedies of each party under this Contract are cumulative and
shall not operate to exclude any rights or remedies provided by law or
otherwise.

All sums payable by Customer under this Contract shall be paid free and clear of
any deductions, withholdings, set offs or counter claims whatsoever.
<PAGE>

Only express modifications to this Contract that are made in writing and signed
by both parties will be binding.

Save as expressly provided in this Contract, neither party shall assign or
otherwise transfer this Contract or any of its rights and obligations under it
whether in whole or in part without the prior written consent of the other,
except that Customer may assign its rights hereunder without the consent of
Supplier in the event of a sale of substantially all the line of business for
which Customer acquired the system, irrespective of whether the sale or transfer
occurs by way of change of control, sale of substantially all the assets, sale
of stock or merger.

Article 20 Notices

Any notice, notification, demand or other communication required, or which may
be given unless otherwise specifically provided for in this Contract, shall be
in writing, in English, and shall be given or made by confirmed facsimile or
similar electronic communication, by certified mail, return receipt requested or
by an overnight courier service which provides the sender with written record of
delivery, and shall be addressed to the respective parties as follows:

To Customer            Michael Hughes
                       Chief Financial Officer

To Supplier            Anders Tang Christensen
                       Chief Financial Officer

The notice, notification, demand or other communication shall be deemed to have
been given or made on the confirmation date. The above addresses may be changed
at any time by giving written notice in accordance with the terms of this
Article.

Article 21 List of Enclosures

Enclosure 1 -- IMS Description
Enclosure 2 -- Additional Software and/or Hardware
Enclosure 3 -- Service and Support Contract
Enclosure 4 -- Documentation
Enclosure 5 -- Time Schedule
Enclosure 6 -- Prices and terms of payment
Enclosure 7 -- Project Manual
Enclosure 8 -- Non-Disclosure Agreement
Enclosure 9 -- Memorandum of Understanding (when executed and effective)
Enclosure 10 -- Millenium Warranty Certificate

This Contract is to be executed in two (2) counterparts each of which when taken
together shall constitute one Contract.

For Customer                                For Supplier

_____ December 1999                         30 December 1999

/s/ Ofer Gneezy                             /s/ Hasse Rasmussen, CEO
------------------------------              ------------------------------

Ofer Gneezy, CEO                            Hasse Rasmussen, CEO<PAGE>

                                                                    Exhibit 10.4

                     Dated ____________________________ 1999

                       (1) FLAG ATLANTIC HOLDINGS LIMITED

                      (2) GTS TRANSATLANTIC HOLDINGS, LTD.

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

                     FURTHER RESTATED SHAREHOLDERS AGREEMENT

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

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

  Confidential Treatment has been requested with respect to the portions of
this agreement marked with three asterisks (***) and the redacted material
has been filed separately with the Securities and Exchange Commission.

<PAGE>

<TABLE>
<CAPTION>

                                TABLE OF CONTENTS

<S>  <C>                                                                                                <C>
1.    DEFINITIONS AND CONSTRUCTION.......................................................................1
2.    PURPOSE............................................................................................5
3.    INCORPORATION,  CAPITALIZATION AND COMPLETION......................................................5
4.    GOVERNANCE........................................................................................10
5.    TRANSFER OF SHARES................................................................................14
6.    CONSTRUCTION OF THE SYSTEM........................................................................17
7.    CAPACITY PURCHASE.................................................................................18
8.    SYSTEM MARKETING..................................................................................21
9.    DIVIDEND AND INVESTMENT POLICIES..................................................................22
10.   AUDITORS AND ACCOUNTS.............................................................................23
11.   DEADLOCK..........................................................................................24
12.   BUSINESS PLAN.....................................................................................26
13.   BUSINESS PRACTICES................................................................................27
14.   TERM AND TERMINATION..............................................................................28
15.   CONFIDENTIALITY...................................................................................31
16.   PROPRIETARY RIGHTS................................................................................32
17.   MUTUAL CO-OPERATION...............................................................................33
18.   RESTRICTIONS ON ANNOUNCEMENTS.....................................................................34
19.   NO PARTNERSHIP....................................................................................34
20.   REMEDIES..........................................................................................34
21.   REPRESENTATIONS AND WARRANTIES....................................................................35
22.   ASSIGNMENT........................................................................................35
23.   ENTIRE AGREEMENT..................................................................................36
</TABLE>

<PAGE>

<TABLE>

<S>   <C>                                                                                              <C>
24.   VARIATION.........................................................................................36
25.   NOTICES...........................................................................................36
26.   WAIVER............................................................................................38
27.   GOVERNING LAW AND DISPUTE RESOLUTION..............................................................38
28.   SEVERABILITY......................................................................................39
29.   SURVIVAL..........................................................................................39
</TABLE>

                                     ANNEXES

Annex 1  -........Description of System

Annex 2  -........Terms For Customer Marketing Agreement

Annex 3  -........Form of Capacity Right of Use Agreement

Annex 4  -........Technical Specifications for Subsea Element

Annex 5  -........Technical Specifications for Backhaul Elements

Annex 6  -........Key Commercial Terms

Annex 7  -........Code of Business Conduct

Annex 8  -........Arbitration Agreement

<PAGE>

                         RESTATED SHAREHOLDERS AGREEMENT

THIS AGREEMENT is made the ____ day of ___________________ 1999, by and between
FLAG Atlantic Holdings Limited, a company incorporated in Bermuda ("FLAG") and
GTS TransAtlantic Holdings, Ltd., a company incorporated in Bermuda ("GTS" and
together with FLAG the "Shareholders").

                                   WITNESSETH:

WHEREAS, the Shareholders wish to participate in the construction, ownership and
commercial exploitation of a transatlantic cable system as described in Annex 1
hereto (as it may be amended from time to time) (the "System") and for such
purpose have established a joint venture company in Bermuda with the name of
FLAG Atlantic Limited (the "Company"); and

WHEREAS, the Shareholders executed a Shareholders Agreement dated 12 January
1999 which sets forth the terms on which the Company will be capitalized and
managed and defines the Shareholders respective rights and obligations as
shareholders of the Company, which Shareholders Agreement was restated in its
entirety on 8 July 1999; and

WHEREAS, the Shareholders wish to further restate and amend such Shareholders
Agreement in its entirety.

NOW, THEREFORE, in consideration of the premises the Shareholders hereby agree
as follows:

1.       DEFINITIONS AND CONSTRUCTION

1.1  For purposes of this Agreement, the following terms shall have the
following meanings and terms defined elsewhere in this Agreement shall have the
meanings ascribed thereto:

                                                                   Page 1 of 42
<PAGE>

       "Affiliate" shall mean, with respect to any entity, any company or other
       entity controlling, controlled by or under common control with such first
       entity. For purposes of this Agreement, "control" means the possession
       directly or indirectly through Beneficial Ownership or otherwise of the
       power to direct or cause the direction of the management or policies of a
       company or other entity, whether through the ownership of voting
       securities, by contract or otherwise and cognate terms shall have a
       corresponding meaning. For purposes of this Agreement (other than Clause
       5.2), each shareholder of GTS and all Affiliates of such shareholder
       shall be deemed to be Affiliates of GTS.

       "Agreement" shall mean this Agreement and the Annexes hereto.

       "Ancillary Agreements" shall mean the Supply Contract, the Capacity
       Agreements between the Company and any Shareholder or any Affiliate of a
       Shareholder, and the agreements referred to in Clauses 3.3 (a)-(e) and
       3.4.2.

       "Beneficial Owner" shall mean with respect to any security any person
       who, directly or indirectly, through any contract, or other legally
       enforceable and irrevocable arrangement, understanding or relationship
       (including, without limitation, by virtue of the control of any other
       person) has or shares: (a) voting power which includes the power to vote,
       or direct the voting of, such security: and/or (b) investment power which
       includes the power to dispose, or to direct the disposition of, such
       security. A person shall be deemed to be the Beneficial Owner of a
       security if that person has the right to acquire beneficial ownership of
       such security, as defined above, within 60 days of the date Beneficial
       Ownership is determined, including but not limited to any right to
       acquire (i) through the exercise of any option, warrant or right; (ii)
       through the conversion of a security; or (iii) pursuant to the power to
       revoke a trust, discretionary account, or similar arrangement; and
       "Beneficial Ownership" has a similar meaning.

                                                                   Page 2 of 42
<PAGE>

       "Board" shall mean the Board of Directors of the Company constituted in
       accordance with the provisions of this Agreement.

