Document:

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                                                                 EXECUTION COPY

                         CAPACITY RIGHT OF USE AGREEMENT

THIS AGREEMENT, dated as of the 7th day of October 1999, is among FLAG ATLANTIC
LIMITED, a company organised under the laws of Bermuda and having its principal
office at The Emporium Building, 69 Front Street, 4th Floor, Hamilton, Bermuda,
FLAG ATLANTIC USA LIMITED, a company organised under the laws of Delaware, USA
and having its principal office at 570 Lexington Avenue, 38th Floor, New York,
NY 10022, USA, (together hereinafter referred to as "FA-1") and NYNEX LONG
DISTANCE COMPANY, D/B/A BELL ATLANTIC LONG DISTANCE, a Delaware corporation,
with principal offices at 1327 Broadway, 8th Floor West, New York, New York,
10018 USA ("BELL ATLANTIC").

                                   WITNESSETH:

WHEREAS, except as set out below, FLAG Atlantic Limited is constructing and will
directly and/or indirectly own, operate and maintain a fiberoptic cable system
to be known as FLAG Atlantic-1 as more fully described in Schedule 1 (the
"System"); and

WHEREAS, FLAG Atlantic USA Limited is constructing and will own all that part of
the System that is within the territory (including the territorial waters) of
the United States of America; and

WHEREAS, the System is currently scheduled to go into service in stages with the
initial stage, as more particularly described in Schedule 1, ("Initial Stage")
currently scheduled to go into service on or about 31 March 2001 ("Scheduled
Initial RFS Date"); and

WHEREAS, BELL ATLANTIC desires to acquire from FA-1, and FA-1 is willing to
provide to BELL ATLANTIC, an indefeasible right of use ("IRU") (except as
otherwise provided herein) in the capacity on the System as set out in Schedule
2A or 2B, as applicable (the "Capacity"); and

WHEREAS, FA-1 and BELL ATLANTIC (the "Parties") desire to define the terms and
conditions under which the Capacity will be acquired by BELL ATLANTIC.

NOW, THEREFORE, the Parties hereby agree as follows:

1.       PURCHASE OF CAPACITY

1.1      Individual units of Capacity as set out in Schedule 2A or 2B, as
         applicable, (each a "Unit") shall be available for activation in
         tranches (each a "Tranche") pursuant to the delivery schedule set out
         in Schedule 6A or 6B, as applicable. BELL ATLANTIC agrees to acquire
         the IRU (except as otherwise provided herein) in the Capacity in
         Tranche 1 and has the option to acquire the IRU (except as otherwise
         provided herein) in the Capacity in Tranches 2, 3, 4 and (if
         applicable) 5 for the purchase price set forth in Schedule 2A or 2B, as
         applicable (the "Purchase Price"), subject to the terms and conditions
         of this Agreement. BELL ATLANTIC may exercise its option to acquire the
         Capacity in Tranches 2, 3, 4 and (if applicable) 5 by notice to FA-1
         ***. BELL ATLANTIC shall by the earlier of *** notify FA-1 whether
         Schedule 2A or 2B shall apply to this Agreement (and if BELL ATLANTIC
         fails

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         to give such notice by the required date Schedule 2A shall apply). If
         Schedule 2A applies then Schedule 6A shall apply and if Schedule 2B
         applies then Schedule 6B shall apply.

1.2      ***

1.3      ***

1.4      FA-1 shall:

         1.4.1    Provide to BELL ATLANTIC the circuit designations within one
                  day after receipt of an Activation Notice from BELL ATLANTIC;
                  and

         1.4.2    Provision the Requested Capacity within *** days (*** days in
                  the case of the initial Requested Capacity to be activated
                  following the Initial RFS Date) after receipt of an Activation
                  Notice for such Requested Capacity in accordance with the
                  standards described in Schedule 7.

1.5      Subject to BELL ATLANTIC paying the Purchase Price in accordance with
         the terms of this Agreement, BELL ATLANTIC shall have the right,
         subject to the terms of this Agreement, to use such Requested Capacity
         from the date provisioned under clause 1.4.2 until the System is
         decommissioned.

1.6      BELL ATLANTIC shall be entitled to collocation pursuant to a
         collocation agreement to be negotiated between the Parties within 90
         days of the execution of this Agreement, based on the principles set
         out in Schedule 4.

1.7      Nothing set forth in this Agreement shall require BELL ATLANTIC to use
         purchased Capacity for transport of communications until such time as
         (a) BELL ATLANTIC, in its sole discretion, determines to use such
         purchased Capacity, and (b) BELL ATLANTIC has obtained all necessary
         approvals to use such purchased Capacity.

1.8      BELL ATLANTIC shall have an ownership interest in the Capacity as
         provided herein but BELL ATLANTIC shall have no legal title or
         ownership in the physical assets of the System itself, including any
         proceeds from the disposition of the System.

1.9      In the event that (i) after using commercially reasonable efforts, FA-1
         does not have the underlying rights to grant an IRU in portions of the
         System located in France, England and between France and England and/or
         (ii) if any jurisdiction in which the System is located does not
         currently recognize or does not recognize in the future the conveyance
         of communications facilities on an IRU basis and/or (iii) FA-1 chooses
         not to obtain an IRU on the portion of the System located in England
         that FLAG Atlantic Limited or a subsidiary will not own outright, then
         as to the Capacity on such portions of the System or within such
         jurisdiction(s) only, this Agreement shall be considered an agreement
         for a lease of such Capacity ("Lease").

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1.10     In the event that this Agreement is to be treated as a Lease for any
         portion of the Capacity, then as to such portion only, the terms
         "purchase" and any variations thereon shall mean "lease" or the
         appropriate variation thereof, and the terms "indefeasible right of
         use" and "IRU" shall mean "Lease." Any other terms and conditions of
         this Agreement also shall be deemed modified only to the extent
         necessary to be consistent with the grant of a lease to BELL ATLANTIC.
         All other terms and conditions of this Agreement shall remain unchanged
         and fully valid and enforceable.

2.       PAYMENTS

2.1      BELL ATLANTIC shall pay to FA-1 the Purchase Price for Capacity to be
         acquired pursuant hereto as follows (and all such payments shall be
         non-refundable except as otherwise provided in clause 4):

         2.1.1    BELL ATLANTIC shall pay to FA-1 the Purchase Price for
                  Capacity in Tranche 1 pursuant to the payment schedule set out
                  in Schedule 3.

         2.1.2    If BELL ATLANTIC exercises its option in clause 1.1 to acquire
                  Capacity in Tranche 2, 3, 4 or (if applicable) 5 it shall pay
                  *** of the Purchase Price specified for the Capacity in that
                  Tranche on notice to FA-1 of the exercise of its option, with
                  the remaining *** of the Purchase Price being payable when
                  such Capacity has passed the bringing-into-service tests
                  specified in Schedule 7.

2.2      BELL ATLANTIC shall pay to FA-1 such amounts for the operation and
         maintenance of the System as are set forth in, or determined pursuant
         to, Schedule 5 ("O&M Payments").

2.3      FA-1 shall render to BELL ATLANTIC invoices for amounts payable
         pursuant to this Agreement. Invoices for the Purchase Price shall be
         rendered in accordance with clause 2.1. Invoices for O&M Payments shall
         be rendered pursuant to Schedule 5. All invoices shall be due and
         payable within 30 days after receipt by BELL ATLANTIC.

2.4      If BELL ATLANTIC disputes any invoiced amount for O&M payments in good
         faith, BELL ATLANTIC must provide to FA-1, on or before the due date of
         the invoice, reasonable notice and a detailed explanation of the basis
         of the dispute, and pay any undisputed amount in accordance with this
         Agreement. *** The parties will make a good faith effort to resolve all
         billing disputes as expeditiously as possible.

