Exhibit 10.10
EMPLOYMENT AGREEMENT
     This Employment Agreement is entered into by and between Wayne M.Rehberger (“Executive”) and XO Communications, Inc., a Delaware corporation(“Employer” or the “Company”), executed this31st day of December 2001, buteffective as of September 25, 2000 (the “Commencement Date”).
WITNESSETH:
     WHEREAS, Employer is engaged in the business of providing high-quality,non-mobile telecommunications services to the rapidly growing business market;and
     WHEREAS, Executive has skills and experience in telephony generally andwith the technology associated with Employer’s business specifically; and
     WHEREAS, Employer desires to obtain Executive’s services for the conductof its business, and Executive desires to be employed in such business by andfor Employer;
     NOW, THEREFORE, in consideration of the premises and the mutual covenantsherein set forth, the parties hereto agree as follows:
     1. Employment. Employer acknowledges and agrees that it hiredExecutive as its Senior Vice President, Finance as of the Commencement Date andthat, effective November 11, 2000, it promoted Executive to Senior VicePresident, Chief Financial Officer, and Executive acknowledges and agrees thathe accepted such employment and promotion upon the terms and conditionshereinafter set forth.
     2. Duties.
          a. Executive shall report directly to Employer’s Chief ExecutiveOfficer and shall perform his services within the framework of thepolicies, objectives andBylaws of Employer. In his corporate capacity, Executive (i) shallexercise generalsupervisory responsibility and management authority over Employer’sfinancial andaccounting functions and, effective as of the date of Executive’spromotion to ChiefFinancial Officer, as Employer’s principal accounting and financialofficer, and (ii) shallperform such other duties commensurate with his position as may beassigned to himfrom time to time by Employer’s Chairman and Chief Executive Officer orboard of directors (the “Board of Directors”).
          b. Executive shall devote substantially all his business time, attentionand energies to the performance of his duties and functions under thisEmploymentAgreement and shall not during the term of his employment hereunder beengaged inany other substantial business activity for gain, profit or otherpecuniary advantage.Executive shall faithfully, loyally and diligently perform his assignedduties and functionsand shall not engage in any activities whatsoever which conflict with hisobligations to Employer during the term of his employment hereunder.
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     3. Term. The term of this Employment Agreement shall commence on theCommencement Date and, unless terminated earlier pursuant toparagraph 12 hereof,shall continue through September 25, 2003 (the “Initial Term”), andthereafter shallcontinue unless and until such time as (i) either party heretonotifies the other, upon sixty(60) days prior written notice, that this Employment Agreement willbe terminated at theend of the Initial Term or the later expiration of such sixty daynotice period, or (ii)Executive’s employment is otherwise terminated pursuant to paragraph12 hereof (the“Extended Term”) (the Initial Term, together with the Extended Term,if any, beingreferred to herein as the “Employment Term”).
     4. Compensation. Employer shall pay to Executive, in consideration ofand as compensation for the services agreed to be rendered by Executivehereunder, the following:
          a. Base Salary. During the Employment Term, the Company shallpay to Executive a Base Salary of $250,000 per annum; provided thatthe amount ofsuch Base Salary shall be reviewed at least annually and may, inEmployer’s solediscretion, be increased by Employer from time to time during theEmployment Term inlight of the conditions then existing and the services then beingrendered by Executive,in which case Executive’s Base Salary shall be such higher amount asmay bedetermined by Employer (such annual Base Salary, as in effect fromtime to time, beingreferred to herein as the “Base Salary”). The Base Salary shall bepayable inaccordance with Employer’s normal payroll schedule, less appropriatedeductions forfederal, state and local income taxes, FICA contributions and anyother deductionsrequired by law or authorized by Executive.
          b. Annual Performance Bonus. In addition to the Base Salary,Executive shall be entitled to receive an annual performance bonus(the “Annual Bonus”)during each year of service during the Employment Term (each such yearbeing referredto as an “Annual Bonus Period”), in an amount, if any, as may bedetermined by thecompensation committee of the Board of Directors (the “CompensationCommittee”)and/or the Board of Directors in their complete discretion, with atarget of 50% of theBase Salary payable during such Annual Bonus Period, based onExecutive’sperformance against objectives for the prior year of service, providedthat Executive’seligibility to receive the Annual Bonus shall be subject to andconditioned uponExecutive’ continuing to be employed by Employer on the date ofpayment of the AnnualBonus. Each Annual Bonus shall be payable in accordance withEmployer’s normalannual bonus payment schedule, less appropriate deductions forfederal, state, and localincome taxes, FICA contributions and any other deductions required bylaw or authorized by Executive.
          c. Options.
