GST USA INC
8-K, 1998-05-19
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)
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                       SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, DC 20549

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

                                    FORM 8-K

                                 CURRENT REPORT

                     PURSUANT TO SECTION 13 OR 15(D) OF THE

                         SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): MAY 4, 1998

                          GST Telecommunications, Inc.
                                  GST USA, Inc.
- --------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

       Canada                       1-12866             N/A
      Delaware                   333-33601-02        83-0310464
- --------------------------------------------------------------------------------
(State or other jurisdiction    (Commission           (IRS Employer
   of incorporation)            File Number)      Identification No.)

                  4001 Main Street, Vancouver, Washington 98663
- --------------------------------------------------------------------------------
     (Address of principal executive offices)        (Zip Code)

Registrants' telephone number, including area code: (360) 906-7100

          (Former name or former address, if changed since last report)

<PAGE>
ITEM 5.           OTHER EVENTS.

         On May 4, 1998, GST  Telecommunications,  Inc. (the "Company") issued a
press release  announcing that GST Network  Funding,  Inc. ("GST  Network"),  an
indirect wholly owned subsidiary of the Company and a wholly owned subsidiary of
GST USA, Inc. ("GST USA"),  had completed a private  placement of $500.0 million
principal  amount at maturity of 10 1/2% Senior Secured  Discount Notes due 2008
(the "Notes").

         The Notes  will fully  accrete  to face value on May 1, 2003.  From and
after May 1, 2003, the Notes will bear interest  payable in cash, at the rate of
10 1/2% per annum on each May 1 and November 1, commencing November 1, 2003. The
Notes will be unconditionally and irrevocably assumed by GST USA, and guaranteed
by the Company,  on May 1, 2003, or earlier if permitted  under the terms of GST
USA's  and  the  Company's  outstanding  indebtedness.  Neither  GST USA nor the
Company  will be liable  on the  Notes  until  they are  assumed.  The Notes are
initially  secured  by a first  priority  security  interest  in  United  States
government securities purchased with the proceeds from the offering.

         GST  Network  intends  to use  the  net  proceeds  from  the  offering,
aggregating   approximately  $288.5  million,  to  purchase   telecommunications
equipment for the continued expansion of the Company's infrastructure, including
the development and construction of additional networks and longhaul fiber optic
facilities. The Notes will also be secured by a first priority security interest
in all equipment purchased by GST Network.

ITEM 7.           FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
                  INFORMATION AND EXHIBITS.

         (c)      EXHIBITS.

         4.1      Indenture    dated    May   4,   1998   by   and   among   GST
                  Telecommunications,  Inc., GST USA, Inc., GST Network Funding,
                  Inc. and United States Trust Company of New York, as trustee.

         10.1     Placement  Agreement  dated  April  29,  1998 by and among GST
                  Telecommunications,  Inc., GST USA, Inc., GST Network Funding,
                  Inc.  and the  several  Placement  Agents  named in Schedule I
                  thereto.

         10.2     Registration  Rights  Agreement dated May 4, 1998 by and among
                  GST  Telecommunications,  Inc.,  GST USA,  Inc.,  GST  Network
                  Funding,  Inc. and Morgan  Stanley & Co.  Incorporated,  Bear,
                  Stearns & Co. Inc., Credit Suisse First Boston Corporation and
                  SBC Warburg Dillon Read Inc.

         10.3     Collateral  Pledge and Security  Agreement  dated as of May 4,
                  1998 from GST Network  Funding,  Inc. to United  States  Trust
                  Company of New York, as Trustee.


                                       -2-

<PAGE>
         10.4     Reimbursement  and Commitment Fee Agreement  dated May 4, 1998
                  among GST  Telecommunications,  Inc.,  GST USA,  Inc.  and GST
                  Network Funding, Inc.

         99.1     Press  Release of GST  Telecommunications,  Inc.  dated May 4,
                  1998.




                                       -3-


<PAGE>
                                    SIGNATURE

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the Registrants have duly caused this report to be signed on their behalf by the
undersigned hereunto duly authorized.

                                           GST TELECOMMUNICATIONS, INC.

Dated: May 19, 1998                     By:/s/ Stephen Irwin
                                           ------------------------------------
                                           Stephen Irwin
                                           Vice Chairman of the Board and
                                           Secretary

                                           GST USA, INC.

Dated: May 15, 1998                     By:/s/ Stephen Irwin
                                           ------------------------------------
                                           Stephen Irwin
                                           Senior Vice President and
                                           Secretary


                                       -4-




                            GST NETWORK FUNDING, INC.

                                  GST USA, INC.

                          GST TELECOMMUNICATIONS, INC.

                                       and

                    UNITED STATES TRUST COMPANY OF NEW YORK,

                                   as Trustee

                                    Indenture

                             Dated as of May 4, 1998

                 10 1/2% Senior Secured Discount Notes due 2008




<PAGE>

                              CROSS-REFERENCE TABLE

TIA SECTIONS                                            INDENTURE SECTIONS

Section 310(a)(1)............................................  7.10
           (a)(2)............................................  7.10
           (b)...............................................  7.08
Section 313(c)...............................................  7.06; 12.02
Section 314(a)...............................................  4.20; 12.02
           (a)(4)............................................  4.19; 12.02
           (c)(1)............................................ 12.03
           (c)(2)............................................ 12.03
           (e)............................................... 12.04
Section 315(b)...............................................  7.05; 12.02
Section 316(a)(1)(A).........................................  6.05
           (a)(1)(B).........................................  6.04
           (b)...............................................  6.07
Section 317(a)(1)............................................  6.08
           (a)(2)............................................  6.09
Section 318(a)............................................... 12.01
           (c)............................................... 12.01


- -----------------
Note:    The  Cross-Reference  Table shall not for any purpose be deemed to be a
         part of the Indenture.

<PAGE>
                                TABLE OF CONTENTS

                                                                            Page

RECITALS OF THE COMPANY.......................................................1

                                   ARTICLE ONE
                   DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.01.  Definitions....................................................1
SECTION 1.02.  Incorporation by Reference of Trust Indenture Act.............23
SECTION 1.03.  Rules of Construction.........................................23

                                   ARTICLE TWO
                                 THE SECURITIES

SECTION 2.01.  Form and Dating...............................................24
SECTION 2.02.  Restrictive Legends...........................................25
SECTION 2.03.  Execution, Authentication and Denominations...................28
SECTION 2.04.  Registrar and Paying Agent....................................29
SECTION 2.05.  Paying Agent to Hold Money in Trust...........................30
SECTION 2.06.  Transfer and Exchange.........................................30
SECTION 2.07.  Book-Entry Provisions for Global Securities...................31
SECTION 2.08.  Special Transfer Provisions...................................33
SECTION 2.09.  Replacement Securities........................................37
SECTION 2.10.  Outstanding Securities........................................37
SECTION 2.11.  Temporary Securities..........................................38
SECTION 2.12.  Cancellation..................................................38
SECTION 2.13.  CUSIP, CINS and ISIN Numbers..................................38
SECTION 2.14.  Defaulted Interest............................................39
SECTION 2.15.  Issuance of Additional Securities.............................39

                                  ARTICLE THREE
                                   REDEMPTION

SECTION 3.01.  Right of Redemption...........................................39
SECTION 3.02.  Mandatory Redemption..........................................40
SECTION 3.03.  Notices to Trustee............................................40

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

Note:    The Table of Contents shall not for any purposes be deemed to be a part
         of the Indenture.

<PAGE>
SECTION 3.04.  Selection of Securities to Be Redeemed........................40
SECTION 3.05.  Notice of Redemption..........................................41
SECTION 3.06.  Effect of Notice of Redemption................................42
SECTION 3.07.  Deposit of Redemption Price...................................42
SECTION 3.08.  Payment of Securities Called for Redemption...................42
SECTION 3.09.  Securities Redeemed in Part...................................42

                                  ARTICLE FOUR
                                    COVENANTS

SECTION 4.01.  Payment of Securities.........................................43
SECTION 4.02.  Maintenance of Office or Agency...............................43
SECTION 4.03.  Limitation on Indebtedness....................................44
SECTION 4.04.  Limitation on Restricted Payments.............................46
SECTION 4.05.  Limitation on Dividend and Other Payment Restrictions
               Affecting Restricted Subsidiaries.............................49
SECTION 4.06.  Limitation on the Issuance and Sale of Capital
               Stock of Restricted Subsidiaries..............................51
SECTION 4.07.  Limitation on Issuances of Guarantees by Restricted
               Subsidiaries..................................................51
SECTION 4.08.  Limitation on Transactions with Shareholders and Affiliates...52
SECTION 4.09.  Limitation on Liens...........................................53
SECTION 4.10.  Limitation on Sale-Leaseback Transactions.....................54
SECTION 4.11.  Limitation on Investments.....................................55
SECTION 4.12.  Limitation on Asset Sales.....................................55
SECTION 4.13.  Impairment of Security Interest or Ability to
               Assume the Securities. .......................................56
SECTION 4.14.  Repurchase of Securities upon a Change of Control.............56
SECTION 4.15.  Existence.....................................................57
SECTION 4.16.  Payment of Taxes and Other Claims.............................57
SECTION 4.17.  Maintenance of Properties and Insurance.......................57
SECTION 4.18.  Notice of Defaults............................................58
SECTION 4.19.  Compliance Certificates.......................................58
SECTION 4.20.  Commission Reports and Reports to Holders.....................59
SECTION 4.21.  Waiver of Stay, Extension or Usury Laws.......................59
SECTION 4.22.  Additional Amounts............................................59
SECTION 4.23.  Assumption of Securities by GST USA...........................60

- --------------
Note:    The Table of Contents shall not for any purposes be deemed to be a part
         of the Indenture.

                                       ii

<PAGE>
                                  ARTICLE FIVE
                              SUCCESSOR CORPORATION

SECTION 5.01.  Consolidation, Merger and Sale of Assets......................61
SECTION 5.02.  Successor Substituted.........................................62

                                   ARTICLE SIX
                              DEFAULT AND REMEDIES

SECTION 6.01.  Events of Default.............................................63
SECTION 6.02.  Acceleration..................................................65
SECTION 6.03.  Other Remedies................................................65
SECTION 6.04.  Waiver of Past Defaults.......................................65
SECTION 6.05.  Control by Majority...........................................66
SECTION 6.06.  Limitation on Suits...........................................66
SECTION 6.07.  Rights of Holders to Receive Payment..........................67
SECTION 6.08.  Collection Suit by Trustee....................................67
SECTION 6.09.  Trustee May File Proofs of Claim..............................67
SECTION 6.10.  Priorities....................................................67
SECTION 6.11.  Undertaking for Costs.........................................68
SECTION 6.12.  Restoration of Rights and Remedies............................68
SECTION 6.13.  Rights and Remedies Cumulative................................68
SECTION 6.14.  Delay or Omission Not Waiver..................................68

                                  ARTICLE SEVEN
                                     TRUSTEE

SECTION 7.01.  General.......................................................69
SECTION 7.02.  Certain Rights of Trustee.....................................69
SECTION 7.03.  Individual Rights of Trustee..................................70
SECTION 7.04.  Trustee's Disclaimer..........................................70
SECTION 7.05.  Notice of Default.............................................70
SECTION 7.06.  Reports by Trustee to Holders.................................71
SECTION 7.07.  Compensation and Indemnity....................................71
SECTION 7.08.  Replacement of Trustee........................................71

- --------------
Note:    The Table of Contents shall not for any purposes be deemed to be a part
         of the Indenture.

                                       iii

<PAGE>
SECTION 7.09.  Successor Trustee by Merger, Etc..............................72
SECTION 7.10.  Eligibility...................................................73
SECTION 7.11.  Money Held in Trust...........................................73
SECTION 7.12.  Withholding Taxes.............................................73

                         ARTICLE EIGHT
                    DISCHARGE OF INDENTURE

SECTION 8.01.  Termination of Company's Obligations..........................73
SECTION 8.02.  Defeasance and Discharge of Indenture.........................74
SECTION 8.03.  Defeasance of Certain Obligations.............................77
SECTION 8.04.  Application of Trust Money....................................79
SECTION 8.05.  Repayment to Issuer...........................................79
SECTION 8.06.  Reinstatement.................................................79
SECTION 8.07.  Insiders......................................................79

                         ARTICLE NINE
              AMENDMENTS, SUPPLEMENTS AND WAIVERS

SECTION 9.01.  Without Consent of Holders....................................80
SECTION 9.02.  With Consent of Holders.......................................80
SECTION 9.03.  Revocation and Effect of Consent..............................81
SECTION 9.04.  Notation on or Exchange of Securities.........................82
SECTION 9.05.  Trustee to Sign Amendments, Etc...............................82
SECTION 9.06.  Conformity with Trust Indenture Act...........................83

                          ARTICLE TEN
                      MEETINGS OF HOLDERS

SECTION 10.01.  Purposes for Which Meetings May Be Called.  .................83
SECTION 10.02.  Manner of Calling Meetings.  ................................83
SECTION 10.03.  Call of Meetings by Issuer or Holders.  .....................84
SECTION 10.04.  Who May Attend and Vote at Meetings.  .......................84
SECTION 10.05.  Quorum; Action...............................................84
SECTION 10.06.  Regulations May Be Made by Trustee; Conduct of the Meeting;
                Voting Rights; Adjournment.  ................................85

- --------------
Note:    The Table of Contents shall not for any purposes be deemed to be a part
         of the Indenture.

                                       iv

<PAGE>
SECTION 10.07.  Voting at the Meeting and Record to Be Kept.  ...............86
SECTION 10.08.  Exercise of Rights of Trustee or Holders May
                Not Be Hindered or Delayed by Call of Meeting.  .............86
SECTION 10.09.  Procedures Not Exclusive.  ..................................86

                                 ARTICLE ELEVEN
                                    SECURITY

SECTION 11.01.  Security.....................................................86

                                 ARTICLE TWELVE
                                  MISCELLANEOUS

SECTION 12.01.  Trust Indenture Act of 1939..................................89
SECTION 12.02.  Notices......................................................89
SECTION 12.03.  Certificate and Opinion as to Conditions Precedent...........90
SECTION 12.04.  Statements Required in Certificate or Opinion................90
SECTION 12.05.  Rules by Trustee, Paying Agent or Registrar..................91
SECTION 12.06.  Payment Date Other Than a Business Day.......................91
SECTION 12.07.  Governing Law; Consent to Jurisdiction and Service...........91
SECTION 12.08.  No Adverse Interpretation of Other Agreements................91
SECTION 12.09.  No Recourse Against Others...................................92
SECTION 12.10.  Successors...................................................92
SECTION 12.11.  Duplicate Originals..........................................92
SECTION 12.12.  Separability.................................................92
SECTION 12.13.  Table of Contents, Headings, Etc.............................92


EXHIBIT A    Form of Security................................................A-1
EXHIBIT B    Form of Certificate.............................................B-1
EXHIBIT C    Form of Certificate to be Delivered in Connection with
               Transfers Pursuant to Regulation S............................C-1

EXHIBIT D    Form of Certificate to be Delivered in Connection with
               Transfers to Non-QIB Accredited Investors.....................D-1

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

Note:    The Table of Contents shall not for any purposes be deemed to be a part
         of the Indenture.


                                        v

<PAGE>
         INDENTURE,  dated as of May 4, 1998, among GST NETWORK FUNDING, INC., a
Delaware  corporation  (the  "COMPANY"),  GST USA, INC., a Delaware  corporation
("GST  USA"),  GST  TELECOMMUNICATIONS,  INC.,  a federally  chartered  Canadian
corporation   ("GST"),  and  UNITED  STATES  TRUST  COMPANY  OF  NEW  YORK  (the
"TRUSTEE").

                             RECITALS OF THE COMPANY

         The Company has duly  authorized  the  execution  and  delivery of this
Indenture to provide for the issuance initially of up to $500,000,000  principal
amount at maturity of the Company's 10 1/2% Senior  Secured  Discount  Notes due
2008 (the "SECURITIES") issuable as provided in this Indenture.

         All things  necessary to make this  Indenture a valid  agreement of the
Company,  GST USA and GST, in accordance with its terms, have been done, and the
Company,  GST USA and GST have done all things necessary to make the Securities,
when  executed by the Company and  authenticated  and  delivered  by the Trustee
hereunder and duly issued by the Company,  the valid  obligations of the Company
as hereinafter provided.

         This  Indenture is subject to, and shall be governed by, the provisions
of the Trust  Indenture Act of 1939, as amended,  that are required to be a part
of and to govern indentures  qualified under the Trust Indenture Act of 1939, as
amended.

                      AND THIS INDENTURE FURTHER WITNESSETH

         For  and in  consideration  of the  premises  and the  purchase  of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders, as follows.

                                   ARTICLE ONE
                   DEFINITIONS AND INCORPORATION BY REFERENCE

         SECTION 1.01. DEFINITIONS.

         "ACCRETED VALUE" means,  for any Specified Date, the amount  calculated
pursuant to (i), (ii),  (iii) or (iv) below for each $1,000 of principal  amount
at maturity of the Securities:

              (i) if the  Specified  Date occurs on one or more of the following
         dates (each a  "SEMI-ANNUAL  ACCRUAL  DATE"),  the Accreted  Value will
         equal the amount set forth below for such Semi-Annual Accrual Date:

<PAGE>
          SEMI-ANNUAL                                     ACCRETED
          ACCRUAL DATE                                       VALUE

          November 1, 1998............................... $  630.95
          May 1, 1999....................................    664.08
          November 1, 1999...............................    698.94
          May 1, 2000....................................    735.64
          November 1, 2000...............................    774.26
          May 1, 2001....................................    814.91
          November 1, 2001...............................    857.69
          May 1, 2002....................................    902.72
          November 1, 2002...............................    950.11
          May 1, 2003.................................... $1,000.00

              (ii) if the  Specified  Date occurs  before the first  Semi-Annual
         Accrual Date,  the Accreted Value will equal the sum of (a) $599.99 and
         (b) an amount  equal to the product of (1) the  Accreted  Value for the
         first  Semi-Annual  Accrual  Date  less  $599.99  MULTIPLIED  by  (2) a
         fraction, the numerator of which is the number of days from the Closing
         Date to the  Specified  Date,  using a 360-day  year of  twelve  30-day
         months, and the denominator of which is the number of days elapsed from
         the Closing Date to the first Semi-Annual Accrual Date, using a 360-day
         year of twelve 30-day months;

              (iii) if the Specified Date occurs between two Semi-Annual Accrual
         Dates,  the Accreted Value will equal the sum of (a) the Accreted Value
         for the Semi-Annual  Accrual Date immediately  preceding such Specified
         Date and (b) an amount equal to the product of (1) the  Accreted  Value
         for  the  immediately  following  Semi-Annual  Accrual  Date  less  the
         Accreted Value for the immediately  preceding  Semi-Annual Accrual Date
         multiplied  by (2) a fraction,  the numerator of which is the number of
         days from the  immediately  preceding  Semi-Annual  Accrual Date to the
         Specified Date,  using a 360-day year of twelve 30-day months,  and the
         denominator of which is 180; or

              (iv) if the  Specified  Date  occurs  after  the last  Semi-Annual
         Accrual Date, the Accreted Value will equal $1,000.

         "ACCRUAL NOTES" means the 12 3/4% Senior Subordinated Accrual Notes due
2007 of GST issued pursuant to the Accrual Notes Indenture.

                                       2

<PAGE>
         "ACCRUAL NOTES  INDENTURE" means the indenture dated as of November 19,
1997 between GST and United States Trust Company of New York.

         "ACQUIRED EQUIPMENT" has the meaning provided in Section 11.01.

         "ACQUIRED EQUIPMENT COST" has the meaning specified in Section 11.01.

         "ADDITIONAL AMOUNTS" has the meaning provided in Section 4.22.

         "ADJUSTED CONSOLIDATED NET INCOME" means, for any period, the aggregate
net  income (or loss) of GST and its  Restricted  Subsidiaries  for such  period
determined in conformity  with GAAP;  PROVIDED that the following items shall be
excluded in computing  Adjusted  Consolidated Net Income (without  duplication):
(i) the net  income of any  Person  (other  than net  income  attributable  to a
Restricted  Subsidiary)  in  which  any  Person  (other  than  GST or any of its
Restricted  Subsidiaries) has an interest and the net income of any Unrestricted
Subsidiary,   except  to  the  extent  of  the  amount  of  dividends  or  other
distributions actually paid to GST or any of its Restricted Subsidiaries by such
other Person, or such Unrestricted  Subsidiary,  during such period; (ii) solely
for the purposes of  calculating  the amount of Restricted  Payments that may be
made pursuant to clause (C) of the first  paragraph of Section 4.04 (and in such
case,  except to the extent  includable  pursuant to clause (i) above),  the net
income (or loss) of any Person accrued prior to the date it becomes a Restricted
Subsidiary or is merged into or  consolidated  with GST or any of its Restricted
Subsidiaries  or all or  substantially  all of the  property  and assets of such
Person are acquired by GST or any of its Restricted Subsidiaries;  (iii) the net
income of any  Restricted  Subsidiary  to the  extent  that the  declaration  or
payment of dividends or similar  distributions by such Restricted  Subsidiary of
such net income is not at the time  permitted  by the  operation of the terms of
its charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental  regulation applicable to such Restricted  Subsidiary;  (iv) any
gains or losses (on an after-tax basis)  attributable to Asset Sales; (v) except
for purposes of calculating  the amount of Restricted  Payments that may be made
pursuant to clause (C) of the first  paragraph of Section 4.04,  any amount paid
or accrued as dividends on Preferred  Stock of GST or any Restricted  Subsidiary
owned by Persons other than GST and any of its Restricted Subsidiaries; and (vi)
all extraordinary gains and extraordinary losses.

         "ADJUSTED  CONSOLIDATED  NET TANGIBLE ASSETS" means the total amount of
assets of GST and its Restricted  Subsidiaries  (less  applicable  depreciation,
amortization and other valuation reserves),  except to the extent resulting from
write-ups of capital assets  (excluding  write-ups in connection with accounting
for  acquisitions  in conformity with GAAP),  after deducting  therefrom (i) all
current   liabilities  of  GST  and  its  Restricted   Subsidiaries   (excluding
intercompany  items) and (ii) all goodwill,  trade names,  trademarks,  patents,
unamortized  debt  discount and expense and other like  intangibles,  all as set
forth on the quarterly or annual consolidated balance sheet of GST

                                       3

<PAGE>
and its  Restricted  Subsidiaries,  prepared  in  conformity  with GAAP and most
recently filed with the Commission pursuant to Section 4.20.

         "AFFILIATE"  means, as applied to any Person, any other Person directly
or indirectly  controlling,  controlled  by, or under direct or indirect  common
control  with,  such  Person.   For  purposes  of  this  definition,   "control"
(including,  with correlative meanings, the terms "controlling," "controlled by"
and  "under  common  control  with"),  as  applied  to  any  Person,  means  the
possession,  directly  or  indirectly,  of the  power to  direct  or  cause  the
direction of the  management  and policies of such Person,  whether  through the
ownership of voting securities, by contract or otherwise.

         "AGENT"  means any  Registrar,  Paying Agent,  authenticating  agent or
co-Registrar.

         "AGENT MEMBERS" has the meaning provided in Section 2.07(a).

         "ASSET  ACQUISITION"  means  (i)  an  investment  by  GST or any of its
Restricted  Subsidiaries in any other Person pursuant to which such Person shall
become a Restricted  Subsidiary  of GST or shall be merged into or  consolidated
with GST or any of its  Restricted  Subsidiaries;  PROVIDED  that such  Person's
primary business is related, ancillary or complementary to the businesses of GST
and its  Restricted  Subsidiaries  on the  date of  such  investment  or (ii) an
acquisition  by GST or any of its  Restricted  Subsidiaries  of the property and
assets of any Person other than GST or any of its Restricted  Subsidiaries  that
constitute  substantially  all of a division or line of business of such Person;
PROVIDED  that the  property  and assets  acquired  are  related,  ancillary  or
complementary  to the businesses of GST and its Restricted  Subsidiaries  on the
date of such acquisition.

         "ASSET SALE" means any sale,  transfer or other disposition  (including
by  way  of  merger,   consolidation  or  sale-leaseback  transactions)  in  one
transaction or a series of related  transactions by GST or any of its Restricted
Subsidiaries to any Person other than GST or any of its Restricted  Subsidiaries
of (i) all or any of the Capital Stock of any Restricted Subsidiary, (ii) all or
substantially all of the property and assets of an operating unit or business of
GST or any of its Restricted  Subsidiaries or (iii) any other property or assets
of GST or any of its  Restricted  Subsidiaries  outside the  ordinary  course of
business of GST or such  Restricted  Subsidiary  and, in each case,  that is not
governed by the provisions of Article Five; PROVIDED that "Asset Sale" shall not
include (A) sales or other  dispositions  of  inventory,  receivables  and other
current assets; or (B) sales or other  dispositions of assets with a fair market
value (as certified in an Officers' Certificate) not in excess of $1 million; or
(C) sales of Acquired Equipment by the Company to GST USA in accordance with the
terms of this  Indenture;  or (D) sales or other  dispositions  of assets to the
extent GST or a Restricted  Subsidiary receives  consideration at least equal to
the fair  market  value of the assets  sold or disposed  of,  PROVIDED  that the
consideration  received  consists  of property  or assets  (other  than  current
assets) of a nature or type or that are used in a business

                                       4

<PAGE>
(or a company  having  property  or assets of a nature or type,  or engaged in a
business)  similar or related to the nature or type of the  property  and assets
of, or business of, GST and its Restricted  Subsidiaries existing on the date of
such sale or other disposition.

         "ASSUMPTION  DATE"  means the date on which GST USA and GST execute and
deliver the supplemental indenture required by Section 4.23(a).

         "AVERAGE LIFE" means, at any date of determination  with respect to any
debt security,  the quotient obtained by dividing (i) the sum of the products of
(a) the  number of years  from such date of  determination  to the dates of each
successive  scheduled principal payment of such debt security and (b) the amount
of such principal payment by (ii) the sum of all such principal payments.

         "BOARD OF DIRECTORS"  means,  with respect to any Person,  the Board of
Directors  of such  Person or any  committee  of such  Board of  Directors  duly
authorized to act with respect to this Indenture.

         "BOARD  RESOLUTION"  means,  with  respect to any  Person,  a copy of a
resolution,  certified by the Secretary or Assistant Secretary of such Person to
have been duly  adopted by the Board of  Directors  of such  Person and to be in
full force and effect on the date of such  certification,  and  delivered to the
Trustee.

         "BUSINESS DAY" means any day except a Saturday,  Sunday or other day on
which  commercial banks in The City of New York, or in the city of the Corporate
Trust Office of the Trustee, are authorized by law to close.

         "CAPITAL STOCK" means, with respect to any Person,  any and all shares,
interests,  participations or other  equivalents  (however  designated,  whether
voting or  non-voting)  in equity of such  Person,  whether now  outstanding  or
issued after the date of this  Indenture,  including,  without  limitation,  all
Common Stock and Preferred Stock.

         "CAPITALIZED  LEASE" means, as applied to any Person,  any lease of any
property (whether real, personal or mixed) of which the discounted present value
of the rental  obligations of such Person as lessee, in conformity with GAAP, is
required to be capitalized on the balance sheet of such Person; and "Capitalized
Lease  Obligations" means the discounted present value of the rental obligations
under such lease.

         "CHANGE  OF  CONTROL"  means  such time as (i) a  "person"  or  "group"
(within the meaning of Sections  13(d) and 14(d)(2) of the Exchange Act) becomes
the  ultimate  "beneficial  owner" (as defined in Rule 13d-3 under the  Exchange
Act) of Voting Stock representing more than 30% of the total voting power of the
Voting Stock of GST on a fully diluted basis; (ii)

                                       5

<PAGE>
individuals  who on the Closing  Date  constitute  the Board of Directors of GST
(together with any new directors whose election by the Board of Directors of GST
or whose nomination for election by GST's shareholders was approved by a vote of
at least  two-thirds of the members of the Board of Directors then in office who
either were  members of the Board of  Directors  of GST on the  Closing  Date or
whose election or nomination for election was previously so approved)  cease for
any reason to  constitute a majority of the members of the Board of Directors of
GST then in office;  or (iii) all of the Common  Stock of GST USA or the Company
is not beneficially owned by GST.

         "CLOSING  DATE" means the date on which the  Securities  are originally
issued under this Indenture.

         "COMMISSION" means the Securities and Exchange Commission, as from time
to time constituted, created under the Exchange Act or, if at any time after the
execution of this  instrument such Commission is not existing and performing the
duties now assigned to it under the TIA, then the body performing such duties at
such time.

         "COMMON SHARES" means the common shares of GST.

         "COMMON STOCK" means,  with respect to any Person,  any and all shares,
interests,  participations or other  equivalents  (however  designated,  whether
voting or non-voting) of such Person's common stock,  whether now outstanding or
issued after the date of this  Indenture,  including,  without  limitation,  all
series and classes of such common stock.

         "COMPANY"  means the party named as such in the first paragraph of this
Indenture  until a  successor  replaces  it  pursuant  to  Article  Five of this
Indenture and thereafter means the successor.

         "COMPANY  ORDER" means a written request or order signed in the name of
the  Issuer  (i) by its  Chairman,  a Vice  Chairman,  its  President  or a Vice
President  and (ii) by its Chief  Financial  Officer,  Treasurer,  an  Assistant
Treasurer, its Secretary or an Assistant Secretary and delivered to the Trustee;
PROVIDED,  HOWEVER,  that such written request or order may be signed by any two
of the officers or directors  listed in clause (i) above in lieu of being signed
by one of such  officers or  directors  listed in such clause (i) and one of the
officers listed in clause (ii) above.

         "CONSOLIDATED EBITDA" means, for any period, the sum of the amounts for
such period of (i) Adjusted  Consolidated Net Income, (ii) Consolidated Interest
Expense,  to the  extent  such  amount  was  deducted  in  calculating  Adjusted
Consolidated  Net  Income,  (iii)  income  taxes,  to the extent such amount was
deducted in  calculating  Adjusted  Consolidated  Net Income  (other than income
taxes (either  positive or negative)  attributable to either  extraordinary  and
non-recurring gains or losses or sales of assets), (iv) depreciation expense, to
the extent such amount

                                       6

<PAGE>
was deducted in calculating  Adjusted  Consolidated Net Income, (v) amortization
expense,  to the  extent  such  amount  was  deducted  in  calculating  Adjusted
Consolidated  Net Income,  and (vi) all other non-cash  items reducing  Adjusted
Consolidated  Net Income  (other than items that will require cash  payments and
for which an accrual or reserve is, or is required  by GAAP to be,  made),  less
all  non-cash  items  increasing  Adjusted   Consolidated  Net  Income,  all  as
determined on a consolidated  basis for GST and its Restricted  Subsidiaries  in
conformity  with GAAP;  PROVIDED  that,  if any  Restricted  Subsidiary is not a
Wholly Owned Restricted Subsidiary, Consolidated EBITDA shall be reduced (to the
extent not otherwise  reduced in accordance with GAAP) by an amount equal to (A)
the  amount  of the  Adjusted  Consolidated  Net  Income  attributable  to  such
Restricted Subsidiary multiplied by (B) the quotient of (1) the number of shares
of outstanding Common Stock of such Restricted  Subsidiary not owned on the last
day of such period by GST or any of its Restricted  Subsidiaries  divided by (2)
the  total  number  of shares of  outstanding  Common  Stock of such  Restricted
Subsidiary on the last day of such period.

         "CONSOLIDATED  INTEREST  EXPENSE" means, for any period,  the aggregate
amount of  interest  in  respect  of  Indebtedness  (including  amortization  of
original  issue  discount on any  Indebtedness  and the interest  portion of any
deferred  payment  obligation,  calculated  in  accordance  with  the  effective
interest  method of accounting;  all  commissions,  discounts and other fees and
charges  owed  with  respect  to  letters  of  credit  and  bankers'  acceptance
financing;  the  net  costs  associated  with  Interest  Rate  Agreements;   and
Indebtedness  that is  Guaranteed  or  secured  by GST or any of its  Restricted
Subsidiaries)  and all but the  principal  component  of  rentals  in respect of
Capitalized  Lease  Obligations  paid,  accrued or scheduled to be paid or to be
accrued by GST and its Restricted  Subsidiaries  during such period;  excluding,
however, (i) any amount of such interest of any Restricted Subsidiary if the net
income of such Restricted  Subsidiary is excluded in the calculation of Adjusted
Consolidated Net Income pursuant to clause (iii) of the definition  thereof (but
only in the same proportion as the net income of such  Restricted  Subsidiary is
excluded from the  calculation of Adjusted  Consolidated  Net Income pursuant to
clause (iii) of the definition thereof) and (ii) any premiums, fees and expenses
(and any  amortization  thereof)  payable in connection with the offering of the
Securities,  all as  determined on a  consolidated  basis  (without  taking into
account Unrestricted Subsidiaries) in conformity with GAAP.

         "CONSOLIDATED   NET  WORTH"  means,  at  any  date  of   determination,
shareholders'  equity as set forth on the most recently  available  quarterly or
annual consolidated balance sheet of GST and its Restricted  Subsidiaries (which
shall  be as of a date  not  more  than  90  days  prior  to the  date  of  such
computation,  and which shall not take into account Unrestricted  Subsidiaries),
less  any  amounts  attributable  to  Redeemable  Stock or any  equity  security
convertible  into or exchangeable for  Indebtedness,  the cost of treasury stock
and the principal  amount of any promissory  notes  receivable  from the sale of
Capital  Stock of GST or any of its  Restricted  Subsidiaries,  each  item to be
determined in conformity  with GAAP  (excluding the effects of foreign  currency
exchange  adjustments  under Financial  Accounting  Standards Board Statement of
Financial Accounting Standards No. 52).

                                       7

<PAGE>
         "CONVERTIBLE  NOTES" means the 137/8% Convertible  Senior  Subordinated
Discount  Notes  due  2005  of GST  issued  pursuant  to the  Convertible  Notes
Indenture.

         "CONVERTIBLE  NOTES  INDENTURE"  means the convertible  notes indenture
dated December 19, 1995 among GST, as issuer, GST USA, as guarantor,  and United
States Trust Company of New York, as trustee.

         "CORPORATE  TRUST  OFFICE" means the office of the Trustee at which the
corporate  trust  business of the Trustee  shall,  at any  particular  time,  be
principally  administered,  which  office  is,  at the  date of this  Indenture,
located at 114 West 47th Street, New York, New York 10036- 1532.

         "CURRENCY AGREEMENT" means any foreign exchange contract, currency swap
agreement or other similar  agreement or arrangement  designed to protect GST or
any of its Restricted Subsidiaries against fluctuations in currency values to or
under  which  GST  or  any  of  its  Restricted  Subsidiaries  is a  party  or a
beneficiary  on the date of this  Indenture or becomes a party or a  beneficiary
thereafter.

         "DEFAULT"  means any event that is, or after  notice or passage of time
or both would be, an Event of Default.

         "DEPOSITARY"  means The  Depository  Trust Company,  its nominees,  and
their respective successors.

         "DEVELOPMENT  COMPANY"  means a  Restricted  Subsidiary  whose  primary
business is the  development,  ownership  and  operation of  alternative  access
telecommunications networks.

         "EVENT OF DEFAULT" has the meaning provided in Section 6.01.

         "EXCESS PROCEEDS" has the meaning provided in Section 4.12.

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.

         "EXCHANGE  SECURITIES"  means any  securities of the Issuer  containing
terms  identical to the  Securities  (except that such Exchange  Securities  (i)
shall be  registered  under the  Securities  Act,  (ii) will not  provide for an
increase in the rate of interest  (other than with  respect to overdue  amounts)
and (iii) will not contain terms with respect to transfer restrictions) that are
issued and  exchanged for the  Securities  pursuant to the  Registration  Rights
Agreement and this Indenture.

         "EXISTING   INDENTURES"  means,   collectively  the  Convertible  Notes
Indenture,  the Senior Notes  Indenture,  the Secured  Notes  Indenture  and the
Accrual Notes Indenture.

                                       8

<PAGE>
         "FAIR  MARKET  VALUE"  means  the  price  that  would  be  paid  in  an
arm's-length  transaction  between  an  informed  and  willing  seller  under no
compulsion to sell and an informed and willing buyer under no compulsion to buy,
as   determined  in  good  faith  by  the  Board  of  Directors  of  GST  (whose
determination shall be conclusive) and evidenced by a Board Resolution.

         "FEE NOTES" means the intercompany  notes due May 1, 2003 issued to GST
Network in  payment of the  commitment  fees by GST USA and  guaranteed  by GST;
PROVIDED that the aggregate  principal  amount of such notes shall be reduced to
the extent the  aggregate  principal  amount  exceeds  the  principal  amount at
maturity of the Securities less (x) the principal  amount of Pledged  Securities
and cash then held in the Pledge Account, together with accrued interest thereon
and (y) the principal amount of all Intercompany Notes then held as security for
the Securities plus the amount of interest that will accrue on such Intercompany
Notes by May 1, 2003.

         "GAAP" means  generally  accepted  accounting  principles in the United
States of  America  as in  effect as of the  Closing  Date,  including,  without
limitation, those set forth in the opinions and pronouncements of the Accounting
Principles Board of the American  Institute of Certified Public  Accountants and
statements and pronouncements of the Financial  Accounting Standards Board or in
such other statements by such other entity as approved by a significant  segment
of the  accounting  profession.  All ratios and  computations  contained in this
Indenture  shall be computed in  conformity  with GAAP  applied on a  consistent
basis, except that calculations made for purposes of determining compliance with
the terms of the covenants  contained  herein and with other  provisions of this
Indenture  shall be made without  giving effect to (i) the  amortization  of any
expenses  incurred in connection  with the offering of the  Securities  and (ii)
except as  otherwise  provided,  the  amortization  of any  amounts  required or
permitted by Accounting Principles Board Opinion Nos. 16 and 17.

         "GLOBAL SECURITIES" has the meaning provided in Section 2.01.

         "GST"  means the party  named as such in the  first  paragraph  of this
Indenture  until a  successor  replaces  it  pursuant  to  Article  Five of this
Indenture and thereafter means the successor.

         "GST   FUNDING"   means  GST  Equipment   Funding,   Inc.,  a  Delaware
corporation.

         "GST USA" means the party named as such in the first  paragraph of this
Indenture  until a  successor  replaces  it  pursuant  to  Article  Five of this
Indenture and thereafter means the successor.

         "GUARANTEE"  means any  obligation,  contingent  or  otherwise,  of any
Person directly or indirectly  guaranteeing any Indebtedness or other obligation
of any other Person and, without

                                       9

<PAGE>
limiting the generality of the foregoing,  any  obligation,  direct or indirect,
contingent  or  otherwise,  of such Person (i) to purchase or pay (or advance or
supply  funds  for the  purchase  or  payment  of)  such  Indebtedness  or other
obligation  of such  other  Person  (whether  arising  by virtue of  partnership
arrangements,  or  by  agreements  to  keep-well,  to  purchase  assets,  goods,
securities  or services,  to  take-or-pay,  or to maintain  financial  statement
conditions  or  otherwise)  or (ii) entered into for purposes of assuring in any
other manner the obligee of such Indebtedness or other obligation of the payment
thereof or to protect such obligee  against loss in respect thereof (in whole or
in part);  PROVIDED that the term "Guarantee" shall not include endorsements for
collection or deposit in the ordinary course of business.  The term  "Guarantee"
used as a verb has a corresponding meaning.

         "GUARANTEED INDEBTEDNESS" has the meaning provided in Section 4.07.

         "HOLDER" or  "SECURITYHOLDER"  means the then registered  holder of any
Security.

         "INCUR"  means,  with respect to any  Indebtedness,  to incur,  create,
issue,  assume,  guarantee or otherwise become liable for or with respect to, or
become  responsible  for,  the  payment  of,  contingently  or  otherwise,  such
Indebtedness,  including an  "incurrence"  of Indebtedness by reason of a Person
becoming a Restricted Subsidiary;  PROVIDED that neither the accrual of interest
nor the accretion of original  issue  discount shall be considered an Incurrence
of Indebtedness.

         "INDEBTEDNESS"  means,  with  respect  to any  Person  at any  date  of
determination  (without  duplication),  (i) all  indebtedness of such Person for
borrowed  money,  (ii)  all  obligations  of such  Person  evidenced  by  bonds,
debentures,  notes or other similar  instruments,  (iii) all obligations of such
Person in respect of letters of credit or other similar  instruments  (including
reimbursement  obligations with respect  thereto),  (iv) all obligations of such
Person to pay the  deferred and unpaid  purchase  price of property or services,
which  purchase price is due more than six months after the date of placing such
property in service or taking  delivery and title  thereto or the  completion of
such  services,  except Trade  Payables,  (v) all  obligations of such Person as
lessee under Capitalized  Leases, (vi) all Indebtedness of other Persons secured
by a Lien on any  asset of such  Person,  whether  or not such  Indebtedness  is
assumed by such Person;  PROVIDED that the amount of such Indebtedness  shall be
the  lesser  of (A) the  fair  market  value  of  such  asset  at  such  date of
determination and (B) the amount of such Indebtedness, (vii) all Indebtedness of
other  Persons  Guaranteed  by such  Person to the extent such  Indebtedness  is
Guaranteed  by such  Person and (viii) to the extent not  otherwise  included in
this  definition,  obligations  under  Currency  Agreements  and  Interest  Rate
Agreements.  The amount of  Indebtedness  of any Person at any date shall be the
outstanding  balance at such date of all unconditional  obligations as described
above and, with respect to contingent  obligations,  the maximum  liability upon
the occurrence of the contingency  giving rise to the  obligation,  PROVIDED (A)
that the amount outstanding at any time of any Indebtedness issued with original
issue discount is the face amount of such Indebtedness

                                       10

<PAGE>
less the unamortized portion of the original issue discount of such Indebtedness
at the time of its issuance as  determined in  conformity  with GAAP,  (B) money
borrowed  and set aside at the time of the  Incurrence  of any  Indebtedness  in
order to pre-fund the payment of interest as such  Indebtedness  shall be deemed
not to be  "Indebtedness"  and (C)  that  Indebtedness  shall  not  include  any
liability for federal, state, local or other taxes.

         "INDEBTEDNESS TO EBITDA RATIO" means, as at any date of  determination,
the ratio of (i) the aggregate  amount of Indebtedness of GST and its Restricted
Subsidiaries  on a  consolidated  basis  as at the  date of  determination  (the
"TRANSACTION  DATE")  to (ii) the  Consolidated  EBITDA of GST for the then most
recent four full fiscal  quarters for which reports have been filed  pursuant to
Section 4.20 (such four full fiscal  quarter  period being referred to herein as
the "FOUR QUARTER PERIOD"); PROVIDED that (x) pro forma effect shall be given to
any Indebtedness  Incurred from the beginning of the Four Quarter Period through
the  Transaction  Date (including any  Indebtedness  Incurred on the Transaction
Date),  to the extent  outstanding  on the  Transaction  Date, (y) if during the
period  commencing  on the first day of such Four  Quarter  Period  through  the
Transaction  Date  (the  "REFERENCE  PERIOD"),  GST or  any  of  its  Restricted
Subsidiaries shall have engaged in any Asset Sale,  Consolidated EBITDA for such
period  shall be reduced by an amount  equal to the  EBITDA  (if  positive),  or
increased by an amount equal to the EBITDA (if negative),  directly attributable
to the assets which are the subject of such Asset Sale as if such Asset Sale had
occurred  on the  first  day of such  Reference  Period  or (z) if  during  such
Reference Period GST or any of the Restricted  Subsidiaries  shall have made any
Asset Acquisition, Consolidated EBITDA of GST shall be calculated on a pro forma
basis as if such Asset Acquisition and any Incurrence of Indebtedness to finance
such  Asset  Acquisition  had taken  place on the  first  day of such  Reference
Period.

         "INDENTURE" means this Indenture as originally executed or as it may be
amended or supplemented from time to time by one or more indentures supplemental
to this  Indenture  entered into pursuant to the  applicable  provisions of this
Indenture.

         "INSTITUTIONAL  ACCREDITED  INVESTOR"  means an institution  that is an
"accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or (7)
of Regulation D under the Securities Act.

         "INTERCOMPANY  NOTES" means the promissory notes due May 1, 2003 issued
to the Company by GST USA and guaranteed by GST.

         "INTEREST PAYMENT DATE" means each semiannual  interest payment date on
May 1 and November 1 of each year, commencing November 1, 2003.

         "INTEREST RATE AGREEMENT" means any interest rate protection agreement,
interest rate future agreement,  interest rate option  agreement,  interest rate
swap agreement, interest rate

                                       11

<PAGE>
cap agreement,  interest rate collar agreement, interest rate hedge agreement or
other  similar  agreement or  arrangement  designed to protect GST or any of its
Restricted  Subsidiaries  against  fluctuations  in interest rates in respect of
Indebtedness  to or under which GST or any of its Restricted  Subsidiaries  is a
party or a  beneficiary  on the date of this  Indenture  or becomes a party or a
beneficiary hereafter;  PROVIDED that the notional principal amount thereof does
not exceed the principal  amount of the  Indebtedness  of GST and its Restricted
Subsidiaries that bears interest at floating rates.

         "INTERNATIONAL ASSET" has the meaning provided in Section 4.11.

         "INTERNATIONAL BUSINESS" has the meaning provided in Section 4.11.

         "INVESTMENT" in any Person means any direct or indirect  advance,  loan
or other extension of credit (including, without limitation, by way of Guarantee
or similar  arrangement;  but  excluding  advances to  customers in the ordinary
course of  business  that are,  in  conformity  with GAAP,  recorded as accounts
receivable  on the  balance  sheet  of GST or its  Restricted  Subsidiaries)  or
capital  contribution  to (by means of any transfer of cash or other property to
others or any  payment  for  property  or  services  for the  account  or use of
others),  or any  purchase  or  acquisition  of  Capital  Stock,  bonds,  notes,
debentures or other similar instruments issued by, such Person and shall include
(i) the designation of a Restricted Subsidiary as an Unrestricted Subsidiary and
(ii) the fair market value of the Capital Stock (or any other  Investment)  held
by GST and its  Restricted  Subsidiaries  of any Person  that has ceased to be a
Restricted  Subsidiary by reason of any transaction permitted by clause (iii) of
Section 4.06. For purposes of the definition of  "Unrestricted  Subsidiary"  and
Section 4.04, (i) "Investment" shall include the fair market value of the assets
(net  of  liabilities  to GST or any  of  its  Restricted  Subsidiaries)  of any
Restricted  Subsidiary at the time that such Restricted Subsidiary is designated
an Unrestricted Subsidiary and shall exclude the fair market value of the assets
(net of  liabilities)  of any  Unrestricted  Subsidiary  at the time  that  such
Unrestricted  Subsidiary  is  designated  a Restricted  Subsidiary  and (ii) any
property  transferred to or from an Unrestricted  Subsidiary  shall be valued at
its fair market value at the time of such  transfer,  in each case as determined
by the Board of Directors of GST in good faith.

         "ISSUER"  means the  Company,  until GST USA becomes the obligor on the
Securities on the Assumption Date, after which the term "Issuer" means GST USA.

         "LIEN" means any mortgage, pledge, security interest, encumbrance, lien
or charge of any kind (including,  without  limitation,  any conditional sale or
other title retention  agreement or lease in the nature  thereof,  any sale with
recourse against the seller or any Affiliate of the seller,  or any agreement to
give any security interest).

                                       12

<PAGE>
         "NET CASH  PROCEEDS"  means,  (a) with  respect to any Asset Sale,  the
proceeds of such Asset Sale in the form of cash or cash  equivalents,  including
payments in respect of deferred payment obligations (to the extent corresponding
to the principal, but not interest, component thereof) when received in the form
of cash or cash equivalents  (except to the extent such obligations are financed
or sold with recourse to GST or any Restricted Subsidiary) and proceeds from the
conversion  of  other   property   received  when  converted  to  cash  or  cash
equivalents,  net of (i)  brokerage  commissions  and  other  fees and  expenses
(including fees and expenses of counsel and investment  bankers) related to such
Asset  Sale,  (ii)  provisions  for all taxes  (whether  or not such  taxes will
actually be paid or are payable) as a result of such Asset Sale  without  regard
to  the   consolidated   results  of  operations  of  GST  and  its   Restricted
Subsidiaries, taken as a whole, (iii) payments made to repay Indebtedness or any
other  obligation  outstanding at the time of such Asset Sale that either (A) is
secured by a Lien on the  property  or assets sold or (B) is required to be paid
as a result of such sale and (iv)  appropriate  amounts to be provided by GST or
any Restricted  Subsidiary as a reserve against any liabilities  associated with
such   Asset   Sale,   including,   without   limitation,   pension   and  other
post-employment  benefit  liabilities,   liabilities  related  to  environmental
matters and liabilities under any  indemnification  obligations  associated with
such Asset Sale, all as determined in conformity  with GAAP and (b) with respect
to any issuance or sale of Capital Stock,  the proceeds of such issuance or sale
in the  form of cash or cash  equivalents,  including  payments  in  respect  of
deferred payment obligations (to the extent corresponding to the principal,  but
not  interest,  component  thereof)  when  received  in the form of cash or cash
equivalents  (except to the extent such  obligations  are  financed or sold with
recourse to GST or any Restricted  Subsidiary)  and proceeds from the conversion
of other property  received when converted to cash or cash  equivalents,  net of
attorneys' fees,  accountants'  fees,  underwriters' or placement  agents' fees,
discounts or commissions  and  brokerage,  consultant and other fees incurred in
connection  with such  issuance  or sale and net of taxes  paid or  payable as a
result thereof.

         "NON-U.S.  PERSON" means a person who is not a U.S. person,  as defined
in Regulation S.

         "OFFER TO PURCHASE" means an offer to purchase Securities by the Issuer
from the  Holders  commenced  by mailing a notice to the Trustee and each Holder
stating: (i) the covenant pursuant to which the offer is being made and that all
Securities  validly  tendered  will be accepted for payment on a pro rata basis;
(ii) the purchase price and the date of purchase  (which shall be a Business Day
no  earlier  than 30 days nor later  than 60 days  from the date such  notice is
mailed) (the "PAYMENT DATE"); (iii) that any Security not tendered will continue
to accrue  interest (or original  issue  discount)  pursuant to its terms;  (iv)
that,  unless the Issuer  defaults in the  payment of the  purchase  price,  any
Security  accepted for payment  pursuant to the Offer to Purchase shall cease to
accrue  interest (or original issue discount) on and after the Payment Date; (v)
that  Holders  electing  to have a Security  purchased  pursuant to the Offer to
Purchase  will be required to surrender  such  Security,  together with the form
entitled "Option of the Holder to Elect Purchase"

                                       13

<PAGE>
on the  reverse  side  thereof  completed,  to the Paying  Agent at the  address
specified  in the notice  prior to the close of  business  on the  Business  Day
immediately  preceding the Payment  Date;  (vi) that Holders will be entitled to
withdraw their election if the Paying Agent  receives,  not later than the close
of business on the third Business Day immediately  preceding the Payment Date, a
telegram,  facsimile  transmission  or  letter  setting  forth  the name of such
Holder,  the  principal  amount  of  Securities  delivered  for  purchase  and a
statement that such Holder is withdrawing  his election to have such  Securities
purchased;  and (vii) that Holders whose  Securities are being purchased only in
part will be issued new Securities  equal in principal amount to the unpurchased
portion  thereof;  PROVIDED that each  Security  purchased and each new Security
issued  shall be in a  principal  amount  at  maturity  of  $1,000  or  integral
multiples thereof.  On the Payment Date, the Issuer shall (i) accept for payment
on a pro rata basis Securities or portions thereof tendered pursuant to an Offer
to Purchase;  (ii) deposit  with the Paying  Agent money  sufficient  to pay the
purchase  price of all  Securities  or portions  thereof so accepted;  and (iii)
deliver,  or cause to be  delivered,  to the Trustee all  Securities or portions
thereof so  accepted  together  with an  Officers'  Certificate  specifying  the
Securities or portions  thereof  accepted for payment by the Issuer.  The Paying
Agent shall promptly mail to the Holders of Securities so accepted payment in an
amount equal to the purchase price, and the Trustee shall promptly  authenticate
and mail to such  Holders  a new  Security  equal  in  principal  amount  to any
unpurchased  portion of the Security  surrendered;  PROVIDED  that each Security
purchased  and each  new  Security  issued  shall be in a  principal  amount  at
maturity  of $1,000 or integral  multiples  thereof.  The Issuer  will  publicly
announce  the results of an Offer to Purchase as soon as  practicable  after the
Payment  Date.  The  Trustee  shall  act as the  Paying  Agent  for an  Offer to
Purchase.  The Issuer will comply with Rule 14e-1 under the Exchange Act and any
other  securities  laws and  regulations  thereunder to the extent such laws and
regulations  are  applicable,  in the  event  that the  Issuer  is  required  to
repurchase Securities pursuant to an Offer to Purchase.

         "OFFICER"  means,  with respect to any Person,  (i) the Chairman of the
Board,  the Vice Chairman of the Board, the President,  any Vice President,  the
Chief Financial Officer, and (ii) the Treasurer or any Assistant  Treasurer,  or
the Secretary or any Assistant Secretary, in each case of such Person.

         "OFFICERS'  CERTIFICATE"  means a  certificate  signed  by one  Officer
listed in clause (i) of the definition  thereof and one Officer listed in clause
(ii) of the definition thereof; PROVIDED, HOWEVER, that any such certificate may
be signed by any two of the  Officers  listed  in clause  (i) of the  definition
thereof  in lieu of being  signed by one  Officer  listed  in clause  (i) of the
definition  thereof  and one  Officer  listed in clause  (ii) of the  definition
thereof.  Each Officers'  Certificate (other than certificates provided pursuant
to TIA Section  314(a)(4))  shall  include the  statements  provided  for in TIA
Section 314(e).

         "OFFSHORE GLOBAL SECURITY" has the meaning provided in Section 2.01.

                                       14

<PAGE>
         "OFFSHORE  PHYSICAL  SECURITIES"  has the  meaning  provided in Section
2.01.

         "OPINION OF COUNSEL"  means a written  opinion  signed by legal counsel
who may be an employee of or counsel to the Company,  GST USA or GST.  Each such
Opinion of Counsel  shall  include the  statements  provided  for in TIA Section
314(e).

         "PAYING AGENT" has the meaning  provided in Section 2.04,  except that,
for the  purposes  of  Article  Eight,  the Paying  Agent  shall not be GST or a
Subsidiary  of GST or an  Affiliate  of any of  them.  The term  "Paying  Agent"
includes any additional Paying Agent.

         "PAYMENT DATE" has the meaning  provided in the definition of "Offer to
Purchase."

         "PERMITTED   INVESTMENT"  means  (i)  an  Investment  in  a  Restricted
Subsidiary or a Person which will, upon the making of such Investment,  become a
Restricted  Subsidiary or be merged or consolidated  with or into or transfer or
convey all or substantially  all its assets to, GST or a Restricted  Subsidiary;
PROVIDED  that  such  person's  primary   business  is  related,   ancillary  or
complementary  to the businesses of GST and its Restricted  Subsidiaries  on the
date of such Investment; (ii) a Temporary Cash Investment; (iii) payroll, travel
and similar  advances  to cover  matters  that are  expected at the time of such
advances  ultimately  to be treated as expenses in  accordance  with GAAP;  (iv)
loans or advances to employees  made in the ordinary  course of business that do
not exceed $1 million in the aggregate at any time  outstanding;  and (v) stock,
obligations or securities received in satisfaction of judgments.

         "PERMITTED LIENS" means (i) Liens for taxes, assessments,  governmental
charges or claims that are being  contested in good faith by  appropriate  legal
proceedings promptly instituted and diligently conducted and for which a reserve
or other appropriate provision,  if any, as shall be required in conformity with
GAAP shall have been made;  (ii)  statutory  Liens of  landlords  and  carriers,
warehousemen,  mechanics,  suppliers,  materialmen,  repairmen or other  similar
Liens arising in the ordinary course of business and with respect to amounts not
yet delinquent or being contested in good faith by appropriate legal proceedings
promptly  instituted and  diligently  conducted and for which a reserve or other
appropriate  provision,  if any, as shall be required  in  conformity  with GAAP
shall have been made;  (iii) Liens  incurred or  deposits  made in the  ordinary
course of  business  in  connection  with  workers'  compensation,  unemployment
insurance and other types of social  security;  (iv) Liens  incurred or deposits
made to secure the performance of tenders, bids, leases, statutory or regulatory
obligations,   bankers'  acceptances,   surety  and  appeal  bonds,   government
contracts,  performance  and  return-of-money  bonds and other  obligations of a
similar  nature  incurred  in the  ordinary  course of  business  (exclusive  of
obligations for the payment of borrowed  money);  (v) easements,  rights-of-way,
municipal and zoning ordinances and similar charges, encumbrances, title defects
or other  irregularities  that do not  materially  interfere  with the  ordinary
course of  business  of GST or any of its  Restricted  Subsidiaries;  (vi) Liens
(including extensions and renewals thereof) upon real or personal property

                                       15

<PAGE>
acquired  after the Closing Date;  PROVIDED that (a) such Lien is created solely
for the purpose of securing  Indebtedness  Incurred,  in accordance with Section
4.03,  (1) to  finance  the cost  (including,  without  limitation,  the cost of
design, development, construction,  acquisition, installation or integration) of
the item of property or assets  subject  thereto and such Lien is created  prior
to, at the time of or within six months after the later of the acquisition,  the
completion  of  construction  or the  commencement  of  full  operation  of such
property or (2) to refinance any  Indebtedness  previously  so secured,  (b) the
principal amount of the  Indebtedness  secured by such Lien does not exceed 100%
of such cost and (c) any such Lien shall not extend to or cover any  property or
assets other than such item of property or assets and any  improvements  on such
item;  (vii)  leases  or  subleases  granted  to others  that do not  materially
interfere  with  the  ordinary  course  of  business  of GST and its  Restricted
Subsidiaries,  taken as a whole;  (viii)  Liens  encumbering  property or assets
under  construction  arising from progress or partial  payments by a customer of
GST or its Restricted Subsidiaries relating to such property or assets; (ix) any
interest or title of a lessor in the property  subject to any Capitalized  Lease
or operating  lease;  (x) Liens  arising  from filing  Uniform  Commercial  Code
financing  statements  regarding leases; (xi) Liens on property of, or on shares
of  stock  or  Indebtedness  of,  any  corporation  existing  at the  time  such
corporation becomes, or becomes a part of, any Restricted  Subsidiary;  PROVIDED
that such Liens do not extend to or cover any  property  or assets of GST or any
Restricted Subsidiary other than the property or assets acquired; (xii) Liens in
favor  of GST or any  Restricted  Subsidiary;  (xiii)  Liens  arising  from  the
rendering of a final judgment or order against GST or any Restricted  Subsidiary
that  does  not  give  rise  to  an  Event  of  Default;  (xiv)  Liens  securing
reimbursement  obligations  with  respect  to letters  of credit  that  encumber
documents and other property relating to such letters of credit and the products
and  proceeds  thereof;  (xv) Liens in favor of customs and revenue  authorities
arising as a matter of law to secure  payment of  customs  duties in  connection
with the  importation  of  goods;  (xvi)  Liens  encumbering  customary  initial
deposits and margin deposits, and other Liens that are either within the general
parameters  customary in the  industry  and  incurred in the ordinary  course of
business, in each case, securing Indebtedness under Interest Rate Agreements and
Currency Agreements and forward contracts,  options,  future contracts,  futures
options or similar agreements or arrangements  designed to protect GST or any of
its Restricted  Subsidiaries from fluctuations in interest rates or the price of
commodities;  (xvii) Liens arising out of  conditional  sale,  title  retention,
consignment or similar arrangements for the sale of goods entered into by GST or
any of its  Restricted  Subsidiaries  in the  ordinary  course  of  business  in
accordance with the past practices of GST and its Restricted  Subsidiaries prior
to the Closing Date; and (xviii) Liens on or sales of receivables.