       "Capacity Agreements" shall mean the agreements entered into pursuant to
       Clause 7.1 and the other agreements pursuant to which the Products (as
       such term is defined in clause 8.2) of the Company are sold, such other
       agreements being substantially in the form of Annex 3 as from time to
       time amended or as otherwise approved by the Board.

       "Construction Management Agreements" shall mean the contracts with FLAG,
        GTS or any of their Affiliates referred to in Clause 3.3(a).

       "Date of Financial Closure" shall mean the date on which the conditions
       precedent specified in Clause 3.6 have been met and the Project Finance
       is in place.

       "Deadlock" shall mean any situation which has persisted for not less than
        60 days in which

         (i)      by virtue of a substantial disagreement between the
                  Shareholders, whether at Board or Shareholder level or both,
                  and which is manifested by an equality of votes at any meeting
                  of the Board or, as the case may be, the Shareholders; or

         (ii)     by virtue of an inability to form a quorum at any meeting or
                  adjourned meeting of the Board or Shareholders

       a matter which is reserved to the Board or the Shareholders in accordance
       with Clause 4.9 or 4.10 cannot be resolved.

       "Expert" shall mean an independent consulting firm or individual chosen
       in accordance with Clause 11.4.

       "European Backhaul Element" shall be as described in Annex 5.

                                                                    Page 3 of 42
<PAGE>

       "Facilities Management Agreement" shall mean the contract with FLAG, GTS
       or any of their Affiliates referred to in Clause 3.3 (d).

       "Landing Station" shall mean a facility forming part of the Subsea
       Element at and through which the subsea cable interfaces with the
       European or United States Backhaul Element, as relevant.

       "Lien" shall mean, with respect to any asset (a) any mortgage,
       assignment, deposit arrangement, deed of trust, lien (statutory or
       other), pledge, hypothecation, encumbrance, charge, expropriation (or
       expropriatory claims), security interest or similar encumbrance in, on or
       of such asset and (b) the interest of a vendor or a lessor under any
       conditional sale agreement, capital lease or title retention agreement
       (or any financing lease having substantially the same economic effect as
       any of the foregoing) relating to such asset.

       "Project Finance" shall mean debt financing non-recourse to the
       Shareholders provided to the Company by one or more reputable financial
       institutions which will allow the Company to draw down up to such amount
       as provided for in the initial Business Plan in order to finance the
       construction of the System.

       "Subsea Element" shall be as described in Annex 4.

       "Supplier" shall mean Alcatel Submarine Networks.

       "Supply Contract" shall mean the construction contract between the
       Company and the Supplier for the construction of the Subsea Element
       (excluding Landing Station construction) dated 20 September 1999 under
       which the Supplier has (amongst other things) committed to increase the
       capacity of the System to 2.4 terabits.

       "United States Backhaul Element" shall be as described in Annex 5.

                                                                    Page 4 of 42
<PAGE>

       1.2    References to any document (including this Agreement) are
              references to that document as amended, consolidated,
              supplemented, novated or replaced from time to time.

       1.3    In the event of any conflict or inconsistency between this
              Agreement and any Ancillary Agreement, this Agreement shall take
              precedence except to the extent that such Ancillary Agreement
              expressly provides otherwise.

2.       PURPOSE

       The purpose of the Company shall be the construction, ownership,
       maintenance and operation of the System and such other ancillary
       activities as the Shareholders may agree in writing.

3.       INCORPORATION,  CAPITALIZATION AND COMPLETION

       3.1    The Shareholders have incorporated the Company under the laws of
              Bermuda and have adopted Bye-Laws consistent with this Agreement.
              In the event of any inconsistency between the terms of this
              Agreement and the Memorandum of Association or Bye-Laws of the
              Company, the terms of this Agreement shall prevail and the
              Memorandum of Association or Bye-Laws, as relevant, shall be
              amended to eliminate such inconsistency.

       3.2    The authorized capital of the Company is initially US$12,000,
              divided into 12,000 shares of US$1.00 each (the "Shares"). Each
              Shareholder has on 12 January 1999 subscribed for 6,000 Shares at
              par. Subject to satisfaction of the conditions precedent set forth
              in Clause 3.6, each Shareholder shall make capital contributions
              (or, if requested by the Board, subordinated loans), up to a
              maximum of US$100,000,000 per Shareholder, pursuant to capital
              calls made in accordance with the schedule to be agreed in
              accordance with Clause 3.6(f) ("Committed Capital Contributions").
              On the Date of Financial Closure each Shareholder shall deliver to
              the Company an irrevocable letter of credit acceptable to the
              Company's lenders to secure its obligations to

                                                                    Page 5 of 42
<PAGE>

              make Committed Capital Contributions as required (the
              "Irrevocable Letters of Credit").

       3.3    The Shareholders shall use reasonable commercial endeavours to, or
              shall cause the Company and/or their appropriate Affiliates to use
              reasonable commercial endeavours to, as the case may be, take the
              following actions or enter into the following agreements:

              (a) construction management contracts between the Company and:

                      (i)      FLAG, or an Affiliate of FLAG, pursuant to which
                               FLAG or such Affiliate will, to standards set
                               forth in the agreement, oversee the construction
                               of the Subsea Element (the "FLAG Construction
                               Management Agreement");

                      (ii)     GTS, or an Affiliate of GTS, pursuant to which
                               GTS or such Affiliate will, to standards set
                               forth in the agreement, oversee the construction,
                               acquisition and/or installation of the European
                               and the United States Backhaul Elements (the "GTS
                               Construction Management Agreement");

              (b)    a customer marketing agreement, under which FLAG and/or
                     Affiliates of FLAG and GTS and /or Affiliates of GTS agree
                     to market the Products in accordance with terms set forth
                     in Annex 2;

              (c)    an arbitration agreement among the Shareholders and all
                     other parties (other than the Supplier) to the other
                     Ancillary Agreements, substantially in the form of Annex 8;

              (d)    a facilities management agreement among (1) FLAG or an
                     Affiliate of FLAG, (2) GTS or an Affiliate of GTS and (3)
                     the Company, under which FLAG, GTS and/or such Affiliates,
                     will operate, manage and maintain the System and under
                     which FLAG or its Affiliate will provide accounting and
                     administrative services to the Company;

              (e)    by 31 March 2000, backhaul agreements among the Company,
                     FLAG, GTS and Affiliates of FLAG and GTS, providing for the
                     acquisition by

                                                                    Page 6 of 42
<PAGE>

                     FLAG and GTS and/or their Affiliates of additional dark
                     fibre and/or duct space and/or wavelengths for purposes not
                     related to the Company in the European and United States
                     Backhaul Elements ***;

              (f)    a Capacity Agreement between the Company and GTS or an
                     Affiliate of GTS providing for the purchase by GTS or such
                     Affiliate of rights of use in the System as provided in
                     Clause 7.1;

              (g)    Capacity Agreements between the Company and FLAG or an
                     Affiliate of FLAG and/or such other purchasers as FLAG has
                     procured providing for the purchase of capacity in the
                     System as provided in Clause 7.2;

              (h)    develop and agree an optimum plan for System upgrades based
                     on foreseeable demand and the time required to effectuate
                     such upgrades, including appropriate trigger events; and

              (i)    agree and approve the initial Business Plan and the
                     construction budget as provided in Clause 12.

       3.4

              3.4.1  FLAG shall use its reasonable commercial endeavours in
                     co-operation with GTS to arrange Project Finance on behalf
                     of the Company; provided that agreement to the terms and
                     conditions of such Project Finance is subject to the
                     unanimous approval of the Shareholders.

              3.4.2  GTS shall use its reasonable commercial endeavours to
                     arrange for the execution and delivery of construction or
                     acquisition or lease contracts between the Company and
                     third parties pursuant to which the ducts, fibre and
                     accommodations for the European Backhaul Element and United
                     States Backhaul Element will be constructed or acquired or
                     leased by such time as is necessary for the timely
                     completion of the construction of the System or such
                     earlier date as may be required in order to satisfy the
                     requirements of Clause 3.6(b).

                                                                    Page 7 of 42
<PAGE>

       3.5

              3.5.1  The Shareholders shall make shareholder loans to and/or
                     provide security on behalf of the Company (the "Loans") as
                     required for the period from 12 January 1999 up to the Date
                     of Financial Closure (up to a maximum aggregate amount of
                     US$5.5 million for each Shareholder), in order to satisfy
                     the Company's obligations under the Supply Contract and to
                     finance the costs of the DGMs referred to in Clause 8.5.
                     The Loans shall be repayable by the Company upon the Date
                     of Financial Closure.