          (i) Grant of Compensatory Options. Effective as of theCommencement Date, Employer granted to Executive, pursuant to Employer’s StockOption Plan (“Plan”) and subject to the terms and conditions set forth in thisparagraph 4(c), an option to acquire 250,000 shares (the “CompensatoryOptions”) of Employer’s Class A voting common stock (“Common Stock”) on theterms set forth in Annex A hereto. The shares of Employer’s Common Stock thatwill be issued on exercise of the Compensatory Options are among the Sharescovered by the Form S-8 Registration Statement previously filed and currentlyin effect covering awards made under the Plan,
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suchthat, upon issuance and distribution of such shares toExecutive, there are no restrictions under federal or statesecurities laws on the further transfer of such shares, other thanrestrictions imposed by virtue of Executive’s status as an officeror director of the Company or as may otherwise be imposed by lawwith respect to unrestricted shares. In addition, the Company shallensure that the provisions of Rule 16b-3 under the SecuritiesExchange Act of 1934, as amended (“Exchange Act”) are applicable tothe grant and distribution of the Compensatory Options, and that thedistribution of the Compensatory Options shall not constitute a“purchase” of the Common Stock pursuant to Section 16(b) of theExchange Act.
          (ii) Grant of Inducement Options. At or prior to the CommencementDate, and subject to the terms and conditions set forth in this paragraph 4(c),the employer granted to Executive, pursuant to the Plan, an option to acquireanother 25,000 shares of Employer’s Common Stock on the terms set forth inAnnex A hereto (the “Inducement Options”). The shares of Employer’sCommon Stock that will be issued on exercise of the Inducement Options areamong the shares covered by the Form S-8 Registration Statement previouslyfiled and currently in effect covering awards made under the Plan, such that,upon issuance and distribution of such shares to Executive, there are norestrictions under federal or state securities laws or regulations on thefurther transfer of such shares, other than restrictions imposed by virtue ofExecutive’s status as an officer or director of the Company or as otherwise maybe imposed by law with respect to unrestricted shares. In addition, theEmployer shall exercise its best efforts to ensure that the provisions of Rule16b-3 under the ExchangeAct are applicable to the grant of the Inducement Options and anysubsequentdistribution of the shares issued upon exercise thereof, and that thedistribution of such shares to Executive shall not constitute a“purchase” of Common Stock pursuant toSection 16(b) of the Exchange Act. The Compensatory Options and theInducementoptions are collectively referred to as the “Options”.
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          (iii) Vesting. The Options shall be subject to vesting schedules, asfollows:     **Period of Executive’s** **Portion of Compensatory****Continuous Employment from** **Option Which Becomes****the Commencement Date** **Exercisable**After one year  25%Monthly thereafter  2.083%
Following four (4) years of continuous relationship with the Employerfrom the Commencement Date, the Compensatory Options will be 100% vested.     **Number of Years of Continuous** **Shares Available****Employment from the Effective** **upon Exercise of the****Date of this Agreement** **Inducement Options**1  6,250 2  6,250 3  6,250 4  6,250 
          Executive may, in his sole discretion, elect to defer vesting of theCompensatory or the Inducement Options by delivering to the Employer a writtennotice of such election no later than December 31 of the calendar yearimmediately preceding the calendar year in which such vesting would otherwiseoccur. Any such election shall be irrevocable and shall set a specific date forthe vesting of such Options; provided that Executive may also specify that theapplicable Options shall vest on the earlier of such specified date or thetermination of Executive’s employment hereunder. In the event of such election,Executive shall indemnify and hold harmless Employer from any and allwithholding amounts and penalties and interest associated therewith that may beassessed by the Internal Revenue Service or any relevant state of local taxingauthority in connection with any such deferral by Executive in the vesting ofany of the Options and the recognition of income associated therewith.
          (iv) Termination. Upon termination of employment for any reasonother than (w) termination by Employer (other than for Cause) after theoccurrence of a Change in Control, (x) permanent disability (as defined below)or (y) death or (z) by Executive upon establishment of ConstructiveTermination, the unvested portion (if any) of the Options shall immediatelyexpire and be forfeited. If termination of employment occurs because ofpermanent disability or death, Executive shall be deemed to have one additionalyear of continuous employment from the date of death or permanent disabilityfor purposes of applying the vesting schedules. If termination of employmentoccurs upon establishment of Constructive Termination or if there is atermination by Employer (other than for Cause) after the occurrence of a Changein Control, vesting of the Options shall occur upon the final effectiveness ofsuch Constructive Termination or the effectiveness of such termination byEmployer (other than for Cause) after the occurrence of a Change of Control.
          (v) Exercise of Options. Executive’s right to exercise the Options
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shall be governed by the terms of the Employer’s Stock Option Plan and theindividual option letter agreements issued to Executive.