2.5      ***

2.6      Any amount payable pursuant to this Agreement which is not paid when
         due shall accrue interest at the annual rate of *** above the U.S.
         Dollar LIBOR for one month as quoted in THE WALL STREET JOURNAL on the
         first business day of the month in which the payment is due or the
         maximum rate permitted under the laws of the State of New York, USA,
         whichever is less. All such default interest shall accrue from the day
         following the date payment of the relevant amount was due until it is
         paid in full and shall accrue both before and after judgement. ***

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2.7      All amounts payable by BELL ATLANTIC pursuant hereto shall be paid in
         full in U.S. dollars by wire transfer, free and clear of all bank or
         transfer charges to such account(s) as FA-1 may by notice to BELL
         ATLANTIC designate without reduction for any deduction or withholding
         for or on account of any tax, duty or other charge of whatever nature
         imposed by any taxing authority in lieu of a direct tax on FA-1 in
         connection with its income. If BELL ATLANTIC is required by law to make
         any deduction or withholding from any payment hereunder, BELL ATLANTIC
         shall pay such additional amount to FA-1 so that after such deduction
         or withholding the net amount received by FA-1 will be not less than
         the amount FA-1 would have received had such deduction or withholding
         not been required. BELL ATLANTIC shall make the required deduction or
         withholding, shall pay the amount so deducted or withheld to the
         relevant governmental authority and shall promptly provide FA-1 with
         evidence of such payment.

2.8      In the case of payments of the Purchase Price, until the Initial RFS
         Date there shall be such controls over the account(s) designated by
         FA-1 pursuant to clause 2.7 so as to ensure that payments of the
         Purchase Price may only be used to make timely payments required to be
         made by FA-1 in connection with the planning, design, construction and
         project management of the System. Any interest arising from amounts
         held in the account(s) shall accrue for the benefit of FA-1.

2.9      BELL ATLANTIC's obligation to pay the Purchase Price and other amounts
         shall not be subject to any rights of set-off, counterclaim, deduction,
         defence or other right which BELL ATLANTIC may have against FA-1 or any
         other party under this Agreement or otherwise.

3.       TAXES

         Save as the context requires or as otherwise stated herein all
         references to payments made in this Agreement are references to such
         payments exclusive of all applicable sales and use taxes, gross
         turnover taxes, value added taxes, or other similar turnover or sales
         based taxes, excise taxes, duties and levies chargeable under
         applicable law in respect of the supply for which the payment is or is
         deemed to be consideration. Where applicable, such taxes shall be added
         to the invoice and shall be paid to FA-1 at the same time as the
         relevant invoice is settled in accordance with clause 2. FA-1 shall be
         solely responsible for payment of taxes on its income and, except as
         provided in clause 2.7, for withholding taxes, including, but not
         limited to, social security and payroll taxes for its employees. BELL
         ATLANTIC shall be solely responsible for payment of taxes on its income
         and for withholding taxes, including, but not limited to, social
         security and payroll taxes for its employees. Neither Party shall have
         any liability for such taxes which are to be borne by the other Party.
         Each Party indemnifies the other Parties and their respective
         affiliates for all claims, losses, penalties, interest, attorney's
         fees, and costs and expenses, including litigation costs, arising from
         any failure to make timely payment of such taxes, duties, and fees such
         Party is required to pay under this Agreement. Each Party shall
         co-operate in any effort by any other Party to contest application or
         payment or to seek refunds of any such taxes, duties, and levies.

4        DEFAULT AND TERMINATION

4.1      In the event that BELL ATLANTIC shall have failed to pay any portion of
         the Purchase Price for Capacity in Tranche 1 for more than *** days
         after its due date, then FA-1 may

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         deactivate all then activated Capacity (and refuse to activate any
         additional Capacity) until BELL ATLANTIC has paid in full all amounts
         overdue together with applicable default interest provided that prior
         to such deactivation, FA-1 shall notify BELL ATLANTIC in writing of its
         concern regarding the overdue payment and shall provide BELL ATLANTIC
         with an opportunity to discuss this matter with FA-1 in order to reach
         an amicable solution to the issue of non-payment and avoid
         deactivation. ***

4.2      If such default in payment of any portion of the Purchase Price for
         Capacity in Tranche 1 continues for a further period of *** days FA-1
         may in its discretion by notice to BELL ATLANTIC, either:

         4.2.1    require BELL ATLANTIC forthwith to pay the unpaid balance of
                  the Purchase Price for Capacity in Tranche 1; or

         4.2.2    terminate this Agreement and relieve BELL ATLANTIC of its
                  obligation to pay any portion of the Purchase Price which has
                  not yet become due and its right to acquire Capacity pursuant
                  hereto.

         Neither such termination of this Agreement nor the exercise by FA-1 of
         such remedy shall relieve BELL ATLANTIC of its obligation to pay
         amounts already due hereunder plus default interest thereon.

4.3      In the event that BELL ATLANTIC shall have failed to pay any amount
         (including O&M Payments) payable by BELL ATLANTIC pursuant hereto (and
         not being disputed in good faith) for more than *** days after its due
         date, then BELL ATLANTIC shall not be entitled to activate any
         additional Capacity or to exercise its option to acquire any additional
         Capacity in Tranche 2, 3, 4 or (if applicable) 5 pursuant to clause 1.1
         until BELL ATLANTIC has paid in full all amounts overdue together with
         applicable default interest. If such failure continues for a further
         *** days, FA-1 shall be entitled to refrain from performing any
         services for BELL ATLANTIC required by this Agreement and to deny BELL
         ATLANTIC the right of access to collocated spaces until BELL ATLANTIC
         has paid in full all amounts overdue together with applicable default
         interest.

4.4      FA-1 reserves the right to temporarily or permanently deactivate all
         then activated Capacity (and refuse to activate any additional
         Capacity) and/or to disconnect BELL ATLANTIC's equipment from the
         System in the event BELL ATLANTIC's use of the System may result in
         material damage or disruption to the System provided that where
         practicable FA-1 shall notify BELL ATLANTIC prior to such deactivation
         or disconnection and shall provide BELL ATLANTIC with an opportunity to
         discuss this matter with FA-1 in order to reach a solution to avoid
         deactivation or disconnection.

4.5      Except as provided herein, BELL ATLANTIC shall have no right to
         terminate or cancel this Agreement for any reason whatsoever. If the
         Initial RFS Date has not occurred within *** months after the Scheduled
         Initial RFS Date *** BELL ATLANTIC may by two months written notice
         terminate its purchase of the Capacity. BELL ATLANTIC shall have no
         obligation to make any further payments under this Agreement following
         such termination and FA-1 shall within 60 days of such termination
         refund to BELL ATLANTIC any portion of the Purchase Price already paid
         by BELL ATLANTIC to FA-1 which has not been used to

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         make timely payments required to be made by FA-1 in connection with the
         planning, design, construction and project management of the System.
         Subject to clause 20.1, the foregoing shall be the limit of BELL
         ATLANTIC's rights for delays to the Initial RFS Date.

5.       OPERATION AND MAINTENANCE

5.1      FA-1 shall be responsible for the operation and maintenance of the
         System including arranging for the repair of the System in the event of
         any fault. *** BELL ATLANTIC's sole responsibility with regard to
         operation and maintenance of the System shall be to make the O&M
         Payments as and when they become due pursuant to this Agreement.

5.2      FA-1 shall promulgate procedures for the maintenance, use and operation
         of the System according to standards generally accepted in the ocean
         cable industry meeting the standards of Schedule 7 and shall provide
         BELL ATLANTIC with a copy thereof. FA-1 may, from time to time, amend
         such procedures and shall provide BELL ATLANTIC with a copy of each
         amendment.

6.       RESTORATION

         FA-1 shall provide restoration on the System as set forth in Schedule
         1. If such restoration is not sufficient for BELL ATLANTIC, then BELL
         ATLANTIC shall be responsible for making its own restoration
         arrangements for Capacity which is then activated.

