ex10-1



 




Exhibit 10.1


STOCK PURCHASE AGREEMENT


dated as of


January 15, 2002


among


XO Communications, Inc.,


Forstmann Little & Co. Equity Partnership VII, L.P.,


Forstmann Little & Co. Subordinated Debt and Equity Management Buyout Partnership VIII, L.P.


and


Teléfonos de México, S.A. de C.V.









 


TABLE OF CONTENTS




	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Page
	 	 	 	 	 	 	

	ARTICLE I	 	ISSUANCE AND SALE OF NEW COMMON SHARES; AMENDMENTS
	 	 	2	 
	 	 	
1.1.
	 	Issuance, Purchase and Sale
	 	 	2	 
	 	 	
1.2.
	 	The Closing; Deliveries
	 	 	2	 
	 	 	
1.3.
	 	Capitalized Terms
	 	 	3	 
	 
	ARTICLE II	 	REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	 	 	3	 
	 	 	
2.1.
	 	Organization; Subsidiaries
	 	 	3	 
	 	 	
2.2.
	 	Due Authorization
	 	 	4	 
	 	 	
2.3.
	 	Capitalization
	 	 	5	 
	 	 	
2.4.
	 	SEC Reports
	 	 	6	 
	 	 	
2.5.
	 	Financial Statements
	 	 	6	 
	 	 	
2.6.
	 	Absence of Certain Changes
	 	 	7	 
	 	 	
2.7.
	 	Litigation
	 	 	7	 
	 	 	
2.8.
	 	Consents; No Violations
	 	 	7	 
	 	 	
2.9.
	 	Communications Regulatory Matters
	 	 	8	 
	 	 	
2.10.
	 	Compliance with Laws
	 	 	9	 
	 	 	
2.11.
	 	Commitments
	 	 	9	 
	 	 	
2.12.
	 	Financial Advisory, Legal and Other Fees
	 	 	10	 
	 	 	
2.13.
	 	Taxes
	 	 	10	 
	 	 	
2.14.
	 	ERISA Compliance
	 	 	11	 
	 	 	
2.15.
	 	Intellectual Property; Technology
	 	 	13	 
	 	 	
2.16.
	 	Environmental Matters
	 	 	14	 
	 	 	
2.17.
	 	Insurance
	 	 	14	 
	 	 	
2.18.
	 	Business Combination and Takeover Statutes
	 	 	15	 
	 	 	
2.19.
	 	Offering of New Common Shares
	 	 	15	 
	 	 	
2.20.
	 	Network Facilities
	 	 	15	 
	 	 	
2.21.
	 	Disclosure
	 	 	16	 
	 	 	
2.22.
	 	Confidentiality
	 	 	16	 
	 
	ARTICLE III	 	REPRESENTATIONS AND WARRANTIES OF THE INVESTORS
	 	 	17	 
	 	 	
3.1.
	 	Acquisition for Investment
	 	 	17	 
	 	 	
3.2.
	 	Restricted Securities
	 	 	17	 
	 	 	
3.3.
	 	Accredited Investor
	 	 	17	 
	 	 	
3.4.
	 	Organization
	 	 	17	 
	 	 	
3.5.
	 	Due Authorization
	 	 	18	 
	 	 	
3.6.
	 	Consents; No Violations
	 	 	18	 
	 	 	
3.7.
	 	Availability of Funds
	 	 	19	 
	 	 	
3.8.
	 	Litigation
	 	 	19	 










 




	 	 	 	 	 	 	 	 	 
	 	 	
3.9.
	 	No Other Representations
	 	 	19	 
	 
	ARTICLE IV	 	COVENANTS
	 	 	19	 
	 	 	
4.1.
	 	Conduct of Business by the Company Pending the Closing
	 	 	19	 
	 	 	
4.2.
	 	Press Releases; Interim Public Filings
	 	 	22	 
	 	 	
4.3.
	 	HSR Act; Foreign Competition Filings
	 	 	22	 
	 	 	
4.4.
	 	Consents; Approvals
	 	 	22	 
	 	 	
4.5.
	 	Listing
	 	 	23	 
	 	 	
4.6.
	 	Board Representation; VCOC
	 	 	23	 
	 	 	
4.7.
	 	Amended and Restated Certificate of Incorporation
	 	 	24	 
	 	 	
4.8.
	 	Cooperation
	 	 	24	 
	 	 	
4.9.
	 	Access to Property; Records
	 	 	24	 
	 	 	
4.10.
	 	Reserve Shares
	 	 	25	 
	 	 	
4.11.
	 	Use of Proceeds
	 	 	25	 
	 	 	
4.12
	 	Restructuring
	 	 	25	 
	 	 	
4.13
	 	Notice of Proposal
	 	 	26	 
	 	 	
4.14
	 	Access to Certain Information
	 	 	26	 
	 	 	
4.15
	 	Limitation on Equity Sales
	 	 	26	 
	 	 	
4.16
	 	Alternative Investment Structure
	 	 	27	 
	 	 	
4.17
	 	Supplemental Schedules
	 	 	27	 
	 	 	
4.18
	 	Stockholders Agreement
	 	 	27	 
	 	 	
4.19
	 	Management Shares
	 	 	28	 
	 	 	
4.20
	 	Releases
	 	 	28	 
	 	 	
4.21
	 	Retention Bonus Plan Payments
	 	 	28	 
	 	 	
4.22
	 	Company’s Obligation Regarding Fees and Expenses
	 	 	28	 
	 
	ARTICLE V	 	CONDITIONS
	 	 	28	 
	 	 	
5.1.
	 	Conditions to Obligations of Each Investor and the Company
	 	 	28	 
	 	 	
5.2.
	 	Conditions to Obligations of Each Investor
	 	 	29	 
	 	 	
5.3.
	 	Conditions to Obligations of the Company
	 	 	33	 
	 
	ARTICLE VI	 	TERMINATION
	 	 	34	 
	 	 	
6.1.
	 	Termination
	 	 	34	 
	 	 	
6.2.
	 	Effect of Termination
	 	 	36	 
	 	 	
6.3
	 	Break-Up Payment
	 	 	36	 
	 
	ARTICLE VII	 	SURVIVAL AND LOSSES
	 	 	37	 
	 	 	
7.1.
	 	Survival
	 	 	37	 
	 	 	
7.2.
	 	Losses
	 	 	37	 
	 
	ARTICLE VIII	 	MISCELLANEOUS
	 	 	38	 
	 	 	
8.1.
	 	Defined Terms; Interpretations
	 	 	38	 
	 	 	
8.2.
	 	Fees and Expenses
	 	 	50	 
	 	 	
8.3.
	 	Restrictive Legends
	 	 	51	 










 





	 	 	 	 	 	 	 	 	 
	 	 	
8.4.
	 	Further Assurances
	 	 	51	 
	 	 	
8.5.
	 	Successors and Assigns
	 	 	51	 
	 	 	
8.6.
	 	Entire Agreement
	 	 	52	 
	 	 	
8.7.
	 	Notices
	 	 	52	 
	 	 	
8.8.
	 	Amendments
	 	 	54	 
	 	 	
8.9.
	 	Counterparts
	 	 	54	 
	 	 	
8.10.
	 	Headings
	 	 	54	 
	 	 	
8.11.
	 	Governing Law
	 	 	54	 
	 	 	
8.12.
	 	Submission to Jurisdiction
	 	 	54	 
	 	 	
8.13.
	 	Waiver Of Jury Trial
	 	 	54	 
	 	 	
8.14.
	 	Severability
	 	 	54	 




	 	 	 	 	 
	Exhibit A	 	
—
	 	New Capitalization
	Exhibit B	 	
—
	 	Stockholders Agreement
	Exhibit C	 	
—
	 	Registration Rights Agreement
	Exhibit D	 	
—
	 	Amended and Restated Certificate of Incorporation
	Exhibit E	 	
—
	 	Restated Bylaws
	Exhibit F	 	
—
	 	Contractual Management Rights Letter
	Exhibit G	 	
—
	 	Investor/Management Common Stock Terms
	Exhibit H	 	
—
	 	New Employee Stock Option Plan




 






























 




Execution Copy


STOCK PURCHASE AGREEMENT


                  STOCK PURCHASE AGREEMENT (this “Agreement”), dated as of January 15, 2002,
among XO Communications, Inc., a Delaware corporation (the “Company”),
Forstmann Little & Co. Equity Partnership VII, L.P., a Delaware limited
partnership (“Equity VII”), Forstmann Little & Co. Subordinated Debt and Equity
Management Buyout Partnership VIII, L.P., a Delaware limited partnership (“MBO
VIII” and together with Equity VII, “Forstmann Little”) and Teléfonos de
México, S.A. de C.V., sociedad anónima de capital variable organized under the
laws of the United Mexican States (“Telmex”; Forstmann Little and Telmex are
sometimes hereinafter referred to as the “Investors” and each is sometimes
referred to individually as an “Investor”).


W I T N E S S E T H :


                  WHEREAS, the Company desires to undertake the Restructuring (as
hereinafter defined) that will, among other things, result in the New
Capitalization (as hereinafter defined); and


                  WHEREAS, in connection with the Restructuring, the Investors desire to
make a significant investment in the Company; and


                  WHEREAS, to implement such investment, the Investors desire to purchase
from the Company, and the Company desires to issue and sell to the Investors,
upon the terms and subject to the conditions set forth herein, the New Common
Shares (as hereinafter defined) of the Company; and


                  WHEREAS, as an inducement to the Investors to enter into this Agreement,
the Investors and the Company shall, on or prior to the Closing (as hereinafter
defined), enter into a stockholders agreement in the form attached hereto as
Exhibit B (the “Stockholders Agreement”) setting forth certain rights and
obligations of the Investors and the Company; and


                  WHEREAS, as a further inducement to the Investors to enter into this
Agreement, the Investors and the Company shall, on or prior to the Closing,
enter into a registration rights agreement in the form attached hereto as
Exhibit C (the “Registration Rights Agreement”), in respect of the New Common
Shares and shares of Common Stock (as hereinafter defined) into which New
Common Shares may be convertible; and


                  WHEREAS, in order to effect the transactions contemplated by this
Agreement, the Company shall, on or prior to the Closing of the transactions
contemplated hereby, amend and restate its certificate of incorporation and
bylaws in the respective forms attached hereto as Exhibit D and Exhibit E,
respectively.


                  NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements set forth in this
Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree
as follows:









 


ARTICLE I


ISSUANCE AND SALE OF NEW COMMON SHARES; AMENDMENTS


                  1.1. Issuance, Purchase and Sale. Upon the terms and subject to the
conditions set forth herein, at the Closing: (a) the Company shall issue and
sell to Forstmann Little and Forstmann Little shall purchase from the Company
79,999,998 shares of the Company’s Class A Common Stock, par value $0.01 per
share (the “Class A Common Stock”), and two shares of the Company’s
to-be-designated Class D Common Stock, par value $0.01 per share, in each case
having the rights and preferences stated in the Amended and Restated
Certificate of Incorporation (as hereinafter defined) (the “Class D Common
Stock”), which shares of Class A Common Stock and Class D Common Stock shall
(subject to footnote no. 5 to Exhibit A) in the aggregate equal 40.00% of the
New Outstanding Equity (as hereinafter defined) (collectively, the “New
Forstmann Little Shares”); (b) the Company shall issue and sell to Telmex and
Telmex shall purchase from the Company 80,000,000 shares of the Company’s
to-be-designated Class C Common Stock, par value $0.01 per share, having the
rights and preferences stated in the Amended and Restated Certificate of
Incorporation (the “Class C Common Stock”), which Class C Common Stock shall
(subject to footnote no. 5 to Exhibit A) in the aggregate equal 40.00% of the
New Outstanding Equity (the “New Telmex Shares” and together with the New
Forstmann Little Shares, the “New Common Shares”); and (c) Telmex and Forstmann
Little shall each pay to the Company, by wire transfer of immediately available
funds, an aggregate purchase price of $400,000,000 in cash in United States
dollars (collectively, the amounts to be paid by all of the Investors pursuant
to this Section 1.1, the “Purchase Price”) in consideration for the New Common
Shares purchased by such Investor upon the Closing (collectively, the
“Investment”).


                  1.2. The Closing; Deliveries. (a) The closing of the purchase and sale
of the New Common Shares hereunder and the other transactions contemplated
hereby (the “Closing”) shall take place at the offices of Fried, Frank, Harris,
Shriver & Jacobson, One New York Plaza, New York, New York 10004, at a date
(the “Closing Date”) and time to be mutually agreed upon by the Company and the
Investors, which shall be at least three (3) but no more than thirty (30) days
after the date following the satisfaction or waiver by each Investor or the
Company, as appropriate, of all of the conditions set forth in Article V (other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of those conditions); provided,
however, that in the event the parties are not able mutually to agree on a
Closing Date in accordance with the immediately proceeding clause, the parties
agree that the Closing Date shall be on the thirtieth (30th) day following the
satisfaction or waiver of all of the conditions set forth in Article V (other
than those conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction or waiver of those conditions).


                  (b)  At the Closing, the Company shall deliver certificates to (i) Equity
VII and MBO VIII representing the New Forstmann Little Shares being purchased
by Equity VII and MBO VIII, respectively, each registered in the name of Equity
VII or its nominee or designee or MBO VIII or its nominee or designee in such
amounts as Equity VII or MBO VIII shall specify to the Company prior to the
Closing and (ii) Telmex representing the New Telmex Shares being purchased by
Telmex and registered in the name of Telmex or its nominee or designee in such
amounts as Telmex shall specify to the Company prior to the Closing. Delivery
of such


2






 


certificates to each Investor shall be made against receipt by the
Company of the portion of the Purchase Price payable by such Investor, which
shall be paid by wire transfer of immediately available funds to an account
designated at least three Business Days prior to the Closing Date by the
Company.


                  1.3. Capitalized Terms. Capitalized terms not otherwise defined herein
shall have the meanings ascribed to such terms in Section 8.1.


ARTICLE II


REPRESENTATIONS AND WARRANTIES OF THE COMPANY


                  The Company hereby represents and warrants to each Investor, as of the
date hereof and as of the Closing, as follows:


                  2.1. Organization; Subsidiaries. (a) The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has the requisite corporate power and authority to carry on its
business as it is now being conducted. The Company is duly qualified and
licensed as a foreign corporation to do business and is in good standing (and
has paid all relevant franchise or analogous taxes), in each jurisdiction where
the character of its assets owned or held under lease or the nature of its
business makes such qualification necessary except where the failure to be so
qualified or licensed would not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect.


                  (b)  Exhibit 21 to the Company’s Annual Report on Form 10-K for the year
ended December 31, 2000 (the “2000 10-K”) and Schedule 2.1(b)(i) together set
forth a complete and correct list as of the date hereof of each corporation,
limited liability company, partnership, business association or other Person
with respect to which the Company has, directly or indirectly, ownership of or
rights with respect to securities or other interests having the power to elect
a majority of such Person’s board of directors or analogous or similar
governing body, or otherwise having the power to direct the management,
business or policies of that corporation, limited liability company,
partnership, business association or other Person which is a “Significant
Subsidiary” as defined in Rule 1-02(w) of Regulation S-X (each, a “Significant
Subsidiary” and, collectively, the “Significant Subsidiaries”). Except as set
forth in Exhibit 21 to the 2000 10-K or on Schedule 2.1(b)(ii), as of the date
hereof (i) the Company owns, either directly or indirectly through one or more
Subsidiaries, all of the capital stock or other equity interests of the
Significant Subsidiaries free and clear of all Encumbrances, other than
Permitted Encumbrances, and (ii) there are no outstanding subscription rights,
options, warrants, convertible or exchangeable securities or other rights of
any character whatsoever relating to issued or unissued capital stock or other
equity interests of any Significant Subsidiary, or any Commitments of any
character whatsoever relating to issued or unissued capital stock or other
equity interests of any Significant Subsidiary or pursuant to which any
Significant Subsidiary is or may become bound to issue or grant additional
shares of its capital stock or other equity interests or related subscription
rights, options, warrants, convertible or exchangeable securities or other
rights, or to grant preemptive rights. Except for any Subsidiaries which are
not Significant Subsidiaries, all of which (other than those wholly owned
Subsidiaries that do not engage in any material business activities or hold any
material assets) are set forth on Schedule


3






 


2.1(b)(iii), and except as set forth
in Exhibit 21 to the 2000 10-K or on Schedule 2.1(b)(iv), as of the date hereof
the Company does not own, directly or indirectly, any interest in any
corporation, limited liability company, partnership, business association or
other Person.


                  (c)  Except as would not have a Material Adverse Effect, each Subsidiary is
a corporation or limited liability company duly organized, validly existing and
in good standing (in jurisdictions where such concept is recognized) under the
laws of the jurisdiction of its organization and has the requisite corporate
power and authority to carry on its business as it is now being conducted.
Each Subsidiary of the Company is duly qualified and licensed as a foreign
corporation or other business entity to do business and is in good standing
(and has paid all relevant franchise or analogous taxes), in each jurisdiction
where the character of its assets owned or held under lease or the nature of
its business makes such qualification necessary and where the failure to be so
qualified or licensed would not individually or in the aggregate reasonably be
expected to have a Material Adverse Effect.


                  2.2. Due Authorization. The Company has all right, corporate power and
authority to enter into this Agreement and each of the other Transaction
Documents to which it is a party, subject to approval of the Bankruptcy Court,
if applicable, and to consummate the transactions contemplated hereby and
thereby. The execution and delivery by the Company of this Agreement and each
of the other Transaction Documents to which it is a party is, and the issuance,
sale and delivery of the New Common Shares by the Company and the compliance by
the Company with each of the provisions of this Agreement and each of the other
Transaction Documents to which it is a party (including the reservation and
issuance of the Conversion Shares after giving effect to the consummation by
the Company of the transactions contemplated hereby) will, upon the
effectiveness of the Amended and Restated Certificate of Incorporation, be (a)
within the corporate power and authority of the Company, and (b) have been duly
authorized by all requisite corporate and other action of the Company. At the
time of the Closing, the Confirmation Order and the Bankruptcy Plan, if
applicable, shall have directed and authorized the Company to have filed the
Amended and Restated Certificate of Incorporation, and the Amended and Restated
Certificate of Incorporation shall authorize a number of shares of Class A
Common Stock, Class C Common Stock and Class D Common Stock at least equal to
the number of shares of New Common Shares to be issued to the Investors
pursuant to the terms of this Agreement plus the Conversion Shares. This
Agreement has been, and each of the other Transaction Documents to which the
Company is a party when executed and delivered by the Company will be, duly and
validly executed and delivered by the Company, and this Agreement constitutes,
and each of such other Transaction Documents when executed and delivered by the
Company will constitute, a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, except as such
enforcement is limited by bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors’ rights generally and for limitations
imposed by general principles of equity. The Conversion Shares will have been
validly reserved for issuance at the Closing, and upon such issuance, will be
duly authorized and validly issued and outstanding, fully paid and
nonassessable. The Company has taken all action necessary to waive, and by its
execution hereof does hereby waive, the provisions of Section 4.16 of the 1999
Stock Purchase Agreement and Section 4.16 of the 2000 Stock Purchase Agreement
to the extent necessary to permit each Investor to consummate the transactions
contemplated by this Agreement and the other Transaction Documents. The terms,
designations, powers, preferences and relative participation, optional and
other special rights, qualifications,


4






 


limitations and restrictions of the Class
C Common Stock and the Class D Common Stock shall be as set forth in the
Amended and Restated Certificate of Incorporation. The New Common Shares, when
issued and delivered in accordance with the terms of this Agreement, will be
duly authorized and validly issued and outstanding, fully paid and
nonassessable, free and clear of any Encumbrances and not subject to the
preemptive or other similar rights of any stockholders of the Company, other
than as contemplated by this Agreement and the other Transaction Documents.


                  2.3. Capitalization. As of January 11, 2002, the authorized capital stock
of the Company consists of (a) 1,000,000,000 shares of Class A Common Stock,
par value $0.02 per share, of which 337,774,204 shares are issued and
outstanding, with any increase since that date being attributable solely to (i)
the exercise of outstanding employee stock options and purchases under employee
stock plans set forth on Schedule 2.3 and (ii) the other transactions described
on Schedule 2.3; (b) 120,000,000 shares of Class B Common Stock, par value
$0.02 per share (the “Class B Common Stock”, and together with the Class A
Common Stock, the “Common Stock”), of which 104,423,158 shares are issued and
outstanding, with any changes in the number of such issued and outstanding
shares of Class B Common Stock resulting solely from the conversion of shares
of Class B Common Stock into shares of Class A Common Stock, and (c) 25,000,000
shares of Preferred Stock, par value $0.01 per share, of which (i) 10,961,885
shares are issued and outstanding as 14% Series A Senior Exchangeable
Redeemable Preferred Shares (the “Series A Preferred Stock”), (ii) 1,768,695
shares are issued and outstanding as the 61/2% Series B Cumulative
Convertible Preferred Stock (the “Series B Preferred Stock”), (iii) 584,375
shares are issued and outstanding as the Series C Cumulative Convertible
Participating Preferred Stock (the “Series C Preferred Stock”), (iv) 265,625
shares are issued and outstanding as the Series D Convertible Participating
Preferred Stock (the “Series D Preferred Stock”), (v) 238,070 shares are issued
and outstanding as the 131/2% Series E Senior Redeemable Exchangeable
Preferred Stock due 2010 (the “Series E Preferred Stock”), (vi) 58,125 shares
are issued and outstanding as the 7% Series F Convertible Redeemable Preferred
Stock (the “Series F Preferred Stock”), (vii) 268,750 shares are issued and
outstanding as the Series G Cumulative Convertible Participating Preferred
Stock (the “Series G Preferred Stock”) and (viii) 131,250 shares are issued and
outstanding as the Series H Convertible Participating Preferred Stock (the
“Series H Preferred Stock” and, together with the Series A Preferred Stock, the
Series B Preferred Stock, the Series C Preferred Stock, the Series D Preferred
Stock, the Series E Preferred Stock, the Series F Preferred Stock, and the
Series G Preferred Stock, the “Preferred Stock”), with any changes in the
number of such issued and outstanding shares of Preferred Stock resulting
solely from the conversion of shares of Preferred Stock into shares of Class A
Common Stock. As of the Closing, after giving effect to the Investment and the
Restructuring, the authorized capital stock of the Company shall be as set
forth in the Amended and Restated Certificate of Incorporation (as revised
pursuant to Section 4.19) and the complete capitalization of the Company shall
be the New Capitalization, including the New Forstmann Little Shares, the New
Telmex Shares and the Management Shares, but excluding shares of Class A Common
Stock to be issued upon the exercise of options issued under the New Employee
Stock Option Plan. All of the issued and outstanding shares of Common Stock
and Preferred Stock have been duly authorized and are validly issued and
outstanding, fully paid and nonassessable. Except as provided in the 1999
Stock Purchase Agreement or the 2000 Stock Purchase Agreement, no shares of
capital stock of the Company are entitled to preemptive or similar rights.
Except as set forth on Schedule 2.3, as of the date hereof, there are no
outstanding subscription rights, options, warrants, convertible or


5






 


exchangeable
securities or other rights of any character whatsoever relating to issued or
unissued capital stock of the Company, or any Commitments of any character
whatsoever relating to issued or unissued capital stock of the Company or
pursuant to which the Company or any of the Subsidiaries is or may become bound
to issue or grant additional shares of its capital stock or related
subscription rights, options, warrants, convertible or exchangeable securities
or other rights, or to grant preemptive rights. Except as set forth on
Schedule 2.3 or as contemplated by this Agreement and the other Transaction
Documents, as of the date hereof, (a) the Company has not agreed to register
any securities under the Securities Act or under any state securities law or
granted registration rights to any Person or entity and (b) there are no voting
trusts, stockholders agreements, proxies or other Commitments or understandings
in effect to which the Company is a party or of which it has Knowledge with
respect to the voting or transfer of any of the outstanding shares of Common
Stock or Preferred Stock.


                  2.4. SEC Reports. Except as set forth on Schedule 2.4, since December 31,
1998, the Company, or its predecessor, has timely filed all proxy statements,
reports and other documents required to be filed by it under the Exchange Act.
The Company has made available to each Investor complete copies of all annual
reports, quarterly reports, proxy statements and other reports filed by the
Company under the Exchange Act, each as filed with the SEC (collectively, the
“SEC Reports”). Except as set forth on Schedule 2.4, each SEC Report was on
the date of its filing, in compliance in all material respects with the
requirements of its respective report form and the Exchange Act and did not, on
the date of filing, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.


                  2.5. Financial Statements. The consolidated financial statements of the
Company (including any related schedules and/or notes) included in the SEC
Reports, have been prepared in accordance with United States generally accepted
accounting principles (“GAAP”) consistently followed throughout the periods
involved (except as may be indicated in the notes thereto) and fairly present
in accordance with GAAP the consolidated financial condition, results of
operations, cash flows and changes in stockholders’ equity of the Company and
the Subsidiaries as of the respective dates thereof and for the respective
periods then ended (in each case subject, as to interim statements, to the
absence of footnotes and as permitted by Form 10-Q and subject to changes
resulting from year-end adjustments, none of which are material in amount or
effect). Except as set forth on Schedule 2.5 or disclosed in the SEC Reports,
neither the Company nor any Subsidiary has any liability or obligation (whether
accrued, absolute, contingent, unliquidated or otherwise, whether known or
unknown, whether due or to become due and regardless of when asserted), except
(a) liabilities and obligations in the respective amounts reflected or reserved
against in the unaudited consolidated balance sheet of the Company and the
Subsidiaries as of September 30, 2001 or (b) liabilities and obligations
incurred in the ordinary course of business since September 30, 2001 which
individually or in the aggregate would not reasonably be expected to have a
Material Adverse Effect.


6






 


                  2.6. Absence of Certain Changes. Except as set forth on Schedule 2.6 or
as disclosed in the SEC Reports or as contemplated by this Agreement or any of
the other Transaction Documents, since September 30, 2001, neither the Company
nor any of the Subsidiaries has suffered any change, event or development or
series of changes, events or developments which individually or in the
aggregate has had or would reasonably be expected to have a Material Adverse
Effect or an adverse effect on the ability of the Company to perform its
obligations under this Agreement or any of the Transaction Documents.


                  2.7. Litigation. (a) Except (i) as set forth on Schedule 2.7(a) or (ii)
as disclosed in the SEC Reports, there is no claim, action, suit, investigation
or proceeding of any kind or nature whatsoever (“Litigation”) pending or, to
the Knowledge of the Company, threatened against the Company or any of the
Subsidiaries or involving any of their respective properties or assets by or
before any court, arbitrator or other Governmental Entity which (i) in any
manner challenges or seeks to prevent, enjoin, alter or materially delay the
transactions contemplated by this Agreement or any of the other Transaction
Documents or (ii) if resolved adversely to the Company or a Subsidiary would
reasonably be expected to have a Material Adverse Effect.


                  (b)  Except as set forth on Schedule 2.7(b) or as disclosed in the SEC
Reports, neither the Company nor any of the Subsidiaries is in default under or
in breach of any order, judgment or decree of any court, arbitrator or other
Governmental Entity, and neither the Company nor any of the Subsidiaries is a
party or subject to any order, judgment or decree of any court, arbitrator or
other Governmental Entity which, in either case, would reasonably be expected
to have a Material Adverse Effect.


                  2.8. Consents; No Violations. Except as set forth on Schedule 2.8(a),
neither the execution, delivery or performance by the Company of this Agreement
or any of the other Transaction Documents to which the Company is a party nor
the consummation of the transactions contemplated hereby or thereby will: (a)
conflict with, or result in a breach or a violation of, any provision of the
certificate of incorporation or bylaws or other organizational documents of the
Company or any of the Subsidiaries including, without limitation, any of the
provisions of the certificates of designation for the Preferred Stock; (b)
constitute, with or without notice or the passage of time or both, a breach,
violation or default, create an Encumbrance, other than Permitted Encumbrances,
or give rise to any right of termination, modification, cancellation,
prepayment, suspension, limitation, revocation or acceleration, under (i) any
Law or (ii) any provision of any agreement or other instrument to which the
Company or any of the Subsidiaries is a party or pursuant to which any of them
or any of their assets or properties is subject, except, with respect to the
matters set forth in this clause (ii), for breaches, violations, defaults,
Encumbrances, other than Permitted Encumbrances, or rights of termination,
modification, cancellation, prepayment, suspension, limitation, revocation or
acceleration, which, individually or in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect or adversely affect the ability
of the Company to perform its obligations under this Agreement or any of the
Transaction Documents to which it is a party; (c) except for the (i) filing of
the Amended and Restated Certificate of Incorporation with the Secretary of
State of the State of Delaware, (ii) any required filings under the HSR Act,
the Exchange Act or the Securities Act, (iii) the Regulatory Approvals, (iv)
the Required Consents, (v) the Confirmation Order, if applicable, (vi) the
Break-Up Payment Order, if applicable, and (vii) any consents of


7






 


third parties
required under any agreement or other instrument to which the Company or any of
the Subsidiaries is a party or pursuant to which any of them or any of their
material assets or properties is subject, all of which are set forth on
Schedule 2.8(b) (the “Third Party Consents”), require any consent, approval or
authorization of, notification to, filing with, or exemption or waiver by, any
Governmental Entity or any other Person on the part of the Company or any of
the Subsidiaries.


