Document:

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                                                                   Exhibit 10.42

                        RETROCESSION SETTLEMENT AGREEMENT

         This RETROCESSION SETTLEMENT AGREEMENT ("this Agreement") dated as of
the 7th day of January, 2000, is entered into by and among RELIANCE INSURANCE
COMPANY, a corporation organized under the insurance laws of the Commonwealth of
Pennsylvania ("Reliance"), RELIANCE GROUP HOLDINGS, INC., a corporation
organized under the laws of the State of Delaware, on behalf of itself and each
of its subsidiaries and affiliates ("Reliance Group"), SUN LIFE ASSURANCE
COMPANY OF CANADA, a corporation organized under the insurance laws of Canada
("Sun Life"), PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY, a corporation
organized under the insurance laws of the State of New York, and AMERICAN
PHOENIX LIFE AND REASSURANCE COMPANY, a corporation organized under the
insurance laws of the State of Connecticut (Phoenix Home Life Mutual Insurance
Company and American Phoenix Life and Reassurance Company are referred to
together as "Phoenix"), and COLOGNE LIFE REINSURANCE COMPANY, a corporation
organized under the insurance laws of the State of Connecticut ("Cologne Life")
(Sun Life, Phoenix and Cologne Life individually, a "Retrocessionaire", and
collectively, the "Retrocessionaires").

         WHEREAS, Reliance and each of the insurers (individually, an "Insurer";
collectively, the "Insurers") listed on Exhibit A attached hereto have
heretofore entered into the reinsurance agreements (individually, a "Reinsurance
Agreement"; collectively, the "Reinsurance Agreements") listed on Exhibit A,
pursuant to which Reliance agreed to reinsure, and the Insurers agreed to cede,
certain subject business (as defined in the Reinsurance Agreements); and

         WHEREAS, Reliance is negotiating with certain of the Insurers the
complete and final settlement of their respective obligations under the
Reinsurance Agreements in accordance with the terms of certain Settlement
Agreements (as hereinafter defined) to be entered into between Reliance and such
Insurers; and

         WHEREAS, Reliance asserts that each of the Retrocessionaires has
heretofore entered into one or more of the agreements listed on Exhibit B
(including the Occupational Accident Excess of Loss Whole Account Retrocession,
Burning Cost Premium Protection, and Occupational Disease and Cumulative Trauma
Whole Account Quota Share Reinsurance), pursuant to which, Reliance asserts,
each Retrocessionaire has agreed to reinsure, and Reliance has agreed to
retrocede, certain liabilities under policies issued by the Insurers and
reinsured by Reliance; and

         WHEREAS, the draft contract wordings also listed on Exhibit B were
provided to the Retrocessionaires naming Reliance as a retrocedent pursuant to
which Reliance asserts the Retrocessionaires are obligated to provide
retrocessional coverage to Reliance (the documents listed in Exhibit B are
hereinafter collectively referred to as the "Asserted Retrocession Agreements");
and

         WHEREAS, two of the retrocessionaires, Sun Life and Phoenix, have
commenced arbitration proceedings, inter alia, to rescind certain of the
Asserted Retrocession Agreements; and

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         WHEREAS, Reliance has commenced an arbitration proceeding seeking,
inter alia, a declaration that the Asserted Retrocession Agreements are valid
and enforceable; and

         WHEREAS, this Agreement will enable Reliance, Sun Life, and Phoenix to
avoid the expense and uncertainty of arbitration, litigation, or other
proceedings; and

         WHEREAS, upon the fulfillment of certain conditions (as hereinafter
provided), Reliance and the Retrocessionaires wish to fully and finally settle
their respective obligations to each other under the Asserted Retrocession
Agreements.

         NOW THEREFORE, in consideration of the mutual promises contained herein
and other good and valuable consideration, the parties hereby agree as follows:

                                    ARTICLE I

                               CERTAIN DEFINITIONS

         Section 1.01 Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:

         "Aon" means Aon Re Inc., all subsidiary and affiliated entities, and
all predecessors and successors of Aon Re Inc. or of any subsidiary or
affiliated entity thereof.

         "Asserted Retrocession Agreements" shall have the meaning set forth in
the fourth whereas clause of this Agreement.

         "Closing" and "Closing Date" shall have the meanings set forth in
Section 2.07 hereof.

         "Cologne Life" shall have the meaning set forth in the first paragraph
of this Agreement.

         "Delphi" means Delphi Financial Group, Inc., all subsidiary and
affiliated entities, and all predecessors and successors of Delphi Financial
Group, Inc. or of any subsidiary or affiliated entity thereof.

         "Delphi Release" shall have the meaning set forth in Section 2.04
hereof.

         "Insurer" and "Insurers" shall have the meanings set forth in the first
whereas clause of this Agreement.

         "Measured Cost " shall have the meaning set forth in Section 6.01(a)
hereof.

         "Phoenix" shall have the meaning set forth in the first paragraph of
this Agreement.

         "Quota Share Retrocession Agreement" means that agreement by which
Reliance Standard Life, Safety National, and Lumbermens Mutual Casualty Company
agreed to reinsure, and Reliance agreed to retrocede, certain policy liabilities
under reinsurance policies underwritten by Unicover on behalf of Reliance, and
which agreement bears an effective date of April 1, 1998.

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         "Rattner" means Rattner Mackenzie Limited, all subsidiary and
affiliated entities, and all predecessors and successors of Rattner Mackenzie
Limited or of any subsidiary or affiliated entity thereof.

         "Reinsurance Agreement" and "Reinsurance Agreements" shall have the
meanings set forth in the first whereas clause of this Agreement.

         "Reinsurance Agreement Liability" means, for each Reinsurance
Agreement, the estimated ultimate gross nominal underwriting loss (estimated
ultimate gross premium minus estimated ultimate gross commission minus estimated
ultimate gross claims).

         "Reliance" shall have the meaning set forth in the first paragraph of
this Agreement.

         "Reliance Compensation" shall have the meaning set forth in Section
6.01(b) hereof.

         "Reliance Adjustment" shall have the meaning set forth in Schedule II.

         "Reliance Group" shall have the meaning set forth in the first
paragraph of this Agreement.

         "Reliance Measured Cost" shall have the meaning set forth in Schedule
II.

         "Reliance Recovered Amount from Aon," "Reliance Recovered Amount from
Rattner," "Reliance Recovered Amount from Unicover," and "Reliance Recovered
Amounts," shall have the meanings set forth in Section 6.01(c) hereof.

         "Reliance Release" shall have the meaning set forth in Section 2.03
hereof.

         "Reliance Standard Life" means Reliance Standard Life Insurance
Company.

         "Retrocession Settlement Amount" shall have the meaning set forth in
Section 2.02(a) hereof.

         "Retrocessionaire" and "Retrocessionaires" shall have the meanings set
forth in the first paragraph of this Agreement.

         "Retrocessionaires Adjustment" shall have the meaning set forth in
Schedule III.

         "Retrocessionaires Measured Cost" shall have the meaning set forth in
Schedule III.

         "Retrocessionaires Recovered Amount from Aon," "Retrocessionaires
Recovered Amount from Rattner," "Retrocessionaires Recovered Amount from
Unicover," and "Retrocessionaires Recovered Amounts" shall have the meanings set
forth in Section 6.01(d) hereof.

         "Safety National" means Safety National Casualty Corporation.

         "Settlement Agreement" means an agreement to effect a complete and
final settlement of the respective obligations of Reliance and an Insurer under
the Reinsurance Agreement or

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Agreements between them, and that is contingent, if at all, principally upon a
one-time payment by Reliance to the Insurer.

         "Sun Life" shall have the meaning set forth in the first paragraph of
this Agreement.

         "This Agreement" shall have the meaning set forth in the first
paragraph of this Agreement.

         "Total Reinsurance Agreement Liability" means the sum of the
Reinsurance Agreement Liability for all Reinsurance Agreements listed on Exhibit
A.

         "Unicover" shall mean Unicover Managers, Inc., Unicover Managers LLC,
all affiliates and successors of either of them, and all predecessors and
successors of Unicover Managers, Inc. or Unicover Managers LLC or of any
subsidiary or affiliated entity of any of them.

         "Unicover Business" means all insurance, reinsurance, and
retrocessional transactions, and all other business or transactions of any kind
or character, in which Unicover was involved directly or indirectly, or that are
otherwise related to Unicover in any way, including but not limited to all
transactions of any kind or character involving any of the Reinsurance
Agreements, Settlement Agreements, or Asserted Retrocession Agreements.

                                   ARTICLE II

                       TERMS AND CLOSING OF THIS AGREEMENT

         Section 2.01 Settlement Agreements.

         (a) Reliance shall use commercially reasonable efforts to enter into
Settlement Agreements with each of the Insurers.

         (b) Neither Reliance nor Reliance Group shall pay or accept any
consideration for a Settlement Agreement other than the consideration recited in
that Settlement Agreement. The consideration prohibited by the previous sentence
includes, but is not limited to, any agreements, arrangements, or understandings
that are conditioned upon, or would not have been entered into except in
connection with or consideration of, a Settlement Agreement.

         (c) At the Closing, Reliance shall deliver to each Retrocessionaire a
true and complete copy of each such written Settlement Agreement, and shall
fully disclose, by notice to all Retrocessionaires, all terms of any agreements,
arrangements, or understandings described in Section 2.01(b) or otherwise
related to any Settlement Agreement, whether written or unwritten.

         Section 2.02 Retrocession Settlement Amount.

         (a) If, on or before January 21, 2000, Reliance has reached Settlement
Agreements which taken together cover Reinsurance Agreements aggregating not
less than 95% of the Total Reinsurance Agreement Liability, and subject to the
satisfaction of the conditions precedent stated in Section 4.01, the
Retrocessionaires shall pay to Reliance on the Closing Date an aggregate amount
equal to $281,523,831 (payable severally by Cologne Life, Phoenix and Sun

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Life in the amounts set forth in Exhibit C hereto) (the "Retrocession
Settlement Amount"). Payment of the Retrocession Settlement Amount shall be made
by wire transfer of immediately available funds to a Reliance bank account or
accounts designated in writing by Reliance. For purposes of determining whether
Reliance has satisfied the requirement that it reach by January 21, 2000,
Settlement Agreements covering Reinsurance Agreements aggregating not less than
95% of the Total Reinsurance Agreement Liability, the parties agree that the
percentage figures assigned to each Reinsurance Agreement listed on Exhibit A
shall govern.