          (vi) Withholding. Upon the vesting of any Inducement Options, orin connection with the exercise of any Compensatory Options, Executiveshall pay to Employer an amount equal to such amount as Employer shall beobligated to remit to the Internal Revenue Service or any relevant state orlocal taxing authority as withholding attributable to the compensationevidenced by the Inducement Options that have vested. At the discretion ofthe Compensation Committee, Executive may pay such amount either in cash orby delivery to the Company of a number of shares of Common Stock (orproceeds from the sale thereof) having a Fair Market Value equal to suchwithholding amount (which delivery may be made by an instruction to theCompany to retain a portion of the shares available upon exercise of theCompensatory Options, or shares available upon exercise of InducementOptions, otherwise distributable to Executive or by an instruction to theselling broker to remit such sales proceeds, otherwise distributable toExecutive, to the Company).
          (vii) Adjustments. In the event that the Common Stock is changedinto or exchanged for a different number or kind of securities of Employeror of another entity (by reason of merger, consolidation, recapitalization,reclassification, stock split, stock dividend, stock combination orotherwise), or if there is a distribution of cash, securities or otherproperty made to the holders of the Common Stock (other than cash dividendsmade out of current earnings of Employer) then an appropriate and equitableadjustment shall be made in the number and kind of securities issuable uponexercise of the Options hereunder, with a view towards preserving the valueto Executive of the rights granted pursuant to this paragraph 4(c). Withoutlimiting the generality of the foregoing, in the event that an adjustmentis required pursuant to the terms of any options, warrants or convertiblesecurities of Employer pursuant to any event of the kind specified above,at least an equivalent adjustment shall be required pursuant to thisparagraph 4(c)(vii). In the event any adjustment is required under thisparagraph 4(c)(vii), appropriate conforming adjustment shall be made to theexercise price of the Compensatory Options, as appropriate, to allreferences to numbers of Inducement Options and/or to the number of sharescovered by the Compensatory Options, as appropriate, contained in thisparagraph 4(c), to the definition of Common Stock, and to any otherprovisions of this paragraph 4(c) as necessary to accomplish the intent ofthis subparagraph (vii).
               5. Certain Definitions. For purposes of this Agreement:
          “Change of Control” shall mean the occurrence of any of thefollowing events:
               (A) The Company is merged or consolidated or reorganizedinto or with another company or other legal entity, other than a merger orconsolidation or reorganization into or with a company or other legal entitythat is an affiliate of Craig O. McCaw, and as a result of such merger,consolidation or reorganization less than amajority of the combined voting power of the then-outstanding securitiesof such company or person immediately after such transaction is held directlyor indirectly in the aggregate by the holders of voting securities of theCompany immediately prior to such sale or transfer, including votingsecurities issuable upon exercise or conversion of options, warrants or othersecurities or rights;
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               (B) The Company sells or otherwise transfers all orsubstantially all of its assets to any other company or other legalentity, other than a such a sale or transfer to a company or other legalentity that is an affiliate of Craig O. McCaw, and as a result of suchsale or other transfer of assets, less than a majority of the combinedvoting power of the then-outstanding securities of such company or personimmediately after such sale or transfer is held directly or indirectly inthe aggregate by the holders of voting securities of the Company immediatelyprior to such sale or transfer, including voting securities issuableupon exercise or conversion of options, warrants or other securitiesor rights;
               (C) Thereis report filed on Schedule 13D or Schedule 14D-1(or any successor schedule, form or report), each as promulgated pursuant tothe Securities Exchange Act of 1934, as amended (the “Exchange Act”),disclosing that any person (as the term “person” is used in Section 13(d)(3)or Section 14(d)(2) of the Exchange Act) other than Craig O. McCaw and hisaffiliates has become the beneficial owner (as the term “beneficial owner” isdefined under Rule 13d-3 or any successor rule or regulation promulgated underthe Exchange Act) of securities representing 50% or more of the votingsecurities of the Company, including voting securities issuable upon exerciseor conversion of options, warrants or other securities or rights;
               (D) Notwithstandingthe foregoing provisions of subparagraphs(A), (B), (C) and (D) hereof, a “Change of Control” shall not be deemed tohave occurred solely because Craig O. McCaw or one or more of his affiliates,or Wendy P. McCaw or a combination thereof, has converted some or all of theshares of Class B common stock of the Company held by any of them into sharesof Class A common stock of the Company.