              3.5.2  The assets of the Company (including the work done under
                     the Supply Contract) shall be security for the Loans. In
                     the event that both parties have fulfilled their
                     obligations under this Clause 3.5 but Project Finance is
                     not secured and the Supplier terminates the Supply Contract
                     pursuant to the terms thereof, the work transferred to the
                     Company under the Supply Contract shall be jointly owned by
                     the Shareholders and each shall be free to use it as it
                     wishes.

       3.6    The obligations of each Shareholder to make its Committed Capital
              Contributions as provided in Clause 3.2, and of each Shareholder
              and its Affiliates to proceed further with the construction of the
              System and to purchase capacity on the System are subject to the
              satisfaction of the following conditions by 12 October 1999:

              (a)    the delivery of the Irrevocable Letters of Credit;

              (b)    Project Finance is available subject only to conditions
                     precedent and the conditions precedent required to make the
                     first drawings under such Project Finance are satisfied;

              (c)    the Supplier shall have delivered a parent company
                     guarantee and a performance bond acceptable to each
                     Shareholder securing its obligations to the Company under
                     the Supply Contract;

                                                                    Page 8 of 42
<PAGE>

              (d)    the documents and agreements set forth in Clause 3.3 (other
                     than those agreements to be entered into pursuant to Clause
                     3.3(e)) have been executed or agreed and remain valid and
                     binding;

              (e)    letters of credit in favour of the Company as required by
                     Clause 7.3 shall have been delivered in respect of the
                     Capacity Agreements referred to in Clauses 3.3(f) and (g);

              (f)    the Shareholders have developed and agreed a schedule for
                     Committed Capital Contributions;

              (g)    there shall have been no change in control of the other
                     Shareholder from the date hereof;

              (h)    US$100 million of capacity sales (in addition to those
                     covered by Clauses 7.1 and 7.2), shall have been concluded;
                     and

              (i)    Global Telesystems Group Inc. ("GTSG") have received a
                     commitment, in a form satisfactory to GTSG, from the five
                     largest shareholders of FLAG Telecom Holdings Limited that
                     any change prior to 31 October 1999 (or termination of this
                     Agreement, if earlier) of more than 50% in the Beneficial
                     Ownership of FLAG will be subject to the purchaser being
                     willing to have the construction, operation and maintenance
                     of the System proceed in accordance with the terms hereof.

              In the event that any condition precedent is not satisfied by the
              date set forth above for such condition precedent, or such later
              date as the Shareholders may agree in writing, the Shareholders
              agree to terminate this Agreement as provided herein.

       3.7    The Company may, with the approval of the Board, establish one or
              more subsidiary companies for the purpose of fulfilling its
              obligations as contemplated by this Agreement and the Ancillary
              Agreements. Such subsidiary companies may own portions of the
              System for regulatory and tax purposes.

                                                                    Page 9 of 42
<PAGE>

       3.8    Each Shareholder shall pay its respective costs and expenses
              relating to the consummation of the transactions contemplated
              hereby. The costs of incorporation of the Company, including but
              not limited to legal fees and expenses and registration fees, and
              expenses incurred in negotiating and concluding agreements between
              the Company and third parties, shall be borne by the Company.

4.     GOVERNANCE

       4.1    The Company shall be managed by a Board consisting of ten
              Directors, half of whom shall be nominated by each Shareholder. A
              quorum for Board meetings shall be two Directors appointed by each
              Shareholder. The right to nominate a Director shall include the
              right to require the removal of such Director and the right to
              nominate a replacement for such Director.

       4.2    One Director nominated by each Shareholder shall be co-chairman of
              the Board, but for Bermuda law purposes, the Board shall name one
              co- chairman as Chairman and one co-chairman as Deputy Chairman.
              For the first year, the co-chairman nominated by FLAG shall be
              Chairman and the co-chairman nominated by GTS shall be Deputy
              Chairman. For each subsequent year, the positions shall be rotated
              such that the positions of Chairman and Deputy Chairman are held
              by nominees of the Shareholders in turn. Neither the Chairman nor
              the Deputy Chairman shall have a casting vote.

       4.3    The Shareholders shall vote their Shares to elect the persons
              nominated by the Shareholders pursuant hereto and to remove any
              Director where removal has been requested by the Shareholder that
              nominated that Director. Each of the Shareholders further agrees
              that (a) it will vote or cause to be voted all Shares owned by
              such Shareholder, and otherwise act and in all other respects use
              its reasonable commercial endeavours so as to comply, to cause its
              Affiliates to comply, and to cause the Company to comply with and
              act in

                                 Page 10 of 42
<PAGE>

              a manner contemplated by the provisions of this Agreement and so
              as to implement this Agreement; and (b) if any Director who is the
              nominee of a Shareholder pursuant to this Clause for any reason
              refuses to exercise his discretion in accordance with the terms of
              this Agreement, such Shareholder shall forthwith take all action
              within its power or control to remove and replace such Director.

       4.4    Actions by the Board shall require the affirmative vote of a
              majority of the Directors present at a duly organized meeting,
              provided that such majority shall, except as provided in Clause
              4.9(e), include at least two Directors nominated by each of the
              Shareholders. The Board may also act by means of a written
              resolution signed by all of the Directors.

       4.5    The management of the Company shall be vested in the Board, which
              may exercise all such powers and do all such things as may be
              exercised or done by the Company and are not expressly or directly
              required to be exercised or done by the Shareholders.

       4.6 (a) The Board shall meet at such times as it shall determine, but
               in any event not less than four times in any twelve month period
               and, in addition, whenever requested in writing by at least one
               Director, on not less than seven days' notice, such request to
               specify the subjects to be addressed at such meeting. All
               meetings of the Board of Directors shall be held in such place
               (or by telephone conference call) as the Board shall determine.

          (b)  Each Shareholder shall nominate a Director, both of whom shall
               meet as frequently as necessary but at least bi-weekly during the
               construction of the System to review the operations of the
               Company and provide the full Board with a report thereon and
               appropriate recommendations.

                                                                   Page 11 of 42
<PAGE>

       4.7    Except as otherwise provided in the incorporating documents, the
              Shareholders shall meet at least once a year.

       4.8    The Company may contract out (to the Shareholders, Affiliates of
              the Shareholders or third parties) such activities of the Company
              as it deems appropriate.

       4.9    The making or taking of any of the following decisions or actions,
              as the case may be, or the implementation of any of the following
              matters by the Company shall require the consent of the Board:

              (a)    changing the provisioning and/or implementation of System
                     upgrades (other than as agreed in accordance with Clause
                     3.3(h));

              (b)    change of pricing and Product range (provided that failure
                     to agree on a change of Product range shall not constitute
                     a Deadlock);

              (c)    purchases of assets other than in the ordinary course of
                     business and declaration and distribution of dividends
                     (other than as set forth herein);

              (d)    changing the marketing arrangements;

              (e)    managing and enforcing the Company's contractual rights and
                     obligations (except to the extent that authority has been
                     specifically delegated under the Ancillary Agreements),
                     including agreeing on appropriate amendments and waivers to
                     any of the Ancillary Agreements and initiating or settling
                     any significant litigation, provided that with respect to
                     litigation involving the Company and a Shareholder or the
                     Affiliate of a Shareholder, the Directors nominated by such
                     Shareholder shall not be entitled to vote;

               (f)    execution by the Company of any agreement with a
                      Shareholder or an Affiliate of a Shareholder or with a
                      term of more than one year or likely to require payments
                      by or to the Company or which may impose upon the Company
                      liabilities exceeding in the aggregate

                                                                   Page 12 of 42
<PAGE>

                     US$2,000,000, other than in accordance with the Business
                     Plan or as set forth herein;

              (g)    grants of Liens on the Company's assets;

              (h)    appointment and removal of officers of the Company;

              (i)    risk management issues; and

              (j)    the adoption of accounting policies and changes thereto.