7.       SYSTEM ENHANCEMENTS, UPGRADES AND ADDITIONAL CAPACITY

7.1      FA-1 reserves the right to further upgrade the capacity of the System
         and to make any enhancements to the System from time to time. FA-1
         shall provide at least 45 days advance notice for System upgrades or
         enhancements. FA-1 shall use reasonable efforts to minimise the
         interruption, interference or impairment of the System caused by the
         implementation of any such enhancement or upgrade and will consult with
         BELL ATLANTIC in determining the date, time and expected duration of
         any such interruption, interference or impairment.

7.2      BELL ATLANTIC shall have the right to acquire the IRU in the Capacity
         in Tranches 2, 3, 4 and (if applicable) 5 pursuant to clause 1.1
         whether or not FA-1 upgrades the capacity of the System in accordance
         with clause 7.1.

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8.       SYSTEM DECOMMISSIONING

         The System shall be decommissioned at such time, no earlier than 15
         years and no later than 25 years from the Initial RFS Date, as either
         FA-1 or the holders of three quarters of the then activated capacity on
         the System determine that the System is technically obsolete or has
         reached the end of its useful economic life. There shall be no
         compensation payable to BELL ATLANTIC whether BELL ATLANTIC voted for
         or against decommissioning. This provision is without prejudice to the
         rights of FA-1 to decommission the System without any liability to BELL
         ATLANTIC whatsoever, in the event of a Force Majeure Event which makes
         it impossible to maintain the business efficacy of the System. FA-1
         will notify BELL ATLANTIC of the possibility of any such
         decommissioning of the System by FA-1 and give due consideration to
         BELL ATLANTIC's position and concerns regarding such possible
         decommissioning when considering whether to decommission the System.

9.       REPRESENTATIONS, WARRANTIES AND COVENANTS

9.1      BELL ATLANTIC represents and warrants to FA-1 as follows:

         9.1.1    BELL ATLANTIC is duly established and in good standing under
                  the laws of Delaware and has full power and authority to enter
                  into this Agreement.

         9.1.2    This Agreement constitutes the legal, valid and binding
                  obligation of BELL ATLANTIC, enforceable against BELL ATLANTIC
                  in accordance with its terms.

         9.1.3    BELL ATLANTIC has obtained or will obtain all necessary
                  consents, licenses, permits and other approvals, both
                  governmental and private, as may be necessary to permit BELL
                  ATLANTIC to perform its obligations under this Agreement and
                  to acquire and use the Capacity.

         9.1.4    BELL ATLANTIC shall perform its obligations under this
                  Agreement and use the Capacity in a manner consistent with
                  applicable law, and shall not use, or permit the Capacity to
                  be used, for any illegal purpose or in any other unlawful
                  manner.

9.2      FA-1 represents and warrants to BELL ATLANTIC as follows:

         9.2.1    It is duly established and in good standing under the laws of
                  the country of its incorporation and has full power and
                  authority to enter into this Agreement.

         9.2.2    This Agreement constitutes its legal, valid and binding
                  obligation enforceable against it in accordance with its
                  terms.

         9.2.3    FA-1 shall perform its obligations under this Agreement and
                  construct, acquire, provide, sell, operate, and maintain the
                  System and Capacity in a manner consistent with applicable
                  law.

         9.2.4    No interruption or impairment of BELL ATLANTIC's use of the
                  Capacity will be as a result of the System failing to comply
                  with the "Year 2000 Criteria" provided below.

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                   "Year 2000 Criteria" means the System and its components
                  accurately processes date/time data from, into, and between
                  the twentieth and twenty-first centuries and the years 1999
                  and 2000.

9.3      FA-1 will, to the extent applicable, comply with the Government
         Requirements set forth in Schedule 8 in the performance of this
         Agreement. Reference to "Seller" in Schedule 8 shall be deemed to be
         references to FA-1.

9.4       FA-1 will use commercially reasonable efforts to obtain all necessary
          consents, licenses and permits and other approvals, both governmental
          and private, as may be necessary to permit FA-1 to perform its
          obligations under this Agreement and to construct, acquire, operate,
          provide, sell, operate and maintain the System and Capacity.

9.5      Except as provided above, FA-1 disclaims, and BELL ATLANTIC waives, all
         representations and warranties regarding the Capacity, including any
         warranty of merchantability or fitness for a particular use, and in
         particular, without limiting the foregoing FA-1 does not warrant that
         the Capacity will be uninterrupted or error free or that the Capacity
         will meet BELL ATLANTIC's requirements for the equipment to be deployed
         by BELL ATLANTIC in connection with the Capacity or services to be
         offered by BELL ATLANTIC utilising this equipment.

10.      FORCE MAJEURE

         "Force Majeure Event" means fire, strike, embargo, any requirement
         imposed by government regulation, civil or military authorities, act of
         God or by the public enemy, or other cause beyond a Party's reasonable
         control. Default of any of FA-1's subcontractors or suppliers shall not
         constitute a Force Majeure Event unless such default arises out of
         causes beyond the reasonable control of both FA-1 and its
         subcontractors or suppliers and without the fault or negligence of
         either of them. No failure or omission by any Party to carry out or
         observe any of the terms and conditions of this Agreement (other than
         payment obligations) shall give rise to any claim against such Party or
         be deemed a breach of this Agreement if such failure or omission arises
         from a Force Majeure Event.

11.      CONFIDENTIALITY

         Other than in connection with an assignment permitted under clause 13,
         or if it is required by applicable law in connection with the
         enforcement of this Agreement, or as required under subpoena or rule of
         order of a court or other governmental body of competent jurisdiction,
         neither FA-1 nor BELL ATLANTIC shall disclose the terms of this
         Agreement to any third party without the prior written consent of the
         other Party. Notwithstanding the foregoing, BELL ATLANTIC may disclose
         this Agreement to persons with whom it or its affiliates propose to
         merge, including, but not limited to, GTE Corporation and its
         affiliates, and/or to any BELL ATLANTIC affiliate provided such
         affiliate is bound by these obligations of confidentiality. In the
         event of a demand to disclose the Agreement under such rule, order, or
         subpoena, the Party subject to such demand shall where possible give
         prompt notice to the other Parties in advance of disclosure to permit
         the other parties to seek reasonable protective arrangements. Without
         limiting the generality of the foregoing, neither FA-1 nor BELL

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         ATLANTIC shall issue any press release or otherwise publicise the
         existence or the terms of this Agreement without the prior written
         consent of the other Party.

12.      NO LICENCE

         Nothing in this Agreement shall or shall be deemed to give rise to any
         right on the part of any Party to use any other Party's Intellectual
         Property. For the purposes of this clause "Intellectual Property" means
         any and all patents, trade marks, rights in designs, copyrights, and
         topography rights, (whether registered or not and any applications to
         register or rights to apply for registration of any of the foregoing),
         rights in inventions, know-how, trade secrets and other confidential
         information, rights in databases and all other intellectual property
         rights of a similar or corresponding character which may now or in the
         future subsist in any part of the world, and a Party's Intellectual
         Property means Intellectual Property owned by or licensed to that Party
         together with the goodwill relating thereto.

13.      ASSIGNMENT

13.1     This Agreement and all the provisions hereof shall be binding upon and
         inure to the benefit of the Parties hereto and their respective
         successors and permitted assigns; provided that, except for the
         assignment of FA-1's rights (but not FA-1's obligations) under this
         Agreement to one or more financial institutions, lenders, creditors and
         export credit agencies as collateral security for financing provided to
         FA-1 or in connection with a sale of receivables by FA-1, neither this
         Agreement nor any of the rights, interest or obligations hereunder
         shall be assigned or transferred by any of the Parties hereto without
         the prior written consent of the other Parties, and any attempted
         assignment or transfer in violation of this clause shall be void.
         Notwithstanding the foregoing, BELL ATLANTIC may assign its rights,
         duties and obligations under this Agreement upon notice to FA-1, but
         without FA-1's prior consent, to BELL ATLANTIC Affiliates or to any
         transferee of or successor to all or substantially all of the business
         assets of BELL ATLANTIC, provided:

         13.1.1   the Affiliate, transferee or successor agrees to be bound by
                  all terms and conditions of this Agreement; and

         13.1.2   the Affiliate, transferee or successor is authorised or
                  permitted under the laws and regulations of its country to
                  acquire and use the Capacity.