               (E) Notwithstanding the foregoing provisions of subparagraphs(C) and (D) hereof, a “Change of Control” shall not be deemed to have occurredsolely because (x) the Company, (y) an entity in which the Company directly orindirectly beneficially owns 50% or more of the voting securities, or (z) anyCompany-sponsored employee stock ownership plan or other employee benefit planof the Company, either files or becomes obligated to file a report or proxystatement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K orSchedule 14A (or any successor schedule, form or report or item therein) underthe Exchange Act, disclosing beneficial ownershipby it of voting securities, whether in excess of 50% or otherwise, orbecause theCompany reports that a change of control of the Company has or may haveoccurred orwill or may occur in the future by reason of such beneficial ownership.
               (F) Notwithstanding the foregoing provisions of subparagraphs(A) through (D) above, no Change in Control shall result from a merger,consolidation or reorganization of the Company with any entity in which Eagle RiverInvestments, L.L.C. has prior to such merger, consolidation or reorganization invested atleast $10,000,000 in equity.
          “Fair Market Value” of a share of Common Stock shall mean, as of anygiven date, (i) the closing price of a share of Common Stock on theprincipal exchange on which Common Stock then trades, if any, on the dayprevious to such date, or, if shares were not traded on the day previousto such date, then on the next preceding trading day during which a saleoccurred; or (ii) If such Common Stock is not traded on an exchange but isquoted on NASDAQ or a successor quotation system, (1) the last
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sales price (if the Common Stock is then listed as a National Market Issueunder the NASDAQ National Market System) or (2) the mean between the closingrepresentative bid and asked prices (in all other cases) for the CommonStock on the day previous to such date (or, if shares were not traded on theday previous to such date, then on the next preceding trading day duringwhich a sale occurred), as reported by NASDAQ or such successor quotationsystems.
          “Cause” shall have the meaning ascribed in Paragraph 12(b)below.
          “Permanent Disability” shall have the same meaning as “permanent andtotal disability,” as defined in the Employer’s Stock Option Plan.
     6. Additional Options The Compensation Committee of the Board ofDirectors of Employer may, in its discretion, grant to Executive,pursuant to Employer’sStock Option Plan, additional options to acquire shares of Employer’sCommon Stock(“Additional Options”). Except as otherwise provided herein, the termsand conditions ofsuch Additional Options shall be as determined by Employer in its solediscretion.Executive’s rights with respect to any Additional Options shall beseparate from (and inaddition to) the rights set forth in paragraph 4(c) above with respectto theCompensatory Options and Inducement Options.
     7. Benefits. During the Employment Term, Executive shall be entitled toparticipate in all group health, major medical, pension and profitsharing, 401(k) andother benefit plans maintained by Employer and provided generally to itsexecutiveofficers, on the same terms as apply to participation therein bymanagement generally(except as otherwise provided herein). Further, during the EmploymentTerm, Executiveshall be entitled to participate in all fringe benefit programs andshall receive allperquisites if and to the extent that Employer establishes and makessuch benefits andperquisites available to management generally, including, but notlimited to, Employer-paid long-term disability insurance and life insurance coverage.
     8. Expenses. During the Employment Term, Employer shall reimburseExecutive for all reasonable travel, entertainment and other businessexpenses incurred or paid by Executive in performing his duties and functions hereunder.
     9. Vacations. Executive shall be entitled to such vacations, holidays,sick leave and personal time off as is allowed under the policies of Employerto management generally (except as otherwise provided herein).
     10. Non-Competition: Non-Solicitation.
     a. During the Employment Term and (except as provided in paragraph 12herein) for a period of one years thereafter, Executive shall not enterinto or participate in any business competitive to the business carried on by Employer.
     b. During the Employment Term and (except as provided in paragraph 12herein) for a period of one years thereafter, Executive shall not (i)directly or indirectly cause or attempt to cause any employee of Employer or any of itsaffiliates to leave the employ of Employer or any affiliate of Employer, (if) in any wayinterfere with the relationship between Employer and any employee or between an affiliate ofEmployer and any employee of such an affiliate, or (iii) interfere orattempt to interfere with any
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transaction in which Employer or any of its affiliates was involved duringthe Employment Term.
     c. The provisions ofthis paragraph 10 shall survive the expiration and/or termination of this Employment Agreement.
     11. ConfidentialInformation. During the Employment Term and for a period of two years thereafter, Executive will not use for his own advantage ordisclose any proprietary or confidential information relating to the businessoperations or properties of Employer, any affiliate of Employer or any of their respectivecustomers, suppliers, landlords, licensors or licensees. Upon the expiration or termination ofthe Employment Term, upon Employer’s request, Executive will surrender and deliver toEmployer all documents and information of every kind relating to or connected withEmployer and its affiliates and their respective businesses, customers, suppliers,landlord, licensors and licensees. The foregoing confidential information provisions shall notapply to information which: (i) is or becomes publicly known through no wrongfulact of the Executive, (ii) is rightfully received from any third party withoutrestriction and without breach by Executive of this Employment Agreement; or (iii) isindependently developed by Executive after the term of his employment hereunder or isindependently developed by a competitor of Employer at any time. The provisions of thisparagraph 11 shall survive the expiration and/or termination of this Employment Agreement.