       4.10    Notwithstanding anything contained elsewhere in this Agreement to
               the contrary, the making or taking of any of the following
               decisions or actions, as the case may be, or the implementation
               of any of the following matters by the Company shall require the
               unanimous agreement of the Shareholders:

              (a)    annual updates and any interim amendments to the Business
                     Plan;

              (b)    capital calls in addition to Committed Capital
                     Contributions;

              (c)    acceleration of or any significant variation in the
                     schedule for Committed Capital Contributions;

              (d)    issuances of notes, guarantees or other forms of
                     indebtedness not provided for in the Business Plan;

              (e)    pursuit of an activity or transaction outside the scope of
                     Clause 2, such as a new line of business, material
                     acquisition, joint venture or disposition of assets of the
                     Company;

              (f)    approval of any transfer or issuance of shares of the
                     Company except as provided for in Clause 5 or Clause 14.3;

              (g)    amalgamation, reorganisation or continuation, statutory or
                     otherwise, liquidation, winding-up, statutory or otherwise,
                     dissolution or termination of the existence of the Company
                     other than as provided for in this Agreement;

              (h)    admission of new shareholders other than as permitted in
                     accordance with Clause 5 or Clause 14.3;

              (i)    decommissioning of the System; and

                                                                  Page 13 of 42
<PAGE>

              (j)    agreeing to any variation, amendment or waiver of any
                     documentation, including but not limited to the credit
                     agreement, with respect to Project Finance.

5.       TRANSFER OF SHARES

       5.1    Neither Shareholder shall sell, assign, encumber, pledge or
              otherwise transact with any of its Shares or any interest therein
              except in accordance with this Clause 5 without the prior written
              consent of the other Shareholder.

       5.2    Either Shareholder may sell, transfer or otherwise dispose of all,
              but not less than all, of its Shares to any Affiliate of such
              Shareholder ("Permitted Transferee") which agrees in writing to be
              bound by the terms of this Agreement as if the Permitted
              Transferee were an original Shareholder, provided that the
              obligations of such Affiliate hereunder shall be guaranteed by the
              transferring Shareholder if required by the Company's lenders and
              if the Permitted Transferee shall cease to be an Affiliate of such
              Shareholder it shall be required to transfer such Shares back to
              such Shareholder. Each Shareholder shall pledge its Shares to
              lenders to the Company as security for the obligations of the
              Company to such lenders if so required under the terms of the
              Project Finance and, subject to any such pledge, may further
              pledge its Shares to other lenders in order to raise funds
              necessary for the fulfilment of its obligations under this
              Agreement.

       5.3

              5.3.1  If, after the Date of Financial Closure, one Shareholder
                     (the "Offeror") wishes to sell, transfer or otherwise
                     dispose of any or all of its Shares (the "Offered Shares")
                     other than in accordance with Clause 5.2, the Offeror shall
                     by notice first offer the Offered Shares to the other
                     Shareholder (the "Offeree"). Such offer shall set out the
                     price and all other terms and conditions and state that
                     such offer shall be

                                                                  Page 14 of 42
<PAGE>

                     deemed to be rejected if not accepted within 60 days of
                     notice of the offer to the Offeree.

              5.3.2  The Offeree may within the validity period of the offer
                     notify the Offeror that the Offeree rejects the offer or
                     accepts the offer in its entirety. If the Offeree accepts
                     the offer, it shall within a period of 30 days after
                     notification of such acceptance purchase the Offered
                     Shares.

              5.3.3  If the Offered Shares shall have been rejected or deemed
                     rejected in accordance with the foregoing, or if the
                     Offeree fails to purchase the Offered Shares in accordance
                     with the foregoing, then the Offeror shall, within a period
                     of 90 days thereafter, be at liberty to sell, transfer or
                     otherwise dispose of the Offered Shares to a third party on
                     terms no less favourable to the Offeror than those offered
                     to the Offeree, provided that such third party shall be
                     acceptable to the Offeree acting reasonably and to the
                     lenders to the Company and shall agree in writing to be
                     bound by the terms of this Agreement as if it were an
                     original party hereto. The Shareholders agree that it is
                     reasonable for an Offeree to withhold approval of a third
                     party it determines in good faith is not a suitable
                     business partner.

       5.4    FLAG acknowledges and agrees that up to 50% of the Beneficial
              Ownership of GTS may be transferred to IXC Communications Services
              Europe Limited ("IXC") or its Affiliate or another United States
              telecommunications operator acceptable to FLAG (acting reasonably
              as provided in Clause 5.3.3). In such case IXC or such other
              operator may assume GTS's rights and obligations regarding the
              United States Backhaul Element and may become a party to the
              customer marketing agreement executed in accordance with Clause
              3.3(b).

       5.5    If a Shareholder ceases to own at least 50% of the Shares in the
              Company (except pursuant to Clause 5.2), then the following
              provisions shall apply:

                                                                   Page 15 of 42
<PAGE>

              (a)    The first sentence of Clause 4.1 shall be deleted and the
                     following substituted therefor:

                     The Company shall be managed by a Board consisting of ten
                     Directors. The owner of the majority of Shares of the
                     Company shall be entitled to appoint one Director for each
                     10% of the Shares or fraction thereof held by it; and the
                     owner of the minority of the Shares shall be entitled to
                     appoint the remaining Directors; provided that the owner of
                     the minority of the Shares shall in any event be entitled
                     to appoint at least two Directors.

              (b)    Notwithstanding Clause 3.2, the obligation to make
                     Committed Capital Contributions shall be adjusted so that,
                     going forward, each Shareholder's percentage contribution
                     to the total Committed Capital Contributions required on a
                     given date shall be equal to its then current percentage
                     Share ownership.

              (c)    The following provisions shall be deleted: (i) the proviso
                     in the first sentence of Clause 4.4, (ii) Clauses 4.10 (a)
                     and (d) and (iii) Clause 12.4.

       5.6    The Shareholders acknowledge and agree that (i) the Project
              Finance is intended to be non-recourse to the Shareholders, except
              to the extent of Share pledges, equity contribution obligations up
              to US$100 million each, guarantees of up to US$100 million of the
              Project Finance and the obligations of each to arrange a letter of
              credit to support its equity contribution and guarantee and (ii)
              with regard to such Share pledges, equity contribution
              obligations, guarantees and letters of credit, it is intended that
              the Shareholders be treated by the lenders, and treat one another,
              equally. In the event that, notwithstanding the foregoing, the
              lenders exercise any right or remedy under any such Share pledge,
              guarantee or letter of credit and the effect of such exercise is
              that (x) either Shareholder (the "Disfavoured Party") pays or
              contributes an amount in excess of the amount paid or contributed
              by the other Shareholder (the "Favoured Party") or (y) a greater
              number of the

                                                                   Page 16 of 42
<PAGE>

              Shares pledged by the Disfavoured Party are foreclosed upon or
              sold than those pledged by the Favoured Party, the Shareholders
              will make such adjustments between themselves as may be
              appropriate so that the Shareholders shall be treated equally
              after giving effect to such exercise of rights and remedies by the
              lenders, including the making of a balancing payment by the
              Favoured Party to the Disfavoured Party, the contribution by the
              Favoured Party of additional amounts to the capital of the Company
              and/or transfer by the Favoured Party of Shares in the Company to
              the Disfavoured Party.

6.       CONSTRUCTION OF THE SYSTEM

       6.1    SUBSEA ELEMENT - FLAG or an Affiliate of FLAG, on behalf of the
              Company, shall negotiate all contracts, in addition to the Supply
              Contract, necessary for the construction of the Subsea Element.
              FLAG will keep GTS fully informed on the progress of negotiations
              for such contracts and in particular of any deviations from the
              agreed design specifications of such contracts. FLAG or such
              Affiliate shall be responsible, on behalf of the Company, to apply
              for all necessary wayleaves, easements, permits, licenses and
              consents required for the subsea element. FLAG or such Affiliate
              will also construction manage the delivery of the Subsea Element
              as provided in the FLAG Construction Management Agreement. The
              Company shall pay FLAG or such Affiliate for providing these
              services such portion of the project management fee for
              construction of the System as the Shareholders may agree.

       6.2    EUROPEAN BACKHAUL ELEMENT - GTS or an Affiliate of GTS, on behalf
              of the Company, shall negotiate all construction, installation and
              acquisition contracts for the European Backhaul Element. Such
              contracts shall provide that such facilities shall comply with the
              design specifications set forth in Annex 5. GTS will keep FLAG
              fully informed on the progress of negotiations of the acquisition,
              construction and installation contracts. GTS

                                                                   Page 17 of 42
<PAGE>

              or such Affiliate shall be responsible, on behalf of the Company,
              to apply for all necessary wayleaves, easements, permits,
              licenses and consents required for the installation of the
              European Backhaul Element. GTS or such Affiliate will also
              construction manage the European Backhaul Element as
              provided in the relevant GTS Construction Management Agreement.
              The Company shall pay GTS or such Affiliate for providing these
              services such portion of the project management fee for
              construction of the System as the Shareholders may agree.