         For the purposes of this clause, an "Affiliate" shall mean any other
         entity that controls, is controlled by or is under common control with
         BELL ATLANTIC.

13.2     FLAG Atlantic Limited and FLAG Atlantic USA Limited may use
         subcontractors or agents to fulfil their obligations hereunder.

14.      ENTIRE AGREEMENT

         This Agreement constitutes the whole agreement between the Parties and
         supersedes any previous or contemporaneous agreements, arrangements or
         understandings between them, oral or written, relating to the subject
         matter hereof. Each of the Parties acknowledges that it is not relying
         on any statements, warranties or representations given or made by any
         of them,

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         whether written or oral, relating to the subject matter hereof, save as
         expressly set out in this Agreement.

15.      VARIATION

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

16.      HEADINGS

         The Clause headings of this Agreement are for convenience of reference
         only and are not intended to restrict, affect or influence the
         interpretation or construction of provisions of such Clause.

17.      SEVERABILITY

         If any provision of this Agreement is found by an arbitral, judicial or
         regulatory authority having jurisdiction to be void or unenforceable,
         such provision shall be deemed to be deleted from this Agreement and
         the remaining provisions shall continue in full force and effect.

18.      WAIVER

18.1     Failure by a Party at any time to enforce any of the provisions of this
         Agreement shall neither be construed as a waiver of any rights or
         remedies hereunder nor in any way affect the validity of this Agreement
         or any part of it and no waiver of a breach of this Agreement shall
         constitute a waiver of any subsequent breach.

18.2     Termination of this Agreement shall not operate as a waiver of any
         breach by a Party of any of the provisions hereof and shall be without
         prejudice to any rights or remedies of a Party which may arise as a
         consequence of such breach or which may have accrued hereunder up to
         the date of such termination.

18.3     No waiver of a breach of this Agreement shall be effective unless given
         in writing.

19.      NOTICE

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

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         If to BELL ATLANTIC:

         NYNEX Long Distance Company
         1372 Broadway, 8th Floor
         New York, NY  10018
         Attention: President

         With copies to:

         Bell Atlantic International
         1095 Avenue of the Americas
         Room: 444
         New York, NY 10036
         Attention:  John Pricken
         Fax:  1-212-597-2696

         Bell Atlantic Corporation
         Legal Department
         1095 Avenue of the Americas
         Room 3831
         New York, NY  10036
         Attention: International Counsel
         Fax: 212-764-2739

         Bell Atlantic Network Services, Inc.
         Legal Department
         1320 North Courthouse Road, 8th Floor
         Arlington, VA  22201
         Attention: Long Distance Counsel
         Fax: 703-974-0691

         If to FA-1:

         FLAG Atlantic Limited
         The Emporium Building
         69 Front Street
         4th Floor
         Hamilton HM 12
         Bermuda

         Attention: Co-chairmen
         Tel:  +1-441-296-0909
         Fax: +1-441-296-0938

         With a copy to:

         FLAG Telecom Limited

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         103 Mount Street - 3rd Floor
         London  W1Y 5HE
         U.K.

         Attention:  General Counsel
         Tel:  +44-171-317-0800
         Fax: +44-171-317-0808

         With a copy to:

         GTS Carrier Services
         Terhulpsesteenweg 6A
         Hoeilaart 1560
         Belgium

         Attention:  General Counsel
         Tel:  +322-658-5200
         Fax: +322-658-5100

19.2     BELL ATLANTIC acknowledges that all communications in connection with
         this Agreement shall be between BELL ATLANTIC and FLAG Atlantic
         Limited. For this purpose, FLAG Atlantic USA Limited hereby appoints
         FLAG Atlantic Limited as its agent to receive and send all
         communications in connection with this Agreement.

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

20.      LIABILITY

20.1     ***

20.2     Notwithstanding any other provision in this Agreement to the contrary,
         no Party shall be liable to any other Party for any indirect, special,
         punitive or consequential damages (including, but not limited to, any
         loss of profit or business or claim from any customer for loss of
         services) arising out of this Agreement or from any breach of any of
         the terms and conditions of this Agreement.

20.3     ***

21.      COUNTERPARTS

                                                                             12
<PAGE>

         This Agreement may be executed in counterparts. Any single counterpart
         or set of counterparts signed, in either case, by all the Parties
         hereto shall constitute a full and original agreement for all purposes.

22.      WAIVER OF IMMUNITY

         The Parties acknowledge that this Agreement is commercial in nature,
         and the Parties expressly and irrevocably waive any claim or right
         which they may have to immunity (whether sovereign immunity or
         otherwise) for themselves or with respect to any of their assets in
         connection with an arbitration, arbitral award or other proceedings to
         enforce this Agreement, including, without limitation, immunity from
         service of process, immunity of any of their assets from pre- or
         post-judgement attachment or execution and immunity from the
         jurisdiction of any court or arbitral tribunal.

23.      FA-1 FINANCIAL CLOSURE

23.1     The obligation of BELL ATLANTIC to pay the Purchase Price (or any
         instalment thereof) and the obligation of FA-1 to provide the Capacity
         is conditional upon the occurrence of FA-1 Financial Closure.

23.2     If FA-1 Financial Closure has not occurred by 31 October 1999, then
         this Agreement shall terminate (with the exception of clauses 11, 20,
         22 and 24 which shall survive termination).

23.3     For the purposes of this Agreement, "FA-1 Financial Closure" shall be
         deemed to take place on the date when FA-1 and its shareholders have
         put in place arrangements satisfactory to them for the financing of the
         construction of the System.

24.      GOVERNING LAW AND DISPUTE RESOLUTION

24.1     This Agreement shall be governed by and construed in accordance with
         the laws of the state of New York, United States of America, without
         regard to the law of New York governing conflicts of law.

24.2     Except as otherwise provided herein, any dispute or controversy arising
         under or in connection with this Agreement shall be finally settled
         under the Rules of Arbitration of the International Chamber of Commerce
         by one arbitrator appointed in accordance with such Rules. The place of
         arbitration shall be London. The arbitration shall be conducted in
         English. The decision and award resulting from such arbitration shall
         be final and binding on the Parties. Judgement upon the arbitration
         award may be rendered by any court of competent jurisdiction, or
         application may be made to such court for a judicial acceptance of the
         award and an order of enforcement. Insofar as permissible under the
         applicable laws, the Parties hereby waive all rights to object to any
         action for judgement or execution which may be brought before a court
         of competent jurisdiction on an arbitration award or on a judgement
         rendered thereon.

25.      NON-EXCLUSIVE MARKET RIGHTS

                                                                              13

<PAGE>

         It is expressly understood and agreed that this Agreement does not
         grant to FA-1 an exclusive privilege to sell or otherwise provide to
         BELL ATLANTIC any or all products and services of the type described in
         this Agreement. It is, therefore, understood that BELL ATLANTIC may
         contract with other suppliers for the procurement of comparable
         products and services.

26.      AFFILIATE PURCHASES

         Affiliates (which shall have the same meaning as that term is given in
         clause 13.1) designated by BELL ATLANTIC may acquire the Capacity in
         place of BELL ATLANTIC by issuing an order to FA-1 that incorporates
         this Agreement by reference. Such Affiliates that order Capacity shall
         be entitled to all the rights, and subject to all the obligations, of
         BELL ATLANTIC under this Agreement and as to orders by such Affiliates,
         references in this Agreement to BELL ATLANTIC shall be deemed to be
         references to such Affiliates.

27.      SURVIVAL

         Clauses 11, 20, 22 and 24 and any rights of a Party which have accrued
         prior to the cancellation, termination, or expiration of this Agreement
         shall survive such cancellation, termination, or expiration.