         (b) Any payments otherwise due and owing to the Retrocessionaires after
the execution of this Agreement shall be suspended and placed in an interest
bearing fiduciary account until payment of the Retrocession Settlement Amount or
the termination of this Agreement pursuant to Section 9.01. If this Agreement is
terminated pursuant to Section 9.01, then, on the next business day after such
termination, Reliance shall pay the amounts in the fiduciary account to the
Retrocessionaires or their designated agents. Reliance's failure to timely remit
premium to each Retrocessionaire or its agent from the execution date of this
Agreement until the next business day after its termination shall not constitute
a breach or other default under the Asserted Retrocession Agreements. Each
Retrocessionaire may set off against loss payments otherwise due Reliance in
connection with the Reinsurance Agreements all amounts that Reliance deposits
pursuant to this Section 2.02(b) until Reliance remits premium to that
Retrocessionaire upon termination of this Agreement. Notwithstanding the
foregoing, the parties recognize that Phoenix and Sun Life have commenced
arbitration proceedings to rescind the Asserted Retrocession Agreements, have
tendered back to their purported retrocedents all premium received from them and
are not accepting any additional premium from their purported retrocedents;
accordingly this Section 2.02(b) shall not apply to Phoenix and Sun Life.

         Section 2.03 Releases by Reliance, Reliance Group, and
Retrocessionaires. At the Closing, each Retrocessionaire, on the one hand, and
Reliance and Reliance Group, on the other hand, will exchange a fully executed
mutual limited release in the form of Exhibit D (the "Reliance Release").

         Section 2.04 Releases by Retrocessionaires and Delphi, Reliance
Standard Life, and Safety National. At the Closing, each Retrocessionaire, on
the one hand, and Reliance on behalf of Delphi, Reliance Standard Life, and
Safety National, on the other hand, will exchange a fully executed mutual
limited release in the form of Exhibit E (the "Delphi Release"). Following
execution of this Agreement, Cologne Life and Phoenix shall make reasonable
efforts (which efforts, however, shall not involve the payment of money) to
persuade the other members of the Unicover Occupational Accident Reinsurance
Pool, including Connecticut General Life Insurance Company, Reliastar Life
Insurance Company, the Lincoln National Life Insurance Company, and Life
Reassurance Corporation of America, to enter into mutual limited releases with
Safety National, Reliance Standard Life, and Delphi similar in form to Exhibit
E.

         Section 2.05 Delivery of Certificates and Documents by Reliance. At the
Closing, Reliance shall deliver the following to each Retrocessionaire:

         (a) Certificates of responsible officers of Reliance and Reliance Group
confirming to the best of their knowledge after reasonable inquiry (i)
satisfaction of the conditions set forth in Sections 2.01(b), 2.01(c), and
2.02(a) and (ii) that the representations and warranties of Reliance

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and Reliance Group set forth herein are true and correct on the date of the
certificates as if made on such date; and

         (b) Copies of all documents that (i) are in the possession, custody, or
control of Reliance or Reliance Group, or in the possession, custody, or control
of any person or entity from which Reliance or Reliance Group has the practical
ability to obtain the documents without instituting any legal proceedings to do
so, and (ii) relate to, refer to, describe, evidence, or constitute any
Reinsurance Agreement, any Settlement Agreement, the Asserted Retrocession
Agreements, or the Unicover Business, together with certificates of responsible
officers of Reliance and Reliance Group that to the best of their knowledge
after reasonable inquiry they have delivered all such documents and the logs
required by Section 2.05(c). As used in this Agreement, the terms "documents"
and "possession, custody or control" have the same meanings as under Rule 34(a)
of the Federal Rules of Civil Procedure.

         (c) Section 2.05(b) shall not require Reliance to deliver either (i)
documents the disclosure of which would, in the reasonable opinion of Paul,
Weiss, Rifkind, Wharton & Garrison, violate any of the confidentiality
agreements listed on Exhibit F, copies of each of which Reliance has delivered
to the Retrocessionaires, or (ii) documents covered by either the
attorney-client privilege or the protection of documents prepared in
anticipation of litigation or for trial; but under both clauses (i) and (ii)
above, provided that Reliance delivers to each Retrocessionaire a log of all
such confidential documents, whenever created, and a log of all such privileged
or protected documents created prior to March 15, 1999, stating for each such
document on each log the information customarily stated in privilege logs.

         Section 2.06. Payment under Settlement Agreements. Promptly after
receiving payment of the Retrocession Settlement Amount, Reliance shall pay all
amounts payable to Insurers under all Settlement Agreements. By the end of the
third business day after it makes any payment under any Settlement Agreement,
Reliance shall deliver to each Retrocessionaire a certificate of a responsible
officer of Reliance confirming payment of same, together with evidence of such
payment.

         Section 2.07. The Closing. The closing of this Agreement (the
"Closing") shall be held at the offices of Gibson, Dunn & Crutcher LLP, 200 Park
Ave., 48th Floor, New York, New York 10166 or at such other place as the parties
may agree, at 9:30 a.m. on January 21, 2000 (the "Closing Date"), or on such
other date and time as the parties may agree.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

         Section 3.01 Representations and Warranties of Reliance and Reliance
Group. Reliance and Reliance Group each represents and warrants to each
Retrocessionaire that:

         (a) Reliance and Reliance Group each has the corporate power to enter
into this Agreement and to carry out its obligations hereunder. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by the boards of directors of
Reliance and Reliance Group, respectively.

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         (b) This Agreement constitutes a valid and binding obligation of
Reliance and Reliance Group, enforceable in accordance with its terms. No other
corporate proceedings by Reliance or Reliance Group are necessary to authorize
this Agreement or the transactions contemplated hereby.

         (c) Exhibit A is a complete list of all agreements or contracts for
which Reliance or Reliance Group contends that the Asserted Retrocession
Agreements provide Reliance retrocessional reinsurance or any other right of
indemnity.

         (d) Other than as disclosed on Exhibit G to this Agreement, neither
Reliance nor Reliance Group has any retrocessional reinsurance or other
contractual right of indemnity with respect to any of the Reinsurance Agreements
other than as may have been provided by the Retrocessionaires under the Asserted
Retrocession Agreements.

         (e) Reliance has previously delivered to Gibson, Dunn & Crutcher LLP on
behalf of the Retrocessionaires true and complete copies of all written
agreements and arrangements, and has fully disclosed the terms and conditions of
all non-written agreements and arrangements, direct or indirect, between
Reliance Group or any subsidiary thereof and either (i) any Insurer or any
subsidiary or affiliate of each Insurer or (ii) any agent, broker, or other
intermediary, which agreements or arrangements arise out of or are related to
the Unicover Business.

         (f) Based on advice of their respective counsel and actuaries, Reliance
and Reliance Group each believes that the Retrocession Settlement Amount and
other consideration to be given by the Retrocessionaires hereunder is present
fair equivalent value for the releases and other consideration to be given by
Reliance and Reliance Group hereunder.

         (g) Except as set forth in Exhibit H, no Settlement Agreement that
Reliance has reached to date with any Insurer will lapse or is otherwise
terminable before January 21, 2000.

         Section 3.02 Representations and Warranties of Retrocessionaires. Each
Retrocessionaire severally represents and warrants to each of Reliance and
Reliance Group that:

         (a) Such Retrocessionaire has the corporate power to enter into this
Agreement and to carry out its obligations hereunder. The board of directors of
each Retrocessionaire has authorized the officer signing this agreement on
behalf of that Retrocessionaire to do so and evidence of such authority has been
provided to Reliance.

         (b) This Agreement constitutes a valid and binding obligation of such
Retrocessionaire, enforceable in accordance with its terms. No other corporate
proceedings by such Retrocessionaire are necessary to authorize this Agreement
or the transactions contemplated hereby.

                                   ARTICLE IV

                              CONDITIONS PRECEDENT

         Section 4.01 Conditions Precedent to Certain Obligations of each
Retrocessionaire. The obligations of each Retrocessionaire under Sections 2.02,
2.03, and 2.04 of this Agreement shall

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be subject to the satisfaction, as of the Closing Date, of the following
conditions (any or all of which may be waived in whole or in part by each
Retrocessionaire):

         (a) Delivery to each Retrocessionaire of the Reliance Release duly
executed by Reliance and Reliance Group;

         (b) Delivery to each Retrocessionaire of the Settlement Agreements
described in Section 2.01(c);

         (c) Delivery to each Retrocessionaire of all certificates and documents
described in Section 2.05;

         (d) Delivery to each Retrocessionaire of the Delphi Release duly
executed by Delphi, Reliance Standard Life, and Safety National;

         (e) Delivery to each Retrocessionaire of copies of all agreements
pursuant to which Safety National or Reliance Standard Life paid Reliance as
described in Section 4.02(d) below, or pursuant to which any of Safety National,
Reliance Standard Life, or Delphi released Reliance, or Reliance released any of
Safety National, Reliance Standard Life, or Delphi from any claim arising out of
or related to the Unicover Business;

         (f) Delivery to each Retrocessionaire of a certificate of an officer of
Reliance confirming that all conditions stated in Section 4.01(e) have been
satisfied;

         (g) Delivery to each Retrocessionaire of copies of all agreements
pursuant to which Aon returned funds to Reliance as described in Section 4.02(e)
below, Aon paid Reliance as described in Section 4.02(f) below, or pursuant to
which Aon and Reliance or Reliance Group released each other from any claim
arising out of or related to the Unicover Business;

         (h) Delivery to each Retrocessionaire of a certificate of an officer of
Reliance confirming that all conditions stated in Section 4.01(g) have been
satisfied; and

         (i) Delivery to each Retrocessionaire of a certificate of an officer of
Reliance confirming that all conditions stated in Sections 4.02(d), 4.02(e), and
4.02(f) have been satisfied.

         Section 4.02 Conditions Precedent to Certain Obligations of Reliance
and Reliance Group. The obligations of Reliance and Reliance Group under
Sections 2.01(c), 2.03, 2.04, and 2.05 of this Agreement shall be subject to the
satisfaction, as of the Closing Date, of the following conditions (any or all of
which may be waived in whole or in part by Reliance or Reliance Group):

         (a) Receipt by Reliance of the Retrocession Settlement Amount;

         (b) Delivery to Reliance and Reliance Group of the Reliance Release
duly executed by each Retrocessionaire;

         (c) Delivery to Reliance and Reliance Group of the Delphi Release duly
executed by each Retrocessionaire;

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         (d) Receipt by Reliance from Safety National and Reliance Standard Life
of substantially all of the funds, fees, or other compensation or consideration
that Safety National and Reliance Standard Life received relating to the
Reinsurance Agreements (which funds, fees, or other compensation or
consideration Reliance estimates to have been $58,113,432);

         (e) Receipt by Reliance from Aon of any funds Aon may be holding in any
capacity (including broker for Insurers, broker of the Asserted Retrocession
Agreements, but only to the extent applicable to the Reinsurance Agreements, and
broker of the Quota Share Retrocession Agreement) relating to the Reinsurance
Agreements (which funds Reliance estimates to be $31,123,084); and

         (f) Receipt by Reliance from Aon of substantially all of the
commissions, fees, brokerage, or other compensation or consideration that Aon
received in any capacity (including broker for Insurers, broker of the Asserted
Retrocession Agreements, but only to the extent applicable to the Reinsurance
Agreements, and broker of the Quota Share Retrocession Agreement) in connection
with the Reinsurance Agreements (which commissions, fees, brokerage, or other
compensation or consideration Reliance estimates to have been $25,639,383).