     12. Termination.
          a. Automatic Termination Upon Death. In the event of Executive’sdeath during the Employment Term, Executive’s employment hereunder shallbe automatically terminated upon the date of death. As soon as reasonablypracticable following Executive’s death, Employer shall pay to Executive’sRepresentative (defined below in paragraph 22) (i) Executive’s accrued but unpaid Base Salaryand Annual Bonus, through the last day of the month of his death, and (ii) anyamount due hereunder for accrued but unused vacation time as of the date of death.In addition, Executive’s Representative shall be entitled to exercise Executive’srights with respect to the Compensatory Options and/or the Inducement Options, as appropriate,as set forth in Paragraph 4(c) above, and Executive’s rights with respect to theOptions, as provided herein and in the stock option agreement(s) pertaining thereto.
          b. Termination by Employer. During the Initial Term, Employer shallbe entitled to terminate Executive’s employment hereunder only upon theestablishment of “Cause” or the “Permanent Disability” of Executive (as those termsare defined below) by giving written notice to that effect to Executive. During anyExtended Term, Employer Shall be entitled to terminate Executive’s employment hereunder (i) uponthe establishment of Cause or the Permanent Disability of Executive, bygiving written notice to that effect to Executive or (ii) for any other reason or for noreason upon 12 months prior written notice to Executive.
          For purposes hereof, the term “Cause” means either (1) Executive’sfailure to substantially perform his duties and functions as contemplatedhereunder, if such failure constitutes gross neglect or willful malfeasance;(2) Executive’s committing fraud or embezzlement or otherwise engaging inconduct that results in Executive being convicted of a felony from which allappeals have been exhausted; (3) Executive’s intentionally acting in a mannerwhich is materially detrimental or damaging to
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Employer’s reputation, business, operations or relations with its employees,suppliers or customers, without taking reasonable steps to remedy suchactions promptly after receiving written notice thereof from Employer; (4)Executive’s chronic or habitual abuse of alcohol or prescription drugs orcontrolled substances; or (5) Executive’s committing any other materialbreach of this Employment Agreement without taking reasonable steps to ceaseor remedy such breach within thirty (30) days after Executive’s receipt ofwritten notice from Employer specifically identifying the nature of andcircumstances relevant to any such claimed material breach by Executive.
          For purposes hereof the term, “Permanent Disability” means: (i)Executive’s failure to devote full normal working time as required herein tohis employment hereunder for a period of at least 90 consecutive normalbusiness days (or for at least a majority of the normal business days in anyconsecutive 180-day period); and (ii) the existence of an illness orincapacity (either physical or mental) affecting Executive which, in thereasonable opinion of a Qualified Physician, is likely to be of suchcharacter or severity that Executive would be unable to resume devoting hisfull normal working time, as required herein, to his employment hereunder fora period of at feast nine consecutive months; the term “Qualified Physician”means an impartial physician competent to diagnose and treat the illness orcondition which Executive is believed to be suffering, selected by Employerand reasonably acceptable to Executive (or if Executive is then incapable ofacting for himself, Executive’s Representative), who shall havepersonallyexamined Executive and shall have personally reviewed Executive’s relevantmedical records; provided Employer shall bear the costs of such QualifiedPhysician’s services and Executive agrees to submit to an examination by suchQualified Physician and to the disclosure of Executive’s relevant medicalrecords to such Qualified Physician.
          The date upon which any termination effected pursuant to thissubparagraph 12(b) shall be effective is set forth in subparagraph 12(d), andthe effect of any such termination shall be as described insubparagraphs12(e) and (f).
          c. Termination by Executive. During the Initial Term, Executiveshall be entitled to terminate his employment hereunder only upon theestablishment of “Constructive Termination” (as that term is defined below),by giving written notice to thateffect to Employer. During any Extended Term, Executive shall be entitled toterminatehis employment hereunder (i) upon the establishment of ConstructiveTermination, by giving notice to that effect to Employer or (ii) for any otherreason or for no reason upon 6 months prior written notice to Employer.
          For purposes hereof, “Constructive Termination” shall mean Executive’stermination of his employment hereunder as a direct result of (i) a reductionin Executive’s initial Base Salary or in the target Annual Bonus percentage,(ii) a material change in the nature or extent of Executive’s title orresponsibilities that is inconsistent with Executive’s intended position andstatus hereunder, (iii) the relocation of Executive’s principal place ofemployment to a location more than 50 miles from Executive’s currentprincipal place of employment or (iv) the material breach by the Employer ofany provision of this Agreement which continues without reasonable stepsbeing taken to cure such breach for a period of 30 days after written noticethereof by Executive to Employer.