         "PERSON" means an individual, a corporation,  a partnership,  a limited
liability company, an association,  a trust or any other entity or organization,
including a government or political  subdivision or an agency or instrumentality
thereof.

         "PHOENIX  FIBER" means Phoenix Fiber Access,  Inc., a subsidiary of GST
USA.

                                       16

<PAGE>
         "PHYSICAL SECURITIES" has the meaning provided in Section 2.01.

         "PLEDGE  ACCOUNT"  means  the  accounts  established  with the  Trustee
pursuant  to the terms of the Pledge  Agreement  for the  deposit of the Pledged
Securities  purchased by the Company with the net proceeds  from the sale of the
Securities.

         "PLEDGE AGREEMENT" means the Collateral Pledge and Security  Agreement,
dated as of the Closing  Date,  made by the Company in favor of the Trustee,  as
such agreement may be amended, restated, supplemented or otherwise modified from
time to time.

         "PLEDGED  SECURITIES"  means the securities which shall consist of U.S.
Government Securities,  purchased by the Company with the proceeds from the sale
of the Securities or the proceeds from such securities, to be held in the Pledge
Account, all in accordance with the terms of the Pledge Agreement.

         "PREFERRED  STOCK"  means,  with  respect  to any  Person,  any and all
shares,  interests,  participations  or other equivalents  (however  designated,
whether voting or non-voting)  of such Person's  preferred or preference  stock,
whether now outstanding or issued after the date of this  Indenture,  including,
without  limitation,  all series and  classes of such  preferred  or  preference
stock.

         "PRINCIPAL" of a debt  security,  including the  Securities,  means the
principal amount due on the Stated Maturity as shown on such debt security.

         "PRIVATE  PLACEMENT LEGEND" means the legend initially set forth on the
Securities in the form set forth in Section 2.02(a).

         "PROTECTED PROPERTY" has the meaning provided in Section 4.09.

         "QIB" means a "qualified institutional buyer" as defined in Rule 144A.

         "REDEEMABLE PREFERRED SHARES" means the Series A Convertible Preference
Shares of GST outstanding on the Closing Date.

         "REDEEMABLE  STOCK"  means any class or series of Capital  Stock of any
Person that by its terms or otherwise  is (i)  required to be redeemed  prior to
the Stated  Maturity of the  Securities,  (ii)  redeemable  at the option of the
holder of such class or series of Capital  Stock at any time prior to the Stated
Maturity of the Securities or (iii) convertible into or exchangeable for Capital
Stock referred to in clause (i) or (ii) above or Indebtedness having a scheduled
maturity  prior to the Stated  Maturity  of the  Securities;  PROVIDED  that any
Capital  Stock that would not  constitute  Redeemable  Stock but for  provisions
thereof giving holders thereof the right to require

                                       17

<PAGE>
such Person to repurchase or redeem such Capital Stock upon the occurrence of an
"asset sale" or "change of control"  occurring  prior to the Stated  Maturity of
the  Securities  shall not  constitute  Redeemable  Stock if the "asset sale" or
"change of control"  provisions  applicable  to such  Capital  Stock are no more
favorable to the holders of such Capital Stock than the provisions  contained in
Section 4.12 and Section 4.14 and such Capital Stock specifically  provides that
such  Person  will not  repurchase  or redeem  any such stock  pursuant  to such
provision prior to the Issuer's repurchase of such Securities as are required to
be repurchased pursuant to Section 4.12 and Section 4.14.

         "REDEMPTION  DATE",  when  used  with  respect  to any  Security  to be
redeemed,  means  the date  fixed for such  redemption  by or  pursuant  to this
Indenture.

         "REDEMPTION  PRICE",  when  used with  respect  to any  Security  to be
redeemed,  means the price at which such Security is to be redeemed  pursuant to
this Indenture.

         "REGISTRAR" has the meaning provided in Section 2.04.

         "REGISTRATION   RIGHTS   AGREEMENT"  means  the   Registration   Rights
Agreement,  dated the date  hereof,  among the  Company,  GST USA,  GST,  Morgan
Stanley & Co. Incorporated, Bear, Stearns & Co. Inc., Credit Suisse First Boston
Corporation and SBC Warburg Dillon Read Inc.

         "REGISTRATION  STATEMENT" means the  Registration  Statement as defined
and described in the Registration Rights Agreement.

         "REGULAR RECORD DATE" for the interest  payable on any Interest Payment
Date means the April 15 or October 15  (whether or not a Business  Day),  as the
case may be, next preceding such Interest Payment Date.

         "REGULATION S" means Regulation S under the Securities Act.

         "RESPONSIBLE OFFICER", when used with respect to the Trustee, means the
chairman or any vice  chairman of the board of  directors,  the  chairman or any
vice chairman of the executive committee of the board of directors, the chairman
of the trust committee,  the president,  any vice president,  any assistant vice
president,  the secretary, any assistant secretary, the treasurer, any assistant
treasurer,  the cashier,  any assistant cashier,  any trust officer or assistant
trust officer,  the controller or any assistant  controller or any other officer
of the Trustee  customarily  performing  functions similar to those performed by
any  of  the  above   designated   officers  and  in  each  case  having  direct
responsibility  for the administration of this Indenture or the Pledge Agreement
and also means, with respect to a particular  corporate trust matter,  any other
officer to whom such matter is referred  because of his or her  knowledge of and
familiarity with the particular subject.

                                       18

<PAGE>
         "RESTRICTED PAYMENTS" has the meaning provided in Section 4.04.

         "RESTRICTED  SUBSIDIARY"  means any  Subsidiary  of GST  other  than an
Unrestricted Subsidiary.

         "RULE 144A" means Rule 144A under the Securities Act.

         "SECURED  NOTES" means the 13 1/4 Senior  Secured Notes due 2007 of GST
Funding issued pursuant to the Secured Notes Indenture.

         "SECURED NOTES  INDENTURE" means the Indenture dated as of May 13, 1997
among GST, GST USA, GST Funding and United States Trust Company of New York.

         "SECURITIES"  means  any of the  securities,  as  defined  in the first
paragraph of the recitals  hereof,  that are  authenticated  and delivered under
this Indenture.  For all purposes of this Indenture, the term "Securities" shall
include the  Securities  initially  issued on the  Closing  Date,  any  Exchange
Securities  to be  issued  and  exchanged  for any  Securities  pursuant  to the
Registration Rights Agreement and this Indenture and any other Securities issued
after the Closing Date under this Indenture. For purposes of this Indenture, all
Securities shall vote together as one series of Securities under this Indenture.

         "SECURITIES ACT" means the Securities Act of 1933.

         "SECURITY GUARANTEE" means the full and unconditional  Guarantee by GST
of (x) the Fee Notes and the Intercompany Notes prior to the Assumption Date and
(y) the Securities  after the Assumption  Date, as set forth in the supplemental
indenture to be delivered under Section 4.23.

         "SECURITY REGISTER" has the meaning provided in Section 2.04.

         "SENIOR  NOTES" means the 137/8% Senior  Discount Notes due 2005 of GST
USA issued pursuant to the Senior Notes Indenture.

         "SENIOR  NOTES  INDENTURE"  means  the  senior  notes  indenture  dated
December 19, 1995 among GST USA, as issuer, GST, as guarantor, and United States
Trust Company of New York, as trustee.

         "SHELF REGISTRATION  STATEMENT" means the Shelf Registration  Statement
as defined and described in the Registration Rights Agreement.

                                       19

<PAGE>
         "SIGNIFICANT  SUBSIDIARY"  means,  at any  date of  determination,  any
Restricted  Subsidiary that,  together with its  Subsidiaries,  (i) for the most
recent  fiscal  year of GST,  accounted  for more  than 10% of the  consolidated
revenues of GST and its  Restricted  Subsidiaries  or (ii) as of the end of such
fiscal year,  was the owner of more than 10% of the  consolidated  assets of GST
and its Restricted Subsidiaries, all as set forth on the most recently available
consolidated financial statements of GST for such fiscal year.

         "SPECIFIED  DATE" means any  Redemption  Date,  and Payment Date for an
Offer to Purchase  or any date on which the Notes  first  become due and payable
after an Event of Default.

         "STATED  MATURITY"  means,  (i) with respect to any debt security,  the
date  specified  in such  debt  security  as the  fixed  date on which the final
installment  of principal of such debt security is due and payable and (ii) with
respect to any  scheduled  installment  of  principal of or interest on any debt
security,  the date  specified in such debt  security as the fixed date on which
such installment is due and payable.

         "SUBSIDIARY"  means,  with  respect  to any  Person,  any  corporation,
association or other business  entity of which more than 50% of the voting power
of the outstanding Voting Stock is owned, directly or indirectly, by such Person
and one or more other Subsidiaries of such Person.

         "SUBSIDIARY GUARANTEE" has the meaning provided in Section 4.07.

         "SUBSIDIARY  GUARANTOR" means a Restricted Subsidiary that executes and
delivers a Subsidiary Guarantee.

         "TEMPORARY  CASH  INVESTMENT"  means any of the  following:  (i) direct
obligations of the United States of America or any agency thereof or obligations
fully and  unconditionally  guaranteed  by the  United  States of America or any
agency thereof,  (ii) time deposit  accounts,  certificates of deposit and money
market  deposits  maturing  within 180 days of the date of  acquisition  thereof
issued  by a bank or trust  company  which is  organized  under  the laws of the
United States of America, any state thereof or any foreign country recognized by
the United  States,  and which bank or trust  company has  capital,  surplus and
undivided profits  aggregating in excess of $50 million (or the foreign currency
equivalent thereof) and has outstanding debt which is rated "A" (or such similar
equivalent rating) or higher by at least one nationally  recognized  statistical
rating  organization  (as defined in Rule 436 under the  Securities  Act) or any
money-market  fund  sponsored  by a  registered  broker-dealer  or  mutual  fund
distributor,  (iii) repurchase  obligations with a term of not more than 30 days
for  underlying  securities  of the types  described in clause (i) above entered
into with a bank meeting the qualifications described in clause (ii) above, (iv)
commercial paper,  maturing not more than 90 days after the date of acquisition,
issued by a corporation (other than an Affiliate of the Issuer) organized and in

                                       20

<PAGE>
existence  under the laws of the United States of America,  any state thereof or
any foreign country  recognized by the United States of America with a rating at
the  time as of which  any  investment  therein  is made of  "P-1"  (or  higher)
according to Moody's Investors  Service,  Inc. or "A-1" (or higher) according to
Standard & Poor's Ratings  Services,  and (v) securities  with maturities of six
months or less from the date of acquisition issued or fully and  unconditionally
guaranteed  by any state,  commonwealth  or  territory  of the United  States of
America, or by any political  subdivision or taxing authority thereof, and rated
at least "A" by Standard & Poor's Ratings Services or Moody's Investors Service,
Inc.

         "TIA" or "TRUST  INDENTURE ACT" means the Trust  Indenture Act of 1939,
as amended  (15 U.S.  Code ss.ss.  77aaa-77bbbb),  as in effect on the date this
Indenture was executed, except as provided in Section 9.06.

         "TOMEN" means Tomen Corporation or its Affiliates.

         "TOMEN  FACILITY"  means,  collectively,  the  Tomen  Master  Agreement
together with all other agreements  (including credit  agreements),  instruments
and documents executed or delivered pursuant thereto or in connection therewith,
in each  case as such  agreements,  instruments  or  documents  may be  amended,
supplemented,  extended,  renewed,  replaced or otherwise  modified from time to
time.

         "TOMEN MASTER  AGREEMENT"  means the Master Agreement dated October 24,
1994,   among  Tomen   America   Inc.,   GST   (formerly   known  as   Greenstar
Telecommunications  Inc.),  GST Telecom Inc.,  Pacwest  Network,  Inc.,  Pacwest
Network L.L.C. and Pacific Lightwave, Inc.

         "TRADE PAYABLES" means any accounts  payable or any other  indebtedness
or monetary obligations to trade creditors created, assumed or Guaranteed by GST
or any of its Restricted Subsidiaries arising in the ordinary course of business
in connection with the acquisition of goods or services by GST or its Restricted
Subsidiaries.

         "TRANSACTION  DATE"  means,  with  respect  to  the  Incurrence  of any
Indebtedness  by  GST  or any of its  Restricted  Subsidiaries,  the  date  such
Indebtedness is to be Incurred and, with respect to any Restricted Payment,  the
date such Restricted Payment is to be made.

         "TRUSTEE"  means the party named as such in the first paragraph of this
Indenture  until a successor  replaces it in accordance  with the  provisions of
Article Seven of this Indenture and thereafter means such successor.

         "UNITED  STATES  BANKRUPTCY  CODE" means the  Bankruptcy  Reform Act of
1978,  as amended  and as  codified in Title 11 of the United  States  Code,  as
amended from time to time hereafter, or any successor federal bankruptcy law.

                                       21

<PAGE>
         "UNRESTRICTED  SUBSIDIARY"  means (i) any Subsidiary of GST that at the
time of  determination  shall be  designated an  Unrestricted  Subsidiary by the
Board of Directors of GST in the manner  provided  below and (ii) any Subsidiary
of an Unrestricted  Subsidiary.  The Board of Directors of GST may designate any
Restricted Subsidiary (including any newly acquired or newly formed Subsidiary),
other than GST USA or a Subsidiary Guarantor,  to be an Unrestricted  Subsidiary
unless such  Subsidiary  owns any Capital Stock of, or owns or holds any Lien on
any  property  of,  GST or any  Restricted  Subsidiary;  PROVIDED  that  (A) any
Guarantee  by GST or  any  Restricted  Subsidiary  of  any  Indebtedness  of the
Subsidiary   being  so  designated   shall  be  deemed  an  Incurrence  of  such
Indebtedness and an Investment by GST or such Restricted  Subsidiary at the time
of such designation; (B) either (I) the Subsidiary to be so designated has total
assets of $1,000 or less or (II) if such  Subsidiary  has  assets  greater  than
$1,000,  that such designation  would be permitted under Section 4.04 and (C) if
applicable,  the Incurrence of  Indebtedness  and the Investment  referred to in
clause (A) above would be permitted  under  Section 4.03 and Section  4.04.  The
Board of Directors of GST may  designate  any  Unrestricted  Subsidiary  to be a
Restricted  Subsidiary of GST;  PROVIDED that immediately after giving effect to
such designation (x) the Liens and Indebtedness of such Unrestricted  Subsidiary
outstanding  immediately after such designation are permitted to be Incurred for
all purposes of this Indenture and (y) no Default or Event of Default shall have
occurred and be  continuing.  Any such  designation by the Board of Directors of
GST shall be evidenced to the Trustee by promptly filing with the Trustee a copy
of the Board  Resolution  giving  effect to such  designation  and an  Officers'
Certificate  certifying  that  such  designation  complied  with  the  foregoing
provisions.

         "U.S. GLOBAL SECURITY" has the meaning provided in Section 2.01.

         "U.S.  GOVERNMENT  OBLIGATIONS"  means  securities  that are (i) direct
obligations  of the United  States of America  for the payment of which its full
faith and  credit is  pledged  or (ii)  obligations  of a Person  controlled  or
supervised by and acting as an agency or instrumentality of the United States of
America the payment of which is  unconditionally  guaranteed as a full faith and
credit  obligation by the United States of America,  which,  in either case, are
not callable or redeemable at the option of the issuer thereof at any time prior
to the Stated  Maturity of the  Securities,  and shall also include a depository
receipt  issued by a bank or trust company as custodian with respect to any such
U.S. Government  Obligation or a specific payment of interest on or principal of
any such U.S.  Government  Obligation  held by such custodian for the account of
the holder of a depository  receipt;  PROVIDED  that (except as required by law)
such  custodian is not  authorized to make any deduction from the amount payable
to the  holder  of such  depository  receipt  from any  amount  received  by the
custodian in respect of the U.S.  Government  Obligation or the specific payment
of interest on or principal of the U.S. Government  Obligation evidenced by such
depository receipt.

         "U.S.   GOVERNMENT   SECURITIES"  means  the  direct   obligations  of,
obligations fully guaranteed by, or participations in pools consisting solely of
obligations of or obligations

                                       22

<PAGE>

guaranteed by, the United States of America for the payment of which  guarantees
or  obligations  the full faith and  credit of the  Unites  States of America is
pledged  and which are not  callable or  redeemable  at the option of the issuer
thereof.

         "U.S.  PERSON" has the meaning  ascribed  thereto in Rule 902 under the
Securities Act.

         "U.S. PHYSICAL SECURITIES" has the meaning provided in Section 2.01.

         "VOTING  STOCK" means with respect to any Person,  Capital Stock of any
class or kind ordinarily having the power to vote for the election of directors,
managers or other voting members of the governing body of such Person.

         "WHOLLY  OWNED"  means,  with respect to any  Subsidiary of any Person,
such  Subsidiary  if all of the  outstanding  Capital  Stock in such  Subsidiary
(other than any director's qualifying shares or Investments by foreign nationals
mandated by applicable  law) is owned by such Person or one or more Wholly Owned
Subsidiaries of such Person.

         SECTION  1.02.  INCORPORATION  BY  REFERENCE  OF TRUST  INDENTURE  ACT.
Whenever  this  Indenture  refers to a provision  of the TIA,  the  provision is
incorporated  by reference in and made a part of this  Indenture.  The following
TIA terms used in this Indenture have the following meanings:

         "INDENTURE SECURITIES" means the Securities;

         "INDENTURE SECURITY HOLDER" means a Holder or a Securityholder;

         "INDENTURE TO BE QUALIFIED" means this Indenture;

         "INDENTURE TRUSTEE" or "INSTITUTIONAL TRUSTEE" means the Trustee; and

         "OBLIGOR" on the indenture  securities means the Company, and after the
Assumption Date, GST USA and GST or any other obligor on the Securities.

         All other TIA terms used in this Indenture that are defined by the TIA,
defined  by TIA  reference  to  another  statute  or  defined  by a rule  of the
Commission and not otherwise  defined herein have the meanings  assigned to them
therein.

         SECTION  1.03.  RULES OF  CONSTRUCTION.  Unless the  context  otherwise
requires:

               (i) a term has the meaning assigned to it;

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<PAGE>
               (ii) an  accounting  term not  otherwise  defined has the meaning
         assigned to it in accordance with GAAP;

               (iii) "or" is not exclusive;

               (iv) words in the singular  include the plural,  and words in the
         plural include the singular;

               (v) provisions apply to successive events and transactions;

               (vi)  "herein,"  "hereof" and other words of similar import refer
         to this Indenture as a whole and not to any particular Article, Section
         or other subdivision; and

               (vii) all references to Sections or Articles refer to Sections or
         Articles of this Indenture unless otherwise indicated.

                                   ARTICLE TWO
                                 THE SECURITIES

         SECTION  2.01.  FORM  AND  DATING.  The  Securities  and the  Trustee's
certificate of authentication  shall be substantially in the form annexed hereto
as  Exhibit  A  with  such  appropriate  insertions,   substitutions  and  other
variations as are required or permitted under this Indenture. The Securities may
have  notations,  legends  or  endorsements  required  by  law,  stock  exchange
agreements to which the Issuer is subject or usage. The Issuer shall approve the
form  of  the  Securities  and  any  notation,  legend  or  endorsement  on  the
Securities. Each Security shall be dated the date of its authentication.

         The  terms  and  provisions  contained  in the  form of the  Securities
annexed hereto as Exhibit A shall  constitute,  and are hereby expressly made, a
part of this Indenture.  Each of the Company,  GST USA, GST and the Trustee,  by
its execution and delivery of this Indenture,  expressly agrees to the terms and
provisions of the Securities applicable to it and to be bound thereby.

         Securities offered and sold in reliance on Rule 144A shall be issued in
the form of permanent global Securities in registered form, substantially in the
form set forth in Exhibit A (the "U.S.  GLOBAL  SECURITY"),  deposited  with the
Trustee,  as  custodian  for the  Depositary,  duly  executed  by the Issuer and
authenticated by the Trustee as hereinafter  provided.  The aggregate  principal
amount  at  maturity  of the  U.S.  Global  Security  may  from  time to time be
increased  or decreased by  adjustments  made on the records of the Trustee,  as
custodian for the Depositary or its nominee, as hereinafter provided.

                                       24

<PAGE>
         Securities  offered  and sold in offshore  transactions  in reliance on
Regulation  S shall  be  issued  in the  form of one or  more  temporary  global
Securities in registered form  substantially  in the form set forth in Exhibit A
(each a "TEMPORARY  OFFSHORE GLOBAL  SECURITY")  deposited with the Trustee,  as
custodian for the Depositary,  duly executed by the Issuer and  authenticated by
the Trustee as  hereinafter  provided.  At any time following June 13, 1998 (the
"OFFSHORE SECURITIES EXCHANGE DATE"), upon receipt by the Trustee and the Issuer
of a  certificate  substantially  in the form of  Exhibit B hereto,  one or more
permanent  global  Securities in registered form  substantially  in the form set
forth in Exhibit A (the "PERMANENT OFFSHORE GLOBAL SECURITY";  and together with
the Temporary Offshore Global Security,  the "OFFSHORE GLOBAL  SECURITIES") duly
executed by the Issuer and authenticated by the Trustee as hereinafter  provided
shall be deposited with the Trustee,  as custodian for the  Depositary,  and the
Registrar  shall reflect on its books and records the date and a decrease in the
principal  amount at maturity of the Temporary  Offshore  Global  Security in an
amount equal to the principal  amount at maturity of the beneficial  interest in
the Temporary Offshore Global Security transferred.

         Securities  which  are  offered  and sold to  Institutional  Accredited
Investors which are not QIBs (excluding Non-U.S. Persons) shall be issued in the
form of permanent  certificated  Securities in registered form in  substantially
the form set forth in Exhibit A (the  "U.S.  PHYSICAL  SECURITIES").  Securities
issued pursuant to Section 2.07 in exchange for interests in the Offshore Global
Security shall be in the form of permanent certificated Securities in registered
form  substantially  in the form set forth in Exhibit A (the "OFFSHORE  PHYSICAL
SECURITIES").

         The Offshore  Physical  Securities  and U.S.  Physical  Securities  are
sometimes collectively herein referred to as the "PHYSICAL SECURITIES". The U.S.
Global Security and the Offshore  Global  Security are sometimes  referred to as
the "GLOBAL SECURITIES".

         The definitive  Securities  shall be typed,  printed,  lithographed  or
engraved or produced by any  combination  of these methods or may be produced in
any other manner permitted by the rules of any securities  exchange on which the
Securities  may be listed,  all as  determined  by the officers  executing  such
Securities, as evidenced by their execution of such Securities.

         SECTION 2.02.  RESTRICTIVE  LEGENDS. (a) Unless and until a Security is
exchanged for an Exchange Security in connection with an effective  Registration
Statement  pursuant to the Registration  Rights  Agreement,  (i) the U.S. Global
Security and each U.S.  Physical  Security shall bear the legend set forth below
on the face thereof and (ii) the Offshore  Physical  Securities and the Offshore
Global  Security shall bear the legend set forth below on the face thereof until
at least 41 days  after the  Closing  Date and  receipt by the  Company  and the
Trustee of a certificate in the form of Exhibit B hereto:

         THIS NOTE HAS NOT BEEN REGISTERED  UNDER THE U.S.  SECURITIES
         ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND

                                  25

<PAGE>
         ACCORDINGLY,  MAY NOT BE  OFFERED  OR SOLD  WITHIN THE UNITED
         STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.  PERSONS
         EXCEPT  AS  SET  FORTH  IN  THE  FOLLOWING  SENTENCE.  BY ITS
         ACQUISITION  HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS
         A  "QUALIFIED  INSTITUTIONAL  BUYER" (AS DEFINED IN RULE 144A
         UNDER  THE  SECURITIES  ACT)  OR (B)  IT IS AN  INSTITUTIONAL
         "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3)
         OR  (7)  OF  REGULATION  D  UNDER  THE  SECURITIES  ACT)  (AN
         "INSTITUTIONAL  ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S.
         PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE  TRANSACTION
         IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2)
         AGREES THAT IT WILL NOT,  WITHIN THE TIME PERIOD  REFERRED TO
         UNDER RULE 144(k) (TAKING INTO ACCOUNT THE PROVISIONS OF RULE
         144(d) IF  APPLICABLE)  UNDER THE SECURITIES ACT AS IN EFFECT
         ON THE DATE OF THE TRANSFER OF THIS NOTE, RESELL OR OTHERWISE
         TRANSFER  THIS NOTE  EXCEPT  (A) TO GST  FUNDING,  GST OR ANY
         SUBSIDIARY  THEREOF,  (B)  INSIDE  THE  UNITED  STATES  TO  A
         QUALIFIED  INSTITUTIONAL  BUYER IN COMPLIANCE  WITH RULE 144A
         UNDER THE SECURITIES  ACT, (C) INSIDE THE UNITED STATES TO AN
         INSTITUTIONAL   ACCREDITED   INVESTOR  THAT,  PRIOR  TO  SUCH
         TRANSFER, FURNISHES TO THE TRUSTEE A SIGNED LETTER CONTAINING
         CERTAIN   REPRESENTATIONS  AND  AGREEMENTS  RELATING  TO  THE
         RESTRICTIONS  ON  TRANSFER  OF THIS  NOTE  (THE FORM OF WHICH
         LETTER  CAN BE  OBTAINED  FROM  THE  TRUSTEE)  AND,  IF  SUCH
         TRANSFER  IS IN RESPECT  OF AN  AGGREGATE  ACCRETED  VALUE OF
         NOTES AT THE  TIME OF  TRANSFER  OF LESS  THAN  $100,000,  AN
         OPINION OF COUNSEL  ACCEPTABLE  TO GST FUNDING OR GST USA, AS
         THE CASE MAY BE, THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
         SECURITIES  ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
         TRANSACTION IN COMPLIANCE  WITH RULE 904 UNDER THE SECURITIES
         ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED
         BY RULE 144 UNDER THE  SECURITIES  ACT (IF  AVAILABLE) OR (F)
         PURSUANT TO AN  EFFECTIVE  REGISTRATION  STATEMENT  UNDER THE
         SECURITIES  ACT AND (3) AGREES  THAT IT WILL  DELIVER TO EACH
         PERSON   TO  WHOM   THIS   NOTE  IS   TRANSFERRED   A  NOTICE
         SUBSTANTIALLY  TO THE EFFECT OF THIS  LEGEND.  IN  CONNECTION
         WITH  ANY  TRANSFER  OF THIS  NOTE  WITHIN  THE  TIME  PERIOD
         REFERRED TO ABOVE,  THE HOLDER MUST CHECK THE APPROPRIATE BOX
         SET FORTH ON THE  REVERSE  HEREOF  RELATING  TO THE MANNER OF
         SUCH TRANSFER AND SUBMIT THIS

                                  26

<PAGE>
         CERTIFICATE TO THE TRUSTEE.  IF THE PROPOSED TRANSFEREE IS AN
         INSTITUTIONAL  ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO
         SUCH TRANSFER,  FURNISH TO THE TRUSTEE AND GST FUNDING OR GST
         USA, AS THE CASE MAY BE, SUCH CERTIFICATIONS,  LEGAL OPINIONS
         OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE
         TO CONFIRM  THAT SUCH  TRANSFER IS BEING MADE  PURSUANT TO AN
         EXEMPTION  FROM,  OR IN A  TRANSACTION  NOT  SUBJECT  TO, THE
         REGISTRATION  REQUIREMENTS  OF THE  SECURITIES  ACT.  AS USED
         HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND
         "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
         UNDER THE SECURITIES ACT. THE INDENTURE  CONTAINS A PROVISION
         REQUIRING  THE TRUSTEE TO REFUSE TO REGISTER  ANY TRANSFER OF
         THIS NOTE IN VIOLATION OF THE FOREGOING RESTRICTIONS.

         (b) Each Global Security,  whether or not an Exchange  Security,  shall
also bear the following legend on the face thereof:

         UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
         OF THE  DEPOSITORY  TRUST COMPANY TO THE COMPANY OR ITS AGENT
         FOR  REGISTRATION OF TRANSFER,  EXCHANGE OR PAYMENT,  AND ANY
         NOTE  ISSUED  IS  REGISTERED  IN THE NAME OF CEDE & CO. OR TO
         SUCH  OTHER  ENTITY  AS  IS   REQUESTED   BY  AN   AUTHORIZED
         REPRESENTATIVE  OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER
         REPRESENTATIVE  OF THE DEPOSITORY TRUST COMPANY OR SUCH OTHER
         NAME AS IS REQUESTED BY AN AUTHORIZED  REPRESENTATIVE  OF THE
         DEPOSITORY  TRUST COMPANY (AND ANY PAYMENT  HEREON IS MADE TO
         CEDE & CO.  OR TO SUCH  OTHER  ENTITY AS IS  REQUESTED  BY AN
         AUTHORIZED  REPRESENTATIVE  OF THE DEPOSITORY TRUST COMPANY),
         ANY  TRANSFER,  PLEDGE  OR  OTHER  USE  HEREOF  FOR  VALUE OR
         OTHERWISE  BY  OR  TO  ANY  PERSON  IS  WRONGFUL   SINCE  THE
         REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

         TRANSFERS  OF  THIS  GLOBAL  SECURITY  SHALL  BE  LIMITED  TO
         TRANSFERS  IN WHOLE,  BUT NOT IN PART,  TO NOMINEES OF CEDE &
         CO. OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
         TRANSFERS  OF  PORTIONS  OF THIS  GLOBAL  SECURITY  SHALL  BE
         LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS
         SET FORTH IN SECTION 2.08 OF THE INDENTURE.

                                  27

<PAGE>
         SECTION 2.03. EXECUTION,  AUTHENTICATION AND DENOMINATIONS.  Subject to
Article Four, the aggregate  principal amount at maturity of Securities that may
be authenticated  and delivered under this Indenture is unlimited.  Two Officers
shall execute the Securities for the Issuer by facsimile or manual  signature in
the name and on behalf of the Issuer.

         If an Officer  whose  signature  is on a Security no longer  holds that
office  at the  time the  Trustee  or  authenticating  agent  authenticates  the
Security, the Security shall be valid nevertheless.

         A Security shall not be valid until the Trustee or authenticating agent
manually signs the certificate of authentication on the Security.  The signature
shall be conclusive evidence that the Security has been authenticated under this
Indenture.

         At any  time  and  from  time  to  time  after  the  execution  of this
Indenture,  the  Trustee or an  authenticating  agent  shall  upon  receipt of a
Company  Order  authenticate  for original  issue  Securities  in the  aggregate
principal amount at maturity specified in such Company Order;  PROVIDED that the
Trustee shall be entitled to receive an Officers'  Certificate and an Opinion of
Counsel of the Company in connection with such authentication of Securities. The
Opinion of Counsel shall, if requested by the Trustee, be to the effect that:

               (a) the form and terms of such Securities  have been  established
         by or pursuant to a Board  Resolution or, if  applicable,  an indenture
         supplemental   hereto  in  conformity   with  the  provisions  of  this
         Indenture;

               (b)  such  supplemental  indenture,  if any,  when  executed  and
         delivered by the Company, GST USA, GST and the Trustee, will constitute
         a valid and binding obligation of the Company, GST USA and GST;

               (c) such  Securities,  when  authenticated  and  delivered by the
         Trustee  and issued by the  Company  in the  manner and  subject to any
         conditions specified in such Opinion of Counsel,  will constitute valid
         and binding  obligations of the Company in accordance  with their terms
         and will be entitled  to the  benefits  of this  Indenture,  subject to
         bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
         and similar  laws of general  applicability  relating  to or  affecting
         creditors' rights and to general equitable principles; and

               (d) the Company has been duly  incorporated  in, and is a validly
         existing  corporation  in good standing under the laws of, the State of
         Delaware.

                                       28

<PAGE>
Such Company Order shall  specify the amount of  Securities to be  authenticated
and the date on which the original  issue of Securities  is to be  authenticated
and in case of an issuance of Securities pursuant to Section 2.15, shall certify
that such issuance is in compliance with Article Four.

         The  Trustee  may  appoint  an  authenticating  agent  to  authenticate
Securities.  An authenticating  agent may authenticate  Securities  whenever the
Trustee may do so. Each  reference in this  Indenture to  authentication  by the
Trustee includes  authentication by such authenticating agent. An authenticating
agent has the same rights as an Agent to deal with the Issuer or an Affiliate of
the Issuer.

         The  Securities  shall be  issuable  only in  registered  form  without
coupons and only in  denominations of $1,000 in principal amount at maturity and
any integral multiple of $1,000 in excess thereof.

         SECTION 2.04.  REGISTRAR AND PAYING AGENT. The Issuer shall maintain an
office or agency where  Securities may be presented for registration of transfer
or for exchange (the  "REGISTRAR"),  an office or agency where Securities may be
presented for payment (the "PAYING AGENT") and an office or agency where notices
and  demands  to or upon  the  Issuer  in  respect  of the  Securities  and this
Indenture may be served, which shall be in the Borough of Manhattan, The City of
New York.  The  Issuer  shall  cause the  Registrar  to keep a  register  of the
Securities  and of their transfer and exchange (the  "SECURITY  REGISTER").  The
Issuer may have one or more co-  Registrars  and one or more  additional  Paying
Agents.

         The Issuer shall enter into an  appropriate  agency  agreement with any
Agent  not a  party  to  this  Indenture.  The  agreement  shall  implement  the
provisions of this  Indenture  that relate to such Agent.  The Issuer shall give
prompt  written  notice to the Trustee of the name and address of any such Agent
and any change in the address of such Agent.  If the Issuer  fails to maintain a
Registrar,  Paying Agent  and/or  agent for service of notices and demands,  the
Trustee  shall act as such  Registrar,  Paying Agent and/or agent for service of
notices and  demands for so long as such  failure  shall  continue  and shall be
entitled  to  compensation  therefor  pursuant to Section  7.07.  The Issuer may
remove any Agent upon  written  notice to such Agent and the  Trustee;  PROVIDED
that no such  removal  shall become  effective  until (i) the  acceptance  of an
appointment  by a successor  Agent to such Agent as evidenced by an  appropriate
agency  agreement  entered  into by the  Issuer  and such  successor  Agent  and
delivered  to the Trustee or (ii)  notification  to the Trustee that the Trustee
shall  serve  as such  Agent  until  the  appointment  of a  successor  Agent in
accordance  with clause (i) of this proviso.  The Issuer,  any Subsidiary of the
Issuer,  or any Affiliate of any of them may act as Paying  Agent,  Registrar or
co-Registrar, and/or agent for service of notice and demands; PROVIDED, HOWEVER,
that neither the Issuer,  a Subsidiary  of the Issuer nor an Affiliate of any of
them  shall  act as  Paying  Agent  in  connection  with the  defeasance  of the
Securities or the discharge of this Indenture under Article Eight.

                                       29

<PAGE>
         The Company initially appoints the Trustee as Registrar,  Paying Agent,
authenticating  agent and agent for service of notice and  demands.  The Trustee
shall preserve in as current a form as is reasonably practicable the most recent
list  available to it of the names and addresses of Holders and shall  otherwise
comply with TIA  ss.312(a).  If, at any time,  the Trustee is not the Registrar,
the Registrar  shall make available to the Trustee before each Interest  Payment
Date and at such other times as the Trustee may  reasonably  request,  the names
and addresses of the Holders as they appear in the Security Register.

         SECTION 2.05. PAYING AGENT TO HOLD MONEY IN TRUST. Not later than 11:00
a.m. New York City time on each due date of the principal,  premium, if any, and
interest on any Securities,  the Issuer shall deposit, or cause to be deposited,
with the Paying Agent money in  immediately  available  funds  sufficient to pay
such principal,  premium, if any, and interest so becoming due. The Issuer shall
require each Paying  Agent,  if any,  other than the Trustee to agree in writing
that such Paying Agent shall hold in trust for the benefit of the Holders or the
Trustee  all money held by the Paying  Agent for the  payment of  principal  of,
premium,  if any, and interest on the  Securities  (whether  such money has been
paid to it by the Issuer or any other obligor on the Securities),  and that such
Paying Agent shall promptly  notify the Trustee in writing of any default by the
Issuer (or any other obligor on the Securities) in making any such payment.  The
Issuer at any time may require a Paying Agent to pay all money held by it to the
Trustee  and account  for any funds  disbursed,  and the Trustee may at any time
during the continuance of any payment default,  upon written request to a Paying
Agent,  require such Paying Agent to pay all money held by it to the Trustee and
to account for any funds  disbursed.  Upon doing so, the Paying Agent shall have
no further liability for the money so paid over to the Trustee. If the Issuer or
any  Subsidiary  of the  Issuer or any  Affiliate  of any of them acts as Paying
Agent, it will, on or before each due date of any principal of, premium, if any,
or interest on the  Securities,  segregate and hold in a separate trust fund for
the  benefit of the  Holders a sum of money  sufficient  to pay such  principal,
premium,  if any, or  interest so becoming  due until such sum of money shall be
paid to such Holders or otherwise disposed of as provided in this Indenture, and
will  promptly  notify the Trustee in writing of its action or failure to act as
required by this Section 2.05.

         SECTION 2.06.  TRANSFER AND EXCHANGE.  The Securities are issuable only
in registered  form. A Holder may transfer a Security by written  application to
the  Registrar  stating  the  name  of the  proposed  transferee  and  otherwise
complying with the terms of this  Indenture.  No such transfer shall be effected
until,  and such  transferee  shall  succeed to the rights of a Holder only upon
registration of the transfer by the Registrar in the Security Register. Prior to
the  registration  of any transfer by a Holder as provided  herein,  the Company
and, after the Assumption  Date, GST USA and GST, the Trustee,  and any agent of
the Issuer  shall treat the person in whose name the Security is  registered  as
the owner thereof for all purposes whether or not the Security shall be overdue,
and neither the Company and,  after the  Assumption  Date,  GST USA and GST, the
Trustee,  nor any such  agent  shall be  affected  by  notice  to the  contrary.
Furthermore,  any  Holder  of or  beneficial  owner of an  interest  in a Global
Security shall, by

                                       30

<PAGE>
acceptance of such Global  Security,  be deemed to have agreed that transfers of
beneficial  interests  in such Global  Security  may be effected  only through a
book-entry  system  maintained  by the  Depositary  (or  its  agent),  and  that
ownership  of a  beneficial  interest  in the  Security  shall be required to be
reflected in a book entry.  When  Securities are presented to the Registrar or a
co- Registrar with a request to register the transfer or to exchange them for an
equal   principal   amount  at  maturity  of  Securities  of  other   authorized
denominations (including on exchange of Securities for Exchange Securities), the
Registrar  shall  register the transfer or make the exchange as requested if its
requirements  for such  transactions are met (including that such Securities are
duly  endorsed  or  accompanied  by a written  instrument  of  transfer  in form
satisfactory to the Trustee and Registrar duly executed by the Holder thereof or
by an attorney  who is  authorized  in writing to act on behalf of the  Holder);
PROVIDED that no exchanges of  Securities  for Exchange  Securities  shall occur
until a  Registration  Statement  shall  have  been  declared  effective  by the
Commission  and that any Securities  that are exchanged for Exchange  Securities
shall be cancelled  by the Trustee.  To permit  registrations  of transfers  and
exchanges in accordance with the terms,  conditions and restrictions hereof, the
Issuer  shall  execute  and the Trustee  shall  authenticate  Securities  at the
Registrar's  request.  No  service  charge  shall be made to any  Holder for any
registration  of transfer or exchange or redemption of the  Securities,  but the
Issuer  may  require  payment  by the  Holder of a sum  sufficient  to cover any
transfer tax or similar  governmental  charge  payable in  connection  therewith
(other than any such transfer taxes or other similar governmental charge payable
upon transfers,  exchanges or redemptions  pursuant to Section 2.11, 3.09, 4.12,
4.14 or 9.04).

         The Registrar shall not be required (i) to issue, register the transfer
of or exchange any Security during a period beginning at the opening of business
15 days before the day of the mailing of a notice of  redemption  of  Securities
selected for  redemption  under Section 3.04 and ending at the close of business
on the day of such mailing,  or (ii) to register the transfer of or exchange any
Security so selected for  redemption in whole or in part,  except the unredeemed
portion of any Security being redeemed in part.

         SECTION 2.07. BOOK-ENTRY PROVISIONS FOR GLOBAL SECURITIES. (a) The U.S.
Global Security and Offshore  Global Security  initially shall (i) be registered
in the name of the Depositary for such Global  Securities or the nominee of such
Depositary,  (ii) be delivered to the Trustee as custodian  for such  Depositary
and (iii) bear legends as set forth in Section 2.02.

         Members of, or participants in, the Depositary  ("AGENT MEMBERS") shall
have no rights under this Indenture with respect to any Global  Security held on
their behalf by the  Depositary,  or the Trustee as its custodian,  or under any
Global Security, and the Depositary may be treated by the Company and, after the
Assumption  Date, GST USA and GST, the Trustee and any agent of the Company and,
after the Assumption  Date, GST USA and GST or the Trustee as the absolute owner
of  such  Global  Security  for all  purposes  whatsoever.  Notwithstanding  the
foregoing,  nothing  herein shall prevent the Company and,  after the Assumption
Date, GST USA

                                       31

<PAGE>
and GST, the Trustee or any agent of the Company and, after the Assumption Date,
GST USA and GST or the Trustee, from giving effect to any written certification,
proxy or other  authorization  furnished by the Depositary or impair, as between
the  Depositary  and its Agent  Members,  the  operation of customary  practices
governing the exercise of the rights of a beneficial owner of any Security.

         (b)  Transfers  of a Global  Security  shall be limited to transfers of
such  Global  Security  in  whole,  but  not in  part,  to the  Depositary,  its
successors or their  respective  nominees.  Interests of beneficial  owners in a
Global Security may be transferred in accordance  with the applicable  rules and
procedures of the  Depositary  and the  provisions of Section 2.08. In addition,
Physical  Securities  shall be transferred to all beneficial  owners in exchange
for their  beneficial  interests  in the U.S.  Global  Security or the  Offshore
Global Security, respectively, if (i) the Depositary notifies the Issuer that it
is unwilling or unable to continue as Depositary for the U.S. Global Security or
the Offshore Global Security,  as the case may be, and a successor depositary is
not  appointed  by the Issuer  within 90 days of such notice or (ii) an Event of
Default has occurred and is continuing  and the Registrar has received a request
to the foregoing effect from the Depositary.

         (c) Any  beneficial  interest in one of the Global  Securities  that is
transferred  to a person who takes  delivery  in the form of an  interest in the
other  Global  Security  will,  upon  transfer,  cease to be an interest in such
Global  Security  and  become an  interest  in the other  Global  Security  and,
accordingly,  will thereafter be subject to all transfer  restrictions,  if any,
and other  procedures  applicable to  beneficial  interests in such other Global
Security for as long as it remains such an interest.

         (d) In connection  with any transfer  pursuant to paragraph (b) of this
Section 2.07 of a portion of the  beneficial  interests in a Global  Security to
beneficial  owners who are required to hold Physical  Securities,  the Registrar
shall  reflect on its books and records the date and a decrease in the principal
amount at maturity of the Global  Security in an amount  equal to the  principal
amount at  maturity  of the  beneficial  interest  in the Global  Security to be
transferred,  and the Issuer shall execute,  and the Trustee shall  authenticate
and deliver, one or more Physical Securities of like tenor and amount.

         (e) In  connection  with the transfer of an entire  Global  Security to
beneficial  owners  pursuant to paragraph (b) of this Section  2.07,  the Global
Security shall be deemed to be surrendered to the Trustee for cancellation,  and
the Issuer shall execute,  and the Trustee shall  authenticate  and deliver,  to
each  beneficial  owner  identified  by  the  Depositary  in  exchange  for  its
beneficial  interest in the Global Security an equal aggregate  principal amount
at maturity of Physical Securities of authorized denominations.

                                       32

<PAGE>
         (f) Any U.S. Physical Security delivered in exchange for an interest in
the U.S. Global  Security  pursuant to paragraph (b) or (d) of this Section 2.07
shall,  except as otherwise  provided by paragraph (d) of Section 2.08, bear the
legend regarding transfer restrictions  applicable to the U.S. Physical Security
set forth in Section 2.02.

         (g) The  registered  holder of a Global  Security may grant proxies and
otherwise  authorize  any person,  including  Agent Members and persons that may
hold  interests  through  Agent  Members,  to take any action  which a Holder is
entitled to take under this Indenture or the Securities.

         (h) QIBs that are beneficial  owners of interests in a Global  Security
may receive Physical  Securities  (which shall bear the Private Placement Legend
if  required  by  Section  2.02)  in  accordance  with  the  procedures  of  the
Depositary.  In connection  with the execution,  authentication  and delivery of
such Physical Securities, the Registrar shall reflect on its books and records a
decrease in the  principal  amount at maturity of the relevant  Global  Security
equal to the principal  amount at maturity of such Physical  Securities  and the
Issuer shall execute and the Trustee shall  authenticate and deliver one or more
Physical Securities having an equal aggregate principal amount at maturity.

         (i)  Any  Offshore  Physical  Security  delivered  in  exchange  for an
interest in the  Offshore  Global  Security  pursuant to  paragraph  (b) of this
Section  shall,  except as otherwise  provided by paragraph (d) of Section 2.08,
bear the legend  regarding  transfer  restrictions  applicable  to the  Offshore
Physical Security set forth in Section 2.02.

         SECTION 2.08. SPECIAL TRANSFER PROVISIONS.  Unless and until a Security
is  exchanged  for  an  Exchange   Security  in  connection  with  an  effective
Registration  Statement  pursuant  to the  Registration  Rights  Agreement,  the
following provisions shall apply:

               (a) TRANSFERS TO QIBS. The following  provisions shall apply with
respect to the registration of any proposed transfer of a U.S. Physical Security
or an  interest  in  the  U.S.  Global  Security  to a QIB  (excluding  Non-U.S.
Persons):

               (i)  If the  Security  to be  transferred  consists  of (A)  U.S.
         Physical Securities,  the Registrar shall register the transfer if such
         transfer is being made by a proposed transferor who has checked the box
         provided for on the form of Security stating,  or has otherwise advised
         the Issuer and the Registrar in writing, that the sale has been made in
         compliance  with the  provisions  of Rule 144A to a transferee  who has
         signed the certification  provided for on the form of Security stating,
         or has otherwise advised the Issuer and the Registrar in writing,  that
         it is  purchasing  the  Security for its own account or an account with
         respect to which it exercises  sole  investment  discretion and that it
         and any such  account is a QIB within the meaning of Rule 144A,  and is
         aware that the sale to it is being made in reliance

                                       33

<PAGE>
         on Rule 144A and  acknowledges  that it has received  such  information
         regarding the Issuer as it has  requested  pursuant to Rule 144A or has
         determined  not to request such  information  and that it is aware that
         the transferor is relying upon its foregoing  representations  in order
         to claim the exemption from  registration  provided by Rule 144A or (B)
         an interest in the U.S. Global Security,  the transfer of such interest
         may be effected  only through the book entry system  maintained  by the
         Depositary.

               (ii) If the  proposed  transferee  is an  Agent  Member,  and the
         Security to be transferred consists of U.S. Physical  Securities,  upon
         receipt by the Registrar of the documents referred to in clause (i) and
         instructions   given  in  accordance  with  the  Depositary's  and  the
         Registrar's  procedures,  the Registrar  shall reflect on its books and
         records the date and an increase in the principal amount at maturity of
         the U.S. Global Security in an amount equal to the principal  amount at
         maturity of the U.S.  Physical  Securities to be  transferred,  and the
         Trustee shall cancel the U.S. Physical Security so transferred.

         (b) TRANSFERS OF INTERESTS IN THE TEMPORARY OFFSHORE GLOBAL SECURITY OR
LEGENDED OFFSHORE PHYSICAL SECURITIES. The following provisions shall apply with
respect to registration  of any proposed  transfer of interests in the Temporary
Offshore Global Security or Legended Offshore Physical Securities:

               (i) The Registrar shall register the transfer of any Security (A)
         if the  proposed  transferee  is a  Non-U.S.  Person  and the  proposed
         transferor  has delivered to the Registrar a certificate  substantially
         in the form of Exhibit C hereto or (B) if the proposed  transferee is a
         QIB and the proposed transferor has checked the box provided for on the
         form of Security  stating,  or has otherwise advised the Issuer and the
         Registrar in writing,  that the sale has been made in  compliance  with
         the  provisions  of  Rule  144A to a  transferee  who  has  signed  the
         certification  provided  for on the form of  Security  stating,  or has
         otherwise  advised the Issuer and the Registrar in writing,  that it is
         purchasing  the Security for its own account or an account with respect
         to which it exercises  sole  investment  discretion and that it and any
         such  account is a QIB within  the  meaning of Rule 144A,  and is aware
         that  the  sale to it is  being  made in  reliance  on  Rule  144A  and
         acknowledges that it has received such information regarding the Issuer
         as it has  requested  pursuant  to Rule 144A or has  determined  not to
         request such  information  and that it is aware that the  transferor is
         relying  upon its  foregoing  representations  in  order  to claim  the
         exemption from registration provided by Rule 144A.

               (ii) If the proposed  transferee is an Agent Member, upon receipt
         by the  Registrar of the  documents  referred to in clause (i)(B) above
         and  instructions  given in accordance  with the  Depositary's  and the
         Registrar's  procedures,  the Registrar  shall reflect on its books and
         records the date and an increase in the principal amount at maturity of
         the

                                       34

<PAGE>
         U.S.  Global  Security,  in an amount equal to the principal  amount at
         maturity of the Temporary  Offshore  Global Security to be transferred,
         and the Trustee  shall  decrease the amount of the  Temporary  Offshore
         Global Security.

               (c)  TRANSFERS  TO NON-U.S.  PERSONS AT ANY TIME.  The  following
provisions  shall apply with respect to any transfer of a Security to a Non-U.S.
Person:

               (i) Prior to June 13,  1998,  the  Registrar  shall  register any
         proposed transfer of a Security to a Non-U.S.  Person upon receipt of a
         certificate  substantially  in the form of  Exhibit  C hereto  from the
         proposed transferor.

               (ii) On and after June 13, 1998, the Registrar shall register any
         proposed  transfer  to  any  Non-U.S.  Person  if  the  Security  to be
         transferred  is a U.S.  Physical  Security  or an  interest in the U.S.
         Global  Security,  upon receipt of a certificate  substantially  in the
         form of Exhibit C from the proposed transferor.

               (iii) (A) If the proposed transferor is an Agent Member holding a
         beneficial  interest in the U.S. Global  Security,  upon receipt by the
         Registrar  of (1)  the  documents  required  by  paragraph  (i) and (2)
         instructions  in accordance with the  Depositary's  and the Registrar's
         procedures,  the  Registrar  shall reflect on its books and records the
         date and a decrease  in the  principal  amount at  maturity of the U.S.
         Global Security in an amount equal to the principal  amount at maturity
         of  the  beneficial   interest  in  the  U.S.  Global  Security  to  be
         transferred,  and (B) if the proposed  transferee  is an Agent  Member,
         upon receipt by the Registrar of instructions  given in accordance with
         the  Depositary's and the Registrar's  procedures,  the Registrar shall
         reflect  on its  books  and  records  the date and an  increase  in the
         principal  amount at maturity  of the  Offshore  Global  Security in an
         amount equal to the principal  amount at maturity of the U.S.  Physical
         Securities  or the U.S.  Global  Security,  as the  case may be,  to be
         transferred,  and the Trustee  shall cancel the Physical  Security,  if
         any, so transferred or decrease the amount of the U.S. Global Security.

         (d)  PRIVATE   PLACEMENT  LEGEND.   Upon  the  transfer,   exchange  or
replacement  of  Securities  not  bearing  the  Private  Placement  Legend,  the
Registrar  shall  deliver  Securities  that do not  bear the  Private  Placement
Legend.  Upon the transfer,  exchange or replacement  of Securities  bearing the
Private Placement Legend,  the Registrar shall deliver only Securities that bear
the Private  Placement Legend unless either (i) the Private  Placement Legend is
no longer  required by Section 2.02 or (ii) there is delivered to the  Registrar
an Opinion of Counsel  reasonably  satisfactory to the Issuer and the Trustee to
the effect that neither such legend nor the related restrictions on transfer are
required in order to maintain  compliance  with the provisions of the Securities
Act. Notwithstanding the foregoing, upon the exchange of Securities for Exchange

                                       35

<PAGE>
Securities as described in Section 2.06 hereof and the  Registration  Statement,
the Registrar shall deliver  Securities  that do not bear the Private  Placement
Legend.

               (e)  GENERAL.  By its  acceptance  of any  Security  bearing  the
Private Placement Legend, each Holder of, or beneficial owner of an interest in,
such Security  acknowledges  the  restrictions  on transfer of such Security set
forth in this Indenture and in the Private  Placement  Legend and agrees that it
will transfer such  Security only as provided in this  Indenture.  The Registrar
shall not register a transfer of any Security unless such transfer complies with
the  restrictions on transfer of such Security set forth in this  Indenture.  In
connection  with any  transfer  of  Securities  to an  Institutional  Accredited
Investor,  each such Holder or  beneficial  owner  agrees by its  acceptance  of
Securities  to furnish to the  Registrar  or to the Issuer such  certifications,
legal opinions or other  information  as such Person may  reasonably  require to
confirm that such  transfer is being made  pursuant to an exemption  from,  or a
transaction not subject to, the registration requirements of the Securities Act;
PROVIDED that the Registrar  shall not be required to determine (but may rely on
a determination  made by the Issuer with respect to) the sufficiency of any such
certifications, legal opinions or other information.

         The  Registrar  shall retain  copies of all letters,  notices and other
written  communications  received pursuant to Section 2.07 or this Section 2.08.
The Issuer shall have the right to inspect and make copies of all such  letters,
notices or other written  communications  at any reasonable time upon the giving
of reasonable written notice to the Registrar.

               (f) TRANSFERS TO NON-QIB INSTITUTIONAL  ACCREDITED INVESTORS. The
following  provisions  shall  apply  with  respect  to the  registration  of any
proposed transfer of a Security to any Institutional  Accredited  Investor which
is not a QIB (excluding Non-U.S. Persons):

               (i) The  Registrar  shall  register the transfer of any Security,
         whether or not such Security bears the Private Placement Legend, if (A)
         the  requested  transfer is after the time  period  referred to in Rule
         144(k)  under  the  Securities  Act as in  effect  at the  time of such
         transfer or (B) the proposed  transferee has delivered to the Registrar
         (1) a certificate substantially in the form of Exhibit D hereto and (2)
         if such  transfer  is in  respect  of an  aggregate  Accreted  Value of
         Securities  at the time of transfer of less than $100,000 an Opinion of
         Counsel  acceptable  to the Issuer that such  transfer is in compliance
         with the Securities Act.

               (ii) If the  proposed  transferor  is an Agent  Member  holding a
         beneficial  interest in the U.S. Global  Security,  upon receipt by the
         Registrar of (A) the documents,  if any,  required by paragraph (i) and
         (B)  instructions  given in accordance  with the  Depositary's  and the
         Registrar's  procedures  the  Registrar  shall reflect on its books and
         records the date and a decrease in the principal  amount at maturity of
         the U.S. Global Security in an amount equal to the principal  amount at
         maturity of the beneficial interest in the U.S.

                                       36

<PAGE>
         Global  Security to be transferred,  and the Issuer shall execute,  and
         the Trustee shall  authenticate and deliver,  one or more U.S. Physical
         Securities of like tenor and amount.

               (g)  TRANSFERS  OF  INTERESTS IN THE  PERMANENT  OFFSHORE  GLOBAL
SECURITY  OR  UNLEGENDED  OFFSHORE  PHYSICAL  SECURITIES  TO U.S.  PERSONS.  The
following  provisions  shall apply with  respect to any transfer of interests in
the Permanent  Offshore Global Security or Offshore Physical  Securities to U.S.
Persons:  The Registrar shall register the transfer of any such Security without
requiring any additional certification.

         SECTION  2.09.  REPLACEMENT  SECURITIES.  If a  mutilated  Security  is
surrendered  to the Trustee or if the Holder  claims that the  Security has been
lost,  destroyed  or  wrongfully  taken,  the Issuer shall issue and the Trustee
shall authenticate a replacement  Security of like tenor and principal amount at
maturity and bearing a number not contemporaneously  outstanding;  PROVIDED that
the requirements of the second paragraph of Section 2.10 are met. If required by
the  Trustee  or the  Issuer,  an  indemnity  bond  must  be  furnished  that is
sufficient  in the  judgment  of both the  Trustee and the Issuer to protect the
Issuer,  the Trustee or any Agent from any loss that any of them may suffer if a
Security is replaced. The Issuer may charge such Holder for its expenses and the
expenses of the Trustee in  replacing  a Security.  In case any such  mutilated,
lost,  destroyed or wrongfully  taken  Security has become or is about to become
due and payable, the Issuer in its discretion may pay the principal of, premium,
if any, and interest  accrued on such Security instead of issuing a new Security
in replacement thereof.

         Every  replacement  Security is an additional  obligation of the Issuer
and shall be entitled to the benefits of this Indenture.

         SECTION 2.10.  OUTSTANDING  SECURITIES.  Securities  outstanding at any
time are all Securities that have been  authenticated  by the Trustee except for
those  cancelled  by it,  those  delivered  to it  for  cancellation  and  those
described in this Section 2.10 as not outstanding.

         If a Security is replaced  pursuant  to Section  2.09,  it ceases to be
outstanding   unless  and  until  the  Trustee  and  the  Issuer  receive  proof
satisfactory  to  them  that  the  replaced  Security  is  held  by a BONA  FIDE
purchaser.

         If the  Paying  Agent  (other  than the Issuer or an  Affiliate  of the
Issuer)  holds on the maturity  date money  sufficient  to pay the principal of,
premium,  if any, and interest accrued on Securities  payable on that date, then
on and after that date such  Securities  cease to be outstanding and interest on
them shall cease to accrue.