                                    ARTICLE V

                TERMINATION OF ASSERTED RETROCESSION AGREEMENTS;
                            DISMISSAL OF PROCEEDINGS

         Section 5.01 Termination of Agreements. Effective upon payment in full
of the Retrocession Settlement Amount, and without execution or delivery of any
other document: (a) no Retrocessionaire shall have any further obligation
whatsoever (including, but not limited to, obligations in law or equity, which
exist or may in the future exist, whether known or unknown to any party, and
whether concealed or unconcealed) to Reliance or Reliance Group arising out of
or related to any of the Asserted Retrocession Agreements or any other agreement
arising out of or related to Unicover Business, other than this Agreement,
except that this Section 5.01 does not extend to or affect any liabilities or
obligations of Phoenix or Cologne Life with respect to reinsurance business
ceded by Reliance to the Unicover Occupational Accident Reinsurance Pool; and
(b) Reliance and Reliance Group shall have no further obligation whatsoever
(including, but not limited to, obligations in law or equity, which exist or may
in the future exist, whether known or unknown to any party, and whether
concealed or unconcealed) to any Retrocessionaire under any of the Asserted
Retrocession Agreements.

         Section 5.02. Dismissal of Proceedings. Immediately after the Closing,
Reliance, Sun Life, and Phoenix will cause their respective attorneys to
execute, deliver, and file documents substantially in the form attached as
Exhibit I.

                                   ARTICLE VI

                         SHARING OF COSTS AND RECOVERIES

         Section 6.01 Definitions.

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         (a) The "Measured Cost" as of any given date shall mean (i) the total
cash consideration that Reliance has then actually paid in consideration of all
Settlement Agreements, minus (ii) $56,523,831, and minus (iii) the Reliance
Compensation.

         (b) "Reliance Compensation" shall mean all funds, fees, and other
compensation or consideration that Reliance received in connection with the
Reinsurance Agreements, minus amounts Reliance actually paid to Unicover in
connection with the Reinsurance Agreements (but amounts that Reliance has set
aside in a segregated account shall not be deemed paid to Unicover unless and
until Unicover actually receives them), minus amounts Reliance actually paid and
the Retrocessionaires or their managing general underwriters actually received
in connection with the Asserted Retrocession Agreements, minus amounts that
Reliance actually paid and that Aon or Rattner actually received as
retrocessional commissions, fees, brokerage or other compensation or
consideration in connection with the Asserted Retrocession Agreements.

         (c) In the event and to the extent that Reliance or Reliance Group
recovers from Aon, Rattner, or Unicover, whether by agreement, litigation,
arbitration, settlement, or otherwise, any amounts on account of or otherwise
reasonably allocable to any Reinsurance Agreement or the Asserted Retrocession
Agreements, then the recovered amount, net of reasonable attorneys fees and
other out-of-pocket expenses of collection actually paid to third parties, shall
be: (i) if recovered from Aon, a "Reliance Recovered Amount from Aon," (ii) if
recovered from Rattner, a "Reliance Recovered Amount from Rattner," and (iii) if
recovered from Unicover, a "Reliance Recovered Amount from Unicover" (but
amounts that Reliance has set aside in a segregated account and not actually
paid to Unicover shall in no event be deemed a Reliance Recovered Amount from
Unicover), provided that the Reliance Recovered Amount from Aon shall not exceed
$13,705,357, the Reliance Recovered Amount from Rattner shall not exceed the
total amount that Reliance actually paid and that Rattner actually received as
retrocessional commissions, fees, brokerage or other compensation or
consideration in connection with the Asserted Retrocession Agreements, and the
Reliance Recovered Amount from Unicover shall not exceed the total amount that
Reliance paid Unicover in fees and other compensation related to the Reinsurance
Agreements. "Reliance Recovered Amounts" shall be the sum of the "Reliance
Recovered Amount from Aon," the "Reliance Recovered Amount from Rattner," and
the "Reliance Recovered Amount from Unicover."

         (d) In the event and to the extent that any Retrocessionaire recovers
from Aon, Rattner, or Unicover, whether by agreement, litigation, arbitration,
settlement, or otherwise, any amounts on account of or otherwise reasonably
allocable to any Reinsurance Agreement or the Asserted Retrocession Agreements,
but as to the latter only to the extent applicable and reasonably allocable to
the Reinsurance Agreements, then the recovered amount, net of reasonable
attorneys fees and other out-of-pocket expenses of collection actually paid to
third parties, shall be (i) if recovered from Aon, a "Retrocessionaires
Recovered Amount from Aon," (ii) if recovered from Rattner, a "Retrocessionaires
Recovered Amount from Rattner," and (iii) if recovered from Unicover, a
"Retrocessionaires Recovered Amount from Unicover," provided that the
Retrocessionaires Recovered Amount from Aon shall not exceed $13,705,357 minus
the Reliance Recovered Amount from Aon; the Retrocessionaires Recovered Amount
from Rattner shall not exceed the total amount that Reliance actually paid and
that Rattner actually received as retrocessional commissions, fees, brokerage or
other compensation or consideration in connection with the Asserted Retrocession
Agreements minus the Reliance Recovered Amount

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from Rattner; and the Retrocessionaires Recovered Amount from Unicover shall not
exceed the total amount that Reliance paid Unicover in fees and other
compensation related to the Reinsurance Agreements minus the Reliance Recovered
Amount from Unicover. "Retrocessionaires Recovered Amounts" shall be the sum of
the "Retrocessionaires Recovered Amount from Aon," the "Retrocessionaires
Recovered Amount from Rattner," and the "Retrocessionaires Recovered Amount from
Unicover."

         Section 6.02 Sharing of Costs and Recoveries by Reliance and the
Retrocessionaires. On or before the 15th day after the end of each calendar
quarter starting with the quarter ending March 31, 2000, and for as long as
necessary thereafter, Reliance will pay the Retrocessionaires and the
Retrocessionaires will pay Reliance amounts computed in accordance with
Schedules I, II, and III to this Agreement. On each of those dates, whether or
not a payment is required, each party will submit to each other party a
certificate of a responsible officer attesting to the correct amount of the
then-current Measured Cost, Reliance Recovered Amounts, Retrocessionaires
Recovered Amounts, as applicable; providing all pertinent underlying amounts and
calculations; and attaching copies of all pertinent underlying documentation
(for example, agreements, awards, or judgments under which amounts may have been
recovered from Aon, Rattner, or Unicover).

         Section 6.03 Allocation of Costs and Recoveries between the
Retrocessionaires. The total payments by all Retrocessionaires to Reliance under
Section 6.02 and Schedules I, II, and III shall be divided between the
Retrocessionaires in the same proportion as the Retrocessionaires Recovered
Amounts that each Retrocessionaire recovered shall bear to the total
Retrocessionaires Recovered Amounts that all Retrocessionaires recovered, in
each case irrespective of whether recovered from Aon, Rattner, or Unicover, but
for purposes of this Section 6.03 Retrocessionaires Recovered Amounts shall be
computed without regard to the proviso in Section 6.01(d). Payments by Reliance
to the Retrocessionaires up to the total amount that all Retrocessionaires have
then paid Reliance under Section 6.02 shall be made so as to achieve the
proportion described in the previous sentence, and any payments by Reliance to
the Retrocessionaires above that amount shall be made in the proportions stated
in Exhibit J.

                                   ARTICLE VII

             AUDITS; COOPERATION; ACCESS TO DOCUMENTS AND EMPLOYEES

         Section 7.01 Audit of Reliance Documents Relating to Settlement
Agreements. The Retrocessionaires shall have the right to conduct reasonable
audits, no less often than annually, of all documents in the possession,
custody, or control of Reliance or Reliance Group that relate in any way to any
Settlement Agreement, the consideration therefor, any agreement, arrangement, or
understanding described in Section 2.01(b), or Reliance's payment under any
Settlement Agreement. Reliance shall not execute any Settlement Agreement the
terms of which do not permit Reliance to disclose to the Retrocessionaires all
documents relating thereto, as required by this Section 7.01. Reliance and
Reliance Group shall make all such documents available for inspection and
copying by the Retrocessionaires or their agents during normal business hours at
its offices in New York, New York.

         Section 7.02 Cooperation and Access to Employees.

                                       11
<PAGE>

         (a) Reliance and Reliance Group will extend to each Retrocessionaire,
at the expense of Reliance or Reliance Group (except that each Retrocessionaire
agrees to reimburse Reliance or Reliance Group for all reasonable out-of-pocket
expenses for travel and other incidentals, but not for compensation of its
employees, that Reliance or Reliance Group incurs at the request of that
Retrocessionaire), all reasonable cooperation in connection with any litigation
or arbitration relating to the Unicover Business. This cooperation will include,
but not be limited to, making available to each Retrocessionaire (but where
reasonably practicable Sun and Phoenix shall participate jointly), for a
reasonable time, each employee of Reliance or Reliance Group (other than the
attorneys named on a separate schedule agreed to by the parties, each of whom
Reliance and Reliance Group represent to be a member of the legal departments of
Reliance or Reliance Group) with knowledge of matters reasonably relevant to the
Unicover Business (excluding the negotiation and consummation of this
Agreement), upon reasonable notice and during normal business hours, to be
interviewed and to prepare for and participate in arbitration or litigation
proceedings relating to the Unicover Business. Reliance and Reliance Group
further agree that they will cooperate with any reasonable efforts of the
Retrocessionaires to obtain access to former employees of Reliance or Reliance
Group regarding such arbitration or litigation proceedings. This cooperation
will also include promptly giving each Retrocessionaire copies of all documents
described in Section 2.05(b) that come into the possession, custody, or control
of Reliance or Reliance Group after the date of this Agreement, subject to the
same requirements, conditions, and limitations set forth in Section 2.05(c).

         (b) Reliance and Reliance Group will extend to each Retrocessionaire
all reasonable cooperation in any litigation, arbitration, or other proceeding
that any Retrocessionaire may reasonably think necessary or desirable to enforce
any right of Reliance or Reliance Group to documents in the possession, custody,
or control of Aon, Rattner, or Unicover. This cooperation shall include, but not
be limited to, the execution of powers of attorney designating each
Retrocessionaire, or any of them, to prosecute such proceedings against Rattner
or Unicover on behalf of Reliance and Reliance Group and assignments to each
Retrocessionaire, or any of them, of all rights (to the maximum extent
assignable) of Reliance and Reliance Group to documents in the possession,
custody, or control of Aon, Rattner, or Unicover. If documents are received from
Aon, Rattner, or Unicover as a result of any such proceeding, Reliance and
Reliance Group shall immediately give each Retrocessionaire copies of all such
documents unless, in the reasonable opinion of Paul, Weiss, Rifkind, Wharton &
Garrison, such disclosure would violate a confidentiality agreement that is
binding upon Reliance. In the event such a determination is made by Paul, Weiss,
Rifkind, Wharton & Garrison, Reliance shall promptly identify the applicable
confidentiality agreement to each Retrocessionaire and shall promptly provide a
log to each Retrocessionaire of each confidential document, stating for each
such document the information customarily stated in privilege logs.