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          The date upon which any termination effected pursuant to thissubparagraph 12(c) shall be effective is set forth in subparagraph 12(d),and the effect of any such termination shall be as described insubparagraphs 12(f) and (g).
          d. Termination Date. In the event Executive’s employmenthereunder is terminated for circumstances constituting Cause, PermanentDisability orConstructive Termination, or if Executive’s employment hereunder isterminated byEmployer (other than for Cause) after the occurrence of a Change ofControl, suchtermination shall take effect upon the termination date set forth in thewritten notice tothat effect given by Executive to Employer or by Employer to Executive,as the case maybe (provided that if either party disputes the propriety of suchtermination, the effectivedate of termination shall be as established by final resolution of suchdispute, whether byagreement of the parties or award of an arbitrator as contemplatedherein, In favor of thepropriety of such termination), and in any other case termination ofExecutive’semployment hereunder shall take effect on the date specified in thewritten noticethereof delivered by Executive to Employer or by Employer to Executive,as the casemay be (the date on which any such termination takes effect beingreferred to herein asthe “Termination Date”). Employer, at its option, may require Executiveto continue toperform his duties hereunder until the Termination Date or pay toExecutive suchamount of compensation and benefits otherwise due hereunder inaccordance withEmployer’s then existing salary payment schedule or in one lump sumpayment.
          e. Effect of Termination by Employer For Cause. In the eventExecutive’s employment is terminated by Employer for Cause, or in theevent Executivevoluntarily terminates his employment as contemplated by paragraph12(c)(ii), at anytime during the Employment Term, then (i) Employer shall pay toExecutive Executive’saccrued but unpaid Base Salary and Annual Bonus through the TerminationDate; (ii)notwithstanding any of the provisions of Employer’s Stock Option Plan orof any optionagreement with respect thereto to the contrary, any and all of theOptions (other than theInducement Options) that theretofore have vested may be exercised at anytime on orbefore the ninetieth day following such Termination Date and, if not soexercised,thereupon automatically shall be canceled; and (iii) Executive’s rightswith respect to theCompensatory Options and/or the Inducement Options, as appropriate,shall be asstated in paragraph 4(c) above.
          f. Effect of Termination Upon Permanent Disability. In the eventExecutive’s employment is terminated by Employer upon the permanentdisability of Executive at any time during the Employment Term, then:
               (i) Employer shall pay to Executive (x) Executive’s accrued butunpaid Base Salary and Annual Bonus through the Termination Date, (y)Executive’s then existing Base Salary for 12 months from the date writtennotice of the termination of Executive’s employment is given by Employer, and(z) any amount due hereunder for accrued but unused vacation time as of theTermination Date.
               (ii) Employer, at its expense, shall make all benefit payments, onbehalf of Executive and Executive’s dependents, for such benefits Executiveotherwise would have been entitled to receive hereunder, for 12 monthsfollowing the date written notice of the termination of Executive’semployment is given by Employer.
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               (iii) With respect to any of the Options (other than the inducementOptions) which remain unvested upon such Termination Date, notwithstanding anyprovision to the contrary in Employer’s Stock Option Plan and/or any stockoption agreement with respect thereto, there shall be immediate vesting ofthat portion of such unvested Options which would have vested within 12 monthsof the date written notice of the termination of Executive’s employment isgiven by Employer. After giving effect to the foregoing sentence, any Options(other than the Inducement Options) which remain unvested shall automaticallyterminate.
               (iv) Executive’s rights with respect to theCompensatoryOptions and/or the Inducement Options, as appropriate, shall be as stated inparagraph 4(c) above.
          g. Effect of Wrongful or Constructive Termination or TerminationFollowing a Change of Control.
               (i) In the event Executive’s employment is terminated during theEmployment Term by Employer (other than for Cause) after the occurrence of aChange of Control, or by Executive in circumstances constituting ConstructiveTermination, then, from and after such Termination Date:
                    (A) Executiveshall not be subject to the non-competition provisions set forth in paragraph 10 hereof.
                    (B) Executive shall be entitled to receive the BaseSalary, Annual Bonus, and benefits, which Executive reasonably would haveexpected to receive (I) in the period from the Termination Date to theexpiration of the Initial Term (if such Termination Date occurs more than 6months prior to the expiration of the Initial Term) or(II) during the 6 monthsfollowing the date written notice of the termination of Executive’s employmentis given by Employer or Executive, as the case may be, (if such TerminationDate occurs after the Initial Term or 6 months prior to the expiration of theInitial Term). All of such amounts shall be payable upon, and the benefitsshall become effective upon, the Termination Date. The treatment of any Optionsother than the Inducement Options shall be governed by the terms of theapplicable granting documents and Annex A.