                  2.9. Communications Regulatory Matters. (a) Except as set forth on
Schedule 2.9(a), as of the date hereof and as of the Closing, the Company has
all licenses, permits, certificates, franchises, consents, waivers,
registrations or other regulatory authorizations from each Governmental Entity
that regulates telecommunications in each applicable jurisdiction, including
without limitation, (i) the State PUCs (together with any renewals, extensions,
or modifications thereof and any additions thereto made as of the Closing Date,
the “State Licenses”); (ii) the appropriate foreign Governmental Entities
(together with any renewals, extensions, or modifications thereof and any
additions thereto made as of the Closing Date, the “Foreign Licenses”); (iii)
the appropriate municipal Governmental Entities (together with any renewals,
extensions, or modifications thereof and any additions thereto made as of the
Closing Date, the “Local Authorizations”) and (iv) the FCC (together with any
renewals, extensions or modifications thereof and any additions thereto made as
of the Closing Date, the “FCC Licenses”) that are required for the conduct of
its business as presently conducted, except where the failure to hold such
Communications Licenses (as herein defined) would not reasonably be expected
to, individually or in the aggregate, result in a Material Adverse Effect. The
FCC Licenses, Foreign Licenses, Local Authorizations and the State Licenses are
hereafter collectively referred to as the “Communications Licenses”. All of
the Communications Licenses other than the Local Authorizations are set forth
in Schedule 2.9(b).


                  (b)  Other than Communications Licenses the loss of which would not
reasonably be expected, individually or in the aggregate, to result in a
Material Adverse Effect, each of the Communications Licenses was duly issued,
is valid and in full force and effect, has not been suspended, canceled,
revoked or modified in any materially adverse manner and is not subject to
conditions or requirements that are not generally imposed on such
authorizations.


                  (c)  Except as would not reasonably be expected to, individually or in the
aggregate, result in a Material Adverse Effect, (i) each holder of a
Communications License has operated in compliance with all terms thereof; and
(ii) each holder of a Communications License is in compliance with, and the
conduct of its business has been and is in compliance with, the Communications
Act and any applicable state or local regulations, and each such holder has
filed all registrations and reports and paid all required fees, including any
renewal applications, required by the Communications Act, any non U.S. laws or
regulations or any applicable state or local regulations. Except as would not
reasonably be expected to, individually or in the aggregate, result in a
Material Adverse Effect, (x) there is no pending or, to the Knowledge of the
Company, threatened action by or before the FCC, any State PUC, any municipal
Governmental Entity or any foreign Governmental Entity to revoke, cancel,
suspend, modify or refuse to renew any of the Communications Licenses, and (y)
except as set forth in Schedule 2.9(c)(ii), there is not now issued,
outstanding or, to the Knowledge of the Company, threatened, any notice by the
FCC, any State PUC, any municipal Governmental Entity or any foreign
Governmental Entity of any violation or complaint, or any application,
complaint, or proceeding


8






 


(other than applications, proceedings, or complaints
that generally affect the Company’s industry as a whole) relating to the
business or operations of the Company or any Subsidiary.


                  (d)  Except as set forth in Schedule 2.9(d) or as would not reasonably be
expected, individually or in the aggregate, to result in a Material Adverse
Effect, no event has occurred which permits the revocation or termination of
any of the Communications Licenses or the imposition of any restriction
thereon, or that would prevent any of the Communications Licenses from being
renewed on a routine basis or in the ordinary course.


                  (e)  None of the execution, delivery or performance of this Agreement or
any of the other Transaction Documents by the Company, nor the consummation of
the transactions contemplated hereby or thereby will result in any revocation,
cancellation, suspension or material modification of any Communications
Licenses or give rise to the right of any Governmental Entity to take any such
action or to fail to renew any Communications License.


                  2.10. Compliance with Laws. Except as set forth on Schedule 2.10 or as
disclosed in the SEC Reports, the Company and the Subsidiaries are in
compliance with all Laws, and neither the Company nor any Subsidiary has
received any notice of any alleged violation of Law applicable to it that would
reasonably be expected to have a Material Adverse Effect. In addition to the
Communications Licenses, the Company holds all other licenses, franchise
permits, consents, registrations, certificates, and other governmental or
regulatory permits, authorizations or approvals required for the operation of
the business as presently conducted and for the ownership, lease or operation
of the Company’s and its Subsidiaries’ properties (collectively, “Licenses”),
except as would not reasonably be expected, individually or in the aggregate,
to result in a Material Adverse Effect. Except as set forth on Schedule 2.10
or as would not reasonably be expected, individually or in the aggregate, to
result in a Material Adverse Effect, the Company and the Subsidiaries have all
Licenses, and all of such Licenses are valid and in full force and effect, and
the Company and the Subsidiaries have duly performed and are in compliance with
all of their obligations under such Licenses.


                  2.11. Commitments. The 2000 10-K (as supplemented by Schedule 2.11(a))
discloses or lists as of the date hereof each binding contract, agreement,
understanding, arrangement and commitment of any nature whatsoever, whether
written or oral, including all amendments thereof and supplements thereto
(“Commitments”) of the following types to which the Company or any Subsidiary
is a party or by or to which the Company or any Subsidiary or any of their
properties may be bound or subject: (a) Commitments containing covenants
purporting to limit the freedom of the Company or any Subsidiary to compete in
any line of business in any geographic area or to hire any individual or group
of individuals that would individually or in the aggregate have a Material
Adverse Effect; (b) written Commitments relating to planned or in process
capital expenditures or other purchases in excess of $20,000,000; (c)
Commitments relating to indentures, mortgages, promissory notes, loan
agreements, guarantees, letters of credit or other agreements or instruments of
the Company or any Subsidiary involving indebtedness in amounts in excess of
$20,000,000; (d) written Commitments relating to the acquisition or disposition
of any operating business or the capital stock of any Person in each case
having a purchase price in excess of $10,000,000 that has not been consummated
or that has been consummated but contains representations, warranties,
covenants, guarantees, indemnities or other obligations that remain in effect;
(e) Commitments in


9






 


respect of any joint venture, partnership or other similar
arrangement, but not including any subsidiaries, in each case involving a
Commitment of future capital of $10,000,000 on the part of the Company; (f)
except for performance bonds and sales, use and income taxes, Commitments with
any Governmental Entity involving reasonably contemplated annual payments by
the Company or any subsidiaries in excess of $7,500,000; (g) Commitments
relating to interconnection agreements with local carriers and Commitments with
resellers (1) involving payments in 2001, or reasonably expected to involve
payments in 2002, in each case in excess of $5,000,000 or (2) with any regional
Bell operating company; and (h) Commitments with customers under which the
customer is obligated to purchase communications services to the extent such
Commitments involve expected payments to the Company in 2002 in excess of
$30,000,000. Except as set forth on Schedule 2.11(b) or as would not
reasonably be expected to have a Material Adverse Effect, neither the Company
nor any of its Subsidiaries are in breach of any Commitment, to the Knowledge
of the Company, no other party to a Commitment is in breach thereof or intends
to cancel, terminate or refuse to renew such Commitment or to exercise or
decline to exercise any option or right thereunder and the Commitments remain
valid and binding in accordance with their terms.


                  2.12. Financial Advisory, Legal and Other Fees. As of the date hereof, no
agent, broker, accounting firm, investment bank, other financial advisor,
commercial bank, other financial institution, law firm, public relations firm
or any other Person is or will be entitled to any fee, commission, expense or
other amount from the Company or any of the Subsidiaries in connection with any
of the transactions contemplated by this Agreement or the other Transaction
Documents except for (i) the fees of Houlihan, Lokey, Howard & Zukin Capital,
Jeffries & Co. and PricewaterhouseCoopers LLP, (1) the bases of which have been
disclosed to the Investors, (2) which have been calculated assuming the
successful completion of the transactions contemplated hereby, including the
New Capitalization, and (3) which do not and will not in the aggregate total
more than $30.0 million, and (ii) the fees, commissions, expenses and other
amounts accrued through the date hereof and paid or payable to all other such
Persons, which do not in the aggregate total more than $5.0 million (taking
into account any amount saved if any of the aforementioned advisors is
replaced); provided that the amounts referred to in clauses (i) and (ii) above
shall (A) include any and all fees, expenses and other amounts (including,
without limitation, legal fees and expenses, but excluding amounts paid to
settle Litigation or as judgments or other awards in connection with
Litigation) not covered by liability or other insurance and payable by the
Company or any Subsidiary in connection with any Litigation brought by
stockholders of the Company or derivatively on behalf of, or in the name of,
the Company related to the Company, its business, its governance, its
securities regulatory disclosure practices, the purchase or sale of any of the
Company’s equity or debt securities, the Investment or the Restructuring
Transaction and (B) exclude (1) the Company’s obligations to pay Expenses
pursuant to Section 8.2 and (2) any and all fees (but not reimbursable
expenses, including, without limitation, fees and expenses of counsel) paid or
payable to any commercial bank or any other financial institution in connection
with any amendments to the Bank Credit Facility or entering into the Amended
Bank Credit Facility.


                  2.13. Taxes. (a) Except as set forth in Schedule 2.13(a), (i) the
Company and each Subsidiary of the Company has (or will have by the Closing
Date) timely filed all material Tax Returns required to be filed by any of
them, and all Tax Returns are correct and complete in all material respects;
(ii) all material Taxes of the Company and the Subsidiaries have been paid


10






 


or
adequate reserves for such Taxes have been established in the financial
statements included in the most recent SEC Report; and (iii) the Company and
each Subsidiary of the Company has either withheld and paid over to the
relevant taxing authority or set aside in accounts for such purpose amounts
sufficient to pay all material Taxes required to have been withheld and paid in
connection with payments to employees, independent contractors, creditors,
stockholders or other third parties.


                  (b)  Except as set forth in Schedule 2.13(b), (i) there are no material
Encumbrances for Taxes upon the assets of the Company or any subsidiary of the
Company except Encumbrances for Taxes not yet due; (ii) there are no material
outstanding deficiencies for any Taxes threatened, proposed, asserted or
assessed in writing against the Company or any Subsidiary of the Company which
are not adequately provided for in the financial statements included in the
most recent SEC Report; (iii) no Taxes or Tax Returns of the Company or any
Subsidiary of the Company are currently under audit or examination or subject
to any other administrative or judicial proceedings by any taxing authority;
(iv) the statutes of limitation for the assessment of federal income Taxes
filed by the Company and each Subsidiary for all periods through and including
1996 have expired; (v) none of the Company or any Subsidiary of the Company has
been a member of an “affiliated group” (within the meaning of Section 1504(a)
of the Code), or any similar affiliated, combined or consolidated group for
state, local or foreign Tax purposes (other than a group the common parent of
which is the Company), or has any liability for the Taxes of any person (other
than the Company or any subsidiary of the Company) under Treasury Regulation
Section 1.1502-6 or any similar provision of state, local or foreign law or as
a transferee, successor, by contract or otherwise; (vi) neither the Company nor
any Subsidiary of the Company is a party to any Tax sharing, Tax indemnity or
other agreement or arrangement with respect to Taxes with any entity not
included in the financial statements included in the SEC Reports; (vii) to the
Knowledge of the Company, no claim involving material amounts has been made by
any taxing authority in any jurisdiction where the Company or any Subsidiary of
the Company does not file Tax Returns that the Company or such Subsidiary of
the Company is or maybe subject to taxation by that jurisdiction; and (viii)
no agreement or other document waiving, extending, or having the effect of
waiving or extending the statute of limitations, the period of assessment or
collection of any material Taxes on the Company or any Subsidiary of the
Company and no power of attorney with respect to any such Taxes, has been filed
with any governmental authority which waiver, extension or power of attorney is
currently in effect.


                  (c)  The Company is not a “U.S. real property holding company” as defined
in Section 897 of the Code.


                  2.14. ERISA Compliance. (a) Absence of Changes in Plans. Schedule
2.14(a)(i) contains a complete and correct list, as of the date hereof, of (i)
all Plans, as amended, that consist of material severance and employment
agreements of the Company or the Subsidiaries with their respective current
employees and their respective officers, or directors, (ii) all Plans, as
amended, that consist of material severance programs, policies and practices of
each of the Company and each of the Subsidiaries, (iii) any Plans that contain
change of control provisions, including in all cases any and all amendments
entered on or prior to the date hereof, and (iv) all other material Plans.
Except as set forth in Schedule 2.14(a)(ii) or in the documents set forth in
Schedule 2.14(a)(i), since January 1, 2001, until the date hereof, there has
not been


11






 


(x)  any adoption of or amendment to, written interpretation of or
announcement of a modification of, any Plan by the Company or any of the
Subsidiaries, (y) any material change in any actuarial or other assumptions
used to calculate funding obligations thereunder (if applicable), or (z) any
change in the manner in which contributions, eligibility for benefits or
participation are determined thereunder, in the case of each of (x) through (z)
that, individually or in the aggregate, would result in a material increase in
the Company’s or the Subsidiaries’ liabilities thereunder.


                  (b)  With respect to each Plan, no event has occurred and there exists no
condition or set of circumstances in connection with which the Company or any
of the Subsidiaries would be subject to any liability under ERISA, the Code or
any other applicable law that, individually or in the aggregate, would have, or
would reasonably be expected to result in, a Material Adverse Effect.


                  (c)  Except as would not have a Material Adverse Effect, each Plan has been
administered in accordance with its terms, and each of the Plans (and any
related trust) has been operated and is in compliance with the applicable
provisions of ERISA, the Code and all other applicable laws. Except as set
forth on Schedule 2.14(c), each Plan which is an “employee pension benefit
plan,” as defined in Section 3(2) of ERISA, which is intended to be qualified
under Section 401(a) of the Code is so qualified and has been determined by the
IRS to be so qualified. Except as would not result, individually or in the
aggregate, in material liability, each Plan which is primarily subject to the
laws of a jurisdiction outside of the United States is in good standing with
applicable regulatory authorities.


                  (d)  Neither the Company, nor any ERISA Affiliate nor any of the
Subsidiaries has incurred any material unsatisfied liability under Title IV of
ERISA in connection with any Plan and, to the knowledge of the Company, no
condition exists that presents a material risk to the Company, any ERISA
Affiliate or any Subsidiary of incurring any such liability. No Plan has
incurred an “accumulated funding deficiency” within the meaning of Section 302
of ERISA or Section 412 of the Code, whether or not waived.


                  (e)  As of the date hereof, except as set forth in Schedule 2.14(e), no
Plan (i) is subject to Title IV of ERISA; (ii) is a “multiemployer plan” within
the meaning of Section 3(37) of ERISA; (iii) is a “multiple employer plan”
within the meaning of Section 413(c) of the Code; or (iv) is or at any time was
funded through a “welfare benefit fund” within the meaning of Section 419(e) of
the Code and no benefits under a Plan are or at any time have been provided
through a voluntary employees’ beneficiary association within the meaning of
Section 501(c)(9) of the Code or a supplemental unemployment benefit plan
within the meaning of Section 501(c)(17) of the Code.


                  (f)  None of the Company or any of the Subsidiaries has any material
liability for unpaid contributions with respect to any Plan, each of them has
made all required contributions under each Plan for all prior periods (except
contributions that are not, individually or in the aggregate, material), and
proper accruals relating to each Plan have been made and are appropriately
reflected on the books of the Company.


12






 


                  (g)  Except as set forth on Schedule 2.14(g), no Plan provides medical
benefits (whether or not insured), with respect to current or former employees
after retirement or other termination of service (other than (x) coverage
mandated by statute or (y) benefits the full cost of which is borne by the
current or former employee).


                  (h)  Except as set forth in Schedule 2.14(h), amounts payable under each
Plan are, in all material respects, deductible for federal income Tax purposes.
Except as set forth in Schedule 2.14(h) or as expressly contemplated by this
Agreement and subject to the limitations provided in Section 5.2(p), the
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents will not, either alone or in combination with another
event, (i) entitle any current or former employee, agent, independent
contractor or officer of the Company or any Subsidiary to severance pay,
unemployment compensation or any other payment, (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such
employee, agent, independent contractor or officer, (iii) constitute a “change
in control” causing a material increase or acceleration of benefits under any
Plan, (iv) result in any payment or benefit that will be characterized as an
“excess parachute payment” within the meaning of Section 280G(b)(1) of the Code
or (v) result in any material loss of deduction for federal income Tax
purposes.


                  (i)  There is no pending or, to the Knowledge of the Company, threatened
(i) assessment, complaint, proceeding, or investigation of any kind in any
court or government agency with respect to any Plan (other than routine claims
for benefits) or (ii) litigation relating to the employment or termination of
employment of any current or former employee of the Company or any of its
Subsidiaries, in each case except as would not be reasonably likely to,
individually or in the aggregate, result in a Material Adverse Effect.


                  (j)  The Company and the Subsidiaries are and have been in compliance in
all material respects with all applicable federal, state and local laws, rules
and regulations (domestic and foreign) respecting employment, employment
practices, labor, terms and conditions of employment and wages and hours, in
each case, with respect to employees. Except as set forth on Schedule 2.14(j),
neither the Company nor any of the Subsidiaries is a party to or bound by any
collective bargaining agreement or other labor union contract. No work
stoppage or labor strike by employees is pending or threatened; neither the
Company nor any of the Subsidiaries is involved in or threatened with any labor
dispute, grievance or litigation relating to labor matters, in each case that
is material to the Company; and no organizational effort or other activity the
purpose of which is to achieve representation of employees has been threatened
or is ongoing.


                  2.15. Intellectual Property; Technology. Except as would not have a
Material Adverse Effect or except as set forth in Schedule 2.15, (a) to the
Knowledge of the Company, the conduct of the business of the Company and the
Subsidiaries as currently conducted does not infringe upon or misappropriate
the Intellectual Property rights of any third party, and no claim has been
asserted to the Company that the conduct of the business of the Company and the
Subsidiaries as currently conducted infringes upon the Intellectual Property
rights of any third party; (b) with respect to each item of Intellectual
Property owned by the Company or a Subsidiary of the Company and used in
connection with its business as currently conducted (“Company Owned
Intellectual Property”), the Company or such Subsidiary of the Company owns
such Company Owned Intellectual Property free and clear of all Encumbrances,
other than


13






 


Permitted Encumbrances; (c) with respect to each item of
Intellectual Property licensed to the Company or a Subsidiary of the Company
(“Company Licensed Intellectual Property”), the Company or such Subsidiary has
the right to use such Company Licensed Intellectual Property in the continued
operation of its respective business pursuant to the terms of the license
agreement governing the use of such Company Licensed Intellectual Property; (d)
the Company Owned Intellectual Property has not been adjudged invalid or
unenforceable in whole or in part; (e) to the Knowledge of the Company, no
person is engaging in any activity that infringes upon the Company Owned
Intellectual Property; (f) each license governing the use of the Company
Licensed Intellectual Property is valid and enforceable, is binding (except as
may be limited by bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or similar laws of general applicability affecting or relating to
the rights of creditors or by general principles of equity) on the Company or
its Subsidiary and, to the Knowledge of the Company, all other parties to such
license, and is in full force and effect; (g) neither the Company nor any
subsidiary is, and, to the knowledge of the Company, no other party to any
license of the Company Licensed Intellectual Property is in breach thereof or
default thereunder; and (h) neither the execution of this Agreement nor the
consummation of the transactions contemplated hereby shall adversely affect any
of the Company’s rights with respect to the Company Owned Intellectual Property
or the Company Licensed Intellectual Property.


                  2.16. Environmental Matters. Except as described in Schedule 2.16, or as
would not reasonably be expected to have a Material Adverse Effect, (a) the
Company and the Subsidiaries have at all times complied with all applicable
Environmental Laws, including compliance with all Environmental Permits and
authorizations required pursuant to all applicable Environmental Laws; (b) the
Company and the Subsidiaries are not the subject of any litigation related to
any Environmental Law with respect to any of the current or past operations of
the Company or any of the Subsidiaries, or any of the currently or formerly
owned, leased or used property or assets of the Company or any of the
Subsidiaries; (c) the Company has no liability relating to, and neither the
Company nor any of the Subsidiaries, nor, to the Knowledge of the Company, any
other Person, has caused or taken any action that will result in any liability
or obligation on the part of the Company or any of the Subsidiaries relating to
(x) the environmental conditions on, under, or about the real property or other
properties or assets currently or formerly owned, leased, operated or used by
the Company or any of the Subsidiaries or (y) the past or present use,
management, handling, transport, treatment, generation, storage, disposal, or
release of any Hazardous Materials; and (d) neither the Company nor any of the
Subsidiaries is subject to any outstanding order from, or contractual or other
obligation with, or to its Knowledge, investigation by, any Governmental Entity
or other person in respect of which the Company or any of the Subsidiaries may
be required to incur costs arising from the release or threatened release of a
Hazardous Material.


                  2.17. Insurance. Schedule 2.17 contains a complete and correct list and
description (including the name of the insurer(s), name of the insured(s),
amount of coverage, type of coverage, deductible amounts and significant
exclusions) of all material insurance policies maintained (including directors’
and officers’ liability insurance) by or on behalf of the Company and the
Subsidiaries, including policies that have expired (the “Expired Policies”) but
have been renewed by the Company but in respect of which the Company has not
yet received a new policy (the “Replacement Policies”); provided, that any
Replacement Policy shall not contain any significant exclusions that are
materially more adverse to the Company than those


14






 


contained in the Expired
Policy. The Company has made available to each Investor complete and correct
copies of all such policies together with all riders and amendments thereto.
Such policies are valid and in full force and effect, and all premiums due
thereon have been paid. The Company and the Subsidiaries have complied in all
material respects with the terms and provisions of such policies. The
insurance coverage provided by such policies, in all material respects, (a) is
on such terms (including, without limitation, as to deductibles and
self-insured retentions), (b) covers such categories of risk (including,
without limitation, errors and omissions, property and casualty, directors’ and
officers’ liability, and workers’ compensation liabilities liability,
securities liability, fiduciary liability, employment practices), (c) the
Company has no liability relating to, and contains such deductibles and
retentions, and (d) is in such amounts as, with respect to each of the criteria
set forth in the foregoing clauses (a) through (d), is adequate and suitable
for the business and operations of the Company and the Subsidiaries.


                  2.18. Business Combination and Takeover Statutes. (a) The Board of
Directors has taken all actions necessary or advisable so that the restrictions
contained in Section 203 of the DGCL applicable to a “business combination” (as
defined in such Section) will not apply to the execution, delivery or
performance of this Agreement or any of the other Transaction Documents or the
consummation of the transactions contemplated hereby or thereby, including, but
not limited to, conversion of any shares of Class C Common Stock or Class D
Common Stock into Conversion Shares.


                  (b)  The execution, delivery and performance of this Agreement or any of
the other Transaction Documents and the consummation of the transactions
contemplated hereby or thereby, including, but not limited to, conversion of
any shares of Class C Common Stock or Class D Common Stock into the Conversion
Shares, will not cause to be applicable to the Company Section 203 or any “fair
price,” “moratorium,” “control share acquisition” or other similar
anti-takeover statute or regulation enacted under state or federal laws.


                  2.19. Offering of New Common Shares. Neither the Company nor any Person
acting on its behalf has taken or will take any action (including, without
limitation, any offering of any securities of the Company under circumstances
which would require, under the Securities Act, the integration of such offering
with the offering and sale of the New Common Shares) which might reasonably be
expected to subject the offering, issuance or sale of the New Common Shares to
the registration requirements of Section 5 of the Securities Act.


                  2.20. Network Facilities. (a) Schedule 2.20(a) consists of maps of (i)
fiber routes that make up the Company’s domestic inter city and metro fiber
optic networks, and (ii) the Company’s domestic fixed wireless licenses to use
broadband fixed wireless spectrum (collectively, the “Network Maps”). As of
the date hereof, the information set forth in the Network Maps is true, correct
and complete in all material respects, subject to (i) inherent dimensional
limitations of the presentation of such information on maps, and (ii) with
respect to the fixed wireless licenses, subject to the information set forth on
Schedule 2.9(a).


                  (b)  Except to the extent that the Company or the Subsidiaries can access
the Customer Base directly through the Company’s network facilities, including
the location of the fiber optic cables, fibers or conduits used or available
for use by the Company in connection with


15






 

its operations and the provision of telecommunications services including, without limitation, the Company’s
longhaul network, each longhaul segment thereof, fiber optic cables, fibers, or
conduits subject to the Company’s rights pursuant to agreements with third
parties providing for an indefeasible right of use for its metropolitan
networks (the “Network Facilities”) or as would not have a Material Adverse
Effect, the Company or the Subsidiaries have all rights necessary to offer
telecommunication services to the Customer Base on a resale or other basis from
each incumbent local exchange carrier.


                  (c)  Except as set forth on the Network Maps, or as would not reasonably be
expected to have a Material Adverse Effect, the Company or its Subsidiaries
have good and marketable title to, a valid leasehold interest in, or a valid
right to use all of the Network Facilities. Except as would not reasonably be
expected to have a Material Adverse Effect, each of the Network Facilities
owned by the Company or the Subsidiaries: (i) is located on property to which
the Company has good and marketable title or is operating pursuant to valid
rights-of-way or other similar rights; (ii) is free and clear of any
Encumbrances, other than Permitted Encumbrances or Encumbrances which are
inherent in an indefeasible right to use; and (iii) is not subject to any
pending Litigation or administrative actions relating to any such property or
right of way.


                  (d)  Except as would not have a Material Adverse Effect, each agreement
with third parties providing for an indefeasible right to use (each, an “IRU
Agreement”) or other agreement permitting the Company or its Subsidiaries to
use the Network Facilities is legal, valid and binding on the parties thereto
and permits each of the Company and the Subsidiaries to use the applicable
Network Facilities set forth on the Network Maps, and is enforceable in
accordance with its terms. Except as would not have a Material Adverse Effect,
the Company or one of the Subsidiaries has an IRU Agreement or other agreement
permitting it to use each of the Network Facilities that it does not own.


                  2.21. Disclosure. Neither this Agreement nor any other Transaction
Document, nor any schedule or exhibit hereto or thereto, nor any certificate
furnished to the Investors by or on behalf of the Company in connection with
the transactions contemplated hereby and thereby, when read in conjunction with
the 2000 10-K and the SEC Reports filed at any time after the 2000 10-K was
filed with the SEC, contains any untrue statement of a material fact or omits
to state a material fact necessary in order to make the statements contained
herein or therein not misleading. For purposes of the preceding sentence, any
preliminary document or written information shall be disregarded if a final or
updated version of such document or written information was delivered to each
Investor by the Company prior to the date hereof. As of the date hereof there
is no fact or information relating to the Company and/or any of its
Subsidiaries that, to the Company’s Knowledge, would reasonably be expected to
be material to the Company and its Subsidiaries and that has not been described
in the SEC Reports or otherwise disclosed to each Investor in writing.


                  2.22. Confidentiality. The Company acknowledges and agrees that all
Confidential Information disclosed to Telmex by Forstmann Little or any of its
Affiliates prior to the execution of the Telmex Confidentiality Agreement in
connection with the transactions contemplated by this Agreement and the other
Transaction Documents was disclosed only


16






 


pursuant to the Forstmann Little
Confidentiality Agreement and not pursuant to any other confidentiality
agreement between the Company and any affiliates of Forstmann Little.


ARTICLE III


REPRESENTATIONS AND WARRANTIES OF THE INVESTORS


                  Each Investor, as to those representations and warranties that are
applicable to each such Investor, hereby represents and warrants to the
Company, severally and not jointly, as of the date hereof and as of the
Closing, as follows:


                  3.1. Acquisition for Investment. (a) Forstmann Little is acquiring the
New Forstmann Little Shares and any Conversion Shares for its own account, for
investment and not with a view to the distribution thereof within the meaning
of the Securities Act.


                  (b)  Telmex is acquiring the New Telmex Shares and any Conversion Shares
for its own account, for investment and not with a view to the distribution
thereof within the meaning of the Securities Act.


                  3.2. Restricted Securities. (a) Forstmann Little understands that (i) the
New Forstmann Little Shares and any Conversion Shares have not been registered
under the Securities Act or any state securities laws by reason of their
issuance by the Company in a transaction exempt from the registration
requirements thereof and (ii) the New Forstmann Little Shares and any
Conversion Shares may not be sold or otherwise disposed of unless such sale or
disposition is registered under the Securities Act and applicable state
securities laws or such sale or other disposition is exempt from registration
thereunder.


                  (b)  Telmex understands that (i) the New Telmex Shares and any Conversion
Shares have not been registered under the Securities Act or any state
securities laws by reason of their issuance by the Company in a transaction
exempt from the registration requirements thereof and (ii) the New Telmex
Shares and any Conversion Shares may not be sold or otherwise disposed of
unless such sale or disposition is registered under the Securities Act and
applicable state securities laws or such sale or other disposition is exempt
from registration thereunder.


                  3.3. Accredited Investor. Equity VII, MBO VIII and Telmex is each an
“accredited investor” (as defined in Rule 501(a) under the Securities Act).
Equity VII, MBO VIII and Telmex each has sufficient knowledge and experience in
financial and business matters so as to be capable of evaluating the merits and
risks of its investment in the New Common Shares and is capable of bearing the
economic risks of such investment.


                  3.4. Organization. (a) Each of Equity VII and MBO VIII is a limited
partnership duly organized, validly existing and in good standing under the
laws of the State of


17






 


Delaware and has the requisite power and authority to
carry on its business as it is now being conducted.


                  (b)  Telmex is a sociedad anónima de capital variable duly organized,
validly existing and in good standing under the laws of the United Mexican
States and has the requisite power and authority to carry on its business as it
is now being conducted.


                  3.5. Due Authorization. Each Investor has all rights, power and authority
to enter into this Agreement and the other Transaction Documents to which it is
a party and to consummate the transactions contemplated hereby and thereby.
The execution and delivery by each Investor of this Agreement and the other
Transaction Documents to which it is a party, the compliance by each Investor
with each of the provisions of this Agreement and the other Transaction
Documents to which it is a party, and the consummation by such Investor of the
transactions contemplated hereby and thereby (a) are within the power and
authority of each Investor and (b) have been duly authorized by all necessary
action on the part of each Investor. This Agreement constitutes, and each of
the other Transaction Documents to which it is a party will constitute upon
execution and delivery by each Investor, a valid and binding agreement of each
Investor enforceable against each Investor in accordance with its respective
terms, except as such enforcement is limited by bankruptcy, insolvency and
other similar laws affecting the enforcement of creditors’ rights generally and
for limitations imposed by general principles of equity.