28.      ***

29.      ***

IN WITNESS WHEREOF, FA-1 and BELL ATLANTIC have each caused this Agreement to be
signed and delivered by its duly authorised representatives, effective as of the
date first set forth above.

FLAG ATLANTIC LIMITED

BY  /s/ Name of Signatory                             BY /s/ James E. Shields
  ------------------------                              -----------------------
Name:                                                 Name:   James E. Shields
Title:                                                Title:

FLAG ATLANTIC USA LIMITED

BY /s/ Larry F. Bautista
  -----------------------
Name:
Title:

                                                                             14
<PAGE>

NYNEX LONG DISTANCE COMPANY

By /s/ Veronica Gralha
  ----------------------
Name:  Veronica Gralha
Title:   President

                                                                              15<PAGE>

                                                                  EXECUTION COPY

                         CAPACITY RIGHT OF USE AGREEMENT

THIS AGREEMENT, dated as of the ______ day of October 1999, is among FLAG
ATLANTIC LIMITED, a company organised under the laws of Bermuda and having its
principal office at The Emporium Building, 69 Front Street, 4th Floor, Hamilton,
Bermuda, FLAG ATLANTIC USA LIMITED, a company organised under the laws of
Delaware, USA and having its principal office at 570 Lexington Avenue, 38th
Floor, New York, NY 10022, USA, (together hereinafter referred to as "FA-1") and
GTE INTELLLIGENT NETWORK SERVICES INCORPORATED ("GTE"), a Delaware corporation
having its principle office 3 Van de Graaff Drive, Burlington, Massachusetts
01803, USA.

                                   WITNESSETH:

WHEREAS, except as set out below, FLAG Atlantic Limited is constructing and will
directly and/or indirectly own, operate and maintain a fiberoptic cable system
to be known as FLAG Atlantic-1 as more fully described in Schedule 1 (the
"System"); and

WHEREAS, FLAG Atlantic USA Limited is constructing and will own all that part of
the System that is within the territory (including the territorial waters) of
the United States of America; and

WHEREAS, the System is currently scheduled to go into service in stages with the
initial stage, as more particularly described in Schedule 1, ("Initial Stage")
currently scheduled to go into service on or about 31 March 2001 ("Scheduled
Initial RFS Date"); and

WHEREAS, GTE desires to acquire from FA-1, and FA-1 is willing to provide to
GTE, an indefeasible right of use ("IRU") (except as otherwise provided herein)
in the capacity on the System as set out in Schedule 2A or 2B, as applicable
(the "Capacity"); and

WHEREAS, FA-1 and GTE (the "Parties") desire to define the terms and conditions
under which the Capacity will be acquired by GTE.

NOW, THEREFORE, the Parties hereby agree as follows:

1.       PURCHASE OF CAPACITY

1.1      Individual units of Capacity as set out in Schedule 2A or 2B, as
         applicable, (each a "Unit") shall be available for activation in
         tranches (each a "Tranche") pursuant to the delivery schedule set out
         in Schedule 6A or 6B, as applicable. GTE agrees to acquire the IRU
         (except as otherwise provided herein) in the Capacity in Tranche 1 and
         has the option to acquire the IRU (except as otherwise provided herein)
         in the Capacity in Tranches 2, 3, 4 and (if applicable) 5 for the
         purchase price set forth in Schedule 2A or 2B, as applicable (the
         "Purchase Price"), subject to the terms and conditions of this
         Agreement. GTE may exercise its option to acquire the Capacity in
         Tranches 2, 3, 4 and (if applicable) 5 by notice to FA-1 ***. GTE shall
         by the earlier of ***

<PAGE>

         notify FA-1 whether Schedule 2A or 2B shall apply to this Agreement
         (and if GTE fails to give such notice by the required date Schedule 2A
         shall apply). If Schedule 2A applies then Schedule 6A shall apply and
         if Schedule 2B applies then Schedule 6B shall apply.

1.2      ***

1.3      ***

1.4      FA-1 shall:

         1.4.1    Provide to GTE the circuit designations within one day after
                  receipt of an Activation Notice from GTE; and

         1.4.2    Provision the Requested Capacity within *** days (*** days in
                  the case of the initial Requested Capacity to be activated
                  following the Initial RFS Date) after receipt of an Activation
                  Notice for such Requested Capacity in accordance with the
                  standards described in Schedule 7.

1.5      Subject to GTE paying the Purchase Price in accordance with the terms
         of this Agreement, GTE shall have the right, subject to the terms of
         this Agreement, to use such Requested Capacity from the date
         provisioned under clause 1.4.2 until the System is decommissioned.

1.6      GTE shall be entitled to collocation pursuant to a collocation
         agreement to be negotiated between the Parties within 90 days of the
         execution of this Agreement, based on the principles set out in
         Schedule 4.

1.7      Nothing set forth in this Agreement shall require GTE to use purchased
         Capacity for transport of communications until such time as (a) GTE, in
         its sole discretion, determines to use such purchased Capacity, and (b)
         GTE has obtained all necessary approvals to use such purchased
         Capacity.

1.8      GTE shall have an ownership interest in the Capacity as provided herein
         but GTE shall have no legal title or ownership in the physical assets
         of the System itself, including any proceeds from the disposition of
         the System.

1.9      In the event that (i) after using commercially reasonable efforts, FA-1
         does not have the underlying rights to grant an IRU in portions of the
         System located in France, England and between France and England and/or
         (ii) if any jurisdiction in which the System is located does not
         currently recognize or does not recognize in the future the conveyance
         of communications facilities on an IRU basis and/or (iii) FA-1 chooses
         not to obtain an IRU on the portion of the System located in England
         that FLAG Atlantic Limited or a subsidiary will not own outright, then
         as to the Capacity on such portions of the System or within such
         jurisdiction(s) only, this Agreement shall be considered an agreement
         for a lease of such Capacity ("Lease").

1.10     In the event that this Agreement is to be treated as a Lease for any
         portion of the Capacity, then as to such portion only, the terms
         "purchase" and any variations thereon shall mean "lease" or the
         appropriate variation thereof, and the terms "indefeasible right of
         use" and "IRU" shall mean "Lease." Any other terms and conditions of
         this Agreement also shall be deemed modified only

                                                                               2

<PAGE>

         to the extent necessary to be consistent with the grant of a lease to
         GTE. All other terms and conditions of this Agreement shall remain
         unchanged and fully valid and enforceable.

2.       PAYMENTS

2.1      GTE shall pay to FA-1 the Purchase Price for Capacity to be acquired
         pursuant hereto as follows (and all such payments shall be
         non-refundable except as otherwise provided in clause 4):

         2.1.1    GTE shall pay to FA-1 the Purchase Price for Capacity in
                  Tranche 1 pursuant to the payment schedule set out in Schedule
                  3.

         2.1.2    If GTE exercises its option in clause 1.1 to acquire Capacity
                  in Tranche 2, 3, 4 or (if applicable) 5 it shall pay *** of
                  the Purchase Price specified for the Capacity in that Tranche
                  on notice to FA-1 of the exercise of its option, with the
                  remaining *** of the Purchase Price being payable when such
                  Capacity has passed the bringing-into-service tests specified
                  in Schedule 7.

2.2      GTE shall pay to FA-1 such amounts for the operation and maintenance of
         the System as are set forth in, or determined pursuant to, Schedule 5
         ("O&M Payments").

2.3      FA-1 shall render to GTE invoices for amounts payable pursuant to this
         Agreement. Invoices for the Purchase Price shall be rendered in
         accordance with clause 2.1. Invoices for O&M Payments shall be rendered
         pursuant to Schedule 5. All invoices shall be due and payable within 30
         days after receipt by GTE.

2.4      If GTE disputes any invoiced amount for O&M payments in good faith, GTE
         must provide to FA-1, on or before the due date of the invoice,
         reasonable notice and a detailed explanation of the basis of the
         dispute, and pay any undisputed amount in accordance with this
         Agreement. *** The parties will make a good faith effort to resolve all
         billing disputes as expeditiously as possible.