       6.3    US BACKHAUL ELEMENT - GTS or an Affiliate of GTS, on behalf of the
              Company, shall negotiate all construction, installation and
              acquisition contracts for the United States Backhaul Element. Such
              contracts shall provide that such facilities shall comply with the
              design specifications set forth in Annex 5. GTS will keep FLAG
              fully informed on progress of negotiations of the acquisition,
              construction and installation contracts. GTS or such Affiliate
              shall be responsible, on behalf of the Company, to apply for all
              necessary wayleaves, easements, permits, licenses and consents
              required for the installation or the United States Backhaul
              Element. GTS or such Affiliate will also construction manage the
              United States Backhaul Element as provided in the relevant GTS
              Construction Management Agreement. The Company shall pay GTS or
              such Affiliate for providing these services such portion of the
              project management fee for construction of the System as the
              Shareholders may agree.

7.       CAPACITY PURCHASE

       7.1(a) GTS or an Affiliate shall purchase the exclusive right to use
              a dark fibre pair and other rights set out in Annex 6 Part I for
              the lifetime of the System *** in accordance with the key
              commercial terms as set out in Annex 6 Part I. The payment
              schedule shall be agreed between the Shareholders and set forth in
              the relevant purchase agreement. All payments will be made free
              and clear of all withholding taxes.

                                                                   Page 18 of 42
<PAGE>

              (b)    Subject to the following terms, FLAG or an affiliate of
                     FLAG is hereby granted the following options: either (i)
                     the option to purchase the products set out in Annex 6 Part
                     I on the same terms as those set out in clause 7.1(a) (the
                     "Fibre Option"); or (ii) the option to purchase up to ***
                     of the Company's Products on the System in accordance with
                     the key commercial terms as set out in Annex 6 Part II (the
                     "Capacity Option"). FLAG may exercise the Capacity Option
                     or the Fibre Option as follows:

                     (A)    The Capacity Option

                            (i)    The Capacity Option shall subsist from the
                                   date of this Agreement until ***;

                            (ii)   The Capacity Option is exercisable from time
                                   to time by notice in writing to the Company;

                            (iii)  The Capacity Option may only be exercised in
                                   lots; being four lots of *** and a final lot
                                   ***;

                            (iv)   The timing and proportion of payments for the
                                   capacity shall be the same as that agreed
                                   under Clause 7.1(a). ***

                     (B)    The Fibre Option

                            (i)    The Fibre Option shall subsist from the date
                                   of this Agreement until ***.

                            (ii)   The Fibre Option is exercisable from time to
                                   time by notice in writing to the company.

                            (iii)  Upon exercise of the Fibre Option, the
                                   Capacity Option and any agreements entered
                                   into pursuant to the exercise of the Capacity
                                   Option shall be immediately terminated.

                            (iv)   Any payments made by FLAG or an Affiliate of
                                   FLAG under the Capacity Option (or any
                                   agreement entered into pursuant to the
                                   exercise of the Capacity Option) shall be
                                   credited towards the purchase price of the
                                   Fibre Option.

                            (v)    The timing and proportions of payments under
                                   the Fibre Option shall be the same as agreed
                                   under Clause 7.1(a). ***

                                                                   Page 19 of 42
<PAGE>

       7.2    FLAG shall buy, or bring purchasers to the Company for, the
              Company's Products (as defined below) of value US$100 million
              (excluding DGM sales) on arm's length commercial terms, paying for
              this in accordance with a schedule to be agreed between the
              Shareholders prior to the Date of Financial Closure. All payments
              will be made free and clear of all withholding taxes. FLAG may
              exercise its option in Clause 7.1 in satisfying any of its
              obligations under this clause.

       7.3    All presales referred to in Clauses 7.1, 7.2 and 7.6 shall be
              documented under Capacity Agreements and secured with an
              appropriate irrevocable letter of credit acceptable to the
              Company's lenders (unless the purchaser is investment grade).

       7.4    Each Shareholder and its Affiliates shall have the right to
              acquire additional dark fibre and/or access to spare duct space
              and/or wavelengths in the Backhaul Elements for purposes not
              related to the Company ***.

       7.5    Each Shareholder and its Affiliates shall have the right to
              acquire additional fibres and/or capacity in the European
              Interconnection Link of the Subsea Element as described in Annex 4
              upon payment to the Company ***.

       7.6

              7.6.1  The Shareholders recognise that it would be valuable for
                     the Company to secure a major purchase commitment from Bell
                     Atlantic Corporation and/or its Affiliates ("Bell
                     Atlantic") and/or GTE, Inc. and/or its Affiliates ("GTE"
                     and together with Bell Atlantic "Bell Atlantic/GTE").

              7.6.2  The commitment by Bell Atlantic/GTE to purchase *** of
                     capacity will be a part of FLAG's US$100,000,000 commitment
                     under Clause 7.2 and will be on terms similar to those
                     outlined in Annex 6 Part II.

                                                                   Page 20 of 42
<PAGE>

8.       SYSTEM MARKETING

       8.1    ***

       8.2    The Company's products ("Products") are defined as and shall be
              limited to rights of use or other non-ownership rights *** of
              capacity and:

              (a)    between any of the following locations:

                     (i)    London and New York;

                     (ii)   Paris and New York;

                     (iii)  New York and a European Landing Station;

                     (iv)   London or Paris and a US Landing Station;

                     (v)    Either US Landing Station and either European
                            Landing Station;

              (b)    of the following capacity sizes: (i) protected ring STM-1,
                     STM-4, STM-16 and STM-64 and (ii) ring STM-64 optical
                     channels; and such modified or additional products as the
                     Board may at any time determine.

       8.3

              8.3.1  Except for sales pursuant to Clause 7 and at DGMs, the
                     Company will set prices as follows: the prices for the
                     STM-1 Product will be set as *** (the "Base Price"). ***

              8.3.2  Any Director may at any time request a review of prices,
                     including a change in the Base Price, the multipliers or
                     the pricing formula. The Board shall decide on such request
                     within 14 days of the same having been submitted. In the
                     event that the Board is unable to reach a decision on a
                     change in pricing, then the matter shall be referred to an
                     Expert chosen in accordance with Clause 11.4 for decision
                     who, notwithstanding Clause 11.6, shall decide the issue
                     within 30 days and whose determination will be binding on
                     the parties.

                                 Page 21 of 42
<PAGE>

       8.4    FLAG and GTS will be free to sell the Company's Products as
              described in Clause 8.2(a)(iii) to (v) to customers who will
              provide their own backhaul to or from a Landing Station and shall
              cause the Company to permit such customers to connect their own
              backhaul at the relevant Landing Station to the Subsea Element.

       8.5    *** FLAG and GTS will be present at each DGM. At the DGM the
              Company will make available and target to sell such portion of the
              capacity of the System as the Board shall determine. Each DGM will
              be held at a mutually convenient location.

       8.6    ***

       8.7    Notwithstanding anything in Clause 8.6 to the contrary, any of the
              Company's Products purchased or to be purchased by FLAG, GTS or
              their Affiliates pursuant to Clause 7.1 or 7.2 may be used at any
              time as a currency with which to acquire equity in other entities.

9.     DIVIDEND AND INVESTMENT POLICIES

       9.1    Subject to the requirements of Clauses 9.3 and 9.4, the Company's
              lenders, the Business Plan and applicable law, the Board, upon
              receipt of the Company's audited annual accounts for each year,
              shall meet to declare and authorize the distribution of dividends,
              which shall, unless the Board unanimously decides otherwise, be
              the maximum amount distributable in respect of the earnings for
              such year and available retained earnings from prior years.

       9.2    Enhancements, upgrades and improvements to the System shall be
              made in accordance with the schedule to be agreed as provided in
              Clause 3.3(h), unless the Board otherwise agrees.

                                                                   Page 22 of 42
<PAGE>

       9.3    There shall be no declaration or distribution of dividends until
              either:

              (a)    all funds advanced to the Company pursuant to the Project
                     Finance have been repaid; or

              (b)    the Shareholders have been released from any restrictions
                     imposed by the terms of the Project Finance on their
                     freedom to re-sell the capacity purchased by them (or their
                     Affiliates) in accordance with Clause 7.1(a) and (b);

       9.4    The Shareholders shall procure that the Company promptly directs
              any cash available to the Company under Clause "ninth" of section
              8.12(b) of the Project Finance credit agreement towards the
              re-payment of the "Term Loans" (as defined therein).

10.    AUDITORS AND ACCOUNTS

       10.1   The auditors of the Company shall be Arthur Andersen, or such
              other first-class firm of accountants as may be agreed to by the
              Shareholders.