         (c) Reliance and Reliance Group will not enter into any confidentiality
agreement that would reduce or limit their rights to disclose any documents to
the Retrocessionaires.

                                  ARTICLE VIII

                           CONFIDENTIALITY; PUBLICITY

         Section 8.01 Confidentiality.

                                       12

<PAGE>

         (a) This Agreement and its terms shall remain confidential and shall
not be disclosed to any person other than the parties hereto, provided, however,
that each party may disclose this Agreement and its terms (i) to its directors,
officers, employees, and attorneys, and those of its parent company, who have a
legitimate need to know such information, (ii) to its accountants and other
professional advisors who have a legitimate need to know such information, (iii)
to rating agencies, (iv) to regulatory agencies, (v) as required by law
(including, without limitation, pursuant to any insurance or securities law or
any legal, regulatory or legislative proceeding), but only after giving the
other parties notice of such proposed disclosure as far in advance as practical,
and (vi) in the case of the Retrocessionaires only, to their retrocessionaires
on the Unicover Business. The disclosing party shall inform the person or entity
obtaining this Agreement or any information about its terms of the confidential
nature of the terms of this Agreement and its terms and the need to maintain
that confidentiality. In the event that disclosure of the Agreement itself is
made pursuant to subsections (ii) or (vi) above, the disclosing party shall
first obtain a signed confidentiality agreement substantially in the form of
Exhibit K to this Agreement. In the event that disclosure of the Agreement
itself is made pursuant to subsections (iv) or (v) above, the disclosing party
will make reasonable efforts to file any copy of this Agreement under seal.

         (b) Reliance and each Retrocessionaire may disclose material terms of
this Agreement, but not a copy of the Agreement itself, to Aon, Delphi, Safety
National, or Reliance Standard, but only for the purpose of obtaining from the
recipient the return of funds, fees, commissions, brokerage, or other
compensation or consideration in respect of or otherwise attributable to the
Reinsurance Agreements, provided that the proposed recipient has first signed a
confidentiality agreement substantially in the form of Exhibit L.

         (c) With the prior approval of the Retrocessionaires, which they will
not unreasonably withhold, Reliance may disclose material terms of this
Agreement, but not a copy of the Agreement itself, to Insurers or brokers for
Insurers, but only for the purposes of negotiating Settlement Agreements or of
obtaining from the recipient the return of funds, fees, commissions, brokerage,
or other compensation or consideration in respect of or otherwise attributable
to the Reinsurance Agreements, provided that the proposed recipient has first
signed a confidentiality agreement substantially in the form of Exhibit L.

         (d) Reliance Group may disclose either the terms or a copy of this
Agreement to any potential material investor in or acquirer of Reliance Group
(i) that is conducting a due diligence investigation of Reliance Group, (ii)
that has signed a confidentiality agreement with Reliance Group that covers this
Agreement and the terms thereof and obligates the recipient to use that
information for the sole purpose of evaluating a possible material investment in
or acquisition of Reliance Group, and (iii) to which Reliance Group has
disclosed information that is, in the reasonable opinion of the chief financial
officer of Reliance Group, Reliance Group's own most sensitive and confidential
information.

         Section 8.02 Publicity.

         (a) Each party to this Agreement, on behalf of itself and its
respective subsidiaries, directors, officers, and employees, covenants that it
shall not issue any press release or make any other statement that contains or
might reasonably be deemed to imply any

                                       13
<PAGE>

disparaging remarks concerning another party to this Agreement or make
statements that present another party to this Agreement in a negative context
with respect to the Reinsurance Agreements, Settlement Agreements, Asserted
Retrocession Agreements, or Unicover Business, provided, however, that nothing
herein will prohibit any party from making any statement to the extent that such
party reasonably determines upon advice of counsel that such statement is
required by law.

         (b) If any party to this Agreement contemplates any public release or
announcement about this Agreement, the party contemplating such a release or
announcement will send the other parties to this Agreement the text of the
proposed release or announcement a reasonable time in advance of its issuance.

                                   ARTICLE IX

                               GENERAL PROVISIONS

         Section 9.01 Termination. In the event that, as of 11:59 p.m., Eastern
Standard Time, on January 21, 2000, any condition precedent stated in Section
4.01 has not been either satisfied or waived by each Retrocessionaire, then any
Retrocessionaire may terminate this Agreement by notice to all other parties. In
the event that, as of 11:59 p.m., Eastern Standard Time, on January 21, 2000,
any condition precedent stated in Section 4.02 has not been either satisfied or
waived by each of Reliance and Reliance Group, then either Reliance or Reliance
Group may terminate this Agreement by notice to all other parties. If any party
so terminates this Agreement, then (i) this Agreement shall terminate and the
rights, duties, and obligations hereunder of the parties hereto and of their
respective directors, officers, employees, agents, representatives, successors
or assigns, shall be void ab initio and (ii) this Agreement shall be deemed to
have been made solely for purposes of settlement, and no party shall refer to
this Agreement or the fact that any party executed it in any subsequent legal
proceeding. Notwithstanding the foregoing, (x) no termination of this Agreement
pursuant to this Section 9.01 shall eliminate any liability of the parties
hereto with respect to any breaches hereof arising before such termination and
(y) the provisions of Section 8.01 of this Agreement relating to the obligations
of the parties hereto to keep information confidential shall survive the
termination of this Agreement.

         Section 9.02 Entire Agreement. This Agreement and its schedules and
exhibits constitutes the entire agreement between the parties with respect to
the transactions contemplated hereby, and supersedes all prior agreements and
understandings, written and oral, among the parties with respect to the subject
matters hereof. Any amendment or modification hereto shall be null and void
unless made in writing by amendment to this Agreement and executed by all
parties.

         Section 9.03 Governing Law. This Agreement shall be governed by,
interpreted under and construed in accordance with New York law, without regard
to conflicts or choice of laws principles.

         Section 9.04. Arbitration.

                                       14
<PAGE>

         (a) Any dispute or claim arising out of or relating to this Agreement,
including its formation and validity, shall be referred to arbitration.
Arbitration shall be initiated by the delivery, by mail, facsimile, or other
reliable means, of a written demand for arbitration by one party or the other.
The arbitration shall be held in New York, New York, or such other place as the
parties may mutually agree.

         (b) For purposes of any arbitration between one or both of Reliance and
Reliance Group, on the one hand, and one or more of the Retrocessionaires, on
the other hand, Reliance and Reliance Group shall be one party and the
Retrocessionaires together shall be one party.

         (c) Arbitration shall be conducted before a three-person Arbitration
Panel appointed as follows. Each party shall appoint one arbitrator, and the two
arbitrators so appointed shall then appoint an impartial Umpire before
proceeding. If either party fails to appoint an arbitrator within thirty (30)
days after it receives a written request by the other party to do so, the other
party may appoint an arbitrator for it. Should the two party appointed
arbitrators fail to choose an Umpire within thirty (30) days of the appointment
of the second arbitrator, each arbitrator shall propose three names, of whom the
other shall strike two, and the decision shall be made from the remaining two by
drawing lots. The arbitrators and Umpire shall be present or former executives
or officers of insurance or reinsurance companies or shall be arbitrators
certified by ARIAS-U.S. The arbitrators and Umpire shall have no financial
interest in the outcome of the arbitration.

         (d) The arbitrators and Umpire shall interpret this Agreement under New
York law. They may permit or order such discovery, if any, as they think
appropriate and may conduct the hearing of the arbitration by written
submissions, oral testimony, or any combination thereof as they think
appropriate.

         (e) The decision of a majority of the Arbitration Panel shall be final
and binding, except to the extent otherwise provided in the Federal Arbitration
Act. The Arbitration Panel shall render its award in writing. Judgment upon the
award may be entered in any court having jurisdiction, pursuant to the Federal
Arbitration Act. Unless the Arbitration Panel orders otherwise, each party shall
pay: (1) the fees and expenses of its own arbitrator, and (2) an equal share of
the fees and expenses of the Umpire and of the other expenses of the
arbitration.

         (f) It is the intent and desire of the parties that any arbitration
under this Section 9.04 should be concluded and an award rendered as
expeditiously as reasonably possible and that the arbitrators should schedule
and conduct the arbitration accordingly.

         Section 9.05 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement shall
become effective when one or more counterparts have been signed by each party
hereto and delivered to the other parties hereto. For purposes of the foregoing,
a facsimile of a signed counterpart shall constitute an original, and delivery
of a facsimile signature shall be effective.

         Section 9.06 No Third Party Beneficiaries. Nothing in this Agreement is
intended or shall be construed to give any person, other than the parties
hereto, any legal or equitable right, remedy or claim under or in respect of
this Agreement or any provision contained herein.

                                       15
<PAGE>

         Section 9.07 Assignment. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective successors and assigns
and legal representatives. This Agreement is not assignable except by operation
or law or by mutual written consent of the parties.

         Section 9.08 Waivers. The terms of this Agreement may be waived only by
a written instrument signed by the party waiving compliance. No delay on the
part of any party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof; nor shall any waiver on the part of any party of
any right, power, privilege, nor any single or partial exercise of any such
right, power or privilege, preclude any further exercise thereof or the exercise
of any other such right, power or privilege.

         Section 9.09 Currency. All payments hereunder shall be in United States
Dollars. All monetary amounts referred to herein are in United States Dollars.
All reports and accounts hereunder shall be rendered in United States Dollars.

         Section 9.10 Headings. The headings in this Agreement are for the
convenience of reference only and shall not affect its interpretation.

         Section 9.11 Preparation. This Agreement is the product of informed
arms-length negotiations between the parties hereto and competent counsel of
their choice, and may involve compromises of previously asserted positions. This
Agreement has been jointly prepared by the parties hereto and the terms hereof
will not be construed in favor of or against any party to this Agreement by
reason of its participation in such preparation. By executing this Agreement, no
party is conceding liability, and this Agreement shall not be construed as an
admission of any kind relating to any claim, liability or obligation relating to
the Asserted Retrocession Agreements.