                  3.6. Consents; No Violations. Neither the execution, delivery or
performance by each Investor of this Agreement and the other Transaction
Documents to which it is a party nor the consummation of the transactions
contemplated hereby or thereby will (a) conflict with, or result in a breach or
a violation of, any provision of the organizational documents of such Investor;
(b) constitute, with or without notice or the passage of time or both, a
breach, violation or default, create an Encumbrance (other than Encumbrances
which would not, individually or in the aggregate, materially impair the
ability of such Investor to consummate the transactions contemplated by this
Agreement and the other Transaction Documents) or give rise to any right of
termination, modification, cancellation, prepayment, suspension, limitation,
revocation or acceleration, under (i) any Law, or (ii) any Commitment of each
Investor, or to which each Investor or any of its assets or properties is
subject, except, with respect to the matters set forth in clause (ii), for
breaches, violations, defaults, Encumbrances (other than Encumbrances which
would not, individually or in the aggregate, materially impair the ability of
such Investor to consummate the transactions contemplated by this Agreement and
the other Transaction Documents) or rights of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or acceleration,
which, individually or in the aggregate, would not have a material adverse
effect on the ability of each Investor to consummate the transactions
contemplated hereby; or (c) except as set forth on Schedule 3.6 and except for
any required filing under the HSR Act, the Foreign Competition Approvals, the
Regulatory Approvals, the completion of the Restructuring Transaction,
including, if applicable, the Confirmation Order and the Third Party Consents,
require any consent, approval or authorization of, notification to, filing
with, or exemption or waiver by, any Governmental Entity or any other Person on
the part of any Investor.


18






 


                  3.7. Availability of Funds. Equity VII, MBO VIII, and Telmex each has
available or committed sufficient funds to pay its respective portion of the
Purchase Price.


                  3.8. Litigation. Except as set forth on Schedule 3.8, as of the date
hereof, to the knowledge of each Investor there is no pending or threatened
Litigation against such Investor or any of its Affiliates or involving any of
its properties or assets by or before any court, arbitrator or other
Governmental Entity which in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the transactions contemplated by this Agreement.


                  3.9. No Other Representations. Each Investor acknowledges and agrees that
it is an informed and sophisticated purchaser, and has undertaken such
investigation and has been provided with and has evaluated such documents and
information as it deems necessary to enable such Investor to make an informed
decision with respect to the execution, delivery and performance of this
Agreement. Each Investor will undertake, prior to the Closing, such further
investigation and request such additional documents and information as it deems
necessary. Each Investor agrees to accept the New Common Shares based upon its
own inspection, examination and determination with respect thereto as to all
matters.


ARTICLE IV


COVENANTS


                  4.1. Conduct of Business by the Company Pending the Closing. (a) Except
as set forth on Schedule 4.1 or as contemplated by this Agreement (including
but not limited to Section 4.12) and the Restructuring Transaction or any of
the other Transaction Documents, to which the Investors are parties during the
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Closing, unless each Investor otherwise
agrees in writing, the Company shall, and shall cause each of the Subsidiaries
to, (i) conduct its business only in the ordinary course and consistent with
past practice or as may be ordered or otherwise required by the Bankruptcy
Court; (ii) use reasonable best efforts to preserve and maintain its assets and
properties and its relationships with its customers, suppliers, advertisers,
distributors, agents, officers and employees and other Persons with which it
has significant business relationships; (iii) use reasonable best efforts to
maintain all of the material assets it owns or uses in the ordinary course of
business consistent with past practice; (iv) use reasonable best efforts to
preserve the goodwill and ongoing operations of its business; (v) maintain its
books and records in the usual, regular and ordinary manner, on a basis
consistent with past practice; and (vi) comply in all material respects with
applicable Laws.


                  (b)  Except as expressly contemplated by this Agreement (including but not
limited to Section 4.12) and the Restructuring Transaction or as set forth on
Schedule 4.1, between the date of this Agreement and the Closing, the Company
shall not, and shall cause each of the Subsidiaries not to, without the prior
written consent of each Investor:



		
	 	          (i) (x) incur any additional Indebtedness, except as contemplated by
the Forebearance Agreement, (y) make any loans, advances or capital
contributions to, or investments in, any Person, except as contemplated
by the Forebearance Agreement or (z) make capital expenditures (1) in any
fiscal quarter that exceed the budget for capital



19






 








		
	 	expenditures set forth
in the Operational Plan for such fiscal quarter by more than ten percent
and (2) in the aggregate, for all fiscal quarters that exceed the budget
for capital expenditures set forth in the Operational Plan for such
overall period by more than five percent;




		
	 	          (ii) change any method of accounting or accounting practice used by
the Company or any Subsidiary, other than such changes required by GAAP;




		
	 	          (iii) repurchase, redeem or otherwise acquire or exchange any share
of Common Stock, Preferred Stock or other equity interests other than as
required by the terms of the Preferred Stock or the Class B Common Stock;




		
	 	          (iv) issue or sell any additional shares of the capital stock of, or
other equity interests in, the Company or any Subsidiary, or securities
convertible into or exchangeable for such shares or other equity
interests, or issue or grant any subscription rights, options, warrants
or other rights of any character relating to shares of such capital
stock, such other equity interests or such securities, except for (x)
issuances of Class A Common Stock pursuant to the exercise of options to
purchase or conversion rights exercisable for Class A Common Stock, in
each case outstanding on the date hereof, (y) options to purchase
28,246,805 shares of Class A Common Stock pursuant to the exchange offer
filed by the Company with the SEC on Schedule TO on May 29, 2001, as
amended and (z) options to purchase up to 610,000 shares of Class A
Common Stock to be issued as promotion awards pursuant to the XO
Communications, Inc. Stock Option Plan;




		
	 	          (v) declare, set aside, make or pay any dividend, or make any
distribution, in respect of any shares of capital stock of the Company,
including dividends required to paid by the Company pursuant to the terms
of the Preferred Stock;




		
	 	          (vi) redeem, retire, defease, offer to purchase or change any
material term of any Public Debt or any indebtedness for borrowed money
except as required by the Forebearance Agreement in connection with asset
sales otherwise permitted by this Agreement;




		
	 	          (vii) amend (x) the Company’s Certificate of Incorporation, bylaws
or other organizational documents or (y) any Subsidiary’s charter, bylaws
or other organizational documents except for the adoption and filing of
the Amended and Restated Certificate of Incorporation;




		
	 	          (viii) take any action that is reasonably likely to result in (x)
any of the representations and warranties set forth in Article II
becoming false or inaccurate in any material respect as of the Closing
Date or (y) the failure of any of the conditions set forth in Article V
to be satisfied;




		
	 	          (ix) make any interest payments or other distributions on or in
respect of the Public Debt;



20






 








		
	 	          (x) permit any insurance policy listed on Schedule 2.17 to lapse or
cease to remain effective or be renewed when subject to expiration
without (A) replacing such policy (the “Old Policy”) immediately upon
notice of pending, threatened or actual cancellation, termination,
expiration with another policy (the “New Policy”) (1) that provides the
Company and its Subsidiaries with coverage that is no less favorable than
that provided by the Old Policy, taking into account the insurer(s), the
insured(s), the type, scope and amount of coverage, deductibles,
exclusions and other material terms (the “Material Terms”) of the Old
Policy and the New Policy or (2) the Material Terms of which are
customary for similar companies operating in the same industry and
geographic markets as the Company and its Subsidiaries and which are
adequate and suitable for the business and operations of the Company and
its Subsidiaries or (B) otherwise ensuring that the potential exposure or
liability of the Company, the Subsidiaries, directors, officers,
employees, assets and properties for any risk or any Loss is no greater
without the Old Policy or the New Policy than is customary for similar
companies operating in the same industry and geographic markets as the
Company and the Subsidiaries and which are adequate and suitable for the
business and operations of the Company and the Subsidiaries; provided,
however, that notwithstanding anything to the contrary in this Section
4.1(b)(x), the Company shall at all times during the term of the
Stockholders Agreement maintain directors’ and officers’ liability
insurance in such amounts and otherwise on terms and conditions
reasonably acceptable to each Investor;




		
	 	          (xi) (A) materially increase the compensation or benefits of, or pay
any bonuses or other similar compensation to, any officer, director,
employee or consultant, except for ordinary merit increases for employees
other than officers based on periodic reviews in accordance with past
practice; or (B) enter into, modify or terminate any Plan, (including
without limitation, any employment agreement or severance agreement),
provided, however, that notwithstanding clause (A) above, the Company and
the Subsidiaries may pay bonuses under and pursuant to the Company’s 2001
Bonus Plan (the “2001 Bonus Plan”) for the fiscal year ended December 31,
2001, in an aggregate amount (1) which does not exceed $28,000,000 and is
otherwise approved by the compensation committee of the Board of
Directors and (2) which, when added to the total aggregate amount of
bonuses and other amounts paid or payable under the Retention Bonus Plan
as a result of, or in connection with, the transactions contemplated
hereby and by the other Transaction Documents, does not exceed $35.0
million; provided, further, that the Company and the Subsidiaries shall
not pay any bonus or other amount under or pursuant to the 2001 Bonus
Plan to any officer, director, employee or consultant who has received,
or is to receive, any bonus or other amount under or pursuant to the
Retention Bonus Plan as a result of, or in connection with, the
transactions contemplated hereby and the other Transaction Documents;




		
	 	          (xii) sell, lease, license, encumber or otherwise dispose of, or
agree to sell, lease, license, encumber or otherwise dispose of any of
its assets other than (A) immaterial dispositions of personal property in
the ordinary course of business consistent with past practice, (B) swaps
of “dark fiber” for “dark fiber” in the ordinary course of business
consistent with past practice, (C), the sale or grant of indefeasible
rights to use of “dark fiber” in the ordinary course of business
consistent with past practice, so long as any such sale or grant, or any
series of related sales or grants, does not in the aggregate



21






 








		
	 	exceed $10
million in any calendar quarter or (D) a sale of either (x) XO One, Inc.
or its assets or (y) XO Limited, its assets or those of its subsidiaries,
provided that the net consideration received by the Company for any such
sale shall be in a form and amount reasonably acceptable to each
Investor; or




		
	 	          (xiii) agree to take any of the actions restricted by this Section
4.1.



                  (c)  Notwithstanding the foregoing provisions of this Section 4.1, the
parties acknowledge that the transfer of control of the Company may require
Regulatory Approvals and that all final decisions with respect to the
Communications Licenses must be taken by the Company until the Regulatory
Approvals have been obtained. The parties do not intend that the foregoing
provisions of this Section 4.1 shall transfer control of the Company or of the
Communications Licenses prior to obtaining the Regulatory Approvals.


                  4.2. Press Releases; Interim Public Filings. The Company shall, and shall
cause each Subsidiary to, deliver to each Investor complete and correct copies
of all press releases and public filings made between the date hereof and the
Closing Date, and, to the extent any such press releases refer to any of the
Investors or their Affiliates, shall give each Investor the reasonable
opportunity to review and comment on such releases and filings (on a strictly
confidential basis until such information is released), in each case, prior to
release in the form in which it will be issued. Each Investor shall give to
the Company and to the other Investor the reasonable opportunity to review and
comment on all Investor Press Announcements (on a strictly confidential basis
until such information is released), in each case prior to release in the form
in which it will be issued.


                  4.3. HSR Act; Foreign Competition Filings. Each Investor and the Company
shall cooperate in making all filings required (a) under the HSR Act; and (b)
to be filed with any Governmental Entity in connection with seeking the Foreign
Competition Approvals, and shall use its reasonable best efforts to take, or
cause to be taken, all actions necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by this
Agreement, including using its reasonable best efforts to resolve such
objections, if any, as the Antitrust Division of the Department of Justice or
the Federal Trade Commission or state antitrust enforcement or other
Governmental Entities may assert under U.S. and foreign antitrust and
competition Laws with respect to the transactions contemplated hereby.


                  4.4. Consents; Approvals. (a) The Company and each Investor shall each
use its reasonable best efforts to obtain all consents, waivers, exemptions,
approvals, authorizations or orders, including without limitation, the
Regulatory Approvals, the Foreign Competition Approvals and the Third Party
Consents (collectively, “Consents”) required in connection with the
transactions contemplated by this Agreement or any of the other Transaction
Documents (including, without limitation (i) all Consents required to avoid any
breach, violation, default, Encumbrance, other than Permitted Encumbrances, or
right of termination, modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration of any material agreement or instrument
to which the Company or any Significant Subsidiary is a party or by which any
of their material assets are bound, in each case, only to the extent that the
Company


22






 


reasonably believes that such breach, violation, default, encumbrance
or right of termination, modification, cancellation, prepayment, suspension,
limitation, revocation or acceleration will not be discharged or otherwise
extinguished pursuant to the Confirmation Order, (ii) all Consents required as
a result of the Restructuring Transaction, (iii) all Consents required as a
result of the filing of the Bankruptcy Case, the Confirmation Order or the
change of control resulting therefrom and (iv) all Consents required from the
SEC). The Company also shall use its reasonable best efforts to obtain all
necessary state securities laws or blue sky permits and approvals required to
carry out the transactions contemplated hereby and shall give each Investor the
reasonable opportunity to review and comment on all filings related to such
permits or approvals (on a strictly confidential basis until such information
is released). The Company shall furnish to each Investor all information as
may be reasonably requested in connection with any such action.


                  (b)  Notwithstanding the provisions of Section 4.3, Section 4.4(a) and
Section 4.8, nothing contained in this Agreement will require or obligate an
Investor or its respective Affiliates to: (i) agree to otherwise become subject
to any limitations on its respective rights effectively to acquire, control, or
operate the business of the Company or its Subsidiaries, or exercise full
rights of ownership of the Company or (ii) agree or otherwise be required to
sell or otherwise dispose of, hold separate (through the establishment of a
trust or otherwise), divest itself of all or a material portion of the assets
or business of such Investor or its Affiliates or the business of the Company
or its Subsidiaries, or (iii) suffer to exist any other material condition in
respect of all or a material portion of the assets or business of such Investor
or its Affiliates. The parties agree that no representation, warranty or
covenant of the Company or each Investor contained in this Agreement shall be
breached or deemed breached as a result of the failure by any party hereto or
any of its Affiliates to take any of the actions specified in the preceding
sentence.


                  4.5. Listing. The Company shall use its reasonable best efforts to have
its Class A Common Stock listed on the NASDAQ National Market System (the
“NMS”) or the New York Stock Exchange for so long as any New Common Shares or
any Conversion Shares are outstanding and held by any of the Investors;
provided, that if the Company is unable to maintain the listing of the Class A
Common Stock on the NMS prior to Closing, the Company shall use its reasonable
best efforts to have the Class A Common Stock quoted on another inter-dealer
quotation system. Prior to the Closing, the Company shall, at the reasonable
request of either Investor, prepare and submit to the NMS or the New York Stock
Exchange, in consultation with each Investor, a listing application covering
the New Common Shares and the Conversion Shares and shall use its reasonable
best efforts to obtain approval for the listing of such shares, subject to
official notice of issuance.


                  4.6. Board Representation; VCOC. (a) The Company agrees to take all
actions required so that, at Closing, the Board of Directors will include the
number of directors nominated or appointed by Forstmann Little equal to the
product of (A) forty percent (40.00%) times (B) the total number of directors
on the Board of Directors, rounded up to the nearest whole number, times (C)
two (2) ; provided, however, that in the event that any non-terminating or
non-terminated Investor shall have assumed the rights and obligations of a
terminating or terminated Investor pursuant to Section 8.5(b), the number of
directors to be nominated or appointed by each Investor shall be adjusted to
that number of directors to which each such


23






 


Investor would be entitled to
appoint or nominate pursuant to the Stockholders Agreement as revised pursuant
to Section 4.18 if determining such number of directors as of the Closing. For
avoidance of doubt, this formula can be expressed mathematically as (0.40 x A =
B; B x 2 = C), where A is the total number of directors on the Board of
Directors, B is the result of the first multiplication, rounded up to the
nearest whole number and C is the total number of directors to be nominated or
appointed by Forstmann Little.


                  (b)  At any time and for so long as any of Equity VI, Equity VII, MBO VII
or MBO VIII holds any equity securities of the Company and does not have a
contractual right from the Company or right pursuant to the Company’s Amended
and Restated Certificate of Incorporation to appoint or nominate at least one
director to the Board of Directors, at the request of Forstmann Little, the
Company shall enter into a letter agreement substantially in the form attached
hereto as Exhibit F (the “Contractual Management Rights Letter”) with Equity
VI, Equity VII, MBO VII and/or MBO VIII (or one of their respective Affiliates)
and such letter agreement shall remain in full force and effect.


                  4.7. Amended and Restated Certificate of Incorporation. The Company
shall, prior to the Closing, use its reasonable best efforts to take, or cause
to be taken, all action (under Section 242 of the DGCL or otherwise) to cause
the Amended and Restated Certificate of Incorporation to be the certificate of
incorporation of the Company at the Closing. In the event that the Bankruptcy
Case is commenced, the Confirmation Order and the Bankruptcy Plan shall approve
the Amended and Restated Certificate of Incorporation and shall direct and
authorize the Company to file it with the Delaware Secretary of State.


                  4.8. Cooperation. Each Investor and the Company shall use its reasonable
best efforts to take, or cause to be taken, all such further actions and to do,
or cause to be done, all things necessary, proper or advisable to consummate
and make effective as promptly as practicable the transactions contemplated by
this Agreement and the other Transaction Documents including, but not limited
to, (i) obtaining all Consents from any Governmental Entity and other third
parties required for the consummation of transactions contemplated by this
Agreement and the other Transaction Documents and (ii) timely making all
necessary filings under the HSR Act. Each Investor will furnish such
information as the Company may reasonably request in connection with any
Bankruptcy Case and will otherwise reasonably support the Company’s preparation
and presentation of any motion, filing or other pleading in any Restructuring
Transaction consistent with the terms of this Agreement.


                  4.9. Access to Property; Records. Between the date hereof and the Closing
the Company shall afford each Investor and its employees, counsel, accountants,
partners, members, investors, and other authorized representatives reasonable
access, upon notice, during normal business hours, to the assets, properties,
offices and other facilities, officers, employees, Commitments and books and
records of the Company and of the Subsidiaries, and to the outside auditors of
the Company and their work papers relating to the Company and the Subsidiaries.
All such information shall be held in confidence in accordance with the terms
of the Forstmann


24






 


Little Confidentiality Agreement and the Telmex
Confidentiality Agreement. The parties hereto agree that no investigation by
the Investors or their representatives shall affect or limit the scope of the
representations and warranties of the Company contained in this Agreement or in
any other Transaction Document delivered pursuant hereto or limit the liability
for breach of any such representation or warranty.


                  4.10. Reserve Shares. Following the Closing, the Company will at all
times reserve and keep available, solely for issuance and delivery upon
conversion of outstanding Class C Common Stock and Class D Common Stock, the
number of shares of Class A Common Stock from time to time issuable upon
conversion of all shares of the Class C Common Stock and Class D Common Stock
at the time outstanding. All shares of Class A Common Stock issuable upon
conversion of the Class C Common Stock and the Class D Common Stock shall be
duly authorized and, when issued upon such conversion, shall be validly issued,
fully paid and nonassessable.


                  4.11. Use of Proceeds. The proceeds received by the Company in respect of
the Investment shall be used by the Company for general corporate purposes,
except that the Company may commit a portion of such proceeds or other cash in
an amount up to $200 million in the aggregate in connection with the
Restructuring.


                  4.12 Restructuring. (a) The Company shall use its reasonable best efforts
to restructure the capitalization of the Company such that the complete
capitalization of the Company shall, upon the Closing, be the New
Capitalization (the “Restructuring”). In furtherance of and without limiting
the generality of the foregoing, the Company shall use its reasonable best
efforts to undertake one or more of the following actions as expeditiously as
possible following the date hereof:



		
	 	          (i) (A) commencing an exchange offer pursuant to which the Company
will offer to exchange all of its outstanding Public Debt and the
Preferred Stock for Class A Common Stock and resulting in the New
Capitalization, and (B) commencing a related consent solicitation with
respect to the approval of a prepackaged plan of reorganization that will
result in the Company having the New Capitalization (the “Prepackaged
Plan”);




		
	 	          (ii) if the exchange offer described in the immediately preceding
paragraph (i) fails to result in the Company having the New
Capitalization, but the Company has received the consents necessary under
the Bankruptcy Code to confirm the Prepackaged Plan, commence a
Bankruptcy Case and file the Prepackaged Plan and a related disclosure
statement with the Bankruptcy Court and seeking to obtain the
Confirmation Order with respect to the Prepackaged Plan as expeditiously
as possible (either of the options described in this paragraph (ii) and
in the immediately preceding paragraph (i) being hereinafter referred to
as the “Prepackaged Approach”);




		
	 	          (iii) if the Company determines in good faith upon the advice of its
financial and legal advisors and representatives that it is not advisable
or feasible to implement the Prepackaged Approach or if such Prepackaged
Approach is unsuccessful



25






 








		
	 	in effecting the New Capitalization, (A) the
Company shall use commercially reasonable efforts to obtain consents or
lock-up agreements sufficient to proceed with a pre-negotiated plan of
reorganization that will result in the Company having the New
Capitalization (the “Pre-negotiated Plan”), and (B) if such consents
and/or lock-up agreements are obtained, the Company shall commence a
Bankruptcy Case and file the Pre-negotiated Plan and a related disclosure
statement with the Bankruptcy Court and seek to obtain the Confirmation
Order with respect to the Pre-negotiated Plan as expeditiously as
possible; and/or




		
	 	          (iv) any other actions reasonably likely to effect the New
Capitalization which are acceptable to each Investor in its reasonable
discretion.



                  (b)  The Company shall provide each Investor with copies of all material
motions, orders, applications and supporting papers and notices prepared by the
Company (including without limitation, forms of orders and notices to
interested parties), prior to their being filed with the Bankruptcy Court,
relating in any way to the Bankruptcy Case and shall consult as practicable
with each Investor prior to taking any significant action with respect to the
Restructuring, including the Bankruptcy Case.


                  4.13 Notice of Proposal. The Company will:


                  (a)  Promptly notify each Investor of the receipt of any oral or written
proposal, offer or inquiry from any Person (including the other Investor)
regarding any proposed (i) merger, (ii) consolidation, (iii) other business
combination, (iv) acquisition of 10% or more of the then-outstanding equity
securities of the Company, (v) acquisition of debt or other securities
convertible into or exchange for, equity securities of the Company which would,
after giving effect to such conversion or exchange, constitute more than 10% of
the outstanding equity securities of the Company, (vi) acquisition of debt
securities of the Company with a principal amount in excess of $100 million or
(vii) Change of Control (each, a “Proposal”); and


                  (b)  Keep each Investor apprised regarding the status and details of any
negotiations regarding any Proposal.


                  4.14 Access to Certain Information. From the date hereof until the
Closing, the Company hereby agrees to the fullest extent permitted by the DGCL:


                  (a)  that the members of the Board of Directors who were elected by the
Series C Preferred Stock and the Series D Preferred Stock shall be permitted to
participate in all meetings and votes of the Board of Directors and shall
receive all information provided to other members of the Board of Directors
regarding any Proposal unless Forstmann Little or its Affiliates are the
parties making such Proposal; and


                  (b)  that Telmex shall receive, on a confidential basis, subject to
applicable law, including applicable provisions of the DGCL, all information
provided to members of the Board of Directors regarding any Proposal.


                  4.15 Limitation on Equity Sales. Except as expressly contemplated by this
Agreement and the other Transaction Documents, the Company agrees:


26






 


                  (a)  to cause its respective Executive Officers (as such term is defined in
Rule 3b-7 promulgated under the Exchange Act) and directors, on any date on or
after the Closing Date, not to, until the six month anniversary of the Closing
Date, without the prior written consent of each Investor, directly or
indirectly sell, offer, contract to sell, make any short sale, pledge, sell any
option or contract to purchase, purchase any option or contract to sell, grant
any option, right or warrant to purchase or otherwise transfer or dispose of
any shares of Common Stock or any securities convertible into or exchangeable
or exercisable for or any rights to purchase or acquire Common Stock, in each
case, acquired pursuant to the transactions contemplated by this Agreement; and


                  (b)  not to, and to use its reasonable best efforts to cause each holder of
5% or more of the Common Stock (other than the Investors) on any date on or
after the Closing Date, not to, until the first anniversary of the Closing
Date, without the prior written consent of the Company and each Investor,
directly or indirectly, (i) sell, offer, contract to sell, make any short sale,
pledge, sell any option or contract to purchase, purchase any option or
contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of any shares of Common Stock or any securities convertible
into or exchangeable or exercisable for or any rights to purchase or acquire
Common Stock or (ii) enter into any swap or other agreement that transfers, in
whole or in part, any of the economic consequences or ownership of Common
Stock, whether any such transaction described in clause (i) or (ii) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise.


                  4.16 Alternative Investment Structure. At any time on or prior to
September 15, 2002, if Telmex notifies the Company and Forstmann Little that
Telmex has concluded in good faith that the Regulatory Approvals in respect of
the FCC Licenses are not likely to be obtained prior to January 15, 2003,
because of the nature or extent of Telmex’s proposed ownership of capital stock
of the Company, the Company and each Investor agrees that they shall use their
respective reasonable best efforts to restructure Telmex’s portion of the
Investment hereunder in such a manner that is (i) likely to result in receipt
of the Regulatory Approvals in respect of the FCC Licenses and (ii) on terms
and conditions that are no less favorable in all material respects to the
Company, Forstmann Little and Telmex than the Investment.


                  4.17 Supplemental Schedules. The Investors acknowledge and agree that the
Company shall be entitled, following the date hereof, to amend and supplement
Schedules 2.6 and 2.7(a), in each case solely to identify additional complaints
from Litigation (other than complaints related to Ordinary Course Litigation)
of which the Company did not have Knowledge on the date hereof, that are
exceptions to the representations and warranties contained in such Sections 2.6
and 2.7(a). The Company shall promptly, and in any event within two Business
Days after receipt of any complaint or other notice of any Litigation that the
Company intends to identify on Schedule 2.6 and/or 2.7(a), deliver copies of
any such amendment or supplement to such Schedule, together with copies of such
complaint or other notice, to each Investor. Nothing in this Section 4.17
shall adversely affect the rights of each Investor under Section 5.2(u),
Section 6.1(d) or Section 7.2.


                  4.18 Stockholders Agreement. If an Investor becomes an Assuming Investor
pursuant to Section 8.5(b), (a) the Company and the Assuming Investor shall use
their reasonable best efforts to revise the Stockholders Agreement to take into
account the revised percentage


27






 


ownership of the Company and (b) the Assuming
Investor may, in its sole discretion, elect to terminate the Stockholders
Agreement.


                  4.19 Management Shares. (a) Subject to Section 4.19(b), (i) upon the
Closing, the Company shall have the right (but not the obligation) to issue to
the members of management of the Company designated by the Company and approved
by the Investors (such approval not to be unreasonably withheld) up to
4,000,000 shares in the aggregate (the “Management Shares”) of a
to-be-designated Class E Common Stock which shall have the rights and
preferences set forth on Exhibit G (the “Class E Common Stock”).


                  (b)  Between the date hereof and the Closing, the parties hereto shall use
their reasonable best efforts to agree upon the definitive rights and
preferences of the Class E Common Stock and upon revisions to the Amended and
Restated Certificate of Incorporation to reflect the terms of the Class E
Common Stock as set forth on Exhibit G.


                  4.20 Releases. In the event a Bankruptcy Case is commenced, the Company
shall use its reasonable best efforts to ensure that the Confirmation Order
shall provide, among other things, that the directors of the Company and each
Investor and its affiliates, members, managers, shareholders, partners,
representatives, employees, attorneys and agents are released from any and all
Litigation related to the Company, its business, its governance, its securities
disclosure practices, the purchase or sale of any of the Company’s equity or
debt securities, the Investment or the Restructuring Transaction.


                  4.21 Retention Bonus Plan Payments. The Company shall use its reasonable
best efforts consistent with its contractual and other legal obligations to
minimize the total aggregate amount of bonuses and other amounts paid or
payable under the Retention Bonus Plan as a result of, or in connection with,
the consummation of the transactions contemplated hereby and by the other
Transaction Documents.


                  4.22 Company’s Obligation Regarding Fees and Expenses. The Company shall
use its reasonable best efforts, consistent with its contractual obligations,
to minimize the amount of fees, commissions, expenses and other amounts paid or
payable by the Company and the Subsidiaries in connection with the transactions
contemplated hereby and by the other Transaction Documents, including, without
limitation, the fees, commissions, expenses and other amounts referred to in
Sections 2.12 and 5.2(t).


ARTICLE V


CONDITIONS


                  5.1. Conditions to Obligations of Each Investor and the Company. The
respective obligation of each Investor and the Company to consummate the
transactions contemplated hereby are subject to the satisfaction or waiver by
such Investor or the Company, as the case may be, at or prior to the Closing of
each of the following conditions:


28






 


                  (a)  No statute, rule or regulation or order, judgment or decree of any
court or administrative agency or other Governmental Entity shall be in effect
which prohibits the consummation of the transactions contemplated hereby or by
any of the other Transaction Documents; provided, however, that except as
otherwise provided in this Agreement, each of the parties shall have used,
subject to Section 4.4, reasonable efforts to prevent the entry of any such
injunction or other order and to appeal as promptly as possible any injunction
or other order that may be entered; and provided further that no party hereto
can assert the failure of this condition to be satisfied if such failure
resulted from such party’s failure to satisfy the first proviso of this Section
5.1(a) or any other provision of this Agreement or any other Transaction
Document;


                  (b)  Any waiting period (and any extension thereof) under the HSR Act
applicable to this Agreement and the transactions contemplated hereby shall
have expired or been terminated; and


                  (c)  All material Foreign Competition Approvals required for the
consummation of the transactions contemplated by this Agreement and the other
Transaction Documents shall have been obtained.