                    (C) Executive’s rights with respect to theCompensatory Options and/or the Inducement Options, as appropriate, shallbe as stated in paragraph 4(c) above.
The foregoing shall be Executive’s sole and exclusive remedy for any suchtermination of his employment under this subparagraph 12(g).
          h. Miscellaneous. In the event of any termination or attemptedtermination hereof: (i) if multiple events, occurrences or circumstances areasserted as bases for such termination or attempted termination, the event,occurrence or circumstance that is earliest in time, and any termination orattempted termination found to be proper hereunder based thereon, shall takeprecedence over the others: (ii) no termination of this Employment Agreementshall relieve or release either party from liability hereunder based on anybreach of the terms hereof by such party occurring prior
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to the Termination Date; (iii) the terms of this Employment Agreement relevantto performance or satisfaction of any obligation hereunder expressly remainingto be performed or satisfied in whole or in part at the Termination Date shallcontinue in force until such full performance or satisfaction has beenaccomplished and otherwise neither party hereto shall have any other orfurther remaining obligations to other party hereunder; and (iv) the vestingand exercise provisions set forth in Employer’s Stock Option Plan and/or anyoption agreement with respect to the Options (other than the InducementOptions) shall continue to apply except to the extent otherwise expresslyprovided in this paragraph 12 or Annex A.
          i. NoSet-off; No Duty of Mitigation. There shall be no right ofsetoff or counterclaim, in respect of any actual or alleged claim, debt orobligation, against any payments or benefits required to be made or provided toExecutive hereunder (including, without limitation, pursuant to subparagraphs12(f) and (g) above). In the event of any termination of Executive’s employmentunder this paragraph 12, Executive shall be under no obligation to seek otheremployment and shall be entitled to all payments or benefits required to bemade or provided to Executive hereunder, without any duty of mitigation ofdamages and regardless of any other employment obtained by Executive.
     13. Injunctive Relief. It is agreed that the services of Executive areunique and that any breach or threatened breach by Executive of any provision ofthis Employment Agreement cannot be remedied solely by damages. Accordingly, inthe event of a breach by Executive of his obligations under this EmploymentAgreement, Employer shall be entitled to seek and obtain interim restraints andpermanent injunctive relief without proving the inadequacy of damages as a remedy, restrainingExecutive and any business, firm, partnership, individual, corporation or entityparticipating in such breach or attempted breach. Nothing herein, however, shall be construed asprohibiting Employer from pursuing any other remedies available at law or in equityfor such breach or threatened breach, including the recovery of damages and thetermination of the services of Executive.
     14. Arbitration. Any dispute or controversy arising out of or relating tothis Employment Agreement or any claimed breach hereof shall be settled, at therequest of either party, by an arbitration proceeding conducted in accordance withthe rules of the American Arbitration Association (“AAA”), with the award determined to beappropriate by the arbitrator therein to be final, non-appealable and binding on theparties hereto, and with judgment upon such award as is rendered in any such arbitrationproceeding available for entry and enforcement in any court having jurisdiction ofthe parties hereto. The arbitrator shall be an impartial arbitrator qualified to serve inaccordance with the rules of the AAA and shall be reasonably acceptable to each of theEmployer and the Executive. If no such acceptable arbitrator is so appointed within 15 daysafter the initial request for arbitration of such disputed matter, each of the partiespromptly shall designate a person qualified to serve as an arbitrator in accordance withthe rules of the AAA, and the two persons so designated promptly shall select thearbitrator from among those persons qualified to serve in accordance with the rules of the AAA.The arbitration shall be held in the greater Northern Virginia area, or in such otherplace as may be agreed upon at the time by the parties. The expenses of the arbitrationproceeding shall  be borne by Employer, but the arbitrator’s award may provide thatExecutive shall reimburse Employer for an equitable share of such expenses if Executive isnot the prevailing party on any of the issues involved in such arbitration. TheEmployer shall pay for and bear the cost of its own and Executive’s experts, evidence andcounsel in
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such arbitration proceeding, but the arbitrator’s award may provide that, inaddition to any other amounts or relief due to Employer, Executive shallreimburse Employer on demand for all of such costs of Executive’s experts,evidence and counsel initially incurred by Employer, to the extent the awardfinds such costs properly allocable to any issue(s) in dispute as to which theaward indicates the Employer to be the prevailing party.