2.5        ***

2.6      Any amount payable pursuant to this Agreement which is not paid when
         due shall accrue interest at the annual rate of *** above the U.S.
         Dollar LIBOR for one month as quoted in THE WALL STREET JOURNAL on the
         first business day of the month in which the payment is due or the
         maximum rate permitted under the laws of the State of New York, USA,
         whichever is less. All such default interest shall accrue from the day
         following the date payment of the relevant amount was due until it is
         paid in full and shall accrue both before and after judgement. Such
         interest shall be payable on demand. ***

2.7      All amounts payable by GTE pursuant hereto shall be paid in full in
         U.S. dollars by wire transfer, free and clear of all bank or transfer
         charges to such account(s) as FA-1 may by notice to GTE designate
         without reduction for any deduction or withholding for or on account of
         any tax, duty or other charge of whatever nature imposed by any taxing
         authority in lieu of a direct tax on FA-1 in connection with its
         income. If GTE is required by law to make any deduction or withholding
         from any payment hereunder, GTE shall pay such additional amount to
         FA-1 so that after such deduction or withholding the net amount
         received by FA-1 will be not less than the

                                                                               3

<PAGE>

         amount FA-1 would have received had such deduction or withholding not
         been required. GTE shall make the required deduction or withholding,
         shall pay the amount so deducted or withheld to the relevant
         governmental authority and shall promptly provide FA-1 with evidence
         of such payment.

2.8      In the case of payments of the Purchase Price, until the Initial RFS
         Date there shall be such controls over the account(s) designated by
         FA-1 pursuant to clause 2.7 so as to ensure that payments of the
         Purchase Price may only be used to make timely payments required to be
         made by FA-1 in connection with the planning, design, construction and
         project management of the System. Any interest arising from amounts
         held in the account(s) shall accrue for the benefit of FA-1.

2.9      GTE's obligation to pay the Purchase Price and other amounts shall not
         be subject to any rights of set-off, counterclaim, deduction, defence
         or other right which GTE may have against FA-1 or any other party under
         this Agreement or otherwise.

3.       TAXES

         Save as the context requires or as otherwise stated herein all
         references to payments made in this Agreement are references to such
         payments exclusive of all applicable sales and use taxes, gross
         turnover taxes, value added taxes, or other similar turnover or sales
         based taxes, excise taxes, duties and levies chargeable under
         applicable law in respect of the supply for which the payment is or is
         deemed to be consideration. Where applicable, such taxes shall be added
         to the invoice and shall be paid to FA-1 at the same time as the
         relevant invoice is settled in accordance with clause 2. FA-1 shall be
         solely responsible for payment of taxes on its income and, except as
         provided in clause 2.7, for withholding taxes, including, but not
         limited to, social security and payroll taxes for its employees. GTE
         shall be solely responsible for payment of taxes on its income and for
         withholding taxes, including, but not limited to, social security and
         payroll taxes for its employees. Neither Party shall have any liability
         for such taxes which are to be borne by the other Party. Each Party
         indemnifies the other Parties and their respective affiliates for all
         claims, losses, penalties, interest, attorney's fees, and costs and
         expenses, including litigation costs, arising from any failure to make
         timely payment of such taxes, duties, and fees such Party is required
         to pay under this Agreement. Each Party shall co-operate in any effort
         by any other Party to contest application or payment or to seek refunds
         of any such taxes, duties, and levies.

4        DEFAULT AND TERMINATION

4.1      In the event that GTE shall have failed to pay any portion of the
         Purchase Price for Capacity in Tranche 1 for more than *** days after
         its due date, then FA-1 may deactivate all then activated Capacity (and
         refuse to activate any additional Capacity) until GTE has paid in full
         all amounts overdue together with applicable default interest provided
         that prior to such deactivation, FA-1 shall notify GTE in writing of
         its concern regarding the overdue payment and shall provide GTE with an
         opportunity to discuss this matter with FA-1 in order to reach an
         amicable solution to the issue of non-payment and avoid deactivation.
         ***

                                                                               4

<PAGE>

4.2      If such  default in payment of any portion of the Purchase  Price for
         Capacity in Tranche 1 continues  for a further period of *** days FA-1
         may in its discretion by notice to GTE, either:

         4.2.1    require GTE forthwith to pay the unpaid balance of the
                  Purchase Price for Capacity in Tranche 1; or

         4.2.2    terminate this Agreement and relieve GTE of its obligation to
                  pay any portion of the Purchase Price which has not yet become
                  due and its right to acquire Capacity pursuant hereto.

         Neither such termination of this Agreement nor the exercise by FA-1 of
         such remedy shall relieve GTE of its obligation to pay amounts already
         due hereunder plus default interest thereon.

4.3      In the event that GTE shall have failed to pay any amount (including
         O&M Payments) payable by GTE pursuant hereto (and not being disputed in
         good faith) for more than *** days after its due date, then GTE shall
         not be entitled to activate any additional Capacity or to exercise its
         option to acquire any additional Capacity in Tranche 2, 3, 4 or (if
         applicable) 5 pursuant to clause 1.1 until GTE has paid in full all
         amounts overdue together with applicable default interest. If such
         failure continues for a further *** days, FA-1 shall be entitled to
         refrain from performing any services for GTE required by this Agreement
         and to deny GTE the right of access to collocated spaces until GTE has
         paid in full all amounts overdue together with applicable default
         interest.

4.4      FA-1 reserves the right to temporarily or permanently deactivate all
         then activated Capacity (and refuse to activate any additional
         Capacity) and/or to disconnect GTE's equipment from the System in the
         event GTE's use of the System may result in material damage or
         disruption to the System provided that where practicable FA-1 shall
         notify GTE prior to such deactivation or disconnection and shall
         provide GTE with an opportunity to discuss this matter with FA-1 in
         order to reach a solution to avoid deactivation or disconnection.

4.5      Except as provided herein, GTE shall have no right to terminate or
         cancel this Agreement for any reason whatsoever. If the Initial RFS
         Date has not occurred within *** months after the Scheduled Initial RFS
         Date *** GTE may by two months written notice terminate its purchase of
         the Capacity. GTE shall have no obligation to make any further payments
         under this Agreement following such termination and FA-1 shall within
         60 days of such termination refund to GTE any portion of the Purchase
         Price already paid by GTE to FA-1 which has not been used to make
         timely payments required to be made by FA-1 in connection with the
         planning, design, construction and project management of the System.
         Subject to clause 20.1, the foregoing shall be the limit of GTE's
         rights for delays to the Initial RFS Date.

5.       OPERATION AND MAINTENANCE

5.1      FA-1 shall be responsible for the operation and maintenance of the
         System including arranging for the repair of the System in the event of
         any fault. *** GTE's sole responsibility with regard to operation and
         maintenance of the System shall be to make the O&M Payments as and when
         they become due pursuant to this Agreement.

                                                                               5

<PAGE>

5.2      FA-1 shall promulgate procedures for the maintenance, use and operation
         of the System according to standards generally accepted in the ocean
         cable industry meeting the standards of Schedule 7 and shall provide
         GTE with a copy thereof. FA-1 may, from time to time, amend such
         procedures and shall provide GTE with a copy of each amendment.

6.       RESTORATION

         FA-1 shall provide restoration on the System as set forth in Schedule
         1. If such restoration is not sufficient for GTE, then GTE shall be
         responsible for making its own restoration arrangements for Capacity
         which is then activated.

7.       SYSTEM ENHANCEMENTS, UPGRADES AND ADDITIONAL CAPACITY

7.1      FA-1 reserves the right to further upgrade the capacity of the System
         and to make any enhancements to the System from time to time. FA-1
         shall provide at least 45 days advance notice for System upgrades or
         enhancements. FA-1 shall use reasonable efforts to minimise the
         interruption, interference or impairment of the System caused by the
         implementation of any such enhancement or upgrade and will consult with
         GTE in determining the date, time and expected duration of any such
         interruption, interference or impairment.