                  5.2. Conditions to Obligations of Each Investor. The obligation of each
Investor to consummate the transactions contemplated hereby shall be subject to
the satisfaction, in the judgment of each Investor, or waiver by such Investor
at or prior to the Closing of each of the following conditions:


                  (a)  Each of the representations and warranties of the Company and the
other Investor contained in this Agreement and each of the other Transaction
Documents (i) that are qualified as to materiality or Material Adverse Effect
shall be true and correct in all respects as of the date hereof and as of the
Closing (except to the extent such representations and warranties are made as
of a particular date, in which case such representations and warranties shall
have been true and correct as of such date) and (ii) that are not so qualified
shall be true and correct in all respects as of the date hereof and as of the
Closing (except to the extent such representations and warranties are made as
of a particular date, in which case such representations and warranties shall
have been true and correct as of such date) except for such inaccuracies in the
representations and warranties referred to in this clause (ii) that do not
have, and are not reasonably likely to have, individually or in the aggregate,
a Material Adverse Effect;


                  (b)  The Company and the other Investor shall have performed, satisfied and
complied in all material respects with all of their respective covenants and
agreements set forth in this Agreement and each of the other Transaction
Documents to be performed, satisfied and complied with prior to or at the
Closing;


                  (c)  The Company shall have delivered to the Investors an officer’s
certificate certifying as to the Company’s compliance with the conditions set
forth in clauses (a) and (b) of this Section 5.2;


                  (d)  The Company and the other Investor shall have executed and delivered
the Registration Rights Agreement, the Registration Rights Agreement shall be
in full force and effect and there shall exist no breach of, or default under,
the Registration Rights Agreement;


29






 


                  (e)  The Company and the other Investor shall have executed and delivered
the Stockholders Agreement, the Stockholders Agreement shall be in full force
and effect and there shall exist no breach of or default under the Stockholders
Agreement;


                  (f)  All of the Transaction Documents shall be in full force and effect and
there shall exist no breach of, or default under, any of the Transaction
Documents by the Company, excluding any breach by such Investor;


                  (g)  The Amended and Restated Certificate of Incorporation substantially in
the form of Exhibit D hereto, as it may be revised pursuant to the mutual
agreement of the parties hereto in accordance with Section 4.19(b) to reflect
the terms of the Class E Common Stock as set forth on Exhibit G, shall have
been duly filed by the Company with the Secretary of State of the State of
Delaware and shall be effective, provided that if, despite their compliance
with Section 4.19(b) hereof, the parties hereto cannot agree upon revisions to
the Certificate of Incorporation to reflect the terms of the Class E Common
Stock as set forth on Exhibit G, this condition shall be satisfied by the
filing of the Amended and Restated Certificate of Incorporation substantially
in the form attached hereto as Exhibit D;


                  (h)  There shall be no outstanding shares of the Class B Common Stock;


                  (i)  All Consents required in connection with the transactions contemplated
by this Agreement and the other Transaction Documents shall have been obtained
except where the failure to have obtained any such Consent would not,
individually or in the aggregate, have a Material Adverse Effect;


                  (j)  The Class A Common Stock shall be listed on the NMS or the New York
Stock Exchange and the New Common Shares and the Conversion Shares shall have
been approved for listing on the NMS or such other national securities
exchange, subject to notice of issuance; provided, however, this Section 5.2(j)
shall be deemed waived if the Investors do not permit the Company to take any
actions reasonably necessary to meet any applicable listing requirements
regarding a minimum number of stockholders;


                  (k)  Either (i) the Bank Credit Facility shall be in form and substance
reasonably acceptable to such Investor, shall be in full force and effect,
there shall exist no breach of or default under the Bank Credit Facility and
any and all fees and expenses paid or payable to any commercial bank or any
other financial institution in connection with any amendments to the Bank
Credit Facility shall be reasonably acceptable to each Investor or (ii) the
Amended Bank Credit Facility shall be in form and substance reasonably
acceptable to such Investor, shall be in full force and effect, there shall
exist no breach of or default under the Amended Bank Credit Facility and any
and all fees and expenses paid or payable to any commercial bank or any other
financial institution in connection with entering into the Amended Bank Credit
Facility shall be reasonably acceptable to each Investor;


                  (l)  Upon the Closing, after giving effect to the issuance of the New
Common Shares pursuant to the terms of this Agreement, the complete capital
structure of the Company shall be the New Capitalization in all material
respects;


30






 


                  (m)  If a Bankruptcy Case is commenced, (i) the Bankruptcy Plan shall be in
form and substance reasonably satisfactory to such Investor in all material
respects and shall have been approved by the Bankruptcy Court pursuant to the
Confirmation Order, (ii) the Confirmation Order shall be in form and substance
reasonably satisfactory to such Investor in all material respects and shall be
final and non-appealable and (iii) all other material orders of the Bankruptcy
Court in respect of the Restructuring shall be final and non-appealable;


                  (n)  (i) Except as may be rendered moot by the entry of the Confirmation
Order, no Litigation shall have been instituted before any court or
Governmental Entity seeking to restrain, modify or prevent the consummation of
the transactions contemplated by this Agreement and the other Transaction
Documents; and (ii) no Litigation shall have been instituted against the
Company or for which the Company would be required to indemnify any Person
before any court or Governmental Entity that, in the reasonable opinion of such
Investor, would reasonably be expected to have a Material Adverse Effect;


                  (o)  (i) Daniel F. Akerson shall continue to be employed by the Company as
the Chief Executive Officer and shall not have expressed any intention to leave
the Company and (ii) each of the following positions at the Company shall be
held either by the person who holds such position on the date hereof or another
person acceptable to each Investor and none of the persons employed in such
positions shall have expressed any intention to leave the Company; provided,
however, that it is understood that the persons employed in such positions as
of the date hereof are acceptable to each Investor: President and Chief
Operating Officer, Chief Financial Officer, Chief Technology Officer, Chief
Marketing Officer; General Counsel, Senior Vice President – Market Sales
Operations and Senior Vice President – National Accounts, Sales & Marketing;


                  (p)  Except as expressly contemplated by Exhibit A or Exhibit H, the
Company shall not have made and shall have no obligation (other than
obligations theretofore waived by the recipient) to make any payment, issue any
securities or make any distribution of any kind or nature whatsoever under the
Plans in connection with or as a result of the consummation of the transactions
contemplated by this Agreement and the other Transaction Documents (including,
without limitation, any severance or other payment to any person upon
termination of such person’s employment with the Company or any Subsidiary,
whether such termination occurs before, upon or after the Closing) because such
payment, issuance or distribution is not required by the terms of the Plans,
the party entitled to receive such payment, securities or distribution has
waived its rights thereto or otherwise or the obligation to make such payment
has been terminated by the Confirmation Order, provided that, in connection
with or as a result of the consummation of the transactions contemplated by
this Agreement and the other Transaction Documents, the Company and the
Subsidiaries shall have the right to make payments under and pursuant to the
Retention Bonus Plan in an amount not to exceed $35.0 million less the total
aggregate amount of all bonuses and other amounts paid or payable under and
pursuant to the 2001 Bonus Plan;


                  (q)  A Business Plan that is reasonably acceptable to such Investor shall
have been adopted by the Company;


31






 


                  (r)  Since the date hereof, there shall not have occurred any event,
circumstance, condition, fact, effect or other matter which, individually or in
the aggregate, has had or would reasonably be expected to have a material
adverse effect (i) on the business, operations, assets, financial condition,
prospects, or results of operations of the Company and its Subsidiaries taken
as a whole (a “Material Adverse Effect”) or (ii) on the ability of the Company
and such Subsidiaries to perform any material obligation under this Agreement
or the other Transaction Documents or to consummate the transactions
contemplated by this Agreement and the other Transaction Documents; provided,
however, that any event, circumstance, condition, fact, effect, or other matter
that would otherwise constitute a Material Adverse Effect shall not constitute
a Material Adverse Effect if the material adverse effect thereof shall have
been eliminated or rendered moot by the Confirmation Order;


                  (s)  All Regulatory Approvals that are required in order to consummate the
transactions contemplated by this Agreement and the other Transaction
Documents, shall have been obtained by a Final Order (or waived in whole or in
part, which waiver will not be unreasonably withheld, in a writing executed by
such Investor, unless such a waiver is prohibited by law), other than
Regulatory Approvals the absence of which would not reasonably be expected to
have a Material Adverse Effect or be unreasonably burdensome to any Investor,
and all parties shall have complied with the conditions, if any, imposed in
connection with the grant of the Regulatory Approvals, other than Regulatory
Approvals the absence of which would not reasonably be expected to have a
Material Adverse Effect or be unreasonably burdensome to any Investor;
provided, that no Investor shall be required to accept or comply with any
material condition that would be unreasonably burdensome or that would have a
material adverse effect on it or on the value of the Company and shall not be
obligated to effect the transactions contemplated by the Transaction Documents
if such conditions are imposed;


                  (t)  As of the Closing, the total amount of any and all fees, commissions,
expenses, and other amounts paid or payable by the Company and the Subsidiaries
to any Person, including, without limitation, any and all broker, agent,
accounting firm, investment bank, other financial advisor, commercial bank,
other financial institution, law firm or public relations firm in connection
with any of the transactions contemplated by this Agreement or the other
Transaction Documents (“Transaction Fees”) shall not exceed $45.0 million;
provided that Transaction Fees shall (A) include any and all fees, expenses and
other amounts (including, without limitation, legal fees and expenses, but
excluding amounts paid to settle Litigation or as judgments or other awards in
connection with Litigation) not covered by liability or other insurance and
payable by the Company or any Subsidiary in connection with any Litigation
brought by stockholders of the Company or derivatively on behalf of, or in the
name of, the Company related to the Company, its business, its governance, its
securities regulatory disclosure practices, the purchase or sale of any of the
Company’s equity or debt securities, the Investment or the Restructuring
Transaction and (B) exclude (1) the Company’s obligations to pay Expenses
pursuant to Section 8.2 and (2) any and all fees (but not reimbursable
expenses, including, without limitation, fees and expenses of counsel) paid or
payable to any commercial bank or any other financial institution in connection
with any amendments to the Bank Credit Facility or entering into the Amended
Bank Credit Facility; and provided further that nothing in this Section 5.2(t)
shall limit the Company’s obligation to pay Expenses pursuant to Section 8.2;


32






 


                  (u)  Any and all Litigation pending or threatened against the Company or
its Affiliates, officers, directors, employees, representatives, attorneys and
agents, and any and all Litigation pending or threatened against either
Investor or its respective Affiliates, officers, directors, managers, partners,
members, stockholders, employees, representatives, attorneys and agents,
related to the Company, its business, its governance, its securities regulatory
disclosure practices, the purchase or sale of any of the Company’s equity or
debt securities, the Investment or the Restructuring Transaction, shall have
been resolved in a manner that is satisfactory to each Investor in its sole
discretion; provided that neither Investor shall be able to assert the failure
of this condition to be satisfied solely as a result of pending Ordinary Course
Litigation; and


                  (v)  The bylaws of the Company, substantially in the form attached hereto
as Exhibit E (the “Bylaws”), shall have been adopted by the Board of Directors
and shall be in full force and effect.


                  5.3. Conditions to Obligations of the Company. The obligation of the
Company to consummate the transactions contemplated hereby shall be subject to
the satisfaction or waiver by the Company at or prior to the Closing of each of
the following conditions:


                  (a)  Each of the representations and warranties of each Investor contained
in this Agreement shall be true and correct when made and as of the Closing
(except to the extent such representations and warranties are made as of a
particular date, in which case such representations and warranties shall have
been true and correct as of such date), except for failures to be true and
correct which individually or in the aggregate would not have a material
adverse effect on the ability of such Investor to consummate the transactions
contemplated hereby;


                  (b)  Each Investor shall have performed, satisfied and complied in all
material respects with all of its covenants and agreements set forth in this
Agreement to be performed, satisfied and complied with on or prior to the
Closing Date;


                  (c)  Each Investor shall have delivered to the Company an officer’s
certificate certifying as to such Investor’s compliance with the conditions set
forth in clauses (a) and (b) of this Section 5.3;


                  (d)  Each Investor shall have executed and delivered the Registration
Rights Agreement and the Stockholders Agreement to the Company, the
Registration Rights Agreement and the Stockholders Agreement shall each be in
full force and effect and there shall exist no breach of or default under
either of the Registration Rights Agreement or the Stockholders Agreement;


                  (e)  If a Bankruptcy Case is commenced, (i) the Bankruptcy Plan shall have
been approved by the Bankruptcy Court pursuant to the Confirmation Order
without material modifications or conditions and (ii) the Confirmation Order
shall have become final and non-appealable; and


                  (f)  All Regulatory Approvals that are required in order to consummate the
transactions contemplated by this Agreement and the other Transaction
Documents, shall have


33






 


been obtained by a Final Order (or waived in whole or in
part in a writing executed by the Company, unless such a waiver is prohibited
by law), other than Regulatory Approvals the absence of which would not
reasonably be expected to have a Material Adverse Effect, and all parties shall
have complied with the conditions, if any, imposed in connection with the grant
of the Regulatory Approvals, other than Regulatory Approvals the absence of
which would not reasonably be expected to have a Material Adverse Effect;
provided that no Investor shall be required to accept or comply with any
material condition that would be unreasonably burdensome or that would have a
material adverse effect on it or on the value of the Company and shall not be
obligated to effect the transactions contemplated by the Transaction Documents
if such condition is imposed.


ARTICLE VI


TERMINATION


                  6.1. Termination. This Agreement may be terminated at any time prior to
the Closing:


                  (a)  by mutual written agreement of the Company and each Investor;


                  (b)  by either Investor, but only with respect to its own rights and
obligations hereunder and not those of the other Investor, if the Closing shall
not have been consummated on or before September 15, 2002; provided, that in
the event all of the conditions set forth in Article V other than the condition
set forth in Section 5.2(s) regarding Regulatory Approvals hereof shall have
been satisfied or waived by the parties hereto on or before September 15, 2002,
then the termination right set forth in this clause (b) shall not be available
to either Investor until the earlier of (i) January 15, 2003 and (ii) the date
on which the Company shall notify each Investor in writing that the Regulatory
Approvals cannot be obtained; provided, further, that in the event all of the
conditions set forth in Article V other than the condition set forth in Section
5.2(s) regarding Regulatory Approvals hereof shall have been satisfied or
waived by the parties hereto on or before September 15, 2002 and the condition
set forth in Section 5.2(s) regarding Regulatory Approvals hereof shall have
been satisfied or waived by the parties hereto in all respects other than
receipt of a Final Order on or before January 15, 2003, then the termination
right set forth in this clause (b) shall not be available to either Investor
until the earlier of (i) March 15, 2003 and (ii) the date on which the Company
shall notify each Investor in writing that the Final Order has been denied;
provided, further, that in the event either Investor elects, pursuant to
Section 1.2, to delay the Closing beyond the third day following satisfaction
or waiver of all of the conditions set forth in Article V hereof, any of the
dates set forth in this clause (b), as applicable, shall be extended by the
actual number of days of such delay;


                  (c)  by either Investor, but only with respect to its own rights and
obligations hereunder and not those of the other Investor, if the other
Investor or the Company shall have breached any of its respective
representations, warranties, covenants or other agreements contained in this
Agreement, which breach constitutes or would reasonably be expected to have a
Material Adverse Effect and cannot reasonably be expected to be cured by the
Closing;


34






 


                  (d)  by either Investor, but only with respect to its own rights and
obligations hereunder and not those of the other Investor, if any event,
circumstance, condition, fact, effect, or other matter has occurred or exists
which (i) would, or would be reasonably likely to give rise to the failure of
any of the conditions to the obligations of such Investor set forth in Section
5.1 or Section 5.2; and (ii) cannot be or has not been cured within 20 days
after the giving of written notice to the Company and the other Investor;


                  (e)  by either Investor, but only with respect to its own rights and
obligations hereunder and not those of the other Investor, if the Company has
not complied with its obligations under Section 6.3(b) relating to obtaining
Bankruptcy Court approval of the Company’s obligations to pay the Break-Up
Payment and Expenses (including the timing of the filing of a motion and
proposed order related thereto that is acceptable to each Investor in all
respects) or if the Bankruptcy Court has not issued an order approving such
obligations, in substance reasonably satisfactory to such Investor, within 45
days following commencement of the Bankruptcy Case;


                  (f)  by either Investor if the other Investor has terminated this
Agreement;


                  (g)  by either Investor or the Company if a court of competent jurisdiction
or governmental, regulatory or administrative agency or commission shall have
issued a final and nonappealable order, judgment or decree or taken any other
action having the effect of permanently restraining, enjoining or otherwise
prohibiting the transactions contemplated by this Agreement;


                  (h)  by the Company if (i) the Board of Directors determines in good faith
that termination of this Agreement is necessary in order for the Company to
accept any Proposal or (ii) the Bankruptcy Court has ordered the Company to
terminate this Agreement in order to accept any Proposal, provided that the
Company shall have the right to terminate this Agreement pursuant to clause (i)
above only if it has complied in all material respects with all of the
provisions of Section 4.13, including the notice provisions thereof, and in any
event it shall comply in all material respects with the requirements of
Sections 6.3 and 8.2 relating to the payment (including the timing of any
payment) of Expenses and the Break-Up Payment prior to termination of this
Agreement pursuant to this Section 6.1(h);


                  (i)  by either Investor, but only with respect to its rights and
obligations hereunder and not those of the other Investor, if the Company
enters into a written agreement with respect to any Proposal;


                  (j)  by the Company, if either Investor terminates its rights and
obligations under this Agreement pursuant to this Section 6.1 and the other
Investor shall not have agreed, within 10 Business Days of receipt of notice of
such termination from the terminating Investor (the delivery of such notice
being a condition precedent to any termination under this Section 6.1(j)) to
exercise its rights to assume all of the rights and obligations of the
terminating Investor pursuant to Section 8.5(b);


35






 


                  (k)  by the Company, if the Closing shall not have been consummated on or
before the date specified in Section 6.1(b), including the extensions provided
for in each of the three provisos contained therein, if applicable;


                  (l)  by the Company, if either Investor shall have breached in any material
respect any of its representations, warranties, covenants or other agreements
contained in this Agreement, which breach cannot reasonably be expected to be
cured by the Closing; provided, that the non-breaching Investor (if there is
one) shall not have agreed, within 10 Business Days of receipt of notice from
the Company of the determination that such breach cannot reasonably be expected
to be cured by the Closing (the delivery of such notice being a condition
precedent to any termination under this Section 6.1(l)), to waive such breach
and exercise its rights to assume all of the rights and obligations of the
breaching Investor pursuant to Section 8.5(b); and


                  (m)  by the Company, if any material event, circumstance, condition, fact,
effect or other matter has occurred or exists which (i) would, or would be
reasonably likely to give rise to the failure of any of the conditions to the
obligation of the Company set forth in Section 5.1 or 5.3; and (ii) cannot be
cured within 20 days after the giving of written notice to each Investor.


                  6.2. Effect of Termination. Subject to Section 8.5(b), in the event of
the termination of this Agreement by any party pursuant to Section 6.1, this
Agreement shall forthwith become void as to such terminating party and there
shall be no liability on the part of any party hereto (or any stockholder,
director, officer, partner, employee, agent, consultant or representative of
such party) to the party that has terminated this Agreement, except as set
forth in this Section 6.2, provided, that nothing contained in this Agreement
shall relieve any party from liability for any breach of this Agreement; and
provided, further, that this Section 6.2 and Sections 7.1, 7.2, 8.1, 8.2, 8.5,
8.6, 8.7, 8.8, 8.11, 8.12, 8.13 and 8.14 shall survive termination of this
Agreement by any party.


                  6.3 Break-Up Payment. (a) The Company shall pay or cause to be paid to
each Investor a payment (the “Break-Up Payment”) equal to one percent (1%) of
the implied, pre-money enterprise value of the Company if the Company proposes
to terminate this Agreement under Section 6.1(h) or both Investors elect to
terminate this Agreement pursuant to Section 6.1(i). The parties agree that
the implied, pre-money enterprise value of the Company shall be determined
using the accounting methods and principles and valuation methodology set forth
on Schedule 6.3(a). The payment of the Break-Up Payment, in same day funds, to
each Investor, shall (i) be a condition precedent to the effectiveness of any
termination by the Company of this Agreement under Section 6.1(h) or (ii) be
made by the Company promptly, but in no event later than the third Business Day
following delivery of notice by either Investor to the Company that either
Investor has elected to terminate this Agreement pursuant to Section 6.1(i);
provided, however, that in the event the Company is engaged in a Bankruptcy
Case, the timing of the payment of the Break-Up Payment shall, in all events,
be in accordance with the Break-Up Payment Order.


                  (b)  In the event a Bankruptcy Case is commenced, the Company shall
promptly, but in no event later than three Business Days after commencement of
such Bankruptcy Case, take all action reasonably necessary to obtain approval
from the Bankruptcy


36






 


Court of the Company’s obligation to pay the Expenses and
the Break-Up Payment to each Investor in accordance with the terms of this
Section 6.3. Any and all motions and other documents filed by the Company in
connection with its obligations under this Section 6.3 must be reasonably
acceptable to each Investor. Furthermore, to the extent that the Company seeks
to establish bidding or similar procedures in connection with any Proposal,
such procedures (and any and all motions and other documents filed by the
Company in connection therewith) must, subject to applicable fiduciary duties
of the Board of Directors, be reasonably acceptable to each Investor in all
respects.


                  (c)  The Company acknowledges and agrees that (i) the payment of the
Break-Up Payment is an integral part of the transactions contemplated by this
Agreement, (ii) in the absence of the Company’s obligations to make this
payment, neither Investor would have entered into this Agreement and (iii)
subject to the proviso to the last sentence of Section 6.3(a), time is of the
essence with respect to the payment of the Break-Up Payment. The Company
accordingly agrees that in the event that the Company fails to pay the Break-Up
Payment in accordance with this Section 6.3 promptly, the Company will, in
addition to the payment of such amount, also pay to each Investor all of its
reasonable costs and expenses (including reasonable attorneys’ fees and
expenses) incurred by such Investor in the enforcement of its rights under this
Section 6.3, together with interest on such amount accruing from the date of
such failure at a rate of 10% per annum from the date upon which such payment
was due, to and including the date of payment.


ARTICLE VII



SURVIVAL AND LOSSES



                  7.1. Survival. The representations and warranties of the parties hereto
contained in this Agreement or in any of the other Transaction Documents shall
expire on the three-year anniversary of the Closing Date, except that the
representations and warranties set forth in Section 2.13 shall expire on the
earlier of (i) the expiration of the statute of limitations applicable to the
substance of such representation or warranty or (ii) the five-year anniversary
of the Closing Date, in each case except to the extent a party has asserted a
claim in accordance with this Article VII for breach of any such representation
or warranty prior to the expiration of such period, in which event any
representation or warranty to which such claim relates shall survive with
respect to such claim until such claim is resolved as provided in this Article
VII. After the expiration of such periods, any claim by a party hereto based
upon any such representation or warranty shall be of no further force or
effect. The covenants and agreements of the parties hereto contained in this
Agreement and in any of the other Transaction Documents shall survive the
Closing until performed in accordance with their terms.


                  7.2. Losses. (a) The Company shall indemnify, defend and hold harmless
each Investor, their Affiliates, and their respective officers, directors,
partners, members, managers, employees, agents, representatives, successors and
assigns (each an “Investor Covered Person”) from and against any and all Losses
incurred or suffered by an Investor Covered Person (whether incurred or
suffered directly or indirectly through ownership or proposed ownership of
Common Stock, membership on the Board of Directors or any committee thereof or
otherwise) arising from or in connection with any Litigation threatened,
commenced or pending by any


37






 


direct or indirect stockholder of the Company
(whether in the name of the Company or otherwise).


                  (b)  An Investor Covered Person seeking indemnification under this Section
7.2 shall, promptly upon becoming aware of the facts indicating that a claim
for indemnification may be warranted, give to the Company a notice of claim
relating to such Loss (a “Claim Notice”). Each Claim Notice shall specify the
nature of the claim, and, if possible, the amount or the estimated amount
thereof. No failure or delay in giving a Claim Notice and no failure to
include any specific information relating to the claim (such as the amount or
estimated amount thereof) shall affect the obligation of the party from whom
indemnification is sought.


ARTICLE VIII


MISCELLANEOUS


                  8.1. Defined Terms; Interpretations. (a) The following capitalized terms,
as used in this Agreement, shall have the following meanings:


                  “Affiliate” shall have the meaning ascribed thereto such term in Rule
12b-2 of the General Rules and Regulations under the Exchange Act.


                  “Agreement” shall have the meaning ascribed thereto in the preamble.


                  “Amended and Restated Certificate of Incorporation” shall mean the Amended
and Restated Certificate of Incorporation attached hereto as Exhibit D, which
shall be revised and completed in accordance with Section 4.19.


                  “Amended Bank Credit Facility” shall mean a bank credit facility under
which the Company is the borrower, in effect as of the Closing as a replacement
to the Bank Credit Facility, which provides for a term loan or term loans and
revolving loans.


                  “Assuming Investor” shall have the meaning ascribed thereto in Section
8.5(b).


                  “Bank Credit Facility” shall mean the Credit and Guarantee Agreement,
dated as of February 3, 2000, among Nextlink, certain subsidiaries of Nextlink,
various Lenders (as defined therein), Goldman Sachs Credit Partners, L.P., as
Syndication Agent, Toronto Dominion (Texas), Inc., as Administrative Agent,
Barclays Bank plc and The Chase Manhattan Bank, as Co-Documentation Agents, and
TD Securities, together with Goldman Sachs Credit Partners, L.P., the Joint
Lead Arrangers, and all ancillary agreements entered into pursuant to the terms
thereof, each as amended as of the Closing.


                  “Bankruptcy Case” shall mean all legal proceedings, if any, instituted in
a United States Bankruptcy Court in connection with the Restructuring or
otherwise involving the Company, and any of its Affiliates, as debtor.


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                  “Bankruptcy Code” shall mean Title 11 of the United States Code, 11 U.S.C.
§101, et seq., as now in effect or hereafter amended.


                  “Bankruptcy Court” shall mean the United States Bankruptcy Court or other
U.S. federal court of competent jurisdiction in which the Bankruptcy Case is
pending.


                  “Bankruptcy Plan” shall mean either the Prepackaged Plan or the
Pre-negotiated Plan, whichever may be filed in connection with the Bankruptcy
Case.


                  “Board of Directors” shall mean the Board of Directors of the Company.


                  “Break-Up Payment” shall have the meaning ascribed thereto in Section
6.3(a).


                  “Break-Up Payment Order” shall mean an order of the Bankruptcy Court
approving the Break-Up Payment.


                  “Business Day” shall mean any day other than a Saturday or Sunday which is
not a day on which banking institutions in New York City are authorized or
obligated by law or executive order to close.


                  “Business Plan” shall mean the business plan of the Company, as approved
by each Investor prior to the Closing, which approval shall not be unreasonably
withheld, and as the same may be amended from time to time in accordance with
the Stockholders Agreement.


                  “Bylaws” shall have the meaning ascribed thereto in Section 5.2(v).


                  “Capital Lease” shall mean a lease with respect to which the lessee is
required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.


                  “Change of Control” shall mean the occurrence of any of the following
events:


                  (i)  any “person” or “group” (as such terms are used in Sections 13(d)
and 14(d) of the Securities Exchange Act of 1934), is or becomes the
beneficial owner, directly or indirectly, of more than 50% of the total
outstanding voting stock of the Company;


                  (ii)  during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors or other
governing body of the Company (together with any new directors whose election
to such Board of Directors or whose nomination for election by the
stockholders of the Company was approved by a vote of 662/3% of the directors
then still in office who were either directors at the beginning of such
period or whose election or nomination for election was previously so
approved), cease for any reason to constitute a majority of such Board of
Directors then in office;


                  (iii)  the Company consolidates with or merges with or into any Person,
or any Person consolidates with or merges with or into the Company, and
immediately following the consummation of such transaction the holders of the
outstanding common stock of the Company immediately prior to such transaction
hold less than 50% of the outstanding common


39






 


stock and the combined voting
power of the outstanding voting securities of (x) the surviving Person in
such transaction or (y) the Person into whose securities the outstanding
common stock of the Company was converted in such transaction or whose
securities were otherwise issued to holders of the outstanding common stock
of the Company in such transaction;


                  (iv)  the Company sells, transfers, conveys, leases or otherwise disposes
of all or substantially all of its assets in one transaction or a series of
related transactions; or


                  (v)  the Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution.


                  “Claim Notice” shall have the meaning ascribed thereto in Section 7.2(b).


                  “Class A Common Stock” shall have the meaning ascribed thereto in Section
1.1.


                  “Class B Common Stock” shall have the meaning ascribed thereto in Section
2.3.


                  “Class C Common Stock” shall have the meaning ascribed thereto in Section
1.1.


                  “Class D Common Stock” shall have the meaning ascribed thereto in Section
1.1.


                  “Class E Common Stock” shall have the meaning ascribed thereto in Section
4.19(a).


                  “Closing” shall have the meaning ascribed thereto in Section 1.2(a).


                  “Closing Date” shall have the meaning ascribed thereto in Section 1.2(a).


                  “Code” shall mean the Internal Revenue Code of 1986, as amended.


                  “Commitments” shall have the meaning ascribed thereto in Section 2.11.


                  “Common Stock” shall have the meaning ascribed thereto in Section 2.3 and
shall include, as the context may require, Class A Common Stock, Class B Common
Stock and all common stock now or hereafter authorized to be issued (including,
without limitation, the Class C Common Stock and Class D Common Stock), and any
and all securities of any kind whatsoever of the Company which may be exchanged
for or converted into Common Stock, and any and all securities of any kind
whatsoever of the Company which may be issued on or after the date hereof in
respect of, in exchange for, or upon conversion of shares of Common Stock
pursuant to a merger, consolidation, stock split, stock dividend,
recapitalization of the Company or otherwise.


                  “Communications Act” shall mean the Communications Act of 1934, as
amended, and the rules and regulations (including those issued by the FCC)
promulgated thereunder.


                  “Communications License” or “Communications Licenses” shall have the
meaning ascribed thereto in Section 2.9(a).


                  “Company” shall have the meaning ascribed thereto in the preamble.