         Section 9.12 Notices. All notices, requests, demands, approvals and
other communications under this Agreement shall be in writing and shall be
delivered personally; by facsimile transmission; by certified, registered or
express mail, postage prepaid; or by a recognized overnight courier service. Any
such notice or other communication shall be deemed given upon actual delivery if
actually delivered during normal business hours, and at the beginning of the
next business day if actually delivered outside normal business hours, in each
case to the following addresses:

                           If to Reliance
                           or Reliance Group:  Lowell Freiberg
                                               Chief Financial Officer
                                               Executive Vice President
                                               Reliance Group Holdings
                                               55 East 52nd Street, 29th Floor
                                               New York, New York 10055
                                               Tel: (212) 909-1160
                                               Fax: (212) 909-1864

                                               with copies to:

                                       16
<PAGE>

                                               Jeffrey A. Welikson, Esq.
                                               Reliance National
                                               77 Water Street, 21st Floor
                                               New York, New York 10005
                                               Tel: (212) 858-3862
                                               Fax: (212) 858-9118

                                               and

                                               Howard E. Steinberg, Esq.
                                               Reliance Group Holdings
                                               55 East 52nd Street, 29th Floor
                                               New York, New York 10055
                                               Tel: (212) 909-1136
                                               Fax: (212) 909-1241

                                               and

                                               Brad S. Karp, Esq.
                                               Claudia Hammerman, Esq.
                                               Paul, Weiss, Rifkind, Wharton
                                               & Garrison
                                               1285 Avenue of the Americas
                                               New York, New York 10019
                                               Tel: (212) 373-3000
                                               Fax: (212) 757-3990

                           If to Sun Life:     Sun Life Assurance Company of
                                               Canada
                                               150 King Street West
                                               Toronto, Ontario, M5H 1J9
                                               Canada

                                               Attention: Senior Vice-President
                                               and Chief Legal Officer
                                               Tel: (416) 979-4024
                                               Fax: (416) 260-8318

                                               and

                                               Attention: Vice President &
                                               General Manager, Reinsurance
                                               Tel: (416) 979-6059
                                               Fax: (416) 585-9908

                                               with copies to:

                                       17
<PAGE>

                                               Peter R. Chaffetz, Esq.
                                               Chadbourne & Parke LLP
                                               30 Rockefeller Plaza
                                               New York, New York 10112
                                               Tel: (212) 408-2335
                                               Fax: (212) 541-5369

                           If to Phoenix:      Dona D. Young, Esq.
                                               Phoenix Home Life Mutual
                                               Insurance Company
                                               One American Row
                                               Hartford, Connecticut 06115
                                               Tel: (860) 403-5967
                                               Fax: (860) 403-5543

                                               with copies to:

                                               Alan J. Levin, Esq.
                                               Edwards & Angell, LLP
                                               90 State House Square
                                               Hartford, Connecticut 06103
                                               Tel: (860) 541-7747
                                               Fax: (860) 527-4198

                         If to Cologne Life:   Charles F. Barr, Esq.
                                               Cologne Life Reinsurance Company
                                               Financial Centre
                                               Post Office Box 10351
                                               Stamford, Connecticut 06904-2351
                                               Tel: (203) 328-5506
                                               Fax: (203) 328-5877

                                               with copies to:

                                               David J. Grais, Esq.
                                               Gibson, Dunn & Crutcher LLP
                                               200 Park Avenue

                                       18
<PAGE>

                                               New York, New York 10166
                                               Tel: (212) 351-4087
                                               Fax: (212) 351-5229

         Any party may, by notice given in accordance with this Agreement to the
other parties, designate another address, fax number or person for receipt of
notices hereunder.

         IN WITNESS WHEREOF, and intending to be legally bound, the parties have
executed this Agreement by their duly authorized representatives on the date(s)
so indicated.

RELIANCE INSURANCE COMPANY

By: /s/ Lowell C. Freiberg
   --------------------------
Name:   Lowell C. Freiberg
Title:  Senior Vice-sPresident
Date:   January 7, 2000

RELIANCE GROUP HOLDINGS, INC.

By: /s/ Lowell C. Freiberg
   --------------------------
Name:   Lowell C. Freiberg
Title:  Executive Vice President
Date:   January 7, 2000

SUN LIFE ASSURANCE COMPANY OF CANADA

By: /s/ Thomas A. Bogart                    By: /s/ Robin E. Fitzgerald
   --------------------------                  --------------------------
Name:  Thomas A. Bogart                     Name:  Robin E. Fitzgerald
Title: SVP & Chief Legal Officer            Title: VP & GM, Reinsurance
Date:  January __, 2000                     Date:  January __, 2000

PHOENIX HOME LIFE MUTUAL INSURANCE COMPANY

By: /s/ Dona D. Young
   --------------------------
Name:   Dona D. Young
Title:  Executive Vice President, Individual Insurance and General Counsel
Date:   January 7, 2000

AMERICAN PHOENIX LIFE AND REASSURANCE COMPANY

By: /s/ David W. Searfoss
   --------------------------

                                       19
<PAGE>
Name:   David W. Searfoss
Title:  Vice President and Chief Financial Officer
Date:   January 7, 2000

COLOGNE LIFE REINSURANCE COMPANY

By: /s/ Charles F. Barr
   --------------------------
Name:   Charles F. Barr
Title:  Assistant General Counsel
Date:   January 7, 2000

                                       20<PAGE>

                                                                  EXECUTION COPY

                              EMPLOYMENT AGREEMENT

            EMPLOYMENT AGREEMENT (this "Agreement"), dated as of August 10, 1999
(the "Commencement Date"), by and between RSL Communications, Ltd., a Bermuda
company (the "Company"), and David Hardwick ("Executive").

                              W I T N E S S E T H:
                              - - - - - - - - - -

            WHEREAS, RSL COM Europe, Ltd. ("RSL Europe"), a subsidiary of the
Company, and Executive are parties to an Employment Agreement, dated as of
August 21, 1997 (the "Old Employment Agreement"), a Stock Unit Award Agreement,
entered into as of October 1, 1997, pursuant to which Executive was initially
granted 5,764.29 restricted units at an initial value of $0.15 per unit (the
"Existing Award Agreement"), and a Stock Unit Award Agreement, entered into as
of October 1, 1997, pursuant to which Executive was granted 5,764.29 restricted
units at an initial value per stock unit based on capital invested in RSL Europe
(the "Old Award Agreement", and together with the Old Employment Agreement, the
"Old Agreements");

            WHEREAS, the Company and Executive desire to modify the terms of
Executive's employment with the Company and to terminate the Old Agreements upon
the execution and delivery of this Agreement and to keep in place the Existing
Award Agreement (a copy of which is attached hereto as Exhibit A);

            WHEREAS, this Agreement shall set out the terms and conditions of
Executive's employment by the Company from and after the Commencement Date; and

            WHEREAS, the Executive desires to continue in the employment of the
Company from and after the Commencement Date under those terms and conditions;

            NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the Company and Executive hereby agree as follows:

1.    Employment.

      (a) Agreement to Employ. Upon the terms and subject to the conditions of
this Agreement, the Company hereby employs Executive, and Executive hereby
accepts continued employment by the Company.

      (b) Term of Employment. The Company shall employ Executive for a term (the
"Term") commencing on the Commencement Date and ending August 1, 2002,

<PAGE>
unless extended by a written agreement signed by both parties. The period
commencing on the Commencement Date and ending on the earlier of (i) the
expiration of the Term, or (ii) the date of Executive's termination of
employment pursuant to Section 5(a) shall be referred to as the "Employment
Period." If the Employment Period or any extension thereof expires without being
renewed, the Executive agrees not to bring any claim for a redundancy payment or
for unfair dismissal.

2.    Position and Duties.

      (a) In general. Executive shall be employed as Vice President - Global
Network Services of the Company and shall perform such duties and services,
consistent with such position for the Company, as may be assigned to him from
time to time by the Company's Chief Operating Officer (the "COO"). The duties of
the Executive shall include serving as an officer or director or otherwise
performing services for any "Affiliate" of the Company as requested by the
Company. An "Affiliate" of the Company means any entity that controls, is
controlled by or is under common control with the Company. Executive shall
report to the COO. Executive's principal office shall be located in the London,
England metropolitan area.

      (b) Full-time employment. During the Employment Period, Executive shall
devote his full business time to the services required of him hereunder, except
for time devoted to services required by him to be performed for any "Affiliate"
of the Company, vacation time and reasonable periods of absence due to sickness,
personal injury or other disability, and shall use his best efforts, judgement,
skill and energy to perform such services in a manner consonant with the duties
of his position and to improve and advance the business and interests of the
Company. Executive shall not be engaged in any other business activity which, in
the reasonable judgment of the COO, conflicts with the duties of the Executive
under this Agreement and shall not serve on the Board of Directors of any other
company. Executive shall travel to such location or locations as may be
requested by the Company, or which Executive believes is necessary or advisable,
in the performance by Executive of his duties hereunder or to the extent
appropriate to improve and advance the interests of the Company and its
Affiliates. There is no formal disciplinary procedure, but Executive is expected
at all times to behave in a manner befitting his employment.

3.    Compensation.

      (a) Base Salary. During the Employment Period, the Company shall pay
Executive a base salary at the annual rate of 150,000 pounds sterling; provided
that, Executive's annual base salary shall be increased as of January 1 of each
year, commencing January 1, 2001, by an amount equal to the base salary then in
effect, multiplied by the percentage increase in the Cost of Living Index during
the preceding

                                       2
<PAGE>
year. The "Cost of Living Index" means the Retail Prices Index for
the London metropolitan area published by the Office of National Statistics for
the preceding 12 month period, or if such index is no longer available, such
other generally available index measuring changes in consumer purchasing power
(in the London metropolitan area or nationally) designated by the Board of
Directors. Any delay in increase in Executive's annual base salary by reason of
the unavailability of any such index at the time any such increase shall
otherwise be due shall be made up by a lump sum payment promptly after the index
becomes available. Executive's salary, as adjusted for any increase in the Cost
of Living Index, may be further increased at the option and in the discretion of
the Board of Directors (such salary, as the same may be increased from time to
time, is referred to herein as the "Base Salary"). The Base Salary shall be
payable in such installments (but not less frequent than monthly) as the
salaries of other executives of the Company are paid.

      (b) Performance Incentive Plan. During the Employment Period, Executive
shall be eligible to participate in the Company's 1997 Performance Incentive
Plan (the "Bonus Plan") and be given an opportunity to earn up to one times Base
Salary upon the achievement of targets determined by the Compensation Committee.
Up to 80% of the total bonus in any given year under the Bonus Plan shall be
based on Company targets. The remainder will be based on Executive's
performance. The discretionary portion of the bonus shall be determined by the
Compensation Committee.

      (c)   Equity Participation.