         A Security does not cease to be  outstanding  because the Issuer or one
of its Affiliates holds such Security,  PROVIDED,  HOWEVER, that, in determining
whether  the  Holders  of the  requisite  principal  amount  of the  outstanding
Securities have given any request, demand,

                                       37

<PAGE>
authorization,  direction, notice, consent or waiver hereunder, Securities owned
by the Issuer or any other  obligor upon the  Securities or any Affiliate of the
Issuer or of such  other  obligor  shall be  disregarded  and  deemed  not to be
outstanding,  except that, in determining whether the Trustee shall be protected
in relying upon any such  request,  demand,  authorization,  direction,  notice,
consent or waiver,  only Securities  which a Responsible  Officer of the Trustee
knows to be so owned  shall be so  disregarded.  Securities  so owned which have
been  pledged  in good  faith may be  regarded  as  outstanding  if the  pledgee
establishes  to the  satisfaction  of the Trustee the pledgee's  right so to act
with  respect to such  Securities  and that the pledgee is not the Issuer or any
other  obligor  upon the  Securities  or any  Affiliate of the Issuer or of such
other obligor.

         SECTION 2.11.  TEMPORARY  SECURITIES.  Until definitive  Securities are
ready for delivery,  the Company may prepare and the Trustee shall  authenticate
temporary Securities. Temporary Securities shall be substantially in the form of
definitive  Securities  but may have  insertions,  substitutions,  omissions and
other  variations  determined to be  appropriate  by the Officers  executing the
temporary  Securities,  as  evidenced  by  their  execution  of  such  temporary
Securities. If temporary Securities are issued, the Issuer will cause definitive
Securities to be prepared without  unreasonable  delay. After the preparation of
definitive  Securities,  the  temporary  Securities  shall be  exchangeable  for
definitive  Securities upon surrender of the temporary  Securities at the office
or agency of the Issuer  designated  for such purpose  pursuant to Section 4.02,
without charge to the Holder. Upon surrender for cancellation of any one or more
temporary Securities the Issuer shall execute and the Trustee shall authenticate
and  deliver  in  exchange  therefor  a like  principal  amount at  maturity  of
definitive  Securities of  authorized  denominations.  Until so  exchanged,  the
temporary Securities shall be entitled to the same benefits under this Indenture
as definitive Securities.

         SECTION 2.12.  CANCELLATION.  The Issuer at any time may deliver to the
Trustee for cancellation any Securities  previously  authenticated and delivered
hereunder which the Issuer may have acquired in any manner  whatsoever,  and may
deliver to the Trustee for cancellation any Securities previously  authenticated
hereunder which the Issuer has not issued and sold. The Registrar and the Paying
Agent  shall  forward to the  Trustee  any  Securities  surrendered  to them for
transfer,   exchange  or  payment.  The  Trustee  shall  cancel  all  Securities
surrendered for transfer,  exchange,  payment or cancellation  and shall destroy
them in  accordance  with its normal  procedure.  The Issuer shall not issue new
Securities to replace Securities it has paid in full or delivered to the Trustee
for cancellation.

         SECTION 2.13. CUSIP,  CINS AND ISIN NUMBERS.  The Issuer in issuing the
Securities may use "CUSIP",  "CINS", "ISIN" or other identification  numbers (if
then generally in use),  and, if so, the Trustee shall use CUSIP  numbers,  CINS
numbers,  ISIN numbers or other  identification  numbers, as the case may be, in
notices of redemption or exchange as a convenience to Holders; PROVIDED that any
such notice shall state that no  representation is made as to the correctness of
such numbers  either as printed on the  Securities or as contained in any notice
of

                                       38

<PAGE>
redemption  or  exchange  and that  reliance  may be  placed  only on the  other
identification numbers printed on the Securities;  PROVIDED FURTHER that failure
to use "CUSIP",  "CINS", "ISIN" or other identification numbers in any notice of
redemption  or exchange  shall not effect the  validity or  sufficiency  of such
notice.

         SECTION 2.14.  DEFAULTED INTEREST.  If the Issuer defaults in a payment
of interest on the  Securities,  it shall pay, or shall  deposit with the Paying
Agent money in  immediately  available  funds  sufficient  to pay the  defaulted
interest,  plus (to the extent  lawful) any  interest  payable on the  defaulted
interest,  to the Persons who are Holders on a subsequent special record date. A
special record date, as used in this Section 2.14 with respect to the payment of
any defaulted interest, shall mean the 15th day next preceding the date fixed by
the Issuer for the payment of defaulted  interest,  whether or not such day is a
Business Day. At least 15 days before the  subsequent  special  record date, the
Issuer  shall mail to each  Holder and to the  Trustee a notice  that states the
subsequent  special  record  date,  the payment date and the amount of defaulted
interest to be paid.

         SECTION  2.15.  ISSUANCE  OF  ADDITIONAL  SECURITIES.  The Issuer  may,
subject to Article Four of this Indenture,  issue  additional  Securities  under
this  Indenture.  The  Securities  issued on the Closing Date and any additional
Securities  subsequently  issued  shall be  treated  as a single  class  for all
purposes under this Indenture.

                                  ARTICLE THREE
                                   REDEMPTION

         SECTION 3.01.  RIGHT OF REDEMPTION.  (a) The Securities may be redeemed
at the option of the  Issuer,  in whole or in part,  at any time or from time to
time, on or after May 1, 2003 and prior to maturity, at the following Redemption
Prices  (expressed in percentages of their principal  amount at maturity),  plus
accrued and unpaid  interest,  if any, to the  Redemption  Date  (subject to the
right of Holders of record on the  relevant  Regular  Record  Date that is on or
prior to the  Redemption  Date to receive  interest  due on an Interest  Payment
Date) if redeemed during the 12-month  period  commencing May 1 of the years set
forth below:

                                       39

<PAGE>

          YEAR                                          REDEMPTION PRICE
          2003                                              105.250%
          2004                                              103.500%
          2005                                              101.750%
          2006 and thereafter                               100.0000%

         (b) In addition,  the Securities may be redeemed as a whole, but not in
part,  at the option of GST, at any time after GST USA has become the obligor on
the Securities and GST has guaranteed the Securities,  at 100% of their Accreted
Value on the Redemption Date, together with accrued interest thereon, if any, to
the  Redemption  Date, in the event GST has become or would become  obligated to
pay, on the next date on which any amount  would be payable  with respect to the
Security  Guarantee,  any Additional Amounts as a result of a change in the laws
(including any regulations  promulgated  thereunder) of Canada (or any political
subdivision or taxing authority  thereof or therein),  or change in any official
position   regarding  the  application  or   interpretation   or  such  laws  or
regulations,  which  change is  announced  or becomes  effective on or after the
Closing Date.

         SECTION  3.02.  MANDATORY  REDEMPTION.  If on May 1,  2003  GST  USA is
prohibited by the Existing  Indentures from assuming all of the Securities,  the
Company will  redeem,  upon not less than 10 nor more than 30 days'  notice,  on
such date the portion of the Securities  that cannot be assumed or guaranteed at
105.250% of their principal  amount at maturity plus accrued and unpaid interest
to the date of redemption.

         SECTION  3.03.  NOTICES  TO  TRUSTEE.  If the  Issuer  elects to redeem
Securities  pursuant  to Section  3.01(a),  GST elects to redeem the  Securities
pursuant to Section  3.01(b) or the  Company is  required  to redeem  Securities
pursuant to Section  3.02,  the  Issuer,  GST or the  Company  shall  notify the
Trustee in writing of the Redemption  Date and the principal  amount at maturity
of Securities to be redeemed.

         The Company, GST USA or GST, as the case may be, shall give each notice
provided for in this Section 3.03 in an Officers'  Certificate  at least 25 days
before mailing the notice to Holders required pursuant to Section 3.05 (unless a
shorter period shall be satisfactory to the Trustee).

         SECTION 3.04. SELECTION OF SECURITIES TO BE REDEEMED.  If less than all
of the Securities are to be redeemed at any time pursuant to Section  3.01(a) or
Section  3.02,  the  Trustee  shall  select the  Securities  to be  redeemed  in
compliance  with the  requirements,  as  certified  to it by the Issuer,  of the
principal  national  securities  exchange,  if any, on which the  Securities are
listed or, if the Securities are not listed on a national securities exchange by
lot or by such other

                                       40

<PAGE>

method as the Trustee in its sole  discretion  shall deem fair and  appropriate;
PROVIDED,  HOWEVER, that no Securities of $1,000 in principal amount at maturity
or less shall be redeemed in part.

         The Trustee shall make the selection  from the  Securities  outstanding
and not previously called for redemption.  Securities in denominations of $1,000
in principal  amount at maturity may only be redeemed in whole.  The Trustee may
select for redemption  portions (equal to $1,000 in principal amount at maturity
or any integral multiple thereof) of Securities that have  denominations  larger
than $1,000 in principal  amount at maturity.  Provisions of this Indenture that
apply to Securities  called for redemption  also apply to portions of Securities
called for  redemption.  The Trustee  shall notify the Issuer and the  Registrar
promptly in writing of the Securities or portions of Securities to be called for
redemption.

         SECTION 3.05.  NOTICE OF REDEMPTION.  With respect to any redemption of
Securities,  at least 30 days but not more than 60 days before a Redemption Date
in the case of the  redemption  under  Section 3.01 and at least 10 but not more
than 30 days  prior to May 1,  2003 in the case of a  redemption  under  Section
3.02,  the Issuer shall mail a notice of  redemption by first class mail to each
Holder whose Securities are to be redeemed.

         The notice  shall  identify  the  Securities  to be redeemed  and shall
state:

                  (a)      the Redemption Date;

                  (b)      the Redemption Price;

                  (c)      the name and address of the Paying Agent;

                  (d) that Securities  called for redemption must be surrendered
         to the Paying Agent in order to collect the Redemption Price;

                  (e) that,  unless the Issuer defaults in making the redemption
         payment,  interest on Securities called for redemption ceases to accrue
         on and after the Redemption  Date and the only  remaining  right of the
         Holders is to  receive  payment of the  Redemption  Price plus  accrued
         interest to the Redemption Date upon surrender of the Securities to the
         Paying Agent;

                  (f) that,  if any  Security  is being  redeemed  in part,  the
         portion  of the  principal  amount  at  maturity  (equal  to  $1,000 in
         principal amount at maturity or any integral  multiple thereof) of such
         Security to be redeemed  and that,  on and after the  Redemption  Date,
         upon  surrender  of such  Security,  a new  Security or  Securities  in
         principal  amount at maturity equal to the unredeemed  portion  thereof
         will be reissued; and

                                       41

<PAGE>
                  (g) that,  if any  Security  contains a CUSIP,  CINS,  ISIN or
         other   identification   number  as  provided  in  Section   2.13,   no
         representation is being made as to the correctness of the CUSIP,  CINS,
         ISIN or other identification number either as printed on the Securities
         or as contained in the notice of  redemption  and that  reliance may be
         placed  only  on  the  other  identification  numbers  printed  on  the
         Securities.

         At the Issuer's  request (which request may be revoked by the Issuer at
any time prior to the time at which the Trustee  shall have given such notice to
the Holders),  made in writing to the Trustee at least five days before  mailing
the notice to Holders  referred to in Section  3.01 or 3.02,  the Trustee  shall
give such notice of redemption in the name and at the expense of the Issuer, GST
or the Company. If, however, the Issuer, GST or the Company gives such notice to
the Holders,  the Issuer, GST or the Company shall  concurrently  deliver to the
Trustee an Officers' Certificate stating that such notice has been given.

         SECTION 3.06. EFFECT OF NOTICE OF REDEMPTION. Once notice of redemption
is mailed,  Securities  called  for  redemption  become  due and  payable on the
Redemption Date and at the Redemption Price. Upon surrender of any Securities to
the Paying Agent,  such Securities shall be paid at the Redemption  Price,  plus
accrued interest, if any, to the Redemption Date.

         Notice of redemption  shall be deemed to be given when mailed,  whether
or not the  Holder  receives  the  notice.  In any  event,  failure to give such
notice, or any defect therein,  shall not affect the validity of the proceedings
for the  redemption  of  Securities  held by  Holders  to whom such  notice  was
properly given.

         SECTION 3.07.  DEPOSIT OF  REDEMPTION  PRICE.  Prior to any  Redemption
Date, the Issuer shall deposit, or cause to be deposited,  with the Paying Agent
(or, if the Issuer is acting as its own Paying Agent,  shall  segregate and hold
in trust as provided in Section  2.05) money  sufficient  to pay the  Redemption
Price of and  accrued  interest  on all  Securities  to be redeemed on that date
other than  Securities or portions  thereof  called for  redemption on that date
that have been delivered by the Issuer to the Trustee for cancellation.

         SECTION 3.08. PAYMENT OF SECURITIES CALLED FOR REDEMPTION. If notice of
redemption  has been given in the  manner  provided  above,  the  Securities  or
portion of Securities  specified in such notice to be redeemed  shall become due
and payable on the  Redemption  Date at the  Redemption  Price  stated  therein,
together with accrued  interest to such  Redemption  Date, and on and after such
date (unless the Issuer shall  default in the payment of such  Securities at the
Redemption  Price and accrued interest to the Redemption Date, in which case the
principal,  until paid, shall bear interest from the Redemption Date at the rate
prescribed in the  Securities),  such Securities  shall cease to accrue interest
(or original issue  discount).  Upon surrender of any Security for redemption in
accordance with a notice of redemption, such Security shall be paid and redeemed
by the Issuer at the Redemption Price,  together with accrued interest,  if any,
to the

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<PAGE>
Redemption Date;  PROVIDED that installments of interest shall be payable to the
Holders  registered  as such at the close of  business on the  relevant  Regular
Record Date that is on or prior to the Redemption Date.

         SECTION  3.09.  SECURITIES  REDEEMED  IN PART.  Upon  surrender  of any
Security  that is redeemed  in part,  the Issuer  shall  execute and the Trustee
shall  authenticate  and deliver to the Holder a new Security equal in principal
amount at maturity to the unredeemed portion of such surrendered Security.

                                  ARTICLE FOUR
                                    COVENANTS

         SECTION 4.01. PAYMENT OF SECURITIES. The Issuer shall pay the principal
of,  premium,  if any,  and interest on the  Securities  on the dates and in the
manner  provided  in the  Securities  and  this  Indenture.  An  installment  of
principal, premium, if any, or interest shall be considered paid on the date due
if the  Trustee or Paying  Agent  (other than the Issuer,  a  Subsidiary  of the
Issuer, or any Affiliate of any of them) holds on that date money designated for
and  sufficient to pay the  installment.  If the Issuer or any Subsidiary of the
Issuer or any Affiliate of any of them,  acts as Paying Agent, an installment of
principal, premium, if any, or interest shall be considered paid on the due date
if the entity acting as Paying Agent  complies with the last sentence of Section
2.05.  As  provided  in Section  6.09,  upon any  bankruptcy  or  reorganization
procedure  relative to the Issuer,  the Trustee  shall serve as the Paying Agent
and conversion agent, if any, for the Securities.

         The Issuer shall pay interest on overdue  principal,  premium,  if any,
and interest on overdue  installments of interest,  to the extent lawful, at the
rate per annum specified in the Securities.

         SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY. The Issuer will maintain
in the Borough of  Manhattan,  the City of New York,  an office or agency (which
may be an office of the Trustee,  Registrar or  co-Registrar or any Affiliate of
any of them) where Securities may be surrendered for registration of transfer or
exchange or for  presentation  for  payment and where  notices and demands to or
upon the Issuer in respect of the  Securities  and this Indenture may be served.
The Issuer will give prompt written  notice to the Trustee of the location,  and
any change in the location,  of such office or agency. If at any time the Issuer
shall  fail to  maintain  any such  required  office or agency or shall  fail to
furnish the Trustee with the address thereof,  such  presentations,  surrenders,
notices  and  demands  may be made or served at the  address of the  Trustee set
forth in Section 12.02.

                                       43

<PAGE>
         The  Issuer  may also from  time to time  designate  one or more  other
offices or agencies where the Securities may be presented or surrendered for any
or all such  purposes and may from time to time rescind such  designations.  The
Issuer will give prompt written notice to the Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.

         The Company hereby  initially  designates the Corporate Trust Office of
the Trustee,  located in the Borough of Manhattan, the City of New York, as such
office of the Issuer in accordance with Section 2.04.

         SECTION 4.03.  LIMITATION ON  INDEBTEDNESS.  (a) GST will not, and will
not permit any of its Restricted  Subsidiaries to, Incur any Indebtedness (other
than the Securities  and  Indebtedness  existing on the Closing Date);  PROVIDED
that GST and GST USA may  Incur  Indebtedness  if,  after  giving  effect to the
Incurrence of such  Indebtedness and the receipt and application of the proceeds
therefrom,  the Indebtedness to EBITDA Ratio would be greater than zero and less
than 5:1. The Company may not Incur any Indebtedness other than the Securities.

         Notwithstanding  the  foregoing,  GST  and  any  Restricted  Subsidiary
(except as specified below) may Incur each and all of the following:

                  (i) Indebtedness  outstanding at any time (including,  but not
         limited to,  Indebtedness  under the Tomen  Facility)  in an  aggregate
         principal  amount  not to  exceed  $320  million,  less any  amount  of
         Indebtedness permanently repaid as provided under Section 4.12;

                  (ii) Indebtedness (A) to GST evidenced by a promissory note or
         (B) to any of its Restricted Subsidiaries; PROVIDED that any subsequent
         event which results in any such Restricted  Subsidiary  ceasing to be a
         Restricted  Subsidiary or any subsequent  transfer of such Indebtedness
         (other than to GST or another  Restricted  Subsidiary) shall be deemed,
         in each case, to constitute  an  Incurrence  of such  Indebtedness  not
         permitted by this clause (ii);

                  (iii) Indebtedness issued in exchange for, or the net proceeds
         of  which  are  used  to   refinance   or  refund,   then   outstanding
         Indebtedness,  other than Indebtedness Incurred under clause (i), (ii),
         (iv),  (v),  (vii) or (viii) of this  paragraph,  and any  refinancings
         thereof in an amount not to exceed the amount so refinanced or refunded
         (plus premiums,  accrued  interest,  fees and expenses);  PROVIDED that
         Indebtedness  the proceeds of which are used to refinance or refund the
         Securities and Security  Guarantee or Indebtedness  that is or would be
         PARI PASSU with, or subordinated in right of payment to, the Securities
         and Security  Guarantee shall only be permitted under this clause (iii)
         if (A) in case the Securities and Security  Guarantee are refinanced in
         part, or the Indebtedness to be

                                       44

<PAGE>
         refinanced  is or would be PARI PASSU with the  Securities  or Security
         Guarantee,  such new Indebtedness,  by its terms or by the terms of any
         agreement  or  instrument  pursuant to which such new  Indebtedness  is
         outstanding, is expressly made PARI PASSU with, or subordinate in right
         of payment to, the remaining  Securities or Security Guarantee,  (B) in
         case the  Indebtedness  to be refinanced is or would be subordinated in
         right of payment to the  Securities  or  Security  Guarantee,  such new
         Indebtedness,  by  its  terms  or by the  terms  of  any  agreement  or
         instrument  pursuant to which such new Indebtedness is outstanding,  is
         expressly  made  subordinate  in right of payment to the  Securities or
         Security  Guarantee at least to the extent that the  Indebtedness to be
         refinanced is subordinated to the Securities or Security  Guarantee and
         (C) such new  Indebtedness,  determined as of the date of Incurrence of
         such new Indebtedness,  does not mature prior to the Stated Maturity of
         the Indebtedness to be refinanced or refunded,  and the Average Life of
         such new  Indebtedness is at least equal to the remaining  Average Life
         of the Indebtedness to be refinanced or refunded;  and PROVIDED FURTHER
         that in no event may  Indebtedness  of GST or GST USA be  refinanced by
         means  of any  Indebtedness  of any  Restricted  Subsidiary  of GST USA
         pursuant to this clause (iii);

                  (iv)  Indebtedness  (A) in respect of  performance,  surety or
         appeal  bonds  provided in the ordinary  course of business,  (B) under
         Currency  Agreements and Interest Rate  Agreements;  PROVIDED that such
         agreements do not increase the Indebtedness of the obligor  outstanding
         at any time other than as a result of fluctuations in foreign  currency
         exchange rates or interest rates or by reason of fees,  indemnities and
         compensation  payable  thereunder;  and  (C)  arising  from  agreements
         providing for indemnification,  adjustment of purchase price or similar
         obligations,  or from Guarantees or letters of credit,  surety bonds or
         performance  bonds  securing  any  obligations  of  GST  or  any of the
         Restricted  Subsidiaries  pursuant  to  such  agreements,  in any  case
         Incurred in connection with the disposition of any business,  assets or
         Restricted  Subsidiary (other than Guarantees of Indebtedness  Incurred
         by any Person acquiring all or any portion of such business,  assets or
         Restricted  Subsidiary for the purpose of financing such  acquisition),
         in a  principal  amount  not to  exceed  the  gross  proceeds  actually
         received by GST or any  Restricted  Subsidiary in connection  with such
         disposition;

                  (v)  Indebtedness  of GST  not to  exceed,  at  any  one  time
         outstanding,  two times the Net Cash Proceeds received by GST after the
         Closing  Date from the  issuance  and sale of its Capital  Stock (other
         than  Redeemable  Stock) to a Person other than a Subsidiary  of GST to
         the extent such Net Cash Proceeds have not been used pursuant to clause
         (C)(2) of the first  paragraph  or clauses  (iii),  (iv) or (vi) of the
         second paragraph of Section 4.04 to make a Restricted Payment; PROVIDED
         that such  Indebtedness does not mature prior to the Stated Maturity of
         the Securities and has an Average Life longer than the Securities;

                                       45

<PAGE>
                  (vi)  Indebtedness  Incurred to finance  the cost  (including,
         without  limitation,  the cost of  design,  development,  construction,
         acquisition, installation or integration) of network assets (including,
         without   limitation,   equipment   and  real  property  and  leasehold
         improvements  that are necessary to install or operate  network assets;
         PROVIDED  that in no event shall the cost of any such real property and
         leasehold  improvements financed hereby exceed 20% of the total cost of
         the related network assets) or inventory  purchased or leased by GST or
         any of its Restricted Subsidiaries after the Closing Date;

                  (vii)  Indebtedness  of GST  or  GST  USA  under  one or  more
         revolving  credit  or  working  capital   facilities  in  an  aggregate
         principal  amount  outstanding  at any time not to exceed the lesser of
         (A) $50  million  and (B) 75% of the  consolidated  book  value  of the
         accounts receivable of GST and its Restricted Subsidiaries; and

                  (viii)  Indebtedness  of  GST or GST  USA  to the  extent  the
         proceeds thereof are promptly (a) used to purchase  Securities tendered
         in an Offer to Purchase  made as a result of a Change of Control or (b)
         deposited to defease the Securities under Article Eight.

         (b) For purposes of determining  any particular  amount of Indebtedness
under this Section 4.03, (1)  Indebtedness  Incurred under the Tomen Facility on
or prior to the Closing Date shall be treated as Incurred pursuant to clause (i)
of the  second  paragraph  of this  Section  4.03 and (2)  Guarantees,  Liens or
obligations with respect to letters of credit supporting  Indebtedness otherwise
included in the  determination of such particular  amount shall not be included.
For purposes of determining compliance with this Section 4.03, in the event that
an item of  Indebtedness  meets  the  criteria  of more than one of the types of
Indebtedness described in the above clauses, GST, in its sole discretion,  shall
classify  such item of  Indebtedness  and only be required to include the amount
and type of such Indebtedness in one of such clauses.

         SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. GST will not, and will
not permit any Restricted Subsidiary to, directly or indirectly,  (i) declare or
pay any  dividend  or make any  distribution  on its Capital  Stock  (other than
dividends or  distributions  payable solely in shares of its or such  Restricted
Subsidiary's Capital Stock (other than Redeemable Stock) or in options, warrants
or other rights to acquire such shares of Capital  Stock) held by Persons  other
than  GST or any of  its  Restricted  Subsidiaries  (and  other  than  pro  rata
dividends or  distributions  on Common Stock of Restricted  Subsidiaries),  (ii)
purchase,  redeem,  retire or otherwise  acquire for value any shares of Capital
Stock of GST (including options, warrants or other rights to acquire such shares
of Capital  Stock)  held by  Persons  other  than any  Wholly  Owned  Restricted
Subsidiaries of GST, (iii) make any voluntary or optional principal payment,  or
voluntary or optional redemption,  repurchase,  defeasance, or other acquisition
or retirement for value,  of Indebtedness of GST USA or GST that is subordinated
in right of payment to the Securities or the Security Guarantee, as the case may
be, or (iv) make any  Investment,  other  than a  Permitted  Investment,  in any
Person (such payments or any other actions described in clauses (i) through (iv)
being collectively "RESTRICTED

                                       46

<PAGE>
PAYMENTS")  if,  at the time of,  and  after  giving  effect  to,  the  proposed
Restricted Payment: (A) a Default or Event of Default shall have occurred and be
continuing,  (B) GST could not Incur at least  $1.00 of  Indebtedness  under the
first  paragraph of Section 4.03 or (C) the aggregate  amount of all  Restricted
Payments  (the amount,  if other than in cash, to be determined in good faith by
the Board of Directors, whose determination shall be conclusive and evidenced by
a Board  Resolution) made after the Closing Date shall exceed the sum of (1) 50%
of the  aggregate  amount of the  Adjusted  Consolidated  Net Income (or, if the
Adjusted  Consolidated  Net  Income  is a  loss,  minus  100%  of  such  amount)
(determined by excluding  income  resulting from transfers of assets by GST or a
Restricted  Subsidiary to an  Unrestricted  Subsidiary)  accrued on a cumulative
basis during the period (taken as one accounting  period) beginning on the first
day of the fiscal quarter  immediately  following the Closing Date and ending on
the last day of the last fiscal quarter preceding the Transaction Date for which
reports have been filed pursuant to Section 4.20 plus (2) the aggregate Net Cash
Proceeds received by GST after May 13, 1997 from the issuance and sale permitted
by this Indenture of its Capital Stock (other than Redeemable Stock) to a Person
who is not a  Subsidiary  of GST, or from the  issuance to a Person who is not a
Subsidiary  of GST of any options,  warrants or other rights to acquire  Capital
Stock of GST (in each case,  exclusive of any  Redeemable  Stock or any options,
warrants or other rights that are redeemable at the option of the holder, or are
required to be redeemed,  prior to the Stated  Maturity of the  Securities),  in
each  case  except  to the  extent  such  Net  Cash  Proceeds  are used to Incur
Indebtedness  pursuant to clause (v) of the second  paragraph  of Section  4.03,
plus (3) an  amount  equal  to the net  reduction  in  Investments  (other  than
reductions in Permitted  Investments and reductions in Investments made pursuant
to clause  (vi) of the  second  paragraph  of this  Section  4.04) in any Person
resulting from payments of interest on  Indebtedness,  dividends,  repayments of
loans or  advances,  or other  transfers  of assets,  in each case to GST or any
Restricted  Subsidiary (except to the extent any such payment is included in the
calculation of Adjusted  Consolidated  Net Income),  or from  redesignations  of
Unrestricted  Subsidiaries  as Restricted  Subsidiaries  (valued in each case as
provided  in the  definition  of  "INVESTMENTS"),  not to exceed  the  amount of
Investments  previously  made  by GST and its  Restricted  Subsidiaries  in such
Person.

         The foregoing provision shall not be violated by reason of:

                  (i) the payment of any dividend  within 60 days after the date
         of declaration  thereof if, at said date of  declaration,  such payment
         would comply with the foregoing paragraph;

                  (ii)  the   redemption,   repurchase,   defeasance   or  other
         acquisition   or  retirement   for  value  of   Indebtedness   that  is
         subordinated  in right of payment to the  Intercompany  Notes or, after
         GST USA assumes the Securities,  the Securities or Security  Guarantee,
         including  premium,  if any, and accrued and unpaid interest,  with the
         proceeds of, or in exchange  for,  Indebtedness  Incurred  under clause
         (iii) of the second paragraph of Section 4.03;

                                       47

<PAGE>
                  (iii)  the  repurchase,  redemption  or other  acquisition  of
         Capital  Stock of GST in  exchange  for,  or out of the  proceeds  of a
         substantially  concurrent  offering of,  shares of Capital Stock (other
         than Redeemable Stock) of GST;

                  (iv) the  acquisition of  Indebtedness of GST USA or GST which
         is subordinated in right of payment to the Intercompany Notes or, after
         GST USA assumes the Securities,  the Securities or Security  Guarantee,
         in exchange for, or out of the proceeds of, a substantially  concurrent
         offering of, shares of the Capital Stock of GST (other than  Redeemable
         Stock);

                  (v) payments or  distributions,  in the nature of satisfaction
         of   dissenters'   rights,   pursuant  to  or  in  connection   with  a
         consolidation,  merger or transfer of assets that complies with Article
         Five;

                  (vi)  Investments  in any  Person or  Persons  (other  than an
         Affiliate  (other  than a  Subsidiary)  of the  Company),  the  primary
         business  of  which  is  related,  ancillary  or  complementary  to the
         business  of GST and its  Restricted  Subsidiaries  on the date of such
         Investments, in an aggregate amount not to exceed $50 million plus, (a)
         in any fiscal year,  an amount not to exceed 10% of GST's  Consolidated
         EBITDA (if positive) for the immediately  preceding fiscal year, (b) an
         amount not to exceed the Net Cash  Proceeds  received  by GST after May
         13, 1997 from the issuance and sale  permitted by this Indenture of its
         Capital Stock (other than  Redeemable  Stock) to a Person that is not a
         Subsidiary of GST, except to the extent such Net Cash Proceeds are used
         to Incur  Indebtedness  pursuant to clause (v) under Section 4.03 or to
         make  Restricted  Payments  pursuant  to  clause  (C)(2)  of the  first
         paragraph  or clause  (iii) or (iv) of this  paragraph  of this Section
         4.04  and (c) the net  reduction  in  Investments  in any  Person  made
         pursuant to this clause  (vi),  except to the extent such  reduction is
         included  in the  calculation  of  Adjusted  Consolidated  Net  Income;
         PROVIDED that the net reduction in any such Investment shall not exceed
         the amount of Investments previously made in such Person;

                  (vii)  Investments  by GST  or a  Restricted  Subsidiary  made
         pursuant  to the second  paragraph  of Section  4.11,  in an  aggregate
         amount not to exceed $25 million; and

                  (viii)  cash  payments in lieu of the  issuance of  fractional
         Common Shares upon conversion  (including mandatory  conversion) of the
         Convertible  Notes provided for in the  Convertible  Notes Indenture or
         the Redeemable  Preferred Shares;  PROVIDED that, except in the case of
         clauses  (i) and  (iii),  no  Default  or Event of  Default  shall have
         occurred and be continuing or occur as a consequence  of the actions or
         payments set forth herein.

         Each Restricted Payment permitted  pursuant to the preceding  paragraph
(other than the  Restricted  Payment  referred to in clause (ii)  thereof and an
exchange of Capital Stock for

                                       48

<PAGE>
Capital Stock or Indebtedness referred to in clause (iii) or (iv) thereof),  and
the Net Cash Proceeds from any issuance of Capital Stock  referred to in clauses
(iii), (iv) and (vi) shall be included in calculating  whether the conditions of
clause  (C) of the  first  paragraph  of this  Section  4.04  have been met with
respect to any subsequent  Restricted Payments.  In the event the proceeds of an
issuance  of Capital  Stock of GST are used for the  redemption,  repurchase  or
other  acquisition of the Securities or Indebtedness that is PARI PASSU with the
Securities  or Security  Guarantee,  then the Net Cash Proceeds of such issuance
shall be included in clause (C) of the first paragraph of this Section 4.04 only
to the extent such  proceeds  are not used for such  redemption,  repurchase  or
other acquisition of Indebtedness.

         The Company will not, and will not permit any Subsidiary  to,  directly
or  indirectly,  make any Restricted  Payment other than  Investments in Pledged
Securities,  cash, the Fee Notes and Intercompany Notes, in each case pledged to
secure the Securities.

         SECTION 4.05.  LIMITATION  ON DIVIDEND AND OTHER  PAYMENT  RESTRICTIONS
AFFECTING  RESTRICTED  SUBSIDIARIES.  GST will  not,  and will  not  permit  any
Restricted Subsidiary to, create or otherwise cause or suffer to exist or become
effective any  consensual  encumbrance or restriction of any kind on the ability
of  any   Restricted   Subsidiary  to  (i)  pay  dividends  or  make  any  other
distributions  permitted  by  applicable  law  on  any  Capital  Stock  of  such
Restricted Subsidiary owned by GST or any other Restricted Subsidiary,  (ii) pay
any  Indebtedness  owed to GST or any other  Restricted  Subsidiary,  (iii) make
loans or advances to GST or any other Restricted Subsidiary or (iv) transfer any
of its property or assets to GST or any other Restricted Subsidiary.

         The  foregoing  provisions  shall  not  restrict  any  encumbrances  or
restrictions:

                  (i)  existing on the  Closing  Date in this  Indenture  or any
         other  agreement  in effect on the Closing  Date,  and any  extensions,
         refinancings,  renewals or  replacements of such  agreements;  PROVIDED
         that  the   encumbrances  and  restrictions  in  any  such  extensions,
         refinancings,  renewals or  replacements  are no less  favorable in any
         material respect to the Holders than those encumbrances or restrictions
         that  are then in  effect  and that  are  being  extended,  refinanced,
         renewed or replaced;

                  (ii) existing under or by reason of applicable law;

                  (iii)  existing  with respect to any Person or the property or
         assets of such  Person  acquired by GST or any  Restricted  Subsidiary,
         existing  at  the  time  of  such   acquisition  and  not  incurred  in
         contemplation  thereof,  which  encumbrances  or  restrictions  are not
         applicable  to any Person or the property or assets of any Person other
         than such Person or the property or assets of such Person so acquired;

                                       49

<PAGE>
                  (iv) in the case of clause (iv) of the first paragraph of this
         Section 4.05, (A) that restrict in a customary  manner the  subletting,
         assignment  or  transfer  of any  property  or  asset  that is a lease,
         license,  conveyance  or  contract or similar  property  or asset,  (B)
         existing by virtue of any transfer of, agreement to transfer, option or
         right with respect to, or Lien on, any property or assets of GST or any
         Restricted Subsidiary not otherwise prohibited by this Indenture or (C)
         arising or agreed to in the ordinary  course of business,  not relating
         to any Indebtedness, and that do not, individually or in the aggregate,
         detract  from the value of property or assets of GST or any  Restricted
         Subsidiary in any manner material to GST or any Restricted Subsidiary;

                  (v)  with  respect  to a  Restricted  Subsidiary  and  imposed
         pursuant to an  agreement  that has been  entered  into for the sale or
         disposition  of all or  substantially  all of the Capital  Stock of, or
         property and assets of, such Restricted Subsidiary;

                  (vi) with respect to any Development Company, imposed pursuant
         to or in connection with any Indebtedness  Incurred by such Development
         Company to finance at least 50% of the total financing required for the
         development  and  construction  of all of  such  Development  Company's
         alternative  access networks or any Indebtedness  Incurred to refinance
         or  replace  such  Indebtedness;  PROVIDED  that (a) such  Indebtedness
         (including such  refinancing  Indebtedness) is permitted to be Incurred
         under Section 4.03, (b) such  encumbrances and restrictions are no more
         restrictive  in  any  material  respect  than  those  encumbrances  and
         restrictions  existing  under  the Tomen  Facility  as in effect on the
         Closing  Date and (c) such  encumbrances  and  restrictions  shall only
         apply to such Development  Company for so long as such Indebtedness (or
         such refinancing Indebtedness) remains outstanding; or

                  (vii) with respect to any  Development  Company (a "RESTRICTED
         DEVELOPMENT  COMPANY"),  imposed  pursuant to or in connection with any
         Indebtedness  Incurred  by  another  Development  Company to finance at
         least 50% of the  total  financing  required  for the  development  and
         construction  of all of such other  Development  Company's  alternative
         access  networks or any  Indebtedness  Incurred to refinance or replace
         such Indebtedness; PROVIDED that (a) such encumbrances and restrictions
         shall not apply to such  Restricted  Development  Company  prior to the
         occurrence  of  an  event  of  default  under  such   Indebtedness  (or
         refinancing  Indebtedness),   (b)  such  Indebtedness  (including  such
         refinancing  Indebtedness)  is permitted to be Incurred  under  Section
         4.03, (c) such encumbrances and restrictions are no more restrictive in
         any material  respect than those  contemplated by the Tomen Facility as
         in  effect  on the  Closing  Date  and (d) at  least  50% of the  total
         financing  required for the development and construction of all of such
         Restricted   Development  Company's  alternative  access  networks  was
         provided by the holder of the  Indebtedness  of such other  Development
         Company.

                                       50

<PAGE>
         The Company will not, and will not permit any of its  Subsidiaries  to,
create or  otherwise  cause or suffer  to exist or become  effective  any of the
matters referred to in the first paragraph of this section.

         Nothing  contained  in  this  Section  4.05  shall  prevent  GST or any
Restricted  Subsidiary  from (1) creating,  incurring,  assuming or suffering to
exist any Liens otherwise  permitted in Section 4.09 or (2) restricting the sale
or other  disposition  of  property  or assets  of GST or any of its  Restricted
Subsidiaries  that  secure   Indebtedness  of  GST  or  any  of  its  Restricted
Subsidiaries.

         SECTION  4.06.  LIMITATION ON THE ISSUANCE AND SALE OF CAPITAL STOCK OF
RESTRICTED  SUBSIDIARIES.  GST will not sell, and will not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell any shares of Capital Stock
of a  Restricted  Subsidiary  (including  options,  warrants or other  rights to
purchase shares of such Capital Stock) except

                  (i) to GST or a Wholly Owned Restricted Subsidiary;

                  (ii)  issuances  or sales to  foreign  nationals  of shares of
         Capital  Stock  of  foreign  Restricted  Subsidiaries,  to  the  extent
         required by applicable law;

                  (iii) if,  immediately after giving effect to such issuance or
         sale,  such  Restricted   Subsidiary  would  no  longer   constitute  a
         Restricted Subsidiary; or

                  (iv)  a  sale  of  Common  Stock  of  Phoenix  Fiber,  and  in
         connection and  concurrently  with such sale, a sale of Common Stock of
         GST Tucson Lightwave, Inc.; PROVIDED that the proceeds of any such sale
         under this clause (iv) shall be applied in  accordance  with clause (A)
         or (B) of the first paragraph of Section 4.12.

         The Company will not sell, and will not permit any Subsidiary, directly
or indirectly,  to issue or sell, any shares of Capital Stock of a Subsidiary of
the Company (including  options,  warrants or other rights to purchase shares of
such Capital Stock).

         SECTION  4.07.  LIMITATION  ON ISSUANCES OF  GUARANTEES  BY  RESTRICTED
SUBSIDIARIES.  GST  will not  permit  any  Restricted  Subsidiary,  directly  or
indirectly,  to Guarantee any Indebtedness of GST or any Indebtedness of GST USA
("GUARANTEED    INDEBTEDNESS"),    unless   (i)   such   Restricted   Subsidiary
simultaneously  executes and delivers a supplemental indenture to this Indenture
providing  for  a  Guarantee  (a  "SUBSIDIARY  GUARANTEE")  of  payment  of  the
Securities by such  Restricted  Subsidiary and (ii) such  Restricted  Subsidiary
waives  and will not in any  manner  whatsoever  claim  or take the  benefit  or
advantage of, any rights of reimbursement, indemnity or subrogation or any other
rights  against the  Company,  GST or GST USA as a result of any payment by such
Restricted Subsidiary under its Subsidiary Guarantee; PROVIDED that this

                                       51

<PAGE>
paragraph shall not be applicable to any Guarantee of any Restricted  Subsidiary
that (x) existed at the time such Person became a Restricted  Subsidiary and (y)
was not  Incurred  in  connection  with,  or in  contemplation  of,  such Person
becoming a Restricted  Subsidiary.  If the Guaranteed  Indebtedness  is (A) PARI
PASSU with the  Intercompany  Notes,  the Securities or the Security  Guarantee,
then the Guarantee of such Guaranteed  Indebtedness shall be PARI PASSU with, or
subordinated   to,  the  Subsidiary   Guarantee  or  (B)   subordinated  to  the
Intercompany Notes, the Securities or the Security Guarantee, then the Guarantee
of  such  Guaranteed  Indebtedness  shall  be  subordinated  to  the  Subsidiary
Guarantee  at  least  to  the  extent  that  the  Guaranteed   Indebtedness   is
subordinated to the Intercompany Notes, the Securities or Security Guarantee, as
the case may be.

         Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary  may  provide  by its  terms  that  it  shall  be  automatically  and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any  Person  not an  Affiliate  of GST of all of GST's  and  each  Restricted
Subsidiary's  Capital Stock in, or all or substantially  all the assets of, such
Restricted  Subsidiary  (which sale,  exchange or transfer is not  prohibited by
this Indenture) or (ii) the release or discharge of the Guarantee which resulted
in the creation of such Subsidiary  Guarantee,  except a discharge or release by
or as a result of payment under such Guarantee.

         The Company will not permit any Subsidiary to,  directly or indirectly,
Guarantee any Indebtedness.

         SECTION  4.08.   LIMITATION  ON  TRANSACTIONS   WITH  SHAREHOLDERS  AND
AFFILIATES.  GST will not,  and will not permit any  Restricted  Subsidiary  to,
directly or indirectly,  enter into, renew or extend any transaction (including,
without limitation, the purchase, sale, lease or exchange of property or assets,
or the  rendering  of any  service)  with any holder (or any  Affiliate  of such
holder)  of 5% or more of any class of  Capital  Stock of GST or any  Restricted
Subsidiary or with any  Affiliate of GST or any  Restricted  Subsidiary,  except
upon  fair and  reasonable  terms no less  favorable  to GST or such  Restricted
Subsidiary than could be obtained,  at the time of such  transaction or, if such
transaction is pursuant to a written agreement,  at the time of the execution of
the agreement providing therefor, in a comparable arm's-length  transaction with
a Person that is not such a holder or an Affiliate.

         The  foregoing  limitation  does not limit,  and shall not apply to (i)
transactions  (A)  approved  by a majority of the  disinterested  members of the
Board  of  Directors  of GST or (B) for  which  GST or a  Restricted  Subsidiary
delivers to the Trustee a written opinion of a nationally  recognized investment
banking  firm  stating that the  transaction  is fair to GST or such  Restricted
Subsidiary from a financial  point of view; (ii) any transaction  solely between
GST and any of its Wholly Owned Restricted Subsidiaries or solely between Wholly
Owned  Restricted  Subsidiaries;  (iii) the payment of reasonable  and customary
regular fees (including through the issuance of shares of Common Stock of GST or
options, warrants or other rights to acquire such shares) to

                                       52

<PAGE>
directors of GST who are not employees of GST or any of its  Subsidiaries;  (iv)
any payments or other transactions pursuant to any tax-sharing agreement between
GST and any other Person with which GST files a consolidated  tax return or with
which  GST is  part  of a  consolidated  group  for  tax  purposes;  or (v)  any
Restricted  Payments  not  prohibited  by  Section  4.04.   Notwithstanding  the
foregoing,  any  transaction  or series  of  transactions  covered  by the first
paragraph  of this  Section 4.08 and not covered by clauses (ii) through (vi) of
this paragraph, the aggregate amount of which exceeds $500,000 in value, must be
approved or determined to be fair in the manner provided for in clause (i)(A) or
(B) above.

         The Company will not, and will not permit any Subsidiary  to,  directly
or indirectly,  enter into, renew or extend any of the transactions described in
the first  paragraph  of this  section  other than any  transaction  between the
Company and GST or any of its Restricted  Subsidiaries  required or permitted by
this Indenture and Pledge Agreement.

         SECTION 4.09.  LIMITATION  ON LIENS.  GST will not, and will not permit
any Restricted  Subsidiary to, create, incur, assume or suffer to exist any Lien
on any of its assets or  properties of any  character,  or any shares of Capital
Stock or Indebtedness  of any Restricted  Subsidiary  (collectively,  "PROTECTED
PROPERTY"),  without making effective provision for all of the Securities (or in
the case of a Lien on Protected Property of GST, the Security Guarantee) and all
other  amounts  due under this  Indenture  to be  directly  secured  equally and
ratably with (or, if the  obligation  or liability to be secured by such Lien is
subordinated  in right of payment to the  Securities or the Security  Guarantee,
prior to) the  obligation  or  liability  secured  by such Lien;  provided  that
neither GST nor any Restricted  Subsidiary will create,  Incur, assume or suffer
to exist any Lien on the Pledged Securities,  the Pledge Account or any Acquired
Equipment, except Liens securing the Securities and the Intercompany Notes.

         The foregoing limitation does not apply to

                  (i) Liens existing on the Closing Date;

                  (ii) Liens  granted  after the  Closing  Date on any assets or
         Capital  Stock  of GST  or its  Restricted  Subsidiaries  securing  the
         Initial  Note,  the  Intercompany  Notes  or  created  in  favor of the
         Company, the Trustee or the Holders of the Securities;

                  (iii)  Liens  with  respect  to  the  assets  of a  Restricted
         Subsidiary  granted by such  Restricted  Subsidiary  to GST or a Wholly
         Owned Restricted Subsidiary to secure Indebtedness owing to GST or such
         other Restricted Subsidiary;

                  (iv)  Liens  securing   Indebtedness   which  is  Incurred  to
         refinance secured  Indebtedness which is permitted to be Incurred under
         clause (iii) of the second  paragraph of Section  4.03;  PROVIDED  that
         such Liens do not extend to or cover any property or assets

                                       53

<PAGE>
         of GST or any Restricted  Subsidiary  other than the property or assets
         securing the Indebtedness being refinanced;

                  (v) Liens upon or Capital  Leases with  respect to  inventory,
         property or equipment  acquired or held by GST or any of its Restricted
         Subsidiaries  to secure all or a part of the purchase price therefor or
         GST's or such  Restricted  Subsidiary's  obligations  under such lease;
         PROVIDED  that such  Liens do not  extend to or cover any  property  or
         assets of GST or any  Restricted  Subsidiary  other than the inventory,
         property or equipment acquired;

                  (vi) Liens on assets or property of, or the Capital  Stock of,
         a Development Company securing  Indebtedness  Incurred under clause (i)
         of the second  paragraph of Section 4.03 to finance at least 50% of the
         total financing for the development and construction of the alternative
         access networks owned by such Development Company;  PROVIDED such Liens
         do not extend to or cover any other property or assets of GST or any of
         its Restricted Subsidiaries;

                  (vii)  Liens  on  any  property  or  assets  of  a  Restricted
         Subsidiary   securing   Indebtedness  of  such  Restricted   Subsidiary
         permitted to be Incurred under the Indenture; or

                  (viii) Permitted Liens.

         The Company will not, and will not permit any  Subsidiary  to,  create,
incur,  assume or suffer to exist any Lien on any of its assets or properties of
any character other than Liens granted in favor of the Trustee or the Holders of
the Securities.

         SECTION 4.10. LIMITATION ON SALE-LEASEBACK TRANSACTIONS.  GST will not,
and will not permit any Restricted  Subsidiary to, enter into any sale-leaseback
transaction  involving  any of its  assets or  properties  whether  now owned or
hereafter  acquired,  whereby GST or a Restricted  Subsidiary sells or transfers
such  assets  or  properties  and  then or  thereafter  leases  such  assets  or
properties  or any part thereof or any other assets or  properties  which GST or
such Restricted Subsidiary, as the case may be, intends to use for substantially
the same purpose or purposes as the assets or properties sold or transferred.

         The  foregoing   restriction  does  not  apply  to  any  sale-leaseback
transaction if

                  (i) the lease is for a period,  including  renewal rights,  of
         not in excess of three years;

                  (ii) the lease  secures or relates  to  industrial  revenue or
         pollution control bonds;

                                       54

<PAGE>
                  (iii) the  transaction  is solely  between  GST and any Wholly
         Owned  Restricted  Subsidiary or solely between Wholly Owned Restricted
         Subsidiaries; or

                  (iv) GST or such Restricted Subsidiary, within 12 months after
         the sale or transfer of any assets or properties is completed,  applies
         an amount  not less than the net  proceeds  received  from such sale in
         accordance  with  clause (A) or (B) of the first  paragraph  of Section
         4.12.

         The Company will not, and will not permit any Subsidiary to, enter into
any sale-leaseback transaction.

         SECTION  4.11.  LIMITATION ON  INVESTMENTS.  GST will not, and will not
permit  any  Restricted  Subsidiary  to, (i) make any  Investment  in any Person
(including an Unrestricted  Subsidiary)  that during its most recent fiscal year
derived or in its current  fiscal year is expected by the Board of  Directors of
GST to derive more than $250,000 in revenues  from, or in its most recent fiscal
year spent or in its current  fiscal year is expected by the Board of  Directors
of GST to spend more than $250,000 on, operations or activities  located outside
the continental  United States (other than in the State of Hawaii or between the
continental United States and the State of Hawaii) (an "INTERNATIONAL BUSINESS")
or  (ii)  acquire  or own  (directly  or  indirectly),  other  than  through  an
Unrestricted Subsidiary, any entity, business or asset that is primarily located
outside the continental United States (other than in the State of Hawaii) or any
right with respect to any of the foregoing (an "INTERNATIONAL ASSET").

         Notwithstanding the foregoing, and subject to Section 4.04, GST and its
Restricted  Subsidiaries  may make an Investment in an  Unrestricted  Subsidiary
which owns,  intends to acquire or has rights with  respect to an  International
Business or  International  Asset  provided  that the  aggregate  amount of such
Investments  does not exceed (i) $25 million  plus,  (A) in any fiscal year,  an
amount not to exceed 10% of GST's  Consolidated  EBITDA  (if  positive)  for the
immediately  preceding  fiscal year and (B) an amount not to exceed the Net Cash
Proceeds received by GST after May 13, 1997 from the issuance and sale permitted
by this Indenture of its Capital Stock (other than Redeemable Stock) to a Person
who is not a Subsidiary  of GST,  less (ii) the amount of any  Investments  made
pursuant to the first  paragraph,  or the amount of any Restricted  Payment made
pursuant to clause (iii), (iv) or (vi) of the second paragraph, of Section 4.04;
PROVIDED that the  International  Business or International  Assets are related,
ancillary or  complementary  to the primary  business of GST and its  Restricted
Subsidiaries on the date of such Investment.

         SECTION  4.12.  LIMITATION  ON ASSET SALES.  GST will not, and will not
permit any Restricted  Subsidiary to,  consummate any Asset Sale, unless (i) the
consideration received by GST or such Restricted Subsidiary is at least equal to
the fair market value of the assets sold or disposed of and (ii) at least 85% of
the consideration received consists of cash or Temporary Cash

                                       55

<PAGE>
Investments;  PROVIDED,  HOWEVER,  that clause (ii) shall not apply to long-term
assignments  of capacity  in a network.  In the event and to the extent that the
Net Cash Proceeds  received by GST or its  Restricted  Subsidiaries  from one or
more Asset  Sales  occurring  on or after the  Closing  Date in any period of 12
consecutive  months  exceed 10% of Adjusted  Consolidated  Net  Tangible  Assets
(determined as of the date closest to the  commencement  of such 12-month period
for which a  consolidated  balance  sheet of GST and its  Subsidiaries  has been
prepared),  then GST shall or shall cause the relevant Restricted  Subsidiary to
(i) within 12 months after the date Net Cash Proceeds so received  exceed 10% of
Adjusted  Consolidated  Net  Tangible  Assets (A) apply an amount  equal to such
excess Net Cash Proceeds to permanently repay unsubordinated Indebtedness of GST
or GST USA or Indebtedness of any Restricted Subsidiary (other than GST USA), in
each case owing to a Person other than GST or any of its Restricted Subsidiaries
or (B) invest an equal amount,  or the amount not so applied  pursuant to clause
(A) (or enter into a  definitive  agreement  committing  to so invest  within 12
months after the date of such  agreement),  in property or assets of a nature or
type or that are used in a business (or in a company having  property and assets
of a nature or type, or engaged in a business)  similar or related to the nature
or  type  of the  property  and  assets  of,  or the  business  of,  GST and its
Restricted  Subsidiaries  existing on the date of such investment (as determined
in good faith by the Board of Directors  of GST,  whose  determination  shall be
conclusive  and evidenced by a Board  Resolution)  and (ii) apply (no later than
the end of the 12-month  period  referred to in clause (i)) such excess Net Cash
Proceeds  (to the extent not applied  pursuant to clause (i)) as provided in the
following  paragraph  of this Section  4.12.  The amount of such excess Net Cash
Proceeds  required to be applied (or to be committed to be applied)  during such
12-month  period as set forth in clause (i) of the  preceding  sentence  and not
applied  as so  required  by the end of such  period  shall  constitute  "Excess
Proceeds."

         If, as of the first day of any calendar month,  the aggregate amount of
Excess Proceeds not theretofore subject to an Offer to Purchase pursuant to this
Section 4.12 totals at least $5.0 million,  the Issuer must commence,  not later
than the  fifteenth  Business  Day of such  month,  and  consummate  an Offer to
Purchase  from the Holders on a pro rata basis an  aggregate  Accreted  Value of
Securities  equal to the Excess Proceeds on such date, at a purchase price equal
to 101% of the Accreted  Value of the  Securities on the relevant  Payment Date,
plus, in each case, accrued interest to such Payment Date.

         The Company will not, and will not permit any Subsidiary to, consummate
any Asset Sale except as permitted under the Pledge Agreement.

         SECTION 4.13.  IMPAIRMENT OF SECURITY INTEREST OR ABILITY TO ASSUME THE
SECURITIES.  Except as specifically  provided in the Pledge  Agreement,  none of
GST, GST USA nor the Company  shall,  nor shall they permit any  Subsidiary  to,
take or  knowingly  omit to take any  action  that (i)  might or would  have the
result of materially impairing the security interest with respect to the Pledged
Securities,  any Acquired Equipment, the Fee Notes or Intercompany Notes for the
benefit of the  Trustee  and the  Holders of the  Securities,  (ii) grant to any
Person other than

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<PAGE>
the Trustee or the Holders of the  Securities,  any interest  whatsoever  in the
Pledged Securities, other amounts in the Pledge Account, any Acquired Equipment,
the Fee Notes or any Intercompany Note, (iii) would prevent, or restrict GST USA
from  assuming,  or GST from  guaranteeing,  the  Securities  on May 1,  2003 or
earlier  if  permitted  by the  Existing  Indentures  or (iv)  would  prevent or
restrict GST USA from issuing Fee Notes to the Company.

         SECTION 4.14.  REPURCHASE OF SECURITIES  UPON A CHANGE OF CONTROL.  The
Issuer must  commence,  within 30 days of the occurrence of a Change of Control,
and consummate an Offer to Purchase for all Securities  then  outstanding,  at a
purchase  price  equal to 101% of the  Accreted  Value  thereof on the  relevant
Payment Date, plus accrued  interest to such Payment Date.  Prior to the mailing
of the notice to Holders  commencing  such Offer to  Purchase,  but in any event
within 30 days  following  any Change of Control,  the Issuer  covenants  to (i)
repay in full all  indebtedness of the Issuer that would prohibit the repurchase
of the  Securities  pursuant  to such  Offer  to  Purchase  or (ii)  obtain  any
requisite  consents under  instruments  governing any such  indebtedness  of the
Issuer to permit the repurchase of the Securities. The Issuer shall first comply
with  the  covenant  in  the  preceding  sentence  before  it  shall  repurchase
Securities pursuant to this Section 4.14.

         SECTION  4.15.  EXISTENCE.  Subject  to  compliance  with the  terms of
Articles  Four and Five of this  Indenture,  GST will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence and
the existence of each of its  Restricted  Subsidiaries  in  accordance  with the
respective  organizational  documents  of GST and each such  Subsidiary  and the
rights (whether pursuant to charter, partnership certificate, agreement, statute
or otherwise), material licenses and franchises of GST and each such Subsidiary;
PROVIDED  that GST shall not be required to preserve any such right,  license or
franchise,  or the  existence of any  Restricted  Subsidiary  (other than of the
Issuer),  if the maintenance or preservation  thereof is no longer  desirable in
the conduct of the business of GST and its  Restricted  Subsidiaries  taken as a
whole.

         SECTION  4.16.  PAYMENT  OF TAXES  AND  OTHER  CLAIMS.  GST will pay or
discharge and shall cause each of its Subsidiaries to pay or discharge, or cause
to be paid or  discharged,  before  the same  shall  become  delinquent  (i) all
material taxes,  assessments and governmental charges levied or imposed upon (a)
GST or any such  Subsidiary,  (b) the income or  profits of any such  Subsidiary
which is a  corporation  or (c) the property of GST or any such  Subsidiary  and
(ii) all material  lawful  claims for labor,  materials  and supplies  that,  if
unpaid,  might  by law  become  a lien  upon  the  property  of GST or any  such
Subsidiary;  PROVIDED  that GST shall not be  required to pay or  discharge,  or
cause to be paid or discharged,  any such tax,  assessment,  charge or claim the
amount,  applicability  or validity of which is being contested in good faith by
appropriate proceedings and for which adequate reserves have been established.

         SECTION 4.17.  MAINTENANCE OF PROPERTIES AND INSURANCE.  GST will cause
all properties  used or useful in the conduct of its business or the business of
any of its Restricted

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<PAGE>
Subsidiaries,  to be  maintained  and kept in reasonable  condition,  repair and
working  order and supplied  with all  necessary  equipment and will cause to be
made all necessary repairs, renewals, replacements, betterments and improvements
thereof,  all as in the reasonable  business judgment of GST may be necessary so
that the  business  carried  on in  connection  therewith  may be  properly  and
advantageously  conducted  at all times;  PROVIDED  that nothing in this Section
4.17  shall  prevent  GST or any such  Subsidiary  from  discontinuing  the use,
operation or maintenance of any of such  properties or disposing of any of them,
if such  discontinuance  or disposal is, in the reasonable  business judgment of
GST, desirable in the conduct of the business of GST or such Subsidiary.

         GST will provide or cause to be provided, for itself and its Restricted
Subsidiaries,  insurance (including appropriate  self-insurance) against loss or
damage  of the kinds  customarily  insured  against  by  corporations  similarly
situated and owning like  properties,  including,  but not limited to,  products
liability insurance and public liability  insurance,  with reputable insurers or
with  the  government  of  the  United  States  of  America,  or  an  agency  or
instrumentality  thereof,  in such amounts,  with such  deductibles  and by such
methods  as  shall be  customary  for  corporations  similarly  situated  in the
industry in which GST or such Restricted Subsidiary, as the case may be, is then
conducting business.

         SECTION 4.18.  NOTICE OF DEFAULTS.  In the event that GST or the Issuer
becomes  aware of any Default or Event of Default,  GST or the Issuer,  promptly
after it becomes aware thereof, will give written notice thereof to the Trustee.

         SECTION  4.19.  COMPLIANCE  CERTIFICATES.  (a) GST shall deliver to the
Trustee,  within  90 days  after  the end of GST's  fiscal  year,  an  Officers'
Certificate  stating  whether or not the signers know of any Default or Event of
Default that occurred during such fiscal year. Such certificates shall contain a
certification from the principal executive officer,  principal financial officer
or principal  accounting  officer of GST that a review has been conducted of the
activities of GST and the Restricted  Subsidiaries  and GST's and the Restricted
Subsidiaries'  performance  under this Indenture and that, to the best knowledge
of such officer,  GST has complied with all conditions and covenants  under this
Indenture.  For  purposes  of  this  Section  4.19,  such  compliance  shall  be
determined  without  regard  to any  period  of grace or  requirement  of notice
provided  under this  Indenture.  If any such officer knows of such a Default or
Event of Default,  the  certificate  shall describe any such Default or Event of
Default and its status.