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                  “Company Licensed Intellectual Property” shall have the meaning ascribed
thereto in Section 2.15.


                  “Company Owned Intellectual Property” shall have the meaning ascribed
thereto in Section 2.15.


                  “Confidential Information” shall have the meaning ascribed thereto in the
Forstmann Little Confidentiality Agreement.


                  “Confirmation Order” shall mean the order entered by the Bankruptcy Court
in the Bankruptcy Case confirming the Bankruptcy Plan pursuant to Section 1129
of the Bankruptcy Code. The Confirmation Order shall provide, among other
things, that (i) the sale of Common Stock pursuant to this Agreement shall be
free and clear of all liens, claims, interests, rights of others or
encumbrances of any kind, (ii) an express finding that the Company and each
Investor have acted in good faith, and (iii) the issuance of Common Stock to
creditors under the Bankruptcy Plan is exempt from registration under the
Securities Act.


                  “Consents” shall have the meaning ascribed thereto in Section 4.4(a).


                  “Contractual Management Rights Letter” shall have the meaning ascribed
thereto in Section 4.6(b).


                  “Conversion Shares” shall mean shares of Class A Common Stock issuable
upon conversion of the Class C Common Stock and Class D Common Stock into Class
A Common Stock pursuant to the Amended and Restated Certificate of
Incorporation, and any and all securities of any kind whatsoever of the Company
which may be issued on or after the date hereof in respect of, in exchange for,
or upon conversion of shares of Class A Common Stock pursuant to a merger,
consolidation, stock split, stock dividend, recapitalization of the Company or
otherwise.


                  “Customer Base” shall mean those Persons to which the Company or the
Subsidiaries provide telecommunications service.


                  “DGCL” shall mean the Delaware General Corporation Law.


                  “Encumbrance” shall mean, with respect to any Person, any mortgage, lien,
pledge, charge, claim, option, proxy, voting trust, security interest or other
encumbrance, or any interest or title of any vendor, lessor, lender or other
secured party to or of such Person under any conditional sale or other title
retention agreement or Capital Lease, upon or with respect to any property or
asset of such Person (including in the case of stock, stockholder agreements,
voting trust agreements and all similar arrangements).


                  “Environmental Law” shall mean any foreign, federal, state or local law,
statute, regulation, rule, ordinance, decree, or any other requirement of law
(including common law) regulating or relating to the protection of human health
and safety or the environment, including, but not limited to, laws relating to
releases or threatened releases of Hazardous Materials into the environment.


41






 


                  “Environmental Permits” shall mean all federal, state, local and foreign
franchises, approvals, authorizations, franchises, licenses, orders,
registrations, certificates, filings, variances, notices and other similar
permits or rights obtained from any Governmental Entity, related to any
Environmental Law.


                  “Equity VI” shall mean Forstmann Little & Co. Equity Partnership VI, L.P.,
a Delaware limited partnership.


                  “Equity VII” shall have the meaning ascribed thereto in the preamble.


                  “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as
amended.


                  “ERISA Affiliate” shall mean any trade or business, whether or not
incorporated, which together with the Company would be deemed a “single
employer” within the meaning of Section 4001(b) of ERISA.


                  “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended,
or any successor federal statute, and the rules and regulations of the SEC
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include reference to the comparable section, if any, of any such successor
federal statute.


                  “Expenses” shall have the meaning ascribed thereto in Section 8.2.


                  “Expired Policies” shall have the meaning ascribed thereto in Section
2.17.


                  “FCC” shall mean the Federal Communications Commission and any successor
Governmental Entity.


                  “FCC Licenses” shall have the meaning ascribed thereto in Section 2.9(a).


                  “Final Order” shall mean an order or determination by the FCC or other
regulatory authority (including State PUCs) (w) that is not reversed, stayed,
enjoined, set aside, annulled or suspended within the deadline, if any,
provided by applicable statute or regulation, (x) with respect to which no
request for stay, motion or petition for reconsideration, application or
request for review, or notice of appeal or judicial petition for review that is
filed within the period referred to in clause (w) above is pending, (y) as to
which the deadlines, if any, for filing such request, motion, petition,
application, appeal or notice have expired, and (z) as to which the deadlines,
if any, for the entry by the FCC or other regulatory authority of orders
staying, reconsidering or reviewing on its own motion such order or
determination have expired; provided, however, that if the statutes and rules
applicable to the regulatory authority do not specify deadlines for the
regulatory authority to enter such orders, this clause (z) shall not apply to
the orders or determinations of that regulatory agency.


                  “FL Fund” shall mean FL Fund, L.P., a Delaware limited partnership.


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                  “Forebearance Agreement” shall mean that certain Forebearance Agreement,
by and between the Company, the lenders under the Senior Credit Facility and
certain Subsidiaries of the Company, dated December 14, 2001, as in effect as
of the date hereof.


                  “Foreign Licenses” shall have the meaning ascribed thereto in Section
2.9(a).


                  “Foreign Competition Approvals” shall mean all consents, authorizations,
approvals, waivers, filings and other actions required by any Governmental
Entities related to antitrust or competition Laws in connection with the
transactions contemplated by this Agreement and the other transactions
documents.


                  “Forstmann Little” shall have the meaning ascribed thereto in the
preamble.


                  “Forstmann Little Confidentiality Agreement” shall mean the
Confidentiality Agreement, dated as of September 27, 2001, between the Company
and FLC XXXI Partnership, L.P., a Delaware limited partnership doing business
as Forstmann Little & Co., which is an affiliate of Forstmann Little.


                  “GAAP” shall have the meaning ascribed thereto in Section 2.5.


                  “Governmental Entity” shall mean any supernational, national, foreign,
federal, state or local judicial, legislative, executive, administrative or
regulatory body or authority.


                  “Guaranty” shall mean, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments
for deposit or collection) of such Person guaranteeing or in effect
guaranteeing (whether by reason of being a general partner of a partnership or
otherwise) any indebtedness, dividend or other obligation of any other Person
in any manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person: (a) to purchase such indebtedness or obligation or any property
constituting security therefor; (b) to advance or supply funds (i) for the
purchase or payment of such indebtedness or obligation, or (ii) to maintain any
working capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available funds
for the purchase or payment of such indebtedness or obligation; (c) to lease
properties or to purchase properties or services primarily for the purpose of
assuring the owner of such indebtedness or obligation of the ability of any
other Person to make payment of the indebtedness or obligation; or (d)
otherwise to assure the owner of such indebtedness or obligation against loss
in respect thereof. In any computation of the indebtedness or other
liabilities of the obligor under any Guaranty, the indebtedness or other
obligations that are the subject of such Guaranty shall be assumed to be direct
obligations of such obligor.


                  “Hazardous Materials” shall mean any substance or material that is
classified or regulated as “hazardous” or “toxic” or similar designation
pursuant to any Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls, petroleum and urea-formaldehyde insulation.


                  “HSR Act” shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder.


43






 


                  “Indebtedness” shall mean, with respect to any Person , at any time,
without duplication, (a) its liabilities for borrowed money; (b) its
liabilities for the deferred purchase price of property acquired by such Person
(excluding accounts payable arising in the ordinary course of business but
including all liabilities created or arising under any conditional sale or
other title retention agreement with respect to any such property); (c) all
liabilities appearing on its balance sheet in accordance with GAAP in respect
of Capital Leases; (d) all liabilities for borrowed money secured by any
Encumbrance with respect to any property owned by such Person (whether or not
it has assumed or otherwise become liable for such liabilities); (e) all its
liabilities in respect of letters of credit or instruments serving a similar
function issued or accepted for its account by banks and other financial
institutions (whether or not representing obligations for borrowed money); (f)
Swaps of such Person; and (g) any Guaranty of such Person with respect to
liabilities of a type described in any of clauses (a) through (f) hereof.


                  “Intellectual Property” shall mean the United States and foreign
trademarks, service marks, trade names, trade dress, domain names, logos,
business and product names, and slogans including registrations and
applications to register or renew the registration of any of the foregoing;
copyrights and registrations or renewals thereof; United States and foreign
letters patent and patent applications, including all reissues, continuations,
divisions, continuations-in-part or renewals or extensions thereof; inventions,
processes, designs, formulae, trade secrets, know-how, confidential business
and technical information; software and computer programs of any kind
whatsoever (including without limitation all modeling software in both source
code and object code versions) and all documentation relating thereto; Internet
websites; mask works and other semiconductor chip rights and registrations or
renewals thereof; and all other intellectual property and proprietary rights,
tangible embodiments of any of the foregoing (in any form or medium including
electronic media), and licenses of any of the foregoing.


                  “Investment” shall have the meaning ascribed thereto in Section 1.1.


                  “Investor Covered Person” shall have the meaning ascribed thereto in
Section 7.2(a).


                  “Investor Press Announcement” shall mean any press releases and public
filings made by an Investor between the date hereof and the Closing Date and
referring to the Company, the other Investor, this Agreement or any of the
other Transaction Documents, or any of the transactions contemplated thereby.


                  “Investor Reimbursement Cap” shall have the meaning ascribed thereto in
Section 8.2.


                  “Investors” shall have the meaning ascribed thereto in the preamble.


                  “IRS” shall mean the United States Internal Revenue Service.


                  “IRU Agreement” shall have the meaning ascribed thereto in Section
2.20(d).


                  “Knowledge”, with respect to the Company, shall mean the knowledge of
Daniel F. Akerson, Noelle Beams, Gary D. Begeman, Douglas Carter, Peter
Campbell, Mark Coppersmith, Nathaniel Davis, Mark Faris, Reese Feuerman, Nancy
Gofus, Scott Macleod,


44






 


Cathy Massey, Richard Montfort, Wayne Rehberger, Michael
Ruley, R. Gerard Salemme, Charles Sackley, Laura Thomas and Joseph Zarella or
any such persons and the knowledge that any of the foregoing persons would have
after due and reasonable inquiry and investigation.


                  “Laws” shall mean all foreign, federal, state, and local laws, statutes,
ordinances, rules, regulations, orders, judgments, decrees and bodies of law.


                  “Licenses” shall have the meaning ascribed thereto in Section 2.10.


                  “Litigation” shall have the meaning ascribed thereto in Section 2.7(a).


                  “Local Authorizations” shall have the meaning ascribed thereto in Section
2.9(a).


                  “Losses” shall mean each and all of the following items: claims, losses,
(including, without limitation, losses of earnings) liabilities, obligations,
payments, damages (actual or punitive but not consequential), charges,
judgments, fines, penalties, amounts paid in settlement, costs and expenses
(including, without limitation, interest which may be imposed in connection
therewith, costs and expenses of investigation, Litigation, demands,
assessments and fees, expenses and disbursements of counsel, consultants and
other experts).


                  “Management Shares” shall have the meaning ascribed thereto in Section
4.19.


                  “Material Adverse Effect” shall have the meaning ascribed thereto in
Section 5.2(r).


                  “Material Terms” shall have the meaning ascribed thereto in Section
4.1(b)(x).


                  “MBO VII” shall mean Forstmann Little & Co. Subordinated Debt and Equity
Management Buyout Partnership VII, L.P., a Delaware limited partnership.


                  “MBO VIII” shall have the meaning ascribed thereto in the preamble.


                  “Network Facilities” shall have the meaning ascribed thereto in Section
2.20(b).


                  “Network Maps” shall have the meaning ascribed thereto in Section 2.20(a).


                  “New Capitalization” shall mean the total capitalization of the Company
as set forth on Exhibit A hereto, including, without limitation, the Management
Shares, but excluding shares of Class A Common Stock issued or issuable upon
exercise of options issued under the New Employee Stock Option Plan.


                  “New Common Shares” shall have the meaning ascribed thereto in Section
1.1.


                  “New Employee Stock Option Plan” shall mean a stock option plan having
terms and conditions outlined in Exhibit H hereto, and otherwise reasonably
satisfactory in form and substance to each of the Investors.


                  “New Forstmann Little Shares” shall have the meaning ascribed thereto in
Section 1.1.


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                  “New Outstanding Equity” shall mean the total outstanding equity
securities of the Company immediately after giving effect to the Restructuring
and the Investment, excluding any options outstanding under a New Employee
Stock Option Plan approved by the Investors, but including but not limited to,
all outstanding Common Stock.


                  “New Policy” shall have the meaning ascribed thereto in Section 4.1(b)(x).


                  “New Telmex Shares” shall have the meaning ascribed thereto in Section
1.1.


                  “Nextlink” shall mean NEXTLINK Communications, Inc., a Delaware
Corporation and the predecessor to the Company.


                  “1999 Stock Purchase Agreement” shall mean the Stock Purchase Agreement,
dated as of December 7, 1999, by and between Equity VI, MBO VII, FL Fund, and
Nextlink.


                  “NMS” shall have the meaning ascribed thereto in Section 4.5.


                  “Old Policy” shall have the meaning ascribed thereto in Section 4.1(b)(x).


                  “Operational Plan” shall mean the revised financial projections and
business plan prepared by the Company and its advisors for presentation to the
lenders under the Bank Credit Facility, a copy of which has been provided by
the Company to each of the Investors.


                  “Ordinary Course Litigation” shall mean Litigation arising in the ordinary
course of business of the Company and the Subsidiaries relating to the business
and operations of the Company and the Subsidiaries which satisfies all of the
following criteria:


                  (i)  Such Litigation which would not, or would not reasonably be expected
to have, either individually or in the aggregate, (x) a Material Adverse Effect
or (y) a material adverse effect upon any officer or director of the Company or
upon either Investor or any Affiliate, officer, director, manager, partner,
member, stockholder, employee, representative, attorney or agent of either
Investor;


                  (ii)  The plaintiffs, claimants or other Persons commencing or pursuing
such Litigation do not include any direct or indirect stockholders of the
Company or of any Subsidiary or any representatives of any such stockholders
suing in such capacity;


                  (iii)  Such Litigation is not, and does not include, in whole or in part, a
derivative or similar claim or action brought by or on behalf of, or in the
name of, the Company or any Subsidiary;


                  (iv)  Such Litigation does not arise out of or relate to, in whole or in
part, the governance or securities regulatory disclosure practices of the
Company, the direct or indirect purchase or sale of any debt or equity
securities of the Company or any Subsidiary, the Investment or the
Restructuring Transaction; and


                  (v)  Such Litigation does not include, in whole or in part, any claim or
allegation of (i) breach of fiduciary duty by the Company or any director,
officer, employee or


46






 


stockholder of the Company or (ii) breach of any federal,
state or foreign securities or blue sky laws.


                  “Permitted Encumbrances” shall mean: any Encumbrance (x) permitted under
the Bank Credit Facility, (y) permitted under any Amended Bank Credit Facility,
or (z) securing Indebtedness ranking pari passu with the Bank Credit Facility
or any Amended Bank Credit Facility.


                  “Person” shall mean any individual, firm, corporation, limited liability
company, partnership, company, trust or other entity, and shall include any
successor (by merger or otherwise) of such entity.


                  “Plan” shall mean each collective bargaining agreement, employment
agreement or severance agreement, and any bonus, pension, post-retirement
benefit, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, retirement, vacation,
severance, disability, death benefit, hospitalization, medical, dental or other
plan, arrangement or understanding providing compensation or benefits generally
to current employees, officers, independent contractors, or directors of the
Company or any of the Subsidiaries, including without limitation, the Retention
Bonus Plan and all other plans, agreements, arrangements and understandings set
forth on Schedule 2.14(a)(i).


                  “Preferred Stock” shall have the meaning ascribed thereto in Section 2.3.


                  “Pre-negotiated Plan” shall have the meaning ascribed thereto in Section
4.12(a)(iii).


                  “Prepackaged Approach” shall have the meaning ascribed thereto in Section
4.12(a)(ii).


                  “Prepackaged Plan” shall have the meaning ascribed thereto in Section
4.12(a)(i)(B).


                  “Proposal” shall have the meaning ascribed thereto in Section 4.13(a).


                  “Public Debt” shall mean the Company’s (a) 12 1/2% Senior Notes due
2006, (b) 9 5/8% Senior Noted due 2007, (c) 9% Senior Noted due 2008, (d) 9.45%
Senior Discount Notes due 2008, (e) 10 3/4% Senior Notes due 2008, (f) 10
3/4% Senior Notes due 2009, (g) 12 1/4% Senior Discount Notes due 2009, (h)
10 1/2% Senior Notes due 2009, (i) 12 1/8% Senior Discount Notes due 2009,
(j) 12 3/4% Senior Notes due 2007, and (k) 5 3/4% Convertible Subordinated
Notes due 2009.


                  “Purchase Price” shall have the meaning ascribed thereto in Section 1.1.


                  “Registration Rights Agreement” shall have the meaning ascribed thereto in
the recitals.


                  “Regulatory Approvals” shall mean all approvals, consents (including
consents to assignments of permits and rights of way), waivers, certificates,
and other authorizations


47






 


required to be obtained from the FCC, any State PUCs
or any other federal, state, foreign or municipal communications regulatory
agency having jurisdiction over the Company’s or either Investor’s business in
order to consummate the transactions contemplated by this Agreement and the
other Transaction Documents.


                  “Replacement Policies” shall have the meaning ascribed thereto in Section
2.17.


                  “Required Consents” shall mean such consents or agreements of creditors
and security holders as shall be required to effectuate the Restructuring
Transaction.


                  “Restructuring” shall have the meaning ascribed thereto in Section
4.12(a).


                  “Restructuring Transaction” shall mean any transaction, filing, case,
action or event or other series of transactions, filings, cases, actions or
events (including, without limitation, an exchange offer, a consent
solicitation, a Prepackaged Plan, a Pre-negotiated Plan or any other Bankruptcy
Case), whereby the completion of which, as evidenced by a Final Order, if
applicable, the Company, in all material respects, shall have effectuated the
Restructuring.


                  “Retention Bonus Plan” shall mean the NEXTLINK Communications, Inc. Change
of Control Retention Bonus and Severance Pay Plan, as filed with the SEC as
Exhibit 10.3 to the Company’s Annual Report on Form 10-K for the fiscal year
ended December 31, 1999.


                  “SEC” shall mean the United States Securities and Exchange Commission and
any successor Governmental Entity.


                  “SEC Reports” shall have the meaning ascribed thereto in Section 2.4.


                  “Securities Act” shall mean the Securities Act of 1933, as amended, or any
successor federal statute, and the rules and regulations of the SEC thereunder,
all as the same shall be in effect at the time. Reference to a particular
section of the Securities Act shall include reference to the comparable
section, if any, of such successor federal statute.


                  “Series A Preferred Stock” shall have the meaning ascribed thereto in
Section 2.3.


                  “Series B Preferred Stock” shall have the meaning ascribed thereto in
Section 2.3.


                  “Series C Preferred Stock” shall have the meaning ascribed thereto in
Section 2.3.


                  “Series D Preferred Stock” shall have the meaning ascribed thereto in
Section 2.3.


                  “Series E Preferred Stock” shall have the meaning ascribed thereto in
Section 2.3.


                  “Series F Preferred Stock” shall have the meaning ascribed thereto in
Section 2.3.


                  “Series G Preferred Stock” shall have the meaning ascribed thereto in
Section 2.3.


                  “Series H Preferred Stock” shall have the meaning ascribed thereto in
Section 2.3.


48






 


                  “Stockholders Agreement” shall have the meaning ascribed thereto in the
recitals.


                  “Significant Subsidiaries” shall have the meaning ascribed thereto in
Section 2.1(b).


                  “State Licenses” shall have the meaning ascribed thereto in Section
2.9(a).


                  “State PUCs” shall mean the state and local public service and public
utilities commissions and agencies, commissions, and similar bodies performing
similar functions.


                  “Subsidiaries” shall mean the collective reference to the Significant
Subsidiaries and all other direct or indirect subsidiaries of the Company.


                  “Swaps” shall mean, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency.


                  “Tax” shall mean any tax, assessment or other governmental charge imposed
by any federal, state, provincial, local government or other political
subdivision or agency thereof, including any income, alternative minimum,
accumulated earnings, personal holding company, franchise, capital stock,
profits, windfall profits, gross receipts, sales, use, value added, transfer,
registration, stamp, premium, excise, customs duties, severance, real property,
personal property, ad valorem, occupancy, license, occupation, employment,
payroll, social security, disability, unemployment, workers’ compensation,
withholding, estimated or other similar tax, assessment or other governmental
charge, including penalties, interest and additions thereto.


                  “Tax Return” shall mean any return, report or similar statement required
to be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund,
amended return or declaration of estimated Tax.


                  “Telmex” shall have the meaning ascribed thereto in the preamble.


                  “Telmex Confidentiality Agreement” shall mean the letter agreement, of
even date herewith, between Telmex and the Company, regarding the disclosure of
information concerning the Company.


                  “Third Party Consents” shall have the meaning ascribed thereto in Section
2.8.


                  “Transaction Documents” shall mean this Agreement, the Amended and
Restated Certificate of Incorporation, the Bylaws, the Stockholders Agreement,
the Registration Rights Agreement, the Bankruptcy Plan, if applicable, and all
other contracts, agreements, schedules, certificates and other documents being
delivered pursuant to or in connection with this Agreement.


                  “Transaction Fees” shall have the meaning ascribed thereto in Section
5.2(t).


                  “Transferring Investor” shall have the meaning ascribed thereto in Section
8.5(b).


49






 


                  “2000 Stock Purchase Agreement” shall mean the Stock Purchase Agreement,
dated as of June 14, 2000, by and between Equity VI, MBO VII, FL Fund, and
Nextlink.


                  “2000 10-K” shall have the meaning ascribed thereto in Section 2.1(b).


                  “2001 Bonus Plan” shall have the meaning ascribed thereto in Section
4.1(b)(xi).


                  (b)  For all purposes of this Agreement, unless otherwise expressly
provided or unless the context requires otherwise:



		
	 	     (i) the terms defined in this Section 8.1 and elsewhere in this
Agreement may include both the plural and singular, as the context may
require;




		
	 	     (ii) the words “herein”, “hereto” and “hereby”, and other words of
similar import, refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision of this Agreement;




		
	 	     (iii) unless otherwise specified, references to Articles, Sections,
paragraphs, clauses, subclauses, subparagraphs, Exhibits and Schedules
are references to Articles, Sections, paragraphs, clauses, subclauses,
subparagraphs, Exhibits and Schedules of this Agreement;




		
	 	     (iv) the words “including” and “include” and other words of similar
import shall be deemed to be followed by the phrase “without limitation”;




		
	 	     (v) any reference herein to a statute, rule or regulation of any
governmental entity (or any provision thereof) shall include such
statute, rule or regulation (or provision thereof), including any
successor thereto, as it may be amended from time to time; and




		
	 	     (vi) whenever the context may require, any pronouns used herein
shall include the corresponding masculine, feminine or neuter forms, and
the singular form of names and pronouns shall include the plural and vice
versa.



                  8.2. Fees and Expenses. The Company shall pay, or cause to be paid, to
the Investors, all of their reasonable, documented, out-of-pocket costs and
expenses incurred in connection with the transactions contemplated by this
Agreement and the other Transaction Documents, including, without limitation,
all fees and expenses (a) incurred in connection with evaluating such
transactions, conducting a due diligence investigation of the Company and the
Subsidiaries, negotiating and documenting this Agreement and the other
Transaction Documents, taking all actions reasonably necessary or appropriate
to consummate such transactions (including, without limitation, the Investment
and the Restructuring Transaction) and enforcing any provision of this
Agreement or any other Transaction Document, (b) of law firms, investment
banking firms, accountants, public relations firms, experts, consultants and
all other Persons engaged by an Investor and (c) incurred in connection with
any regulatory filings, including filings under the HSR Act, the Communications
Act, the Securities Act and the Exchange Act, any foreign antitrust or
competition Laws and with the State PUCs and non-U.S. regulatory authorities
(collectively “Expenses”); provided that the Company shall have no


50






 


obligation
to reimburse the Investors for any Expenses pursuant to this Section 8.2 in an
amount in excess of $14,000,000 in the aggregate (the “Investor Reimbursement
Cap”), except that Expenses (including, without limitation, legal fees)
incurred by the Investors in enforcing any provision of this Agreement or any
other Transaction Document shall not be subject to the Investor Reimbursement
Cap. Subject to approval of the Bankruptcy Court, if applicable, the Company
shall pay Expenses to an Investor promptly following receipt by the Company of
documentation for any such Expenses, which such Investor may, at its option,
deliver to the Company on an “as-incurred” basis.


                  8.3. Restrictive Legends. No New Common Shares may be transferred without
registration under the Securities Act and applicable state securities laws
unless counsel to the Company shall advise the Company that such transfer may
be effected without such registration. Each certificate representing any of
the foregoing shall bear legends in substantially the following form:



		
	 	THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE
EXEMPTION TO THE REGISTRATION REQUIREMENTS OF SUCH ACT
OR SUCH LAWS.



                  8.4. Further Assurances. At any time or from time to time after the
Closing, the Company, on the one hand, and each Investor, on the other hand,
agree to cooperate with each other, and at the request of the other party, to
execute and deliver any further instruments or documents and to take all such
further action as the other party may reasonably request in order to evidence
or effectuate the consummation of the transactions contemplated hereby or by
the other Transaction Documents and to otherwise carry out the intent of the
parties hereunder or thereunder.


                  8.5. Successors and Assigns. (a) This Agreement shall bind and inure to
the benefit of the Company and each Investor and their respective successors,
permitted assigns, heirs and personal representatives, provided that the
Company may not assign its rights or obligations under this Agreement to any
Person without the prior written consent of each Investor, and provided,
further, that neither Investor may assign its rights or obligations under this
Agreement to any Person without the prior written consent of the Company, which
consent shall not be unreasonably withheld or delayed; provided, further, that
notwithstanding the foregoing, either Investor may assign its rights and
obligations hereunder to one of its Affiliates; provided, that no such
assignment to an Affiliate shall release the party making such assignment from
any of its obligations under this Agreement. For the purpose of clarity, the
Company may withhold consent to any transfer by either Investor to any Person
(including without limitation, an Affiliate of such Investor), if such
assignment would reasonably be expected to result in the Company incurring a
significant delay in obtaining the Regulatory Approvals.


51






 


                  (b)  Notwithstanding anything to the contrary contained in Section 8.5(a)
or elsewhere in this Agreement, if (i) one Investor (but not both Investors)
terminates this Agreement pursuant to Section 6.1(b), 6.1(c), 6.1(d), 6.1(e),
6.1(i) or 6.1(n) or (ii) the Company proposes to terminate this Agreement
pursuant to Section 6.1(l) as a result of a breach of a representation,
warranty, covenant or other agreement made by one Investor in this Agreement,
the non-terminating Investor in the case of clause (i) above and the
non-breaching Investor in the case of clause (ii) above (such non-terminating
Investor or such non-breaching Investor, the “Assuming Investor”) shall have
the right, in its sole discretion, without the consent of the terminating
Investor in the case of clause (i) above or the breaching Investor in the case
of clause (ii) above (such terminating Investor or such breaching Investor, the
“Transferring Investor”) or, in the case of clauses (i) and (ii) above, the
Company, to assume the rights and obligations of the Transferring Investor
under this Agreement and the other Transaction Documents to which it is a party
and, except as expressly provided in Section 6.1(j), the Company shall have no
right to terminate this Agreement or any other Transaction Document solely as a
result thereof; provided, however, that an Assuming Investor shall have no
obligation or liability to the Company or any other Person for any breach by
the Transferring Investor of any representation, warranty, covenant or
agreement made by such Transferring Investor pursuant to this Agreement or any
other Transaction Document; and provided further that the Company shall have no
right to terminate this Agreement as a result of any breach by the Assuming
Investor of any representation, warranty, covenant or agreement made by such
Assuming Investor pursuant to this Agreement or any other Transaction Document
which breach arises solely as a result of the termination of this Agreement by
the Transferring Investor.


                  8.6. Entire Agreement. This Agreement and the other Transaction Documents
and paragraph 4 of the Letter Agreement, dated November 21, 2001, between
Telmex and Forstmann Little & Co. contain the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior and
contemporaneous arrangements or understandings with respect thereto; provided,
that the Forstmann Little Confidentiality Agreement and the Telmex
Confidentiality Agreement will remain in full force and effect in accordance
with their terms.


                  8.7. Notices. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument delivered in person or sent by telecopy, nationally
recognized overnight courier or first class registered or certified mail,
return receipt requested, postage prepaid, addressed to such party at the
address set forth below or such other address as may hereafter be designated in
writing by such party to the other parties:



	 	 	 
	(i)	 	
if to the Company, to:
	 
	 	 	
XO Communications, Inc.
	 	 	
11111 Sunset Hills Road
	 	 	
Reston, VA 20190
	 	 	
Attn: Gary D. Begeman, Esq.
	 
	 	 	
with a copy to:




52







 




	 	 	 
	 	 	
Willkie Farr & Gallagher
	 	 	
787 Seventh Avenue
	 	 	
New York, NY 10019
	 	 	
Telecopy: (212) 728-8111
	 	 	
Attn: Bruce R. Kraus, Esq.
	 
	(ii)	 	
if to Forstmann Little, to:
	 
	 	 	
c/o Forstmann Little & Co.
	 	 	
767 Fifth Avenue
	 	 	
New York, NY 10153
	 	 	
Attention: Sandra J. Horbach
	 
	 	 	
with a copy to:
	 
	 	 	
Fried, Frank, Harris, Shriver & Jacobson
	 	 	
One New York Plaza
	 	 	
New York, NY 10004
	 	 	
Telecopy: (212) 859-4000
	 	 	
Attention: Stephen Fraidin, Esq.
	 
	(iii)	 	
if to Telmex, to:
	 
	 	 	
Teléfonos de México, S.A. de C.V.
	 	 	
Parque Via 190, Piso 10
	 	 	
Colonia Cuauhtémoc
	 	 	
06599 México, D.F.
	 	 	
Attention: Lic. Javier Mondragon Alarcon
	 
	 	 	
with a copy to:
	 
	 	 	
Latham & Watkins
	 	 	
885 Third Avenue
	 	 	
Suite 1000
	 	 	
New York, NY 10022-4802
	 	 	
Telecopy: (212) 751-4864
	 	 	
Attention: Charles M. Nathan, Esq.