      (i) The Company shall grant Executive a non-qualified stock option (the
"Option") under the Company's 1997 Stock Incentive Plan (the "Stock Plan") to
purchase 75,000 shares of the Company's Class A Common Stock at an exercise
price of US$19.316 per share, the Fair Market Value (as defined in the Stock
Plan) on August 10, 1999, the date of grant. The Option shall become vested and
exercisable as set forth below, provided that Executive is employed by the
Company on such date (except as otherwise provided below), and once exercisable
shall, except as otherwise provided below, remain exercisable until the
expiration of seven years from the date of grant. However, the Option shall be
immediately terminated upon a termination of Executive's employment by the
Company for Cause (as hereinafter defined):

            Date First Exercisable                    Percentage Exercisable

First Anniversary of the Commencement Date                  33 1/3%
Second Anniversary of the Commencement Date                 66 2/3%
Third Anniversary of the Commencement Date                  100%

                                       3
<PAGE>
The Option shall become immediately exercisable in full in the event that
Executive's employment with the Company is terminated: (i) by the Company other
than for Cause, (ii) by Executive for Good Reason or (iii) by reason of the
death or Disability of the Executive. Additionally, the Option shall become
immediately exercisable in full upon a Change in Control; provided, however,
that no acceleration of exercisability or vesting shall occur with respect to
the Option if the Compensation Committee reasonably determines in good faith
prior to the occurrence of a Change in Control that the Option shall be honored
or assumed, or a new stock option substituted therefor (such honored, assumed or
substituted option hereinafter called an "Alternative Option") by the
Executive's new employer (or the parent or a subsidiary of such employer)
immediately following the Change in Control (the "Successor"). If following a
Change in Control, Executive is Terminated other than for Cause or Successor
conditions Executive's continued employment on relocation of Executive's
principal place of employment outside of the London, England metropolitan area,
the Option shall become immediately exercisable in full. Except as otherwise
provided in the stock option agreement relating to the Option, the exercisable
portion of the Option shall, following any termination of Executive's employment
(other than for Cause), remain exercisable for the lesser of 90 days and the
remaining term of the Option.

      (ii) The Existing Award Agreement shall remain in full force and effect.
The Old Award Agreement is terminated and shall be of no further force and
effect. In exchange for the Old Award Agreement, the Company shall issue to
Executive 90,000 shares of Restricted Stock (as defined under, and in accordance
with, the Stock Plan) (the "Restricted Stock"). The Restricted Stock grant date
shall be the date the Restricted Stock grant is approved by the Compensation
Committee of the Board. The Restricted Stock shall vest in its entirety on
September 1, 2000. The Restricted Stock shall become immediately vested in its
entirety in the event that Executive's employment with the Company is terminated
(i) by the Company other than for Cause or (ii) by reason of the death or
Disability of the Executive, however, in the event that Executive's employment
with the Company terminates for any other reason prior to such date, then the
Executive shall immediately forfeit all rights with respect to the Restricted
Stock and all the Restricted Stock will be immediately canceled, without any
payment or other obligation by or of the Company in respect thereof.
Additionally, the Restricted Stock shall become immediately vested in full upon
a Change in Control; provided, however, that no acceleration of vesting shall
occur with respect to the Restricted Stock if the Compensation Committee
reasonably determines in good faith prior to the occurrence of a Change in
Control that the Restricted Stock shall be honored or assumed, or new restricted
stock substituted therefor (such honored, assumed or substituted restricted
stock hereinafter called the "Alternative Restricted Stock") by the Successor.
If following a Change in Control, Executive is Terminated other than for Cause
or Successor conditions Executive's continued employment on relocation of
Executive's principal place of employment outside of the London, England
metropolitan area, the Restricted Stock shall

                                       4
<PAGE>
become immediately vested in full. Until such time as the Restricted Stock shall
have vested, such shares of Restricted Stock shall be nontransferable.

      The grant of the Restricted Stock shall initially be evidenced by a stock
certificate registered in Executive's name (the "Initial Certificate"). The
Initial Certificate shall be held by the Company for the benefit of Executive
until such time as all of the shares of the Restricted Stock shall have vested.
The Restricted Stock shall be subject to and governed by the terms and
conditions of the Stock Plan.

4.    Benefits, Perquisites and Expenses.

      (a)   Benefits.  During the Employment Period:
            --------

          (i)  The Company will provide Executive with an annual car allowance
               of 10,000 pounds sterling. Executive may at his option use his
               own car or have the Company provide a leased car or contract hire
               car. In addition to the car allowance, the Company will also pay
               for insurance together with personal and business petrol costs.
               Executive shall be liable for any personal taxes levied for use
               of the car, shall take good care of the car and will be
               responsible for ensuring that it remains, at all times, in
               road-worthy condition.

          (ii) The Executive will belong to a suitable Personal Pension Scheme
               nominated by Executive and approved by the Board of Inland
               Revenue of the United Kingdom. The Executive's pension
               entitlement shall be 12.5% of Executive's Base Salary as does not
               exceed the allowable maximum as defined in Section 640A(2) of the
               Income and Corporation Taxes Act 1988.

          (iii) The Company shall continue to provide Executive and his family
               with full private medical coverage as Executive currently
               receives.

          (iv) The Company shall arrange and pay for life insurance for the
               Executive in the value of four times his Base Salary for the
               benefit of Executive's family on the Executive's death. The
               Company may arrange for life insurance to the same amount for the
               benefit of the Company at the cost of the Company.

Executive shall be eligible to participate in (i) each welfare benefit plan
sponsored or maintained by the Company, including, without limitation, each
group life, hospitalization, medical, dental, health, accident or disability
insurance or similar plan or program of the Company, and (ii) each pension,
profit sharing, retirement, deferred

                                       5
<PAGE>
compensation or savings plan sponsored or maintained by the Company, in each
case, whether now existing or established hereafter, on the same basis as
generally made available to other senior officers of the Company, provided that
if such coverage would be additive or duplicative to the benefits Executive is
provided pursuant to clauses (ii) or (iii) above the benefits shall be provided
by the Company and its Affiliates to Executive in a manner that avoids
duplication. The Company may amend or terminate any such plan in its discretion.

      (b) Perquisites. During the Employment Period, Executive shall be entitled
to five weeks' paid vacation annually and shall also be entitled to receive such
perquisites as are generally provided to other senior officers of the Company in
accordance with the then current policies and practices of the Company, provided
that Executive shall not receive any other benefit relating to automobiles other
than is provided pursuant to clause (i) of Section 4(a) above. Executive shall
not be entitled to receive remuneration for unused vacation and shall not be
permitted to carry-over unused vacation to the following year. Notwithstanding
the foregoing, upon termination of this Agreement for any reason whatsoever,
Executive shall be entitled to be paid for each day of vacation time that may
remain after deducting from accrued vacation entitlement the amount of vacation
already taken in the calendar year in which the employment ceases. Accrued
vacation entitlement shall be calculated by taking for each complete calendar
month of employment during the calendar year in which the employment ceases,
1/12th of the annual vacation to which the Executive would have been entitled
for that year.

      (c) Business Expenses. During the Employment Period, the Company shall pay
or reimburse Executive for all reasonable expenses incurred or paid by Executive
in the performance of Executive's duties hereunder, upon presentation of expense
statements or vouchers and such other information as the Company may require and
in accordance with the generally applicable policies and procedures of the
Company.

      (d) Indemnification. The Company shall indemnify Executive and hold
Executive harmless from and against any claim, loss or cause of action arising
from or out of Executive's performance as an officer, director or employee of
the Company or any of its subsidiaries or affiliates or in any other capacity,
including any fiduciary capacity, in which Executive serves at the request of
the Company to the maximum extent permitted by applicable law and the Company's
Memorandum of Association and Bye-Laws in effect on the date hereof.

5.    Termination of Employment.

      (a) Termination of the Employment Period. The Employment Period shall end
upon the earliest to occur of (i) a termination of Executive's employment on
account of Executive's death, (ii) a Termination due to Disability or
Retirement, (iii) a

                                       6
<PAGE>
Termination for Cause, (iv) a Termination Without Cause, (v) a Termination by
Executive for Good Reason, (vi) a Termination by Executive other than for Good
Reason or (vii) the expiration of the Term. The Company or the Executive may
initiate a termination in any manner permitted hereunder by giving the other
party written notice thereof (the "Termination Notice"). The effective date (the
"Termination Date") of any termination shall be deemed to be the later of (i) in
the case of a Termination Notice from Executive, 45 days after the receipt by
the Company of the Termination Notice, (ii) the date on which the Termination
Notice is given, or (iii) the date specified in the Termination Notice;
provided, however, that in the case of the Executive's death, the Termination
Date shall be the date of death. Upon termination of his employment for any
reason, Executive will immediately resign from all positions that he holds with
the Company and its Affiliates and, should Executive fail to tender his
resignation within two days of the request, the Company is irrevocably
authorized to appoint an agent in his name and on his behalf to sign any
documents and do anything necessary or desirable to give effect to his
resignation.

      (b)   Payments Upon Certain Terminations.
            ----------------------------------

             (i)  Termination Without Cause or Termination by Executive for Good
Reason. In the event that Executive's employment is terminated by the Company
Without Cause or by Executive for Good Reason, the Company shall pay Executive
his Earned Salary, Vested Benefits and a Severance Benefit (as such terms are
hereinafter defined). In addition, if Executive's employment terminates pursuant
to this subsection (i), the Company shall continue to provide to Executive the
benefits referred to in Section 4(a)(iii), or substantially comparable benefits,
until the earlier of (x) the date on which Executive is eligible to obtain
comparable benefits from other employment or (y) the expiration of the Term or
(z) one year.

             (ii) Termination due to Death. In the event of the termination of
Executive's employment due to Executive's death, the Company shall pay
Executive's estate Executive's Earned Salary, Vested Benefits and a lump sum
payment equal to 12 months of Executive's Base Salary (at the rate in effect on
the date of his death).

            (iii) Termination due to Disability or Retirement. In the event of
termination of Executive's employment by the Company due to Disability or a
Termination due to Retirement, the Company shall pay Executive his Earned Salary
and Vested Benefits, plus, in the event of termination due to Disability, to the
Executive or his estate his Base Salary at the Termination Date on a monthly
basis for 12 months following the month in which Executive's employment is
terminated. In the event that Executive's employment with the Company is
terminated due to Disability, Executive's benefits under this subsection (iii)
shall be reduced by the amount of any Company sponsored (and paid for)
disability benefits paid to Executive. The payments to be made

                                       7
<PAGE>
to Executive during the period of disability prior to termination are intended
to comply with the Disability Discrimination Act.

            (iv) Termination by Executive Other Than for Good Reason. In the
event of a Termination by Executive other than for Good Reason, the Company
shall pay Executive his Earned Salary and Vested Benefits.

            (v)  Termination for Cause. In the event of a termination of
Executive's employment by the Company for Cause, the Company shall pay Executive
his Earned Salary and Vested Benefits.

      (c) Timing of Payments. Earned Salary shall be paid in a single lump sum
as soon as practicable, but in no event later than the earlier of 60 days
following the end of the Employment Period or the day such Earned Salary would
have been payable under the Company's normal payroll practices. Vested Benefits
shall be payable in accordance with the terms of the plan, policy, practice,
program, contract or agreement under which such benefits have accrued except as
otherwise expressly modified by this Agreement. Fifty percent (50%) of Severance
Benefits shall be paid within 30 days after the Termination Date and the
remaining 50% of the Severance Benefits shall be paid in equal monthly
installments during the eleven month period following the payment of the first
50% of Severance Benefits.

      (d) Retention of monies owed. The Company may at any time during
Executive's employment or upon his termination for any reason deduct and retain
from any monies owed by it to Executive any sum properly paid by it or any
Affiliate to, on behalf or at the request of Executive or due to it from
Executive including, but not limited to, unauthorized expenses or excess
vacation.