7.2      GTE shall have the right to acquire the IRU in the Capacity in Tranches
         2, 3, 4 and (if applicable) 5 pursuant to clause 1.1 whether or not
         FA-1 upgrades the capacity of the System in accordance with clause 7.1.

8.       SYSTEM DECOMMISSIONING

         The System shall be decommissioned at such time, no earlier than 15
         years and no later than 25 years from the Initial RFS Date, as either
         FA-1 or the holders of three quarters of the then activated capacity on
         the System determine that the System is technically obsolete or has
         reached the end of its useful economic life. There shall be no
         compensation payable to GTE whether GTE voted for or against
         decommissioning. This provision is without prejudice to the rights of
         FA-1 to decommission the System without any liability to GTE
         whatsoever, in the event of a Force Majeure Event which makes it
         impossible to maintain the business efficacy of the System. FA-1 will
         notify GTE of the possibility of any such decommissioning of the System
         by FA-1 and give due consideration to GTE's position and concerns
         regarding such possible decommissioning when considering whether to
         decommission the System.

9.       REPRESENTATIONS, WARRANTIES AND COVENANTS

9.1      GTE represents and warrants to FA-1 as follows:

         9.1.1    GTE is duly established and in good standing under the laws of
                  Delaware and has full power and authority to enter into this
                  Agreement.

                                                                               6

<PAGE>

         9.1.2    This Agreement constitutes the legal, valid and binding
                  obligation of GTE, enforceable against GTE in accordance with
                  its terms.

         9.1.3    GTE has obtained or will obtain all necessary consents,
                  licenses, permits and other approvals, both governmental and
                  private, as may be necessary to permit GTE to perform its
                  obligations under this Agreement and to acquire and use the
                  Capacity.

         9.1.4    GTE shall perform its obligations under this Agreement and use
                  the Capacity in a manner consistent with applicable law, and
                  shall not use, or permit the Capacity to be used, for any
                  illegal purpose or in any other unlawful manner.

9.2      FA-1 represents and warrants to GTE as follows:

         9.2.1    It is duly established and in good standing under the laws of
                  the country of its incorporation and has full power and
                  authority to enter into this Agreement.

         9.2.2    This Agreement constitutes its legal, valid and binding
                  obligation enforceable against it in accordance with its
                  terms.

         9.2.3    FA-1 shall perform its obligations under this Agreement and
                  construct, acquire, provide, sell, operate, and maintain the
                  System and Capacity in a manner consistent with applicable
                  law.

         9.2.4    No interruption or impairment of GTE's use of the Capacity
                  will be as a result of the System failing to comply with the
                  "Year 2000 Criteria" provided below.

                  "Year 2000 Criteria" means the System and its components
                  accurately processes date/time data from, into, and between
                  the twentieth and twenty-first centuries and the years 1999
                  and 2000.

9.3      FA-1 will, to the extent applicable, comply with the Government
         Requirements set forth in Schedule 8 in the performance of this
         Agreement. Reference to "Seller" in Schedule 8 shall be deemed to be
         references to FA-1.

9.4      FA-1 will use commercially reasonable efforts to obtain all necessary
         consents, licenses and permits and other approvals, both governmental
         and private, as may be necessary to permit FA-1 to perform its
         obligations under this Agreement and to construct, acquire, operate,
         provide, sell, operate and maintain the System and Capacity.

9.5      Except as provided above, FA-1 disclaims, and GTE waives, all
         representations and warranties regarding the Capacity, including any
         warranty of merchantability or fitness for a particular use, and in
         particular, without limiting the foregoing FA-1 does not warrant that
         the Capacity will be uninterrupted or error free or that the Capacity
         will meet GTE's requirements for the equipment to be deployed by GTE in
         connection with the Capacity or services to be offered by GTE utilising
         this equipment.

10.      FORCE MAJEURE

                                                                               7

<PAGE>

         "Force Majeure Event" means fire, strike, embargo, any requirement
         imposed by government regulation, civil or military authorities, act of
         God or by the public enemy, or other cause beyond a Party's reasonable
         control. Default of any of FA-1's subcontractors or suppliers shall not
         constitute a Force Majeure Event unless such default arises out of
         causes beyond the reasonable control of both FA-1 and its
         subcontractors or suppliers and without the fault or negligence of
         either of them. No failure or omission by any Party to carry out or
         observe any of the terms and conditions of this Agreement (other than
         payment obligations) shall give rise to any claim against such Party or
         be deemed a breach of this Agreement if such failure or omission arises
         from a Force Majeure Event.

11.      CONFIDENTIALITY

         Other than in connection with an assignment permitted under clause 13,
         or if it is required by applicable law in connection with the
         enforcement of this Agreement, or as required under subpoena or rule of
         order of a court or other governmental body of competent jurisdiction,
         neither FA-1 nor GTE shall disclose the terms of this Agreement to any
         third party without the prior written consent of the other Party.
         Notwithstanding the foregoing, GTE may disclose this Agreement to
         persons with whom it or its affiliates propose to merge, including, but
         not limited to, GTE Corporation and its affiliates, and/or to any GTE
         affiliate provided such affiliate is bound by these obligations of
         confidentiality. In the event of a demand to disclose the Agreement
         under such rule, order, or subpoena, the Party subject to such demand
         shall where possible give prompt notice to the other Parties in advance
         of disclosure to permit the other parties to seek reasonable protective
         arrangements. Without limiting the generality of the foregoing, neither
         FA-1 nor GTE shall issue any press release or otherwise publicise the
         existence or the terms of this Agreement without the prior written
         consent of the other Party.

12.      NO LICENCE

         Nothing in this Agreement shall or shall be deemed to give rise to any
         right on the part of any Party to use any other Party's Intellectual
         Property. For the purposes of this clause "Intellectual Property" means
         any and all patents, trade marks, rights in designs, copyrights, and
         topography rights, (whether registered or not and any applications to
         register or rights to apply for registration of any of the foregoing),
         rights in inventions, know-how, trade secrets and other confidential
         information, rights in databases and all other intellectual property
         rights of a similar or corresponding character which may now or in the
         future subsist in any part of the world, and a Party's Intellectual
         Property means Intellectual Property owned by or licensed to that Party
         together with the goodwill relating thereto.

13.      ASSIGNMENT

13.1     This Agreement and all the provisions hereof shall be binding upon and
         inure to the benefit of the Parties hereto and their respective
         successors and permitted assigns; provided that, except for the
         assignment of FA-1's rights (but not FA-1's obligations) under this
         Agreement to one or more financial institutions, lenders, creditors and
         export credit agencies as collateral security for financing provided to
         FA-1 or in connection with a sale of receivables by FA-1, neither this
         Agreement nor any of the rights, interest or obligations hereunder
         shall be assigned or

                                                                               8

<PAGE>

         transferred by any of the Parties hereto without the prior written
         consent of the other Parties, and any attempted assignment or transfer
         in violation of this clause shall be void. Notwithstanding the
         foregoing, GTE may assign its rights, duties and obligations under
         this Agreement upon notice to FA-1, but without FA-1's prior consent,
         to GTE Affiliates or to any transferee of or successor to all or
         substantially all of the business assets of GTE, provided:

         13.1.1  the  Affiliate,  transferee  or  successor  agrees  to be
                 bound by all  terms  and  conditions  of this Agreement; and

         13.1.2  the Affiliate, transferee or successor is authorised or
                 permitted under the laws and regulations of its country to
                 acquire and use the Capacity.

         For the purposes of this clause, an "Affiliate" shall mean any other
         entity that controls, is controlled by or is under common control with
         GTE.

13.2     FLAG Atlantic Limited and FLAG Atlantic USA Limited may use
         subcontractors or agents to fulfil their obligations hereunder.