                  All such notices, requests, consents and other communications shall be
deemed to have been given or made if and when delivered personally or by
overnight courier to the parties at the above addresses or sent by electronic
transmission, with confirmation received, to the telecopy numbers specified
above (or at such other address or telecopy number for a party as shall be
specified by like notice). Any notice delivered by any party hereto to any
other party hereto shall also be delivered to each other party hereto
simultaneously with delivery to the first party receiving such notice.


53






 


                  8.8. Amendments. The terms and provisions of this Agreement may be
modified or amended, or any of the provisions hereof waived, temporarily or
permanently, in a writing executed and delivered by the Company and each
Investor. No waiver of any of the provisions of this Agreement shall be deemed
to or shall constitute a waiver of any other provision hereof (whether or not
similar). No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof.


                  8.9. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but
one agreement.


                  8.10. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.


                  8.11. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAW, OTHER THAN THE CHOICE OF LAW PRINCIPLES OF SUCH
STATE.


                  8.12. Submission to Jurisdiction. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of Delaware and of the United States of
America, in each case located in New Castle County, for any Litigation arising
out of or relating to this Agreement or the other Transaction Documents and the
transactions contemplated hereby and thereby (and agrees not to commence any
Litigation relating hereto or thereto except in such courts), and further
agrees that service of any process, summons, notice or document by U.S.
registered mail to its respective address set forth in this Agreement shall be
effective service of process for any Litigation brought against it in any such
court. Each of the parties hereto hereby irrevocably and unconditionally
waives any objection to the laying of venue of any litigation arising out of
this Agreement or the transactions contemplated hereby in the courts of the
State of Delaware or the United States of America, in each case located in the
New Castle County, hereby further irrevocably and unconditionally waives and
agrees not to plead or claim in any such court that any such litigation brought
in any such court has been brought in an inconvenient forum.


                  8.13. Waiver Of Jury Trial. THE COMPANY AND THE INVESTORS HEREBY WAIVE
ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING
OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS.


                  8.14. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to


54






 


modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the fullest extent
possible.


55






 


                  IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the date first above written.



	 	 	 
	Investors
	 
	
FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP VII, L.P.
	 
	By:	 	
FLC XXXII Partnership, L.P.
	 	 	
its general partner
	 
	By:	 	
/s/ Sandra J. Horbach
	 	 	
Name: Sandra J. Horbach
	 	 	
Title: General Partner



FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY MANAGEMENT BUYOUT
PARTNERSHIP VIII, L.P.




	 	 	 
	By:	 	
FLC XXXIII Partnership, L.P.
	 	 	
its general partner
	 
	By:	 	
/s/ Sandra J. Horbach
	 	 	
Name: Sandra J. Horbach
	 	 	
Title: General Partner




TELÉFONOS DE MÉXICO, S.A. DE C.V.





	 	 	 
	By:	 	
/s/ Francisco Javier Mondragon
	 	 	
Name: Francisco Javier Mondragon
	 	 	
Title: General Counsel



56






 



XO COMMUNICATIONS, INC.                           




	 	 	 
	By:	 	
/s/ Daniel F. Akerson
	 	 	
Name: Daniel F. Akerson
	 	 	
Title: Chairman and Chief Executive Officer




57










 



Exhibit A

The New Capitalization


     Upon Closing, the complete capitalization of the Company, after giving
effect to (i) the Restructuring, (ii) the issuance of the Management Shares and
(iii) the other transactions contemplated by the Stock Purchase Agreement of
which this Exhibit is a part and to which it is attached, but excluding any
options issued under the New Employee Stock Option Plan or any shares of Class
A Common Stock issued or issueable upon exercise of such options, shall be as
follows:




	 	 	 	 	 
	

	 	 	Amount	 	Ownership of the Company1
	 
	

	Unrestricted Cash	 	
If the Closing occurs at any time
during a period specified below, the
Company’s unrestricted cash upon
Closing shall not be less than the
amount set forth opposite such
period:2
	 	—





	 	 	 
	Period	 	Unrestricted Cash
	 
	From the date hereof

through and including

March 31, 2002	 	
$486 million
	 
	From April 1, 2002

through and including

June 30, 2002	 	
$335 million
	 
	From July 1, 2002

through and including

September 30, 2002	 	
$192 million
	 
	From October 1, 2002

through and including

the Closing	 	
$70 million





	 	 	 	 	 
	

	Aggregate Indebtedness3	 	
Not to exceed $1.034 billion
	 	—
	 
	













	 	 	 
	1	 	
Without giving effect to New Employee Stock Option Plan.
	 
	2	 	
The amounts set forth below are exclusive of any and all Transaction Fees
payable during such period, provided that in no event shall the total aggregate
amount of all Transaction Fees exceed the amount set forth in Section 5.2(t)
	 
	3	 	
For purposes of this Exhibit A, “Indebtedness” means all indebtedness of the
Company and its subsidiaries for borrowed money and all liabilities appearing
on the Company’s balance sheet in accordance with GAAP in respect of Capital
Leases. “Indebtedness” does not include intercompany debt or accrued interest.



A-1







 




	 	 	 	 	 	 	 
	

	Forstmann Little’s New
Equity
 (79,999,998
shares of Class A

Common Stock and two
shares of
 Class D
Common Stock)	 	
$400 million
	 	 	40.00	%
	 
	

	Telmex’s New Equity
(80,000,000
 shares of
Class C Common Stock)	 	
$400 million
	 	 	40.00	%
	 
	

	Management Shares (up
to 4,000,000
 shares of
Class E
 Common Stock)4	 	
approximately $7.0 million5
	 	 	2.00%6	 
	 
	

	Other Equity Holders
(up to
 36,000,000
shares of Class A

Common Stock)	 	
$180 million7
	 	 	18.00	%
	 
	














	 	 	 
	4	 	
See generally Exhibit G for the rights and preferences of the Class E Common
Stock.
	 
	5	 	
This figure is subject to change within the range set forth on Exhibit G.
Any change to this figure may affect the percentage of the outstanding Common
Stock represented by the Management Shares and the percentage of the
outstanding Common Stock acquired by Forstmann Little and Telmex in the
Investment but shall not effect the percentage of the outstanding Common Stock
allocable to the other equity holders as set forth above.
	 
	6	 	
See footnote no. 5 above.
	 
	7	 	
Implied valuation.



A-2









 




Exhibit B



STOCKHOLDERS AGREEMENT


by and among


FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-VII, L.P.


FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY MANAGEMENT

BUYOUT PARTNERSHIP-VIII, L.P.


[TELEFONOS DE MEXICO, S.A. de C.V.]


and

XO COMMUNICATIONS, INC.


dated as of


_____________, 2002


 







 



TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page
	 	 	

	 
	ARTICLE I DEFINITIONS	 	 	
1	 
	 
	1.1. Definitions	 	 	
1	 
	1.2. General Interpretation	 	 	
1	 
	 
	ARTICLE II CORPORATE GOVERNANCE	 	 	
2	 
	 
	2.1. Board of Directors	 	 	
2	 
	2.2. Election of Directors	 	 	
2	 
	2.3. Board Vacancies	 	 	
4	 
	2.4. Quorum Requirements	 	 	
4	 
	2.5. Initial Directors; Certificate of Incorporation and By-laws	 	 	
4	 
	2.6. Veto Rights	 	 	
5	 
	2.7. Committees	 	 	
5	 
	2.8. Executive Officers	 	 	
7	 
	2.9. Directors’ Indemnification	 	 	
8	 
	2.10. Expenses	 	 	
8	 
	2.11. Non-Voting Observer	 	 	
9	 
	2.12. Consultation Rights	 	 	
9	 
	 
	ARTICLE III CERTAIN COVENANTS	 	 	
9	 
	 
	3.1. Voting	 	 	
9	 
	3.2. Cooperation	 	 	
10	 
	3.3. Restrictions on other Agreements	 	 	
10	 
	3.4. Right of First Refusal on Major Events	 	 	
10	 
	 
	ARTICLE IV TRANSFER RESTRICTIONS	 	 	
12	 
	 
	4.1. Restrictions on Transfers of Shares	 	 	
12	 
	4.2. Transfers During Investment Period	 	 	
12	 
	4.3. General Conditions to Transfer	 	 	
12	 
	4.4. Termination of Transfer Restrictions	 	 	
13	 
	 
	ARTICLE V STANDSTILL PROVISIONS	 	 	
13	 
	 
	5.1. Standstill Provisions	 	 	
13	 
	5.2. Exceptions to the Standstill Provisions	 	 	
14	 




-i-







 




	 	 	 	 	 
	 	 	Page
	 	 	

	 
	ARTICLE VI [INTENTIONALLY OMITTED]	 	 	
14	 
	 
	ARTICLE VII PREEMPTIVE RIGHTS	 	 	
14	 
	 
	7.1. Preemptive Rights	 	 	
14	 
	7.2. Substitute Securities	 	 	
16	 
	 
	ARTICLE VIII TERM	 	 	
17	 
	 
	8.1. Term	 	 	
17	 
	 
	ARTICLE IX GENERAL	 	 	
17	 
	 
	9.1. Accounting; Financial Statements and Other Information	 	 	
17	 
	9.2. Competition	 	 	
18	 
	9.3. Legend on Stock Certificates, Etc.	 	 	
18	 
	9.4. Successors and Assigns	 	 	
19	 
	9.5. Entire Agreement	 	 	
19	 
	9.6. Notices	 	 	
19	 
	9.7. Amendments	 	 	
21	 
	9.8. Counterparts	 	 	
21	 
	9.9. Headings	 	 	
21	 
	9.10. Governing Law	 	 	
21	 
	9.11. Submission to Jurisdiction	 	 	
21	 
	9.12. Waiver of Jury Trial	 	 	
21	 
	9.13. Severability	 	 	
21	 
	9.14. Third Party Beneficiaries	 	 	
22	 
	9.15. Remedies	 	 	
22	 




-ii-







 



STOCKHOLDERS AGREEMENT



     STOCKHOLDERS
AGREEMENT (this “Agreement”) is made as of _____, 2002, by
and among FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP-VII, L.P., a Delaware
limited partnership (“Equity VII”), FORSTMANN LITTLE & CO. SUBORDINATED DEBT
AND EQUITY MANAGEMENT BUYOUT PARTNERSHIP-VIII, L.P., a Delaware limited
partnership (“MBO VIII” and collectively with Equity VII and their Permitted
Transferees, “Forstmann Little”), [TELEFONOS DE MEXICO, S.A. de C.V., a
sociedad anonima de capital variable organized under the laws of the United
Mexican States] (together with its Subsidiaries and its Permitted Transferees,
“Telmex” and Telmex and Forstmann Little sometimes being hereinafter
collectively referred to as the “Investors” and individually as an “Investor”)
and XO Communications, Inc., a Delaware corporation (“XO” or the “Company”).


W I T N E S S E T H:


     WHEREAS, the Company and the Investors are parties to that certain Stock
Purchase Agreement, dated as of January 15, 2002 (the “Stock Purchase
Agreement”) pursuant to which Forstmann Little is purchasing
_______ shares
of Class A Common Stock, par value $0.01 per share, of the Company (“Class A
Common Stock”), and two shares of Class D Common Stock, par value $0.01 per
share, of the Company (“Class D Common Stock”) and Telmex is purchasing
_______ shares of Class C Common Stock, par value $0.01 per share, of the
Company (“Class C Common Stock”, together with the Class A Common Stock and
Class D Common Stock sometimes being hereinafter collectively referred to as
“Common Stock”);


     WHEREAS, the Stock Purchase Agreement contemplates that the parties hereto
will enter into this Agreement and the parties hereto deem it to be in their
best interests to establish and set forth their agreement with respect to
certain rights and obligations associated with ownership of Common Stock;


     WHEREAS, the execution and delivery of this Agreement is a condition to
the closing of the Stock Purchase Agreement.


     NOW, THEREFORE, in consideration of the promises and the mutual covenants
contained herein, the parties hereto hereby agree as follows:


ARTICLE I


DEFINITIONS


     1.1. Definitions. Capitalized terms used in this Agreement shall have the
meanings set forth in Annex A.


     1.2. General Interpretation. For all purposes of this Agreement, unless
otherwise expressly provided or unless the context requires otherwise:


 







 



     (a)  the terms defined in Annex A to this Agreement may include both the
plural and singular, as the context may require;


     (b)  the words “herein”, “hereto” and “hereby”, and other words of similar
import, refer to this Agreement as a whole and not to any particular Article,
Section or other subdivision of this Agreement;


     (c)  unless otherwise specified, references to Articles, Sections, clauses,
subclauses, subparagraphs, Annexes and Schedules are references to Articles,
Sections, clauses, subclauses, subparagraphs, Annexes and Schedules of this
Agreement;


     (d)  the words “including” and “include” and other words of similar import
shall be deemed to be followed by the phrase “without limitation”;


     (e)  any reference herein to a statute, rule or regulation of any
governmental entity (or any provision thereof) shall include such statute, rule
or regulation (or provision thereof), including any successor thereto, as it
may be amended from time to time; and


     (f)  whenever the context may require, any pronouns used herein shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of names and pronouns shall include the plural and vice versa.


ARTICLE II


CORPORATE GOVERNANCE


     2.1. Board of Directors. The total number of authorized directors
constituting the Board of Directors of the Company from time to time (each, a
“Director” and collectively, the “Board of Directors” or the “Board”) shall be
determined in the manner specified by the By-laws. Each Investor shall take,
or cause to be taken, and shall use its reasonable best efforts to cause the
Company to take, or cause to be taken, all action necessary to cause the
By-laws to provide that, prior to the Board Representation Date, the Board of
Directors shall be fixed at twelve and, at and after the Board Representation
Date, the Board of Directors may be expanded to include a greater number of
Directors as set forth in Section 2.2(d). The initial Directors shall be those
individuals determined pursuant to Section 2.5. Thereafter, the Directors
shall be elected annually in accordance with the Certificate of Incorporation,
By-laws and this Article II.


     2.2. Election of Directors. (a) Prior to the Board Representation Date,
so long as Forstmann Little Beneficially Owns shares of Common Stock
representing at least 10% of the outstanding shares of Common Stock, Forstmann
Little shall have the right to appoint or nominate to the Board of Directors
such number of Directors, equal to the sum of (A) (i) a fraction in which the
numerator is the total number of outstanding shares of Common Stock
Beneficially Owned by Forstmann Little, and the denominator is the total number
of shares of Common Stock outstanding, multiplied by (ii) the total number of
Directors on the Board of Directors, rounded up to the nearest whole number,
plus (B) (i) a fraction in which the numerator is the total number of
outstanding shares of Common Stock Beneficially Owned by Telmex, and the
denominator is the total number of shares of Common Stock outstanding
multiplied by (ii)


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 the total number of Directors on the Board of Directors, rounded up to the
nearest whole number; provided, however, that Forstmann Little shall, in
connection with such appointment or nomination, include among its appointees or
nominees, if so requested by Telmex by written notification, the Telmex
Independent Designees. At the Board Representation Date, Telmex shall cause
the Telmex Independent Designees nominated pursuant to this Section 2.2(a) to
resign from the Board and such Directors shall thereafter be replaced in
accordance with Section 2.2(b) or Section 2.3, as applicable. The Directors
nominated or appointed by Forstmann Little pursuant to Article II (other than
Telmex Independent Designees) are referred to herein individually as a
“Forstmann Little Designee” or collectively as the “Forstmann Little
Designees.” The Directors appointed or nominated by Telmex pursuant to
Article II (including the Telmex Independent Designees) are referred to herein
individually as a “Telmex Designee” or collectively as the “Telmex Designees.”
The Forstmann Little Designees and the Telmex Designees are sometime referred
to herein individually as an “Investor Designee” or collectively as the
“Investor Designees.”


     (b)  At and after the Board Representation Date, so long as an Investor
Beneficially Owns shares of Common Stock representing at least 10% of the
outstanding shares of Common Stock, such Investor shall have the right to
appoint or nominate to the Board of Directors such number of Directors, rounded
up to the next whole number, equal to the product of (i) a fraction in which
the numerator is the total number of outstanding shares of Common Stock
Beneficially Owned by such Investor, and the denominator is the total number of
shares of Common Stock outstanding, multiplied by (ii) the total number of
Directors on the Board of Directors.


     (c)  At each annual meeting of stockholders held at which the term of
office of one or more Directors expires, the Company shall nominate the
Forstmann Little Designees and the Telmex Designees to serve as Directors and
shall include such Directors in the slate of nominees recommended by the Board
to stockholders for election as Directors; provided that, if any such person
declines or is unable to accept the nomination, and if Forstmann Little or
Telmex, as the case may be, determines to designate another person, the Company
shall nominate and include in such slate of nominees such other person
designated by Forstmann Little or Telmex, as the case may be.


     (d)  Each Investor shall take, or cause to be taken, and shall use its
reasonable best efforts to cause the Company to take, or cause to be taken, all
action necessary to cause the Board to include, in addition to the Investor
Designees, the Chief Executive Officer of the Company and such number of other
independent Directors (the “Independent Directors”) as shall be required by any
stock exchange or quotation system on which the Common Stock is quoted or
listed. The initial Independent Directors shall be approved by each of the
Investors.


     (e)  At each such time after the Closing Date as the percentage Beneficial
Ownership in the Company of an Investor is increased or decreased, the number
of Investor Designees to be designated by such Investor shall be recalculated
in accordance with the procedure set forth in Section 2.2(a). Any change
resulting from the application of this Section 2.2(e) shall be effected on the
earlier to occur of (x) the first meeting of stockholders of the Company
following the determination of such change, and (y) the first meeting of the
Board of Directors following the determination of such change.


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     2.3. Board Vacancies. (a) Each Investor Designee shall hold office until
his or her death, resignation or removal or until his or her successor shall
have been duly elected and qualified. If any Forstmann Little Designee shall
cease to serve as a Director of the Company (and any committee thereof) for any
reason, each Investor shall take, or cause to be taken, and shall use its
reasonable best efforts to cause the Company to take, or cause to be taken,
such action as is necessary so that the vacancy resulting thereby can be filled
by another person designated by Forstmann Little in accordance with this
Agreement. If any Telmex Designee shall cease to serve as a Director of the
Company (and any committee thereof) for any reason, each Investor shall take,
or cause to be taken, and shall use its reasonable best efforts to cause the
Company to take, or cause to be taken, such action as is necessary so that the
vacancy resulting thereby can be filled by another person designated by Telmex
in accordance with the terms of this Agreement. Any Director appointed (or
nominated and elected) to replace another Director shall serve for the
remainder of the term of the Director being replaced, subject to earlier death,
resignation or removal or until his successor shall have been duly elected and
qualified. In the event that at any time during the term of this Agreement
there exist vacancies on the Board due to the death, resignation or removal of
an Investor Designee, each of the Investors agrees to use its best efforts to
designate successors to fill any such vacancies as promptly as practicable, but
in no event later than the 30th day following such vacancy (the period from the
first date of such vacancy until the earlier to occur of the filling of such
vacancy or the 30th day thereafter, the “Vacancy Period”); provided, however,
that if such vacancy is not filled during such 30-day period, the Investor that
has the right to fill such vacancy may do so at any time following such 30-day
period. During the Vacancy Period, no action (except for such Board actions as
are required to fill such vacancy in accordance with the terms of this
Agreement) may be taken by the Board until such vacancy is filled or this
requirement is waived by the Investor that has the right to fill such vacancy.
Each Independent Director shall hold office until his or her death, resignation
or removal or until his or her successor shall have been duly elected and
qualified. If any Independent Director shall cease to serve as a Director of
the Company (and any committee thereof) for any reason, the vacancy resulting
thereby shall be filled by another person selected by the Board of Directors in
accordance with the By-laws and approved by each of the Investors.


     (b)  No Forstmann Little Designee may be removed from office except by
Forstmann Little and no Telmex Designee may be removed from office except by
Telmex. Forstmann Little shall have the right to remove any Forstmann Little
Designee, and Telmex shall have the right to remove any Telmex Designee, in
each case, with or without cause, at any time.


     2.4. Quorum Requirements. During such time as Forstmann Little
Beneficially Owns shares of Common Stock representing at least 10% of the
outstanding shares of Common Stock, the Board of Directors may not take any
action unless a quorum consisting of at least one Forstmann Little Designee is
present and during such time as Telmex Beneficially Owns shares of Common Stock
representing at least 10% of the outstanding shares of Common Stock, the Board
of Directors may not take any action unless a quorum consisting of at least one
Telmex Designee (which, prior to the Board Representation Date, shall be a
Telmex Independent Designee, to the extent a Telmex Independent Designee has
been designated pursuant to Section 2.2(a)) is present.


     2.5. Initial Directors; Certificate of Incorporation and By-laws. (a)
The initial Directors of the Company shall consist of those individuals
selected by the mutual written


-4-







 




 agreement of the Investors and the Company (consistent with the procedures
set forth in Section 2.2) prior to the Closing Date. Each Investor, by its
execution and delivery of this Agreement, shall be deemed to have ratified and
approved the appointment of the initial Directors. Subject to Section 2.2(e),
each of the initial Directors shall serve in such office until the first annual
stockholders meeting (or until his earlier death, resignation or removal or
until his successor shall have been duly elected and qualified).


     (b)  On the Closing Date, the Certificate of Incorporation and By-laws of
the Company shall be substantially in the forms appended as Annex B and C
hereto.


     2.6. Veto Rights. So long as (i) an Investor Beneficially Owns shares of
Class A Common Stock representing at least 20% of the outstanding shares of
Common Stock and (ii) no Major Event or Acquisition has occurred, the approval
of at least one Director nominated or appointed by such Investor shall be
required before the Company may take any of the following actions:


     (i)  amend, alter or repeal the Certificate of Incorporation or By-Laws,
or any part thereof, or amend, alter or repeal any constituent instruments of
any Company Subsidiary, or any part thereof;


     (ii)  enter into any transaction with any Affiliate (other than a wholly
owned Subsidiary of the Company), officer, director or stockholder of the
Company, except for compensation and benefits paid to Directors and Officers in
the ordinary course of business and other than those entered into concurrently
with or prior to the Closing Date;


     (iii)  file any voluntary petition for bankruptcy or for receivership
(including a voluntary petition for the liquidation, dissolution or winding up
of the Company or any of its Subsidiaries other than a liquidation of a
Subsidiary in which all the assets of the liquidating Subsidiary are
distributed to the Company or another Subsidiary of the Company) or make any
assignment for the benefit of creditors;


     (iv)  adopt any stockholder rights plan or other anti-takeover provisions
in any document or instrument; or


     (v)  issue or agree to issue any Preferred Stock.


     2.7. Committees. (a) Subject to Section 2.7(b), the federal securities
laws, and the rules and regulations of the SEC and any stock exchange or
quotation system on which the Common Stock is quoted or listed, so long as an
Investor Beneficially Owns shares of Common Stock representing at least 10% of
the outstanding shares of Common Stock, each Investor shall take, or cause to
be taken, and shall use its reasonable best efforts to cause the Company to
take, or cause to be taken, all action necessary to provide that at least one
of the Director designees of such Investor (which, as to Telmex, prior to the
Board Representation Date, shall be a Telmex Independent Designee, to the
extent that a Telmex Independent Designee has been designated pursuant to
Section 2.2(a)) shall be entitled to sit on each committee of the Board and
each Investor shall take, or cause to be taken, and shall use its reasonable
best efforts to cause the Company to take, or cause to be taken, all action
necessary to cause such designee to be


-5-







 




 appointed to each of the committees of the Board as may be requested at
any time or from time to time by Forstmann Little or Telmex, as the case may
be.


     (b)  Each Investor shall take, or cause to be taken, and shall use its
reasonable best efforts to cause the Company to take, or cause to be taken, all
action necessary to provide that the Board of Directors shall annually, during
the term of this Agreement, appoint an Executive Committee which shall be
comprised of five members, including the Chief Executive Officer of the
Company. Prior to the Board Representation Date, Forstmann Little shall have
the right to have (i) three of its Director designees on the Executive
Committee so long as Forstmann Little Beneficially Owns shares of Common Stock
representing 15% or more of the outstanding shares of Common Stock or (ii) two
of its Director designees on the Executive Committee so long as Forstmann
Little Beneficially Owns shares of Common Stock representing at least 10% of
the outstanding shares of Common Stock but less than 15% of the outstanding
shares of Common Stock. Prior to the Board Representation Date, Telmex shall
have the right to have one Telmex Independent Designee (to the extent a Telmex
Independent Designee has been designated pursuant to Section 2.2(a)) on the
Executive Committee so long as Telmex Beneficially Owns shares of Common Stock
representing at least 10% of the outstanding shares of Common Stock. After the
Board Representation Date, each Investor shall have the right to have (i) two
of its Director designees on the Executive Committee so long as such Investor
Beneficially Owns shares of Common Stock representing 15% or more of the
outstanding shares of Common Stock or (ii) one of its Director designees on the
Executive Committee so long as such Investor Beneficially Owns shares of Common
Stock representing at least 10% of the outstanding shares of Common Stock but
less than 15% of the outstanding shares of Common Stock. The initial Executive
Committee shall consist of the Chief Executive Officer of the Company, three
Forstmann Little Designees and one Telmex Independent Designee.


     (c)  The Company shall not, and each Investor shall cause the Company to
not, directly or indirectly, and shall not permit any of the Company’s
Subsidiaries to, directly or indirectly, take any of the following actions
(except to the extent any such action is specifically authorized under the
Transaction Documents) without the approval of (x) prior to the Board
Representation Date, at least three-fifths of the members of the Executive
Committee, or (y) at and after the Board Representation Date, at least
two-thirds of the members of the Executive Committee:


     (i)  adopt a new Business Plan, materially modify the Business Plan or
take any action that would constitute a material deviation from the Business
Plan;


     (ii)  approve or recommend a Major Event;


     (iii)  acquire, by purchase, merger or otherwise, in one transaction or a
series of related transactions, any equity or other ownership interest in, or
assets of, any Person in exchange for consideration with a Fair Market Value
greater than $100 million;


     (iv)  authorize for issuance or issue any equity securities or Equity
Derivative Securities in one transaction or a series of related transactions
with a Fair Market Value at the time of issuance in excess of $100 million
(excluding any Permitted Benefit Plan Issuance);


-6-







 



     (v)  purchase, redeem, prepay, acquire or retire for value any shares of
its capital stock or securities exercisable for or convertible into shares of
its capital stock other than as required under the terms of such capital stock
or securities;


     (vi)  declare, incur any liability to declare, or pay any dividends, or
make any distributions in respect of, any shares of its capital stock other
than as required under the terms of such capital stock;


     (vii)  redeem, retire, defease, offer to purchase or change any material
term, condition or covenant in respect of outstanding long-term Indebtedness
other than as required under the terms of such Indebtedness;


     (viii)  incur Indebtedness in one transaction or a series of related
transactions in excess of $100 million in aggregate principal amount (other
than intercompany Indebtedness and Indebtedness outstanding as of the Closing
Date (and borrowings pursuant to the terms thereof), and any amendment or
refinancing of such Indebtedness in a principal amount not exceeding the
principal amount so refinanced and on financial and other terms no less
favorable to the Company than such outstanding Indebtedness);


     (ix)  make any material change in its accounting principles or practices
(other than as required by GAAP or recommended by the Company’s outside
auditors), or remove the Company’s outside auditors or appoint new auditors; or


     (x)  appoint, or terminate or modify the terms of the employment of, any
member of the Company’s senior management as set forth on Annex E, and any of
their successors or replacements, and any other persons of a similar level of
authority and responsibility in the organizational structure who are appointed
after the date hereof.


Notwithstanding the foregoing, if any of the matters referred to in this
Section 2.7(c) are proposed to but not approved by the requisite three-fifths
majority (or, at and after the Board Representation Date, the requisite
two-thirds majority) of the Executive Committee, then the Investor Designees on
the Executive Committee shall attempt in good faith to resolve any objections
any such Investor Designee may have to the proposal and, if the Investor
Designees on the Executive Committee are unable to resolve in good faith the
disagreement within 30 days after the Executive Committee meeting at which the
matter was not approved, any member of the Executive Committee shall be
entitled to present such issue to the Board of Directors where the issue may be
adopted or rejected by a majority vote of the Board of Directors.


     (d)  Each Investor shall take, or cause to be taken, and shall use its
reasonable best efforts to cause the Company to take, or cause to be taken, all
action necessary to cause the Board to annually, during the term of this
Agreement, appoint an Audit and a Compensation Committee.


     2.8. Executive Officers. Each Investor shall take, or cause to be taken,
and shall use its reasonable best efforts to cause the Company to take, or
cause to be taken, all action necessary to cause the Board of Directors to
appoint a Chief Executive Officer and such other officers of the Company
(“Officers”) as it may determine from time to time pursuant to the By-laws.
Such Officers shall serve subject to the pleasure of the Board of Directors.


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     2.9. Directors’ Indemnification.


     (a)  For a period of at least six years after the Closing Date, the Company
shall obtain and cause to be maintained in effect, with financially sound
insurers, either (i) the current policy of directors’ and officers’ liability
insurance maintained by the Company (provided that the Company may substitute
therefor policies of at least the same coverage and amounts containing terms
and conditions which are no less advantageous in any material respect to the
insured parties thereunder) with respect to claims arising from facts or events
that occurred at or before the Closing Date (including consummation of the the
Investment and the Restructuring), or (ii) a run-off (i.e., “tail”) policy or
endorsement with respect to the current policy of directors’ and officers’
liability insurance covering claims asserted within six years after the Closing
Date arising from facts or events that occurred at or before the Closing Date
(including consummation of the Investment and the Restrucutring); and such
policies or endorsements shall name as insureds thereunder all present and
former directors and officers of the Company or any of its Subsidiaries.