         (b) GST shall  deliver to the Trustee,  within 90 days after the end of
its fiscal year, a  certificate  signed by GST's  independent  certified  public
accountants  stating (i) that their audit  examination  has included a review of
the terms of this  Indenture  and the  Securities  as they relate to  accounting
matters,  (ii)  that  they  have  read the  most  recent  Officers'  Certificate
delivered  to the Trustee  pursuant to  paragraph  (a) of this  Section 4.19 and
(iii)  whether,  in connection  with their audit  examination,  anything came to
their  attention  that caused them to believe  that GST or the Issuer was not in
compliance with any of the terms, covenants, provisions or conditions of

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<PAGE>
Article  Four and Section 5.01 of this  Indenture as they pertain to  accounting
matters  and, if any  Default or Event of Default  has come to their  attention,
specifying  the nature  and  period of  existence  thereof;  PROVIDED  that such
independent  certified public accountants shall not be liable in respect of such
statement  by reason of any failure to obtain  knowledge  of any such Default or
Event  of  Default  that  would  not be  disclosed  in the  course  of an  audit
examination  conducted in accordance with generally  accepted auditing standards
in effect at the date of such examination.

         (c) Within 90 days of the end of each of GST's fiscal years,  GST shall
deliver to the Trustee a list of all Significant Subsidiaries. The Trustee shall
have no duty with respect to any such list except to keep it on file and make it
available for  inspection by the Holders upon  reasonable  notice to the Trustee
and during normal business hours.

         SECTION 4.20.  COMMISSION REPORTS AND REPORTS TO HOLDERS.  At all times
from and after the  earlier of (i) the date of the  commencement  of an Exchange
Offer  or  the   effectiveness   of  the  Shelf   Registration   Statement  (the
"REGISTRATION")  and (ii) six months  after the Closing  Date,  in either  case,
whether or not the Company is then required to file reports with the Commission,
the  Company  shall  file  with  the  Commission  all  such  reports  and  other
information  as it would be  required  to file with the  Commission  by Sections
13(a) or 15(d) under the Exchange Act if it were subject  thereto.  In addition,
at all times prior to the earlier of the date of the Registration and six months
after the Closing Date, the Company shall,  at its cost,  deliver to each Holder
of the Securities quarterly and annual reports substantially equivalent to those
which would be required by the Exchange Act. In addition,  at all times prior to
the Registration, upon the request of any Holder or any prospective purchaser of
the Securities  designated by a Holder,  the Company shall supply to such Holder
or such prospective purchaser the information required under Rule 144A under the
Securities  Act.  Whether  or not GST is  required  to  file  reports  with  the
Commission,  if  any  Securities  are  outstanding,  GST  shall  file  with  the
Commission  all such  reports and other  information  as it would be required to
file with the  Commission by Sections 13(a) or 15(d) under the Exchange Act. The
Company and GST shall supply the Trustee and each Holder of  Securities or shall
supply to the Trustee for forwarding to each Holder, without cost to such Holder
or the Trustee, copies of such reports or other information.

         SECTION  4.21.  WAIVER OF STAY,  EXTENSION  OR USURY LAWS.  Each of the
Issuer and GST covenants (to the extent that it may lawfully do so) that it will
not at any time insist upon, or plead, or in any manner whatsoever claim or take
the benefit or advantage of, any stay or extension law or any usury law or other
law that would  prohibit  or forgive the Issuer or GST, as the case may be, from
paying all or any portion of the principal of,  premium,  if any, or interest on
the Securities as  contemplated  herein,  wherever  enacted,  now or at any time
hereafter in force,  or that may affect the covenants or the performance of this
Indenture; and (to the extent that it may lawfully do so) each of the Issuer and
GST  hereby  expressly  waives  all  benefit  or  advantage  of any such law and
covenants that it will not hinder, delay or impede the execution of any power

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herein granted to the Trustee, but will suffer and permit the execution of every
such power as though no such law had been enacted.

         SECTION  4.22.  ADDITIONAL  AMOUNTS.  Any payments made by GST under or
respect to the Securities  pursuant to the Security  Guarantee will be made free
and clear of and  without  withholding  or  deduction  for or on  account of any
present or future tax,  duty,  levy,  impost,  assessment or other  governmental
charge (including  penalties,  interest and other  liabilities  related thereto)
imposed or levied by or on behalf of the Government of Canada or of any province
or territory  thereof or by any  authority or agency  therein or thereof  having
power to tax (hereinafter "TAXES"), unless GST is required to withhold or deduct
Taxes  by law or by the  interpretation  or  administration  thereof.  If GST is
required  to  withhold  or deduct any amount for or on account of Taxes from any
payment  made  under  or with  respect  to the  Securities,  GST  will  pay such
additional amounts ("ADDITIONAL  AMOUNTS") as may be necessary,  so that the net
amount  received by each Holder of  Securities  (including  Additional  Amounts)
after such withholding or deduction will not be less than the amount such Holder
would have received if such Taxes had not been  withheld or deducted;  PROVIDED,
HOWEVER,  that no  Additional  Amounts will be payable with respect to a payment
made to a Holder  (an  "EXCLUDED  HOLDER")  (i) with  which GST does not deal at
arm's length  (within the meaning of the Income Tax Act (Canada)) at the time of
making  such  payment,  or (ii)  which is subject to such Taxes by reason of its
being connected with Canada or any province or territory  thereof otherwise than
solely by reason of the Holder's  activity in  connection  with  purchasing  the
Securities,  by the mere  holding of  Securities  or by reason of the receipt of
payments thereunder. GST will, upon written request of any Holder (other than an
Excluded  Holder),  reimburse  such  Holder,  for the amount of (i) any Taxes so
levied or imposed and paid by such Holder as a result of payments  made under or
with  respect to the  Securities  and (ii) any Taxes so levied or  imposed  with
respect to any  reimbursement  under the foregoing clause (i), but excluding any
such Taxes on such  Holder's net income so that the net amount  received by such
Holder after such  reimbursement will not be less than the net amount the Holder
would have received if Taxes on such reimbursement had not been imposed.

         At least 30 days prior to each date on which any payment  under or with
respect to the  Securities  is due and payable,  if GST will be obligated to pay
Additional Amounts with respect to such payment, GST will deliver to the Trustee
an Officers'  Certificate  stating the fact that such Additional Amounts will be
payable  and the  amounts so payable  and will set forth such other  information
necessary to enable the Trustee to pay such Additional Amounts to Holders on the
payment date. Whenever in this Indenture there is mentioned, in any context, the
payment of principal (or premium,  if any),  Redemption  Price,  interest or any
other amount  payable under or with respect to any Security,  such mention shall
be deemed to include mention of the payment of Additional  Amounts to the extent
that,  in such  context,  Additional  Amounts  are,  were or would be payable in
respect thereof.

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         SECTION 4.23.  ASSUMPTION OF SECURITIES BY GST USA. (a) On May 1, 2003,
or earlier if permitted under the terms of the Existing Indentures,  GST USA and
GST will execute and deliver a  supplemental  indenture to this Indenture in the
form  attached  hereto  as  Exhibit  E and GST USA will  execute  and  deliver a
Collateral Pledge and Security Agreement substantially in the form of the Pledge
Agreement in favor of the Trustee granting to the Trustee for the benefit of the
Holders of the  Securities a first  priority  security  interest in all Acquired
Equipment that secured the Intercompany  Notes or was held by the Company on the
Assumption Date.

         (b) On the  Assumption  Date,  GST USA will  deliver to the  Trustee an
Opinion of Counsel to the effect that,  after giving effect to the assumption of
the  Securities  by GST USA  pursuant to the  supplemental  indenture  delivered
pursuant to clause (a) above:

                  (i) each of the Securities  and this  Indenture  constitutes a
         valid and binding  obligation of GST USA in  accordance  with its terms
         and the  Securities  are  entitled to the  benefits of this  Indenture,
         subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
         moratorium  and similar  laws of general  applicability  relating to or
         affecting creditors' rights and to general equitable principles;

                  (ii)  each of this  Indenture  and  the  indenture  supplement
         delivered  under  clause  (a) above  constitutes  a valid  and  binding
         obligation of GST in accordance with its terms,  subject to bankruptcy,
         insolvency, fraudulent transfer, reorganization, moratorium and similar
         laws of  general  applicability  relating  to or  affecting  creditors'
         rights and to general equitable principles; and

                  (iii) GST USA has  granted to the  Trustee  for the benefit of
         the holders of the  Securities  a valid and  perfected  first  priority
         security   interest  in  all  Acquired   Equipment   that  secured  the
         Intercompany Notes or was held by the Company on the Assumption Date to
         secure  the  payment of  principal  of and  interest  on, and any other
         amounts owing in respect of, the Securities.

                  (c) On the  Assumption  Date,  upon delivery of the Opinion of
Counsel  pursuant to clause (b) above,  GST USA will  liquidate  the Company and
will cause the Company to distribute all of its assets (if any) to GST USA.

                                  ARTICLE FIVE
                              SUCCESSOR CORPORATION

         SECTION 5.01. CONSOLIDATION, MERGER AND SALE OF ASSETS. Neither GST nor
GST USA shall consolidate with, merge with or into, or sell,  convey,  transfer,
lease or  otherwise  dispose of all or  substantially  all of its  property  and
assets (as an entirety or substantially an

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entirety in one transaction or a series of related  transactions) to, any Person
(other than a  consolidation  or merger with or into a Wholly  Owned  Restricted
Subsidiary with a positive net worth; PROVIDED that, in connection with any such
merger or  consolidation,  no  consideration  (other  than  Common  Stock in the
surviving  Person,  GST or GST  USA)  shall  be  issued  or  distributed  to the
stockholders  of GST or GST USA) or permit  any Person to merge with or into GST
or GST USA unless:

                  (i) GST or GST USA  shall  be the  continuing  Person,  or the
         Person (if other than GST or GST USA) formed by such  consolidation  or
         into  which GST or GST USA is merged or that  acquired  or leased  such
         property and assets of GST or GST USA shall be a corporation  organized
         and validly  existing under the laws of the United States of America or
         any jurisdiction  thereof and shall expressly assume, by a supplemental
         indenture,   executed  and  delivered  to  the  Trustee,   all  of  the
         obligations  of GST or GST  USA,  as the  case  may  be,  on all of the
         Securities, the Intercompany Notes and the Security Guarantee and under
         this Indenture;

                  (ii) immediately after giving effect to such  transaction,  no
         Default or Event of Default shall have occurred and be continuing;

                  (iii) immediately after giving effect to such transaction on a
         PRO FORMA  basis,  GST, GST USA or any Person  becoming  the  successor
         obligor of the  Securities or the Security  Guarantee,  as the case may
         be,  shall have a  Consolidated  Net Worth equal to or greater than the
         Consolidated  Net  Worth  of GST or  GST  USA,  as  the  case  may  be,
         immediately prior to such transaction;

                  (iv) immediately  after giving effect to such transaction on a
         PRO  FORMA  basis  GST or GST USA,  as the case may be,  or any  Person
         becoming  the  successor  obligor  of the  Securities  or the  Security
         Guarantee,  as  the  case  may  be,  could  Incur  at  least  $1.00  of
         Indebtedness under the first paragraph of Section 4.03(a); and

                  (v)  GST or GST  USA,  as the  case  may be,  delivers  to the
         Trustee an Officers' Certificate (attaching the arithmetic computations
         to demonstrate  compliance  with clauses (iii) and (iv)) and Opinion of
         Counsel,  in each  case  stating  that  such  consolidation,  merger or
         transfer and such supplemental  indenture  complies with this provision
         and that all conditions  precedent provided for herein relating to such
         transaction have been complied with;  PROVIDED,  HOWEVER,  that clauses
         (iii) and (iv) above do not apply if, in the good  faith  determination
         of the Board of  Directors of GST or GST USA, as the case may be, whose
         determination  shall be evidenced by a Board Resolution,  the principal
         purpose  of  such   transaction  is  to  change  the   jurisdiction  of
         incorporation  of GST to a state in the United  States or of GST USA to
         another state of the United States; and PROVIDED FURTHER that any

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         such  transaction  shall not have as one of its purposes the evasion of
         the foregoing limitations.

         The  restrictions and conditions  described in the preceding  paragraph
shall also apply to the  Company  except that  clauses  (iii) and (iv) shall not
apply to a merger  or  consolidation  of GST USA and the  Company  or the  sale,
conveyance or other disposition of all or substantially all of the assets of the
Company to GST USA.

         SECTION 5.02. SUCCESSOR SUBSTITUTED.  Upon any consolidation or merger,
or any sale,  conveyance,  transfer or other disposition of all or substantially
all of the property and assets of the Company, GST USA or GST in accordance with
Section  5.01  of  this   Indenture,   the  successor   Person  formed  by  such
consolidation  or into which the  Company,  GST USA or GST is merged or to which
such sale,  conveyance,  transfer or other disposition is made shall succeed to,
and be substituted  for, and may exercise every right and power of, the Company,
GST USA or GST, as the case may be, under this Indenture with the same effect as
if such successor  Person had been named as the Company,  GST USA or GST, as the
case may be, herein;  PROVIDED that the Company, GST USA or GST, as the case may
be, shall not be released from its obligations to pay the principal of, premium,
if  any,  or  interest  on the  Securities  in the  case  of a  lease  of all or
substantially all of its property and assets.

                                   ARTICLE SIX
                              DEFAULT AND REMEDIES

         SECTION 6.01. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall occur with
respect to the Securities if:

                  (a) the Issuer  defaults  in the payment of  principal  of (or
         premium, if any, on) any Security when the same becomes due and payable
         at maturity, upon acceleration, redemption or otherwise;

                  (b) the Issuer  defaults  in the  payment of  interest  on any
         Security  when the  same  becomes  due and  payable,  and such  default
         continues for a period of 30 days;

                  (c) the Company, GST USA or GST defaults in the performance of
         or breaches any other covenant or agreement of the Company,  GST USA or
         GST in this Indenture or under the Securities,  the Security Guarantee,
         the Fee  Notes or any  Intercompany  Note and such  default  or  breach
         continues for a period of 30  consecutive  days after written notice by
         the Trustee or the Holders of 25% or more in aggregate principal amount
         of Securities;

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                  (d)  there  occurs  with  respect  to any  issue or  issues of
         Indebtedness of GST or any Significant Subsidiary having an outstanding
         principal  amount of $5 million or more in the  aggregate  for all such
         issues of all such  Persons,  whether such  Indebtedness  now exists or
         shall hereafter be created, (I) an event of default that has caused the
         holder thereof to declare such Indebtedness to be due and payable prior
         to its Stated Maturity and such Indebtedness has not been discharged in
         full or such  acceleration has not been rescinded or annulled within 30
         days of such  acceleration  and/or (II) the failure to make a principal
         payment  at the final (but not any  interim)  fixed  maturity  and such
         defaulted  payment shall not have been made,  waived or extended within
         30 days of such payment default;

                  (e) any final judgment or order (not covered by insurance) for
         the payment of money in excess of $5 million in the  aggregate  for all
         such final  judgments or orders against all such Persons  (treating any
         deductibles,  self-insurance  or retention as not so covered)  shall be
         rendered  against  the  Company,   GST  USA,  GST  or  any  Significant
         Subsidiary and shall not be paid or discharged,  and there shall be any
         period of 30 consecutive  days following entry of the final judgment or
         order that causes the aggregate  amount for all such final judgments or
         orders  outstanding and not paid or discharged against all such Persons
         to exceed $5 million  during which a stay of  enforcement of such final
         judgment or order,  by reason of a pending  appeal or otherwise,  shall
         not be in effect;

                  (f) a court  having  jurisdiction  in the  premises  enters  a
         decree or order for (A) relief in respect of the Company,  GST USA, GST
         or  any  Significant  Subsidiary  in  an  involuntary  case  under  any
         applicable bankruptcy, insolvency or other similar law now or hereafter
         in  effect,  (B)  appointment  of  a  receiver,  liquidator,  assignee,
         custodian,  trustee,  sequestrator or similar  official of the Company,
         GST USA, GST or any Significant Subsidiary (other than a liquidation of
         the  Company  into GST USA in  connection  with the  assumption  of the
         Securities) or for all or substantially  all of the property and assets
         of the Company,  GST USA, GST or any Significant  Subsidiary or (C) the
         winding up or liquidation  of the affairs of the Company,  GST USA, GST
         or any Significant  Subsidiary (other than a liquidation of the Company
         into GST USA in connection with the assumption of the Securities)  and,
         in each case,  such decree or order shall remain unstayed and in effect
         for a period of 30 consecutive days;

                  (g) the Company,  GST USA, GST or any  Significant  Subsidiary
         (A)  commences  a  voluntary  case  under  any  applicable  bankruptcy,
         insolvency or other similar law now or hereafter in effect, or consents
         to the entry of an order for  relief in an  involuntary  case under any
         such law, (B) consents to the appointment of or taking  possession by a
         receiver,  liquidator,  assignee,  custodian,  trustee, sequestrator or
         similar  official  of the  Company,  GST  USA,  GST or any  Significant
         Subsidiary  (other than a  liquidation  of the Company  into GST USA in
         connection with the assumption of the

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         Securities) or for all or substantially  all of the property and assets
         of the  Company,  GST USA,  GST or any  Significant  Subsidiary  or (C)
         effects any general assignment for the benefit of creditors;

                  (h) the  Trustee or the  Company  does not have at all times a
         first priority perfected  security interest in all Pledged  Securities,
         the  Pledge  Account,  all  Acquired  Equipment,   the  Fee  Notes  and
         Intercompany  Notes or the  Company,  GST USA or GST asserts in writing
         that  the  security  arrangements  under  this  Indenture,  the  Pledge
         Account, the Fee Notes and the Intercompany Notes are not in full force
         and effect; or

                  (i) GST USA  shall  not have  become a direct  obligor  on the
         Securities  (other than  Securities  to be redeemed as described  under
         Section 3.02 for which the Company shall have  deposited the redemption
         price) and GST shall not have become a guarantor of the  Securities  by
         May 1, 2003.

         SECTION 6.02. ACCELERATION. If an Event of Default (other than an Event
of  Default  specified  in clause (f) or (g) of Section  6.01 that  occurs  with
respect to the Company,  GST USA or GST or clause (h)) occurs and is  continuing
under this  Indenture,  the Trustee or the Holders of at least 25% in  aggregate
principal amount of the outstanding Securities,  by written notice to the Issuer
(and to the  Trustee  if such  notice  is given by the  Holders),  may,  and the
Trustee at the request of such Holders  shall,  declare the  Accreted  Value of,
premium,  if any, and accrued interest,  on the Securities to be immediately due
and payable.  Upon a declaration of acceleration,  such Accreted Value, premium,
if any, and accrued interest shall be immediately due and payable.  In the event
of a declaration of acceleration because an Event of Default set forth in clause
(d) of  Section  6.01  has  occurred  and is  continuing,  such  declaration  of
acceleration  shall be  automatically  rescinded  and  annulled  if the event of
default  triggering  such  Event of  Default  pursuant  to  clause  (d) shall be
remedied or cured by GST or the relevant Significant Subsidiary or waived by the
holders of the relevant  Indebtedness  within 60 days after the  declaration  of
acceleration  with respect thereto.  If an Event of Default  specified in clause
(f) or (g) of Section 6.01 occurs with respect to the Company, GST USA or GST or
an Event of Default  specified  in clause (h)  occurs,  the  Accreted  Value of,
premium,  if any, and accrued interest on the Securities then outstanding  shall
IPSO FACTO become and be immediately  due and payable without any declaration or
other act on the part of the Trustee or any Holder.

         SECTION  6.03.  OTHER  REMEDIES.  If an Event of Default  occurs and is
continuing,  the Trustee  may,  and at the  direction of the Holders of not less
than a majority of the  outstanding  principal  amount of the Securities  shall,
pursue any  available  remedy by  proceeding  at law or in equity to collect the
payment of principal of,  premium,  if any, or interest on the  Securities or to
enforce the performance of any provision of the Securities or this Indenture.

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         The Trustee may maintain a  proceeding  even if it does not possess any
of the Securities or does not produce any of them in the proceeding.

         SECTION 6.04.  WAIVER OF PAST DEFAULTS.  Subject to Sections 6.02, 6.07
and  9.02,  the  Holders  of at least a  majority  in  principal  amount  of the
outstanding Securities,  by written notice to the Issuer and to the Trustee, may
waive  all  past  Defaults  and  Events  of  Default  and  rescind  and  annul a
declaration  of  acceleration  (except a Default in the payment of principal of,
premium,  if any, or interest on any  Security as specified in clause (a) or (b)
of Section 6.01 or in respect of a covenant or provision of this Indenture which
cannot  be  modified  or  amended  without  the  consent  of the  holder of each
outstanding Security affected) if (i) all existing Events of Default, other than
the nonpayment of principal of,  premium,  if any, or interest on the Securities
that have become due solely by such declaration of acceleration, have been cured
or waived and (ii) the rescission would not conflict with any judgment or decree
of a court of competent  jurisdiction.  Upon any such waiver, such Default shall
cease to exist,  and any Event of Default  arising  therefrom shall be deemed to
have been cured,  for every purpose of this Indenture;  but no such waiver shall
extend to any  subsequent  or other  Default  or Event of  Default or impair any
right consequent thereto.

         SECTION 6.05.  CONTROL BY MAJORITY.  The Holders of at least a majority
in aggregate principal amount of the outstanding Securities may direct the time,
method and place of conducting any  proceeding  for any remedy  available to the
Trustee or exercising any trust or power conferred on the Trustee.  However, the
Trustee  may  refuse to follow any  direction  that  conflicts  with law or this
Indenture,  that may  involve the  Trustee in  personal  liability,  or that the
Trustee  determines  in good  faith may be unduly  prejudicial  to the rights of
Holders of Securities  not joining in the giving of such  direction and may take
any  other  action  it  deems  proper  that is not  inconsistent  with  any such
direction received from Holders of Securities pursuant to this Section 6.05.

         SECTION 6.06.  LIMITATION ON SUITS.  A Holder may not pursue any remedy
with respect to this Indenture or the Securities unless:

                  (i)  the  Holder  gives  the  Trustee   written  notice  of  a
         continuing Event of Default;

                  (ii) the Holders of at least 25% in aggregate principal amount
         of  outstanding  Securities  make a written  request to the  Trustee to
         pursue the remedy;

                  (iii) such Holder or Holders offer and, if requested  provide,
         the Trustee  indemnity  satisfactory  to the Trustee against any costs,
         liabilities or expenses  which may be incurred in compliance  with such
         request;

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                  (iv) the Trustee  does not comply  with the request  within 60
         days after  receipt of the written  request and the offer of indemnity;
         and

                  (v) during  such 60-day  period,  the Holders of a majority in
         aggregate  principal  amount of the outstanding  Securities do not give
         the Trustee a direction that is inconsistent with the request.

         For purposes of Section 6.05 of this  Indenture  and this Section 6.06,
the Trustee shall comply with TIA Section 316(a) in making any  determination of
whether the Holders of the required  aggregate  principal  amount of outstanding
Securities  have  concurred in any request or direction of the Trustee to pursue
any  remedy  available  to the  Trustee  or the  Holders  with  respect  to this
Indenture or the Securities or otherwise under the law.

         A Holder may not use this  Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over such other Holder.

         SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any
other  provision  of this  Indenture,  the right of any Holder of a Security  to
receive  payment of the  principal  of,  premium,  if any,  or  interest on such
Security,  or to bring suit for the enforcement of any such payment, on or after
the due date  expressed  in such  Security,  shall not be  impaired  or affected
without the consent of such Holder.

         SECTION  6.08.  COLLECTION  SUIT BY TRUSTEE.  If an Event of Default in
payment of principal, premium or interest specified in clause (a), (b) or (c) of
Section 6.01 occurs and is continuing,  the Trustee may recover  judgment in its
own name and as  trustee  of an express  trust  against  the Issuer or any other
obligor of the  Securities for the whole amount of principal,  premium,  if any,
and  accrued  interest  remaining  unpaid,  together  with  interest  on overdue
principal,  premium, if any, and, to the extent that payment of such interest is
lawful,  interest on overdue installments of interest,  in each case at the rate
specified in the  Securities,  and such further amount as shall be sufficient to
cover  the  costs  and  expenses  of   collection,   including  the   reasonable
compensation,  expenses,  disbursements and advances of the Trustee,  its agents
and counsel.

         SECTION  6.09.  TRUSTEE MAY FILE PROOFS OF CLAIM.  The Trustee may file
such  proofs of claim  and other  papers or  documents  as may be  necessary  or
advisable  in order to have the claims of the Trustee  (including  any claim for
the  reasonable  compensation,  expenses,  disbursements  and  advances  of  the
Trustee,  its agents and counsel,  and any other  amounts due the Trustee  under
Section 7.07) and the Holders  allowed in any judicial  proceedings  relative to
the  Issuer (or any other  obligor  of the  Securities),  its  creditors  or its
property and shall be entitled and  empowered to collect and receive any monies,
securities or other property  payable or deliverable upon conversion or exchange
of the Securities or upon any such claims and to distribute the same,

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and any custodian,  receiver,  assignee,  trustee,  liquidator,  sequestrator or
other similar official in any such judicial  proceeding is hereby  authorized by
each  Holder to make such  payments  to the  Trustee  and, in the event that the
Trustee shall consent to the making of such payments directly to the Holders, to
pay to the  Trustee  any  amount  due to it  for  the  reasonable  compensation,
expenses,  disbursements and advances of the Trustee, its agent and counsel, and
any other amounts due the Trustee under Section 7.07.  Nothing herein  contained
shall be deemed to empower the Trustee to  authorize or consent to, or accept or
adopt  on  behalf  of any  Holder,  any  plan  of  reorganization,  arrangement,
adjustment or  composition  affecting the Securities or the rights of any Holder
thereof,  or to  authorize  the  Trustee  to vote in respect of the claim of any
Holder in any such proceeding.

         SECTION 6.10. PRIORITIES. If the Trustee collects any money pursuant to
this Article Six, it shall pay out the money in the following order:

         FIRST: to the Trustee for all amounts due under Section 7.07;

                  SECOND:  to the Holders  for  amounts  then due and unpaid for
         principal  of,  premium,  if any,  and  interest on the  Securities  in
         respect  of  which or for the  benefit  of which  such  money  has been
         collected,  ratably,  without  preference  or  priority  of  any  kind,
         according  to the  amounts  due  and  payable  on such  Securities  for
         principal, premium, if any, and interest, respectively; and

                  THIRD:  to the Issuer or any other obligors of the Securities,
         as their interests may appear, or as a court of competent  jurisdiction
         may direct.

         The Trustee,  upon prior written notice to the Issuer, may fix a record
date and payment date for any payment to Holders pursuant to this Section 6.10.

         SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement of
any right or remedy under this  Indenture or in any suit against the Trustee for
any action  taken or omitted by it as  Trustee,  a court may  require  any party
litigant in such suit to file an  undertaking  to pay the costs of the suit, and
the court may assess reasonable  costs,  including  reasonable  attorneys' fees,
against any party  litigant in the suit having due regard to the merits and good
faith of the claims or defenses  made by the party  litigant.  This Section 6.11
does not apply to a suit by the Trustee,  a suit by a Holder pursuant to Section
6.07 of this  Indenture,  or a suit by  Holders  of more  than 10% in  principal
amount of the outstanding Securities.

         SECTION 6.12. RESTORATION OF RIGHTS AND REMEDIES. If the Trustee or any
Holder has  instituted  any proceeding to enforce any right or remedy under this
Indenture and such proceeding has been discontinued or abandoned for any reason,
or has been determined  adversely to the Trustee or to such Holder, then, and in
every such case, subject to any determination in

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such  proceeding,  the Issuer,  the  Trustee  and the Holders  shall be restored
severally and  respectively to their former  positions  hereunder and thereafter
all rights and remedies of the Issuer, Trustee and the Holders shall continue as
though no such proceeding had been instituted.

         SECTION  6.13.  RIGHTS AND  REMEDIES  CUMULATIVE.  Except as  otherwise
provided with respect to the  replacement  or payment of  mutilated,  destroyed,
lost or wrongfully  taken  Securities in Section 2.09, no right or remedy herein
conferred  upon or  reserved  to the Trustee or to the Holders is intended to be
exclusive of any other right or remedy, and every right and remedy shall, to the
extent  permitted by law, be cumulative and in addition to every other right and
remedy  given  hereunder  or now or  hereafter  existing  at law or in equity or
otherwise.  The  assertion or employment  of any right or remedy  hereunder,  or
otherwise, shall not prevent the concurrent assertion or employment of any other
appropriate right or remedy.

         SECTION 6.14. DELAY OR OMISSION NOT WAIVER. No delay or omission of the
Trustee or of any Holder to exercise any right or remedy accruing upon any Event
of Default  shall impair any such right or remedy or  constitute a waiver of any
such Event of Default or an acquiescence  therein.  Every right and remedy given
by this  Article Six or by law to the Trustee or to the Holders may be exercised
from time to time, and as often as may be deemed expedient, by the Trustee or by
the Holders, as the case may be.

                                  ARTICLE SEVEN
                                     TRUSTEE

         SECTION 7.01. GENERAL.  The duties and  responsibilities of the Trustee
shall be as provided  by the TIA and as set forth  herein.  Notwithstanding  the
foregoing, no provision of this Indenture shall require the Trustee to expend or
risk its own funds or otherwise incur any financial liability in the performance
of any of its  duties  hereunder,  or in the  exercise  of any of its  rights or
powers, if it shall have reasonable grounds for believing that repayment of such
funds or adequate  indemnity  against such risk or  liability is not  reasonably
assured to it. Whether or not herein  expressly so provided,  every provision of
this  Indenture  relating  to the  conduct  or  affecting  the  liability  of or
affording  protection to the Trustee shall be subject to the  provisions of this
Article Seven.

         SECTION 7.02. CERTAIN RIGHTS OF TRUSTEE. Subject to TIA Sections 315(a)
through (d):

                  (i) the Trustee may rely and shall be  protected  in acting or
         refraining  from acting upon any  resolution,  certificate,  statement,
         instrument,  opinion,  report,  notice,  request,  direction,  consent,
         order, bond,  debenture,  note, other evidence of indebtedness or other
         paper or document  believed by it to be genuine and to have been signed
         or

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         presented by the proper person.  The Trustee need not  investigate  any
         fact  or  matter   stated  in  the  document  and  may  in  good  faith
         conclusively rely as to the truth of the statements and the correctness
         of the opinions therein;

                  (ii) before the Trustee acts or refrains  from acting,  it may
         require an Officers'  Certificate or an Opinion of Counsel. The Trustee
         shall  not be liable  for any  action it takes or omits to take in good
         faith in reliance on such  certificate,  opinion and/or an accountants'
         certificate;

                  (iii) the Trustee may act through its attorneys and agents and
         shall  not be  responsible  for the  misconduct  or  negligence  of any
         attorney or agent appointed with due care;

                  (iv) the Trustee  shall be under no obligation to exercise any
         of the rights or powers  vested in it by this  Indenture at the request
         or  direction of any of the  Holders,  unless such  Holders  shall have
         offered to the Trustee security or indemnity reasonably satisfactory to
         it against the costs,  expenses and liabilities  that might be incurred
         by it in compliance with such request or direction;

                  (v) the Trustee shall not be liable for any action it takes or
         omits to take in good faith that it believes to be authorized or within
         its  rights or  powers  or for any  action it takes or omits to take in
         accordance with the direction of the Holders of a majority in principal
         amount of the outstanding  Securities  relating to the time, method and
         place of  conducting  any  proceeding  for any remedy  available to the
         Trustee,  or exercising any trust or power  conferred upon the Trustee,
         under this  Indenture;  PROVIDED  that the  Trustee's  conduct does not
         constitute negligence or bad faith;

                  (vi)  whenever in the  administration  of this  Indenture  the
         Trustee shall deem it desirable  that a matter be proved or established
         prior to  taking,  suffering  or  omitting  any action  hereunder,  the
         Trustee (unless other evidence be herein specifically  prescribed) may,
         in the  absence  of bad  faith  on its  part,  rely  upon an  Officers'
         Certificate;

                  (vii) the Trustee shall not be bound to make any investigation
         into the  facts  or  matters  stated  in any  resolution,  certificate,
         statement,  instrument,  opinion,  report, notice, request,  direction,
         consent,  order, bond, debenture,  note, other evidence of indebtedness
         or other paper or document,  but the Trustee,  in its  discretion,  may
         make such further inquiry or  investigation  into such facts or matters
         as it may see fit,  and, if the Trustee  shall  determine  to make such
         further inquiry or  investigation,  it shall be entitled to examine the
         books,  records and premises of the Company,  GST USA or GST personally
         or by agent or attorney; and

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                  (viii) any request or direction of the Company, GST USA or GST
         mentioned herein shall be sufficiently evidenced by a Company Order and
         any resolution of the Board of Directors may be sufficiently  evidenced
         by a Board Resolution.

         SECTION  7.03.  INDIVIDUAL  RIGHTS  OF  TRUSTEE.  The  Trustee,  in its
individual or any other capacity,  may become the owner or pledgee of Securities
and may otherwise deal with the Company,  GST USA, GST or their  Affiliates with
the same rights it would have if it were not the  Trustee.  Any Agent may do the
same with like rights.  However,  the Trustee is subject to TIA Sections  310(b)
and 311.

         SECTION  7.04.   TRUSTEE'S   DISCLAIMER.   The  Trustee  (i)  makes  no
representation  as to  the  validity  or  adequacy  of  this  Indenture  or  the
Securities,  (ii) shall not be accountable  for the Company's use or application
of the proceeds from the Securities  and (iii) shall not be responsible  for any
statement in the Securities other than its certificate of authentication.

         SECTION 7.05. NOTICE OF DEFAULT. If any Default or any Event of Default
occurs and is continuing  and if such Default or Event of Default is known to an
officer  assigned to  administer  corporate  trust  matters of the Trustee,  the
Trustee  shall mail to each  Holder in the manner and to the extent  provided in
TIA  Section  313(c)  notice of the  Default or Event of Default  within 45 days
after it  occurs,  unless  such  Default  or Event of  Default  has been  cured;
PROVIDED,  HOWEVER,  that, except in the case of a default in the payment of the
principal of, premium, if any, or interest on any Security, the Trustee shall be
protected in  withholding  such notice if and so long as the board of directors,
the executive  committee or a trust  committee of directors  and/or  Responsible
Officers of the Trustee in good faith  determine  that the  withholding  of such
notice is in the interest of the Holders.

         SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS.  Within 60 days after each
May 15,  beginning  with May 15, 1998,  the Trustee shall mail to each Holder as
provided in TIA Section  313(c) a brief  report that  complies  with TIA Section
313(a) dated as of such May 15, if required by TIA Section 313(a).

         SECTION 7.07.  COMPENSATION  AND INDEMNITY.  The Company and, after the
Assumption  Date,  GST USA and GST,  jointly  and  severally,  shall  pay to the
Trustee from time to time such  compensation  as shall be agreed upon in writing
for its services.  The  compensation  of the Trustee shall not be limited by any
law on compensation of a trustee of an express trust. The Company, and after the
Assumption  Date, GST USA and GST,  jointly and severally,  shall  reimburse the
Trustee upon request for all reasonable  out-of-pocket expenses (including costs
of collection) and advances incurred or made by the Trustee. Such expenses shall
include the  reasonable  compensation  and expenses of the Trustee's  agents and
counsel.

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         The Company,  and after the Assumption  Date, GST USA and GST,  jointly
and severally,  shall  indemnify the Trustee for, and hold it harmless  against,
any loss or liability or expense incurred by it without  negligence or bad faith
on its  part  in  connection  with  the  acceptance  or  administration  of this
Indenture  and its duties under this  Indenture and the  Securities,  including,
without limitation, the costs and expenses of defending itself against any claim
or  liability  and of  complying  with any process  served upon it or any of its
officers in connection  with the exercise or performance of any of its powers or
duties under this Indenture and the Securities.

         To secure the Issuer's  payment  obligations  in this Section 7.07, the
Trustee shall have a lien prior to the  Securities on all money or property held
or  collected  by the  Trustee,  in its  capacity  as Trustee,  except  money or
property  held in trust to pay principal  of,  premium,  if any, and interest on
particular Securities.

         If the Trustee incurs expenses or renders services after the occurrence
of an Event of  Default  specified  in clause (f) or (g) of  Section  6.01,  the
expenses and the  compensation  for the services  will be intended to constitute
expenses of  administration  under Title 11 of the United States Bankruptcy Code
or any applicable federal or state law for the relief of debtors.

         SECTION 7.08.  REPLACEMENT OF TRUSTEE.  A resignation or removal of the
Trustee and appointment of a successor  Trustee shall become effective only upon
the successor  Trustee's  acceptance of  appointment as provided in this Section
7.08.

         The  Trustee  may  resign  at any time by so  notifying  the  Issuer in
writing  at least 30 days  prior to the date of the  proposed  resignation.  The
Holders of a majority in  principal  amount of the  outstanding  Securities  may
remove the  Trustee by so  notifying  the  Trustee in writing  and may appoint a
successor  Trustee  with the consent of the  Issuer.  The Issuer may at any time
remove the Trustee, by Company Order given at least 30 days prior to the date of
the proposed  removal if: (i) the Trustee is no longer  eligible  under  Section
7.10; (ii) the Trustee is adjudged a bankrupt or an insolvent;  (iii) a receiver
or other public officer takes charge of the Trustee or its property; or (iv) the
Trustee becomes incapable of acting.

         If the  Trustee  resigns or is removed,  or if a vacancy  exists in the
office of Trustee for any reason,  the Issuer shall promptly appoint a successor
Trustee.  Within one year after the successor Trustee takes office,  the Holders
of a majority in principal  amount of the  outstanding  Securities may appoint a
successor  Trustee to replace the successor  Trustee appointed by the Issuer. If
the successor  Trustee does not deliver its written  acceptance  required by the
next succeeding paragraph of this Section 7.08 within 30 days after the retiring
Trustee resigns or is removed,  the retiring Trustee,  the Issuer or the Holders
of a majority in principal amount of the outstanding Securities may petition any
court of competent jurisdiction for the appointment of a successor Trustee.

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         A  successor  Trustee  shall  deliver  a  written   acceptance  of  its
appointment  to the retiring  Trustee and to the Issuer.  Immediately  after the
delivery of such  written  acceptance,  subject to the lien  provided in Section
7.07, (i) the retiring Trustee shall transfer all property held by it as Trustee
to the  successor  Trustee,  (ii) the  resignation  or removal  of the  retiring
Trustee shall become  effective  and (iii) the successor  Trustee shall have all
the rights,  powers and duties of the Trustee under this Indenture.  A successor
Trustee shall mail notice of its succession to each Holder.

         If the Trustee is no longer eligible under Section 7.10, any Holder who
satisfies  the  requirements  of TIA Section  310(b) may  petition  any court of
competent  jurisdiction  for the removal of the Trustee and the appointment of a
successor Trustee.

         The Issuer shall give notice of any  resignation and any removal of the
Trustee and each appointment of a successor Trustee to all Holders.  Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.

         Notwithstanding  replacement  of the Trustee  pursuant to this  Section
7.08, the Issuer's  obligations  under Section 7.07 shall continue  indefinitely
for the benefit of the retiring Trustee.

         SECTION  7.09.  SUCCESSOR  TRUSTEE  BY  MERGER,  ETC.  If  the  Trustee
consolidates  with,  merges or converts into, or transfers all or  substantially
all of its corporate trust business to, another  corporation or national banking
association,  the  resulting,  surviving or transferee  corporation  or national
banking  association without any further act shall be the successor Trustee with
the same  effect  as if the  successor  Trustee  had been  named as the  Trustee
herein.

         SECTION 7.10.  ELIGIBILITY.  This Indenture shall always have a Trustee
who satisfies the requirements of TIA Section 310(a)(1).  The Trustee shall have
a combined capital and surplus of at least  $25,000,000 as set forth in its most
recent published annual report of condition.

         SECTION 7.11.  MONEY HELD IN TRUST. The Trustee shall not be liable for
interest on any money  received by it except as the Trustee may agree in writing
with the Issuer.  Money held in trust by the Trustee need not be segregated from
other  funds  except to the extent  required by law and except for money held in
trust under Article Eight of this Indenture.

         SECTION 7.12.  WITHHOLDING TAXES. The Trustee, as agent for the Issuer,
shall exclude and withhold from each payment of principal and interest and other
amounts due  hereunder or under the  Securities  any and all  withholding  taxes
applicable  thereto  as  required  by law.  The  Trustee  agrees  to act as such
withholding agent and, in connection  therewith,  whenever any present or future
taxes or similar charges are required to be withheld with respect to any

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<PAGE>
amounts  payable in respect of the  Securities,  to  withhold  such  amounts and
timely pay the same to the appropriate authority in the name of and on behalf of
the holders of the Securities,  that it will file any necessary  withholding tax
returns or  statements  when due,  and that,  as promptly as possible  after the
payment  thereof,  it will  deliver  to each  holder of a  Security  appropriate
documentation  showing  the  payment  thereof,  together  with  such  additional
documentary evidence as such holders may reasonably request from time to time.

                                  ARTICLE EIGHT
                             DISCHARGE OF INDENTURE

         SECTION 8.01. TERMINATION OF COMPANY'S OBLIGATIONS. Except as otherwise
provided in this Section 8.01, the Issuer may terminate the Company's, GST USA's
and GST's obligations under the Securities and this Indenture if:

                  (i) all  Securities  previously  authenticated  and  delivered
         (other  than  destroyed,  lost or  stolen  Securities  that  have  been
         replaced  or  Securities  that are paid  pursuant  to  Section  4.01 or
         Securities for whose payment money or securities have  theretofore been
         held in trust and  thereafter  repaid to the  Issuer,  as  provided  in
         Section 8.05) have been delivered to the Trustee for  cancellation  and
         the Issuer has paid all sums payable by it hereunder; or

                  (ii) (A) the Securities  mature within one year or all of them
         are to be called for  redemption  within  one year  under  arrangements
         satisfactory  to the Trustee for giving the notice of  redemption,  (B)
         the Issuer  irrevocably  deposits in trust with the Trustee during such
         one-year period,  under the terms of an irrevocable  trust agreement in
         form and substance  satisfactory to the Trustee,  as trust funds solely
         for  the  benefit  of the  Holders  for  that  purpose,  money  or U.S.
         Government  Obligations  sufficient  (in the  opinion  of a  nationally
         recognized  firm  of  independent  public  accountants  expressed  in a
         written  certification  thereof  delivered  to  the  Trustee),  without
         consideration  of any  reinvestment  of any  interest  thereon,  to pay
         principal, premium, if, any, and interest on the Securities to maturity
         or redemption, as the case may be, and to pay all other sums payable by
         it  hereunder,  (C) no Default or Event of Default  with respect to the
         Securities  shall have  occurred and be  continuing on the date of such
         deposit,  (D) such deposit will not result in a breach or violation of,
         or constitute a default under, this Indenture or any other agreement or
         instrument to which the Company,  GST USA or GST is a party or by which
         it is  bound  and  (E) the  Issuer  has  delivered  to the  Trustee  an
         Officers'  Certificate and an Opinion of Counsel,  in each case stating
         that all  conditions  precedent  provided  for herein  relating  to the
         satisfaction and discharge of this Indenture have been complied with.

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         With respect to the foregoing  clause (i), the Issuer's and,  after the
Assumption  Date,  GST's and GST USA's  obligations  under  Section  7.07  shall
survive.  With respect to the foregoing clause (ii), the Issuer's obligations in
Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 4.22,
7.07,  7.08,  8.04, 8.05 and 8.06 and Article Eleven and the Security  Guarantee
shall survive until the Securities are no longer outstanding.  Thereafter,  only
the Issuer's and, after the Assumption Date, GST's and GST USA's  obligations in
Sections 7.07, 8.05 and 8.06 shall survive.  After any such irrevocable deposit,
the Trustee  upon  request  shall  acknowledge  in writing the  discharge of the
Company's,  GST USA's  and  GST's  obligations  under  the  Securities  and this
Indenture except for those surviving obligations specified above.

         SECTION 8.02. DEFEASANCE AND DISCHARGE OF INDENTURE. The Issuer will be
deemed to have paid and the Company, GST USA and GST will be discharged from any
and all  obligations  in respect of the  Securities on the 123rd day (or, to the
extent  applicable  under clause (B) below, one year) after the deposit referred
to in clause (A) of this Section 8.02 if:

                  (A) the  Issuer  has  irrevocably  deposited  or  caused to be
         irrevocably  deposited with the Trustee (or another trustee  satisfying
         the  requirements  of Section  7.10) and conveyed all right,  title and
         interest  for  the  benefit  of the  Holders,  under  the  terms  of an
         irrevocable  trust agreement in form and substance  satisfactory to the
         Trustee as trust  funds in trust,  specifically  pledged to the Trustee
         for the benefit of the Holders as security for payment of the principal
         of,  premium,  if any, and  interest,  if any, on the  Securities,  and
         dedicated solely to, the benefit of the Holders, in and to (1) money in
         an amount, (2) U.S. Government Obligations that, through the payment of
         interest,  premium,  if  any,  and  principal  in  respect  thereof  in
         accordance  with  their  terms,  will  provide,  not later than one day
         before the due date of any  payment  referred  to in this  clause  (A),
         money  in  an  amount  or  (3)  a  combination  thereof  in  an  amount
         sufficient,   in  the  opinion  of  a  nationally  recognized  firm  of
         independent  public  accountants  expressed in a written  certification
         thereof  delivered  to the  Trustee,  to  pay  and  discharge,  without
         consideration of the reinvestment of such interest and after payment of
         all federal,  state and local taxes or other charges and assessments in
         respect thereof payable by the Trustee,  the principal of, premium,  if
         any, and accrued  interest on the outstanding  Securities at the Stated
         Maturity of such principal or interest; PROVIDED that the Trustee shall
         have been irrevocably instructed to apply such money or the proceeds of
         such U.S.  Government  Obligations  to the  payment of such  principal,
         premium, if any, and interest with respect to the Securities;

                  (B) the Issuer shall have  delivered to the Trustee (i) either
         (x) an Opinion of Counsel to the effect that Holders will not recognize
         income, gain or loss for United States federal income tax purposes as a
         result of the  Issuer's  exercise of its option under this Section 8.02
         and will be subject  to United  States  federal  income tax on the same
         amount and in the same  manner and at the same times as would have been
         the  case if such  option  had not been  exercised,  which  Opinion  of
         Counsel must be based upon (and accompanied

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         by a copy of) a ruling of the United States Internal Revenue Service to
         the same effect  unless  there has been a change in  applicable  United
         States federal income tax law after the Closing Date such that a ruling
         is no longer required or (y) a ruling directed to the Trustee  received
         from the United States  Internal  Revenue Service to the same effect as
         the aforementioned  Opinion of Counsel; (ii) an Opinion of Counsel or a
         ruling from  Revenue  Canada,  Taxation to the effect that Holders will
         not recognize income, gain or loss for Canadian federal,  provincial or
         territorial  income  tax or other  tax  purposes  as a  result  of such
         deposit  and  defeasance  and will be  subject to  Canadian  federal or
         provincial  income tax and other tax on the same  amounts,  in the same
         manner  and at the  same  times as  would  have  been the case had such
         deposit and  defeasance not occurred (and for purposes of such opinion,
         such  Canadian  counsel  shall  assume that  Holders of the  Securities
         include  Holders who are not resident in Canada);  and (iii) an Opinion
         of Counsel to the effect that (x) the creation of the defeasance  trust
         does not violate the  Investment  Company Act of 1940 and (y) after the
         passage of 123 days following the deposit (except,  with respect to any
         trust  funds for the  account  of any Holder who may be deemed to be an
         "insider" for purposes of the United States  Bankruptcy Code, after one
         year following the deposit), the trust funds will not be subject to the
         effect of Section 547 of the United States  Bankruptcy  Code or Section
         15 of the New York Debtor and  Creditor  Law in a case  commenced by or
         against the  Company,  GST USA or GST under  either such  statute,  and
         either (I) the trust  funds will no longer  remain the  property of the
         Issuer or GST (and  therefore  will not be subject to the effect of any
         applicable  bankruptcy,  insolvency,  reorganization  or  similar  laws
         affecting  creditors' rights generally) or (II) if a court were to rule
         under  any such  law in any case or  proceeding  that the  trust  funds
         remained  property of the Issuer or GST (a)  assuming  such trust funds
         remained in the possession of the Trustee prior to such court ruling to
         the extent not paid to the  Holders,  the  Trustee  will hold,  for the
         benefit of the Holders, a valid and perfected security interest in such
         trust funds that is not avoidable in  bankruptcy  or otherwise  (except
         for the effect of Section 552(b) of the United States  Bankruptcy  Code
         on interest on the trust funds  accruing  after the  commencement  of a
         case under such  statute),  (b) the Holders will be entitled to receive
         adequate  protection  of their  interests  in such trust  funds if such
         trust funds are used in such case or  proceeding  and (c) no  property,
         rights in  property  or other  interests  granted to the Trustee or the
         Holders in exchange  for, or with  respect to, such trust funds will be
         subject to any prior  rights of holders  of other  Indebtedness  of the
         Company, GST USA, GST, or any of its Subsidiaries;

                  (C)  immediately  after giving effect to such deposit on a PRO
         FORMA basis,  no Default or Event of Default shall have occurred and be
         continuing  on the date of such deposit or during the period  ending on
         the 123rd day (or one year)  after the date of such  deposit,  and such
         deposit  shall not result in a breach or violation  of, or constitute a
         default under,  any other agreement or instrument to which the Company,
         GST USA, GST or any of their  respective  Subsidiaries is a party or by
         which the Company, GST USA, GST or any of their respective Subsidiaries
         is bound;

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<PAGE>
                  (D) if the Securities are then listed on a national securities
         exchange,  the Issuer shall have delivered to the Trustee an Opinion of
         Counsel to the effect  that the  Securities  will not be  delisted as a
         result of such deposit, defeasance and discharge; and

                  (E) the  Issuer has  delivered  to the  Trustee  an  Officers'
         Certificate  and an Opinion of Counsel,  in each case  stating that all
         conditions  precedent  provided for herein  relating to the  defeasance
         contemplated by this Section 8.02 have been complied with.

         Notwithstanding the foregoing,  prior to the end of the 123-day (or one
year) period referred to in clause (B)(iii)(y) of this Section 8.02, none of the
Company's,  GST  USA's  or  GST's  obligations  under  this  Indenture  shall be
discharged.  Subsequent  to the end of such 123- day (or one year)  period  with
respect to this Section 8.02, the Company's,  GST USA's and GST's obligations in
Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 2.09, 2.14, 4.01, 4.02, 4.22,
7.07,  7.08,  8.05 and 8.06 and Article Eleven and the Security  Guarantee shall
survive until the Securities  are no longer  outstanding.  Thereafter,  only the
Issuer's  obligations in Sections 7.07, 8.05 and 8.06 shall survive. If and when
a ruling  from the  United  States  Internal  Revenue  Service  or an Opinion of
Counsel  referred  to in clause  (B)(i)  of this  Section  8.02 may be  provided
specifically without regard to, and not in reliance upon, the continuance of the
Issuer's obligations under Section 4.01 and GST's obligations under the Security
Guarantee,  then the  Issuer's  obligations  under such  Section  4.01 and GST's
obligations  under the  Security  Guarantee  shall  cease upon  delivery  to the
Trustee  of such  ruling or Opinion of  Counsel  and  compliance  with the other
conditions precedent provided for herein relating to the defeasance contemplated
by this Section 8.02.

         After any such  irrevocable  deposit,  the Trustee upon  request  shall
acknowledge  in writing  the  discharge  of the  Company's,  GST USA's and GST's
obligations  under the Securities and this Indenture  except for those surviving
obligations in the immediately preceding paragraph.

         SECTION 8.03.  DEFEASANCE OF CERTAIN OBLIGATIONS.  The Company, GST USA
and GST may omit to comply with any term,  provision or  condition  set forth in
clauses  (iii) and (iv) of Section 5.01 and  Sections  4.03  through  4.21,  and
clause (c) of  Section  6.01 with  respect to clauses  (iii) and (iv) of Section
5.01 and  Sections  4.03 through  4.21,  and clauses (d), (e) and (h) of Section
6.01 shall be deemed not to be Events of Default,  in each case with  respect to
the outstanding Securities if:

                  (i) the  Issuer  has  irrevocably  deposited  or  caused to be
         irrevocably  deposited with the Trustee (or another trustee  satisfying
         the  requirements  of Section  7.10) and conveyed all right,  title and
         interest to the Trustee for the benefit of the Holders, under the terms
         of an irrevocable trust agreement in form and substance satisfactory to
         the  Trustee  as trust  funds in  trust,  specifically  pledged  to the
         Trustee for the  benefit of the Holders as security  for payment of the
         principal of, premium, if any, and interest, if any, on the

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         Securities, and dedicated solely to, the benefit of the Holders, in and
         to (A)  money in an  amount,  (B)  U.S.  Government  Obligations  that,
         through the payment of interest  and  principal  in respect  thereof in
         accordance  with  their  terms,  will  provide,  not later than one day
         before the due date of any  payment  referred  to in this  clause  (i),
         money  in  an  amount  or  (C)  a  combination  thereof  in  an  amount
         sufficient,   in  the  opinion  of  a  nationally  recognized  firm  of
         independent  public  accountants  expressed in a written  certification
         thereof  delivered  to the  Trustee,  to  pay  and  discharge,  without
         consideration of the reinvestment of such interest and after payment of
         all federal,  state and local taxes or other charges and assessments in
         respect thereof payable by the Trustee,  the principal of, premium,  if
         any, and interest on the outstanding  Securities on the Stated Maturity
         of such  principal or interest;  PROVIDED  that the Trustee  shall have
         been irrevocably instructed to apply such money or the proceeds of such
         U.S. Government Obligations to the payment of such principal,  premium,
         if any, and interest with respect to the Securities;

                  (ii) such deposit will not result in a breach or violation of,
         or constitute a default under, this Indenture or any other agreement or
         instrument  to  which  the  Company,  GST  USA,  GST or  any  of  their
         respective Subsidiaries is a party or by which it is bound;

                  (iii) no Default or Event of Default  shall have  occurred and
         be continuing on the date of such deposit;

                  (iv) the Issuer  has  delivered  to the  Trustee an Opinion of
         Counsel to the effect  that (A) the  creation of the  defeasance  trust
         does not violate the  Investment  Company Act of 1940,  (B) the Holders
         have a valid  first-priority  security interest in the trust funds, (C)
         the Holders will not recognize  income,  gain or loss for United States
         federal  income  tax  purposes  as a  result  of such  deposit  and the
         defeasance  of the  obligations  referred to in the first  paragraph of
         this Section 8.03 and will be subject to United States  federal  income
         tax on the same  amount and in the same manner and at the same times as
         would  have  been  the  case if such  deposit  and  defeasance  had not
         occurred,  (D) the Holders will not recognize income,  gain or loss for
         Canadian  federal,  provincial or  territorial  income tax or other tax
         purposes  as a  result  of  such  deposit  and  the  defeasance  of the
         obligations referred to in the first paragraph of this Section 8.03 and
         will be subject to Canadian federal or provincial  income tax and other
         tax on the same  amount and in the same manner and at the same times as
         would  have  been  the  case if such  deposit  and  defeasance  had not
         occurred  and (E) after the passage of 123 days  following  the deposit
         (except,  with respect to any trust funds for the account of any Holder
         who may be deemed to be an "insider"  for purposes of the United States
         Bankruptcy Code, after one year following the deposit), the trust funds
         will not be subject to the effect of Section  547 of the United  States
         Bankruptcy  Code or Section 15 of the New York Debtor and  Creditor Law
         in a case  commenced  by or against the Issuer or GST under either such
         statute,  and  either  (1) the trust  funds  will no longer  remain the
         property of the Issuer or GST (and therefore will not be subject to the

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         effect of any  applicable  bankruptcy,  insolvency,  reorganization  or
         similar laws affecting  creditors'  rights generally) or (2) if a court
         were to rule  under  any such law in any  case or  proceeding  that the
         trust funds  remained  property of the Issuer or GST (x) assuming  such
         trust funds  remained in the  possession  of the Trustee  prior to such
         court  ruling to the extent not paid to the  Holders,  the Trustee will
         hold,  for the benefit of the Holders,  a valid and perfected  security
         interest in such trust funds that is not  avoidable  in  bankruptcy  or
         otherwise (except for the effect of Section 552(b) of the United States
         Bankruptcy  Code on  interest  on the trust  funds  accruing  after the
         commencement  of a case under such  statute),  (y) the Holders  will be
         entitled to receive  adequate  protection  of their  interests  in such
         trust funds if such trust funds are used in such case or proceeding and
         (z) no property,  rights in property or other interests  granted to the
         Trustee or the Holders in exchange  for, or with respect to, such trust
         funds  will  be  subject  to any  prior  rights  of  holders  of  other
         Indebtedness of GST, GST USA, the Company or any of its Subsidiaries;

                  (v) if the Securities are then listed on a national securities
         exchange,  the Issuer shall have delivered to the Trustee an Opinion of
         Counsel to the effect that such deposit and  defeasance  will not cause
         the Securities to be delisted; and

                  (vi) the  Issuer has  delivered  to the  Trustee an  Officers'
         Certificate  and an Opinion of Counsel,  in each case  stating that all
         conditions  precedent  provided for herein  relating to the  defeasance
         contemplated by this Section 8.03 have been complied with.

         SECTION 8.04.  APPLICATION OF TRUST MONEY. Subject to Section 8.06, the
Trustee or Paying Agent shall hold in trust money or U.S. Government Obligations
deposited  with it pursuant to Section  8.01,  8.02 or 8.03, as the case may be,
and  shall  apply  the  deposited  money  and the  money  from  U.S.  Government
Obligations in accordance  with the Securities and this Indenture to the payment
of principal of, premium, if any, and interest on the Securities; but such money
need not be segregated from other funds except to the extent required by law.

         SECTION 8.05. REPAYMENT TO ISSUER. Subject to Sections 7.07, 8.01, 8.02
and 8.03, the Trustee and the Paying Agent shall promptly pay to the Issuer upon
request  any  excess  money  held by them at any  time  and  thereupon  shall be
relieved  from all  liability  with  respect to such money.  The Trustee and the
Paying  Agent  shall pay to the Issuer any money held by them for the payment of
principal,  premium,  if any, or interest that remains  unclaimed for two years;
PROVIDED that the Trustee or such Paying Agent before being required to make any
payment  may  cause to be  published  at the  expense  of the  Issuer  once in a
newspaper of general  circulation in the City of New York or mail to each Holder
entitled to such money at such  Holder's  address (as set forth in the  Security
Register)  notice  that  such  money  remains  unclaimed  and that  after a date
specified  therein  (which  shall  be at  least  30 days  from  the date of such
publication or mailing) any unclaimed  balance of such money then remaining will
be repaid to the Issuer.  After payment to the Issuer,  Holders entitled to such
money must look to the Issuer for payment as general creditors

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unless an applicable law  designates  another  Person,  and all liability of the
Trustee and such Paying Agent with respect to such money shall cease.