       10.2   The Company shall keep true and accurate accounts and records in
              accordance with generally accepted accounting principles in the
              United States and consistent with those adopted by the
              Shareholders and their Affiliates. In the event of any
              inconsistencies in such accounting policies, the policies
              recommended by the Company's auditors shall be followed. The
              Shareholders shall cause the Company to prepare and submit to each
              Shareholder, as soon as practicable, but not later than three
              months after the end of each financial year, complete annual
              financial statements including the balance sheet and profit and
              loss statements of the Company in respect of such financial year,
              certified by the Company's auditors and prepared in accordance
              with such accounting principles and practices.

       10.3   The financial year of the Company shall end on 31 December of each
              year.

<PAGE>

       10.4    The Company shall provide the Shareholders with monthly
               management accounts and other information on the Company's
               financial performance and the Shareholders' interests. Further,
               the Company shall provide the Shareholders with the necessary
               information and documentation for the Shareholders to determine
               their tax liabilities relating to any distributions (or deemed
               distributions) with respect to Shareholders' Shares, or for
               other purposes that may be required by any applicable government
               regulations. Such documentation and information shall include,
               but not be limited to, information with respect to the Company's
               tax liabilities and copies of tax returns.

       10.5    Within 30 days after the close of each quarterly period during
               its financial year, the Company shall submit to each of the
               Shareholders the unaudited balance sheet and profit and loss
               statement of the Company in respect of such quarterly period.

       10.6    All accounts and records of the Company shall be in English and
               open to inspection by each of the Shareholders or by its duly
               authorized representative during regular business hours.

11.      DEADLOCK

       11.1    In the event of a Deadlock, each Shareholder shall, within seven
               days of the Deadlock having arisen, cause its nominees on the
               Board to prepare and circulate to the other Shareholder a
               memorandum setting out its position on the dispute and its
               reasons for adopting such a position. Each such memorandum shall
               be considered by the Chief Executive Officer of each Shareholder
               who shall meet together within seven days of receipt of the
               memoranda and shall use reasonable endeavours to resolve the
               Deadlock.

       11.2    If such Chief Executive Officers do so agree, they shall jointly
               issue a statement setting out the terms of such agreement and
               each Shareholder shall

<PAGE>

               exercise the voting rights and other powers of control available
               to it in relation to the Company to procure that the terms of
               such Agreement are implemented and the Company shall do all
               things within its power to implement such terms.

       11.3    If such Chief Executive Officers do not so agree within 14 days
               of their initial meeting, either Shareholder shall have the right
               to refer the following matters to the relevant Expert, while a
               failure to agree on matters which are not referred to below or
               otherwise specifically provided for herein shall mean that the
               status quo prevails with respect to such matters:

               (a)  Operational matters, including but not limited to the
                    selection of suppliers and acceptance of key deliverables;
                    and

               (b)  pricing and costing matters, including but not limited to
                    issues arising under Clause 8.

       11.4    Whenever a matter is to be referred to an Expert for
               determination, the matter in question shall be referred to an
               Expert agreed between the Shareholders or, in default of
               agreement, if in relation to an operational matter, an Expert
               nominated by the President of the Institute of Electrical
               Engineers, or if in relation to pricing, costing or marketing
               matters, an Expert nominated by the President of the Institute of
               Chartered Accountants of England and Wales.

       11.5    Each of the Shareholders shall be entitled to provide the Expert
               with such information and such written representations as may be
               necessary to assist in the determination of the matter in
               question provided such information and/or representations are
               made within 30 days of the date of referral. Each Shareholder
               shall simultaneously send copies of any correspondence with the
               Expert to the other Shareholder.

<PAGE>

       11.6    The Expert shall be entitled to seek expert evidence at his
               discretion as to the circumstances in which the matter has arisen
               and the most expeditious method of its resolution and to rely
               upon the same but before doing so shall disclose such evidence to
               the Shareholders and give them an opportunity to make
               representations with respect to the same. The Expert shall be
               required by the Shareholders to reach a determination of the
               issues referred to him as soon as is reasonably practicable and,
               in any event unless the Shareholders otherwise agree, within 45
               days of his appointment.

       11.7    The Expert shall act as an expert and not as an arbitrator and
               his decision shall be notified to both Shareholders
               simultaneously and implemented as soon as is practicable upon
               notification. Unless both Shareholders agree in writing prior to
               the appointment of the Expert, the Expert's decision shall be
               final and binding upon the Shareholders except in the case of
               fraud or manifest error and his fees shall be paid by the
               Shareholders in equal shares unless the Expert decides otherwise.

12.      BUSINESS PLAN

       12.1    FLAG shall in consultation with GTS prepare a rolling five-year
               business plan for the Company together with an annual operating
               budget (the "Business Plan") on an annual basis.

       12.2    The initial Business Plan and construction budget shall be agreed
               and approved by the Shareholders as provided in Clause 3.3(i).
               The Business Plan will be revised each financial year and shall
               be submitted to the Shareholders for approval not later than 30
               October of each year and shall include a revised pro forma
               consolidated balance sheet, a revised budgeted consolidated
               income statement, and a revised pro forma consolidated statement
               of changes in financial position of the Company for each month of
               the first financial year and each quarter of each subsequent
               financial year and shall be accompanied by a statement of all
               budgeted capital expenditures to be incurred in such

<PAGE>

               financial year, all presented on the same basis, together with
               revised consolidated statements of change in financial position
               of the Company for the next five years in order to complete the
               Business Plan for the rolling five year period, and shall be
               supported by the explanations, notes and information upon which
               the projections underlying such Business Plan have been based and
               how it is proposed to finance such capital and other
               expenditures.

       12.3    The Shareholders shall meet to discuss and agree such Business
               Plan for the forthcoming year no later than 30 November of each
               year. In the event that the Shareholders are unable to agree a
               Business Plan, the Company will operate in accordance with the
               existing Business Plan until such time as a new Business Plan is
               agreed. No Deadlock shall exist with respect to failure to agree
               a Business Plan until the expiration of the full five year term
               of the last approved Business Plan.

       12.4    If the Shareholders agree that an additional capital contribution
               is required to finance the Business Plan, they will contribute
               that capital equally.

13.      BUSINESS PRACTICES

       13.1    The Company shall at all times comply with all applicable laws
               and regulations and shall conduct its business in accordance with
               the code of business conduct attached hereto as Annex 7, in
               accordance with the U.S. Foreign Corrupt Practices Act of 1977,
               as amended, and in accordance with the U.S. Communications Act of
               1934, as amended by the U.S. Telecommunications Act of 1996 (the
               "Communications Act"). Each Shareholder shall ensure that its and
               its Affiliates' employees, agents and representatives who provide
               services to or act for and on behalf of the Company are familiar
               with and act in accordance with the code of business conduct set
               forth in Annex 7. The Company shall obtain all necessary
               licences, approvals, permits and authorizations necessary for the
               operation of its business.

<PAGE>

       13.2    The Company will permit officers and designated representatives
               of any Shareholder to visit and inspect any of the properties of
               the Company, and to examine and audit the books of record and
               account of the Company and discuss the affairs, finances and
               accounts of the Company with, and be advised as to the same by,
               its officers, all at such reasonable times and intervals and to
               such reasonable extent as such Shareholder may request.

       13.3    The Company will pay all taxes, assessments and other
               governmental charges of any kind imposed on or in respect of its
               income or any of its businesses or assets, or in respect of taxes
               and other amounts it is required by law to withhold from amounts
               paid by it to its employees, before any penalty or interest
               accrues on the amount payable and before any Lien on any of its
               property exists as a result of non-payment; provided, however
               that the Company shall not be required by this Clause 13.3 to pay
               any amount if it is diligently contesting its alleged obligation
               to pay that amount in good faith through appropriate proceedings
               and maintains appropriate reserves or other provisions in respect
               of the contested amount as may be required under generally
               accepted accounting principles in the United States.

14.      TERM AND TERMINATION

       14.1    Unless earlier terminated pursuant to Clause 3.6, this Agreement
               shall remain in effect until the earliest of (i) termination by
               mutual consent, (ii) such time as all Shares are owned by one
               Shareholder and/or its Affiliates and (iii) the dissolution of
               the Company.