     (b)  The Company shall obtain and cause to be maintained in effect, with
financially sound insurers, a policy of directors’ and officers’ liability
insurance covering all present and former directors and officers of the Company
or any of its Subsidiaries and, to the extent available, the Telmex Observers
(and their respective successors) in an amount and upon such terms as are
reasonably acceptable to the Investors. The Company shall enter into
indemnification agreements in customary form with each member of the Board of
Directors and each Telmex Observer.


     (c)  The Certificate of Incorporation, By-laws and other organizational
documents of the Company and each of its Subsidiaries shall at all times, to
the fullest extent permitted by law, provide for indemnification of,
advancement of expenses to, and limitation of the personal liability of,
present and former directors and officers of the Company, and the present and
former members of the boards of directors or other similar managing bodies of
each of the Company’s Subsidiaries and such other persons, if any, who,
pursuant to a provision of such Certificate of Incorporation, By-laws or other
organizational documents, exercise or perform any of the powers or duties
otherwise conferred or imposed upon members of the Board or the boards of
directors or other similar managing bodies of each of the Company’s
Subsidiaries. Such provisions may not be amended, repealed or otherwise
modified in any manner adverse to any present or former directors and officers
of the Company or any present or former member of the boards of directors or
other similar managing bodies of any of the Company’s Subsidiaries, until at
least six years following the termination of this Agreement.


     (d)  Each member of the Board of Directors, each officer of the Company and
each Telmex Observer is intended to be a third-party beneficiary of the
obligations of the Company pursuant to this Section 2.9, and the obligations of
the Company pursuant to this Section 2.9 shall be enforceable by the members of
the Board of Directors, the officers of the Company or the Telmex Observers, as
applicable.


     2.10. Expenses. The Company shall pay the reasonable out-of-pocket
expenses incurred by each of the members of the Board of Directors and the
Telmex Observers in connection with performing his or her duties, including
without limitation the reasonable out-of-


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 pocket expenses incurred by such person attending meetings of the Board or
any committee thereof or meetings of any board of directors or other similar
managing body (and any committee thereof) of any Subsidiary of the Company.


     2.11. Non-Voting Observer. Prior to the Board Representation Date and so
long as Telmex Beneficially Owns shares of Common Stock representing 10% or
more of the outstanding shares of Common Stock, Telmex shall have the right to
designate up to two non-voting observers to the Board of Directors (each a
“Telmex Observer” and, collectively, the “Telmex Observers”). The Telmex
Observers shall have the same access to information concerning the business and
operations of the Company and at the same time as the Directors of the Company,
shall be entitled to receive notice of, and to be present at, all regular and
special meetings of the Board of Directors, and any meeting of a committee
thereof, and shall be entitled to participate in discussions and consult with,
and make proposals and furnish advice to, the Board of Directors, and the
various committees thereof, but shall not have any right to vote at such
meetings. The Telmex Observers shall not be considered a “Director” of the
Company for any purposes hereunder, under the By-laws or otherwise.


     2.12. Consultation Rights. Prior to the Board Representation Date,
Forstmann Little shall consult with representatives of Telmex at least monthly
at mutually agreeable times regarding the business, finances and prospects of
the Company, including, without limitation, the matters considered by the
Executive Committee pursuant to Section 2.7(c) and the matters considered by
the Investors pursuant to Section 2.6; provided, however, that the information
provided to Telmex in connection with such consultations shall not include
information that Forstmann Little’s antitrust counsel has determined in their
sole discretion should not be the subject of such consultations because
providing such information to Telmex could reasonably be expected to constitute
a violation of applicable antitrust laws.


ARTICLE III


CERTAIN COVENANTS


     3.1. Voting. (a) Forstmann Little shall vote all shares of Common Stock
over which it exercises voting power in favor of the election of the Telmex
Designees and Telmex shall vote all shares of Common Stock over which it
exercises voting power in favor of the election of the Forstmann Little
Designees, in each case to the extent they have been nominated consistently
with this Agreement. Each Investor shall take such further action as shall be
necessary to comply with the terms of this Agreement and to cause the Investor
Designees to be elected as Directors in accordance with this Agreement
(including, to the extent consistent with this Agreement and applicable law,
causing their respective designees on the Board to nominate, and recommend to
the stockholders of the Company the election of the Investor Designees and
opposing, and causing their respective designees on the Board to oppose, any
proposal to remove an Investor Designee at each meeting of the stockholders of
the Company at which the election or removal of members of the Board is on the
agenda).


     (b)  Each Investor shall vote all shares of Common Stock over which it may
exercise voting power, and each Investor and the Company shall take all other
actions necessary and appropriate, to ensure that the Certificate of
Incorporation and By-laws do not at any time


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 conflict with the provisions of this Agreement and shall not vote to
approve (or consent to the approval of) any amendment to the Certificate of
Incorporation and By-laws which would be inconsistent with this Agreement.


     3.2. Cooperation. (a) Each Investor shall vote all shares of Common
Stock over which it exercises voting power and shall take all other necessary
or desirable actions within its control (including, without limitation,
attending all meetings in person or by proxy for purposes of obtaining a quorum
and executing all written consents in lieu of meetings, as applicable), and the
Company shall take, and each Investor shall use its reasonable best efforts to
cause the Company to take, all necessary and desirable actions within its
control (including, without limitation, calling special Board and stockholder
meetings), to effectuate the provisions of Article II.


     (b)  Each Investor agrees that it shall not commence any claim, action,
suit or proceeding against the Company under any of the Transaction Documents
without providing the other Investors with prior written notice thereof.


     3.3. Restrictions on other Agreements. No Investor shall grant any proxy
or enter into or agree to be bound by any voting trust with respect to the
Common Stock other than those granted or established by this Agreement, nor
shall any Investor enter into any stockholder agreement or arrangements of any
kind with any Person with respect to the Common Stock, on terms that are
inconsistent with the provisions of this Agreement, or that would interfere
with the ability of any Investor to comply with the provisions of this
Agreement, including agreements or arrangements with respect to the
acquisition, disposition or voting shares of Common Stock on terms that are
inconsistent with the provisions of this Agreement, or that would interfere
with the ability of any Investor to comply with the provisions of this
Agreement.


     3.4. Right of First Refusal on Major Events. From and after the fourth
anniversary of the Closing Date, the Company and each of the Investors agrees,
that:


     (a)  If (x) the Company or any of its Subsidiaries, officers, directors or
employees or (y) any investment banker, financial advisor, attorney,
accountants or other representatives retained by the Company or any of its
Subsidiaries (the “Representatives”), which Representatives are acting at the
direction and/or with the knowledge of the Company or such Subsidiary, directly
or indirectly through another Person, (i) solicits, initiates or encourages
(including by way of furnishing information) the making, submission or
announcement of any inquiry about or proposal for a Major Event, or knowingly
takes any other action designed to facilitate any Major Event, (ii)
participates in any discussions or negotiations regarding, or provides any
nonpublic information or data with respect to a Major Event, or (iii) receives,
directly or indirectly, any inquiries or proposals from any Person relating to,
or that the Company reasonably believes could lead to, a Major Event (each a
“Preliminary Activity”), the Company shall promptly advise each of the
Investors in writing of any Preliminary Activity (including the specific terms
of any inquiry or proposal and the identity of the Person making such inquiry
or proposal).


     (b)  The Company shall promptly and fully inform each Investor of the
status of any such Preliminary Activity, of the furnishing of information to
any Person in respect of


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 Preliminary Activity, and of any negotiations or discussions relating
thereto (including any material amendments or proposed material amendments).
The Company shall promptly provide to each Investor copies of all information
made available to any Person with respect to any Preliminary Activity and will
afford each Investor the same ability to conduct due diligence as afforded to
such Person.


     (c)  Promptly upon receipt by the Company or any of its Subsidiaries of a
bona fide proposal from any Person for a Major Event (a “Major Event
Proposal”), the Company shall deliver to the Investors a written notice (a
“Major Event Notice”) attaching a copy (or, in the case of an oral Major Event
Proposal, a reasonably detailed written description) of the Major Event
Proposal.


     (d)  Promptly upon receipt of a Major Event Notice, the Investors shall
engage in good faith discussions regarding the desirability and timing of the
proposed Major Event and shall endeavor to agree with respect to whether to
support or reject the Major Event Proposal within 5 Business Days following
the Investors receipt of a Major Event Notice (the “Reconciliation Period”);


     (i)  If the Investors agree to support or reject the Major Event Proposal
within the Reconciliation Period, then the Major Event Proposal shall be
submitted to the Executive Committee for approval or rejection in accordance
with Section 2.7 of this Agreement.


     (ii)  If the Investors are unable to agree within the Reconciliation
Period, then the Investor which objects to approval of the Major Event Proposal
(the “Objecting Investor”) shall be entitled, for a period of five Business
Days following the Reconciliation Period (the “Solicitation Period”), to
solicit, initiate, encourage or facilitate any inquiries with respect to, or
the making of, a bona-fide proposal for an alternative Major Event (a
“Competing Proposal”) and negotiate or otherwise engage in discussions with any
Person (each a “Competing Proposal Person”) with respect to such Competing
Proposal, provided that (A) the Objecting Investor shall, subject to clause
(B), be entitled to disclose to a Competing Proposal Person the existence of
the Major Event proposal and any information or material regarding the Major
Event Proposal, but shall not, without the express written approval of the
Board of Directors or the Executive Committee, disclose to any Person
(including any Competing Proposal Person) the identity of the Person making the
Major Event Proposal, and (B) each Competing Proposal Person enters into a
customary confidentiality agreement with the Company on terms no less favorable
to such Person than those contained in any confidentiality agreement with the
proponent or proponents of the Major Event Proposal.


     (e)  Within 5 Business Days after the Solicitation Period, a meeting of the
Board of Directors shall be held at which the Board of Directors shall consider
both the Competing Proposal and the Major Event Proposal. The Board of
Directors shall adopt the Competing Proposal if the Board of Directors
determines, by majority vote, that the Competing Proposal is at least as
favorable to the Company’s stockholders in all material respects, and is as
likely or more likely to be consummated, as the Major Event Proposal. In
connection with such determination the Board of Directors shall be entitled to
rely on the advice of outside counsel and the Company’s independent financial
advisors regarding the proposals. If the Board of Directors approves the
Competing Proposal, such Competing Proposal shall be recommended by the Board


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 of Directors to the stockholders of the Company. If the Board of
Directors (in a manner consistent with the provisions of this Section 3.4)
approves the Major Event Proposal, the Company may enter into a definitive
agreement with respect to, and consummate, a transaction substantially on the
terms set forth in such Major Event Proposal.


     (f)  Notwithstanding anything to the contrary in this Section 3.4, the
Company’s obligations pursuant to this Section 3.4 shall be subject to (i) all
applicable laws, including without limitation the Delaware General Corporation
Law, and (ii) the execution by each Investor of a confidentiality agreement in
form and substance reasonably satisfactory to the Company.


ARTICLE IV


TRANSFER RESTRICTIONS


     4.1. Restrictions on Transfers of Shares. Except as provided in this
Article IV or with the prior written approval of the other Investor, no
Investor may, directly or indirectly, sell, assign, transfer or otherwise
dispose of, by merger, consolidation or otherwise (including by operation of
law), or pledge or otherwise encumber, any Restricted Securities (any such
transaction, a “Transfer” and any Investor Transferring Restricted Securities,
a “Transferor”) to or in favor of any other Person (any Person to whom
Restricted Securities are Transferred, a “Transferee”), prior to the fourth
anniversary of the Closing Date (the four-year period from (and including) the
Closing Date to (but excluding) such fourth anniversary, the “Investment
Period”). Notwithstanding the foregoing, nothing contained herein shall be
deemed to limit the ability of (i) the Investors to Transfer shares of Common
Stock in connection with a Major Event approved by the Board of Directors in
accordance with this Agreement, and, if required by applicable law or the
Certificate of Incorporation, by the holders of any class of Common Stock, (ii)
the limited partners in either of Equity VII or MBO VIII to transfer, directly
or indirectly, their limited partnership interests in Equity VII or MBO VIII,
as the case may be, at any time or from time to time, or (iii) the general
partners of Equity VII or MBO VIII to transfer, directly or indirectly, at any
time or from time to time, up to 20% of the equity interests in Equity VII or
MBO VIII, as the case may be.


     4.2. Transfers During Investment Period. (a) During the Investment
Period, no Restricted Securities may be Transferred, in whole or in part,
unless the Transfer is to a Permitted Transferee.


     (b)  Following any Transfer of Restricted Securities in accordance with
this Section 4.2, the restrictions provided for in Section 4.1 shall continue
to apply to the shares of Common Stock so Transferred.


     4.3. General Conditions to Transfer. Every Transfer of Restricted
Securities made during the Investment Period must comply with the following
requirements as applicable:


     (a)  such Permitted Transferee shall have executed and delivered to the
Company, as a condition precedent to the Transfer, an instrument or instruments
in form and substance reasonably satisfactory to the Company confirming that
such Permitted Transferee


-12-







 




 agrees to be bound by the terms of this Agreement, including an agreement
that such Permitted Transferee shall not thereafter Transfer such Restricted
Securities to any Person to whom the Transferor would not be permitted to
Transfer such Common Stock pursuant to the terms of this Agreement;


     (b)  the certificates issued to the Permitted Transferee which represent
the Restricted Securities so Transferred shall bear the legends provided in
Section 9.3;


     (c)  no registration of any securities shall be required under the
Securities Act or the Exchange Act, or any other applicable securities or “blue
sky” laws, by reason of such Transfer and the Transferor shall have delivered
to the Company an opinion of counsel, which opinion and counsel shall be
reasonably satisfactory to the Company, to such effect; and


     (d)  such Transfer shall not be in violation of applicable law and shall be
subject to receipt of all necessary regulatory approvals.


     4.4. Termination of Transfer Restrictions. Notwithstanding anything
herein to the contrary, all restrictions on Transfers of Restricted Securities
contained herein (other than those related to compliance with federal and state
securities law) shall terminate after the fourth anniversary of the Closing
Date.


ARTICLE V


STANDSTILL PROVISIONS


     5.1. Standstill Provisions. Subject to Section 5.2, and except as
otherwise expressly permitted by this Agreement (including Transfers made in
compliance with the provisions of Article IV) each Investor agrees that, so
long as the other Investor Beneficially Owns shares of Common Stock
representing 20% or more of the outstanding shares of Common Stock, it shall
not, and will cause each of its Affiliates not to, either alone or as part of a
“group” (as such term is used in Section 13d-5 (as such rule is currently in
effect) of the Exchange Act), and such Investor will not, and will cause each
of its Affiliates not to, advise, assist or encourage others to, directly or
indirectly, without the prior written consent of the other Investor:


     (a)  acquire, or offer or agree to acquire, or become the Beneficial Owner
of or obtain rights in respect of any shares of Common Stock, other equity
securities of the Company or other securities convertible or exchangeable into
equity securities of the Company;


     (b)  solicit proxies or consents or become a “participant” in a
“solicitation” (as such terms are defined or used in Regulation 14A under the
Exchange Act) of proxies or consents with respect to any voting securities of
the Company or initiate or become a participant in any stockholder proposal or
“election contest” with respect to the Company or induce others to initiate the
same, or otherwise seek to advise or influence any Person with respect to the
voting of any voting securities of the Company in connection with the election
of Directors or with respect to an amendment to the Certificate of
Incorporation or By-laws that would increase or decrease the number of
Directors on the Board of Directors;


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     (c)  form, encourage or participate in a “person” within the meaning of
Section 13(d)(3) of the Exchange Act for the purpose of taking any actions
described in this Section 5.1;


     (d)  initiate any stockholder proposals for submission to a vote of
stockholders, with respect to the Company; or


     (e)  offer, seek, or propose to enter into any merger, acquisition, tender
offer, sale transaction involving a substantial portion of the Company’s assets
or other business combination involving the Company.


     5.2. Exceptions to the Standstill Provisions. (a) Notwithstanding the
foregoing, the provisions of Section 5.1 shall not prohibit:


     (i)  the acquisition of securities of the Company pursuant to (x) Article
VII, (y) a distribution made on a pro rata basis to all holders of a class of
the Company’s capital stock, or (z) stock dividends or stock splits and similar
reclassifications;


     (ii)  any transaction by an Investor involving a Major Event approved by
the Executive Committee or the Board of Directors pursuant hereto and, if
required, by the holders of any class of Common Stock;


     (iii)  the granting by the Company to the Directors of stock options or
stock grants on a pro-rata basis (and the exercise thereof); or


     (iv)  any transaction by an Investor involving a Competing Proposal in
compliance with Section 3.4.


     (b)  Nothing contained in Section 5.1 (i) shall prohibit any of the
Investors or their Affiliates from complying with Rules 13d-1 through 13d-7, as
applicable, promulgated under the Exchange Act or from making such disclosure
to the Company’s stockholders or from taking such action which, in their
judgment may be required under applicable law, or (ii) shall be deemed to
restrict the manner in which the Investor Designees participate in
deliberations or discussions of the Board of Directors.


ARTICLE VI


[INTENTIONALLY OMITTED]


ARTICLE VII


PREEMPTIVE RIGHTS


     7.1. Preemptive Rights. (a) Except for Excluded Securities, the Company
shall not issue, or agree to issue (i) any equity securities of the Company or
any of its Subsidiaries, (ii) any options, warrants or other rights to
subscribe for, purchase or otherwise acquire any equity securities of the
Company or any of its Subsidiaries or (iii) any other securities of the Company
or any of its Subsidiaries that are convertible into or exchangeable for any
equity securities of the


-14-







 




 Company or any of its Subsidiaries unless, in each case, the Company shall
have first given written notice (the “Preemptive Notice”) to each Investor (for
purposes of this Section, each a “Preemptive Offeree”) that shall (a) state the
Company’s intention to issue any of the securities described in (i), (ii), or
(iii) above (in each case, an “Issuance”), the amount to be issued, the terms
of such securities, the purchase price therefor and a summary of the other
material terms of the proposed Issuance, and (b) offer (a “Preemptive Offer”)
to issue to each Preemptive Offeree or their Affiliates up to such number of
securities set forth in the Preemptive Notice (subject to Section 7.1(b)) (with
respect to each Preemptive Offeree, the “Offered Securities”) upon the terms
and subject to the conditions set forth in the Preemptive Notice, which
Preemptive Offer by its terms shall remain open and irrevocable for a period of
20 Business Days from the date it is delivered by the Company to the Investor
(and, to the extent the Preemptive Offer is accepted during such 20 Business
Day period, until the closing of the Issuance contemplated by the Preemptive
Offer).


     (b)  Each Investor shall be entitled to participate in each Issuance on a
pro rata basis. The number of securities (or principal amount of debt
securities) to be offered to each Preemptive Offeree shall be an amount equal
to the product of (i) the total number of securities (or total principal amount
of debt securities) to be issued in the Issuance multiplied by (ii) a fraction
in which the numerator is the number of shares of Common Stock Beneficially
Owned by such Preemptive Offeree and the denominator is the aggregate number of
shares of Common Stock Beneficially Owned by all Preemptive Offerees, in each
case immediately prior to such Issuance.


     (c)  Notice of a Preemptive Offeree’s intention to accept a Preemptive
Offer, in whole or in part, shall be evidenced by a writing signed by such
party and delivered to the Company prior to the end of the 20 Business Day
period of such Preemptive Offer (each, a “Notice of Acceptance”), setting forth
the portion of the Offered Securities that the Preemptive Offeree elects to
purchase.


     (i)  In the event that a Notice of Acceptance is not given by a Preemptive
Offeree in respect of all the Offered Securities, the Company shall have 60
days following the earlier of (A) delivery of the Notice of Acceptance from
each of the Preemptive Offerees or (B) the end of the 20 Business Day period
referred to in clause (a) above, if a Notice of Acceptance is not delivered by
each of the Preemptive Offerees, to issue all or any part of such remaining
Offered Securities not covered by the Notice of Acceptance to any other
Person(s), but only at a price not less than the price, and on terms no more
favorable to the other Person(s) than the terms, stated in the Preemptive
Notice.


     (ii)  If the Company does not consummate the Issuance of all or part of
the remaining Offered Securities to such other Person(s) within such 60-day
period, the right provided hereunder shall be deemed to be revived with respect
to such remaining Offered Securities and such securities shall not be offered
unless first re-offered to each Preemptive Offeree in accordance with this
Section.


     (iii)  Upon the closing of the Issuance to such other Person(s) (the
“Other Buyers”) of all or part of the remaining Offered Securities (or if there
are no Other Buyers, on the first Business Day following such 60th day), each
Preemptive Offeree shall purchase from the


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 Company, and the Company shall issue to each such Preemptive Offeree, the
Offered Securities covered by its Notice of Acceptance delivered to the Company
by the Preemptive Offeree, on the terms specified in the Preemptive Offer;
provided that, if the closing of the Issuance to such Other Buyers is to occur
prior to the 20th Business Day following delivery of the Notice of Acceptance,
the Preemptive Offeree shall have until such 20th Business Day to pay the
purchase price for the Offered Securities covered by the Notice of Acceptance.
The purchase by a Preemptive Offeree of any Offered Securities is subject in
all cases to the execution and delivery by the Company and the Preemptive
Offeree of a purchase agreement relating to such Offered Securities in
customary form and in form and substance similar in all material respects to
the extent applicable to that executed and delivered between the Company and
the Other Buyers or the other Preemptive Offerees.


     (d)  For purposes of this Section 7.1, “Excluded Securities” shall mean:
(i) any securities issued as a stock dividend or upon any stock split or other
subdivision or combination of shares of capital stock of the Company or any of
its Subsidiaries; (ii) securities issuable or issued to employees of the
Company pursuant to an employee benefit plan or agreement duly approved or
authorized by the Board of Directors or a committee thereof; (iii) securities
issued in connection with a Major Event; (iv) securities issued upon exercise
of any then-previously issued warrants, options or other similar rights; (v)
securities issued in connection with the acquisition, by merger, purchase or
otherwise, of any equity interests in or assets of any other Person approved
pursuant to Section 2.7(c); (vi) any Indebtedness incurred pursuant to the
Amended Bank Credit Facility; (vii) any intercompany Indebtedness; and (viii)
securities issued pursuant to this Section 7.1 resulting from the prior
exercise of preemptive rights.


     7.2. Substitute Securities. So long as there remain outstanding any
shares of Class C Common Stock, the Company shall permit a Preemptive Offeree
to purchase, in lieu of shares of Class A Common Stock (or rights to acquire
the same, as the case may be) to be issued in the proposed Issuance, (i) shares
of Class C Common Stock (or rights to acquire the same, as the case may be) in
the case of Telmex, and (ii) shares of Class D Common Stock (or rights to
acquire the same, as the case may be) in the case of Forstmann Little (in the
case of either clause (i) or (ii), “Substitute Securities”); provided, however,
that, to the extent that there are not sufficient shares of Class C Common
Stock or Class D Common Stock, as the case may be, authorized by the
Certificate of Incorporation, the Preemptive Offeree may purchase the
securities to be issued in the proposed Issuance and the terms of the proposed
Issuance shall be adjusted accordingly to allow the Preemptive Offeree to
convert such securities into Substitute Securities as soon as reasonably
practicable after such shares of Class C Common Stock or Class D Common Stock
are so authorized. The Company shall take such further action (to the extent
consistent with applicable law) as shall be necessary to ensure that there is
available out of its authorized but unissued shares of Common Stock such number
of its shares of Common Stock as shall be sufficient to effect the issuance of
Substitute Securities. If a Preemptive Offeree elects to purchase Substitute
Securities pursuant to this Section 7.2, the number of securities to be issued
to such Preemptive Offeree, the purchase price therefor and the other material
terms of the proposed Issuance shall be adjusted accordingly to preserve the
economics of the securities.


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ARTICLE VIII


TERM


     8.1. Term. This Agreement shall become effective as of the closing under
the Stock Purchase Agreement (the date on which such closing occurs, the
“Closing Date”) and shall terminate on the date that either of the Investors
Beneficially Owns shares of Common Stock representing less than 10% of the
outstanding shares of Common Stock; provided, however, that this Agreement
shall not terminate as a result of a Transfer of Common Stock in violation of
this Agreement that causes an Investor to Beneficially Own shares of Common
Stock representing less than 10% of the outstanding shares of Common Stock.
Upon such termination, there shall be no liability on the part of any party
hereto, except that nothing in this Section 8.1 shall in any way relieve any
party from liability for any breach of the provisions set forth herein for the
period prior to the termination of this Agreement.


ARTICLE IX


GENERAL


     9.1. Accounting; Financial Statements and Other Information. (a) The
Company will maintain a system of accounting established and administered in
accordance with GAAP. Whenever the Company is not otherwise subject to the
reporting obligations of the Exchange Act, the Company will deliver to each
Investor:


     (i)  within 90 days after the end of each fiscal year of the Company,
consolidated balance sheets of the Company and its Subsidiaries as at the end
of such year and the related consolidated statements of income, stockholders’
equity and cash flows of the Company and its Subsidiaries for such fiscal year,
setting forth in each case in comparative form figures for the previous fiscal
year, all in reasonable detail and accompanied by a report thereon of
independent certified public accountants of recognized standing selected by the
Company which report shall state that such consolidated financial statements
present fairly in all material respects the financial position of the Company
as at the dates indicated and the results of its operations and its cash flows
for the periods indicated in conformity with GAAP applied on a basis consistent
with prior years (except as otherwise specified in such report) and that the
audit by such accountants in connection with such consolidated financial
statements has been made in accordance with generally accepted auditing
standards;


     (ii)  within 45 days after the end of each fiscal quarter of the Company,
consolidated balance sheets of the Company and its Subsidiaries as at the end
of such quarter and the related consolidated statements of income,
stockholders’ equity and cash flows of the Company and its Subsidiaries for
such fiscal quarter, setting forth, in each case in comparative form, figures
for the previous fiscal quarter, all in reasonable detail; and


     (iii)  with reasonable promptness, such other information and data with
respect to the Company or any of its Subsidiaries as from time to time may be
reasonably requested by an Investor.


-17-







 



     (b)  Each set of financial statements required to be provided by the
Company pursuant to this Section 9.1 shall be substantially in the form
appropriate for inclusion in a filing on Form 10-K or Form 10-Q, as applicable,
with the SEC pursuant to the Exchange Act, and shall be accompanied by a
narrative report setting forth, in reasonable detail, for such period, any
material deviations by the Company and its Subsidiaries from the Business Plan.


     9.2. Competition. (a) The Company and each of the Investors agree that
each Investor and its Affiliates, officers, directors, employees and agents
may, alone or in combination with any other Person, engage in activities or
businesses, make investments in and acquisitions of any Person, and enter into
partnerships and joint ventures with any Person, whether or not competitive now
or in the future with the businesses or activities of the Company.


     (b)  The Company and each of the Investors agree that no Investor, nor any
Affiliate, officer, director, employee and agent thereof, shall have any
obligation to refer to the Company any business opportunities presented to or
developed by any of them, except to the extent they were presented to or
developed by such Person specifically in its capacity as a stockholder,
officer, director, employee or agent of the Company.


     9.3. Legend on Stock Certificates, Etc. (a) Each certificate representing
Restricted Securities shall contain a legend, in addition to any other legend
required by the Board of Directors or the Company pursuant to the By-laws or
applicable law, reading substantially as follows:





		
	 	“ANY SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION, OR ANY
PLEDGE OR OTHER ENCUMBRANCE, OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED BY, AND THE RIGHTS OF THE HOLDER OF SUCH
SECURITIES ARE SUBJECT TO, THE TERMS AND CONDITIONS CONTAINED IN
THE STOCKHOLDERS AGREEMENT, DATED AS OF [         ], AS
IT MAY BE AMENDED FROM TIME TO TIME, AND THE COMPANY’S CERTIFICATE
OF INCORPORATION AND BY-LAWS, WHICH ARE AVAILABLE FOR EXAMINATION
AT THE REGISTERED OFFICE OF THE COMPANY.




		
	 	THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS
OF ANY STATE AND MAY NOT BE SOLD OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT OR SUCH LAWS.”



The Company will maintain an executed counterpart of this Agreement on file in
its principal office and will make such counterpart available for inspection.
The Company shall not transfer on its books any certificates representing
Restricted Securities, or other shares of capital stock, nor issue any
certificates in lieu thereof unless all the conditions hereof have been
complied with, and a purported transfer not in accordance with the terms hereof
shall be void.


-18-







 



     (b)  The requirement that the above securities legend be placed upon
certificates evidencing any shares of Restricted Securities shall cease and
terminate upon the earliest of the following events: (i) when such shares are
transferred in an underwritten public offering, (ii) when such shares are
transferred pursuant to Rule 144 under the Securities Act or (iii) when such
shares are transferred in any other transaction if the Transferor delivers to
the Company an opinion of its counsel, which counsel and opinion shall be
reasonably satisfactory to the Company, or a “no-action” letter from the staff
of the SEC, in either case to the effect that such legend is no longer
necessary in order to protect the Company against a violation by it of the
Securities Act upon any sale or other disposition of such shares without
registration thereunder. The requirement that the above legend regarding this
Agreement be placed upon certificates evidencing shares of Restricted
Securities shall cease and terminate upon the Transfer of such shares other
than to a Permitted Transferee. Upon the consummation of any event requiring
the removal of a legend hereunder, the Company, upon the surrender of
certificates containing such legend, shall, at its own expense, deliver to the
holder of any such shares as to which the requirement for such legend shall
have terminated, one or more new certificates evidencing such shares not
bearing such legend.


     9.4. Successors and Assigns. This Agreement shall bind and inure to the
benefit of the Company and the Investors and their respective successors and
permitted assigns, provided that, the Company may not assign its rights or
obligations under this Agreement to any Person without the prior written
consent of the Investors, and provided further that, except as provided in
Article IV, the Investors may not assign their rights or obligations under this
Agreement to any Person without the prior written consent of the Company and
the other Investor.


     9.5. Entire Agreement. This Agreement (including the Annexes, Schedules
and Exhibits hereto), the Stock Purchase Agreement and the Registration Rights
Agreement constitute the entire agreement between the parties and supersedes
all prior agreements and understandings, oral and written, between the parties
hereto with respect to the subject matter hereof.