      (e)   Definitions.  The following capitalized terms have the following
 meanings:

            "Change in Control" means the occurrence of (i) a sale or other
disposition of stock of the Company, other than a spin-off or any other form of
distribution of the Company's shares, or an issuance of stock of the Company as
a result of which any "person" (as such term is used in section 13(d) and 14(d)
of the Exchange Act), other than the Company, or Ronald S. Lauder ("Lauder"), or
any of his controlled entities, is or becomes the beneficial owner of more than
50% of the total voting power of the Company and those persons who are members
of the Board of Directors of the Company immediately prior to the closing of
such transaction constitute less than one half of the membership of the Board of
Directors of the Company immediately following the closing of such transaction,
(ii) any merger, consolidation or reorganization following which those persons
who are members of the Board of Directors of the Company immediately

                                       8
<PAGE>
prior to the closing of such transaction constitute less than one half of the
membership of the board of directors of the surviving entity immediately
following the closing of such transaction, (iii) a transaction pursuant to which
more than 50% of the total value of the assets of the Company and its
consolidated subsidiaries are transferred and the transferee of such assets is
not Lauder or a company controlled by him, or (iv) a complete liquidation of the
Company.

            "Earned Salary" means any Base Salary earned, but unpaid, for
services rendered to the Company on or prior to the date on which the Employment
Period ends.

            "Normal Retirement Age" means the first day of the month following
Executive attaining age 65.

            "Severance Benefit" means an amount equal to Executive's annual Base
Salary as in effect immediately prior to the Termination Date.

            "Termination due to Disability" means a termination of Executive's
employment by the Company because Executive has been incapable of substantially
fulfilling the positions, duties, responsibilities and obligations set forth in
this Agreement because of physical, mental or emotional incapacity resulting
from injury, sickness or disease for a period of (i) at least six consecutive
months or (ii) more than nine months in any twelve month period. Any question as
to the existence, extent or potentiality of Executive's disability upon which
Executive and the Company cannot agree shall be determined by a qualified,
independent physician selected by the Company and reasonably acceptable to
Executive. The determination of any such physician shall be final and conclusive
for all purposes of this Agreement. Executive or his legal representative or any
adult member of his immediate family shall have the right to present to such
physician such information and arguments as to Executive's disability as he, she
or they deem appropriate, including the opinion of Executive's personal
physician.

            "Termination due to Retirement" means termination of employment by
Executive other than for Good Reason, or termination of Executive's employment
by the Company other than a Termination for Cause, on or after Executive's
Normal Retirement Age.

            "Termination for Cause" means a termination of Executive's
employment by the Company due to (i) Executive's conviction of a felony or the
entering by Executive of a plea of nolo contendere with respect to a charged
felony, (ii) Executive's gross negligence, recklessness, dishonesty, fraud,
willful malfeasance or willful misconduct in the performance of the services
contemplated by this Agreement, (iii) a willful failure without reasonable
justification to comply with a reasonable written order of the Board of
Directors, the CEO, or the COO; (iv) a willful and material breach of
Executive's duties

                                       9
<PAGE>
or obligations under this Agreement, including, without limitation, Executive's
failure to devote full business time to the Company in accordance with Section
2(b) of this Agreement; or (v) Executive being disqualified from acting as a
company director. Notwithstanding the foregoing, a termination shall not be
treated as a Termination for Cause unless the Company shall have delivered a
written notice to Executive stating that it intends to terminate his employment
for Cause and specifying the factual basis for such termination, and the event
or events that form the basis for the notice, if capable of being cured, shall
not have been cured within 30 days of the receipt of such notice.

            "Termination Without Cause" means any termination by the Company of
Executive's employment hereunder other than (i) a Termination due to Disability,
(ii) a Termination due to Retirement or (iii) a Termination for Cause.

            "Termination for Good Reason" means a termination of Executive's
employment by Executive within 90 days following (i) a reduction in Executive's
annual Base Salary or opportunity under the Bonus Plan below the levels
contemplated by Sections 3(a) and (b), (ii) a material reduction in Executive's
positions, duties, responsibilities or reporting lines from those described in
Section 2 hereof; or (iii) a material breach of this Agreement by the Company.
Notwithstanding the foregoing, a termination shall not be treated as a
Termination for Good Reason (x) if Executive shall have consented in writing to
the occurrence of the event giving rise to the claim of Termination for Good
Reason or (y) unless Executive shall have delivered a written notice to the
Company within 30 days of his having actual knowledge of the occurrence of one
of the events specified in clause (i), (ii) or (iii) above stating that he
intends to terminate his employment for Good Reason and specifying the factual
basis for such termination, and such event, if capable of being cured, shall not
have been cured within 30 days of the receipt of such notice or (z) if the
opportunity under the Bonus Plan is reduced by action of the Compensation
Committee or Board of Directors of the Company. Following a "Change in Control",
Executive shall not be deemed to have Good Reason under clause (ii) above so
long as he continues to have substantially the responsibilities he had at the
time of the Change in Control.

            "Termination Without Good Reason" means any termination by Executive
of Executive's employment hereunder other than (i) a termination due to
Executive's death, (ii) a Termination due to Retirement, (iii) a Termination for
Good Reason, or (iv) a Termination due to Disability.

            "Vested Benefits" means amounts which are vested or which Executive
is otherwise entitled to receive under the terms of or in accordance with any
plan, policy, practice or program of, or any contract or agreement with, the
Company, including the Option (to the extent provided in Section 3(c)), at or
subsequent to the date of his termination without regard to the performance by
Executive of further services or the

                                       10
<PAGE>
resolution of a contingency, and expenses incurred prior to termination of
employment that are reimbursable under Section 4(c).

      (f) Adjustment to Notice. The Company reserves the right to make a payment
in lieu of notice should it so wish, or require Executive to remain away from
work during the notice period, whichever it may deem appropriate. Any payment in
lieu of notice will have any appropriate PAYE tax and National Insurance
Contributions deducted at source.

      (g) Full Discharge of Company Obligations. The amounts payable to
Executive pursuant to this Section 5 following termination of his employment
(including amounts payable with respect to Vested Benefits) shall be in full and
complete satisfaction of Executive's rights under this Agreement and any other
claims he may have in respect of his employment by the Company or any of its
subsidiaries. Such amounts shall constitute liquidated damages with respect to
any and all such rights and claims and, upon Executive's receipt of such
amounts, the Company shall be released and discharged from any and all liability
to Executive in connection with this Agreement or otherwise in connection with
Executive's employment with the Company and its subsidiaries and Affiliates,
other than Executive's rights to indemnification under Section 4(d).

6.    Agreement Not to Compete With Company

             (a) During the Employment Period and for a period of one year
thereafter (the "Applicable Period"), Executive shall not directly or indirectly
own, manage, operate, finance, join, control, advise, consult, render services
to, have an interest or future interest or participate in the ownership,
management, operation, financing or control of, or be employed by or connected
in any manner with any Competing Business (other than as a holder of common
stock of the Company, and not in excess of 1% of the outstanding voting shares
of any other publicly traded company). "Competing Business" means the business
of telecommunication services and solutions in any country which is a member of
the European Union during the period of Executive's employment with the Company,
where the Company or an Affiliate conducts such business at any time during the
Term. Any opportunity directly or indirectly related to any business engaged in
by the Company, its subsidiaries and Affiliates of which Executive becomes aware
during the Term shall be deemed a corporate opportunity of the Company, and
Executive shall promptly make such opportunity available to the Company.

            (b) If, during the period of one year after expiration of the
Employment Period, Executive proposes to engage directly or indirectly in what
may be a Competing Business, Executive shall so notify the Company in a writing
which shall fully set forth and describe in detail the nature of the activity
which may be a competitive Business, the names of the companies or other
entities with or for whom such activity is proposed to be engaged in by
Executive or by an Affiliate of Executive (the "Section 6 Notice"). If,

                                       11
<PAGE>
within 30 days after receipt by the Company of a Section 6 Notice, the Company
shall fail to notify Executive that it deems the proposed activity to be a
Competing Business, then Executive shall be free to engage in the activities
described in the Section 6 Notice without violation of Section 6(a). If,
however, the Company notifies Executive that the proposed activities constitute
a Competing Business, then (i) Executive shall not engage in such Competing
Business during the one year period following expiration of the Employment
Period, and (ii) the Company shall pay Executive, during such one year period,
in equal monthly installments, an amount equal to his highest Base Salary;
provided that the amount payable under this Section 6(b) shall be reduced by the
amount of Severance Benefit that Executive is receiving for such period.

7.    Confidential Information

      (a) Without the prior written consent of the Company, Executive shall not
disclose at any time during the Employment Period or any time thereafter any
Confidential Information (as defined below) to any third person other than in
the course of fulfilling Executive's responsibilities under this Agreement
unless such Confidential Information has been previously disclosed to the public
by the Company or an Affiliate or is in the public domain (other than by reason
of Executive's breach of the provisions of this paragraph).

      (b) "Confidential Information" is any non-public information pertaining to
the Company or an Affiliate, any of their businesses or the business or personal
affairs of Lauder or his family and how any of them conducts its or his business
or affairs. "Confidential Information" includes not only information disclosed
by the Company or an Affiliate to Executive, but non-public information
developed, created or learned by Executive during the course of or as a result
of Executive's employment with the Company. "Confidential Information"
specifically includes non-public information and documents concerning the
Company's and its Affiliates' methods of doing business; research,
telecommunications technology, its actual and potential clients, transactions
and suppliers (including the Company's or an Affiliate's terms, conditions and
other business arrangements with them); client or potential client or
transaction lists and billing; advertising, marketing and business plans and
strategies (including prospective or pending licensing applications or
investments in license holders or applicants); profit margins, goals, objectives
and projections; compilations, analyses and projections regarding the Company,
its Affiliates or any of its clients or potential clients or their businesses;
trade secrets; salary, staffing, management organization or employment
information; information relating to members of the Board of Directors and
management of the Company or an Affiliate; files, drawings or designs;
information regarding product development, marketing plans, sales plans or
manufacturing plans; operating policies or manuals, business plans, financial
records or packaging design; or any other non-public financial, commercial,
business or technical information relating to the Company, an

                                       12
<PAGE>
Affiliate, Lauder or his family or non-public information designated as
confidential or proprietary that the Company, an Affiliate or Lauder may receive
belonging to others who do business with any of them.

      (c) Nothing herein shall prevent the disclosure by Executive of any
information required by an order of a court having competent jurisdiction or
under subpoena from a government agency, provided that, if Executive receives a
request for the disclosure of any Confidential Information pursuant to court
process or by a government agency, Executive shall promptly (and at the latest
within five business days but not less than three days prior to the date
Executive is required to respond to the request) notify the Company of that
request and cooperate to the maximum extent authorized by law with the Company
in protecting the Company's and it Affiliates' interest in maintaining the
confidentiality of any Confidential Information. The Company will reimburse
Executive for reasonable out-of-pocket costs or expenses incurred by Executive
in connection with his cooperation with the Company and its Affiliates
hereunder.