14.      ENTIRE AGREEMENT

         This Agreement constitutes the whole agreement between the Parties and
         supersedes any previous or contemporaneous agreements, arrangements or
         understandings between them, oral or written, relating to the subject
         matter hereof. Each of the Parties acknowledges that it is not relying
         on any statements, warranties or representations given or made by any
         of them, whether written or oral, relating to the subject matter
         hereof, save as expressly set out in this Agreement.

15.      VARIATION

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

16.      HEADINGS

         The Clause headings of this Agreement are for convenience of reference
         only and are not intended to restrict, affect or influence the
         interpretation or construction of provisions of such Clause.

17.      SEVERABILITY

         If any provision of this Agreement is found by an arbitral, judicial or
         regulatory authority having jurisdiction to be void or unenforceable,
         such provision shall be deemed to be deleted from this Agreement and
         the remaining provisions shall continue in full force and effect.

18.      WAIVER

                                                                               9

<PAGE>

18.1     Failure by a Party at any time to enforce any of the provisions of this
         Agreement shall neither be construed as a waiver of any rights or
         remedies hereunder nor in any way affect the validity of this Agreement
         or any part of it and no waiver of a breach of this Agreement shall
         constitute a waiver of any subsequent breach.

18.2     Termination of this Agreement shall not operate as a waiver of any
         breach by a Party of any of the provisions hereof and shall be without
         prejudice to any rights or remedies of a Party which may arise as a
         consequence of such breach or which may have accrued hereunder up to
         the date of such termination.

18.3     No waiver of a breach of this Agreement shall be effective unless given
         in writing.

19.      NOTICE

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

         If to GTE:

         GTE Global Networks Incorporated
         5221 N. O'Connor Boulevard
         East Tower
         Irving
         Texas 75039
         Attention:  AVP Product Market Management

         With copies to:

         GTE Global Networks Incorporated
         1411 Greenway Drive
         Irving
         Texas 75038
         Attention:  Contract Management

         If to FA-1:

         FLAG Atlantic Limited
         The Emporium Building
         69 Front Street
         4th Floor
         Hamilton HM 12
         Bermuda

                                                                              10

<PAGE>

         Attention: Co-chairmen
         Tel:  +1-441-296-0909
         Fax: +1-441-296-0938

         With a copy to:

         FLAG Telecom Limited
         103 Mount Street - 3rd Floor
         London  W1Y 5HE

         U.K.

         Attention:  General Counsel
         Tel:  +44-171-317-0800
         Fax: +44-171-317-0808

         With a copy to:

         GTS Carrier Services
         Terhulpsesteenweg 6A
         Hoeilaart 1560
         Belgium

         Attention:  General Counsel
         Tel:  +322-658-5200
         Fax: +322-658-5100

19.2     GTE acknowledges that all communications in connection with this
         Agreement shall be between GTE and FLAG Atlantic Limited. For this
         purpose, FLAG Atlantic USA Limited hereby appoints FLAG Atlantic
         Limited as its agent to receive and send all communications in
         connection with this Agreement.

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

20.      LIABILITY

20.1     ***

20.2     Notwithstanding any other provision in this Agreement to the contrary,
         no Party shall be liable to any other Party for any indirect, special,
         punitive or consequential damages (including, but not limited to, any
         loss of profit or business or claim from any customer for loss of
         services)

                                                                              11

<PAGE>

         arising out of this Agreement or from any breach of any of the terms
         and conditions of this Agreement.

20.3     ***

21.      COUNTERPARTS

         This Agreement may be executed in counterparts. Any single counterpart
         or set of counterparts signed, in either case, by all the Parties
         hereto shall constitute a full and original agreement for all purposes.

22.      WAIVER OF IMMUNITY

         The Parties acknowledge that this Agreement is commercial in nature,
         and the Parties expressly and irrevocably waive any claim or right
         which they may have to immunity (whether sovereign immunity or
         otherwise) for themselves or with respect to any of their assets in
         connection with an arbitration, arbitral award or other proceedings to
         enforce this Agreement, including, without limitation, immunity from
         service of process, immunity of any of their assets from pre- or
         post-judgement attachment or execution and immunity from the
         jurisdiction of any court or arbitral tribunal.

23.      FA-1 FINANCIAL CLOSURE

23.1     The obligation of GTE to pay the Purchase Price (or any instalment
         thereof) and the obligation of FA-1 to provide the Capacity is
         conditional upon the occurrence of FA-1 Financial Closure.

23.2     If FA-1 Financial Closure has not occurred by 31 October 1999, then
         this Agreement shall terminate (with the exception of clauses 11, 20,
         22 and 24 which shall survive termination).

23.3     For the purposes of this Agreement, "FA-1 Financial Closure" shall be
         deemed to take place on the date when FA-1 and its shareholders have
         put in place arrangements satisfactory to them for the financing of the
         construction of the System.

24.      GOVERNING LAW AND DISPUTE RESOLUTION

24.1     This Agreement shall be governed by and construed in accordance with
         the laws of the state of New York, United States of America, without
         regard to the law of New York governing conflicts of law.

24.2     Except as otherwise provided herein, any dispute or controversy arising
         under or in connection with this Agreement shall be finally settled
         under the Rules of Arbitration of the International Chamber of Commerce
         by one arbitrator appointed in accordance with such Rules. The place of
         arbitration shall be London. The arbitration shall be conducted in
         English. The decision and award resulting from such arbitration shall
         be final and binding on the Parties. Judgement upon the arbitration
         award may be rendered by any court of competent jurisdiction, or
         application may be made to such court for a judicial acceptance of the
         award and an order of enforcement.

                                                                              12

<PAGE>

         Insofar as permissible under the applicable laws, the Parties hereby
         waive all rights to object to any action for judgement or execution
         which may be brought before a court of competent jurisdiction on an
         arbitration award or on a judgement rendered thereon.

25.      NON-EXCLUSIVE MARKET RIGHTS

         It is expressly understood and agreed that this Agreement does not
         grant to FA-1 an exclusive privilege to sell or otherwise provide to
         GTE any or all products and services of the type described in this
         Agreement. It is, therefore, understood that GTE may contract with
         other suppliers for the procurement of comparable products and
         services.

26.      AFFILIATE PURCHASES

         Affiliates (which shall have the same meaning as that term is given in
         clause 13.1) designated by GTE may acquire the Capacity in place of GTE
         by issuing an order to FA-1 that incorporates this Agreement by
         reference. Such Affiliates that order Capacity shall be entitled to all
         the rights, and subject to all the obligations, of GTE under this
         Agreement and as to orders by such Affiliates, references in this
         Agreement to GTE shall be deemed to be references to such Affiliates.

27.      SURVIVAL

         Clauses 11, 20, 22 and 24 and any rights of a Party which have accrued
         prior to the cancellation, termination, or expiration of this Agreement
         shall survive such cancellation, termination, or expiration.

28.      ***

                                                                              13

<PAGE>

29.      ***

IN WITNESS WHEREOF, FA-1 and GTE have each caused this Agreement to be signed
and delivered by its duly authorised representatives, effective as of the date
first set forth above.

FLAG ATLANTIC LIMITED

           /s/ Samih Kawar
BY ________________________
Name:      Samih Kawar
Title:     Director

FLAG ATLANTIC USA LIMITED

           /s/ James E. Shields                           /s/ Larry F. Bautista
BY ________________________                      BY ________________________
Name:      James E. Shields                      Name:     Larry F. Bautista
Title:     Authorised Signatory                  Title:    Authorised Signatory

GTE INTELLIGENT NETWORK SERVICES INCORPORATED

           /s/ Steven H. Blumenthal
By __________________________
Name:      Steven H. Blumenthal
Title:     Vice President, Engineering GTEI

GTE INTELLIGENT NETWORK SERVICES INCORPORATED

           /s/ Mark P. Hileman
By __________________________
Name:      Mark P. Hileman
Title:     Assistant Secretary-GNI

                                                                              14

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