         SECTION 8.06.  REINSTATEMENT.  If the Trustee or Paying Agent is unable
to apply any money or U.S.  Government  Obligations  in accordance  with Section
8.01, 8.02 or 8.03, as the case may be, by reason of any legal  proceeding or by
reason  of  any  order  or  judgment  of any  court  or  governmental  authority
enjoining, restraining or otherwise prohibiting such application, the Company's,
GST USA's and GST's obligations under this Indenture and the Securities shall be
revived and  reinstated  as though no deposit had  occurred  pursuant to Section
8.01, 8.02 or 8.03, as the case may be, until such time as the Trustee or Paying
Agent is permitted  to apply all such money or U.S.  Government  Obligations  in
accordance  with Section 8.01,  8.02 or 8.03, as the case may be; PROVIDED that,
if the Company, GST USA or GST has made any payment of principal of, premium, if
any,  or  interest  on  any  Securities  because  of  the  reinstatement  of its
obligations,  the  Company,  GST USA or  GST,  as the  case  may  be,  shall  be
subrogated  to the rights of the  Holders  of such  Securities  to receive  such
payment  from the money or U.S.  Government  Obligations  held by the Trustee or
Paying Agent.

         SECTION  8.07.  INSIDERS.  With  respect  to the  determination  of the
Persons constituting beneficial owners of Securities and whether any such Person
is an "insider" for purposes of Sections  8.02(B)(iii)(y)  and 8.03(iv)(E),  the
Trustee may rely on an Officers' Certificate.

                                  ARTICLE NINE
                       AMENDMENTS, SUPPLEMENTS AND WAIVERS

         SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company, GST USA and GST,
when authorized by resolutions of their Boards of Directors, and the Trustee may
amend or supplement  this  Indenture,  the  Securities  or the Pledge  Agreement
without notice to or the consent of any Holder:

                  (a) to cure any  ambiguity,  defect or  inconsistency  in this
         Indenture or the Pledge  Agreement;  PROVIDED  that such  amendments or
         supplements  shall not adversely affect the interests of the Holders in
         any material respect;

                  (b) to comply with Article Five or Section 4.23 hereof;

                  (c) to  comply  with any  requirements  of the  Commission  in
         connection with the qualification of this Indenture under the TIA;

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                  (d) to evidence and provide for the  acceptance of appointment
         hereunder by a successor Trustee; or

                  (e) to make any change  that,  in the  opinion of the Board of
         Directors of GST evidenced by a Board  Resolution,  does not materially
         and adversely affect the rights of any Holder.

         SECTION  9.02.  WITH CONSENT OF HOLDERS.  Subject to Sections  6.04 and
6.07 and without prior notice to the Holders, the Company, GST USA and GST, when
authorized by their Boards of Directors  (as  evidenced by a Board  Resolution),
and the Trustee may amend this Indenture, the Securities or the Pledge Agreement
with the written  consent of the Holders of a majority  in  aggregate  principal
amount of the outstanding Securities, and the Holders of a majority in aggregate
principal amount of the outstanding  Securities by written notice to the Trustee
may waive future compliance by the Company, GST USA or GST with any provision of
this Indenture, the Securities or the Pledge Agreement.

         Notwithstanding  the  provisions  of this  Section  9.02,  without  the
consent of each Holder  affected,  an  amendment  or waiver,  including a waiver
pursuant to Section 6.04, may not:

                  (i) change the Stated  Maturity  of the  principal  of, or any
         installment of interest on, any Security;

                  (ii) reduce the Accreted Value or principal of, or premium, if
         any, or interest  on, any  Security  or  adversely  affect any right of
         repayment at the option of any Holder of any Security;

                  (iii) change the place or currency of payment of principal of,
         or premium, if any, or interest on, any Security;

                  (iv) impair the right to institute suit for the enforcement of
         any  payment  on or after the  Stated  Maturity  (or,  in the case of a
         redemption, on or after the Redemption Date) of any Security;

                  (v)  reduce  the  percentage  of  outstanding  Securities  the
         consent  of  whose  Holders  is  required  for  any  such  supplemental
         indenture or for any waiver of  compliance  with certain  provisions of
         this Indenture or certain Defaults and their consequences  provided for
         in this Indenture;

                  (vi) waive a default in the payment of principal of,  premium,
         if any, or interest on the Securities;

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                  (vii) amend or modify the terms of the Pledge  Agreement  in a
         manner that would materially and adversely affect the Holders;

                  (viii) release GST from its Security Guarantee; or

                  (ix) modify any of the provisions of this Section 9.02, except
         to  increase  any such  percentage  or to provide  that  certain  other
         provisions of this  Indenture  cannot be modified or waived without the
         consent of the Holder of each outstanding Security affected thereby.

         It shall not be  necessary  for the consent of the  Holders  under this
Section  9.02  to  approve  the  particular  form  of  any  proposed  amendment,
supplement or waiver,  but it shall be  sufficient if such consent  approves the
substance thereof.

         After an  amendment,  supplement  or waiver  under  this  Section  9.02
becomes  effective,  the Issuer  shall mail to the  Holders  affected  thereby a
notice briefly  describing the amendment,  supplement or waiver. The Issuer will
mail supplemental  indentures to Holders upon request. Any failure of the Issuer
to mail such  notice,  or any defect  therein,  shall not,  however,  in any way
impair or affect the validity of any such supplemental indenture or waiver.

         SECTION 9.03.  REVOCATION AND EFFECT OF CONSENT.  Until an amendment or
waiver becomes effective, a consent to it by a Holder is a continuing consent by
the Holder and every  subsequent  Holder of a Security  or portion of a Security
that evidences the same debt as the Security of the consenting  Holder,  even if
notation of the consent is not made on any Security. However, any such Holder or
subsequent  Holder may revoke the  consent as to its  Security or portion of its
Security.  Such revocation  shall be effective only if the Trustee  receives the
notice of revocation before the date the amendment, supplement or waiver becomes
effective. An amendment,  supplement or waiver shall become effective on receipt
by the Trustee of written consents from the Holders of the requisite  percentage
in principal amount of the outstanding Securities.

         The Issuer may,  but shall not be  obligated  to, fix a record date for
the purpose of  determining  the Holders  entitled to consent to any  amendment,
supplement or waiver. If a record date is fixed, then,  notwithstanding the last
two sentences of the  immediately  preceding  paragraph,  those persons who were
Holders at such record date (or their duly  designated  proxies)  and only those
persons shall be entitled to consent to such amendment,  supplement or waiver or
to revoke any consent previously given,  whether or not such persons continue to
be Holders  after such record date.  No such consent shall be valid or effective
for more than 90 days after such record date.

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         After an amendment,  supplement or waiver becomes  effective,  it shall
bind every  Holder  unless it is of the type  described  in any of  clauses  (i)
through  (ix) of Section  9.02.  In case of an  amendment  or waiver of the type
described in clauses (i) through (ix) of Section  9.02,  the amendment or waiver
shall bind each Holder who has consented to it and every subsequent  Holder of a
Security that evidences the same  indebtedness as the Security of the consenting
Holder.

         SECTION 9.04.  NOTATION ON OR EXCHANGE OF SECURITIES.  If an amendment,
supplement  or waiver  changes the terms of a Security,  the Trustee may require
the Holder to deliver such Security to the Trustee.  At the Issuer's expense the
Trustee  may place an  appropriate  notation on the  Security  about the changed
terms and  return it to the  Holder  and the  Trustee  may place an  appropriate
notation on any Security thereafter authenticated.  Alternatively, if the Issuer
or the Trustee so  determines,  the Issuer in exchange  for the  Security  shall
issue and the Trustee  shall  authenticate  a new  Security  that  reflects  the
changed terms.

         SECTION  9.05.  TRUSTEE TO SIGN  AMENDMENTS,  ETC. The Trustee shall be
entitled to receive, and shall be fully protected in relying upon, an Opinion of
Counsel  stating  that the  execution  of any  amendment,  supplement  or waiver
authorized  pursuant to this  Article  Nine is  authorized  or permitted by this
Indenture.  Subject  to the  preceding  sentence,  the  Trustee  shall sign such
amendment, supplement or waiver if the same does not adversely affect the rights
of the Trustee. The Trustee may, but shall not be obligated to, execute any such
amendment, supplement or waiver that affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.

         SECTION 9.06.  CONFORMITY WITH TRUST INDENTURE ACT. Every  supplemental
indenture   executed  pursuant  to  this  Article  Nine  shall  conform  to  the
requirements of the TIA as then in effect.

                                   ARTICLE TEN
                               MEETINGS OF HOLDERS

         SECTION 10.01.  PURPOSES FOR WHICH MEETINGS MAY BE CALLED. A meeting of
Holders  may be  called  at any  time  and  from  time to time  pursuant  to the
provisions of this Article Ten for any of the following purposes:

                  (a) to give any notice to the Issuer or to the Trustee,  or to
         give any  directions  to the Trustee,  or to waive or to consent to the
         waiving  of  any  Default  or  Event  of  Default   hereunder  and  its
         consequences,  or to take any other  action  authorized  to be taken by
         Holders pursuant to any of the provisions of Article Six;

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                  (b) to remove  the  Trustee  or  appoint a  successor  Trustee
         pursuant to the provisions of Article Seven;

                  (c) to consent to an amendment,  supplement or waiver pursuant
         to the provisions of Section 9.02; or

                  (d) to take any other action  authorized  to be taken by or on
         behalf of the Holders of any specified  aggregate  principal  amount at
         maturity of the Securities under any other provision of this Indenture,
         or authorized or permitted by law.

         SECTION 10.02. MANNER OF CALLING MEETINGS.  The Trustee may at any time
call a meeting of Holders to take any action  specified in Section 10.01,  to be
held at such  time  and at such  place  in The  City of New  York,  New  York or
elsewhere as the Trustee  will  determine.  Notice of every  meeting of Holders,
setting forth the time and place of such meeting and in general terms the action
proposed to be taken at such meeting, will be mailed by the Trustee, first-class
postage  prepaid,  to the Issuer and to the Holders at their last  addresses  as
they will appear on the registration books of the Registrar not less than 10 nor
more than 60 days prior to the date fixed for a meeting.

         Any meeting of Holders will be valid  without  notice if the Holders of
all  outstanding  Securities are present in Person or by proxy,  or if notice is
waived before or after the meeting by the Holders of all outstanding Securities,
and if the  Issuer  and the  Trustee  are  either  present  by  duly  authorized
representatives or have, before or after the meeting, waived notice.

         SECTION  10.03.  CALL OF MEETINGS BY ISSUER OR HOLDERS.  In case at any
time the Issuer, pursuant to a Board Resolution, or the Holders of not less than
10% in aggregate principal amount at maturity of the outstanding Securities will
have  requested  the  Trustee  to call a meeting  of  Holders to take any action
specified in Section  10.01,  by written  request  setting  forth in  reasonable
detail the action proposed to be taken at the meeting,  and the Trustee will not
have  mailed the  notice of such  meeting  within 20 days after  receipt of such
request,  then the Issuer or the  Holders  of  Securities  in the  amount  above
specified may determine the time and place in The City of New York,  New York or
elsewhere  for such  meeting and may call such meeting for the purpose of taking
such action,  by mailing or causing to be mailed  notice  thereof as provided in
Section  10.02,  or by causing  notice  thereof to be published at least once in
each of two successive  calendar weeks (on any Business Day during such week) in
a newspaper or newspapers printed in the English language, customarily published
at least  five  days a week of a  general  circulation  in The City of New York,
State of New York,  the first such  publication  to be not less than 10 nor more
than 60 days prior to the date fixed for the meeting.

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         SECTION 10.04.  WHO MAY ATTEND AND VOTE AT MEETINGS.  To be entitled to
vote at any meeting of Holders,  a Person will (i) be a registered Holder of one
or more Securities, or (ii) be a Person appointed by an instrument in writing as
proxy for the registered  Holder or Holders of Securities.  The only Persons who
will be entitled to be present or to speak at any meeting of Holders will be the
Persons   entitled  to  vote  at  such   meeting  and  their   counsel  and  any
representatives  of the Trustee and its counsel and any  representatives  of the
Issuer or GST and their counsel.

         SECTION 10.05. QUORUM;  ACTION. The Persons entitled to vote a majority
in principal amount of the outstanding  Securities shall constitute a quorum. In
the  absence of a quorum  within 30 minutes of the time  appointed  for any such
meeting, the meeting shall, if convened at the request of Holders of Securities,
be dissolved. In any other case the meeting may be adjourned for a period of not
less than 10 days as  determined  by the  chairman of the  meeting  prior to the
adjournment  of such meeting.  In the absence of a quorum at any such  adjourned
meeting,  such  adjourned  meeting may be further  adjourned for a period of not
less than 10 days as  determined  by the  chairman of the  meeting  prior to the
adjournment  of  such  adjourned  meeting.  Notice  of  the  reconvening  of any
adjourned meeting shall be given as provided in Section 10.02,  except that such
notice  need be given only once and not less than five days prior to the date on
which the meeting is scheduled to be reconvened. Notice of the reconvening of an
adjourned  meeting shall state expressly the percentage of the principal  amount
of the outstanding Securities which shall constitute a quorum.

         Subject to the foregoing,  at the reconvening of any meeting  adjourned
for a lack of a quorum,  the Persons entitled to vote 25% in principal amount at
maturity of the outstanding Securities at the time shall constitute a quorum for
the taking of any action set forth in the notice of the original meeting.

         At a meeting or an  adjourned  meeting duly  reconvened  and at which a
quorum is  present as  aforesaid,  any  action or  matter,  except as  otherwise
specified herein,  shall be effectively  passed and decided if passed or decided
by the Persons  entitled to vote not less than a majority in principal amount at
maturity of outstanding Securities represented and voting at such meeting.

         Any action or matter passed or decision taken at any meeting of Holders
of Securities  duly held in accordance  with this Section 10.05 shall be binding
on all the Holders of  Securities,  whether or not present or represented at the
meeting.

         SECTION  10.06.  REGULATIONS  MAY BE MADE BY  TRUSTEE;  CONDUCT  OF THE
MEETING; VOTING RIGHTS; ADJOURNMENT. Notwithstanding any other provision of this
Indenture,  the  Trustee  may make such  reasonable  regulations  as it may deem
advisable for any action by or any meeting of Holders, in regard to proof of the
holding of Securities and of the  appointment  of proxies,  and in regard to the
appointment and duties of inspectors of votes, and submission and examination

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of proxies, certificates and other evidence of the right to vote, and such other
matters concerning the conduct of the meeting as it will think appropriate. Such
regulations may fix a record date and time for determining the Holders of record
of  Securities  entitled to vote at such  meeting,  in which case those and only
those  Persons  who are  Holders of  Securities  at the record  date and time so
fixed, or their proxies, will be entitled to vote at such meeting whether or not
they will be such Holders at the time of the meeting.

         The Trustee  will,  by an  instrument  in writing,  appoint a temporary
chairman of the meeting,  unless the meeting will have been called by the Issuer
or by Holders as  provided  in  Section  10.03,  in which case the Issuer or the
Holders  calling the meeting,  as the case may be, will in like manner appoint a
temporary  chairman.  A  permanent  chairman  and a permanent  secretary  of the
meeting will be elected by vote of the Holders of a majority in principal amount
at maturity of the Securities represented at the meeting and entitled to vote.

         At any meeting each Holder or proxy will,  subject to the provisions of
Section 10.04 hereof,  be entitled to one vote for each $1,000  principal amount
at maturity of Securities held or represented by him or her; PROVIDED,  HOWEVER,
that no vote will be cast or counted at any meeting in respect of any Securities
challenged as not outstanding and ruled by the chairman of the meeting to be not
outstanding.  The  chairman  may  adjourn  any such  meeting  if he is unable to
determine  whether any Holder or proxy will be entitled to vote at such meeting.
The  chairman of the meeting  will have no right to vote other than by virtue of
Securities  held by him or instruments in writing as aforesaid duly  designating
him as the proxy to vote on behalf of other Holders. Any meeting of Holders duly
called  pursuant  to the  provisions  of Section  10.02 or Section  10.03 may be
adjourned  from time to time by vote of the Holders of a majority  in  aggregate
principal  amount at maturity of the  Securities  represented at the meeting and
entitled to vote,  and the meeting may be held as so adjourned  without  further
notice.

         SECTION  10.07.  VOTING AT THE MEETING AND RECORD TO BE KEPT.  The vote
upon any  resolution  submitted  to any  meeting of  Holders  will be by written
ballots on which will be subscribed  the signatures of the Holders of Securities
or/of their representatives by proxy and the principal amount at maturity of the
Securities  voted by the ballot.  The  permanent  chairman  of the meeting  will
appoint two  inspectors  of votes,  who will count all votes cast at the meeting
for or against any  resolution  and will make and file with the secretary of the
meeting  their  verified  written  reports in duplicate of all votes cast at the
meeting.  A record in  duplicate of the  proceedings  of each meeting of Holders
will be prepared by the  secretary  of the meeting and there will be attached to
such  record  the  original  reports of the  inspectors  of votes on any vote by
ballot taken thereat and affidavits by one or more Persons  having  knowledge of
the facts,  setting  forth a copy of the notice of the meeting and showing  that
such notice was mailed as provided in Section  10.02.  The record will be signed
and verified by the  affidavits of the  permanent  chairman and the secretary of
the meeting and one of the duplicates will be delivered to the Issuer and the

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other to the Trustee to be preserved by the Trustee, the latter to have attached
thereto the ballots voted at the meeting.

         Any record so signed and verified  will be  conclusive  evidence of the
matters therein stated.

         SECTION  10.08.  EXERCISE  OF RIGHTS OF TRUSTEE  OR HOLDERS  MAY NOT BE
HINDERED OR DELAYED BY CALL OF MEETING.  Nothing  contained  in this Article Ten
will be deemed or construed  to authorize or permit,  by reason of any call of a
meeting of Holders or any rights expressly or impliedly  conferred  hereunder to
make such call,  any  hindrance  or delay in the exercise of any right or rights
conferred  upon or reserved  to the  Trustee or to the Holders  under any of the
provisions of this Indenture or of the Securities.

         SECTION 10.09.  PROCEDURES  NOT EXCLUSIVE.  The procedures set forth in
this Article Ten are not exclusive and the rights and obligations of the Issuer,
GST,  the  Trustee  and the  Holders  under  other  Articles  of this  Indenture
(including, without limitation,  Articles Six, Seven, Eight and Nine) will in no
way be limited by the provisions of this Article Ten.

                                 ARTICLE ELEVEN
                                    SECURITY

         SECTION 11.01. SECURITY. (a) On the Closing Date, the Company shall (i)
enter into the Pledge Agreement and comply with the terms and provisions thereof
and (ii)  purchase the Pledged  Securities  to be pledged to the Trustee for the
benefit of the Holders in an amount  equal to the net proceeds to be received by
the Company from the sale of the Securities  (plus all cash owned by the Company
on the Closing Date). The Pledged  Securities shall be pledged by the Company to
the  Trustee  for the benefit of the Holders and shall be held by the Trustee in
the Pledge Account pending disposition pursuant to the Pledge Agreement.

                  (b) On the Closing  Date,  GST USA, GST and the Company  shall
enter into the Reimbursement  and Commitment Fee Agreement.  The Securities will
be secured by a first priority security  interest in the Pledged  Securities and
in the Pledge Account and by a first priority security interest in the Company's
rights under the  Reimbursement  and  Commitment Fee Agreement and any Fee Notes
issued thereunder.

                  (c) Each Holder, by its acceptance of a Security, consents and
agrees to the terms of the Pledge Agreement (including,  without limitation, the
provisions  providing for foreclosure and release of the Pledged  Securities) as
the same may be in effect or may be amended from time to time in accordance with
its terms,  and  authorizes  and  directs  the  Trustee to enter into the Pledge
Agreement and to perform its respective obligations and exercise its

                                       87

<PAGE>
respective  rights  thereunder in accordance  therewith.  The Company will do or
cause to be done all such acts and things as may be necessary  or proper,  or as
may be required by the provisions of the Pledge Agreement, to assure and confirm
to the Trustee the  security  interest  in the Pledged  Securities  contemplated
hereby,  by the  Pledge  Agreement  or any part  thereof,  as from  time to time
constituted,  so as to render the same available for the security and benefit of
this Indenture and of the Securities secured hereby, according to the intent and
purposes herein  expressed.  The Company shall take, or shall cause to be taken,
any and all  actions  reasonably  required  (and  any  action  requested  by the
Trustee) to cause the Pledge  Agreement to create and maintain,  as security for
the  obligations of the Company under this Indenture and the  Securities,  valid
and  enforceable  first  priority  security  interests in and on all the Pledged
Securities,  the Pledge Account,  the Fee Notes, the Intercompany  Notes and the
Acquired Equipment in favor of the Trustee,  superior to and prior to the rights
of third Persons and subject to no other Liens.

                  (d)  Upon  written  request  by the  Company  to the  Trustee,
Pledged  Securities  shall be released from the Pledge Account to the Company in
order to finance the cost (including,  without  limitation,  the cost of design,
development,    construction,    acquisition,   installation   or   integration)
(collectively,  "ACQUIRED  EQUIPMENT COST") of  telecommunications  inventory or
equipment purchased or leased by the Company ("ACQUIRED EQUIPMENT"). The release
of amounts to the  Company in order to  finance  Acquired  Equipment  Cost shall
occur  concurrently with the expenditure of funds by the Company with respect to
such costs and shall be in an amount equal to such costs.  Immediately  upon the
acquisition  of Acquired  Equipment,  the Company  shall grant a first  priority
security  interest in such Acquired  Equipment to the Trustee for the benefit of
the Holders of the  Securities.  GST USA shall  purchase all Acquired  Equipment
from the Company at a purchase  price equal to the Acquired  Equipment  Cost for
such Acquired  Equipment and the purchase  price shall be paid in the form of an
Intercompany  Note in a principal  amount equal to the Acquired  Equipment Cost,
issued  by GST  USA and  fully  and  unconditionally  guaranteed  by  GST.  Each
Intercompany  Note shall be secured by a first priority security interest in all
Acquired  Equipment  purchased  by GST  USA.  The  Company  shall  grant a first
priority  security  interest  in all  Intercompany  Notes to the Trustee for the
benefit of the Holders of the Securities.  On the Assumption Date, GST USA shall
grant a first  priority  security  interest in all Acquired  Equipment  securing
Intercompany Notes or then held by the Company to the Trustee for the benefit of
the Holders of the Securities.

                  (e) The  release of any  Pledged  Securities  pursuant  to the
Pledge  Agreement will not be deemed to impair the security under this Indenture
in  contravention  of the  provisions  hereof if and to the extent  the  Pledged
Securities are released pursuant to this Indenture and the Pledge Agreement.  To
the extent  applicable,  the Company shall cause TIA Section 314(d)  relating to
the release of property or securities from the Lien and security interest of the
Pledge Agreement (other than pursuant to Sections 7(a), 7(b) or 7(c) thereof)

                                       88

<PAGE>
and relating to the  substitution  therefor of any property or  securities to be
subjected  to the Lien and  security  interest  of the  Pledge  Agreement  to be
complied with. Any certificate or opinion  required by TIA Section 314(d) may be
made by an Officer of the  Company,  except in cases  where TIA  Section  314(d)
requires  that such  certificate  or opinion be made by an  independent  Person,
which  Person  shall be an  independent  engineer,  appraiser  or  other  expert
selected by the Company.

                  (f) The Company  shall cause TIA Section  314(b),  relating to
opinions  of  counsel  regarding  the Lien  under the  Pledge  Agreement,  to be
complied  with.  The Trustee may, to the extent  permitted by Sections  7.01 and
7.02 hereof,  accept as  conclusive  evidence of  compliance  with the foregoing
provisions the appropriate statements contained in such instruments.

                  (g) The  Trustee,  in its  sole  discretion  and  without  the
consent of the  Holders,  may, and at the request of the Holders of at least 25%
in aggregate  principal amount at maturity of Securities then outstanding shall,
on behalf of the Holders,  take all actions it deems necessary or appropriate in
order to (i) enforce any of the terms of the Pledge  Agreement  and (ii) collect
and  receive any and all amounts  payable in respect of the  obligations  of the
Company  thereunder.  The Trustee  shall have power to institute and to maintain
such suits and  proceedings  as the  Trustee may deem  expedient  to preserve or
protect its interests and the interests of the Holders in the Pledged Securities
(including  power to institute and maintain suits or proceedings to restrain the
enforcement  of  or  compliance  with  any  legislative  or  other  governmental
enactment,  rule or order that may be  unconstitutional  or otherwise invalid if
the  enforcement of, or compliance  with,  such  enactment,  rule or order would
impair the security interest hereunder or be prejudicial to the interests of the
Holders or of the Trustee).

                                 ARTICLE TWELVE
                                  MISCELLANEOUS

         SECTION 12.01.  TRUST INDENTURE ACT OF 1939. Prior to the effectiveness
of the Registration Statement,  this Indenture shall incorporate and be governed
by the  provisions  of the TIA that  are  required  to be part of and to  govern
indentures  qualified under the TIA. After the effectiveness of the Registration
Statement, this Indenture shall be subject to the provisions of the TIA that are
required to be a part of this Indenture and shall, to the extent applicable,  be
governed by such provisions.

         SECTION  12.02.   NOTICES.   Any  notice  or  communication   shall  be
sufficiently  given if in  writing  and  delivered  in person or mailed by first
class mail addressed as follows:

                                       89

<PAGE>
                IF TO THE COMPANY:

                           GST Network Funding, Inc.
                           4001 Main Street
                           Vancouver, Washington  98663
                           Attention:  Chief Executive Officer

                  IF TO GST USA:

                           GST USA, Inc.
                           4001 Main Street
                           Vancouver, Washington  98663
                           Attention:  Chief Executive Officer

                  IF TO GST:

                           GST Telecommunications, Inc.
                           4001 Main Street
                           Vancouver, Washington  98663
                           Attention:  Chief Executive Officer

                  IF TO THE TRUSTEE:

                           United States Trust Company of New York
                           114 West 47th Street
                           New York, New York  10036-1532
                           Attention:  Corporate Trust Division

                  The  Company,  GST USA,  GST or the  Trustee  by notice to the
other may designate  additional or different addresses for subsequent notices or
communications.

                  Any notice or communication mailed to a Holder shall be mailed
to him at his address as it appears on the Security Register by first class mail
and shall be sufficiently  given to him if so mailed within the time prescribed.
Copies of any such  communication  or notice to a Holder shall also be mailed to
the Trustee and each Agent at the same time.

                  Failure to mail a notice or  communication  to a Holder or any
defect in it shall not affect its  sufficiency  with  respect to other  Holders.
Except for a notice to the Trustee,  which is deemed  given only when  received,
and except as otherwise provided in this Indenture, if a notice or communication
is mailed in the  manner  provided  in this  Section  12.02,  it is duly  given,
whether or not the addressee receives it.

                                       90

<PAGE>
                  Where this Indenture  provides for notice in any manner,  such
notice may be waived in writing by the Person  entitled to receive  such notice,
either  before or after the event,  and such waiver shall be the  equivalent  of
such notice.  Waivers of notice by Holders shall be filed with the Trustee,  but
such filing  shall not be a condition  precedent  to the  validity of any action
taken in reliance upon such waiver.

                  In case by reason of the suspension of regular mail service or
by reason of any other  cause it shall be  impracticable  to give such notice by
mail,  then such  notification as shall be made with the approval of the Trustee
shall constitute a sufficient notification for every purpose hereunder.

                  SECTION  12.03.  CERTIFICATE  AND  OPINION  AS  TO  CONDITIONS
PRECEDENT. Upon any request or application by the Company, GST USA or GST to the
Trustee to take any action under this  Indenture,  the  Company,  GST USA or GST
shall furnish to the Trustee:

                  (i) an Officers'  Certificate  stating that, in the opinion of
         the signers,  all conditions  precedent,  if any,  provided for in this
         Indenture relating to the proposed action have been complied with; and

                  (ii) an Opinion of Counsel  stating  that,  in the  opinion of
         such Counsel, all such conditions precedent have been complied with.

                  SECTION 12.04.  STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each  certificate  or opinion  with  respect to  compliance  with a condition or
covenant provided for in this Indenture shall include:

                  (i) a statement that each person  signing such  certificate or
         opinion has read such covenant or condition and the definitions  herein
         relating thereto;

                  (ii) a brief  statement  as to the  nature  and  scope  of the
         examination  or  investigation  upon  which the  statement  or  opinion
         contained in such certificate or opinion is based;

                  (iii) a statement that, in the opinion of each such person, he
         has made such  examination or  investigation  as is necessary to enable
         him to express an informed  opinion as to whether or not such  covenant
         or condition has been complied with; and

                  (iv) a statement  as to whether or not, in the opinion of each
         such  person,  such  condition  or  covenant  has been  complied  with;
         PROVIDED, HOWEVER, that, with respect to matters of fact, an Opinion of
         Counsel may rely on an Officers'  Certificate or certificates of public
         officials.

                                       91

<PAGE>
         SECTION 12.05. RULES BY TRUSTEE, PAYING AGENT OR REGISTRAR. The Trustee
may make reasonable  rules for action by or at a meeting of Holders.  The Paying
Agent or Registrar may make reasonable rules for its functions.

         SECTION  12.06.  PAYMENT DATE OTHER THAN A BUSINESS DAY. If an Interest
Payment Date, Redemption Date, Payment Date, Stated Maturity or date of maturity
of any Security  shall not be a Business  Day,  then  payment of  principal  of,
premium,  if any, or interest on such Security,  as the case may be, need not be
made on such date, but may be made on the next succeeding  Business Day with the
same force and effect as if made on the Interest  Payment  Date,  Payment  Date,
Redemption Date, or at the Stated Maturity or date of maturity of such Security;
PROVIDED  that no  interest  shall  accrue  for the  period  from and after such
Interest Payment Date, Payment Date, Redemption Date, Stated Maturity or date of
maturity, as the case may be.

         SECTION 12.07. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE. This
Indenture and the  Securities  shall be governed by the laws of the State of New
York. Each of the Company,  GST USA and GST will appoint Olshan Grundman Frome &
Rosenzweig  LLP, 505 Park Avenue,  New York,  New York 10022,  Attention:  David
Adler,  Esq.  as its  agent  for  service  of  process  in any  suit,  action or
proceeding  with  respect to this  Indenture or the  Securities  and for actions
brought under federal or state  securities  laws brought in any federal or state
court  located in The City of New York and each of the Company,  GST USA and GST
agrees to submit to the jurisdiction of any such court.

         SECTION 12.08.  NO ADVERSE  INTERPRETATION  OF OTHER  AGREEMENTS.  This
Indenture may not be used to interpret another indenture, loan or debt agreement
of the Company,  GST USA, GST or any of their Subsidiaries.  Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.

         SECTION 12.09. NO RECOURSE AGAINST OTHERS.  No recourse for the payment
of the principal of, premium,  if any, or interest on any of the Securities,  or
for any claim based  thereon or  otherwise in respect  thereof,  and no recourse
under or upon any obligation,  covenant or agreement of the Company,  GST USA or
GST contained in this Indenture, or in any of the Securities,  or because of the
creation  of any  Indebtedness  represented  thereby,  shall be had  against any
incorporator or against any past, present or future partner, shareholder,  other
equityholder, officer, director, employee or controlling person, as such, of the
Company,  GST USA or GST or of any successor Person,  either directly or through
the Company,  GST USA or GST or any successor  Person,  whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise;  it being expressly  understood that all such liability is
hereby  expressly  waived and released as a condition of, and as a consideration
for, the execution of this Indenture and the issue of the Securities.

                                       92

<PAGE>
         SECTION 12.10.  SUCCESSORS.  All agreements of the Company, GST USA and
GST in this Indenture and the Securities shall bind their respective successors.
All agreements of the Trustee in this Indenture shall bind its successors.

         SECTION 12.11. DUPLICATE ORIGINALS.  The parties may sign any number of
copies of this Indenture. Each signed copy shall be an original, but all of them
together represent the same agreement.

         SECTION 12.12. SEPARABILITY. In case any provision in this Indenture or
in the  Securities  shall be invalid,  illegal or  unenforceable,  the validity,
legality and enforceability of the remaining  provisions shall not in any way be
affected or impaired thereby.

         SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC. The Table of Contents,
Cross-Reference  Table  and  headings  of the  Articles  and  Sections  of  this
Indenture have been inserted for  convenience  of reference  only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
and provisions hereof.

                                       93

<PAGE>
                                   SIGNATURES

         IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed, all as of the date first written above.

                                           GST NETWORK FUNDING, INC.


                                           By:/s/ Stephen Irwin
                                              ----------------------------------
                                              Name:  Stephen Irwin
                                              Title: Senior Vice President

                                           GST USA, INC.



                                           By:/s/ Stephen Irwin
                                              ----------------------------------
                                              Name:  Stephen Irwin
                                              Title: Senior Vice President

                                           GST TELECOMMUNICATIONS, INC.



                                           By:/s/ Stephen Irwin
                                              ----------------------------------
                                              Name:  Stephen Irwin
                                              Title: Vice Chairman and
                                                     Secretary

                                           UNITED STATES TRUST COMPANY
                                             OF NEW YORK



                                           By:/s/ Louis Young
                                              ----------------------------------
                                              Name:  Louis Young
                                              Title: Vice President

                                       94

<PAGE>
                                                                       EXHIBIT A

                                 [FACE OF NOTE]

THIS NOTE WAS ISSUED WITH ORIGINAL  ISSUE  DISCOUNT FOR U.S.  FEDERAL INCOME TAX
PURPOSES.  FOR  INFORMATION  REGARDING  ISSUE  PRICE,  AMOUNT OF ORIGINAL  ISSUE
DISCOUNT,  ISSUE  DATE AND YIELD TO  MATURITY,  THE HOLDER  MAY  CONTACT  DANIEL
TRAMPUSH, CHIEF FINANCIAL OFFICER OF THE COMPANY, AT (360) 906-7100.

                            GST NETWORK FUNDING, INC.

                  10 1/2% Senior Secured Discount Note due 2008

                                                                 [CUSIP _______]

No. ____________                                                      $_________



         GST NETWORK  FUNDING,  INC., a Delaware  corporation  (the "COMPANY" or
together with any successor  under the  Indenture  hereinafter  referred to, the
"ISSUER") for value received,  promises to pay to __________,  or its registered
assigns, the principal sum of $__________ on May 1, 2008.

         Interest  Payment Dates:  May 1 and November 1, commencing  November 1,
2003.

         Regular Record Dates: April 15 and October 15.

         Reference  is hereby  made to the further  provisions  of this Note set
forth on the reverse  hereof,  which further  provisions  shall for all purposes
have the same effect as if set forth at this place.



<PAGE>
         IN WITNESS  WHEREOF,  the  Company  has  caused  this Note to be signed
manually or by facsimile by its duly authorized officer.

Date: ____________                            GST NETWORK FUNDING, INC.


                                              By:
                                                 -------------------------------
                                                 Name:
                                                 Title:



                                              By:
                                                 -------------------------------
                                                 Name:
                                                 Title:

                    (Trustee's Certificate of Authentication)

This is one of the 10 1/2% Senior  Secured  Discount Notes due 2008 described in
the within-mentioned Indenture.

                                                 UNITED STATES TRUST COMPANY OF
                                                   NEW YORK,

                                                       as Trustee

                                              By:
                                                 ------------------------------
                                                 Authorized Signatory

                                      A-2

<PAGE>

                             [REVERSE SIDE OF NOTE]

                            GST NETWORK FUNDING, INC.

                  10 1/2% Senior Secured Discount Note due 2008

1.  PRINCIPAL AND INTEREST.

         On or after May 1,  2003,  or  earlier  if  permitted  by the  Existing
Indentures  (the  "ASSUMPTION  DATE"),  the Notes  will be  unconditionally  and
irrevocably  assumed by GST USA, Inc. a Delaware  corporation  ("GST USA"),  and
guaranteed (the "NOTE GUARANTEE") by GST  Telecommunications,  Inc., a federally
chartered Canadian  corporation  ("GST").  As used in this Note, the term Issuer
means the Company until GST USA becomes the obligor  hereunder,  after which the
term "Issuer" means GST USA or any successor thereto.  Upon GST USA's assumption
of this note, the Company will be liquidated  and all of its assets  distributed
to its sole stockholder, GST USA.

         The Issuer will pay the principal of this Note on May 1, 2008.

         The Issuer  promises to pay  interest on the  principal  amount of this
Note on each Interest  Payment  Date, as set forth below,  at the rate per annum
shown above.

         Interest  on the  Notes  shall  accrue at the rate of 10 1/2% per annum
(the "INTEREST RATE") and will be payable in U.S.  dollars  semiannually (to the
Holders  of  record of the  Notes at the  close of  business  on the April 15 or
October  15  immediately  preceding  the  Interest  Payment  Date)  on May 1 and
November 1 of each year,  commencing November 1, 2003; PROVIDED that no interest
shall  accrue on the  principal  amount of this Note prior to May 1, 2003 and no
interest  shall be paid on this  Note  prior to  November  1,  2003,  except  as
provided in the next paragraph.

         If an exchange offer registered under the Securities Act (the "Exchange
Offer")  is not  consummated,  and a  shelf  registration  statement  under  the
Securities  Act with  respect to resales of the Notes (the  "Shelf  Registration
Statement) is not declared effective by the Commission, on or before November 4,
1998 in accordance with the terms of the Registration Rights Agreement dated May
4, 1998 among the Company,  GST USA,  GST,  Morgan  Stanley & Co.  Incorporated,
Bear,  Stearns & Co.,  Inc.,  Credit  Suisse  First Boston  Corporation  and SBC
Warburg Dillon Read Inc., interest (in addition to the accrual of original issue
discount  during the period  ending May 1, 2003 and in addition to the  interest
otherwise  due on the Notes after such date) will  accrue,  at an annual rate of
0.5%, from November 4, 1998 payable in cash semiannually, in arrears on each May
1 and November 1, commencing May 1, 1999 until the Exchange Offer is consummated
or the

                                      A-3

<PAGE>

Shelf  Registration  Statement is declared  effective;  PROVIDED that failure to
cause such exchange offer to be consummated or such shelf registration statement
to be  declared  effective  shall be deemed  not to be a default  or breach of a
covenant for purposes of Section  6.01(c) of the  Indenture.  The Holder of this
Note is entitled to the benefits of such Registration  Rights Agreement.  To the
extent  there is a  conflict  between  this  Note and such  Registration  Rights
Agreement,  such  Registration  Rights  Agreement  shall  control  to the extent
permitted by applicable law.

         From and after May 1, 2003,  interest on the Notes will accrue from the
most recent  date to which  interest  has been paid or, if no interest  has been
paid,  from May 1, 2003;  PROVIDED that, if there is no existing  default in the
payment of interest and this Note is authenticated between a Regular Record Date
referred to on the face hereof and the next  succeeding  Interest  Payment Date,
interest shall accrue from such Interest Payment Date. Interest will be computed
on the basis of a 360-day year of 12 30-day months.

         The Issuer shall pay interest on overdue principal and premium, if any,
and (to the extent lawful)  interest on overdue  installments of interest at the
rate per annum borne by the Notes.

2.  METHOD OF PAYMENT.

         The Issuer will pay  principal as provided  above and interest  (except
defaulted  interest) on the principal  amount of the Notes as provided  above on
each May 1 and  November 1 to the persons who are Holders (as  reflected  in the
Security  Register  at the  close of  business  on the April 15 and  October  15
immediately preceding the Interest Payment Date), in each case, even if the Note
is cancelled on  registration of transfer or registration of exchange after such
record date; PROVIDED that, with respect to the payment of principal, the Issuer
will not make payment to the Holder unless this Note is  surrendered to a Paying
Agent.

         The Issuer will pay principal,  premium, if any, and as provided above,
interest in money of the United States of America that at the time of payment is
legal  tender for payment of public and private  debts.  If a payment  date is a
date other than a Business  Day at a place of  payment,  payment  may be made at
that place on the next  succeeding  day that is a Business  Day and no  interest
shall accrue for the intervening period.

3.  PAYING AGENT AND REGISTRAR.

         Initially,  the Trustee will act as authenticating  agent, Paying Agent
and Registrar.  The Issuer may change any authenticating  agent, Paying Agent or
Registrar without notice.  The Issuer, any Subsidiary or any Affiliate of any of
them may act as Paying Agent, Registrar or co-Registrar.

                                      A-4

<PAGE>
4.  INDENTURE; LIMITATIONS.

         The Company issued the Notes under an Indenture dated as of May 4, 1998
(the  "INDENTURE"),  among the  Company,  GST USA,  GST and United  States Trust
Company of New York, as trustee (the  "TRUSTEE").  Capitalized  terms herein are
used as defined in the Indenture  unless otherwise  indicated.  The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by  reference  to the Trust  Indenture  Act.  The Notes are  subject to all such
terms, and Holders are referred to the Indenture and the Trust Indenture Act for
a statement of all such terms. To the extent permitted by applicable law, in the
event of any  inconsistency  between the terms of this Note and the terms of the
Indenture, the terms of the Indenture shall control.

         The Notes  are  general  secured,  unsubordinated  indebtedness  of the
Issuer,  will rank PARI PASSU in right of payment  with all  existing and future
secured,  unsubordinated  indebtedness of the Issuer and will be senior in right
of payment to all existing and future subordinated indebtedness of the Issuer.

5.  REDEMPTION.

         The Notes will be redeemable,  at the Issuer's  option,  in whole or in
part,  at any time and from  time to time on or after  May 1,  2003 and prior to
maturity,  upon not less than 30 nor more than 60 days' prior  notice  mailed by
first-class  mail to each  Holders'  last  address as it appears in the Security
Register,  at the following Redemption Prices (expressed in percentages of their
principal amount at maturity),  plus accrued and unpaid interest, if any, to the
Redemption  Date  (subject  to the right of  Holders  of record on the  relevant
Regular  Record  Date  that is on or prior  to the  Redemption  Date to  receive
interest due on an Interest  Payment Date that is on or prior to the  Redemption
Date)  if  redeemed  during  the  12-month  period  commencing  on  May 1 of the
applicable year set forth below:

                 YEAR                                        REDEMPTION  PRICE
                 2003                                          105.250%
                 2004                                          103.500%
                 2005                                          101.750%
                 2006 and thereafter                           100.0000%

         In addition,  the Notes may be redeemed as a whole, but not in part, at
the option of GST, at any time after GST USA has become the obligor on the Notes
and GST has  guaranteed  the  Notes,  at 100% of  their  Accreted  Value  on the
Redemption  Date,  together  with  accrued  interest  thereon,  if  any,  to the
Redemption  Date, in the event GST has become or would become  obligated to pay,
on the next date on which any amount  would be payable  with respect to the Note
Guarantee, any Additional Amounts as a result of a change in the laws (including
any regulations promulgated

                                      A-5

<PAGE>
thereunder) of Canada (or any political  subdivision or taxing authority thereof
or therein),  or change in any official  position  regarding the  application or
interpretation or such laws or regulations, which change is announced or becomes
effective on or after the Closing Date.

         If on May 1, 2003,  GST USA is  prohibited  by the Existing  Indentures
from  assuming  all of the  indebtedness  represented  by, and  becoming  direct
obligor on, the Notes,  or GST is  prohibited  by the Existing  Indentures  from
issuing the Note  Guarantee,  the  Company  will redeem the portion of the Notes
that can not be assumed or guaranteed at 105.250% of their  principal  amount at
maturity plus accrued and unpaid interest to the applicable Redemption Date.

6.  NOTICE OF REDEMPTION.

         Notice of any optional  redemption  will be mailed at least 30 days but
not more than 60 days before the  Redemption  Date,  and notice of any mandatory
redemption  will be mailed at least 10 days but not more than 30 days before the
Redemption  Date,  in each case,  to each Holder of Notes to be redeemed at such
Holder's last address as it appears in the Security Register.  Notes in original
denominations  larger than $1,000 may be redeemed in part;  PROVIDED  that Notes
will only be issued in  denominations  of $1,000 principal amount at maturity or
integral multiples thereof. On and after the Redemption Date, interest ceases to
accrue on Notes or portions of Notes  called for  redemption,  unless the Issuer
defaults in the payment of the Redemption Price.

7. REPURCHASE UPON CHANGE IN CONTROL.

         Upon the  occurrence  of any Change of Control,  each Holder shall have
the right to require the  repurchase of its Notes by the Issuer in cash pursuant
to the offer described in the Indenture at a purchase price equal to 101% of the
Accreted Value thereof plus accrued and unpaid interest,  if any, to the date of
purchase (the "CHANGE OF CONTROL PAYMENT").

         A notice of such Change of Control will be mailed  within 30 days after
any Change of Control occurs to each Holder at his last address as it appears in
the Security Register. Notes in original denominations larger than $1,000 may be
sold to the  Issuer  in  part;  PROVIDED  that  Notes  will  only be  issued  in
denominations  of $1,000  principal  amount at maturity  or  integral  multiples
thereof.  On and after the applicable Payment Date, interest ceases to accrue on
Notes or portions of Notes  surrendered  for purchase by the Issuer,  unless the
Issuer defaults in the payment of the Change of Control Payment.

8.  DENOMINATIONS; TRANSFER; EXCHANGE.

         The Notes are in registered  form without coupons in  denominations  of
$1,000 of principal amount at maturity and integral  multiples thereof. A Holder
may register the transfer or exchange of Notes in accordance with the Indenture.
The Registrar may require a Holder, among

                                      A-6

<PAGE>
other things, to furnish appropriate  endorsements and transfer documents and to
pay any  taxes and fees  required  by law or  permitted  by the  Indenture.  The
Registrar  need not register the transfer or exchange of any Notes  selected for
redemption. Also, it need not register the transfer or exchange of any Notes for
a period of 15 days before a selection of Notes to be redeemed is made.

9.  PERSONS DEEMED OWNERS.

         A Holder shall be treated as the owner of a Note for all purposes.

10.  UNCLAIMED MONEY.

         If money for the  payment of  principal,  premium,  if any, or interest
remains  unclaimed for two years,  the Trustee and the Paying Agent will pay the
money back to the Issuer. After that, Holders entitled to the money must look to
the Issuer for payment,  unless an applicable law designates another Person, and
all  liability  of the Trustee and such Paying  Agent with respect to such money
shall cease.

11. DISCHARGE PRIOR TO REDEMPTION OR MATURITY.

         If the  Issuer  deposits  with the  Trustee  money  or U.S.  Government
Obligations  sufficient to pay the then  outstanding  principal of, premium,  if
any,  and  accrued  interest on the Notes (a) to  redemption  or  maturity,  the
Company,  GST USA and GST will be  discharged  from the Indenture and the Notes,
except in certain  circumstances  for certain sections  thereof,  and (b) to the
Stated  Maturity,  the Company,  GST USA and GST will be discharged from certain
covenants set forth in the Indenture.

12.  AMENDMENT; SUPPLEMENT; WAIVER.

         Subject  to  certain  exceptions,  the  Indenture  or the  Notes may be
amended or  supplemented  with the consent of the Holders of at least a majority
in principal amount of the Notes then  outstanding,  and any existing default or
compliance  with any  provision may be waived with the consent of the Holders of
at least a majority in principal amount of the Notes then  outstanding.  Without
notice  to or the  consent  of any  Holder,  the  parties  thereto  may amend or
supplement  the  Indenture  or the  Notes  to,  among  other  things,  cure  any
ambiguity,  defect or inconsistency and make any change that does not materially
and adversely affect the rights of any Holder.

13.  RESTRICTIVE COVENANTS.

         The Indenture imposes certain limitations on the ability of GST and its
Restricted  Subsidiaries,  among other things, to incur additional indebtedness;
create  liens;  engage in  sale-leaseback  transactions;  pay  dividends or make
distributions in respect of their capital stock; make

                                      A-7

<PAGE>
investments or make certain other  restricted  payments;  sell assets;  issue or
sell stock of Restricted Subsidiaries; enter into transactions with stockholders
or affiliates;  acquire  assets or businesses  located  outside the  continental
United  States and  Hawaii;  or,  with  respect to GST,  GST USA and the Company
consolidate,  merge or sell all or  substantially  all of its assets.  Within 90
days after the end of the last quarter of each fiscal  year,  GST must report to
the Trustee on compliance with such limitations.

14.  SUCCESSOR PERSONS.

         Generally,  when a  successor  person or other  entity  assumes all the
obligations  of  its  predecessor  under  the  Notes  and  the  Indenture,   the
predecessor person will be released from those obligations.

15.  DEFAULTS AND REMEDIES.

         The  following  events   constitute   "Events  of  Default"  under  the
Indenture:  (a) default in the payment of principal of (or premium,  if any, on)
any Note when the same becomes due and payable at maturity,  upon  acceleration,
redemption or otherwise; (b) default in the payment of interest on any Note when
the same becomes due and payable,  and such default continues for a period of 30
days; (c) the Company, GST USA or GST defaults in the performance of or breaches
any other covenant or agreement of the Company,  GST USA or GST in the Indenture
or under the Notes, the Note Guarantee,  the Fee Notes or the Intercompany Notes
and such default or breach  continues for a period of 30 consecutive  days after
written  notice  by the  Trustee  or the  Holders  of 25% or more  in  aggregate
principal  amount of the Notes;  (d) there  occurs with  respect to any issue or
issues  of  Indebtedness  of  GST  or  any  Significant   Subsidiary  having  an
outstanding principal amount of $5,000,000 or more in the aggregate for all such
issues  of all such  Persons,  whether  such  Indebtedness  now  exists or shall
hereafter be created, (I) an event of default that has caused the holder thereof
to declare such  Indebtedness to be due and payable prior to its Stated Maturity
and such  Indebtedness has not been discharged in full or such  acceleration has
not been rescinded or annulled within 30 days of such  acceleration  and/or (II)
the failure to make a principal payment at the final (but not any interim) fixed
maturity and such defaulted payment shall not have been made, waived or extended
within 30 days of such  payment  default;  (e) any final  judgment or order (not
covered by  insurance)  for the payment of money in excess of  $5,000,000 in the
aggregate  for all such  final  judgments  or orders  against  all such  Persons
(treating any deductibles,  self-insurance or retention as not so covered) shall
be rendered against the Company, GST USA, GST or any Significant  Subsidiary and
shall not be paid or discharged, and there shall be any period of 30 consecutive
days  following  entry of the final  judgment or order that causes the aggregate
amount  for all such  final  judgments  or  orders  outstanding  and not paid or
discharged  against all such Persons to exceed $5,000,000 during which a stay of
enforcement  of such final  judgment or order,  by reason of a pending appeal or
otherwise,  shall  not be in  effect;  (f) a court  having  jurisdiction  in the
premises enters a decree or order for (A) relief in respect of the Company,  GST
USA, GST or

                                      A-8

<PAGE>
any  Significant   Subsidiary  in  an  involuntary  case  under  any  applicable
bankruptcy,  insolvency  or other  similar law now or hereafter  in effect,  (B)
appointment   of  a  receiver,   liquidator,   assignee,   custodian,   trustee,
sequestrator or similar official of the Company, GST USA, GST or any Significant
Subsidiary  (other than a liquidation  of the Company into GST USA in connection
with  the  assumption  of the  Notes)  or for  all or  substantially  all of the
property and assets of the Company,  GST USA, GST or any Significant  Subsidiary
or (C) the winding up or liquidation of the affairs of the Company, GST USA, GST
or any Significant  Subsidiary (other than a liquidation of the Company into GST
USA in  connection  with the  assumption  of the Notes) and, in each case,  such
decree  or  order  shall  remain  unstayed  and in  effect  for a  period  of 30
consecutive days; or (g) the Company, GST USA, GST or any Significant Subsidiary
(A) commences a voluntary  case under any applicable  bankruptcy,  insolvency or
other  similar law now or  hereafter  in effect,  or consents to the entry of an
order for relief in an involuntary  case under any such law, (B) consents to the
appointment  of  or  taking  possession  by a  receiver,  liquidator,  assignee,
custodian,  trustee,  sequestrator or similar official of the Company,  GST USA,
GST or any Significant  Subsidiary (other than a liquidation of the Company into
GST  USA in  connection  with  the  assumption  of  the  Notes)  or  for  all or
substantially all of the property and assets of the Company, GST USA, GST or any
Significant  Subsidiary or (C) effects any general assignment for the benefit of
creditors;  (h) the  Trustee or the  Company  does not have at all times a first
priority  perfected  security  interest  in all Pledged  Securities,  the Pledge
Account,  all Acquired  Equipment,  the Fee Notes and Intercompany Notes or GST,
GST USA or the Company asserts in writing that the security  arrangements  under
the Indenture,  the Pledge Account, the Fee Notes and the Intercompany Notes are
not in full  force and  effect;  or (i) GST USA  shall not have  become a direct
obligor  on the Notes  (other  than  Notes to be  redeemed  as  described  under
"Mandatory Redemption" for which the Company shall have deposited the redemption
price) and GST shall not have become a guarantor of the Notes by May 1, 2003.

         If an Event of Default  (other  than an Event of Default  specified  in
clause (f) or (g) above that occurs with respect to the Company, GST USA, or GST
or clause (h)) occurs and is continuing under the Indenture,  the Trustee or the
Holders  of at least  25% in  aggregate  principal  amount  of the  Notes,  then
outstanding, by written notice to the Company (and to the Trustee if such notice
is given by the  Holders),  may,  and the Trustee at the request of such Holders
shall, declare the Accreted Value of, premium, if any, and accrued interest,  if
any,  on the  Notes  to be  immediately  due and  payable.  If a  bankruptcy  or
insolvency  default with  respect to the  Company,  GST USA or GST occurs and is
continuing,  the Accreted Value of, premium, if any, and accrued interest on the
Notes  automatically  becomes  due and  payable.  Holders  may not  enforce  the
Indenture  or the Notes  except as  provided in the  Indenture.  The Trustee may
require  indemnity  satisfactory  to it before it enforces the  Indenture or the
Notes.  Subject  to  certain  limitations,  Holders  of at least a  majority  in
principal  amount of the Notes then  outstanding  may direct the  Trustee in its
exercise of any trust or power.

                                      A-9

<PAGE>
16.  ADDITIONAL AMOUNTS.

         Any  payments by GST under or with respect to the Notes may require the
payment of  Additional  Amounts as may become  payable under Section 4.22 of the
Indenture.

17. TRUSTEE DEALINGS WITH COMPANY OR GUARANTOR.

         The  Trustee  under  the  Indenture,  in its  individual  or any  other
capacity,  may make loans to, accept deposits from and perform  services for GST
or the Issuer or their  Affiliates and may otherwise deal with GST or the Issuer
or their Affiliates as if it were not the Trustee.

18.  NO RECOURSE AGAINST OTHERS.

         No  incorporator or any past,  present or future partner,  shareholder,
other equity holder, officer, director,  employee or controlling person as such,
of the  Company,  GST  USA or GST or of any  successor  Person  shall  have  any
liability for any obligations of the Company,  GST USA or GST under the Notes or
the  Indenture  or for any claim  based on, in respect of or by reason of,  such
obligations  or their  creation.  Each  Holder by  accepting  a Note  waives and
releases  all  such  liability.   Such  waiver  and  release  are  part  of  the
consideration for the issuance of the Notes.

19.  AUTHENTICATION.

         This Note shall not be valid until the Trustee or authenticating  agent
signs the certificate of authentication on the other side of this Note.

21.  ABBREVIATIONS.

         Customary  abbreviations  may be used in the  name  of a  Holder  or an
assignee,  such as:  TEN COM (= tenants  in  common),  TEN ENT (= tenants by the
entireties),  JT TEN (= joint  tenants  with  right of  survivorship  and not as
tenants in common),  CUST (=  Custodian)  and U/G/M/A (= Uniform Gifts to Minors
Act).

         The Company will furnish to any Holder upon written request and without
charge a copy of the  Indenture.  Requests  may be made to GST Network  Funding,
Inc., 9001 Main Street, Vancouver,  Washington 98663, Attention: Chief Financial
Officer.

                                      A-10

<PAGE>
                            [FORM OF TRANSFER NOTICE]

         FOR VALUE RECEIVED the  undersigned  registered  holder hereby sell(s),
assign(s) and transfer(s) unto

INSERT TAXPAYER IDENTIFICATION NO.

m
- --------------------------------------------------------------------------------
Please print or typewrite name and address including zip code of assignee

- --------------------------------------------------------------------------------
the within Note and all rights thereunder, hereby irrevocably constituting and
___________ appointing attorney to transfer said Note on the books of the
Company with full power of substitution in the premises.

                     [THE FOLLOWING PROVISION TO BE INCLUDED
                ON ALL SECURITIES OTHER THAN EXCHANGE SECURITIES,
                    PERMANENT OFFSHORE GLOBAL SECURITIES AND
                    UNLEGENDED OFFSHORE PHYSICAL SECURITIES]

         In  connection  with any transfer of this Note  occurring  prior to the
date which is the earlier of (i) the date of an effective  Registration  or (ii)
the end of the period  referred to in Rule 144(k) under the Securities  Act, the
undersigned  confirms that without utilizing any general solicitation or general
advertising that:

                                   [CHECK ONE]

[ ]      (a) this Note is being  transferred  in  compliance  with the exemption
         from  registration  under  the  Securities  Act of  1933,  as  amended,
         provided by Rule 144A thereunder.

                                       OR

[ ]      (b) this Note is being  transferred  other than in accordance  with (a)
         above  and  documents  are  being   furnished  which  comply  with  the
         conditions of transfer set forth in this Note and the Indenture.

                                      A-11

<PAGE>
If none of the foregoing boxes is checked,  the Trustee or other Registrar shall
not be obligated to register  this Note in the name of any Person other than the
Holder  hereof  unless  and  until  the  conditions  to  any  such  transfer  of
registration  set forth herein and in Section 2.08 of the  Indenture  shall have
been satisfied.

Date: ______________________                ____________________________________
                                            NOTICE:   The   signature   to  this
                                            assignment  must correspond with the
                                            name as written upon the face of the
                                            within-mentioned instrument in every
                                            particular,  without  alteration  or
                                            any change whatsoever.

TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.

         The undersigned represents and warrants that it is purchasing this Note
for its own  account  or an account  with  respect  to which it  exercises  sole
investment  discretion  and  that  it  and  any  such  account  is a  "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended,  and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges  that it has received such information  regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request  such  information  and that it is aware that the  transferor  is
relying upon the undersigned's  foregoing  representations in order to claim the
exemption from registration provided by Rule 144A.

Dated:_____________________                 ____________________________________
                                            NOTICE:   To  be   executed   by  an
                                            executive officer

                                      A-12

<PAGE>
                       OPTION OF HOLDER TO ELECT PURCHASE

         If you wish to have this Note  purchased  by the  Company  pursuant  to
Section 4.12 or Section 4.14 of the Indenture, check the Box: |_|

         If you wish to have a portion  of this Note  purchased  by the  Company
pursuant to Section 4.12 or Section 4.14 of the Indenture,  state the amount (in
principal amount):

$________________.