     15. Indemnification.
          a. Employer shall Indemnify Executive to the fullest extent permittedby Delaware law as in effect on the date hereof against all costs,expenses, liabilitiesand losses (including, without limitation, attorneys’ fees, judgments,penalties andamounts paid in settlement) reasonably incurred by Executive in connectionwith anyaction, suit or proceeding, whether civil, criminal, administrative orinvestigative in whichExecutive is made, or is threatened to be made, a party to or a witness insuch action,suit or proceeding by reason of the fact that he is or was an officer,director, consultant,agent or Executive of the Employer or of any of Employer’s controlledaffiliates or is orwas serving as an officer, consultant director, member, Executive,trustee, agent orfiduciary of any other entity at the request of the Employer (a“Proceeding”).
          b. Employer shall advance to Executive all reasonable costs andexpenses incurred by him in connection with a proceeding within 20 daysafter receipt byEmployer of a written request for such advance, accompanied by an itemizedlist of thecosts and expenses and Executive’s written undertaking to repay toEmployer ondemand the amount of such advance if it shall ultimately be determinedthat Executive isnot entitled to be indemnified against such costs and expenses.
          c. The indemnification provided to Executive hereunder is in additionto, and not in lieu of, any additional indemnification to which he may beentitled pursuantto Employer’s Certificate of Incorporation or Bylaws, any insurancemaintained byEmployer from time to time providing coverage to Executive and otherofficers anddirectors of Employer, or any separate written agreement with Executive.The provisionsof this paragraph 15 shall survive any termination of this EmploymentAgreement.
     16. Amendment and Modification. This Employment Agreement (includingthe Annex A hereto) contains the entire agreement between the parties withrespect tothe subject matter hereof, and supersedes any and all prior agreements,arrangementsor understandings between the parties hereto with respect to the subjectmatter hereof,whether written or oral Subject to applicable law and upon the consent ofthe Board ofDirectors of Employer, this Employment Agreement may be amended, modifiedandsupplemented by written agreement of Employer and Executive with respectto any ofthe terms contained herein.
     17. Waiver of Compliance. Any failure of either party to comply with anyobligation, covenant, agreement or condition on its part contained hereinmay beexpressly waived in writing by the other party, but such waiver or failureto insist uponstrict compliance shall not operate as a waiver of, or estoppel withrespect to, anysubsequent or other failure. Whenever this Employment Agreement requiresor permitsconsent by or on behalf of any party, such consent shall be given inwriting.
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     18. Notices. All notices, requests, demands and other communicationsrequired or permitted hereunder shall be in writing and shall be deemedto have beenduly given if delivered by hand, sent by registered or certified U.S.Mail, postage prepaid,commercial overnight courier service or transmitted by facsimile andshall be deemedserved or delivered to the addressee at the address for such noticespecified belowwhen hand delivered, upon confirmation of sending when sent by fax, onthe day afterbeing sent when sent by overnight delivery or five (5) days after havingbeen mailed,certified or registered, with postage prepaid:   **If to Employer** **If to Executive:**XO Communications, Inc. Wayne M. Rehberger11111 Sunset Hills Road At such address as shall be reflectedReston, VA 20190 in Employer’s payroll recordsFacsimile: 703-547-2025  Attention: General Counsel  
or/in the case of either such party, to such substitute address as such partymay designate from time to time for purposes of notices to be given to suchparty hereunder, which substitute address shall be designated as suchin awritten notice given to the other party addressed as aforesaid.
     19. Assignment. This Employment Agreement shall inure to the benefit ofExecutive and Employer and be binding upon the successors and generalassigns of Employer. This Employment Agreement shall not be assignable, except to theextent set forth in paragraph 22.
     20. Enforceability. In the event it is determined that this EmploymentAgreement is unenforceable in any respect, it is the mutual intent of theparties that it beconstrued to apply and be enforceable to the maximum extent permitted byapplicable law.
     21. Applicable Law. This Employment Agreement shall be construed andenforced in accordance with the laws applicable to contracts executed,delivered and fully to be performed in the State of Virginia.
     22. Beneficiaries: Executive’s Representative. Executive shall be entitledto select (and to change, from time to time, except to the extent prohibitedunder anyapplicable law) a beneficiary or beneficiaries to receive any payments,distributions orbenefits to be made or distributed hereunder upon or following Executive’sdeath. Anysuch designation shall be made by written notice to Employer. In the eventof Executive’s death or of a judicial determination of Executive’sincompetence, referencesin this Agreement to Executive shall be deemed, as appropriate, to referto hisdesignated beneficiary, to his estate or to his executor or personalrepresentative(“Executive’s Representative”) solely for the purpose of providing a clearmechanism forthe exercise of Executive’s rights hereunder in the case of Executive’sdeath or Permanent Disability.
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     IN WITNESS WHEREOF, the parties have executed this EmploymentAgreement to be effective on and as of the day and year first abovewritten.    XO COMMUNICATIONS, INC.