       14.2    In the event that this Agreement is terminated except pursuant to
               Clause 14.1 (ii) or the Company is to be wound-up or liquidated
               pursuant to this Clause, the following shall apply:

<PAGE>

               14.2.1 the Company shall undertake no new business or obligation
                    other than that already commenced or incurred or necessary
                    for the fulfilment of another obligation already incurred;
                    14.2.2 the Company shall diligently complete all obligations
                    and projects that may be outstanding at the date of
                    termination to the extent that such obligations are not
                    assumed by one or both of the Shareholders by mutual
                    agreement;

               14.2.3 upon completion of the obligations and projects in
                    accordance with Clause 14.2.2, the Company shall have no
                    right to or to the use of any intellectual property derived
                    from either Shareholder (or any Affiliate thereof) or
                    previously used by or in the course of business of the
                    Company and the Company shall promptly return to the
                    originating Shareholder all property (including without
                    limitation all confidential information and documents)
                    belonging to such Shareholder; and

               14.2.4 on completion of the obligations and matters set out in
                    Clauses 14.2.1 through 14.2.3, the Shareholders shall
                    forthwith take all necessary and appropriate steps to
                    wind-up and liquidate the Company in such a way as to
                    maximise the return to the Shareholders.

     14.3

               14.3.1 If the Company's (or its relevant Affiliate's) application
                    for a cable landing licence by the FCC has been denied, or
                    the FCC has raised objections to granting such licence, then
                    (i) FLAG shall promptly notify GTS, (ii) the Shareholders
                    shall use their reasonable commercial endeavours to resolve
                    the objections of the FCC and (iii) FLAG may, and upon
                    receipt of notice given by GTS shall, take or cause to be
                    taken such action (which may include divesting itself of a
                    sufficient number of Shares without application of Clause 5,
                    except that the transferee shall be acceptable to GTS acting
                    reasonably and to the lenders of the Company and shall agree
                    in writing to become a party to this Agreement with such
                    amendments as may be appropriate

<PAGE>

                    in the circumstances. FLAG agrees that it is reasonable for
                    GTS to withhold approval of a third party it determines in
                    good faith is not a suitable business partner) as is
                    necessary to ensure that the Company is not deemed an
                    affiliate of Bell Atlantic Corporation for purposes of
                    section 271 of the Communications Act. If such licence has
                    not been granted by 31 March 2000, then GTS may require
                    FLAG, by notice in writing to FLAG within 14 days of that
                    date, to sell to GTS such number of Shares as is necessary
                    to ensure that the Company is not deemed an affiliate of
                    Bell Atlantic Corporation for purposes of section 271 of the
                    Communications Act at a price equal to fair market value.
                    Such fair market value of such Shares will be determined by
                    an independent investment banking firm of international
                    repute (the "Valuer") agreed by the Shareholders, or in
                    default of agreement within five days of such notice,
                    appointed by the President of the Institute of Chartered
                    Accountants of England and Wales. In determining such fair
                    market value, the Valuer will value the Company as a going
                    concern, taking into consideration the dilution or
                    departure, as the case may be, of FLAG as a shareholder and
                    the obligations of FLAG set forth in Clause 14.3.2, if
                    applicable. The Valuer will be instructed to render its
                    decision within 30 days or as soon as is practicable
                    thereafter. The purchase price shall be paid and the Shares
                    transferred as provided herein within seven days after
                    receipt by the Shareholders of the Valuer's report. The
                    foregoing, shall not apply if (a) FLAG can promptly
                    establish, to GTS's reasonable satisfaction, that the delay
                    in the Company's (or its Affiliate's) obtaining, or the
                    Company's (or its Affiliate's) failure to obtain, the
                    required cable landing licence from the FCC was not caused
                    by the fact that the Company is an affiliate of Bell
                    Atlantic Corporation or (b) if on or before the deadline for
                    FLAG to take or cause to be taken the necessary action, the
                    Company or its Affiliate is granted the requested cable
                    landing licence or Bell Atlantic

<PAGE>

                    Corporation or its Affiliate is granted relief by the FCC
                    from the restrictions contained in section 271 of the
                    Communications Act.

                14.3.2 In the event that FLAG is required to sell all of its
                    Shares to GTS as provided in Clause 14.3.1, FLAG agrees that
                    it and its Affiliates will continue to fully co-operate with
                    the Company and provide such assistance to the Company as
                    may be required for the commercial success of the Company.
                    The Company shall compensate FLAG and its Affiliates on
                    reasonable arm's length commercial terms for such assistance
                    as is provided.

       14.4    In no circumstances shall either Shareholder be liable to the
               other Shareholder, whether in contract, tort or otherwise, for
               loss (whether direct or indirect) of profits, business or
               anticipated savings or for any indirect or consequential loss
               whatsoever.

15.      CONFIDENTIALITY

       15.1    Each Shareholder undertakes that it and its Affiliates, and its
               and its Affiliates' employees, agents and representatives shall
               not, without limit in point of time, divulge or communicate to
               any third party (except as may be necessary for the performance
               of its obligations under this Agreement or any Ancillary
               Agreement or to enforce its rights hereunder; or as may be
               required by law or regulatory process or by any stock exchange;
               or as may be required in connection with any potential sale by a
               Shareholder of its Shares as permitted herein, unless the
               potential purchaser is a competitor of the Company, the other
               Shareholder or any Affiliates thereof), or use for its own
               purpose any information about the private affairs of the Company
               or the other Shareholder or its Affiliates, except such
               information as may have come into public knowledge otherwise than
               by reason of a breach of this undertaking.

<PAGE>

       15.2    Notwithstanding the foregoing, the Shareholders are entitled to
               disclose the existence and terms of this Agreement to their
               Affiliates, the Supplier and potential and actual lenders to and
               financial advisers of the Company, the Shareholders and their
               Affiliates, and GTS is entitled to disclose the terms of this
               Agreement to IXC, provided that each of those parties has entered
               into the same obligations of confidentiality as those contained
               herein. Any other disclosure is subject to the prior written
               agreement of the other Shareholder.

16.      PROPRIETARY RIGHTS

       16.1    Except as otherwise may be agreed in writing by the relevant
               parties, no Shareholder or Affiliate of such Shareholder shall
               have any interest in or right to use any name, trademark or logo
               belonging to the other Shareholder or any of its Affiliates,
               except that the name and domain name FLAG Atlantic may be used in
               connection with the marketing and sale of the Company's Products.

       16.2    In the event that a Shareholder and its Affiliates no longer own
               Shares, any name, trademark or logo belonging to such Shareholder
               or any of its Affiliates which was previously permitted to be
               used shall no longer be used in connection with the Company.

       16.3    For the purposes of this Clause "Intellectual Property" means any
               and all patents, trade marks, rights in designs, copyrights and
               topography rights, (whether registered or not and any
               applications to register or rights to apply for registration of
               any of the foregoing), rights in inventions, know-how, trade
               secrets and other confidential information, rights in databases
               and all other intellectual property rights of a similar or
               corresponding character which may now or in the future subsist in
               any part of the world.

       16.4    Each Shareholder shall, and shall cause its Affiliates to,
               provide to the Company on a royalty-free basis such Intellectual
               Property as the Company

<PAGE>

               may require for the optimal performance of the System to the
               extent that such Shareholder or any of its Affiliates owns, or
               otherwise has a right to license, such Intellectual Property. The
               other Shareholder and its Affiliates shall not have any interest
               in or right to use any such Intellectual Property and no
               Shareholder or its Affiliates shall by virtue of this Agreement
               or its ownership of Shares have any interest in or right to use
               any Intellectual Property developed by, or provided by third
               parties to, the Company except in the performance of an Ancillary
               Agreement.

       16.5    In the event that a Shareholder and its Affiliates no longer own
               Shares, the Company shall continue to have the right to use on a
               royalty-free basis for the life of the System any Intellectual
               Property essential to operation and maintenance of the System
               belonging to such Shareholder or its Affiliates which was used by
               the Company when such Shareholder or any of its Affiliates' owned
               any Shares and to require physical or electronic transfer of such
               Intellectual Property to a location specified by the other
               Shareholder in a manner causing minimum disruption to the
               continuing operation of the System.

17.      MUTUAL CO-OPERATION

       17.1    Each of the Shareholders agrees that it will use all reasonable
               commercial endeavours to promote the business and profitability
               of the Company.

       17.2    Each of the Shareholders shall do and execute or procure to be
               done and executed all such acts, deeds, documents and things as
               may be within its power including (without prejudice to the
               generality of the foregoing) the passing of resolutions (whether
               by the Board or in general meeting of the Company) to give full
               effect to this Agreement and to procure that all provisions of
               this Agreement are observed and performed.