Date:_____________

Your Signature:_________________________________________________________________
              (Sign exactly as your name appears on the other side of this Note)

Signature Guarantee:  ______________________________

                                      A-13

<PAGE>
                                                                       EXHIBIT B

                               FORM OF CERTIFICATE

                                                                ------- --, ----

United States Trust Company
  of New York
114 West 47th Street
New York, New York 10036-1532

Attention:  Corporate Trust Division

                         Re:   GST Network Funding, Inc. (the "COMPANY")
                               10 1/2% Senior Secured Discount NotES
                               DUE 2008 (THE "SECURITIES")

Ladies and Gentlemen:

         This letter relates to U.S. $_________  principal amount at maturity of
Securities  represented  by a Note (the  "LEGENDED  NOTE")  which bears a legend
outlining  restrictions upon transfer of such Legended Note. Pursuant to Section
2.02 of the Indenture (the "INDENTURE")  dated as of May 4, 1998 relating to the
Securities,  we hereby  certify that we are (or we will hold such  Securities on
behalf of) a person  outside the United States to whom the  Securities  could be
transferred  in accordance  with Rule 904 of Regulation S promulgated  under the
U.S. Securities Act of 1933, as amended.  Accordingly,  you are hereby requested
to exchange the legended certificate for an unlegended certificate  representing
an  identical  principal  amount at  maturity of  Securities,  all in the manner
provided for in the Indenture.

         You and the  Company  are  entitled  to rely upon this  letter  and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any  administrative  or legal  proceedings  or  official  inquiry  with
respect to the matters covered hereby.  Terms used in this  certificate have the
meanings set forth in Regulation S.

                                             Very truly yours,

                                             [Name of Holder]

                                             By:
                                                --------------------------------
                                                Authorized Signature


<PAGE>
                                                                       EXHIBIT C

                       Form of Certificate to be Delivered
                          in Connection with Transfers
                            Pursuant to Regulation S

                                                                 ------ --, ----



United States Trust Company
  of New York
114 West 47th Street
New York, New York 10036-1532

Attention:  Corporate Trust Division

                         Re:   GST Network Funding, Inc. (the "COMPANY")
                               10 1/2% Senior Secured Discount Notes
                               Due 2008 (the "Securities")

Ladies and Gentlemen:

         In  connection  with our  proposed  sale of  U.S.$__________  aggregate
principal  amount at maturity of the  Securities,  we confirm that such sale has
been  effected  pursuant  to and in  accordance  with  Regulation  S  under  the
Securities Act of 1933, as amended, and, accordingly, we represent that:

         (1) the offer of the  Securities was not made to a person in the United
States;

         (2) at the  time the buy  order  was  originated,  the  transferee  was
outside the United States or we and any person  acting on our behalf  reasonably
believed that the transferee was outside the United States;

         (3) no  directed  selling  efforts  have been made by us in the  United
States in  contravention  of the  requirements  of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable; and


<PAGE>
         (4) the  transaction  is not  part of a plan or  scheme  to  evade  the
registration requirements of the Securities Act of 1933.

         You and the  Company  are  entitled  to rely upon this  letter  and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any  administrative  or legal  proceedings  or  official  inquiry  with
respect to the matters covered hereby.  Terms used in this  certificate have the
meanings set forth in Regulation S.

                                              Very truly yours,

                                              [Name of Transferor]

                                              By:
                                                 -------------------------------
                                                 Authorized Signature

                                      C-2

<PAGE>
                                                                       EXHIBIT D

                            Form of Certificate to be
                          Delivered in Connection with
                    Transfers to Non-QIB Accredited Investors

                                                                 ------ --, ----


United States Trust Company
  of New York
114 West 47th Street
New York, New York 10036-1532

Attention:  Corporate Trust Division

                         Re:   GST Network Funding, Inc. (the "COMPANY")
                               10 1/2% Senior Secured Discount NotES
                               Due 2008 (the "Securities")

Ladies and Gentlemen:

         In  connection  with our proposed  purchase of  $___________  aggregate
principal amount at maturity of the Securities, we confirm that:

         1. We  understand  that any  subsequent  transfer of the  Securities is
     subject to certain  restrictions  and conditions set forth in the Indenture
     dated as of May 4, 1998 relating to the Securities  (the  "INDENTURE")  and
     the  undersigned  agrees  to be bound  by,  and not to  resell,  pledge  or
     otherwise   transfer  the  Securities   except  in  compliance  with,  such
     restrictions and conditions and the Securities Act of 1933, as amended (the
     "SECURITIES ACT").

         2. We  understand  that the offer and sale of the  Securities  have not
     been  registered  under the Securities Act, and that the Securities may not
     be offered or sold except as permitted in the following sentence. We agree,
     on our own behalf and on behalf of any  accounts for which we are acting as
     hereinafter  stated,  that if we should sell any Securities,  we will do so
     only (A) to GST, the Company or any subsidiary  thereof,  (B) in accordance
     with  Rule 144A  under the  Securities  Act to a  "qualified  institutional
     buyer" (as defined therein), (C) to an institutional  "accredited investor"
     (as  defined  below)  that,  prior  to  such  transfer,  furnishes  (or has
     furnished on its behalf by a U.S. broker-dealer) to you and to the


<PAGE>
     Company  a signed  letter  substantially  in the form of this  letter,  (D)
     outside the United States in accordance with Rule 904 of Regulation S under
     the  Securities  Act, (E) pursuant to the  provisions of Rule 144 under the
     Securities Act or (F) pursuant to an effective registration statement under
     the  Securities  Act,  and we  further  agree  to  provide  to  any  person
     purchasing any of the Securities  from us a notice  advising such purchaser
     that resales of the Securities are restricted as stated herein.

         3. We understand  that, on any proposed  resale of any  Securities,  we
     will be  required to furnish to you and the  Company  such  certifications,
     legal opinions and other  information as you and the Company may reasonably
     require to confirm  that the  proposed  sale  complies  with the  foregoing
     restrictions.  We further  understand  that the Securities  purchased by us
     will bear a legend to the foregoing effect.

         4. We are an  institutional  "accredited  investor" (as defined in Rule
     501(a)(1),  (2), (3) or (7) of Regulation D under the  Securities  Act) and
     have such knowledge and experience in financial and business  matters as to
     be capable of  evaluating  the  merits and risks of our  investment  in the
     Securities,  and we and any  accounts for which we are acting are each able
     to bear the economic risk of our or its investment.

         5. We are acquiring the Securities  purchased by us for our own account
     or for one or more accounts (each of which is an institutional  "ACCREDITED
     INVESTOR") as to each of which we exercise sole investment discretion.

         You and the  Company  are  entitled  to rely upon this  letter  and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any  administrative  or legal  proceedings  or  official  inquiry  with
respect to the matters covered hereby.

                                                   Very truly yours,

                                                   [Name of Transferee]

                                                   By:
                                                      --------------------------
                                                      Authorized Signature

                                      D-2

<PAGE>
                                                                       EXHIBIT E

                             SUPPLEMENTAL INDENTURE

         SUPPLEMENTAL  INDENTURE  (the  "SUPPLEMENTAL  INDENTURE"),  dated as of
_______,  ____,  among GST USA, INC., a Delaware  corporation  ("GST USA"),  GST
TELECOMMUNICATIONS,  INC., a federally chartered Canadian  corporation  ("GST"),
and UNITED STATES TRUST COMPANY OF NEW YORK, as trustee (the "TRUSTEE").

                              W I T N E S S E T H:

         WHEREAS, in accordance with Section 4.23(a) of the Indenture,  dated as
of May 4, 1998,  among GST Network  Funding,  Inc., GST USA, GST and the Trustee
(the  "INDENTURE"),  relating to the 10 1/2% Senior  Secured  Discount Notes due
2008 of the Company (the "SECURITIES"),  GST USA and GST are required to deliver
this  Supplemental  Indenture  providing for GST USA to assume the  indebtedness
represented  by, and become the direct obligor on, the Securities and for GST to
guarantee  (the  "SECURITY  GUARANTEE")  the  performance  of all  of GST  USA's
obligations under the Securities and the Indenture;

         WHEREAS, the terms of the Existing Indentures do not prohibit GST USA's
assuming the  indebtedness  represented  by, and becoming the direct obligor on,
the Securities or GST's issuance of the Security Guarantee;

         WHEREAS,  the  Boards  of  Directors  of each  of GST USA and GST  have
authorized and approved delivery of this Supplemental Indenture; and

         WHEREAS, all other things necessary to make this Supplemental Indenture
a valid supplement to the Indenture  according to its terms and the terms of the
Indenture have been done.

         NOW, THEREFORE, the parties hereto agree as follows:

         SECTION 1.1.  CERTAIN TERMS DEFINED IN THE INDENTURE.  All  capitalized
terms used herein  without  definition  herein shall have the meanings  ascribed
thereto in the Indenture.

         SECTION 1.2.  ASSUMPTION OF THE  SECURITIES BY GST USA. GST USA hereby,
effective  on  the  date  of  this  Indenture  Supplement,  unconditionally  and
irrevocably  assumes the  indebtedness  represented by, and agrees to become the
direct obligor on, the Securities.

<PAGE>
         SECTION 1.3.  SECURITY  GUARANTEE.  Subject to the  provisions  of this
Indenture Supplement,  effective on the date of this Indenture  Supplement,  GST
hereby fully,  unconditionally and irrevocably  guarantees to each Holder and to
the Trustee on behalf of the Holders:  (i) the due and  punctual  payment of the
principal of, premium, if any, on and interest on each Security, when and as the
same shall  become due and  payable,  whether at maturity,  by  acceleration  or
otherwise,  the due and punctual payment of interest on the overdue principal of
and interest,  if any, on the Securities,  to the extent lawful, and the due and
punctual  performance of all other  obligations of GST USA to the Holders or the
Trustee, all in accordance with the terms of such Security and the Indenture and
(ii)  in the  case  of any  extension  of  time of  payment  or  renewal  of any
Securities or any of such other obligations, that the same will be promptly paid
in full when due or performed in  accordance  with the terms of the extension or
renewal,  at Stated  Maturity,  by acceleration or otherwise.  GST hereby waives
diligence,  presentment, demand of payment, filing of claims with a court in the
event of merger or  bankruptcy  of GST USA,  any right to  require a  proceeding
first against GST USA, the benefit of discussion, protest or notice with respect
to any such Security or the debt evidenced  thereby and all demands  whatsoever,
and covenants that this Security Guarantee will not be discharged as to any such
Security except by payment in full of the principal thereof and interest thereon
and as provided in Section  8.01 and Section 8.02 of the  Indenture  (subject to
Section  8.06 of the  Indenture).  The  maturity of the  obligations  guaranteed
hereby may be  accelerated  as provided in Article Six of the  Indenture for the
purposes  of  this  Security  Guarantee.  In the  event  of any  declaration  of
acceleration  of such  obligations  as provided in Article Six of the Indenture,
such obligations (whether or not due and payable) shall forthwith become due and
payable by GST for the purpose of this Security Guarantee. In addition,  without
limiting the foregoing  provisions,  upon the  effectiveness  of an acceleration
under Article Six of the Indenture, the Trustee shall promptly make a demand for
payment on the  Securities  under the  Security  Guarantee  provided for in this
Indenture Supplement.

         If the  Trustee or the Holder of any  Security is required by any court
or  otherwise  to  return  to  GST  USA or  GST,  or  any  custodian,  receiver,
liquidator,  trustee,  sequestrator or other similar official acting in relation
to GST USA or GST, any amount paid to the Trustee or such Holder in respect of a
Security, this Security Guarantee,  to the extent theretofore discharged,  shall
be  reinstated  in full force and  effect.  GST further  agrees,  to the fullest
extent that it may lawfully do so, that, as between it, on the one hand, and the
Holders and the  Trustee,  on the other hand,  the  maturity of the  obligations
guaranteed hereby may be accelerated as provided in Article Six of the Indenture
for  the  purposes  of  this  Security  Guarantee,   notwithstanding  any  stay,
injunction  or other  prohibition  extant under any  applicable  bankruptcy  law
preventing such acceleration in respect of the obligations Guaranteed hereby.

                                      E-2

<PAGE>
         GST hereby  irrevocably  waives any claim or other  rights which it may
now or hereafter acquire against GST USA that arise from the existence, payment,
performance or enforcement of its obligations under this Security  Guarantee and
the  Indenture,   including,  without  limitation,  any  right  of  subrogation,
reimbursement,   exoneration,   contribution,   indemnification,  any  right  to
participate  in any  claim  or  remedy  of the  Holders  against  GST USA or any
collateral  which any such  Holder  or the  Trustee  on  behalf  of such  Holder
hereafter acquires, whether or not such claim, remedy or right arises in equity,
or under contract,  statute or common law, including,  without  limitation,  the
right to take or receive from GST USA, directly or indirectly,  in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim or other  rights.  If any amount shall be paid to GST in violation of
the  preceding  sentence  and the  principal  of,  premium,  if any, and accrued
interest on the Securities  shall not have been paid in full,  such amount shall
be deemed to have been paid to GST for the benefit of, and held in trust for the
benefit  of, the  Holders,  and shall  forthwith  be paid to the Trustee for the
benefit  of the  Holders to be  credited  and  applied  upon the  principal  of,
premium,  if any, and accrued interest on the Securities.  GST acknowledges that
it received  direct and indirect  benefits  from the issuance of the  Securities
pursuant to the Indenture, and that such Securities were issued, in part, on the
promise that this Security  Guarantee would be issued,  and that the waivers set
forth in this Indenture  Supplement are knowingly made in  consideration of such
benefits.

         SECTION 1.4. OBLIGATIONS UNCONDITIONAL.  Subject to Section 1.7 of this
Indenture  Supplement,   nothing  contained  in  this  Indenture  Supplement  or
elsewhere in the Indenture or in the  Securities is intended to or shall impair,
as among GST and the holders of the  Securities,  the  obligation of GST,  which
will be  absolute  and  unconditional,  upon  failure by GST USA,  to pay to the
holders of the Securities the principal of, premium, if any, and interest on the
Securities as and when the same shall become due and payable in accordance  with
their  terms,  or is  intended  to or shall  affect the  relative  rights of the
holders of the  Securities  and creditors of GST, nor shall  anything  herein or
therein  prevent the holder of any  Security or the Trustee on their behalf from
exercising all remedies otherwise permitted by applicable law upon default under
the Indenture.

         Without  limiting the  foregoing,  nothing  contained in this Indenture
Supplement  will  restrict  the  right  of the  Trustee  or the  holders  of the
Securities  to take any action to declare the  Security  Guarantee to be due and
payable prior to the Stated Maturity of the Securities  pursuant to Section 6.02
of the  Indenture  or to pursue any rights or  remedies  hereunder  or under the
Indenture.

         SECTION 1.5. NOTICE TO TRUSTEE. GST shall give prompt written notice to
the  Trustee of any fact  known to GST which  would  prohibit  the making of any
payment to or by the Trustee in respect of the  Security  Guarantee  pursuant to
the provisions of this Indenture Supplement.

                                      E-3

<PAGE>
         SECTION 1.6. THIS ARTICLE NOT TO PREVENT EVENTS OF DEFAULT. The failure
to make a payment on account of principal  of,  premium,  if any, or interest on
the Securities by reason of any provision of this Indenture  Supplement will not
be construed as preventing the occurrence of an Event of Default.

         SECTION 1.7.  LIMITATION.  Notwithstanding  any other provision of this
Indenture  Supplement,  the Indenture or the Securities,  the Security Guarantee
shall not be  enforceable  against  GST in an  amount  in excess of the  maximum
amount which,  after giving effect to all other contingent and fixed liabilities
of GST and after giving effect to any  collections for or payments made by or on
behalf of any obligor on the Securities under the Indenture,  will result in the
obligations  of GST under the Security  Guarantee not  constituting a fraudulent
conveyance or fraudulent transfer under applicable law.

         SECTION  2.  GOVERNING  LAW;  SUBMISSION  TO  JURISDICTION;  AGENT  FOR
SERVICE. This Indenture Supplement shall be governed by the laws of the State of
New  York.  GST  and  GST USA  each  hereby  appoints  Olshan  Grundman  Frome &
Rosenzweig  LLP, 505 Park Avenue,  New York,  New York 10022,  Attention:  David
Adler,  Esq.  as its  agent  for  service  of  process  in any  suit,  action or
proceeding  with respect to this Indenture  Supplement  and for actions  brought
under  federal or state  securities  laws  brought in any federal or state court
located  in The City of New York and each of GST USA and GST agrees to submit to
the jurisdiction of any such court.

         SECTION 3. COUNTERPARTS.  This Supplemental  Indenture may be signed in
any number of  counterparts,  each of which shall be an original,  with the same
effect as if the signatures thereto and hereto were upon the same instrument.

         SECTION  4.  RATIFICATION.  Except  that GST USA has  become the direct
obligor on the  Securities  and GST has provided the  Security  Guarantee,  each
provision  of the  Indenture  shall  remain  in full  force and  effect  and the
Indenture is in all respects  agreed to,  ratified and  confirmed by each of GST
USA, GST and the Trustee.

                                      E-4

<PAGE>
         IN WITNESS  WHEREOF,  the parties hereto have caused this  Supplemental
Indenture to be duly executed as of the date first above written.

                                   GST USA, INC.


                                   By:
                                      -----------------------------------------
                                      Name:
                                      Title:

                                   GST TELECOMMUNICATIONS, INC.


                                   By:
                                      -----------------------------------------
                                      Name:
                                      Title:


                                   UNITED STATES TRUST COMPANY
                                   OF NEW YORK


                                   By:
                                      -----------------------------------------
                                      Name:
                                      Title:


                          GST TELECOMMUNICATIONS, INC.
                                  GST USA, INC.
                            GST NETWORK FUNDING, INC.

                               PLACEMENT AGREEMENT

                                                                  April 29, 1998

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

Ladies and Gentlemen:

         GST Network  Funding,  Inc., a Delaware  corporation  ("GST  Funding"),
proposes to issue and sell to the several  Placement  Agents named in Schedule I
hereto  (the  "Placement  Agents")  $500,000,000  principal  amount at  maturity
($299,995,000  initial  Accreted  Value) of GST Funding's 10 1/2% Senior Secured
Discount Notes Due 2008 (the "Notes") to be issued pursuant to the provisions of
an Indenture dated as of May 4, 1998 (the  "Indenture")  among GST Funding,  GST
Telecommunications,  Inc., a federally chartered Canadian  corporation  ("GST"),
GST USA,  Inc.,  a Delaware  corporation  ("GST USA"),  and United  States Trust
Company of New York, as trustee (the "Trustee"). GST Funding will use all of the
net  proceeds  from the  offering  of the  Notes  to  purchase  U.S.  Government
Securities (the "Pledged  Securities") and pledge the Pledged  Securities to the
Trustee for the benefit of the holders of the Notes  pursuant to the  provisions
of a  Collateral  Pledge  and  Security  Agreement,  dated as of the date of the
Indenture (the "Pledge Agreement"), made by GST Funding in favor of the Trustee.
In addition,  on the Closing Date (as defined below),  in consideration  for GST
Funding making the financing through this Offering  available to GST USA and for
GST Funding  facilitating the purchase of GST USA's equipment,  GST USA, GST and
GST Funding will enter into a Reimbursement  and Commitment Fee Agreement in the
form attached hereto as Exhibit A. The Pledged Securities will be sold from time
to time to  acquire  funds to pay the  Acquired  Equipment  Cost in  respect  of
Acquired  Equipment.  All Acquired Equipment will be subject to a first priority
security  interest  in favor of the  Trustee  for the  benefit of holders of the
Notes. From time to time after the purchase of Acquired

<PAGE>

Equipment,  such  Acquired  Equipment  will be sold by GST Funding to GST USA in
exchange for  Intercompany  Notes (as defined in the Pledge  Agreement) from GST
USA. Each  Intercompany  Note will be guaranteed by GST (the "Note  Guarantee"),
will be secured by a security interest in the Acquired Equipment  purchased with
such  Intercompany  Note and will be pledged to the  Trustee  for the benefit of
holders of the Notes.  On May 1, 2003,  or earlier if  permitted by the terms of
GST USA's and GST's outstanding indebtedness, GST USA will assume and become the
direct obligor on the Notes and GST will guarantee the Notes.

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

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

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

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

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

                                       2

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

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

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

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

                                       3

<PAGE>
liens,  pledges or other  encumbrance.  The total  assets and  revenues of GST's
direct and indirect subsidiaries other than the Specified  Subsidiaries,  in the
aggregate,  comprised  less  than 5% of  GST's  total  consolidated  assets  and
revenues,  respectively, at and for the year ended September 30, 1997 and at and
for the quarter ended December 31, 1997.

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

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

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

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

                  (j) The execution and delivery by each of GST Funding, GST and
GST USA of, and the  performance by each of GST Funding,  GST and GST USA of its
obligations under, this Agreement (including the issuance,  sale and delivery of
the Notes), the Indenture,  the Registration Rights Agreement, the Reimbursement
and  Commitment  Fee  Agreement  and the  Notes to which it is a party  will not
contravene any provision of applicable law or the  certificate of  incorporation
or  by-laws  of any of GST  Funding,  GST or GST USA or any  agreement  or other
instrument binding upon GST Funding,  GST or GST USA that is material to GST and
its subsidiaries taken as a whole, or any judgment, order or decree of any

                                       4

<PAGE>
governmental body, agency or court having jurisdiction over GST Funding,  GST or
GST USA and no consent,  approval,  authorization  or order of, or qualification
with, any governmental  body or agency is required for the performance by any of
GST Funding,  GST or GST USA of its obligations under this Agreement  (including
the issuance,  sale and delivery of the Notes), the Indenture,  the Registration
Rights Agreement, the Reimbursement and Commitment Fee Agreement or the Notes to
which it is a party,  except such as may be required by the  securities  laws or
Blue Sky laws of the various states in connection with the offer and sale of the
Notes  or by the  federal  and  state  securities  laws in  connection  with the
registration obligations under the Registration Rights Agreement.

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

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

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

                  (n) None of GST Funding,  GST or GST USA or any  affiliate (as
defined in Rule 501(b) of Regulation D under the Securities Act, an "Affiliate")
of GST  Funding,  GST or GST USA has  directly  or  through  any agent (i) sold,
offered for sale, solicited offers to buy or otherwise negotiated in respect of,
any security (as defined in the  Securities  Act) which is or will be integrated
with the sale of the Notes in a manner that would require the registration

                                       5

<PAGE>
under the  Securities  Act of the Notes or (ii)  engaged  in any form of general
solicitation  or general  advertising  in connection  with the offering (as such
terms are used in Regulation D under the Securities  Act) of the Notes or in any
manner  involving a public  offering  within the meaning of Section  4(2) of the
Securities Act.

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

                  (p) Assuming compliance by the Placement Agents with the terms
of Sections  1(ii), 2 and 6 hereof,  it is not necessary in connection  with the
offer,  sale and  delivery  of the Notes to the  Placement  Agents in the manner
contemplated  by this Agreement and each  Memorandum to register the Notes under
the Securities Act or to qualify the Indenture  under the Trust Indenture Act of
1939, as amended.

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

                  (r) GST Funding,  GST, GST USA and the Specified  Subsidiaries
(i) are in compliance with any and all applicable  foreign,  federal,  state and
local  laws and  regulations  relating  to the  protection  of human  health and
safety,  the environment or hazardous or toxic substances or wastes,  pollutants
or contaminants ("Environmental Laws"), (ii) have received all permits, licenses
or other  approvals  required  of them under  applicable  Environmental  Laws to
conduct their  respective  businesses and (iii) are in compliance with all terms
and conditions

                                       6

<PAGE>
of any such permit,  license or approval,  except where such  noncompliance with
Environmental  Laws,  failure to receive  required  permits,  licenses  or other
approvals or failure to comply with the terms and  conditions  of such  permits,
licenses  or  approvals  would not,  individually  or in the  aggregate,  have a
material adverse effect on GST and its subsidiaries, taken as a whole.

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

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

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

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

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

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

                  (y)  The  Intercompany  Security  Agreement,  dated  as of the
Closing Date, made by GST USA for the benefit of GST Funding (the  "Intercompany
Security Agreement") has been duly authorized, executed and delivered by, and is
a valid and binding agreement of,

                                       7

<PAGE>
GST  USA,   enforceable  in  accordance  with  its  terms,  except  as  (i)  the
enforceability  thereof may be limited by the effect of  applicable  bankruptcy,
insolvency,  reorganization,  moratorium  or similar laws  affecting  creditors'
rights generally and (ii) the availability of equitable  remedies may be limited
by equitable principles of general applicability.

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

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

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

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

                  2.  OFFERING.  Each of the  Placement  Agents has  advised GST
Funding, GST and GST USA that it will make an offering of the Notes purchased by
it  hereunder  on the  terms  set  forth  in the  Final  Memorandum  as  soon as
practicable  after  this  Agreement  is  entered  into  as in  its  judgment  is
advisable.

                  3. PURCHASE AND DELIVERY. GST Funding hereby agrees to sell to
the several  Placement Agents,  and the Placement Agents,  upon the basis of the
representations  and warranties  contained  herein but subject to the conditions
stated herein,  agree,  severally and not jointly, to purchase from GST Funding,
the  respective  principal  amount at  maturity of Notes set forth in Schedule I
hereto opposite their names at a purchase price of 96.5% of the principal amount
at maturity thereof, plus accrued interest, if any, from May 4, 1998 to the date
of payment and delivery.

                  Payment  for the Notes shall be made  against  delivery of the
Notes at a closing  (the  "Closing")  to be held at the  offices  of  Shearman &
Sterling, 599 Lexington Avenue, New York, New York, at 9:00 A.M., local time, on
May 4, 1998,  or at such other  time on the same or such other  date,  not later
than May 19, 1998,  as shall be  designated in writing by you. The time and date
of such payment are herein referred to as the "Closing Date." Payment for

                                       8

<PAGE>
the Notes shall be made to GST Funding by wire transfer to an account previously
designated  to the  Placement  Agents by GST  Funding in  immediately  available
funds.

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

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

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

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

                  (ii)  there  shall  not  have  occurred  any  change,  or  any
         development involving a prospective change, in the condition, financial
         or otherwise,  or in the earnings,  business or operations,  of GST and
         its  subsidiaries,  taken  as a  whole,  from  that  set  forth  in the
         Preliminary  Memorandum that, in your judgment, is material and adverse
         and that makes it, in your judgment,  impracticable to market the Notes
         on the terms and in the manner contemplated in the Final Memorandum.

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

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

                                       9

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

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

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

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

                  (g) GST  Funding  shall have  received  from GST USA a capital
contribution in cash of at least $2 million.

                  (h) GST  Funding,  GST USA and GST shall have entered into the
Reimbursement  and Commitment Fee Agreement and such agreement  shall be in full
force and effect.

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

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

                  (a) To  furnish  to you,  without  charge,  during  the period
         mentioned  in  subsection  (c) of this Section 5, as many copies of the
         Final Memorandum and any

                                       10

<PAGE>
         supplements and amendments thereto as you may reasonably request and to
         use its best efforts to deliver as many copies of the Final  Memorandum
         as you may  request  to you by 5:00 P.M.  (New  York City  time) on the
         business day next following the execution of this Agreement.

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

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

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

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

                  (f)  Whether  or not  the  transactions  contemplated  by this
         Agreement are  consummated or this Agreement is terminated,  to pay all
         costs and expenses incident to the performance of its obligations under
         this Agreement,  including,  without limitation: (i) the preparation of
         each  Memorandum and all amendments and supplements  thereto,  (ii) the
         preparation, issuance and delivery of the Notes, including any transfer
         or other taxes payable thereon, (iii) the fees and disbursements of GST
         Funding's, GST's and

                                       11

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

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

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

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

                                       12

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

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

                  (l) As soon as  permissible  under  all  agreements  of GST in
         existence  on the date  hereof,  GST will  transfer  all of the capital
         stock of Action Telecom to GST USA, and thereafter such company will be
         a wholly owned subsidiary of GST USA.

                  6.  OFFERING  OF NOTES;  RESTRICTIONS  ON  TRANSFER.  (a) Each
Placement  Agent,  severally and not jointly,  represents and warrants that such
Placement Agent is a qualified institutional buyer as defined in Rule 144A under
the Securities Act (a "QIB").  Each Placement Agent,  severally and not jointly,
agrees with GST  Funding,  GST and GST USA that (i) it will not  solicit  offers
for, or offer or sell, the Notes by any form of general  solicitation or general
advertising (as such terms are used in Regulation D under the Securities Act) or
in any manner  involving a public offering within the meaning of Section 4(2) of
the  Securities Act and (ii) it will solicit offers for the Notes only from, and
will offer the Notes only to,  persons that it reasonably  believes to be (A) in
the case of offers inside the United States, (1) QIBs or (2) other institutional
accredited  investors  (as defined in Rule 501(a) (1), (2), (3) or (7) under the
Securities Act)  ("institutional  accredited  investors")  that,  prior to their
purchase of any Notes,  deliver to such Placement Agent a letter  containing the
representations  and agreements set forth in Annex A to the Final Memorandum and
(B) in the case of offers outside the United States,  to persons other than U.S.
persons  ("foreign  purchasers",  which  term  shall  include  dealers  or other
professional  fiduciaries in the United States acting on a  discretionary  basis
for foreign  beneficial  owners  (other than an estate or trust))  that, in each
case,  in  purchasing  such Notes are deemed to have  represented  and agreed as
provided in the Final Memorandum under the heading "Transfer Restrictions."

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

                  (i) it understands that no action has been or will be taken in
         any  jurisdiction  by GST  Funding,  GST or GST USA that would permit a
         public  offering of the Notes,  or possession or distribution of either
         Memorandum or any other offering or publicity

                                       13

<PAGE>
         material  relating to the Notes, in any country or  jurisdiction  where
         action for that purpose is required;

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

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

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

                  (v) each Placement Agent  represents and, during the period of
         six months from the date hereof,  agrees that (i) it has not offered or
         sold and will not  offer or sell any  Notes to  persons  in the  United
         Kingdom  except to persons whose  ordinary  activities  involve them in
         acquiring,  holding, managing or disposing of investments (as principal
         or  agent)  for the  purposes  of  their  businesses  or  otherwise  in
         circumstances  which have not  resulted and will not result in an offer
         to the public in the United  Kingdom  within the  meaning of the Public
         Offers of Securities Regulations 1995 (the "Regulations");  (ii) it has
         complied  and  will  comply  with  all  applicable  provisions  of  the
         Financial  Services  Act  1986  and the  Regulations  with  respect  to
         anything  done by it in  relation  to the Notes in,  from or  otherwise
         involving the United Kingdom; and (iii) it has only issued or passed on
         and will only issue or pass on to any person in the United  Kingdom any
         document  received by it in  connection  with the issue of the Notes if
         that person is of a kind  described in Article  11(3) of the  Financial
         Services Act 1986 (Investment  Advertisements)  (Exemptions) Order 1996
         or is a person to whom such document may  otherwise  lawfully be issued
         or passed on;

                                       14

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

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

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

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

         7.  INDEMNIFICATION AND CONTRIBUTION.  (a) Each of GST Funding, GST and
GST USA agrees,  jointly and  severally,  to indemnify  and hold  harmless  each
Placement  Agent,  and each person,  if any, who controls such  Placement  Agent
within the meaning of either  Section 15 of the  Securities Act or Section 20 of
the Exchange Act, or is under common  control  with,  or is controlled  by, such
Placement  Agent,  from and  against  any and all  losses,  claims,  damages and
liabilities  (including,   without  limitation,  any  legal  or  other  expenses
reasonably incurred by any Placement Agent or any such controlling or affiliated
person in connection with defending or  investigating  any such action or claim)
caused by any untrue  statement or alleged  untrue  statement of a material fact
contained in either  Memorandum (as amended or  supplemented  if GST Funding and
GST shall have furnished any amendments or  supplements  thereto),  or caused by
any omission or alleged  omission to state therein a material fact  necessary to
make the statements therein in light of the circumstances  under which they were
made  not  misleading,  except  insofar  as  such  losses,  claims,  damages  or
liabilities  are caused by any such  untrue  statement  or  omission  or alleged
untrue  statement or omission based upon  information  relating to any Placement
Agent furnished to GST Funding or GST in writing by such Placement Agent through
you expressly for use therein.

                                       15

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

         (c) In case any proceeding  (including any governmental  investigation)
shall be instituted  involving  any person in respect of which  indemnity may be
sought  pursuant to either  subsection (a) or (b) of this Section 7, such person
(the  "indemnified  party") shall  promptly  notify the person against whom such
indemnity  may  be  sought  (the  "indemnifying   party")  in  writing  and  the
indemnifying  party, upon request of the indemnified party, shall retain counsel
reasonably  satisfactory to the  indemnified  party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel,  but the fees and expenses of such counsel  shall be at the expense
of such indemnified party unless (i) the indemnifying  party and the indemnified
party shall have  mutually  agreed to the  retention of such counsel or (ii) the
named parties to any such proceeding  (including any impleaded  parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel  would be  inappropriate  due to actual or potential
differing  interests between them. It is understood that the indemnifying  party
shall not, in connection with any proceeding or related  proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
(in addition to any local counsel) for all such indemnified parties and that all
such fees and expenses shall be reimbursed as they are incurred. Such firm shall
be designated  in writing by Morgan  Stanley & Co.  Incorporated  in the case of
parties indemnified pursuant to subsection (a) above and by GST Funding, GST and
GST USA in the case of parties indemnified pursuant to subsection (b) above. The
indemnifying  party  shall not be liable for any  settlement  of any  proceeding
effected  without its written  consent,  but if settled  with such consent or if
there be a final judgment for the plaintiff,  the  indemnifying  party agrees to
indemnify the indemnified party from and against any loss or liability by reason
of such settlement or judgment.  Notwithstanding the foregoing  sentence,  if at
any time an  indemnified  party shall have  requested an  indemnifying  party to
reimburse the indemnified party for fees and expenses of counsel as contemplated
by the second and third sentences of this subsection (c), the indemnifying party
agrees that it shall be liable for any  settlement  of any  proceeding  effected
without its written  consent if (A) such settlement is entered into more than 30
days after receipt by such  indemnifying  party of the aforesaid request and (B)
such  indemnifying  party shall not have  reimbursed  the  indemnified  party in
accordance  with  such  request  prior  to  the  date  of  such  settlement.  No
indemnifying party shall, without the prior

                                       16

<PAGE>
written consent of the indemnified  party,  effect any settlement of any pending
or threatened  proceeding in respect of which any indemnified  party is or could
have  been a party  and  indemnity  could  have been  sought  hereunder  by such
indemnified party, unless such settlement  includes an unconditional  release of
such indemnified  party from all liability on claims that are the subject matter
of such proceeding.

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

                  (e) GST  Funding,  GST and GST USA, and the  Placement  Agents
agree that it would not be just or  equitable if  contribution  pursuant to this
Section 7 were determined by PRO RATA allocation  (even if the Placement  Agents
were  treated  as one  entity  for  such  purpose)  or by any  other  method  of
allocation that does not take account of the equitable  considerations  referred
to in  subsection  (d) of this  Section  7. The  amount  paid or  payable  by an
indemnified  party as a result of the losses,  claims,  damages and  liabilities
referred  to in  subsection  (d) of this  Section 7 shall be deemed to  include,
subject  to the  limitations  set  forth  above,  any  legal or  other  expenses
reasonably incurred by such indemnified party in connection with

                                       17

<PAGE>

investigating  or  defending  any such  action  or  claim.  Notwithstanding  the
provisions of this Section 7, no Placement Agent shall be required to contribute
any amount in excess of the  amount by which the total  price at which the Notes
resold by it in the initial  placement  of the Notes were  offered to  investors
exceeds the amount of any damages that such  Placement  Agent has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission.  No person guilty of fraudulent  misrepresentation  (within
the  meaning of  Section  11(f) of the  Securities  Act)  shall be  entitled  to
contribution   from  any  person   who  was  not   guilty  of  such   fraudulent
misrepresentation.  The indemnity and contribution  provisions contained in this
Section 7 and the representations and warranties of GST Funding, GST and GST USA
and the Placement  Agents contained in this Agreement shall remain operative and
in full force and effect  regardless of (i) any  termination of this  Agreement,
(ii) any  investigation  made by or on  behalf  of the  Placement  Agents or any
person  controlling the Placement Agents or by or on behalf of GST Funding,  GST
or GST USA, their officers or directors or any person  controlling  GST Funding,
GST or GST USA and (iii)  acceptance  of and payment  for any of the Notes.  The
remedies  provided for in this Section 7 are not  exclusive  and shall not limit
any rights or remedies which may otherwise be available to any indemnified party
at law or in equity.

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

                  9.  MISCELLANEOUS.  (a)  If,  on the  Closing  Date,  any  one
Placement  Agent  shall  fail or  refuse  to  purchase  Notes  that it agreed to
purchase  hereunder on such date,  and the principal  amount of Notes which such
defaulting  Placement Agent agreed but failed or refused to purchase is not more
than  one-tenth  of the total  principal  amount of the Notes to be purchased on
such date, the other  Placement  Agents shall be obligated to purchase the Notes
which such  defaulting  Placement Agent agreed but failed or refused to purchase
on such date; PROVIDED that in no event shall the principal amount of Notes that
any Placement Agent has

                                       18

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

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

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

                  (c)  Each  of  GST  Funding,  GST,  and  GST  USA  hereby  (i)
acknowledges  that it has irrevocably  designated and appointed  Olshan Grundman
Frome & Rosenzweig  LLP, 505 Park Avenue,  New York, New York 10022,  Attention:
David J. Adler, Esq. (together with any successor,  the "Process Agent"), as its
authorized  agent  upon  which  process  may be served  in any  suit,  action or
proceeding  arising  out of or relating to this  Agreement  or the  transactions
contemplated  herein,  the Indenture,  the Registration  Rights  Agreement,  the
Pledge Agreement, the Reimbursement and Commitment Fee Agreement, the Notes, the
Fee  Notes,  the Note  Guarantee  or the  guarantee  of the Fee Notes  (the "Fee
Guarantee") that may be instituted in any federal or state court in the State of
New York, or brought under federal or state  securities  laws, and  acknowledges
that the Process Agent has accepted such  designation,  (ii) agrees that service
of process  upon the  Process  Agent and written  notice of such  service to GST
Funding,  GST or GST USA, as the case may be (mailed or delivered to GST's Chief
Executive  Officer at GST's  principal  office at 4001 Main  Street,  Vancouver,
Washington

                                       19

<PAGE>
98663),  shall be deemed in every respect  effective service of process upon GST
Funding,  GST or GST USA, as the case may be, in any suit,  action or proceeding
and (iii) agrees to take any and all action,  including the execution and filing
of any and all such  documents and  instruments  as may be necessary to continue
such  designation  and appointment of the Process Agent in full force and effect
so long as any of the Notes shall be outstanding.  Each of GST Funding,  GST and
GST USA hereby agrees to submit to the nonexclusive  jurisdiction of any federal
or state court in the State of New York in any such suit,  action or  proceeding
arising out of or relating to this  Agreement or the  transactions  contemplated
herein, the Indenture,  the Registration Rights Agreement, the Pledge Agreement,
the Notes or the Note Guarantee.

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

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

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

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

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

         Morgan Stanley & Co.             GST Telecommunications, Inc.
         Incorporated                     4001 Main Street
         1585 Broadway                    Vancouver, Washington  98663
         New York, New York  10036        Attention:  Chief Executive Officer
         Attention:  James Avery

         with a copy to:                  with a copy to:

         Shearman & Sterling              Olshan Grundman Frome &
         599 Lexington Avenue             Rosenzweig LLP

                                       20

<PAGE>

         New York, New York  10022              505 Park Avenue
         Attention:  Jerry V. Elliott, Esq.     New York, New York  10022-1170
                                                Attention:  Stephen Irwin, Esq.

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





                                       21

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

                                             Very truly yours,

                                             GST NETWORK FUNDING, INC.

                                             By: /s/ Stephen Irwin
                                                --------------------------------
                                                Name: Stephen Irwin
                                                Title: Senior Vice President

                                             GST TELECOMMUNICATIONS, INC.


                                             By: /s/ Stephen Irwin
                                                --------------------------------
                                                Name: Stephen Irwin
                                                Title: Vice Chairman and
                                                       Secretary

                                             GST USA, INC.

                                             By: /s/ Stephen Irwin
                                                --------------------------------
                                                Name: Stephen Irwin
                                                Title: Senior Vice President


Agreed as of the date first above written

MORGAN STANLEY & CO. INCORPORATED

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

By Morgan Stanley & Co. Incorporated

By: James Avery
    ----------------------
    Name: James Avery
    Title: Principal


<PAGE>
                                   SCHEDULE I

                                                    Principal Amount at Maturity
                Placement Agent                             To Be Purchased

Morgan Stanley & Co. Incorporated...................           $200,000,000
Bear, Stearns & Co. Inc.............................           $200,000,000
Credit Suisse First Boston Corporation..............            $50,000,000
SBC Warburg Dillon Read Inc.........................            $50,000,000
                                                                -----------


                         Total......................           $500,000,000
                                                               ============



<PAGE>
                                   SCHEDULE II

                             Specified Subsidiaries

GST Telecom Inc., a Delaware corporation
GST Pacific Lightwave, Inc., a Washington corporation
GST Telecom Hawaii, Inc., a Hawaii corporation
GST Tucson Lightwave, Inc., an Arizona corporation
GST Telecom New Mexico, Inc., a New Mexico corporation
GST Telecom California, Inc., a Delaware corporation
NACT Telecommunications, Inc., a Delaware corporation
Wasatch International Network Services, Inc., a Utah corporation
GST Net Inc., a Delaware corporation
International Telemanagement Group, Inc., an Ohio corporation
TotalNet Communications, Inc., a Texas corporation
GST Call America, Inc., a California corporation
GST USA, Inc., a Delaware corporation
TriStar Residential Communications Corp., a Washington corporation
GST EquipCo, Inc., a Washington corporation
GST Internet, Inc., a Delaware corporation
GST Action Telecom, Inc., a Delaware corporation
GST Equipment Funding, Inc., a Delaware corporation
GST Telecom Washington, Inc., a Delaware corporation
GST Government Systems, Inc., a Delaware corporation
GST Home, Inc., a Delaware corporation


- --------------------
In accordance  with Item 601 of Regulation S-K, the Registrant has not filed the
exhibits to this  Agreement with the  Securities  and Exchange  Commission.  The
Registrant  undertakes to supplementally  provide a copy of such exhibits to the
Securities and Exchange Commission upon request.


                          REGISTRATION RIGHTS AGREEMENT

                                Dated May 4, 1998

                                      among

                            GST NETWORK FUNDING, INC.

                                  GST USA, INC.

                          GST TELECOMMUNICATIONS, INC.,

                                       and

                       MORGAN STANLEY & CO. INCORPORATED,

                            BEAR, STEARNS & CO. INC.,

                     CREDIT SUISSE FIRST BOSTON CORPORATION

                                       and

                          SBC WARBURG DILLON READ INC.


<PAGE>

                          REGISTRATION RIGHTS AGREEMENT

         THIS  REGISTRATION  RIGHTS  AGREEMENT  (this  "Agreement")  is made and
entered into May 4, 1998 among GST NETWORK FUNDING, INC., a Delaware corporation
("GST  Funding"),  GST USA,  INC.,  a  Delaware  corporation  ("GST  USA"),  GST
TELECOMMUNICATIONS,  INC., a Canadian  corporation ("GST"), and MORGAN STANLEY &
CO.  INCORPORATED,  BEAR,  STEARNS  &  CO.  INC.,  CREDIT  SUISSE  FIRST  BOSTON
CORPORATION  and SBC WARBURG DILLON READ INC.  (collectively  referred to as the
"Placement Agents").

         This Agreement is made pursuant to the Placement  Agreement dated April
29, 1998 (the "Placement  Agreement"),  among GST Funding,  GST USA, GST and the
Placement  Agents,  which  provides for the sale by GST Funding to the Placement
Agents of  $500,000,000  principal  amount at maturity of GST  Funding's 10 1/2%
Senior Secured Discount Notes Due 2008 (the "Notes") to be issued by GST Funding
pursuant  to the  provisions  of an  Indenture  dated as of the date hereof (the
"Indenture") among GST Funding,  GST USA, GST and United States Trust Company of
New York, as trustee (the "Trustee"). In order to induce the Placement Agents to
enter into the Placement Agreement,  GST Funding, GST USA and GST have agreed to
provide to the Placement  Agents and their direct and indirect  transferees  the
registration  rights with respect to the Notes set forth in this Agreement.  The
execution of this  Agreement is a condition to the closing  under the  Placement
Agreement.

         In consideration of the foregoing, the parties hereto agree as follows:

         1. DEFINITIONS.

         As used in this  Agreement,  the  following  capitalized  defined terms
shall have the following meanings:

         "1933 ACT" shall mean the Securities Act of 1933, as amended.

         "1934 ACT" shall mean the Securities Exchange Act of 1934, as amended.

         "CLOSING  DATE" shall mean the Closing Date as defined in the Placement
     Agreement.

         "EXCHANGE  DATE" shall have the  meaning set forth in Section  2(a)(ii)
     hereof.

         "EXCHANGE  NOTES" shall mean  securities  issued under the Indenture by
     GST Funding or by GST USA, as the case may be,  containing  terms identical
     to the Notes  (except that the Exchange  Notes will not contain  terms with
     respect  to  transfer  restrictions)  to be  offered to Holders of Notes in
     exchange for Notes pursuant to the Exchange Offer.


<PAGE>
         "EXCHANGE  OFFER" shall mean the  exchange  offer by GST Funding or GST
     USA, as the case may be, of Exchange Notes for  Registrable  Notes pursuant
     to Section 2(a) hereof.

         "EXCHANGE OFFER  REGISTRATION" shall mean a registration under the 1933
     Act effected pursuant to Section 2(a) hereof.

         "EXCHANGE OFFER  REGISTRATION  STATEMENT"  shall mean an exchange offer
     registration  statement  on  Form  S-4  (or,  if  applicable,   on  another
     appropriate  form) and all amendments and supplements to such  registration
     statement,  in each case including the Prospectus  contained  therein,  all
     exhibits thereto and all material incorporated by reference therein.

         "GST" shall have the meaning set forth in the  preamble  and shall also
     include GST's successors.

         "GST  FUNDING"  shall have the  meaning set forth in the  preamble  and
     shall also include GST Funding's successors.

         "GST USA" shall have the  meaning set forth in the  preamble  and shall
     also include GST USA's successors.

         "HOLDER" shall mean the Placement  Agents,  for so long as they own any
     Registrable  Notes,  and each of their  successors,  assigns and direct and
     indirect  transferees  who become  registered  owners of Registrable  Notes
     under the Indenture; PROVIDED that for purposes of Sections 4 and 5 hereof,
     the term "Holder" shall include Participating Broker-Dealers.

         "INDENTURE" shall have the meaning set forth in the preamble.

         "MAJORITY  HOLDERS"  shall  mean  the  Holders  of a  majority  of  the
     aggregate principal amount of outstanding  Registrable Notes; PROVIDED that
     whenever  the consent or approval of Holders of a specified  percentage  of
     Registrable  Notes is  required  hereunder,  Registrable  Notes held by GST
     Funding or any of its affiliates (as such term is defined in Rule 405 under
     the 1933 Act) (other than the  Placement  Agents or  subsequent  holders of
     Registrable  Notes  if  such  subsequent  holders  are  deemed  to be  such
     affiliates  solely by reason of their  holding of such  Registrable  Notes)
     shall not be counted in  determining  whether  such consent or approval was
     given by the Holders of such required percentage or amount.

         "PARTICIPATING  BROKER-DEALER"  shall  have the  meaning  set  forth in
     Section 4(a) hereof.

                                       2

<PAGE>
         "PERSON" shall mean an individual,  partnership,  corporation, trust or
     unincorporated  organization,  or  a  government  or  agency  or  political
     subdivision thereof.

         "PLACEMENT AGENTS" shall have the meaning set forth in the preamble.

         "PLACEMENT AGREEMENT" shall have the meaning set forth in the preamble.

         "PROSPECTUS"  shall  mean the  prospectus  included  in a  Registration
     Statement, including any preliminary prospectus, and any such prospectus as
     amended  or  supplemented  by  any  prospectus   supplement,   including  a
     prospectus  supplement  with  respect to the terms of the  offering  of any
     portion of the Registrable Notes covered by a Shelf Registration Statement,
     and by all other amendments and supplements to such prospectus, and in each
     case including all material incorporated by reference therein.

         "REGISTRABLE NOTES" shall mean the Notes;  PROVIDED,  HOWEVER, that the
     Notes shall cease to be Registrable Notes (i) when a Registration Statement
     with  respect to such Notes shall have been  declared  effective  under the
     1933 Act and such Notes shall have been  disposed of or exchanged  pursuant
     to such Registration Statement,  (ii) when such Notes have been sold to the
     public pursuant to Rule 144(k) (or any similar provision then in force, but
     not Rule  144A)  under the 1933 Act or (iii)  when such  Notes  shall  have
     ceased to be outstanding.

         "REGISTRATION  EXPENSES"  shall mean any and all  expenses  incident to
     performance  of or  compliance  by GST  Funding,  GST USA and GST with this
     Agreement,  including  without  limitation:  (i) all SEC, stock exchange or
     National  Association of Securities Dealers,  Inc.  registration and filing
     fees,  (ii) all fees and expenses  incurred in connection  with  compliance
     with  state  securities  or blue sky laws  (including  reasonable  fees and
     disbursements of counsel for any Underwriters or Holders in connection with
     blue sky qualification of any of the Exchange Notes or Registrable  Notes),
     (iii) all expenses of any Persons in  preparing or assisting in  preparing,
     word processing,  printing and distributing any Registration Statement, any
     Prospectus,   any  amendments  or  supplements  thereto,  any  underwriting
     agreements, securities sales agreements and other documents relating to the
     performance of and compliance with this  Agreement,  (iv) all rating agency
     fees, if any, (v) all fees and disbursements  relating to the qualification
     of the  Indenture  under  applicable  securities  laws,  (vi)  the fees and
     disbursements  of  the  Trustee  and  its  counsel,   (vii)  the  fees  and
     disbursements of counsel for GST Funding,  GST USA and GST and, in the case
     of a Shelf  Registration  Statement,  the  fees  and  disbursements  of one
     counsel for the Holders  (which  counsel  shall be selected by the Majority
     Holders and which counsel may also be counsel for the Placement Agents) and
     (viii) the fees and disbursements of the independent  public accountants of
     GST Funding,  GST USA and GST, including the expenses of any special audits
     or "cold comfort" letters required by or incident to such performance and

                                       3

<PAGE>
     compliance,  but excluding fees and expenses of counsel to the Underwriters
     (other  than  fees and  expenses  set forth in  clause  (ii)  above) or the
     Holders and  underwriting  discounts and commissions and transfer taxes, if
     any, relating to the sale or disposition of Registrable Notes by a Holder.

         "REGISTRATION  STATEMENT" shall mean any registration  statement of GST
     Funding,  GST  USA  or  GST  that  covers  any of  the  Exchange  Notes  or
     Registrable  Notes  pursuant to the  provisions  of this  Agreement and all
     amendments and supplements to any such  Registration  Statement,  including
     post-effective  amendments, in each case including the Prospectus contained
     therein,  all exhibits  thereto and all material  incorporated by reference
     therein.

         "SEC" shall mean the Securities and Exchange Commission.

         "SHELF  REGISTRATION"  shall mean a registration  effected  pursuant to
     Section 2(b) hereof.

         "SHELF  REGISTRATION  STATEMENT"  shall  mean  a  "shelf"  registration
     statement of GST  Funding,  GST USA or GST  pursuant to the  provisions  of
     Section 2(b) hereof which covers all of the Registrable Notes (but no other
     securities  unless  approved by the  Holders  whose  Registrable  Notes are
     covered by such Shelf Registration  Statement) on an appropriate form under
     Rule 415 under the 1933 Act, or any similar rule that may be adopted by the
     SEC, and all amendments and  supplements  to such  registration  statement,
     including post-effective  amendments, in each case including the Prospectus
     contained  therein,  all exhibits thereto and all material  incorporated by
     reference therein.

         "TIA" shall have the meaning set forth in Section 3(l) hereof.

         "TRUSTEE"  shall have the  meaning  set forth in the  preamble  and its
     successors under the Indenture.

         "UNDERWRITTEN  REGISTRATION"  or  "UNDERWRITTEN  OFFERING" shall mean a
     registration  in which  Registrable  Notes are sold to an  Underwriter  for
     reoffering to the public.

         "UNDERWRITERS" shall have the meaning set forth in Section 3 hereof.

         2. REGISTRATION UNDER THE 1933 ACT.

         (a) To the extent not  prohibited by any  applicable  law or applicable
interpretation of the Staff of the SEC, GST Funding, GST USA and GST shall cause
to be filed an Exchange Offer  Registration  Statement covering the offer by GST
Funding or GST USA, as the case may

                                       4

<PAGE>
be, to the Holders to exchange all of the Registrable  Notes for Exchange Notes,
to have such  Registration  Statement  remain effective until the closing of the
Exchange Offer and to consummate the Exchange Offer on or prior to the date that
is six months  after the Closing  Date.  GST Funding or GST USA, as the case may
be,  shall  commence  the  Exchange  Offer  promptly  after the  Exchange  Offer
Registration  Statement has been declared  effective by the SEC and use its best
efforts to have the Exchange Offer consummated not later than 60 days after such
effective  date.  GST Funding or GST USA, as the case may be, shall commence the
Exchange Offer by mailing the related exchange offer Prospectus and accompanying
documents to each Holder stating,  in addition to such other  disclosures as are
required by applicable law:

                  (i) that the  Exchange  Offer is being made  pursuant  to this
         Agreement  and that all  Registrable  Notes  validly  tendered  will be
         accepted for exchange;

                  (ii) the dates of  acceptance  for exchange  (which shall be a
         period  of at least 20  business  days  from the date  such  notice  is
         mailed) (each such date being an "Exchange Date");

                  (iii)  that any  Registrable  Note not  tendered  will  remain
         outstanding  and continue to accrue  interest,  but will not retain any
         rights under this Agreement;

                  (iv)  that  Holders   electing  to  have  a  Registrable  Note
         exchanged  pursuant to the Exchange Offer will be required to surrender
         such   Registrable   Note,   together  with  the  enclosed  letters  of
         transmittal,  to the  institution  and at the  address  (located in the
         Borough of  Manhattan,  The City of New York)  specified  in the notice
         prior to the close of business on the last Exchange Date; and

                  (v) that Holders will be entitled to withdraw their  election,
         not later than the close of  business  on the last  Exchange  Date,  by
         sending to the institution  and at the address  (located in the Borough
         of Manhattan, The City of New York) specified in the notice a telegram,
         telex,  facsimile transmission or letter setting forth the name of such
         Holder,  the  principal  amount  of  Registrable  Notes  delivered  for
         exchange and a statement that such Holder is  withdrawing  his election
         to have such Notes exchanged.

         As soon as practicable after the last Exchange Date, GST Funding or GST
USA, as the case may be, shall:

                  (i) accept for exchange  Registrable Notes or portions thereof
         tendered and not validly withdrawn pursuant to the Exchange Offer; and

                  (ii)  deliver,  or cause to be  delivered,  to the Trustee for
         cancellation all Registrable  Notes or portions thereof so accepted for
         exchange by GST Funding or GST

                                       5

<PAGE>
         USA,  as the case may be, and issue,  and cause the Trustee to promptly
         authenticate  and  mail,  to each  Holder  an  Exchange  Note of  equal
         principal amount.

GST  Funding,  GST USA and GST shall use their  best  efforts  to  complete  the
Exchange   Offer  as  provided  above  and  shall  comply  with  the  applicable
requirements  of the  1933  Act,  the  1934 Act and  other  applicable  laws and
regulations in connection with the Exchange Offer.  The Exchange Offer shall not
be  subject  to any  conditions,  other  than that the  Exchange  Offer does not
violate applicable law or any applicable interpretation of the Staff of the SEC.
GST Funding or GST USA, as the case may be, shall inform the Placement Agents of
the names and addresses of the Holders to whom the Exchange  Offer is made,  and
the Placement Agents shall have the right, subject to applicable law, to contact
such Holders and otherwise  facilitate  the tender of  Registrable  Notes in the
Exchange Offer.

                  (b)  In  the  event  that  (i)  GST  Funding,  GST  USA or GST
determines  that the Exchange  Offer  Registration  provided for in Section 2(a)
above is not available or may not be consummated  as soon as  practicable  after
the last Exchange Date because it would violate applicable law or the applicable
interpretations  of the Staff of the SEC, (ii) the Exchange Offer is not for any
other reason  consummated  by November 4, 1998 or (iii) the  Exchange  Offer has
been  completed  and in the  opinion  of counsel  for the  Placement  Agents,  a
Registration  Statement must be filed and a Prospectus  must be delivered by the
Placement  Agents in connection with any offering or sale of Registrable  Notes,
GST  Funding,  GST USA and GST shall use their best efforts to cause to be filed
as soon as practicable after such determination,  date or notice of such opinion
of counsel is given to GST Funding,  GST USA or GST, as the case may be, a Shelf
Registration  Statement  providing  for the  sale by the  Holders  of all of the
Registrable  Notes  and to  have  such  Shelf  Registration  Statement  declared
effective by the SEC. In the event GST Funding,  GST USA or GST, as the case may
be, is required to file a Shelf Registration Statement solely as a result of the
matters referred to in clause (iii) of the preceding sentence,  GST Funding, GST
USA or GST, as the case may be,  shall file and have  declared  effective by the
SEC both an Exchange Offer Registration  Statement pursuant to Section 2(a) with
respect to all Registrable Notes and a Shelf  Registration  Statement (which may
be a  combined  Registration  Statement  with the  Exchange  Offer  Registration
Statement)  with  respect to offers and sales of  Registrable  Notes held by the
Placement Agents after  completion of the Exchange Offer.  GST Funding,  GST USA
and GST agree to use their best efforts to keep the Shelf Registration Statement
continuously  effective  until the expiration of the period  referred to in Rule
144(k) for the Registrable Notes covered by such Shelf Registration Statement or
such  shorter  period  that will  terminate  when all of the  Registrable  Notes
covered by the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement. GST Funding, GST USA and GST further agree to supplement
or amend the Shelf Registration Statement if required by the rules,  regulations
or instructions  applicable to the registration  form used by GST Funding or GST
USA, as the case may be, for such Shelf  Registration  Statement  or by the 1933
Act or by any other rules and regulations  thereunder for shelf  registration or
if reasonably requested by a Holder with respect to information

                                       6

<PAGE>
relating  to such  Holder,  and to use  their  best  efforts  to cause  any such
amendment to become  effective and such Shelf  Registration  Statement to become
usable as soon as thereafter practicable.  GST Funding, GST USA and GST agree to
furnish to the Holders of  Registrable  Notes copies of any such  supplement  or
amendment promptly after its being used or filed with the SEC.

                  (c) GST  Funding,  GST USA and GST shall pay all  Registration
Expenses in connection with the registration pursuant to Section 2(a) or Section
2(b) hereof.  Each Holder shall pay all  underwriting  discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of such Holder's
Registrable Notes pursuant to the Shelf Registration Statement.