8.    No Disparaging Comments

Each of the parties hereto agrees not to make disparaging or derogatory comments
about the other party, members of the Board or Affiliates, or members of the
Board of Affiliates, except to the extent required by law, and then only after
consultation with the other party to the maximum extent possible in order to
maintain goodwill for each of the parties.

9.    Return of Company Property

Promptly (and at the latest within ten business days) following Executive's
termination of services, Executive shall:

      (i)   return to the Company all documents, records, notebooks, computer
            diskettes and tapes and anything else containing the Company's
            Confidential Information (as defined above), and any other property
            or Confidential Information of the Company or its Affiliates,
            including all copies thereof in Executive's possession, custody or
            control, and

      (ii)  delete from any computer or other electronic storage medium owned by
            Executive any of the proprietary or Confidential Information of the
            Company or its Affiliates.

                                       13
<PAGE>
10.   No Soliciting or Hiring Company Employees

During the Employment Period and for a twelve month period thereafter, Executive
shall not directly or indirectly induce any employee of the Company or any
Affiliate, other than Executive's secretary or personal assistant, to terminate
employment with such entity. Additionally, during the Employment Period and for
a twelve month period thereafter, Executive shall not directly or indirectly,
either individually or as owner, agent, employee, consultant or otherwise,
employ or offer employment to any person who is or was employed by the Company
or any Affiliate as an employee; provided, however, that Executive shall not be
deemed to have breached the provisions of this sentence in the event that
Executive had no prior knowledge of such hiring (or offer of employment).

11.   Continuing Obligations Following Termination

Executive agrees that his obligations and restrictions with respect to
noncompetition, confidentiality, Company property, nondisparagement and
nonsolicitation, and the Company obligations to indemnify Executive under
Section 4(d), will continue to apply following the termination of Executive's
relationship regardless of the manner in which his relationship with the Company
is terminated, whether voluntarily, for Cause, for Good Reason, without Cause or
otherwise.

12.   Arbitration of All Disputes

Any dispute, controversy or claim arising out of, relating to or in connection
with this Agreement, or the breach, termination or validity thereof, shall be
finally resolved by binding arbitration. The arbitration shall be held in London
England. Except to the extent inconsistent with this Agreement, the arbitration
shall be conducted in accordance with the Rules of the London Court of
International Arbitration ("LCIA") then in effect at the time of the
arbitration. The arbitration shall be conducted by one arbitrator who shall be
acceptable to both the Company and the Executive. If the parties cannot agree on
an acceptable arbitrator within 30 days, the dispute shall be heard by a panel
of three arbitrators, one appointed by each of the parties within 30 days
thereafter and the third appointed by the other two arbitrators. If one party
names an arbitrator and the other fails to do so in the required time period,
the arbitrator so appointed shall act as sole arbitrator. If the two arbitrators
do not appoint a third arbitrator within 30 days after the last of the two
arbitrators has been appointed, the third arbitrator shall be appointed by the
LCIA. The arbitral award shall be in writing and shall be final and binding on
the parties. The award may include an award of costs, including reasonable
attorney's fees and disbursements, unless the arbitrators conclude that matters
of equity or important considerations of fairness dictate otherwise. The parties
expressly agree that leave to appeal under Section 69(1) or an application for
the determination of a preliminary point of law under Section 45 of the
Arbitration Act of 1996 may not be sought with respect to

                                       14
<PAGE>
any question of law arising from an award. Judgement upon the award may be
entered by any court having jurisdiction thereof or having jurisdiction over the
parties or their assets.

13.  No Punitive or Emotional Damages

The parties hereto agree that neither the Executive nor the Company will be
entitled to seek or obtain punitive, exemplary or similar damages of any kind
from the other or, in the case of Executive, from the Company's officers,
directors, employees or shareholders, or to seek or obtain damages or
compensation for emotional distress, as a result of any dispute, controversy or
claim arising out of, relating to or in connection with this Agreement, or the
performance, breach, termination or validity thereof. Nothing herein shall
preclude an award of compensatory or punitive damages against any other third
party.

14.  Injunctive Relief to Avoid Irreparable Injury

      (a) Executive acknowledges and agrees that the individualized services and
capabilities that he will provide to the Company under this Agreement are of a
personal, special, unique, unusual, extraordinary and intellectual character.

      (b) Executive acknowledges and agrees that because the international
telecommunications industry is globally integrated and that its constituent
companies are dependent for their survival on protection of their confidential
information which is highly advanced and technical and on carefully developed
knowledge of customer systems and requirements, the restrictions in this
agreement are reasonable to protect the Company's rights under this Agreement
and to safeguard the Company's and its Affiliates' Confidential Information.

      (c) Executive acknowledges and agrees that the covenants and obligations
of Executive with respect to noncompetition, nonsolicitation, confidentiality
and Company property relate to special, unique and extraordinary matters and
that a violation of any of the terms of such covenants and obligations will
cause the Company and its Affiliates irreparable injury for which adequate
remedies are not available at law. Executive therefore agrees that the Company
shall be entitled to an order of specific performance, injunction, restraining
order or such other interim or permanent equitable relief (without the
requirement to post bond) restraining Executive from committing any violation of
the covenants and obligations contained in this Agreement. Executive
acknowledges and agrees that if any one or more of any part of such restrictions
shall be rendered or judged invalid or unenforceable, such restriction or part
shall be deemed to be severed from this Agreement and such invalidity or
unenforceability shall not in any way affect the validity of the remaining
provisions.

                                       15
<PAGE>
      (d) These injunctive remedies are cumulative and are in addition to any
other rights and remedies the Company may have at law or in equity.

      (e) Executive represents that his economic means and circumstances are
such that the provisions of this Agreement, including the noncompetition,
nonsolicitation, confidentiality and Company property provisions, will not
prevent him from providing for himself and his family on a basis satisfactory to
him and them.

15.  Automatic Amendment by Court Order and Interim Enforcement

      (a) If the Arbitrator(s) or a court determines that, but for the
provisions of this paragraph, any part of this agreement is illegal, void as
against public policy or otherwise unenforceable, the relevant part will
automatically be amended to the extent necessary to make it sufficiently narrow
in scope, time and geographic area to be legally enforceable. All other terms
will remain in full force and effect.

      (b) If the Executive raises any question as to the enforceability of any
part or terms of this agreement, including, without limitation, the provisions
relating to noncompetition, nonsolicitation, confidentiality and Company
property, the Executive specifically agrees that he will comply fully with this
Agreement unless and until the entry of an arbitral award to the contrary.

16.  Notices

All notices and other communications required or permitted hereunder shall be
sufficiently given if (a) delivered personally, (b) sent by facsimile
transmission (with confirmation received), (c) sent by a nationally-recognized
air courier assuring overnight delivery, or (d) mailed (by registered or
certified mail, return receipt requested and postage prepaid) as follows:

            if to the Executive, to the Executive at:

            26 Sheen Common Drive
            Richmond, Surrey

            if to the Company,  to the Company at

            Clarendon House
            Church Street
            Hamilton HM CX
            Bermuda
            Fax:  (441) 292-4720

                                       16
<PAGE>
            Attention:  Michael Ashford

            with a copy to:

            c/o RSL Communications, N. America, Inc.
            Suite 4300
            767 Fifth Avenue
            New York, New York 10153
            Fax: (212) 317-0600
            Attention:  Corporate Counsel

or to such other address as shall be furnished by notice from time to time by
one party hereto to the other party. Any such communication shall be deemed to
have been given, (i) in the case of personal delivery, on the date of delivery,
(ii) in the case of delivery by air courier, on the first business day following
the day on which such communication was posted, and (iii) in the case of
mailing, on the third business day following the day on which such notice was
posted.

17.  Sole and Entire Understanding; Amendments

The entire understanding and agreement between the Company and Executive have
been incorporated into this Agreement. There are no other agreements, promises,
representations, understandings or inducements by the Company to Executive or
Executive to the Company other than those specifically set forth in this
Agreement. This Agreement may not be altered, amended or added to except in a
single writing signed by the Company and the Executive. Executive acknowledges
that, excepting the Existing Award Agreeement, he is not entitled to any
compensation, unvested stock options or "phantom" grants or benefits of any kind
pursuant to the Old Agreements, and upon execution of this Agreement, the Old
Agreements are hereby terminated and are of no further force or effect.

18.  Waiver of Breach

A waiver or breach of any provision of this Agreement shall not constitute or
operate as a waiver of any other breach of such provision or of any other
provision, and any failure to enforce any provision hereof shall not operate as
a waiver of such provision or of any other provision.

19.  Headings

The headings of sections in this Agreement are for convenience only, are not a
part of this Agreement and shall not affect the construction of the provisions
of this Agreement.

                                       17
<PAGE>
20.  Arm's Length

      (a) This Agreement was entered into at arm's length, without duress or
coercion, and is to be interpreted as an agreement between parties of equal
bargaining strength. Both the Company and the Executive agree that this
Agreement is clear and unambiguous as to its terms, and that no parol or other
evidence will be used or admitted to alter or explain the terms of this
Agreement, but that it will be interpreted based on the language within its four
corners in accordance with the purposes for which it is entered into.

      (b) The parties hereto expressly agree that any rule or contractual
interpretation, as applied under California law or anywhere else, that would
allow parol or extrinsic evidence to attempt to show fraud in the inducement or
duress to contradict the plain, unambiguous terms of this Agreement shall not
apply to this Agreement and its performance and enforcement. This provision is a
material part of this Agreement and, should any party try to introduce evidence
contrary to this provision, any other party shall be entitle to consider it a
breach and to rescind this contract in full.

21.  Successors and Assigns

      (a) This Agreement will inure to the benefit of, and will be binding upon,
the Company, its successors and assigns and upon the Executive and his heirs,
successors and assigns; provided, however, that, because this is an Agreement
for personal services, the Executive cannot assign any of his obligations under
this Agreement to anyone else.

      (b) This Agreement may be executed in counterparts, in which case each of
the two counterparts will be deemed to be an original and the final counterpart
shall be deemed to be an original.

22.  English Law Governs

Any questions or other matters arising under this Agreement, whether of
validity, interpretation, performance or otherwise, will therefore be governed
by and construed in accordance with the laws of the England.

                                       18
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            IN WITNESS WHEREOF, this Agreement has been executed by Executive
and then by the Company on the dates shown below, but effective as of the date
and year first above written.

                                    EXECUTIVE

                                    /s/ David Hardwick
Date:_____________                  _________________________
                                    David Hardwick

                                    RSL COMMUNICATIONS, LTD.

                                        /s/ Itzhak Fisher
Date:_____________                  BY:______________________
                                          President and Chief
                                          Executive Officer
                                    Title:___________________

                                       19

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