<PAGE>

       17.3    Each of the Shareholders agrees with the other that this
               Agreement is entered into between them and will be performed by
               each of them in a spirit of mutual co-operation, trust and
               confidence and that it will use all means reasonably available to
               it (including its voting power whether direct or indirect, in
               relation to the Company) to give effect to the objectives of this
               Agreement and to ensure compliance by the Company with its
               obligations.

18.            RESTRICTIONS ON ANNOUNCEMENTS

               Each of the Shareholders undertakes that it will not, and that it
               will cause its Affiliates not to (save as required by law or any
               applicable regulatory body or stock exchange), make any
               announcement in connection with this Agreement without the prior
               written consent of the other Shareholder (which consent may not
               be unreasonably withheld and may be given either generally or in
               a specific case or cases and may be subject to conditions).

19.            NO PARTNERSHIP

               Nothing contained or implied in this Agreement shall constitute
               or be deemed to constitute a partnership between the Shareholders
               and neither Shareholder shall have any authority to bind or
               commit the other.

20.            REMEDIES

               Each Shareholder acknowledges and agrees that if either of them
               shall breach any of the warranties, representations, indemnities,
               covenants, agreements, undertakings, and obligations (for the
               purposes of this Clause referred to as the "Agreed Terms") on
               each of their parts contained in this Agreement or any other
               agreement entered into pursuant to it, damages may not be an
               adequate remedy, in which case the Agreed Terms shall be
               enforceable by injunction, order for specific performance or such
               other equitable relief as a court of competent jurisdiction may
               see fit.

<PAGE>

21.             REPRESENTATIONS AND WARRANTIES

               Each of the Shareholders represents and warrants to the other
               that:

               21.1 Such Shareholder is duly organized, validly existing and in
                    good standing under the laws of the jurisdiction in which it
                    has been organized; and

               21.2 The execution, delivery and performance by such Shareholder
                    or any of its Affiliates of this Agreement and such
                    Ancillary Agreements to which it is or will be a party have
                    or will have been duly authorized by all requisite corporate
                    action, and this Agreement and such Ancillary Agreements
                    will not violate the provisions of such Shareholder's or
                    such Affiliate's, as relevant, constitutional documents; or
                    violate or constitute a material breach or constitute an
                    event of default under the provisions of any note of which
                    such Shareholder or such Affiliate is the maker or of any
                    indenture, agreement or other instrument to which such
                    Shareholder or such Affiliate is a party, or by which it is
                    bound; or result in the creation or imposition of any Lien
                    of any nature whatsoever upon any of its property or assets
                    except as required to secure Project Finance; or, to the
                    best of such Shareholder's knowledge, of any applicable law,
                    regulation or order, including without limitation any law,
                    regulation or order relating to competition or securities
                    matters; and this Agreement constitutes a legal, valid and
                    binding obligation of such Shareholder, enforceable in
                    accordance with its terms.

22.    ASSIGNMENT

       Save as otherwise provided herein, the benefits and obligations conferred
       by this Agreement upon each of the Shareholders are personal to that
       Shareholder and shall not be, and shall not be capable of being,
       assigned, delegated, transferred or otherwise disposed of without the
       prior written consent of the other Shareholder save an assignment to a
       Permitted Transferee of that Shareholder's Shares which has complied with
       Clause 5 and any attempted assignment, delegation, transfer or other
       disposition in violation of this Clause shall be void.

<PAGE>

23.    ENTIRE AGREEMENT

       This Agreement (together with any documents referred to herein)
       constitutes the whole agreement between the Shareholders and supersedes
       any previous agreements, arrangements or understandings between them
       relating to the subject matter hereof including but not limited to the
       Shareholders Agreement dated 12 January 1999 as amended prior to the date
       hereof. Each of the Shareholders acknowledges that it is not relying on
       any statements, warranties or representations given or made by any of
       them relating to the subject matter hereof, save as expressly set out in
       this Agreement. This Agreement may be executed in counterparts, each of
       which shall constitute an original, but all of which when taken together
       shall constitute a single contract.

24.    VARIATION

       No variation or amendment to this Agreement shall be effective unless in
       writing signed by authorised representatives of each of the Shareholders.

25.    NOTICES

       25.1    Any notice, request, demand or other communication required or
               permitted hereunder shall be in writing and shall be sufficiently
               given if in English, and delivered by hand or sent by prepaid
               registered or certified mail (air mail if international), by
               facsimile or by prepaid international courier of international
               reputation addressed to the appropriate party at the following
               address or to such other address or place as such party may from
               time to time designate:

<PAGE>

      if to FLAG:          FLAG Atlantic Holdings Limited
                           The Emporium Building
                           69 Front Street - 4th Floor
                           Hamilton  HM12, Bermuda
                           Attention:  Chairman and CEO
                           Tel: 1 441 296 0909
                           Fax: 1 441 296 0938

      with a copy to:     FLAG Telecom Limited
                          103 Mount Street - 3rd Floor
                          London  W1Y  5HE
                          U.K.
                          Attention:  General Counsel
                          Tel:  44 171 317 0800
                          Fax: 44 171 317 0808

       if to GTS:         GTS TransAtlantic Holdings, Ltd.
                          Conyers, Dill & Pearman
                          Clarendon House
                          Church Street
                          Hamilton HM11, Bermuda
                          Attention:  Graeme Collis
                          Tel:    1 441 295 1422
                          Fax:    1 441 292 4720

      with a copy to:     GTS
                          Terhulpsesteenweg 6A
                          Hoeilaart 1560
                          Belgium
                          Attention:  Legal Director

<PAGE>

                          Tel:    322 658 5200
                          Fax:    322 658 5100

       25.2    Any notice, request, demand or other communication given or made
               pursuant to Clause 25.1 shall be deemed to have been received (i)
               in the case of hand delivery or courier, on the date of receipt
               as evidenced by a receipt of delivery from the recipient, (ii) in
               the case of mail delivery, on the date which is seven days after
               the mailing thereof and (iii) in the case of transmission by
               facsimile, on the date of transmission with confirmed answer
               back. Each such communication sent by facsimile shall be promptly
               confirmed by notice in writing hand-delivered or sent by courier,
               mail or air mail as provided herein, but failure to send such a
               confirmation shall not affect the validity of such communication.

26.    WAIVER

       No failure of either Shareholder to exercise, and no delay in exercising,
       any right or remedy in respect of any provision of this Agreement shall
       operate as a waiver of such right or remedy.

27.    GOVERNING LAW AND DISPUTE RESOLUTION

       27.1    This Agreement shall be governed by and construed in accordance
               with the laws of England and Wales without regard to the laws of
               England and Wales governing conflicts of laws.

       27.2    Except as otherwise provided herein, any dispute or controversy
               arising under or in connection with this Agreement shall be
               finally settled under the Rules of Arbitration of the
               International Chamber of Commerce by one arbitrator appointed in
               accordance with such Rules. The place of arbitration shall be
               London. The arbitration shall be conducted in English. The
               decision and award resulting from such arbitration shall be final
               and binding on the

<PAGE>

               parties. Judgment upon the arbitration award may be rendered by
               any court of competent jurisdiction, or application may be made
               to such court for a judicial acceptance of the award and an order
               of enforcement. Insofar as permissible under the applicable laws,
               the parties hereby waive all rights to object to any action for
               judgment or execution which may be brought before a court of
               competent jurisdiction on an arbitration award or on a judgment
               rendered thereon. This clause shall not restrict the right of
               either Shareholder to seek injunctive relief, specific
               performance or other equitable relief in any court of competent
               jurisdiction, as provided in Clause 20.

28.    SEVERABILITY

       The invalidity or unenforceability for any reason of any part of this
       Agreement shall not prejudice or affect the validity or enforceability of
       the remainder of this Agreement. If further lawful performance of this
       Agreement or any part of it shall be impossible due to a breach of any
       applicable competition or anti-trust legislation or other applicable law,
       the parties shall forthwith use their best endeavours to agree amendments
       to this Agreement so as to comply with such legislation or other law.

29.    SURVIVAL

       The provisions of Clauses 14, 15, 16, 18, 20, 26 and 27 shall survive the
       termination of this Agreement.

<PAGE>

IN WITNESS WHEREOF the parties have entered into this Agreement the date and
year first above written.

FLAG ATLANTIC HOLDINGS                      GTS TRANSATLANTIC
LIMITED                                     HOLDINGS, LTD.

    /s/ Ed McCormack                           /s/ Steven E. Andrews
By___________________                      By___________________
   Name:    Ed McCormack                      Name:    Steven E. Andrews
   Title:   Chief Financial Officer           Title:   Authorized Signatory

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