                  (d) An  Exchange  Offer  Registration  Statement  pursuant  to
Section 2(a) hereof or a Shelf  Registration  Statement pursuant to Section 2(b)
hereof will not be deemed to have become  effective  unless it has been declared
effective by the SEC;  PROVIDED,  HOWEVER,  that, if, after it has been declared
effective,  the offering of Registrable  Notes pursuant to a Shelf  Registration
Statement is  interfered  with by any stop order,  injunction  or other order or
requirement  of  the  SEC  or any  other  governmental  agency  or  court,  such
Registration  Statement will be deemed not to have become  effective  during the
period of such interference  until the offering of Registrable Notes pursuant to
such  Registration  Statement  may  legally  resume.  As  provided  for  in  the
Indenture,  in the event the  Exchange  Offer is not  consummated  and the Shelf
Registration  Statement  is not  declared  effective  on or prior to November 4,
1998,  interest  (in  addition  to the  accrual of  original  issue  discount or
interest otherwise due on the Notes) on the Notes will accrue, at an annual rate
of 0.5%,  from  accrual of  original  issue  discount or November 4, 1998 and be
payable in cash until the Exchange Offer is consummated or a shelf  Registration
Statement is declared effective.

                  (e) Without  limiting the remedies  available to the Placement
Agents  and the  Holders,  GST  Funding,  GST USA and GST  acknowledge  that any
failure by GST Funding,  GST USA and GST to comply with their  obligations under
Section 2(a) and Section 2(b) hereof may result in material  irreparable  injury
to the Placement  Agents or the Holders for which there is no adequate remedy at
law, that it will not be possible to measure damages for such injuries precisely
and that, in the event of any such failure,  the Placement  Agents or any Holder
may obtain such relief as may be required to specifically enforce GST Funding's,
GST USA's and GST's obligations under Section 2(a) and Section 2(b) hereof.

                  (f) During any consecutive  365-day period,  GST Funding,  GST
USA and GST may suspend availability of any Shelf Registration  Statement for no
more than two periods of up to 45 consecutive  days (except for the  consecutive
45-day  period  immediately  prior to the maturity of the Notes) and for no more
than an  aggregate  of 60 days  during any  365-day  period,  if GST's  Board of
Directors  determines  in good  faith  that  there is a valid  purpose  for such
suspension.

                                       7

<PAGE>
                  3. REGISTRATION PROCEDURES.

                  In connection with the respective  obligations of GST Funding,
GST USA and GST with respect to the Registration  Statements pursuant to Section
2(a)  and  Section  2(b)  hereof,  GST  Funding,  GST  USA  and  GST  shall,  as
expeditiously as possible:

                  (a) prepare and file with the SEC a Registration  Statement on
         the  appropriate  form  under the 1933  Act,  which  form  shall (i) be
         selected  by GST  Funding  or GST  USA,  (ii)  in the  case  of a Shelf
         Registration, be available for the sale of the Registrable Notes by the
         selling  Holders  thereof and (iii)  comply as to form in all  material
         respects with the  requirements  of the applicable form and include all
         financial statements required by the SEC to be filed therewith, and use
         their  best  efforts  to cause such  Registration  Statement  to become
         effective and remain effective in accordance with Section 2 hereof;

                  (b)  prepare  and  file  with  the  SEC  such  amendments  and
         post-effective  amendments  to each  Registration  Statement  as may be
         necessary  to  keep  such  Registration  Statement  effective  for  the
         applicable  period and cause each  Prospectus to be supplemented by any
         required  prospectus  supplement and, as so  supplemented,  to be filed
         pursuant  to Rule 424  under the 1933  Act;  and keep  each  Prospectus
         current  during the period  described  under  Section 4(3) and Rule 174
         under the 1933 Act that is  applicable  to  transactions  by brokers or
         dealers with respect to the Registrable Notes or Exchange Notes;

                  (c) in the  case  of a  Shelf  Registration,  furnish  to each
         Holder of Registrable  Notes, to counsel for the Placement  Agents,  to
         counsel  for the  Holders and to each  Underwriter  of an  Underwritten
         Offering of Registrable  Notes, if any, without charge,  as many copies
         of each  Prospectus,  including each  preliminary  Prospectus,  and any
         amendment or supplement thereto and such other documents as such Holder
         or  Underwriter  may  reasonably  request,  in order to facilitate  the
         public sale or other  disposition  of the  Registrable  Notes;  and GST
         Funding,  GST USA and GST consent to the use of such Prospectus and any
         amendment or supplement  thereto in accordance  with  applicable law by
         each  of  the  selling  Holders  of  Registrable  Notes  and  any  such
         Underwriters   in  connection   with  the  offering  and  sale  of  the
         Registrable  Notes  covered  by and in the  manner  described  in  such
         Prospectus or any amendment or  supplement  thereto in accordance  with
         applicable law;

                  (d) use their best efforts (i) to register or qualify,  by the
         time the applicable Registration Statement is declared effective by the
         SEC, the Registrable  Notes under all applicable  state securities laws
         or blue sky laws of such  jurisdictions  as any  Holder of  Registrable
         Notes covered by a Registration  Statement shall reasonably  request in
         writing and (ii) to cooperate  with such Holder in connection  with any
         filings required to be made

                                       8

<PAGE>
         with the National  Association of Securities  Dealers,  Inc. and do any
         and all other  acts and things  which may be  reasonably  necessary  or
         advisable to enable such Holder to consummate  the  disposition in each
         such  jurisdiction  of such  Registrable  Notes  owned by such  Holder;
         PROVIDED,  HOWEVER,  that none of GST Funding,  GST USA or GST shall be
         required  to (A)  qualify  as a foreign  corporation  or as a dealer in
         securities in any jurisdiction where it would not otherwise be required
         to qualify but for this Section 3(d),  (B) file any general  consent to
         service  of  process  or (C)  subject  itself to  taxation  in any such
         jurisdiction if it is not otherwise so subject;

                  (e) in the case of a Shelf Registration, notify each Holder of
         Registrable  Notes,  counsel  for  the  Holders  and  counsel  for  the
         Placement  Agents  promptly  and,  if  requested  by any such Holder or
         counsel,  confirm  such  advice  in  writing  (i)  when a  Registration
         Statement has become  effective and when any  post-effective  amendment
         thereto  has been filed and becomes  effective,  (ii) of any request by
         the  SEC  or  any  state   securities   authority  for  amendments  and
         supplements  to  a   Registration   Statement  and  Prospectus  or  for
         additional  information  after the  Registration  Statement  has become
         effective,  (iii) of the  issuance  by the SEC or any state  securities
         authority  of  any  stop  order  suspending  the   effectiveness  of  a
         Registration  Statement or the initiation of any  proceedings  for that
         purpose,  (iv)  if,  between  the  effective  date  of  a  Registration
         Statement  and the  closing of any sale of  Registrable  Notes  covered
         thereby,  the representations and warranties of GST Funding, GST USA or
         GST contained in any underwriting agreement, securities sales agreement
         or other similar  agreement,  if any, relating to the offering cease to
         be true and correct in all material respects or if GST Funding, GST USA
         or GST receives any notification  with respect to the suspension of the
         qualification of the Registrable  Notes for sale in any jurisdiction or
         the initiation of any proceeding for such purpose, (v) of the happening
         of any  event  during  the  period a Shelf  Registration  Statement  is
         effective which makes any statement made in such Registration Statement
         or the  related  Prospectus  untrue in any  material  respect  or which
         requires  the making of any changes in such  Registration  Statement or
         Prospectus in order to make the  statements  therein not misleading and
         (vi)  of  any  determination  by GST  Funding,  GST  USA or GST  that a
         post-effective   amendment  to  a  Registration   Statement   would  be
         appropriate;

                  (f) make every  reasonable  effort to obtain the withdrawal of
         any order suspending the  effectiveness of a Registration  Statement at
         the  earliest  possible  moment and  provide  immediate  notice to each
         Holder of the withdrawal of any such order;

                  (g) in the  case  of a  Shelf  Registration,  furnish  to each
         Holder of Registrable  Notes,  without  charge,  at least one conformed
         copy of each Registration  Statement and any  post-effective  amendment
         thereto  (without  documents   incorporated  therein  by  reference  or
         exhibits thereto, unless requested);

                                       9

<PAGE>
                  (h) in the case of a Shelf  Registration,  cooperate  with the
         selling   Holders  of  Registrable   Notes  to  facilitate  the  timely
         preparation and delivery of certificates representing Registrable Notes
         to be sold and not  bearing  any  restrictive  legends  and enable such
         Registrable  Notes  to be in such  denominations  (consistent  with the
         provisions  of the  Indenture)  and  registered  in such  names  as the
         selling Holders may reasonably  request at least one business day prior
         to the closing of any sale of Registrable Notes;

                  (i) in the case of a Shelf  Registration,  upon the occurrence
         of any event  contemplated by Section  3(e)(v)  hereof,  use their best
         efforts  to  prepare a  supplement  or  post-effective  amendment  to a
         Registration  Statement  or the  related  Prospectus  or  any  document
         incorporated  therein by reference or file any other required  document
         so that, as thereafter  delivered to the purchasers of the  Registrable
         Notes,  such  Prospectus  will not  contain any untrue  statement  of a
         material  fact or omit to state a material  fact  necessary to make the
         statements therein, in light of the circumstances under which they were
         made, not misleading.  GST Funding, GST USA and GST agree to notify the
         Holders to suspend use of the  Prospectus  as  promptly as  practicable
         after the occurrence of such an event,  and the Holders hereby agree to
         suspend use of the Prospectus until GST Funding, GST USA or GST, as the
         case may be, has amended or supplemented the Prospectus to correct such
         misstatement or omission;

                  (j)  within  a  reasonable  time  prior to the  filing  of any
         Registration Statement, any Prospectus, any amendment to a Registration
         Statement or amendment or  supplement  to a Prospectus  or any document
         which is to be incorporated by reference into a Registration  Statement
         or a  Prospectus  after  initial  filing of a  Registration  Statement,
         provide copies of such document to the Placement Agents and its counsel
         (and, in the case of a Shelf  Registration  Statement,  the Holders and
         their counsel) and make such of the representatives of GST Funding, GST
         USA and GST as shall be reasonably requested by the Placement Agents or
         its counsel (and, in the case of a Shelf  Registration  Statement,  the
         Holders or their  counsel)  available for  discussion of such document,
         and  shall  not  at  any  time  file  or  make  any  amendment  to  the
         Registration   Statement,   any  Prospectus  or  any  amendment  of  or
         supplement to a Registration  Statement or a Prospectus or any document
         which is to be incorporated by reference into a Registration  Statement
         or a Prospectus, of which the Placement Agents and its counsel (and, in
         the case of a Shelf  Registration  Statement,  the  Holders  and  their
         counsel)  shall not have  previously  been advised and furnished a copy
         or,  other than with respect to  documents  filed  pursuant to the 1934
         Act, to which the  Placement  Agents or their counsel (and, in the case
         of a Shelf Registration Statement,  the Holders or their counsel) shall
         reasonably object,  except for any amendment or supplement or document,
         a copy of which has been previously  furnished to the Placement  Agents
         and its counsel  (and, in the case of a Shelf  Registration  Statement,
         the Holders and their counsel),  which counsel for GST Funding, GST USA
         and GST shall

                                       10

<PAGE>
         advise GST  Funding,  GST USA and GST,  in the form of a written  legal
         opinion, is required in order to comply with applicable law;

                  (k)  obtain  a  CUSIP  number  for  all   Exchange   Notes  or
         Registrable  Notes,  as the case may be, not later  than the  effective
         date of a Registration Statement;

                  (l)  cause  the  Indenture  to be  qualified  under  the Trust
         Indenture Act of 1939, as amended (the "TIA"),  in connection  with the
         registration  of the Exchange Notes or Registrable  Notes,  as the case
         may be,  cooperate  with the  Trustee  and the  Holders to effect  such
         changes to the  Indenture as may be required for the Indenture to be so
         qualified in accordance with the terms of the TIA and execute,  and use
         their best efforts to cause the Trustee to execute all documents as may
         be required to effect  such  changes and all other forms and  documents
         required  to be filed  with the SEC to enable  the  Indenture  to be so
         qualified in a timely manner;

                  (m) in the case of a Shelf  Registration,  make  available for
         inspection by a representative of the Holders of the Registrable Notes,
         any Underwriter participating in any disposition pursuant to such Shelf
         Registration Statement, and attorneys and accountants designated by the
         Holders,  at reasonable times and in a reasonable manner, all financial
         and other records,  pertinent  documents and properties of GST Funding,
         GST USA and GST,  and  cause the  respective  officers,  directors  and
         employees  of GST  Funding,  GST USA and GST to supply all  information
         reasonably requested by any such representative,  Underwriter, attorney
         or accountant in connection with a Shelf Registration Statement;

                  (n) in the  case  of a  Shelf  Registration,  use  their  best
         efforts to cause all  Registrable  Notes to be listed on any securities
         exchange or any automated  quotation system on which similar securities
         issued by GST USA or GST are then listed if  requested  by the Majority
         Holders,  to the  extent  such  Registrable  Notes  satisfy  applicable
         listing requirements;

                  (o) use their  best  efforts  to cause the  Exchange  Notes or
         Registrable  Notes,  as the case may be, to be rated by two  nationally
         recognized statistical rating organizations (as such term is defined in
         Rule 436(g)(2) under the 1933 Act);

                  (p) if reasonably requested by any Holder of Registrable Notes
         covered by a  Registration  Statement,  (i) promptly  incorporate  in a
         Prospectus supplement or post-effective amendment such information with
         respect  to  such  Holder  as such  Holder  reasonably  requests  to be
         included  therein and (ii) make all required filings of such Prospectus
         supplement or such post-effective amendment as soon as GST Funding, GST
         USA or GST has received  notification of the matters to be incorporated
         in such filing; and

                                       11

<PAGE>
                  (q) in the  case  of a Shelf  Registration,  enter  into  such
         customary  agreements  and take all such other  actions  in  connection
         therewith  (including  those  requested by the Holders of a majority of
         the  Registrable  Notes being sold) in order to expedite or  facilitate
         the disposition of such Registrable  Notes  including,  but not limited
         to, an Underwritten Offering and in such connection,  (i) to the extent
         possible,  make such  representations and warranties to the Holders and
         any Underwriters of such Registrable Notes with respect to the business
         of  GST  Funding,   GST  USA  and  GST  and  their  subsidiaries,   the
         Registration  Statement,   Prospectus  and  documents  incorporated  by
         reference or deemed incorporated by reference, if any, in each case, in
         form,  substance  and  scope  as are  customarily  made by  issuers  to
         underwriters in underwritten offerings and confirm the same if and when
         requested,  (ii) obtain opinions of counsel to GST Funding, GST USA and
         GST (which counsel and opinions, in form, scope and substance, shall be
         reasonably  satisfactory to the Holders and such Underwriters and their
         respective counsel) addressed to each selling Holder and Underwriter of
         Registrable Notes, covering the matters customarily covered in opinions
         requested  in  underwritten  offerings,  (iii)  obtain  "cold  comfort"
         letters  from  the  independent  certified  public  accountants  of GST
         Funding, GST USA and GST (and, if necessary, any other certified public
         accountant of any subsidiary of GST Funding, GST USA and GST, or of any
         business  acquired by GST Funding,  GST USA or GST for which  financial
         statements and financial data are or are required to be included in the
         Registration   Statement)   addressed  to  each   selling   Holder  and
         Underwriter of Registrable  Notes, such letters to be in customary form
         and covering matters of the type customarily  covered in "cold comfort"
         letters in connection  with  underwritten  offerings,  and (iv) deliver
         such documents and  certificates as may be reasonably  requested by the
         Holders of a majority  in  principal  amount of the  Registrable  Notes
         being sold or the Underwriters,  and which are customarily delivered in
         underwritten  offerings,  to  evidence  the  continued  validity of the
         representations  and  warranties  of GST Funding,  GST USA and GST made
         pursuant  to  clause  (i)  above and to  evidence  compliance  with any
         customary conditions contained in an underwriting agreement.

         In the case of a Shelf Registration Statement,  GST Funding, GST USA or
GST may require each Holder of Registrable Notes to furnish to GST Funding,  GST
USA or GST such information  regarding the Holder and the proposed  distribution
by such Holder of such Registrable Notes as GST Funding, GST USA or GST may from
time to time reasonably request in writing.

         In the case of a Shelf Registration Statement, each Holder agrees that,
upon receipt of any notice from GST Funding,  GST USA or GST of the happening of
any event of the kind  described  in Section  3(e)(v)  hereof,  such Holder will
forthwith   discontinue   disposition  of   Registrable   Notes  pursuant  to  a
Registration  Statement  until  such  Holder's  receipt  of  the  copies  of the
supplemented or amended Prospectus  contemplated by Section 3(i) hereof, and, if
so  directed by GST  Funding,  GST USA or GST,  such Holder will  deliver to GST
Funding,  GST USA or GST (at its  expense) all copies in its  possession,  other
than permanent file copies then in

                                       12

<PAGE>

such Holder's  possession,  of the Prospectus  covering such  Registrable  Notes
current at the time of receipt of such notice.  If GST  Funding,  GST USA or GST
shall give any such  notice to suspend  the  disposition  of  Registrable  Notes
pursuant to a Registration Statement,  GST Funding, GST USA and GST shall extend
the period during which the Registration Statement shall be maintained effective
pursuant  to this  Agreement  by the number of days  during the period  from and
including  the date of the giving of such notice to and  including the date when
the Holders shall have received copies of the supplemented or amended Prospectus
necessary to resume such dispositions.

         The  Holders  of  Registrable  Notes  covered  by a Shelf  Registration
Statement who desire to do so may sell such Registrable Notes in an Underwritten
Offering. In any such Underwritten Offering, the investment banker or investment
bankers and manager or managers (the  "Underwriters")  that will  administer the
offering  will be  selected by the  Majority  Holders of the  Registrable  Notes
included in such offering.

         4. PARTICIPATION OF BROKER-DEALERS IN EXCHANGE OFFER.

         (a) GST Funding,  GST USA and GST understand  that the Staff of the SEC
has taken the position that any  broker-dealer  that receives Exchange Notes for
its own account in the Exchange  Offer in exchange for Notes that were  acquired
by such  broker-dealer as a result of market-making or other trading  activities
(a "Participating  Broker-Dealer"),  may be deemed to be an "underwriter" within
the  meaning  of the  1933  Act  and  must  deliver  a  prospectus  meeting  the
requirements  of the 1933 Act in  connection  with any  resale of such  Exchange
Notes.

         GST Funding, GST USA and GST understand that it is the Staff's position
that if the Prospectus  contained in the Exchange Offer  Registration  Statement
includes a plan of  distribution  containing a statement to the above effect and
the means by which  Participating  Broker-Dealers may resell the Exchange Notes,
without  naming the  Participating  Broker-Dealers  or specifying  the amount of
Exchange Notes owned by them, such Prospectus may be delivered by  Participating
Broker-Dealers  to satisfy their prospectus  delivery  obligation under the 1933
Act in connection with resales of Exchange Notes for their own accounts, so long
as the Prospectus otherwise meets the requirements of the 1933 Act.

         (b) In light of the above, notwithstanding the other provisions of this
Agreement,  GST  Funding,  GST USA and GST  agree  that the  provisions  of this
Agreement as they relate to a Shelf Registration shall also apply to an Exchange
Offer Registration to the extent, and with such reasonable modifications thereto
as may  be,  reasonably  requested  by the  Placement  Agent  or by one or  more
Participating Broker-Dealers,  in each case as provided in clause (ii) below, in
order to  expedite  or  facilitate  the  disposition  of any  Exchange  Notes by
Participating  Broker-Dealers consistent with the positions of the Staff recited
in Section 4(a) above; PROVIDED that:

                                       13

<PAGE>
                  (i) GST  Funding,  GST USA and GST  shall not be  required  to
         amend or  supplement  the  Prospectus  contained in the Exchange  Offer
         Registration  Statement,  as would otherwise be contemplated by Section
         3(i) hereof,  for a period  exceeding  180 days after the last Exchange
         Date  (as such  period  may be  extended  pursuant  to the  penultimate
         paragraph of Section 3 hereof) and Participating  Broker-Dealers  shall
         not be authorized  by GST Funding,  GST USA or GST to deliver and shall
         not deliver such  Prospectus  after such period in connection  with the
         resales contemplated by this Section 4; and

                  (ii) the application of the Shelf Registration  procedures set
         forth in Section 3 hereof to an  Exchange  Offer  Registration,  to the
         extent not  required  by the  positions  of the Staff of the SEC or the
         1933  Act  and  the  rules  and  regulations  thereunder,  will  be  in
         conformity with the reasonable request to GST Funding,  GST USA and GST
         by the Placement  Agents or with the  reasonable  request in writing to
         GST Funding,  GST USA and GST by one or more broker-dealers who certify
         to the Placement Agents,  GST Funding,  GST USA and GST in writing that
         they anticipate  that they will be  Participating  Broker-Dealers;  and
         PROVIDED FURTHER that, in connection with such application of the Shelf
         Registration  procedures  set forth in Section 3 hereof to an  Exchange
         Offer Registration, GST Funding, GST USA and GST shall be obligated (A)
         to  deal  only  with  one   entity   representing   the   Participating
         Broker-Dealers, which shall be Morgan Stanley & Co. Incorporated unless
         it elects  not to act as such  representative,  (B) to pay the fees and
         expenses   of  only  one   counsel   representing   the   Participating
         Broker-Dealers,  which shall be counsel to the Placement  Agents unless
         such counsel elects not to so act and (C) to cause to be delivered only
         one, if any,  "cold  comfort"  letter with respect to the Prospectus in
         the form  existing on the last  Exchange  Date and with respect to each
         subsequent amendment or supplement,  if any, effected during the period
         specified in clause (i) above.

                  (c)  The  Placement  Agents  shall  have no  liability  to GST
Funding, GST USA, GST or any Holder with respect to any request that it may make
pursuant to Section 4(b) above.

         5. INDEMNIFICATION AND CONTRIBUTION.

         (a) Each of GST Funding, GST USA and GST agrees, jointly and severally,
to  indemnify  and hold  harmless  the  Placement  Agents,  each Holder and each
Person,  if any,  who  controls the  Placement  Agents or any Holder  within the
meaning of either  Section 15 of the 1933 Act or Section 20 of the 1934 Act,  or
is under common control with, or is controlled  by, the Placement  Agents or any
Holder, from and against all losses, claims, damages and liabilities (including,
without  limitation,  any legal or other  expenses  reasonably  incurred  by the
Placement  Agents,  any Holder or any such  controlling or affiliated  Person in
connection with defending or  investigating  any such action or claim) caused by
any untrue statement or alleged untrue statement of a material fact contained in
any Registration Statement (or any amendment thereto) pursuant to which Exchange
Notes or Registrable Notes were registered under the 1933 Act, including all

                                       14

<PAGE>
documents  incorporated  therein  by  reference,  or caused by any  omission  or
alleged  omission to state therein a material fact required to be stated therein
or necessary to make the  statements  therein not  misleading,  or caused by any
untrue statement or alleged untrue statement of a material fact contained in any
Prospectus (as amended or supplemented if GST Funding, GST USA or GST shall have
furnished any amendments or supplements  thereto),  or caused by any omission or
alleged  omission  to  state  therein  a  material  fact  necessary  to make the
statements therein in light of the circumstances  under which they were made not
misleading,  except insofar as such losses,  claims,  damages or liabilities are
caused by any such untrue  statement or omission or alleged untrue  statement or
omission based upon  information  relating to the Placement Agents or any Holder
furnished to GST Funding,  GST USA or GST in writing by the Placement  Agents or
any  selling  Holder   expressly  for  use  therein.   In  connection  with  any
Underwritten  Offering permitted by Section 3 hereof,  GST Funding,  GST USA and
GST will also indemnify the Underwriters,  if any, selling brokers,  dealers and
similar  securities  industry  professionals  participating in the distribution,
their  officers and directors and each Person who controls such Persons  (within
the  meaning  of the 1933 Act and the 1934 Act) to the same  extent as  provided
above with  respect to the  indemnification  of the  Holders,  if  requested  in
connection with any Registration Statement.

         (b) Each Holder  agrees,  severally  and not jointly,  to indemnify and
hold harmless GST Funding,  GST USA and GST, the Placement  Agents and the other
selling Holders, and each of their respective  directors,  officers who sign the
Registration  Statement and each Person,  if any, who controls GST Funding,  GST
USA or GST, the Placement Agents and any other selling Holder within the meaning
of either  Section  15 of the 1933 Act or Section 20 of the 1934 Act to the same
extent  as the  foregoing  indemnity  from GST  Funding,  GST USA and GST to the
Placement  Agents  and the  Holders,  but only  with  reference  to  information
relating to such Holder  furnished to GST Funding,  GST USA or GST in writing by
such Holder  expressly for use in any  Registration  Statement (or any amendment
thereto) or any Prospectus (or any amendment or supplement thereto).

         (c) In case any proceeding  (including any governmental  investigation)
shall be instituted  involving  any Person in respect of which  indemnity may be
sought pursuant to either paragraph (a) or paragraph (b) above, such Person (the
"indemnified  party")  shall  promptly  notify  the  Person  against  whom  such
indemnity  may  be  sought  (the  "indemnifying   party")  in  writing  and  the
indemnifying  party, upon request of the indemnified party, shall retain counsel
reasonably  satisfactory to the  indemnified  party to represent the indemnified
party and any others the indemnifying party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such proceeding.
In any such proceeding, any indemnified party shall have the right to retain its
own counsel,  but the fees and expenses of such counsel  shall be at the expense
of such indemnified party unless (i) the indemnifying  party and the indemnified
party shall have  mutually  agreed to the  retention of such counsel or (ii) the
named parties to any such proceeding  (including any impleaded  parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate

                                       15

<PAGE>
due to actual or potential  differing  interests  between them. It is understood
that the  indemnifying  party shall not, in  connection  with any  proceeding or
related  proceedings  in the same  jurisdiction,  be liable for (a) the fees and
expenses of more than one separate  firm (in addition to any local  counsel) for
the Placement  Agents and all Persons,  if any, who control the Placement Agents
within  the  meaning  of either  Section 15 of the 1933 Act or Section 20 of the
1934 Act, (b) the fees and expenses of more than one separate  firm (in addition
to any local counsel) for GST Funding,  GST USA and GST, their directors,  their
officers  who sign the  Registration  Statement  and each  Person,  if any,  who
controls GST  Funding,  GST USA or GST within the meaning of either such Section
and (c) the fees and expenses of more than one separate firm (in addition to any
local counsel) for all Holders and all Persons,  if any, who control any Holders
within the meaning of either such  Section,  and that all such fees and expenses
shall be reimbursed as they are incurred.  In such case  involving the Placement
Agents  and  Persons  who  control  the  Placement  Agents,  such firm  shall be
designated  in  writing  by  Morgan  Stanley  & Co.  Incorporated.  In such case
involving the Holders and such Persons who control  Holders,  such firm shall be
designated  in writing by the Majority  Holders.  In all other cases,  such firm
shall be designated by GST. The  indemnifying  party shall not be liable for any
settlement  of any  proceeding  effected  without  its written  consent  but, if
settled with such consent or if there be a final judgment for the plaintiff, the
indemnifying  party agrees to indemnify the  indemnified  party from and against
any loss or liability by reason of such settlement or judgment.  Notwithstanding
the foregoing sentence, if at any time an indemnified party shall have requested
an indemnifying  party to reimburse the indemnified  party for fees and expenses
of counsel as  contemplated by the second and third sentences of this paragraph,
the indemnifying  party agrees that it shall be liable for any settlement of any
proceeding  effected  without  its  written  consent if (i) such  settlement  is
entered into more than 30 days after receipt by such  indemnifying  party of the
aforesaid request and (ii) such indemnifying party shall not have reimbursed the
indemnified  party for such fees and expenses of counsel in accordance with such
request  prior to the date of such  settlement.  No  indemnifying  party  shall,
without  the  prior  written  consent  of  the  indemnified  party,  effect  any
settlement  of any  pending or  threatened  proceeding  in respect of which such
indemnified  party is or could have been a party and  indemnity  could have been
sought hereunder by such indemnified party,  unless such settlement  includes an
unconditional  release of such  indemnified  party from all  liability on claims
that are the subject matter of such proceeding.

         (d) If the  indemnification  provided for in paragraph (a) or paragraph
(b) of this Section 5 is unavailable to an indemnified  party or insufficient in
respect of any losses,  claims,  damages or liabilities,  then each indemnifying
party under such  paragraph,  in lieu of  indemnifying  such  indemnified  party
thereunder,  shall  contribute to the amount paid or payable by such indemnified
party as a  result  of such  losses,  claims,  damages  or  liabilities  in such
proportion as is appropriate  to reflect the relative fault of the  indemnifying
party or parties on the one hand and of the indemnified  party or parties on the
other hand in connection  with the statements or omissions that resulted in such
losses, claims, damages or liabilities,  as well as any other relevant equitable
considerations. The relative fault of GST Funding, GST USA, GST and the Holders

                                       16

<PAGE>
shall be determined  by reference to, among other things,  whether the untrue or
alleged untrue  statement of a material fact or the omission or alleged omission
to state a material  fact relates to  information  supplied by GST Funding,  GST
USA, GST or by the Holders and the parties' relative intent,  knowledge,  access
to information and opportunity to correct or prevent such statement or omission.
The Holders' respective  obligations to contribute pursuant to this Section 5(d)
are several in  proportion to the  respective  principal  amount of  Registrable
Notes of such Holder that were registered pursuant to a Registration Statement.

         (e) GST Funding,  GST USA, GST, and each Holder agree that it would not
be just or equitable if contribution  pursuant to this Section 5 were determined
by PRO RATA  allocation or by any other method of allocation  that does not take
account of the equitable  considerations referred to in paragraph (d) above. The
amount  paid or  payable  by an  indemnified  party as a result  of the  losses,
claims,  damages and  liabilities  referred to in  paragraph  (d) above shall be
deemed to include,  subject to the  limitations  set forth  above,  any legal or
other expenses  reasonably incurred by such indemnified party in connection with
investigating  or  defending  any such  action  or  claim.  Notwithstanding  the
provisions  of this  Section 5, no Holder  shall be  required  to  indemnify  or
contribute  any amount in excess of the amount by which the total price at which
Registrable  Notes were sold by such  Holder  exceeds  the amount of any damages
that such Holder has otherwise  been required to pay by reason of such untrue or
alleged untrue  statement or omission or alleged  omission.  No Person guilty of
fraudulent  misrepresentation  (within the meaning of Section  11(f) of the 1933
Act) shall be  entitled  to  contribution  from any Person who was not guilty of
such fraudulent  misrepresentation.  The remedies provided for in this Section 5
are not exclusive and shall not limit any rights or remedies which may otherwise
be available to any indemnified party at law or in equity.

         (f) The indemnity and contribution provisions contained in this Section
5 shall  remain  operative  and in full force and effect  regardless  of (i) any
termination of this Agreement,  (ii) any  investigation  made by or on behalf of
the Placement Agents,  any Holder or any person controlling the Placement Agents
or any Holder,  or by or on behalf of GST Funding,  GST USA, GST, their officers
or  directors  or any person  controlling  GST  Funding,  GST USA or GST,  (iii)
acceptance of any of the Exchange Notes and (iv) any sale of  Registrable  Notes
pursuant to a Shelf Registration Statement.

         6. MISCELLANEOUS.

         (a) NO INCONSISTENT AGREEMENTS. None of GST Funding, GST USA or GST has
entered into,  and on or after the date of this  Agreement  will enter into, any
agreement  which is  inconsistent  with the  rights  granted  to the  Holders of
Registrable  Notes in this Agreement or otherwise  conflicts with the provisions
hereof.  The rights granted to the Holders  hereunder do not in any way conflict
with and are not inconsistent with the rights granted to the holders of GST

                                       17

<PAGE>
Funding's, GST USA's or GST's other issued and outstanding securities under any
such agreements.

         (b) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence,  may not be amended,  modified or supplemented,
and waivers or  consents to  departures  from the  provisions  hereof may not be
given unless GST Funding,  GST USA and GST have obtained the written  consent of
Holders of at least a majority in aggregate  principal amount of the outstanding
Registrable Notes affected by such amendment,  modification,  supplement, waiver
or consent;  PROVIDED,  HOWEVER,  that no amendment,  modification,  supplement,
waiver or  consents to any  departure  from the  provisions  of Section 5 hereof
shall be effective as against any Holder of Registrable  Notes unless  consented
to in writing by such Holder.

         (c)  NOTICES.  All notices  and other  communications  provided  for or
permitted  hereunder  shall  be made in  writing  by  hand-delivery,  registered
first-class  mail,  telex,  telecopier,  or any courier  guaranteeing  overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
GST Funding,  GST USA and GST by means of a notice given in accordance  with the
provisions of this Section 6(c), which address initially is, with respect to the
Placement Agents, the address set forth in the Placement Agreement;  and (ii) if
to GST Funding,  initially at GST  Funding's  address set forth in the Indenture
and  thereafter  at such other  address,  notice of which is given in accordance
with the  provisions of this Section 6(c);  and if to GST USA,  initially at GST
USA's address set forth in the Indenture and  thereafter at such other  address,
notice of which is given in accordance with the provisions of this Section 6(c);
and if to GST,  initially  at  GST's  address  set  forth in the  Indenture  and
thereafter at such other  address,  notice of which is given in accordance  with
the provisions of this Section 6(c).

         All such notices and  communications  shall be deemed to have been duly
given at the time delivered by hand, if personally delivered; five business days
after being deposited in the mail,  postage  prepaid,  if mailed;  when answered
back, if telexed; when receipt is acknowledged,  if telecopied;  and on the next
business  day if  timely  delivered  to an air  courier  guaranteeing  overnight
delivery.

         Copies of all such notices,  demands, or other  communications shall be
concurrently  delivered  by the person  giving the same to the  Trustee,  at the
address specified in the Indenture.

         (d) SUCCESSORS AND ASSIGNS.  This Agreement  shall inure to the benefit
of and be binding upon the  successors,  assigns and  transferees of each of the
parties,  including,  without  limitation  and  without  the need for an express
assignment,  subsequent Holders; PROVIDED that nothing herein shall be deemed to
permit any  assignment,  transfer or other  disposition of Registrable  Notes in
violation of the terms of the  Placement  Agreement.  If any  transferee  of any
Holder shall acquire  Registrable Notes, in any manner,  whether by operation of
law or  otherwise,  such  Registrable  Notes shall be held subject to all of the
terms of this Agreement, and by taking

                                       18

<PAGE>
and holding such Registrable  Notes such person shall be conclusively  deemed to
have  agreed to be bound by and to perform  all of the terms and  provisions  of
this Agreement and such person shall be entitled to receive the benefits hereof.
The  Placement  Agents (in their  capacity as  Placement  Agents)  shall have no
liability  or  obligation  to GST  Funding,  GST USA or GST with  respect to any
failure by a Holder to comply  with,  or any breach by any Holder of, any of the
obligations of such Holder under this Agreement.

         (e)  PURCHASES AND SALES OF NOTES.  GST Funding,  GST USA and GST shall
not, and shall use their best efforts to cause their  affiliates  (as defined in
Rule 405 under  the 1933  Act) not to,  purchase  and then  resell or  otherwise
transfer any Notes.

         (f) RATING OF NOTES. GST Funding, GST USA and GST shall cause the Notes
or the  Exchange  Notes,  as the case may be, to be rated by  Moody's  Investors
Service,  Inc. or  Standard & Poor's  Ratings  Services  within 18 months of the
Closing Date.

         (g)  THIRD  PARTY  BENEFICIARY.   The  Holders  shall  be  third  party
beneficiaries to the agreements made hereunder between GST Funding,  GST USA and
GST, on the one hand,  and the  Placement  Agents,  on the other hand,  and each
Holder shall have the right to enforce such agreements directly to the extent it
deems such  enforcement  necessary  or  advisable  to protect  its rights or the
rights of Holders hereunder.

         (h)  COUNTERPARTS.  This  Agreement  may be  executed  in any number of
counterparts and by the parties hereto in separate  counterparts,  each of which
when so  executed  shall be  deemed  to be an  original  and all of which  taken
together shall constitute one and the same agreement.

         (i) HEADINGS.  The headings in this  Agreement are for  convenience  of
reference only and shall not limit or otherwise affect the meaning hereof.

         (j) DESIGNATION OF PROCESS AGENT;  SUBMISSION TO JURISDICTION.  Each of
GST Funding,  GST USA and GST hereby (i)  acknowledges  that it has  irrevocably
designated  and  appointed  Olshan  Grundman  Frome &  Rosenzweig  LLP, 505 Park
Avenue, New York, New York 10022, Attention: David J. Adler, Esq. (together with
any successor,  the "Process Agent"), as its authorized agent upon which process
may be served in any suit,  action or  proceeding  arising out of or relating to
this Agreement or the transactions contemplated herein that may be instituted in
any federal or state court in the State of New York, or brought under federal or
state securities laws, and acknowledges that the Process Agent has accepted such
designation,  (ii) agrees  that  service of process  upon the Process  Agent and
written  notice of such service to GST Funding,  GST USA or GST, as the case may
be (mailed or delivered to GST's Chief Executive Officer at its principal office
at 4001 Main  Street,  Vancouver,  Washington  98663),  shall be deemed in every
respect  effective  service of process upon GST Funding,  GST USA or GST, as the
case may be,

                                       19

<PAGE>
in any such  suit,  action or  proceeding  and (iii)  agrees to take any and all
action,  including the  execution  and filing of any and all such  documents and
instruments as may be necessary to continue such  designation and appointment of
the Process  Agent in full force and effect so long as any of the Notes shall be
outstanding. Each of GST Funding, GST USA and GST hereby agrees to submit to the
nonexclusive jurisdiction of any federal or state court in the State of New York
in any such  suit,  action or  proceeding  arising  out of or  relating  to this
Agreement or the transactions contemplated herein.

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

         (l) GOVERNING LAW. This Agreement  shall be governed by the laws of the
State of New York.

         (m)  SEVERABILITY.  In the event that any one or more of the provisions
contained  herein,  or the  application  thereof  in any  circumstance,  is held
invalid, illegal or unenforceable,  the validity, legality and enforceability of
any such  provision  in every  other  respect  and of the  remaining  provisions
contained herein shall not be affected or impaired thereby.

                                       20

<PAGE>
         IN WITNESS WHEREOF,  the parties have executed this Agreement as of the
date first written above.


                                   GST TELECOMMUNICATIONS, INC.


                                   By /s/ Daniel Trampush
                                     ------------------------------------------
                                     Name:  Daniel Trampush
                                     Title: Senior Vice President

                                   GST USA, INC.



                                   By /s/ Daniel Trampush
                                     ------------------------------------------
                                     Name:  Daniel Trampush
                                     Title: Senior Vice President


                                     GST NETWORK FUNDING, INC.




                                   By /s/ Daniel Trampush
                                     ------------------------------------------
                                     Name:  Daniel Trampush
                                     Title: Senior Vice President

Confirmed and accepted as of
   the date first above written:

MORGAN STANLEY & CO. INCORPORATED
BEAR, STEARNS & CO. INC.
CREDIT SUISSE FIRST BOSTON CORPORATION
SBC WARBURG DILLON READ INC.

By Morgan Stanley & Co. Incorporated

By /S/ James B. Avery
   ---------------------------------
     Name:  James B. Avery
     Title: PRINCIPAL



                                COLLATERAL PLEDGE

                             AND SECURITY AGREEMENT

                             Dated as of May 4, 1998

                                      from

                           GST NETWORK FUNDING, INC.,

                                   AS PLEDGOR

                                       to

                           UNITED STATES TRUST COMPANY

                                  OF NEW YORK,

                                   AS TRUSTEE




<PAGE>
                          T A B L E O F C O N T E N T S

SECTION                                                                     PAGE

SECTION 1.       Definitions; Appointment; Deposit and Investment..............2
     1.1.        Definitions...................................................2
     1.2.        Appointment of the Trustee....................................3
     1.3.        Pledge and Grant of Security Interest.........................3
     1.4.        Deposit of Proceeds of Offering...............................6

SECTION 2.       Security for Obligation.......................................6

SECTION 3.       Delivery of Collateral........................................6

SECTION 4.       Maintaining the Collateral Accounts...........................6

SECTION 5.       Investing of Amounts in the Collateral Investments Account....7

SECTION 6.       Delivery of Collateral Investments; Filing....................7

SECTION 7.       Disbursements Relating to Collateral..........................8

SECTION 8.       Representations and Warranties................................9

SECTION 9.       Further Assurances...........................................12

SECTION 10.      Covenants....................................................12

SECTION 11.      As to Acquired Equipment.....................................13

SECTION 12.      Insurance....................................................13

SECTION 13.      Power of Attorney............................................14

SECTION 14.      No Assumption of Duties; Reasonable Care.....................15

SECTION 15.      Indemnity....................................................15

SECTION 16.      Remedies upon Event of Default...............................16

SECTION 17.      Expenses.....................................................17

SECTION 18.      Security Interest Absolute...................................17


<PAGE>
SECTION                                                                     PAGE

SECTION 19.      Voting Rights; Dividends; Etc................................17

SECTION 20.      Miscellaneous Provisions.....................................18
     20.1.       Notices......................................................18
     20.2.       No Adverse Interpretation of Other Agreements................19
     20.3.       Severability.................................................19
     20.4.       Headings.....................................................19
     20.5.       Counterpart Originals........................................19
     20.6.       Benefits of Pledge Agreement.................................19
     20.7.       Amendments, Waivers and Consents.............................19
     20.8.       Interpretation of Agreement..................................20
     20.9.       Continuing Security Interest; Termination; Release...........20
     20.10.      Survival Provisions..........................................21
     20.11.      Waivers......................................................21
     20.12.      Authority of the Trustee.....................................21
     20.13.      Final Expression.............................................22
     20.14.      Rights of Holders............................................22
     21.15.      GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
                 JURY TRIAL; WAIVER OF DAMAGES................................22

SCHEDULES

Schedule I       -     Locations of Collateral

EXHIBITS

Exhibit A        -     Form of Fee Note

Exhibit B        -     Trustee's Officer Certificate

Exhibit C        -     Form of Acknowledgement of Control of Collateral
                       Investment Account

Exhibit D        -     Form of Consent and Agreement

Exhibit E        -     Form of Intercompany Note

Exhibit F        -     Form of Intercompany Security Agreement

Exhibit G        -     Form of GST Guaranty



<PAGE>

                                COLLATERAL PLEDGE
                             AND SECURITY AGREEMENT

         This COLLATERAL PLEDGE AND SECURITY AGREEMENT (this "PLEDGE AGREEMENT")
is made and  entered  into as of May 4, 1998 by and among GST  NETWORK  FUNDING,
INC., a Delaware  corporation  (the  "PLEDGOR"),  having its principal office at
4001 Main Street,  Vancouver,  Washington 98663, in favor of United States Trust
Company of New York ("U.S.  TRUST"),  a banking and trust company duly organized
and  existing  under the laws of the State of New York,  having an office at 114
West 47th Street,  New York,  N.Y.  10036,  as trustee (the  "TRUSTEE")  for the
holders (the  "HOLDERS") of the Notes (as defined  herein) issued by the Pledgor
under the Indenture referred to below.

                               W I T N E S S E T H

         WHEREAS,  the Pledgor,  GST  Telecommunications,  Inc.,  a  corporation
organized  under the federal laws of Canada  ("GST"),  GST USA, Inc., a Delaware
corporation  ("GST  USA"),  and the  Trustee  have  entered  into  that  certain
indenture  dated as of the date hereof (as amended,  restated,  supplemented  or
otherwise  modified from time to time, the  "INDENTURE"),  pursuant to which the
Pledgor is  initially  issuing  $500,000,000  in aggregate  principal  amount at
maturity of its 10 1/2% Senior Secured  Discount Notes due 2008 (the "NOTES") on
the date hereof (the "OFFERING");

         WHEREAS, in consideration for the Pledgor making the financing from the
Offering  available to GST USA and for the Pledgor  facilitating the purchase of
equipment  for GST  USA,  GST  USA,  GST and the  Pledgor  have  entered  into a
Reimbursement  and  Commitment  Fee Agreement  pursuant to which GST USA and GST
have  agreed to pay any fees or expenses  incurred by the Pledgor in  connection
therewith (the  "REIMBURSEMENT  OBLIGATION") and to pay GST Network a commitment
fee (the "COMMITMENT FEE") in an amount equal to 4.5% per annum of the amount by
which  the  aggregate  principal  amount  of the  Notes  exceeds  the  aggregate
principal  amount of the  Intercompany  Notes (as  defined  below)  then held as
security  for the Notes and such  Commitment  Fee may be paid by the issuance of
indebtedness  ("FEE  NOTES")  of GST USA in a  principal  amount  equal  to such
Commitment Fee in the form attached hereto as Exhibit A;

         WHEREAS,  the  Pledgor is  required  to apply the net  proceeds  of the
Offering to acquire  Collateral  Investments  (as defined  below)  which will be
pledged to the  Trustee on the Closing  Date,  to be held by the Trustee for the
benefit of the Holders to secure the Pledgor's  obligations  under the Indenture
and the Notes;

         WHEREAS, the Pledgor is permitted to use the proceeds of the Collateral
Investments  (as  defined  below)  from  time to time pay the  cost  (including,
without limitation, the cost of design, development, construction,  acquisition,
installation and integration) (the



<PAGE>
"ACQUIRED EQUIPMENT COST") of the Acquired Equipment (as defined below) and sell
the Acquired  Equipment to GST USA in exchange for  indebtedness of GST USA in a
principal amount equal to the Acquired  Equipment Cost to be evidenced by one or
more   promissory   notes  in  the  form  attached  hereto  as  Exhibit  D  (the
"INTERCOMPANY NOTES");

         WHEREAS,  the Pledgor has agreed to pledge all  Intercompany  Notes and
Fee Notes (collectively,  the "PLEDGED DEBT") it receives to the Trustee for the
benefit of the Holders to secure the Pledgor's  obligations  under the Indenture
and the Notes;

         WHEREAS,  the Pledgor has opened a securities  account (the "COLLATERAL
INVESTMENTS ACCOUNT") with Bear, Stearns Asset Management,  Inc. ("BSAM") at its
office  at 1221  Avenue  of the  Americas,  New  York,  NY  10020,  Account  No.
[__________]  in the name of the Pledgor but under the sole dominion and control
of the Trustee and subject to the terms of this Pledge Agreement; and

         WHEREAS,  to secure the  obligations  of the Pledgor  now or  hereafter
existing  under the  Indenture  and the Notes  whether for  principal,  premium,
interest,  fees,  expenses or  otherwise  (the  "OBLIGATIONS"),  the Pledgor has
agreed to (i) pledge to the Trustee  for its benefit and the ratable  benefit of
the Holders, a security interest in the Collateral (as hereinafter  defined) and
(ii)  execute and deliver  this Pledge  Agreement in order to secure the payment
and performance by the Pledgor of all the  Obligations.  Capitalized  terms used
herein and not otherwise  defined  herein shall have the meanings  given to such
terms in the Indenture.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the premises herein contained,  and
in order to induce  the  Holders to  purchase  the Notes,  the  Pledgor  and the
Trustee hereby agree, for the benefit of the Trustee and for the ratable benefit
of the Holders, as follows:

         SECTION 1. DEFINITIONS; APPOINTMENT; DEPOSIT AND INVESTMENT.

         1.1. DEFINITIONS.

         "AMENDED BOOK-ENTRY REGULATIONS" means 31 C.F.R. Part 357 as amended by
the  amendments  thereto  promulgated  at 61 Fed. Reg.  43626-43638  (August 23,
1996).

         "CASH EQUIVALENTS" means U.S. Government Securities,  as defined in the
Indenture.

         "OFFICER'S CERTIFICATE" shall mean a certificate signed by the Chairman
of the Board, the President or any Vice President of the Pledgor (i) stating (A)
the amount of

                                       2

<PAGE>

funds needed by the Pledgor to pay the Acquired  Equipment  Cost of any Acquired
Equipment to be purchased by the Pledgor and confirming that the cost of design,
development,   construction,   installation  and  integration  of  all  Acquired
Equipment will not exceed 50% of the aggregate  Acquired  Equipment Cost of such
Acquired  Equipment;  (B) that GST USA has  entered  into a legally  binding and
enforceable  agreement  (a  "PURCHASE  AGREEMENT")  with the Pledgor to purchase
promptly,  but in no event later than the earliest date such Acquired  Equipment
can be  commercially  operational,  such  Acquired  Equipment  in  exchange  for
indebtedness  with a principal  amount equal to the Acquired  Equipment Cost and
that  bears  interest  at 200 basis  points  above the rate equal to that of the
Notes and  evidenced  by an  Intercompany  Note in the form of Exhibit D hereto,
guaranteed  by GST under a  Guaranty  in the form of Exhibit F; and (C) that the
Pledgor will pledge the Intercompany  Note to the Trustee for the benefit of the
Holders,  and (ii)  having  attached  thereto,  an invoice or other  appropriate
documentation for the Acquired  Equipment stating the Acquired Equipment Cost to
be paid.

         "QUALIFIED  FINANCIAL  INSTITUTION"  shall mean any person  meeting the
minimum  requirements  imposed upon the Trustee  pursuant to Section 7.10 of the
Indenture.

         "REVISED  ARTICLE  8" has the  meaning  set  forth in  ss.357.2  of the
Amended Book- Entry Regulations.

         "TRUSTEE"  shall mean the Person  named as the  "Trustee"  in the first
paragraph of this  Agreement  until a successor  Trustee shall have become such,
and  thereafter  "Trustee"  shall  mean  the  Person  who is  then  the  Trustee
hereunder.

         All  defined  terms  used  herein  without  definition  shall  have the
respective meanings ascribed to them in the Indenture.  Unless otherwise defined
herein  or in the  Indenture,  terms  used  in  Articles  8 or 9 of the  Uniform
Commercial  Code as in effect in the State of New York (the  "U.C.C."),  Revised
Article 8 and the  Amended  Book-Entry  Regulations  are used  herein as therein
defined.

         1.2.  APPOINTMENT  OF THE  TRUSTEE.  The Pledgor  hereby  appoints  the
Trustee as Trustee in accordance  with the terms and conditions set forth herein
and the Trustee hereby accepts such appointment.

         1.3. PLEDGE AND GRANT OF SECURITY INTEREST.  The Pledgor hereby assigns
and  pledges to the  Trustee  for its  benefit  and the  ratable  benefit of the
Holders,  and hereby  grants to the  Trustee  for its  benefit  and the  ratable
benefit of the Holders a security interest in, the following (collectively,  the
"COLLATERAL"):

                                       3

<PAGE>
                  (a) all of the Pledgor's  right,  title and interest,  whether
         now owned or hereafter acquired,  in and to all equipment in all of its
         forms, wherever located, now or hereafter existing (including,  but not
         limited  to,  all  telecommunications  equipment  of every  type),  all
         fixtures and all parts thereof and all accessions  thereto (any and all
         such  equipment,  fixtures,  parts and  accessions  being the "ACQUIRED
         EQUIPMENT");

                  (b) all of the Pledgor's  right,  title and interest,  whether
         now  owned or  hereafter  acquired,  in and to all  accounts,  contract
         rights,   chattel  paper,   instruments,   deposit  accounts,   general
         intangibles  and  other  obligations  of any  kind,  now  or  hereafter
         existing,  whether or not arising out of or in connection with the sale
         or lease of  Acquired  Equipment  or other  goods or the  rendering  of
         services,  and  all  rights  now or  hereafter  existing  in and to all
         security  agreements,  leases and other contracts securing or otherwise
         relating  to  any  such  accounts,   contract  rights,  chattel  paper,
         instruments,  deposit accounts, general intangibles or obligations (any
         and all such accounts,  contract  rights,  chattel paper,  instruments,
         deposit accounts,  general  intangibles and obligations,  to the extent
         not  referred  to  in  clause  (d),   (e)  or  (f)  below,   being  the
         "RECEIVABLES",  and any and all such leases,  security  agreements  and
         other contracts being the "RELATED CONTRACTS");

                  (c) all of the following (the "SECURITY COLLATERAL"):

                           (i) the Pledged Debt and the  instruments  evidencing
                      the  Pledged  Debt and GST's  guarantee  thereof,  and all
                      interest,  cash,  instruments and other property from time
                      to time received,  receivable or otherwise  distributed in
                      respect of or in  exchange  for any or all of the  Pledged
                      Debt; and

                           (ii) all  additional  indebtedness  from time to time
                      owed to the Pledgor and the  instruments  evidencing  such
                      indebtedness,  and all  interest,  cash,  instruments  and
                      other property from time to time  received,  receivable or
                      otherwise distributed in respect of or in exchange for any
                      or all of such indebtedness;

                  (d) all of the Pledgor's  right,  title and interest in and to
         each of the Purchase  Agreements  entered into by the Pledgor from time
         to time, and the Intercompany  Security Agreement and the Reimbursement
         and  Commitment  Fee  Agreement,  as such  agreements may be amended or
         otherwise  modified  from  time to time  (collectively,  the  "ASSIGNED
         AGREEMENTS"),  including,  without  limitation,  (i) all  rights of the
         Pledgor to receive moneys due and to become due

                                       4

<PAGE>
         under or pursuant to the  Assigned  Agreements,  (ii) all claims of the
         Pledgor  for damages  arising out of or for breach of or default  under
         the Assigned Agreements and (iii) the right of the Pledgor to terminate
         the  Assigned   Agreements,   to  perform   thereunder  and  to  compel
         performance  and otherwise  exercise all remedies  thereunder (all such
         Collateral being the "AGREEMENT COLLATERAL");

                  (e)  all  of  the   following   (collectively,   the  "ACCOUNT
         COLLATERAL"):

                           (i) the  Collateral  Investments  Account,  all funds
                      held therein and all certificates and instruments, if any,
                      from  time  to  time   representing   or  evidencing   the
                      Collateral Investments Account;

                           (ii) all other deposit  accounts of the Pledgor,  all
                      funds held therein and all  certificates  and instruments,
                      if any, from time to time  representing or evidencing such
                      deposit accounts;

                           (iii)  all  Collateral  Investments  (as  hereinafter
                      defined)  from  time to  time  and  all  certificates  and
                      instruments,  if any,  from time to time  representing  or
                      evidencing the Collateral Investments;

                           (iv) all  notes,  certificates  of  deposit,  deposit
                      accounts,  checks and other  instruments from time to time
                      hereafter  delivered to or otherwise possessed by BSAM for
                      or on  behalf of the  Pledgor  in  substitution  for or in
                      addition  to  any or all  of  the  then  existing  Account
                      Collateral; and

                           (v) all interest,  dividends,  cash,  instruments and
                      other property from time to time  received,  receivable or
                      otherwise distributed in respect of or in exchange for any
                      or all of the then existing Account Collateral; and

                  (f) all  proceeds of any and all of the  foregoing  Collateral
         (including,  without  limitation,  proceeds that constitute property of
         the types  described  in clauses (a) - (e) of this Section 1.3) and, to
         the extent not otherwise  included,  all (i) payments  under  insurance
         (whether  or  not  the  Trustee  is the  loss  payee  thereof),  or any
         indemnity, warranty or guaranty, payable by reason of loss or damage to
         or otherwise  with respect to any of the foregoing  Collateral and (ii)
         cash.

                                       5

<PAGE>
         1.4. DEPOSIT OF PROCEEDS OF OFFERING. The Pledgor shall deposit the net
proceeds of the  Offering and all other cash on hand on the date hereof into the
Collateral  Investments  Account and direct BSAM to purchase Cash Equivalents to
be held in the Collateral Investments Account.

         SECTION 2. SECURITY FOR OBLIGATION.  This Pledge Agreement  secures the
payment of all  Obligations  of the Pledgor now or hereafter  existing under the
Indenture  and the  Notes,  whether  for  principal,  premium,  interest,  fees,
expenses or otherwise (all such  Obligations  being the "SECURED  OBLIGATIONS").
Without  limiting the  generality of the foregoing,  this Agreement  secures the
payment of all amounts that constitute part of the Secured Obligations and would
be owed by the Pledgor to the Trustee or the Holders under the Indenture but for
the fact that they are  unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Pledgor.

         SECTION 3. DELIVERY OF  COLLATERAL.  All  certificates  or  instruments
representing or evidencing the Security  Collateral or Account  Collateral shall
be  delivered  to and held by or on behalf of the  Trustee  pursuant  hereto and
shall be in suitable form for transfer by delivery,  or shall be  accompanied by
duly executed  instruments  of transfer or assignment in blank,  all in form and
substance  satisfactory  to the Trustee or shall be  credited to the  Collateral
Investments Account. For the better perfection of the Trustee's rights in and to
the Security  Collateral and Account  Collateral,  the Pledgor shall  forthwith,
upon the pledge of any  Security  Collateral  or Account  Collateral  hereunder,
cause  all  such  Security  Collateral  or  Account  Collateral,  including  the
Collateral  Investments  Account and all other accounts  representing a security
entitlement to or containing any Collateral (including,  without limitation, any
Collateral  Investments)  to be  registered  in the name  "United  States  Trust
Company of New York for the benefit of the holders of the 10 1/2% Senior Secured
Discount Notes of GST Network  Funding,  Inc. Due 2008" and to be under the sole
dominion and control of the Trustee,  which dominion and control shall be agreed
to and  acknowledged by BSAM or any other  securities  intermediary  holding any
such account in an acknowledgement in the form of Exhibit B hereto, subject only
to the  revocable  rights  specified in Section 7. In  addition,  the Trustee or
BSAM,  as the  case  may be,  shall  have  the  right  at any  time to  exchange
certificates or instruments  representing or evidencing any Security  Collateral
or Account  Collateral  for  certificates  or  instruments  of smaller or larger
denominations.

         SECTION 4.  MAINTAINING  THE  COLLATERAL  ACCOUNTS.  (a) So long as any
Obligation  shall  remain  unpaid,  the Pledgor  will  maintain  the  Collateral
Investments Account.

         (b) It shall  be a term and  condition  of the  Collateral  Investments
Account,  notwithstanding  any term or  condition  to the  contrary in any other
agreement relating to the Collateral Investments Account and except as otherwise
provided  by the  provisions  of  Section  7 and  Section  16,  that  no  amount
(including interest on Collateral Investments) shall be

                                       6

<PAGE>
paid or released to or for the  account of, or  withdrawn  by or for the account
of, the Pledgor or any other Person from the Cash Collateral Account.

         (c)  The  Collateral  Investments  Account  shall  be  subject  to such
applicable  laws, and such  applicable  regulations of the Board of Governors of
the Federal Reserve System and of any other appropriate  banking or governmental
authority, as may now or hereafter be in effect.

         (d)  Notwithstanding the provisions of this Section 4 or any other term
of this Agreement, the Trustee shall relocate the Account Collateral to accounts
at a Qualified Financial  Institution  designated by the Pledgor upon receipt of
the following  documentation:  (i) written  instructions  from a duly authorized
officer of the Pledgor (A) authorizing  such  relocation of the Collateral;  and
(B) designating the account at the Qualified Financial  Institution to which the
Collateral is to be relocated; (ii) a letter agreement in the form of Exhibit C,
duly executed by the Qualified  Financial  Institution;  and (iii) an opinion of
counsel to the  Pledgor,  in form and  substance  satisfactory  to the  Trustee,
stating  that the  Trustee has a valid and  perfected  first  priority  security
interest in the Collateral relocated pursuant to this Section 4(d). In the event
of the  relocation of an Account  Collateral  pursuant to this Section 4(d), the
accounts to which such Account  Collateral  is relocated  shall for all purposes
under this Agreement thereafter be the Collateral Investment Account.

         SECTION 5. INVESTING OF AMOUNTS IN THE COLLATERAL  INVESTMENTS ACCOUNT.
The Pledgor  will,  subject to the  provisions of Section 7 and Section 16, from
time to time (a) invest amounts on deposit in the Collateral Investments Account
in such Cash  Equivalents  in the name of the  Trustee as the Pledgor may select
and (b) invest interest paid on the Cash  Equivalents  referred to in clause (a)
above,  and reinvest other proceeds of any such Cash Equivalents that may mature
or be sold,  in each case in such Cash  Equivalents,  as the  Pledgor may select
(the  Cash  Equivalents   referred  to  in  clauses  (a)  and  (b)  above  being
collectively  "COLLATERAL  INVESTMENTS").  Interest  and  proceeds  that are not
invested or  reinvested  in Collateral  Investments  as provided  above shall be
deposited and held in the Collateral Investments Account.

         SECTION 6. DELIVERY OF COLLATERAL  INVESTMENTS;  FILING. (a) Subject to
the  other  terms  and  conditions  of this  Pledge  Agreement,  all  Collateral
Investments  under  this  Pledge  Agreement  shall  be  held  in the  Collateral
Investments  Account,  subject (except as expressly provided in subsections 7(a)
and 7(b)  hereof) to the  exclusive  dominion  and  control of the  Trustee  and
exclusively  for the benefit of the  Trustee and for the ratable  benefit of the
Holders and segregated from all other funds or other property  otherwise held by
the Trustee.

         (b)  All  Account  Collateral  shall  be  retained  in  the  Collateral
Investments Account pending  disbursement  pursuant to the terms hereof and upon
request from the

                                       7

<PAGE>
Pledgor,  the Trustee  shall report to the Pledgor the amount and type of assets
contained in each such account.

         (c)  Concurrently  with the execution  and delivery of this  Agreement,
BSAM is delivering to the Pledgor a duly  executed  certificate,  in the form of
Exhibit B hereto,  of an officer of BSAM,  confirming  BSAM's  establishment and
maintenance of the Collateral  Investment Account and its receipt and holding of
the Collateral  Investments or a security  entitlement thereto and the crediting
of the  Collateral  Investments  or such security  entitlement to the Collateral
Investment Account, all in accordance with this Pledge Agreement.

         (d) Concurrently with the execution and delivery of this Agreement, the
Pledgor is  delivering  to the Trustee duly executed  financing  statements,  in
proper  form for filing  under the Uniform  Commercial  Code of the State of New
York and  each  state  listed  on  Schedule  I hereto  covering  the  Collateral
described in this Pledge Agreement.

         SECTION 7.  DISBURSEMENTS  RELATING  TO  COLLATERAL.  The assets in the
Collateral Investments Account shall be released only as follows:

                  (a) Three business days prior to the due date of any scheduled
         cash interest  payments on the Notes,  any Payment Date with respect to
         an Offer to Purchase the Notes under the Indenture or a Redemption Date
         with  respect  to the  Notes,  the  Pledgor  may,  pursuant  to written
         instructions  executed by the Pledgor (an "ISSUER  ORDER"),  direct the
         Trustee  to direct  BSAM to  release  from the  Collateral  Investments
         Account and, if  necessary,  to liquidate  the  Collateral  Investments
         indicated  on  the  Issuer  Order  and  pay  to  the  Holders  proceeds
         sufficient to provide for payment in full of such principal, premium or
         interest then due on the Notes.  Upon receipt of an Issuer  Order,  the
         Trustee  will take any action  necessary  to provide for the payment of
         the principal,  premium or interest on the Notes in accordance with the
         payment  provisions  of the  Indenture  to the Holders from (and to the
         extent of) proceeds of the Collateral  Investments Account.  Nothing in
         this  Section  7  shall  affect  the  Trustee's  rights  to  apply  the
         Collateral   to  the   payments  of  amounts  due  on  the  Notes  upon
         acceleration thereof.

                  (b) Upon  receipt  by the  Trustee  of an Issuer  Order and an
         Officer's  Certificate  with  respect to the  payment  of any  Acquired
         Equipment  Cost, the Trustee shall direct BSAM to  immediately  release
         proceeds  from the  Collateral  Investments  Account  and if  necessary
         liquidate  the  Collateral   Investments  indicated  in  the  Officer's
         Certificate  or Issuer  Order in such amount as will be  sufficient  to
         provide for payment in full of the Acquired Equipment Cost. The Pledgor
         agrees to use the  disbursed  proceeds to pay such  Acquired  Equipment
         Cost on the date of such release, and any

                                       8

<PAGE>
         such released  funds will be disbursed  directly to the supplier of the
         Acquired  Equipment  pursuant to the invoice  attached to the Officer's
         Certificate.

                  (c) Nothing contained in Section 1, Section 5, this Section 7,
         or any other  provision of this Agreement  shall (i) afford the Pledgor
         any right to issue  entitlement  orders  with  respect to any  security
         entitlement to the Collateral  Investments or any securities account in
         which any such security entitlement may be carried, or otherwise afford
         the Pledgor control of any such security  entitlement or (ii) otherwise
         give rise to any  rights of  Pledgor  with  respect  to the  Collateral
         Investments, any security entitlement thereto or any securities account
         in which any such security  entitlement may be carried,  other than the
         Pledgor's rights under this Pledge Agreement as the beneficial owner of
         collateral pledged to and subject to the exclusive dominion and control
         (except as expressly  provided in Sections  7(a) and (b) hereof) of the
         Trustee in its capacity as such (and not as a securities intermediary).
         The Pledgor acknowledges,  confirms and agrees that the Trustee holds a
         security  entitlement to the Collateral  Investments  solely as trustee
         for the Holders and not as a securities intermediary.

                  (d) The  Pledgor  shall  prepare and deliver to the Trustee or
         shall  provide  the  Trustee  with all  information  necessary  for the
         Trustee to prepare  and deliver to BSAM,  instructions  to BSAM for the
         release of funds from the Collateral  Investments Account in accordance
         with the terms of Section 7.

         SECTION  8.   REPRESENTATIONS   AND  WARRANTIES.   The  Pledgor  hereby
represents  and  warrants,  and in  connection  with  each  purchase  or sale of
Acquired Equipment will be deemed to represent and warrant, that:

                  (a) The  execution  and  delivery  by the  Pledgor of, and the
         performance  by the  Pledgor  of its  obligations  under,  this  Pledge
         Agreement  will not  contravene  any provision of applicable law or the
         Certificate of Incorporation  of the Pledgor or any material  agreement
         or other  material  instrument  binding  upon the Pledgor or any of its
         subsidiaries or any judgment, order or decree of any governmental body,
         agency or court  having  jurisdiction  over the  Pledgor  or any of its
         subsidiaries,  or result in the creation or  imposition  of any Lien on
         any assets of the Pledgor,  except for the security  interests  granted
         under this Pledge  Agreement;  no consent,  approval,  authorization or
         order of, or  qualification  with, any  governmental  body or agency is
         required  (i) for the  performance  by the  Pledgor of its  obligations
         under this Pledge Agreement,  (ii) for the pledge by the Pledgor of the
         Collateral  pursuant to this Pledge  Agreement  or (iii) except for any
         such  consents,  approvals,  authorizations  or orders  required  to be
         obtained  by the Trustee (or the  Holders)  for reasons  other than the
         consummation  of this  transaction,  for the exercise by the Trustee of
         the rights provided for in this Pledge

                                       9

<PAGE>
         Agreement or the remedies in respect of the Collateral pursuant to this
         Pledge Agreement.

                  (b) The  Pledgor is the  beneficial  owner of the  Collateral,
         free and clear of any Lien or claims  of any  person or entity  (except
         for the security  interests  granted under this Pledge  Agreement).  No
         financing  statement  covering the Pledgor's interest in the Collateral
         is on file in any public office other than the financing statements, if
         any, filed pursuant to this Pledge Agreement.  The Pledgor has no trade
         names.

                  (c) This Pledge  Agreement has been duly  authorized,  validly
         executed  and   delivered  by  the  Pledgor  and   (assuming   the  due
         authorization and valid execution and delivery of this Pledge Agreement
         by the Trustee and  enforceability  of the Pledge Agreement against the
         Trustee in accordance  with its terms)  constitutes a valid and binding
         agreement of the Pledgor, enforceable against the Pledgor in accordance
         with its terms, except as (i) the enforceability  hereof may be limited
         by   bankruptcy,   insolvency,   fraudulent   conveyance,   preference,
         reorganization,  moratorium  or similar laws now or hereafter in effect
         relating to or affecting creditors' rights or remedies generally,  (ii)
         the  availability  of  equitable  remedies  may be limited by equitable
         principles  of general  applicability  and the  discretion of the court
         before  which any  proceeding  therefor  may be brought,  and (iii) the
         exculpation  provisions  hereunder  may be  limited  by  public  policy
         considerations.

                  (d) Upon the  delivery to the Trustee of the  certificates  or
         instruments,  if any,  representing or evidencing the  Collateral,  the
         filing of  financing  statements,  if any,  required  by the UCC in the
         appropriate  offices in the State of New York and each state  listed on
         Schedule 1 hereto,  and the  transfer  and pledge to the Trustee of the
         Account  Collateral  and the  acquisition  by the Trustee of a security
         entitlement  thereto,  in accordance  with Section 3, the pledge of and
         grant of a security interest in the Collateral  securing the payment of
         the Secured  Obligations for the benefit of the Trustee and the Holders
         will constitute a first priority  perfected  security  interest in such
         Collateral,  enforceable  as such against all  creditors of the Pledgor
         (and any persons  purporting to purchase any of the Collateral from the
         Pledgor).

                  (e) There are no legal or governmental proceedings pending or,
         to the best of the Pledgor's knowledge, threatened to which the Pledgor
         or any of its subsidiaries is a party or to which any of the properties
         of the Pledgor or any such subsidiary is subject that would  materially
         adversely  affect the power or ability  of the  Pledgor to perform  its
         obligations   under  this  Pledge   Agreement  or  to  consummate   the
         transactions contemplated hereby.

                                       10

<PAGE>
                  (f) The  pledge  of the  Collateral  pursuant  to this  Pledge
         Agreement  is  not  prohibited  by  law  or   governmental   regulation
         (including, without limitation,  Regulations T, U and X of the Board of
         Governors of the Federal Reserve System) applicable to the Pledgor.

                  (g) All of the Acquired Equipment is or will be located at the
         places specified in Schedule I hereto.  The chief place of business and
         chief executive  office of the Pledgor and the office where the Pledgor
         keeps its records  concerning the Receivables,  and the original copies
         of each Assigned  Agreement and all originals of all chattel paper that
         evidence Receivables,  are located at the address first specified above
         for the Pledgor.  Original  copies of each  Assigned  Agreement and all
         originals  of all chattel  paper that  evidence  Receivables  have been
         delivered  to  the  Trustee.  None  of  the  Receivables  or  Agreement
         Collateral is evidenced by a promissory note or other  instrument.  The
         Pledgor has exclusive possession and control of the Acquired Equipment.

                  (h) Each Intercompany Note issued to the Pledgor hereunder and
         each Fee  Note  issued  to the  Pledgor  under  the  Reimbursement  and
         Commitment  Fee Agreement will be duly  authorized,  executed or issued
         and  delivered  by GST USA and will be the  legal,  valid  and  binding
         obligation of GST USA.

                  (i)  Each  guaranty  of an  Intercompany  Note  and a Fee Note
         issued to the Pledgor will be duly  authorized,  executed and delivered
         by GST and will be the legal valid and binding obligation of GST.

                  (j) The Intercompany  Security Agreement,  a true and complete
         copy of  which  has  been  furnished  to the  Trustee,  has  been  duly
         authorized, executed and delivered by all parties thereto, has not been
         amended  or  otherwise  modified,  is in full  force and  effect and is
         binding upon and enforceable  against all parties thereto in accordance
         with its terms.  GST USA has  executed  and  delivered to the Pledgor a
         consent,  in substantially  the form of Exhibit D, to the assignment of
         the  Intercompany   Security   Agreement  and  all  related   Agreement
         Collateral to the Trustee pursuant to this Agreement.

                  (k) Each Purchase  Agreement  delivered to the Pledgor will be
         duly  authorized,  executed  and  delivered  by GST USA and will be the
         legal,   valid  and  binding  obligation  of  GST  USA  enforceable  in
         accordance with its terms.

                  (l) No Event of Default (as defined below) exists.

                                       11

<PAGE>
         SECTION 9. FURTHER ASSURANCES.  The Pledgor will, promptly upon request
by the Trustee  (which  request the Trustee may submit at the  direction  of the
Holders  of a  majority  in  principal  amount of the Notes  then  outstanding),
execute and deliver or cause to be executed and delivered, or use its reasonable
best efforts to procure, all assignments,  instruments and other documents,  all
in form and  substance  reasonably  satisfactory  to the  Trustee,  deliver  any
instruments  to the Trustee and take any other  actions  that are  necessary  or
desirable to perfect,  continue the perfection of, or protect the first priority
of the  Trustee's  security  interest in and to the  Collateral,  to protect the
Collateral against the rights, claims, or interests of third persons (other than
any such rights,  claims or interests created by or arising through the Trustee)
or to effect the  purposes of this  Pledge  Agreement.  The Pledgor  also hereby
authorizes the Trustee to file any financing or  continuation  statements in the
United  States  with  respect to the  Collateral  without the  signature  of the
Pledgor (to the extent  permitted by applicable  law). The Pledgor will promptly
pay all reasonable costs incurred in connection with any of the foregoing within
45 days of receipt of an invoice therefor.  The Pledgor also agrees,  whether or
not requested by the Trustee,  to take all actions that are necessary to perfect
or  continue  the  perfection  of, or to  protect  the first  priority  of,  the
Trustee's  security  interest in and to the Collateral,  including the filing of
all  necessary  financing  and  continuation  statements,  and  to  protect  the
Collateral against the rights,  claims or interests of third persons (other than
any such rights, claims or interests created by or arising through the Trustee).

         SECTION  10.  COVENANTS.  The  Pledgor  covenants  and agrees  with the
Trustee  and the Holders  that from and after the date of this Pledge  Agreement
until the earlier of payment in full in cash of all Secured  Obligations due and
owing under the Indenture and the Notes:

                  (a) that (i) it will not  (and  will not  purport  to) sell or
         otherwise  dispose of, or grant any option or warrant  with respect to,
         any of the Collateral and at times will be the sole beneficial owner of
         the  Collateral,  except  as  contemplated  by  this  Agreement  or the
         Indenture  or (ii) it will not  create or permit to exist any Lien upon
         or with  respect  to any of the  Collateral  (except  for the  security
         interests  granted  under  this  Pledge  Agreement,   the  Intercompany
         Security  Agreement  and any Lien  created  by or arising  through  the
         Trustee under the Indenture);

                  (b)  that  it  will  not  (i)  enter  into  any  agreement  or
         understanding  that  restricts  or  inhibits or purports to restrict or
         inhibit the Trustee's rights or remedies hereunder,  including, without
         limitation,  the  Trustee's  right to sell or otherwise  dispose of the
         Collateral or (ii) fail to pay or discharge any tax, assessment or levy
         of any nature with respect to the  Collateral  not later than five days
         prior to the date of any  proposed  sale  under any  judgment,  writ or
         warrant of attachment with respect to the Collateral;

                                       12

<PAGE>
                  (c) in the event the  Pledgor is  required to make an Offer to
         Purchase  the Notes  under the  Indenture,  it will fund such  Offer to
         Purchase  (i)  first  from  funds  (or  the   proceeds  of   Collateral
         Investments) held in the Collateral  Investments  Account,  (ii) second
         from  the   proceeds  of   Intercompany   Offers  (as  defined  in  the
         Intercompany  Notes) under the Intercompany  Notes and (iii) third from
         the  proceeds of a Fee Note Offer (as  defined in the Fee  Notes).  The
         Pledgor  covenants that it will not accept any Intercompany or Fee Note
         Offer except and to the extent required to fund an Offer to Purchase in
         accordance with the terms of the preceding sentence; and

                  (d) it will deliver to the Trustee,  true and complete  copies
         of each  Purchase  Agreement,  promptly  after each such  agreement  is
         entered  into by GST  USA  and  the  Pledgor,  and  will  require  as a
         condition to its entry into any such  Purchase  Agreement  that GST USA
         execute and deliver to the Pledgor a consent, in substantially the form
         of Exhibit  C, to the  assignment  of the  Purchase  Agreement  and all
         related Agreement Collateral to the Trustee pursuant to this Agreement;

                  (e) Subject to the terms and conditions of this Agreement, the
         Pledgor  shall at its  expense  perform  and  observe all the terms and
         provisions  of the Assigned  Agreements  to be performed or observed by
         it, maintain the Assigned Agreements in full force and effect,  enforce
         the Assigned  Agreements in accordance with their  respective terms and
         take all such action to such end as may be from time to time  requested
         by the Trustee; and

                  (f) Subject to the terms and conditions of this Agreement, the
         Pledgor shall not:

                  (i) cancel or terminate  any Assigned  Agreement or consent to
         or accept any cancellation or termination thereof;

                  (ii) amend or otherwise modify any Assigned  Agreement or give
         any consent, waiver or approval thereunder;

                  (iii)  waive  any  default  under or  breach  of any  Assigned
         Agreement;

                  (iv) consent to or permit or accept any  prepayment of amounts
         to  become  due under or in  connection  with any  Assigned  Agreement,
         except as expressly provided therein; or

                  (v) take any other  action  in  connection  with any  Assigned
         Agreement  that would impair the value of the interest or rights of the
         Pledgor  thereunder  or that would impair the interest or rights of the
         Trustee.

                                       13

<PAGE>
         SECTION 11. AS TO ACQUIRED  EQUIPMENT.  (a) The Pledgor  shall keep the
Acquired  Equipment at the places therefor specified in Section 8(g) or, upon 30
days'  prior  written  notice  to  the  Trustee,  at  such  other  places  in  a
jurisdiction  where all action  required by Section 8(g) or 9 or shall have been
taken with respect to the Acquired Equipment to perfect, continue the perfection
of or protect the first  priority of the Trustee's  security  interest in and to
such Collateral.

                  (b) The  Pledgor  shall  cause the  Acquired  Equipment  to be
maintained and preserved in the same condition, repair and working order as when
new, ordinary wear and tear excepted,  and in accordance with any manufacturer's
manual, and shall forthwith,  or in the case of any loss or damage to any of the
Acquired Equipment as quickly as practicable after the occurrence thereof,  make
or  cause  to be made  all  repairs,  replacements  and  other  improvements  in
connection  therewith  that are  necessary or desirable to such end. The Pledgor
shall promptly furnish to the Trustee a statement  respecting any loss or damage
to any of the Acquired Equipment.

                  (c) The Pledgor  shall pay promptly  when due all property and
other taxes,  assessments and  governmental  charges or levies imposed upon, and
all claims (including  claims for labor,  materials and supplies)  against,  the
Acquired Equipment.

         SECTION 12.  INSURANCE.  (a) The  Pledgor  shall,  at its own  expense,
maintain  insurance  with  respect to the Acquired  Equipment  in such  amounts,
against such risks,  in such form and with such  insurers,  as is reasonable and
customary  for  persons  in the  telecommunications  business.  Each  policy for
liability  insurance  shall  provide  for all losses to be paid on behalf of the
Trustee  and the  Pledgor as their  interests  may  appear,  and each policy for
property  damage  insurance  shall provide for all losses  (except for losses of
less than  $1,000,000 per  occurrence) to be paid directly to the Trustee.  Each
such policy  shall in  addition  (i) name the Pledgor and the Trustee as insured
parties thereunder (without any representation or warranty by or obligation upon
the Trustee) as their  interests  may appear,  (ii) contain the agreement by the
insurer that any loss thereunder shall be payable to the Trustee notwithstanding
any action,  inaction or breach of  representation  or warranty by the  Pledgor,
(iii) provide that there shall be no recourse against the Trustee for payment of
premiums or other amounts with respect thereto and (iv) provide that at least 10
days' prior  written  notice of  cancellation  or of lapse shall be given to the
Trustee by the insurer.  The Pledgor  shall  deliver to the Trustee  original or
duplicate  policies of such  insurance  and, on each  anniversary of the Closing
Date, a report of a reputable  insurance  broker with respect to such insurance.
Further,  the Pledgor  shall,  at the request of the Trustee,  duly exercise and
deliver  instruments of assignment of such insurance policies to comply with the
requirements  of Section 9 and cause the insurers to acknowledge  notice of such
assignment.

                                       14

<PAGE>
                  (b) Reimbursement under any liability insurance  maintained by
the Pledgor  pursuant to this Section 12 may be paid  directly to the Person who
shall  have  suffered  a loss  covered  by such  insurance.  In case of any loss
involving  damage to Acquired  Equipment,  the Pledgor shall make or cause to be
made the necessary  repairs to or replacements of such Acquired  Equipment,  and
any proceeds of insurance  maintained  by the Pledgor  which are received by the
Trustee   pursuant  to  this  Section  12  shall  be  paid  to  the  Pledgor  as
reimbursement for the costs of such repairs or replacements.

         SECTION 13. POWER OF ATTORNEY. In addition to all of the powers granted
to the  Trustee  pursuant to the  Indenture,  the Pledgor  hereby  appoints  and
constitutes  the Trustee as the Pledgor's  attorney-in-fact  (with full power of
substitution)  to  exercise to the fullest  extent  permitted  by law all of the
following  powers  upon and at any time  after the  occurrence  and  during  the
continuance  of  an  Event  of  Default:  (a)  collection  of  proceeds  of  any
Collateral;  (b) conveyance of any item of Collateral to any purchaser  thereof;
(c) giving of any notices or recording of any Liens under Section 6 hereof;  and
(d) paying or discharging  taxes or Liens levied or placed upon the  Collateral,
the legality or validity thereof and the amounts necessary to discharge the same
to be  determined  by the Trustee in its sole  reasonable  discretion,  and such
payments  made by the Trustee to become part of the Secured  Obligations  of the
Pledgor to the Trustee,  due and payable  immediately upon demand. The Trustee's
authority under this Section 13 shall include, without limitation, the authority
to endorse and  negotiate  any checks or  instruments  representing  proceeds of
Collateral  in the  name  of the  Pledgor,  execute  and  give  receipt  for any
certificate of ownership or any document constituting Collateral, transfer title
to any item of Collateral,  sign the Pledgor's name on all financing  statements
(to the  extent  permitted  by  applicable  law) or any other  documents  deemed
necessary  or  appropriate  by the Trustee to  preserve,  protect or perfect the
security interest in the Collateral and to file the same, prepare, file and sign
the Pledgor's name on any notice of Lien, and to take any other actions  arising
from or incident to the powers granted to the Trustee in this Pledge  Agreement.
This power of attorney is coupled  with an interest  and is  irrevocable  by the
Pledgor.

         SECTION 14. NO ASSUMPTION OF DUTIES;  REASONABLE  CARE.  The rights and
powers  granted to the Trustee  hereunder are being granted in order to preserve
and protect the  security  interest of the Trustee and the Holders in and to the
Collateral  granted hereby and shall not be interpreted to, and shall not impose
any duties on the Trustee in  connection  therewith  other than those  expressly
provided  herein  or  imposed  under  applicable  law.  Except  as  provided  by
applicable  law or by the  Indenture,  the  Trustee  shall  be  deemed  to  have
exercised  reasonable care in the custody and  preservation of the Collateral in
its possession if the Collateral is accorded  treatment  substantially  equal to
that  which  the  Trustee  accords  similar  property  held  by the  Trustee  as
collateral agent or other similar capacity, it being understood that the Trustee
in its capacity as such shall not have any  responsibility  for (a) ascertaining
or taking action with respect to calls,  conversions,  exchanges,  maturities or
other

                                       15

<PAGE>
matters relative to any Collateral,  whether or not the Trustee has or is deemed
to have  knowledge of such matters,  (b) taking any necessary  steps to preserve
rights  against any parties with respect to any  Collateral  or (c) investing or
reinvesting any of the Collateral,  PROVIDED, HOWEVER, that nothing contained in
this Agreement shall relieve the Trustee of any responsibilities as a securities
intermediary  under applicable law. The Trustee shall have no duty (a) to see to
any recording,  filing,  or depositing of this  Agreement,  any Indenture or any
agreement  referred  to  herein  or  therein  or  any  financing   statement  or
continuation  statement  evidencing  a  security  interest,  or to  see  to  the
maintenance of any such recording or filing or depositing or to any rerecording,
refiling or redepositing  of any thereof,  (b) to see to any insurance or (c) to
see to the payment or discharge  of any tax  assessment,  or other  governmental
charge or any lien or encumbrance of any kind owing with respect to, assessed or
levied against, any part of the Collateral. The Trustee makes no representations
as to the  validity or  sufficiency  of any  Collateral,  the  Indenture or this
Agreement.  The Trustee shall not be  accountable  for the use or application by
the Pledgor of any of the proceeds of the Collateral  Investments Account or the
Interest  Account.  The Trustee  shall not be  responsible  for the  legality or
validity of this Agreement or the validity, priority,  perfection or sufficiency
of the Collateral.

         SECTION 15. INDEMNITY.  The Pledgor shall indemnify,  hold harmless and
defend the Trustee and its directors,  officers,  agents and employees, from and
against any and all claims,  actions,  obligations,  liabilities  and  expenses,
including reasonable defense costs, reasonable investigative fees and costs, and
reasonable  legal fees and damages  arising from the  Trustee's  performance  as
Trustee  under this  Pledge  Agreement,  except to the extent  that such  claim,
action,  obligation,  liability or expense is directly  attributable  to the bad
faith, gross negligence or wilful misconduct of such indemnified person.

         SECTION 16.  REMEDIES  UPON EVENT OF  DEFAULT.  If any Event of Default
under the Indenture or the Notes or default hereunder (any such Event of Default
or default being referred to in this Pledge  Agreement as an "EVENT OF DEFAULT")
shall have occurred and be continuing:

                  (a) The Trustee and the Holders shall have, in addition to all
         other rights given by law or by this Pledge Agreement or the Indenture,
         all of the rights and  remedies  with  respect to the  Collateral  of a
         secured  party under the UCC in effect in the State of New York at that
         time. In addition, with respect to any Collateral that shall then be in
         or shall thereafter come into the possession or custody of the Trustee,
         the Trustee may sell or cause the same to be sold at any broker's board
         or at public or private  sale,  in one or more  sales or lots,  at such
         price or prices as the Trustee may deem best,  for cash or on credit or
         for  future  delivery,  without  assumption  of any  credit  risk.  The
         purchaser of any or all  Collateral so sold shall  thereafter  hold the
         same absolutely,  free from any claim, encumbrance or right of any kind
         whatsoever created

                                       16

<PAGE>
         by or through the Pledgor.  Unless any of the Collateral threatens,  in
         the reasonable judgment of the Trustee, to decline speedily in value or
         is or becomes of a type sold on a recognized  market,  the Trustee will
         give the Pledgor  reasonable notice of the time and place of any public
         sale  thereof,  or of the time after  which any  private  sale or other
         intended  disposition  is  to be  made.  Any  sale  of  the  Collateral
         conducted in conformity with reasonable  commercial practices of banks,
         insurance companies,  commercial finance companies,  or other financial
         institutions  disposing of property  similar to the Collateral shall be
         deemed to be commercially  reasonable.  Any  requirements of reasonable
         notice shall be met if such notice is mailed to the Pledgor as provided
         in Section  20.1  hereof at least ten (10) days  before the time of the
         sale or disposition.  The Trustee or any Holder may, in its own name or
         in the name of a designee or nominee,  buy any of the Collateral at any
         public sale and, if permitted by  applicable  law, at any private sale.
         All expenses  (including  court costs and reasonable  attorneys'  fees,
         expenses and  disbursements) of, or incident to, the enforcement of any
         of the provisions  hereof shall be recoverable from the proceeds of the
         sale or other disposition of the Collateral.

                  (b) The  Pledgor  further  agrees to use its  reasonable  best
         efforts  to do or  cause  to be  done  all  such  other  acts as may be
         necessary  to make  such  sale or  sales of all or any  portion  of the
         Collateral  pursuant  to this  Section  16  valid  and  binding  and in
         compliance with any and all other  applicable  requirements of law. The
         Pledgor further agrees that a breach of any of the covenants  contained
         in this Section 16 will cause irreparable injury to the Trustee and the
         Holders,  that the Trustee and the Holders  have no adequate  remedy at
         law in respect of such  breach  and,  as a  consequence,  that each and
         every  covenant  contained  in this  Section  16 shall be  specifically
         enforceable  against the  Pledgor,  and the Pledgor  hereby  waives and
         agrees  not to assert  any  defenses  against  the  remedy of  specific
         performance  for the breach of any such covenants  except for a defense
         that no Event of Default has occurred.

                  (c) All cash  proceeds  received  by the Trustee in respect of
         any  sale  of,  or  other  realization  upon  all  or any  part  of the
         Collateral  may,  in the  discretion  of the  Trustee,  be  held by the
         Trustee  as  collateral  for,  and/or  then or at any  time  thereafter
         applied (after payment of any amounts  payable to the Trustee  pursuant
         to Section  15) in whole or in part by the  Trustee  against all or any
         part of the  Secured  Obligations  in such order as the  Trustee  shall
         elect.  Any surplus of such cash or cash  proceeds  held by the Trustee
         and  remaining  after  payment in full of all the  Secured  Obligations
         shall be paid over to the  Pledgor  or to  whomsoever  may be  lawfully
         entitled to receive such surplus.

                  (d) All  payments  received  by the  Pledgor in respect of the
         Collateral  shall be received in trust for the benefit of the  Trustee,
         shall be segregated from other funds of

                                       17

<PAGE>
         the Pledgor and shall be forthwith paid over to the Trustee in the same
         form as so received (with any necessary indorsement).

         SECTION 17.  EXPENSES.  The Pledgor will upon demand pay to the Trustee
the  amount of any and all  reasonable  fees and  expenses,  including,  without
limitation,  the reasonable  fees,  expenses and  disbursements  of its counsel,
experts  and agents  retained  by the  Trustee,  that the  Trustee  may incur in
connection with (a) the review,  negotiation and  administration  of this Pledge
Agreement,  (b) the custody or preservation of, or the sale of, collection from,
or  other  realization  upon,  any  of  the  Collateral,  (c)  the  exercise  or
enforcement of any of the rights of the Trustee and the Holders hereunder or (d)
the failure by the Pledgor to perform or observe any of the provisions hereof.

         SECTION 18. SECURITY INTEREST  ABSOLUTE.  All rights of the Trustee and
the Holders and security interests hereunder, and all obligations of the Pledgor
hereunder, shall be absolute and unconditional irrespective of:

                  (a) any lack of validity or enforceability of the Indenture or
         any other agreement or instrument relating thereto;

                  (b) any change in the time,  manner or place of payment of, or
         in any other term of,  all or any of the  Secured  Obligations,  or any
         other  amendment or waiver of or any consent to any departure  from the
         Indenture;

                  (c) any exchange,  surrender, release or non-perfection of any
         Liens  on  any  other   collateral  for  all  or  any  of  the  Secured
         Obligations; or

                  (d) to the  extent  permitted  by  applicable  law,  any other
         circumstance  which might otherwise  constitute a defense available to,
         or a discharge of, the Pledgor in respect of the Secured Obligations or
         of this Pledge Agreement.

         SECTION 19. VOTING  RIGHTS;  DIVIDENDS;  ETC. (a) So long as no Default
under the Indenture shall have occurred and be continuing,  the Pledgor shall be
entitled to exercise any and all voting and other consensual  rights  pertaining
to the Security  Collateral or any part thereof for any purpose not inconsistent
with the terms of this  Agreement  or the  Indenture  and the  Notes;  PROVIDED,
HOWEVER, that the Pledgor shall not exercise or refrain from exercising any such
right if such action  would have a material  adverse  effect on the value of the
Security  Collateral or any part thereof;  and PROVIDED FURTHER that the Pledgor
shall give the Trustee at least five days' written notice of the manner in which
it intends to exercise, or the reasons for refraining from exercising,  any such
right.

                                       18

<PAGE>
                  (b)  Upon the  occurrence  and  during  the  continuance  of a
Default  under the  Indenture:  all rights of the Pledgor to exercise or refrain
from exercising the voting and other  consensual  rights that it would otherwise
be entitled to exercise  pursuant  to Section  19(a)  shall,  upon notice to the
Pledgor by the Trustee, cease.

                  (c) All dividends  and interest  payments that are received by
the Pledgor in respect of Security Collateral shall be received in trust for the
benefit of the Trustee,  shall be segregated from other funds of the Pledgor and
shall be forthwith  paid over to the Trustee as Security  Collateral in the same
form as so received (with any necessary indorsement).

         SECTION 20. MISCELLANEOUS PROVISIONS.

         20.1. NOTICES.  Any notice or communication shall be sufficiently given
if in writing and delivered in person or mailed by first class mail,  commercial
courier service or telecopier communication, addressed as follows:

                  IF TO THE PLEDGOR:

                                    GST Network Funding, Inc.
                                    4001 Main Street
                                    Vancouver, WA  98663
                                    Attention:  Chief Executive Officer

                                        and

                                    GST Telecommunications Inc.
                                    4001 Main Street
                                    Vancouver, WA  98663
                                    Attention:  Chief Executive Officer

                  WITH A COPY TO:

                                    Olshan Grundman Frome & Rosenzweig LLP
                                    505 Park Avenue
                                    New York, NY  10022
                                    Attention:  David J. Adler

                                       19

<PAGE>
                IF TO THE TRUSTEE:

                     United States Trust Company of New York

                                    114 West 47th Street
                                    New York, NY  10036
                                    Attention:  Mr. Louis Young

         20.2.  NO  ADVERSE  INTERPRETATION  OF OTHER  AGREEMENTS.  This  Pledge
Agreement  may  not be  used  to  interpret  another  pledge,  security  or debt
agreement of the Pledgor or any subsidiary thereof. No such pledge,  security or
debt  agreement  (other than the Indenture) may be used to interpret this Pledge
Agreement.

         20.3.  SEVERABILITY.  The  provisions  of  this  Pledge  Agreement  are
severable,  and if any clause or  provision  shall be held  invalid,  illegal or
unenforceable in whole or in part in any  jurisdiction,  then such invalidity or
unenforceability   shall  affect  in  that  jurisdiction  only  such  clause  or
provision,  or part  thereof,  and shall not in any manner affect such clause or
provision  in any other  jurisdiction  or any other  clause or provision of this
Pledge Agreement in any jurisdiction.

         20.4.  HEADINGS.  The  headings  in this  Pledge  Agreement  have  been
inserted for  convenience  of reference  only,  are not to be  considered a part
hereof and shall in no way  modify or  restrict  any of the terms or  provisions
hereof.

         20.5. COUNTERPART ORIGINALS. This Pledge Agreement may be signed in two
or more  counterparts,  each of which  shall be deemed an  original,  but all of
which shall together constitute one and the same agreement.

         20.6.  BENEFITS OF PLEDGE AGREEMENT.  Nothing in this Pledge Agreement,
express or implied,  shall give to any person, other than the parties hereto and
their  successors  hereunder,  and the  Holders,  any  benefit  or any  legal or
equitable right, remedy or claim under this Pledge Agreement.

         20.7. AMENDMENTS,  WAIVERS AND CONSENTS. Any amendment or waiver of any
provision  of this  Pledge  Agreement  and any consent to any  departure  by the
Pledgor from any provision of this Pledge  Agreement  shall be effective only if
made or duly given in  compliance  with all of the terms and  provisions  of the
Indenture,  and neither the Trustee nor any Holder shall be deemed,  by any act,
delay,  indulgence,  omission or  otherwise,  to have waived any right or remedy
hereunder  or to have  acquiesced  in any  Default or Event of Default or in any
breach of any of the terms and conditions hereof.  Failure of the Trustee or any
Holder to  exercise,  or delay in  exercising,  any  right,  power or  privilege
hereunder  shall not  preclude  any other or  further  exercise  thereof  or the
exercise of any other right, power or privilege. A

                                       20

<PAGE>
waiver by the Trustee or any Holder of any right or remedy  hereunder on any one
occasion shall not be construed as a bar to any right or remedy that the Trustee
or such  Holder  would  otherwise  have on any future  occasion.  The rights and
remedies herein provided are cumulative, may be exercised singly or concurrently
and are not exclusive of any rights or remedies provided by law.

         20.8.  INTERPRETATION OF AGREEMENT.  All terms not defined herein or in
the Indenture  shall have the meaning set forth in the  applicable  UCC,  except
where the context otherwise requires.  To the extent a term or provision of this
Pledge Agreement conflicts with the Indenture,  the Indenture shall control with
respect  to the  subject  matter of such  term or  provision.  Acceptance  of or
acquiescence  in a course of performance  rendered  under this Pledge  Agreement
shall not be relevant to  determine  the meaning of this Pledge  Agreement  even
though the  accepting or  acquiescing  party had  knowledge of the nature of the
performance and opportunity for objection.

         20.9.  CONTINUING  SECURITY INTEREST;  TERMINATION;  RELEASE.  (a) This
Pledge  Agreement  shall  create a  continuing  security  interest in and to the
Collateral  and shall,  unless  otherwise  provided in the  Indenture or in this
Pledge  Agreement,  remain in full force and effect until the payment in full in
cash of the Secured Obligations. This Pledge Agreement shall be binding upon the
Pledgor, its transferees, successors and assigns, and shall inure, together with
the rights and remedies of the Trustee hereunder, to the benefit of the Trustee,
the Holders and their respective successors, transferees and assigns.

         (b) This Pledge  Agreement  shall terminate upon the earlier of (i) the
payment in full in cash of the Secured  Obligations  and (ii) the  assumption by
GST USA of all the  Obligations  of  Funding  pursuant  to  Section  4.23 of the
Indenture, the execution by GST USA of documentation and the taking of all other
actions  necessary  to provide  the  Trustee,  for its  benefit  and the ratable
benefit of the  Holders,  with a perfected,  first  priority  security  interest
(subject  only to the liens  granted to the  Trustee,  for its  benefit  and the
benefit of the Holders,  under this Agreement) in the Collateral,  including any
collateral  securing the Pledged  Debt,  to secure all of GST USA's  obligations
under the  Indenture and the Notes and the delivery by counsel to the Pledgor of
an opinion  confirming the  existence,  perfection and priority of such security
interest.  At such time, the Trustee shall, pursuant to an Issuer Order, execute
and deliver all  documentation  necessary  or  desirable to release its security
interest hereunder and under the Intercompany  Security Agreement,  reassign and
redeliver to the Pledgor all of the Collateral hereunder that has not been sold,
disposed of,  retained or applied by the Trustee in accordance with the terms of
this Pledge Agreement and the Indenture.  Such reassignment and redelivery shall
be without  warranty  by or  recourse  to the  Trustee in its  capacity as such,
except as to the  absence of any Liens on the  Collateral  created by or arising
through the Trustee, and shall be at the reasonable expense of the Pledgor.

                                       21

<PAGE>
                  (c)  Upon  any  sale  of  Acquired  Equipment  to  GST  USA in
accordance with the terms of this Agreement,  the Trustee will, at the Pledgor's
expense,  execute and deliver to the Pledgor such documents as the Pledgor shall
reasonably  request to evidence  the release of such item of Acquired  Equipment
from the assignment and security  interest  granted hereby;  PROVIDED,  HOWEVER,
that (i) at the time of such  request  and such  release no  Default  shall have
occurred  and be  continuing,  (ii) the  Pledgor  shall  have  delivered  to the
Trustee,  at least five Business Days prior to the date of the proposed release,
a written request for release describing the item of Acquired Equipment together
with a form of release for execution by the Trustee and a  certification  by the
Pledgor to the effect that the  transaction is in compliance with this Agreement
and as to such other matters as the Trustee may request,  which written  release
shall  state  that  the  price  to be paid is at  least  equal  to the  Acquired
Equipment Cost, payable in the form an Intercompany Note with a principal amount
equal to the  Acquired  Equipment  Cost and bearing  interest at a rate at least
equal to the rate of  interest on the Notes,  and (iii) the  Pledgor  shall have
pledged and  delivered to the Trustee such  Intercompany  Note and an opinion of
counsel that such  Intercompany  Note is secured by a perfected  first  priority
security interest in such Acquired  Equipment (subject only to the liens granted
to the  Trustee,  for its  benefit and the  benefit of the  Holders,  under this
Agreement)  and an opinion of counsel  that the  Pledgor has granted a valid and
perfected  first  priority  security  interest in the  Intercompany  Note to the
Trustee for its benefit and the benefit of the Holders.

         20.10.  SURVIVAL  PROVISIONS.   All  representations,   warranties  and
covenants  of the Pledgor  contained  herein  shall  survive the  execution  and
delivery of this Pledge Agreement, and shall terminate only upon the termination
of this Pledge Agreement. The obligations of the Pledgor under Section 16 hereof
shall survive the termination of this Agreement.

         20.11.  WAIVERS.  The Pledgor waives presentment and demand for payment
of any of the  Secured  Obligations,  protest  and notice of dishonor or default
with respect to any of the Secured  Obligations,  and all other notices to which
the Pledgor might otherwise be entitled,  except as otherwise expressly provided
herein or in the Indenture.

         20.12.  AUTHORITY  OF THE  TRUSTEE.  (a) The Trustee  shall have and be
entitled to exercise all powers hereunder that are  specifically  granted to the
Trustee  by the  terms  hereof,  together  with such  powers  as are  reasonably
incident  thereto.  The Trustee may  perform any of its duties  hereunder  or in
connection  with the  Collateral by or through  agents or employees and shall be
entitled to retain  counsel  and to act in  reliance  upon the advice of counsel
concerning  all such  matters.  Except as otherwise  expressly  provided in this
Pledge  Agreement  or the  Indenture,  neither  the  Trustee  nor any  director,
officer,  employee,  attorney  or agent of the  Trustee  shall be  liable to the
Pledgor  for any  action  taken or omitted  to be taken by the  Trustee,  in its
capacity as Trustee,  hereunder,  except for its own bad faith, gross negligence
or  willful  misconduct,  and  the  Trustee  shall  not be  responsible  for the
validity, effectiveness or

                                       22

<PAGE>
sufficiency hereof or of any document or security furnished pursuant hereto. The
Trustee and its directors,  officers,  employees,  attorneys and agents shall be
entitled  to  rely  on any  communication,  instrument  or  document  reasonably
believed by it or them to be genuine and correct and to have been signed or sent
by the proper person or persons.

                  (b)   The   Pledgor   acknowledges   that   the   rights   and
responsibilities  of the Trustee under this Pledge Agreement with respect to any
action  taken by the Trustee or the exercise or  non-exercise  by the Trustee of
any option,  right,  request,  judgment or other  right or remedy  provided  for
herein or resulting or arising out of this Pledge  Agreement  shall,  as between
the Trustee and the  Holders,  be  governed by the  Indenture  and by such other
agreements  with respect thereto as may exist from time to time among them, but,
as between the  Trustee  and the  Pledgor,  the  Trustee  shall be  conclusively
presumed to be acting as trustee for the Holders  with full and valid  authority
so to act or refrain  from  acting,  and the Pledgor  shall not be  obligated or
entitled to make any inquiry respecting such authority.

         20.13.  FINAL  EXPRESSION.  This Pledge  Agreement,  together  with the
Indenture and any other agreement executed in connection  herewith,  is intended
by the parties as a final expression of this Pledge Agreement and is intended as
a complete and exclusive statement of the terms and conditions thereof.

         20.14.  RIGHTS OF HOLDERS.  No Holder shall have any independent rights
hereunder  other than those rights  granted to  individual  Holders  pursuant to
Section 6.07 of the Indenture;  PROVIDED that nothing in this  subsection  shall
limit any rights granted to the Trustee under the Notes or the Indenture.

         20.15. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL;
WAIVER  OF  DAMAGES.  (a)  THIS  PLEDGE  AGREEMENT  SHALL  BE  GOVERNED  BY  AND
INTERPRETED UNDER THE LAWS OF THE STATE OF NEW YORK, AND ANY DISPUTE ARISING OUT
OF, CONNECTED WITH,  RELATED TO, OR INCIDENTAL TO THE  RELATIONSHIP  ESTABLISHED
BETWEEN THE PLEDGOR,  THE TRUSTEE AND THE HOLDERS IN CONNECTION WITH THIS PLEDGE
AGREEMENT, AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE,  SHALL BE
RESOLVED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

                  (b)  THE  PLEDGOR  HAS  APPOINTED   OLSHAN  GRUNDMAN  FROME  &
ROSENZWEIG LLP, 505 PARK AVENUE, NEW YORK, NY 10022,  ATTENTION:  DAVID J. ADLER
AS ITS AGENT FOR  SERVICE  OF  PROCESS IN ANY SUIT,  ACTION OR  PROCEEDING  WITH
RESPECT TO THIS PLEDGE  AGREEMENT AND FOR ACTIONS BROUGHT UNDER U.S.  FEDERAL OR
STATE SECURITIES LAWS

                                       23

<PAGE>
BROUGHT IN ANY FEDERAL OR STATE COURT LOCATED IN THE CITY OF NEW YORK AND AGREES
TO SUBMIT TO THE JURISDICTION OF ANY SUCH COURT.

                  (c) THE PLEDGOR AGREES THAT THE TRUSTEE SHALL, IN ITS CAPACITY
AS TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY  HOLDER,  HAVE THE RIGHT,  TO THE
EXTENT  PERMITTED  BY  APPLICABLE  LAW,  TO PROCEED  AGAINST  THE PLEDGOR OR THE
COLLATERAL  IN A COURT IN ANY  LOCATION  REASONABLY  SELECTED IN GOOD FAITH (AND
HAVING PERSONAL OR IN REM  JURISDICTION  OVER THE PLEDGOR OR THE COLLATERAL,  AS
THE CASE MAY BE) TO ENABLE THE  TRUSTEE TO  REALIZE  ON SUCH  COLLATERAL,  OR TO
ENFORCE A JUDGMENT  OR OTHER COURT ORDER  ENTERED IN FAVOR OF THE  TRUSTEE.  THE
PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS
IN ANY  PROCEEDING  BROUGHT BY THE  TRUSTEE TO  REALIZE ON SUCH  PROPERTY  OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE TRUSTEE, EXCEPT FOR SUCH
COUNTERCLAIMS,  SETOFFS  OR  CROSSCLAIMS  WHICH,  IF NOT  ASSERTED  IN ANY  SUCH
PROCEEDING,  COULD NOT OTHERWISE BE BROUGHT OR ASSERTED.  THE PLEDGOR WAIVES ANY
OBJECTION  THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN THE CITY OF NEW YORK
ONCE  THE  TRUSTEE  HAS  COMMENCED  A  PROCEEDING  DESCRIBED  IN THIS  PARAGRAPH
INCLUDING,  WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS.

                  (d) THE PLEDGOR  AGREES THAT NEITHER ANY HOLDER NOR (EXCEPT AS
OTHERWISE PROVIDED IN THIS PLEDGE AGREEMENT OR THE INDENTURE) THE TRUSTEE IN ITS
CAPACITY AS TRUSTEE SHALL HAVE ANY LIABILITY TO THE PLEDGOR  (WHETHER ARISING IN
TORT,  CONTRACT OR OTHERWISE)  FOR LOSSES  SUFFERED BY THE PLEDGOR IN CONNECTION
WITH,  ARISING OUT OF, OR IN ANY WAY RELATED TO, THE  TRANSACTIONS  CONTEMPLATED
AND THE RELATIONSHIP  ESTABLISHED BY THIS PLEDGE AGREEMENT, OR ANY ACT, OMISSION
OR EVENT OCCURRING IN CONNECTION  THEREWITH,  UNLESS IT IS DETERMINED BY A FINAL
AND  NONAPPEALABLE  JUDGMENT  OF A COURT THAT IS BINDING ON THE  TRUSTEE OR SUCH
HOLDER,  AS THE  CASE MAY BE,  THAT  SUCH  LOSSES  WERE  THE  RESULT  OF ACTS OR
OMISSIONS  ON THE  PART OF THE  TRUSTEE  OR SUCH  HOLDERS,  AS THE  CASE MAY BE,
CONSTITUTING BAD FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.

                  (e) TO THE EXTENT  PERMITTED  BY  APPLICABLE  LAW, THE PLEDGOR
WAIVES THE POSTING OF ANY BOND  OTHERWISE  REQUIRED OF THE TRUSTEE OR ANY HOLDER
IN CONNECTION WITH ANY JUDICIAL PROCESS OR

                                       24

<PAGE>
PROCEEDING  TO ENFORCE ANY  JUDGMENT OR OTHER  COURT  ORDER  PERTAINING  TO THIS
PLEDGE  AGREEMENT OR ANY RELATED  AGREEMENT OR DOCUMENT  ENTERED IN FAVOR OF THE
TRUSTEE  OR  ANY  HOLDER,  OR TO  ENFORCE  BY  SPECIFIC  PERFORMANCE,  TEMPORARY
RESTRAINING ORDER OR PRELIMINARY OR PERMANENT INJUNCTION,  THIS PLEDGE AGREEMENT
OR ANY RELATED AGREEMENT OR DOCUMENT BETWEEN THE PLEDGOR ON THE ONE HAND AND THE
TRUSTEE AND/OR THE HOLDERS ON THE OTHER HAND.



                                       25


<PAGE>
         IN WITNESS WHEREOF,  the Pledgor, and the Trustee have each caused this
Pledge  Agreement to be duly  executed and  delivered as of the date first above
written.

                                    Pledgor:

                                    GST NETWORK FUNDING, INC.


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

                                    UNITED STATES TRUST COMPANY
                                      OF NEW YORK, as Trustee




                                    By: /S/ Louis Young
                                       ----------------------------------------
                                       Name:  Louis Young
                                       Title: Vice President


<PAGE>

                                   SCHEDULE I

                         LOCATIONS OF ACQUIRED EQUIPMENT

                                   California



- --------------------
In accordance  with Item 601 of Regulation S-K, the Registrant has not filed the
exhibits to this  Agreement with the  Securities  and Exchange  Commission.  The
Registrant  undertakes to supplementally  provide a copy of such exhibits to the
Securities and Exchange Commission upon request.




                   REIMBURSEMENT AND COMMITMENT FEE AGREEMENT

         REIMBURSEMENT  AND COMMITMENT FEE AGREEMENT dated May 4, 1998 among GST
TELECOMMUNICATIONS,  INC., a federally chartered Canadian  corporation  ("GST"),
GST USA,  INC., a Delaware  corporation  ("GST USA"),  and GST NETWORK  FUNDING,
INC., a Delaware  corporation  ("GST Funding").  Capitalized  terms used and not
defined in this  Agreement  have the  meanings  set forth or  referred to in the
Indenture (as defined below).

         WHEREAS,  GST  Funding  shall  issue  on the date  hereof  $500,000,000
principal  amount at maturity of its 10 1/2% Senior  Secured  Discount Notes due
2008 (the "Notes") pursuant to the terms of an Indenture (the "Indenture") dated
the date hereof among GST, GST Funding, GST USA, and United States Trust Company
of New York (the "Trustee");

         WHEREAS,  the net  proceeds to GST  Funding  from the sale of the Notes
(the  "Offering")  must be used to  purchase  U.S.  Government  Securities  (the
"Pledged  Securities") and the Pledged Securities must be pledged by GST Funding
to the Trustee for the benefit of the holders of the Notes;

         WHEREAS,  upon written  request  from GST Funding to the  Trustee,  the
Pledged  Securities will be released from the Pledge Account in order to finance
the cost of Acquired Equipment;

         WHEREAS,  immediately  upon the acquisition of any Acquired  Equipment,
(i) GST Funding must grant a first priority  security  interest in such Acquired
Equipment  to the Trustee for the benefit of the holders of the Notes,  (ii) GST
USA must purchase the Acquired Equipment from GST Funding for an amount equal to
the  Acquired  Equipment  Cost and  (iii)  GST USA must  issue a senior  secured
promissory note  guaranteed by GST in an amount equal to the Acquired  Equipment
Cost payable to GST Funding (each, an "Intercompany Note").

         WHEREAS,  the  Notes  will  be  secured  by a first  priority  security
interest in the Pledged Securities,  the Pledge Account, the Intercompany Notes,
the Fee Notes (as defined below) and this Agreement.

         NOW, THEREFORE, in consideration of the premises and in order to induce
GST  Funding to offer the Notes in the  Offering,  GST and GST USA hereby  agree
with GST Funding as follows:

         1. GST and GST USA hereby jointly and severally  agree to (i) reimburse
GST Funding for all  expenses  incurred  by GST Funding in  connection  with the
Offering  and  the  purchase  of  Acquired   Equipment   and  the   transactions
contemplated  by the  Indenture  and the  Pledge  Agreement  and (ii) pay to GST
Funding a commitment fee (the  "Commitment  Fee") in an amount equal to 4.5% per
annum of the amount by which the aggregate principal amount at

<PAGE>

maturity  of the  Notes  exceeds  the  aggregate  principal  amount  of all  the
Intercompany Notes then held as security for the Notes.

         2. The Commitment Fee shall be paid semi-annually,  in arrears, on each
May 1 and November 1,  commencing  November 1, 1998 and shall be paid by GST USA
issuing to GST  Funding  unsubordinated  promissory  notes  (each a "Fee  Note")
guaranteed  by GST on a senior  basis;  PROVIDED  that the  aggregate  principal
amount of the Fee Notes  shall be reduced to the extent  such  principal  amount
exceeds  the  aggregate  principal  amount of the Notes  less (x) the  aggregate
principal amount of Pledged Securities and cash then held in the Pledge Account,
together with accrued interest thereon and (y) the aggregate principal amount of
all  Intercompany  Notes then held as security  for the Notes plus the amount of
interest  that will accrue on such  Intercompany  Notes by May 1, 2003.  The Fee
Notes will  mature on May 1, 2003 and there will not be any  payment of interest
prior to maturity.

         3. MISCELLANEOUS.

            (a) NO INCONSISTENT AGREEMENTS.  None of GST Funding, GST USA or GST
has entered into,  and on or after the date of this  Agreement  will enter into,
any agreement that conflicts with the provisions hereof.

            (b)  AMENDMENTS  AND  WAIVERS.  The  provisions  of this  Agreement,
including  the  provisions  of this  sentence,  may not be amended,  modified or
supplemented in a manner that adversely  affects the rights of GST Funding,  and
waivers or consents to departures  from the  provisions  hereof may not be given
unless GST Funding, GST USA and GST have obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding Notes.

            (c)  COUNTERPARTS.  This  Agreement may be executed in any number of
counterparts and by the parties hereto in separate  counterparts,  each of which
when so  executed  shall be  deemed  to be an  original  and all of which  taken
together shall constitute one and the same agreement.

            (d) DESIGNATION OF PROCESS AGENT;  SUBMISSION TO JURISDICTION.  Each
of GST Funding,  GST USA and GST hereby (i) acknowledges that it has irrevocably
designated  and  appointed  Olshan  Grundman  Frome &  Rosenzweig  LLP, 505 Park
Avenue, New York, New York 10022, Attention: David J. Adler, Esq. (together with
any successor,  the "Process Agent"), as its authorized agent upon which process
may be served in any suit,  action or  proceeding  arising out of or relating to
this Agreement or the transactions contemplated herein that may be instituted in
any federal or state court in the State of New York, or brought under federal or
state securities laws, and acknowledges that the Process Agent has accepted such
designation,  (ii) agrees  that  service of process  upon the Process  Agent and
written notice of

                                       2

<PAGE>
such  service  to GST  Funding,  GST USA or GST,  as the case may be  (mailed or
delivered to GST's Chief Executive  Officer at its principal office at 4001 Main
Street, Vancouver, Washington 98663), shall be deemed in every respect effective
service of process upon GST Funding,  GST USA or GST, as the case may be, in any
such suit,  action or  proceeding  and (iii)  agrees to take any and all action,
including the execution and filing of any and all such documents and instruments
as may be necessary to continue such  designation and appointment of the Process
Agent in full force and effect so long as any of the Notes shall be outstanding.
Each of GST Funding, GST USA and GST hereby agrees to submit to the nonexclusive
jurisdiction  of any federal or state court in the State of New York in any such
suit,  action or proceeding  arising out of or relating to this Agreement or the
transactions contemplated herein.

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

            (f) GOVERNING LAW. This  Agreement  shall be governed by the laws of
the State of New York.

            (g)  SEVERABILITY.  In  the  event  that  any  one  or  more  of the
provisions contained herein, or the application thereof in any circumstance,  is
held   invalid,   illegal  or   unenforceable,   the   validity,   legality  and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.

            (h)  THIRD  PARTY  BENEFICIARY.  The  Holders  shall be third  party
beneficiaries  to the agreements made hereunder  among GST Funding,  GST USA and
GST, and each Holder shall have the right to enforce such agreements directly to
the extent it deems such  enforcement  necessary  or  advisable  to protect  its
rights or the rights of Holders hereunder.

                                       3

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

                                           GST TELECOMMUNICATIONS, INC.



                                           By /s/ Stephen Irwin
                                             -----------------------------------
                                             Name:  Stephen Irwin
                                             Title: Vice Chairman and Secretary

                                           GST USA, INC.




                                           By /s/ Stephen Irwin
                                             -----------------------------------
                                             Name:  Stephen Irwin
                                             Title: Senior Vice President

                                           GST NETWORK FUNDING, INC.





                                           By /s/ Stephen Irwin
                                             -----------------------------------
                                             Name:  Stephen Irwin
                                             Title: Senior Vice President




NEWS RELEASE                                              GST TELECOMMUNICATIONS

FOR IMMEDIATE RELEASE                                         MAY 4, 1998


      GST TELECOMMUNICATIONS ANNOUNCES PRIVATE PLACEMENT OF SENIOR SECURED
                   DISCOUNT NOTES OF WHOLLY-OWNED SUBSIDIARY


(VANCOUVER, Wash.) - GST Telecommunications,  Inc. (NASDAQ:GSTX) announced today
that GST Network  Funding,  Inc.,  an indirect  wholly-owned  subsidiary  of GST
Telecommunications,  Inc., has privately  placed $300.0 million (gross proceeds)
of 10-1/2  percent  senior  secured  discount  notes.  The net  proceeds of such
offering  will be used to finance the purchase of  telecommunications  equipment
for the  continued  expansion of the  Company's  infrastructure,  including  the
development and  construction  of additional  networks and long haul fiber optic
facilities.

The senior secured  discount notes have not been registered under the Securities
Act and may not be offered or sold in the United States absent  registration  or
an applicable exemption from such registration.


For more information, please contact:
GST Telecommunications
Dan Trampush        (360) 906-7152
Lisa Miles          (360) 906-7140


                                     # # #



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