     9.6. Notices. All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument delivered in person or sent by telecopy, nationally
recognized overnight courier or first class registered or certified mail,
return receipt requested, postage prepaid, addressed to such party at the
address set forth below or such other address as may hereafter be designated in
writing by such party to the other parties:




	 
	 
	if to the Company, to:
	 
	XO Communications, Inc.
	11111 Sunset Hills Road
	Reston, VA 20190
	Attention: Gary D. Begeman, Esq



-19-







 




	 
	with a copy to:
	 
	Willkie Farr & Gallagher
	787 Seventh Avenue
	New York, NY 10019
	Telecopy: (212) 728-8111
	Attention: Bruce R. Kraus, Esq
	 
	if to Forstmann Little, to:
	 
	c/o Forstmann Little & Co.
	767 Fifth Avenue
	New York, NY 10153
	Attention: Sandra J. Horbach
	 
	with a copy to:
	 
	Fried, Frank, Harris, Shriver & Jacobson
	One New York Plaza
	New York, NY 10004
	Telecopy: (212) 859-4000
	Attention: Stephen Fraidin, Esq
	 
	if to Telmex, to:
	 
	Teléfonos de México, S.A. de C.V.
	Parque Via 190, Piso 10
	Colonia Cuauhtémoc
	06599 México, D.F
	Attention: Lic. Javier Mondragon Alarcon
	 
	with a copy to:
	 
	Latham & Watkins
	885 Third Avenue
	Suite 1000
	New York, NY 10022-4802
	Telecopy: (212) 751-4864
	Attention: Charles M. Nathan, Esq



     Any notice, request, consents or other communication delivered hereunder
will be conclusively deemed to have been given: (i) if by personal delivery,
upon the actual delivery thereof; (ii) if by certified or registered mail, on
the fifth Business Day following the deposit thereof in the mail; and (iii) if
by electronic means, on the day of transmittal thereof if given on a Business
Day during normal business hours or on the next succeeding Business Day if
given at other times. A party giving notice, request, consent or other
communication by electronic means


-20-







 




 shall send the original thereof by personal delivery or by certified or
registered mail unless the intended recipient agrees otherwise.


     9.7. Amendments. The terms and provisions of this Agreement may be
modified or amended, or any of the provisions hereof waived, temporarily or
permanently, in a writing executed and delivered by the Company and each of the
Investors. No waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof (whether
or not similar). No delay on the part of any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof.


     9.8. Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but
one agreement.


     9.9. Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed to be a part
of this Agreement.


     9.10. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE WITHOUT GIVING EFFECT TO THE
PRINCIPLES OF CONFLICTS OF LAW.


     9.11. Submission to Jurisdiction. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of Delaware and of the United States of
America, in each case located in the State of Delaware, for any litigation
arising out of or relating to this Agreement and the transactions contemplated
hereby (and agrees not to commence any litigation relating hereto other than in
such courts), and further agrees that service of any process, summons, notice
or document by U.S. registered mail to its respective address set forth in this
Agreement shall be effective service of process for any litigation brought
against it in any such court. Each of the parties hereto hereby irrevocably
and unconditionally waives any objection to the laying of venue of any
litigation arising out of this Agreement or the transactions contemplated
hereby in the courts of the State of Delaware or the United States of America,
in each case located in the State of Delaware, hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such litigation brought in any such court has been brought in an
inconvenient forum.


     9.12. Waiver of Jury Trial. THE COMPANY AND THE INVESTORS HEREBY WAIVE
ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY ACTION, PROCEEDING
OR LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH THIS AGREEMENT.


     9.13. Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to


-21-







 




 modify this Agreement so as to effect the original intent of the parties
as closely as possible in an acceptable manner to the end that the transactions
contemplated hereby are fulfilled to the fullest extent possible.


     9.14. Third Party Beneficiaries. Except as provided in Section 2.9(c),
none of the provisions of this Agreement shall be for the benefit of, or
enforceable by, any third party.


     9.15. Remedies. The parties hereto agree that money damages or other
remedy at law would not be sufficient or adequate remedy for any breach or
violation of, or a default under, this Agreement by them and that in addition
to all other remedies available to them, each of them shall be entitled to an
injunction restraining such breach, violation or default or threatened breach,
violation or default and to any other equitable relief, including without
limitation specific performance, without bond or other security being required.



-22-







 



     IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.



FORSTMANN LITTLE & CO. EQUITY PARTNERSHIP VII, L.P.




	 	 	 
	By:	 	
FLC XXXII Partnership, L.P.,
	 	 	
its general partner
	 
	By:	 	
__________________
	 	 	
Sandra J. Horbach,
	 	 	
a general partner




FORSTMANN LITTLE & CO. SUBORDINATED DEBT AND EQUITY MANAGEMENT BUYOUT
PARTNERSHIP VIII, L.P.




	 	 	 
	By:	 	
FLC XXXIII Partnership,
	 	 	
its general partner
	 
	By:	 	
__________________
	 	 	
Sandra J. Horbach,
	 	 	
a general partner



TELEFONOS DE MEXICO, S.A. DE C.V.




	 	 	 
	By:	 	
__________________
	 	 	
Name: Ing. Jaime Chico Pardo
	 	 	
Title: Director General




XO COMMUNICATIONS, INC.




	 	 	 
	By:	 	
__________________
	 	 	
Name: Daniel F. Akerson
	 	 	
Title: Chairman and Chief Executive Officer




-23-







 



Annex A



DEFINITIONS




     “Acquisition” shall mean the acquisition by any “person” or any “group”
(as such terms are used for purposes of Rules 13d-1 and 13d-5 under the
Exchange Act) of more than 50% of the total number of outstanding shares of
Common Stock.


     “Affiliate” shall mean, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, “control” when used with respect to any specified Person means the
power to direct the management and policies of such Person directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms “controlling” and “controlled” having meanings
correlative to the foregoing.


     “Agreement” shall have the meaning ascribed to such term in the preamble
to this Agreement.


     “Amended Bank Credit Facility” shall mean a bank credit facility under
which the Company is the borrower, in effect as of the Closing Date as a
replacement to the Bank Credit Facility, which provides for a term loan or term
loans and revolving loans.


     “Bank Credit Facility” shall mean the Credit and Guarantee Agreement,
dated as of February 3, 2000, among NEXTLINK Communications, Inc., the
predecessor to the Company (“Nextlink”), certain subsidiaries of Nextlink,
various Lenders (as defined therein), Goldman Sachs Credit Partners, L.P., as
Syndication Agent, Toronto Dominion (Texas), Inc., as Administrative Agent,
Barclays Bank plc and The Chase Manhattan Bank, as Co-Documentation Agents, and
TD Securities, together with Goldman Sachs Credit Partners, L.P., the Joint
Lead Arrangers, and all ancillary agreements entered into pursuant to the terms
thereof, each as amended as of the Closing Date.


     “Beneficial Ownership” shall have the meaning ascribed to such term in
Rules 13d-3 and 13d-5 under the Exchange Act, except that, solely for the
purpose of determining “Beneficial Ownership,” (i) a Person shall be deemed to
have “Beneficial Ownership” of all shares of Common Stock that such Person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time, and (ii) “Beneficial Ownership” shall be determined
without regard to any disclaimer of beneficial ownership and without regard to
the fact that one or more classes of the Common Stock is not registered under
the Exchange Act; provided, however, that an Investor shall be deemed to
Beneficially Own shares of Class A Common Stock only at such time, and to the
extent, that it has record ownership of shares of Class A Common Stock and
shall not be deemed to Beneficially Own shares of Class A Common Stock by
virtue of its ownership of shares of Class C Common Stock or Class D Common
Stock or any other option, warrant or security exercisable for or convertible
into shares of Class A Common Stock. Correlative meanings shall also be
ascribed to the terms “Beneficially Own” and “Beneficial Owner”.


A-1







 



     "Board of Directors” or “Board” shall have the meaning ascribed to such
term in Section 2.1, as the same may be composed from time to time in
accordance with this Agreement and the By-laws.


     “Board Representation Date” shall mean the earlier of (i) the first date
on which the Board of Directors has received written notice from Telmex that
Telmex desires to designate Directors to the Board pursuant to Section 2.2(b),
and Telmex has determined in good faith, after consultation with its legal
counsel, which counsel shall be an outside law firm of national reputation,
that one or more directors, officers or employees of Telmex or a Subsidiary of
Telmex can become Directors without violating Section 8 of the Clayton
Antitrust Act of 1914, as amended, and (ii) the first date upon which any
director, officer or employee of Telmex or a Subsidiary of Telmex is elected or
appointed as a Director.


     “Business Day” shall mean any day other than a Saturday or Sunday which is
not a day on which banking institutions in New York City are authorized or
obligated by law or executive order to close.


     “Business Plan” shall mean the business plan of the Company, as approved
by each of the Investors prior to the Closing Date, and as the same may be
amended from time to time in accordance with this Agreement. A copy of the
Business Plan, as approved by each of the Investors prior to the Closing Date,
which approval shall not be unreasonably withheld, shall be attached hereto as
Annex D.


     “By-laws” shall mean the By-laws of the Company, as in effect on the
Closing Date, as the same may be amended from time to time in accordance with
this Agreement and the terms thereof.


     “Capital Lease” shall mean a lease with respect to which the lessee is
required concurrently to recognize the acquisition of an asset and the
incurrence of a liability in accordance with GAAP.


     “Certificate of Incorporation” shall mean the Amended and Restated
Certificate of Incorporation of the Company, as in effect on the Closing Date,
as the same may be amended from time to time in accordance with this Agreement
and the terms thereof.


     “Class A Common Stock” shall have the meaning ascribed to such term in the
recitals to this Agreement.


     “Class C Common Stock” shall have the meaning ascribed to such term in the
recitals to this Agreement.


     “Class D Common Stock” shall have the meaning ascribed to such term in the
recitals to this Agreement.


     “Closing Date” shall have the meaning set forth in Section 8.1 of this
Agreement.


A-2







 



     “Common Stock” shall have the meaning ascribed to such term in the
recitals to this Agreement.


     “Company” shall have the meaning ascribed to such term in the preamble to
this Agreement.


     “Competing Proposal” shall have the meaning ascribed to such term in
Section 3.4(d).


     “Competing Proposal Person” shall have the meaning ascribed to such term
in Section 3.4(d).


     “Director” shall have the meaning ascribed to such term in Section 2.1.


     “Encumbrance” shall mean, with respect to any Person, any mortgage, lien,
pledge, charge, claim, option, proxy, voting trust, security interest or other
encumbrance, or any interest or title of any vendor, lessor, lender or other
secured party to or of such Person under any conditional sale or other title
retention agreement or Capital Lease, upon or with respect to any property or
asset of such Person (including in the case of stock, stockholder agreements,
voting trust agreements and all similar arrangements).


     “Equity VII” shall have the meaning ascribed to such term in the preamble
to this Agreement.


     “Equity Derivative Securities” shall mean any and all equity or debt
securities (or any hybrid or combination thereof) convertible into or
exchangeable or exercisable for, or which otherwise give the holder thereof the
right to acquire, any equity securities of the Company.


     “Exchange Act” shall mean the United States Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder.


     “Excluded Securities” shall have the meaning ascribed to such term in
Section 7.1(d).


     “Fair Market Value” shall mean (i) in the case of cash, the amount
thereof, (ii) in the case of capital stock that has been publicly traded for a
period of at least 12 months, the Market Value thereof, and (iii) in the case
of other assets or securities, the fair market value thereof as determined in
good faith by the Board of Directors (which determination shall be conclusive
and binding on all stockholders).


     “Forstmann Little” shall have the meaning ascribed to such term in the
preamble to this Agreement.


     “Forstmann Little Designee” or “Forstmann Little Designees” shall have the
meaning ascribed to such term in Section 2.2(a).


A-3







 



     “GAAP” shall mean generally accepted accounting principles set forth from
time to time in the opinions and pronouncements of the Accounting Principles
Board and the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board (or agencies
with similar functions of comparable stature and authority within the U.S.
accounting profession), that are applicable to the circumstances as of the date
of determination.


     “Guaranty” shall mean, with respect to any Person, any obligation (except
the endorsement in the ordinary course of business of negotiable instruments
for deposit or collection) of such Person guaranteeing or in effect
guaranteeing (whether by reason of being a general partner of a partnership or
otherwise) any indebtedness, dividend or other obligation of any other Person
in any manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person: (a) to purchase such indebtedness or obligation or any property
constituting security therefor; (b) to advance or supply funds (i) for the
purchase or payment of such indebtedness or obligation, or (ii) to maintain any
working capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available funds
for the purchase or payment of such indebtedness or obligation; (c) to lease
properties or to purchase properties or services primarily for the purpose of
assuring the owner of such indebtedness or obligation of the ability of any
other Person to make payment of the indebtedness or obligation; or (d)
otherwise to assure the owner of such indebtedness or obligation against loss
in respect thereof. In any computation of the indebtedness or other
liabilities of the obligor under any Guaranty, the indebtedness or other
obligations that are the subject of such Guaranty shall be assumed to be direct
obligations of such obligor.


     “Indebtedness” shall mean, with respect to any Person, at any time,
without duplication, (a) its liabilities for borrowed money; (b) its
liabilities for the deferred purchase price of property acquired by such Person
(excluding accounts payable arising in the ordinary course of business but
including all liabilities created or arising under any conditional sale or
other title retention agreement with respect to any such property); (c) all
liabilities appearing on its balance sheet in accordance with GAAP in respect
of Capital Leases; (d) all liabilities for borrowed money secured by any
Encumbrance with respect to any property owned by such Person (whether or not
it has assumed or otherwise become liable for such liabilities); (e) all its
liabilities in respect of letters of credit or instruments serving a similar
function issued or accepted for its account by banks and other financial
institutions (whether or not representing obligations for borrowed money); (f)
Swaps of such Person; and (g) any Guaranty of such Person with respect to
liabilities of a type described in any of clauses (a) through (f) hereof.


     “Independent Directors” shall have the meaning ascribed to such term in
Section 2.2(d).


     “Investment” shall have the meaning ascribed to such term in the Stock
Purchase Agreement.


     “Investment Period” shall have the meaning ascribed to such term in
Section 4.1.


A-4







 



     “Investor” or “Investors” shall have the meaning ascribed to such terms in
the preamble to this Agreement.


     “Investor Designee” or “Investor Designees” shall have the meaning
ascribed to such term in Section 2.2(a).


     “Issuance” shall have the meaning ascribed to such term in Section 7.1(a).


     “Major Event” shall mean any merger (other than a merger of a wholly-owned
Subsidiary of the Company with and into the Company), consolidation,
reorganization or recapitalization of the Company or any sale of all or a
substantial portion of the assets of the Company and its Subsidiaries, taken as
a whole.


     “Major Event Notice” shall have the meaning ascribed to such term in
Section 3.4(c).


     “Major Event Proposal” shall have the meaning ascribed to such term in
Section 3.4(c).


     “Market Value” means, as of any date of determination, (i) with respect to
shares of any class or series of capital stock traded (1) on the New York Stock
Exchange (the “NYSE”) or another national stock exchange or quoted on The
National Market System of the Nasdaq Stock Market (“Nasdaq NMS”) the average of
the reported closing bid and asked prices regular way of a share of such class
or series for the 30 trading days immediately preceding such date of
determination (the “Relevant Trading Period”), as reported, (x) in the case of
the NYSE, on the NYSE composite tape, and (y) in the case of any other national
securities exchange or Nasdaq NMS, publicly by such exchange or Nasdaq NMS, or
(2) solely or primarily in the over-the-counter market, the average of the bid
and asked prices of a share of such class or series in the over-the-counter
market during the Relevant Trading Period as furnished by any NYSE member firm
selected from time to time by the Company or (ii) with respect to any class or
series of capital stock not traded or quoted on the NYSE, any other national
stock exchange or Nasdaq NMS or in the over-the-counter market, the fair market
value of a share of such class or series as determined in good faith by the
Board of Directors (which determination shall be conclusive and binding on all
stockholders).


     “Maximum Number” means the number, rounded up to the next whole number,
equal to the product of (i) the total number of Directors on the Board
multiplied by (ii) a fraction in which the numerator is the total number of
outstanding shares of Common Stock Beneficially Owned by Telmex, and the
denominator is the total number of shares of Common Stock outstanding; provided
that in no event shall the Maximum Number exceed the number of Directors on the
Board appointed or nominated by Forstmann Little (excluding the Telmex
Independent Designees).


     “MBO VIII” shall have the meaning ascribed to such term in the preamble to
this Agreement.


A-5







 



     “Notice of Acceptance” shall have the meaning ascribed to such term in
Section 7.1(c).


     “Objecting Investor” shall have the meaning ascribed to such term in
Section 3.4(d).


     “Offered Securities” shall have the meaning ascribed to such term in
Section 7.1(a).


     “Officers” shall have the meaning ascribed to such term in Section 2.8.


     “Other Buyers” shall have the meaning ascribed to such term in Section
7.1(c).


     “Permitted Benefit Plan Issuance” means any issuance of equity securities
or Equity Derivative Securities to directors, officers, employees in the
ordinary course of business pursuant to an employee stock purchase plan,
employee stock option plan or other similar compensation plan approved by the
compensation committee of the Board of Directors or the Board of Directors.


     “Permitted Transferee” means a Transferee who (i) becomes such as a result
of a Transfer (x) in connection with a transaction in which the Transferor
(which must be a Person owning assets other than the Common Stock with a Fair
Market Value in excess of the Fair Market Value of the Common Stock
Beneficially Owned by it, as of the most recent practicable date prior to the
Transfer) consolidates, amalgamates or merges with, or sells or otherwise
conveys all or substantially all of its assets to, another Person or Persons,
such that all shares of Common Stock owned by the Transferor become owned,
directly or indirectly through the Person or Persons surviving such
consolidation, amalgamation or merger or acquiring all or substantially all of
such assets, as the case may be; or (y) in the case of Forstmann Little, to any
Affiliate of Equity VII or MBO VIII so long as the Transferee remains an
Affiliate of Equity VII or MBO VIII, as the case may be, or in the case of
Telmex, to Telefonos de Mexico, S.A. de C.V. or any Subsidiary of Telefonos de
Mexico, S.A. de C.V. so long as the Transferee remains a Subsidiary of
Telefonos de Mexico, S.A. de C.V.; and (ii) executes a copy of this Agreement.


     “Person” shall mean any individual, corporation, limited liability
company, partnership, trust or other entity, and shall include any successor
(by merger or otherwise) of such entity.


     “Preemptive Notice” shall have the meaning ascribed to such term in
Section 7.1(a).


     “Preemptive Offer” shall have the meaning ascribed to such term in Section
7.1(a).


     “Preemptive Offeree” shall have the meaning ascribed to such term in
Section 7.1(a).


A-6







 



     “Preferred Stock” shall have the meaning ascribed to such term in the
Certificate of Incorporation.


     “Preliminary Activity” shall have the meaning ascribed to such term in
Section 3.4(a).


     “Reconciliation Period” shall have the meaning ascribed to such term in
Section 3.4(d).


     “Registration Rights Agreement” shall mean the Registration Rights
Agreement dated as of ____, 2002 among the Investors and the
Company.


     “Representatives” shall have the meaning ascribed to such term in Section
3.4(a).


     “Restricted Securities” means shares of Common Stock of the Company
purchased pursuant to the Stock Purchase Agreement by an Investor and any
securities issued or issuable with respect to such shares of Common Stock by
way of a stock split, stock dividend or stock combination, or any shares of
Common Stock issued in connection with a recapitalization, merger,
consolidation or other reorganization.


     “Restructuring” shall have the meaning ascribed to such term in the Stock
Purchase Agreement.


     “SEC” shall mean the United States Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act or the
Exchange Act.


     “Securities Act” shall mean the United States Securities Act of 1933 and
the rules and regulations promulgated thereunder.


     “Solicitation Period” shall have the meaning ascribed to such term in
Section 3.4(d).


     “Stock Purchase Agreement” shall have the meaning ascribed to such term in
the recitals to this Agreement.


     “Subsidiary” of any Person shall mean (i) a corporation more than 50% of
the outstanding voting stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person
and one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof.


     “Substitute Securities” shall have the meaning ascribed to such term in
Section 7.2.


A-7







 



     “Swaps” means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency.


     “Telmex” shall have the meaning ascribed to such term in the preamble to
this Agreement.


     “Telmex Designee” or “Telmex Designees” shall have the meaning ascribed to
such term in Section 2.2(a).


     “Telmex Independent Designees” means those individuals nominated by Telmex
who are independent of, and not affiliated with, either Telmex or the Company.
The number of Telmex Independent Designees shall not exceed the Maximum Number.


     “Telmex Observer” or “Telmex Observers” shall have the meaning ascribed to
such term in Section 2.11.


     “Third Party” shall mean any Person other than the Company or the
Investors, or any of their respective Affiliates.


     “Transaction Documents” shall mean this Agreement, the Stock Purchase
Agreement, and the Registration Rights Agreement.


     “Transfer” shall have the meaning ascribed to such term in Section 4.1.


     “Transferee” shall have the meaning ascribed to such term in Section 4.1.


     “Transferor” shall have the meaning ascribed to such term in Section 4.1.


     “Vacancy Period” shall have the meaning ascribed to such term in Section
2.3(a).


     “XO” shall have the meaning ascribed to such term in the preamble to this
Agreement.



A-8









 




Exhibit C



REGISTRATION RIGHTS AGREEMENT


Dated as of ____________ ___, 2002


among


XO Communications, Inc.


Forstmann Little & Co. Equity Partnership-VII, L.P.,


Forstmann Little & Co. Subordinated Debt and Equity Management

Buyout Partnership-VIII, L.P.


and


Teléfonos de México, S.A. de C.V.


 







 



Table of Contents




	 	 	 	 	 	 	 
	 	 	 	 	Page
	 	 	 	 	

	 
	1.	 	
Definitions
	 	 	1	 
	2.	 	
Registration Under Securities Act, etc.
	 	 	3	 
	 	 	
2.1.      Registration on Request
	 	 	3	 
	 	 	
2.2.      Incidental Registration
	 	 	5	 
	 	 	
2.3.      Registration Procedures
	 	 	6	 
	 	 	
2.4.      Underwritten Offerings
	 	 	10	 
	 	 	
2.5.      Preparation; Reasonable Investigation
	 	 	11	 
	 	 	
2.6.      Indemnification
	 	 	12	 
	 	 	
2.7.      Unlegended Certificates
	 	 	15	 
	 	 	
2.8.      No Required Sale
	 	 	15	 
	3.	 	
Rule 144
	 	 	15	 
	4.	 	
Amendments and Waivers
	 	 	15	 
	5.	 	
Notice
	 	 	15	 
	6.	 	
Assignment; Third Party Beneficiaries
	 	 	16	 
	7.	 	
Remedies
	 	 	17	 
	8.	 	
No Inconsistent Agreements
	 	 	17	 
	9.	 	
Descriptive Headings
	 	 	17	 
	10.	 	
Governing Law
	 	 	17	 
	11.	 	
Counterparts
	 	 	17	 
	12.	 	
Invalidity of Provision
	 	 	18	 
	13.	 	
Further Assurances
	 	 	18	 
	14.	 	
Entire Agreement; Effectiveness
	 	 	18	 




i







 



REGISTRATION RIGHTS AGREEMENT


     This Registration Rights Agreement (this “Agreement”), dated as of
_________ ___, 2002, is among XO Communications, Inc., a Delaware corporation
(the “Company”), Forstmann Little & Co. Equity Partnership-VII, L.P., a
Delaware limited partnership (“Equity VII”), Forstmann Little & Co.
Subordinated Debt and Equity Management Buyout Partnership-VIII, L.P. a
Delaware limited partnership (“MBO VIII” and collectively with Equity VII,
“Forstmann Little”) and Teléfonos de México, S.A. de C.V., a sociedad anonima
de capital variable (“Telmex”; Forstmann Little and Telmex are sometimes
hereinafter referred to as the “Purchasers” and each is sometimes individually
referred to as a “Purchaser”).


     WHEREAS, pursuant to the Stock Purchase Agreement (the “Stock Purchase
Agreement”), dated as of January 15, 2002, among the Company and the
Purchasers, (a) Forstmann Little will acquire (i) ____________ shares (the “New
Class A Shares”) of Class A Common Stock, par value $0.01 per share, of the
Company (“Class A Common Stock”) and (ii) 2 shares of Class D Common Stock, par
value $0.01 per share, of the Company (the “Class D Common Shares”) and (b)
Telmex will acquire ____________ shares of Class C Common Stock, par value $0.01
per share, of the Company (the “Class C Common Shares”).


     WHEREAS, each share of the Class C Common Shares and each Class D Common
Share is convertible, under certain circumstances, into one share of Class A
Common Stock, subject to adjustment.


     WHEREAS, as part of, and as partial consideration for, the acquisition of
the New Class A Shares and the Class D Common Shares by Forstmann Little and
the acquisition of the Class C Common Shares by Telmex, the Company hereby
grants to the Purchasers certain registration rights with respect to certain
shares of Class A Common Stock to be issued or issuable to each of them upon
consummation of the transactions contemplated by the Stock Purchase Agreement.


     Accordingly, the parties hereto agree as follows:


     1.     Definitions. As used in this Agreement, unless the context otherwise
requires, the following terms have the following respective meanings:


     “Commission” means the United States Securities and Exchange Commission or
any other federal agency at the time with primary responsibility for
administering the Securities Act.


     “Common Stock” means the New Class A Shares and the Class C Common Shares
and any shares of Class A Common Stock acquired by a Holder upon the conversion
of shares of the Class C Common Shares or the Class D Common Shares,
collectively.


     “Demand Holders” means Forstmann Little and Telmex and each Permitted
Transferee of Forstmann Little or Telmex that is a Holder and to which
Forstmann Little or Telmex has expressly assigned demand rights under Section
2.1.


 







 



     “Exchange Act” means the Securities Exchange Act of 1934, as amended, or
any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference to a
particular section of the Exchange Act shall include a reference to the
comparable section, if any, of any such similar federal statute.


     “Holders” means the Purchasers and any of their Permitted Transferees who
agree to be bound by the provisions of this Agreement.


     “Permitted Transferee” means any Person to whom any Purchaser shall have
the right to transfer any Registrable Securities in accordance with the terms
of the Stockholders Agreement, dated as of________  ___, 2002, among Forstmann
Little and Telmex and the Company, as in effect at the time of such transfer.


     “Person” means a corporation, an association, a partnership, an
organization, a business, a trust, an individual, or any other entity or
organization, including a government or political subdivision or an
instrumentality or agency thereof.


     “Registrable Securities” means (i) the New Class A Shares; (ii) any shares
of Class A Common Stock issued or issuable upon conversion of the Class C
Common Shares or the Class D Common Shares; and (iii) any shares of Class A
Common Stock or other securities of the Company issued or issuable with respect
to the Class A Common Stock referred to in clauses (i) and (ii) by way of a
stock dividend or stock split or in connection with a recapitalization, merger,
consolidation or otherwise. As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities (a) when a registration
statement with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) when such securities
shall have been otherwise transferred, new certificates for them not bearing a
legend restricting further transfer shall have been delivered by the Company
and subsequent public distribution of them shall not require registration of
them under the Securities Act, or (c) when all such securities owned by a
Holder are eligible for sale under Rule 144(k) under the Securities Act or any
successor provision.


     “Registration Expenses” means all expenses incident to the registration
and disposition of the Registrable Securities pursuant to Section 2 hereof,
including, without limitation, all registration, filing and applicable national
securities exchange fees, all fees and expenses of complying with state
securities or blue sky laws (including fees and disbursements of counsel to the
underwriters or any Holder in connection with “blue sky” qualification of the
Registrable Securities and determination of their eligibility for investment
under the laws of the various jurisdictions), all word processing, duplicating
and printing expenses, all messenger and delivery expenses, the fees and
disbursements of counsel for the Company and of its independent public
accountants, including the expenses of “cold comfort” letters or any special
audits required by, or incident to, such registration, all fees and
disbursements of underwriters (other than underwriting discounts and
commissions), all transfer taxes, and all fees and expenses of counsel to any
Holder; provided, however, that Registration Expenses shall exclude, and the
Holders shall pay, underwriting discounts and commissions in respect of the
Registrable Securities being registered.


2







 



     “Securities Act” means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Act shall include a reference to the
comparable section, if any, of any such similar Federal statute.


     2.     Registration Under Securities Act, etc.


             2.1.      Registration on Request.


                         (a)  Request. Each Demand Holder shall have the right to require the
Company to effect the registration under the Securities Act of all or part of
the Registrable Securities, by delivering a written request thereof to the
Company specifying the number of shares of Registrable Securities it wishes to
register and the intended method of distribution. The Company shall (i) use
its reasonable best efforts to effect the registration under the Securities Act
(including by means of a shelf registration pursuant to Rule 415 under the
Securities Act if so requested by the Demand Holder making such request) of the
Registrable Securities which the Company has been so requested to register by
Demand Holders, for distribution in accordance with the intended method of
distribution set forth in the written request delivered by such Demand Holder,
such registration to be effected as expeditiously as possible (but in any event
within 90 days of receipt of such written request), and (ii) if requested by
such Demand Holder, use its reasonable best efforts to obtain acceleration of
the effective date of the registration statement relating to such registration.



                         (b)  Limitations on Registration on Request. Each of the Purchasers and
its respective Permitted Transferees that are Demand Holders shall collectively
be entitled to require the Company to effect, and the Company shall effect,
five (5) registrations, for a total of ten (10) registrations for all Demand
Holders, pursuant to this Section 2.1. The Company shall not be required to
effect any registration upon request by any Demand Holder if such registration
does not meet the Minimum Size (as hereinafter defined). “Minimum Size” means
the lesser of (i) an anticipated aggregate public offering price (before
deducting underwriting discounts and commissions) of $50 million or (ii) an
anticipated registration, offering and sale of 20% or more of the shares of
Common Stock acquired by such Purchaser pursuant to the Stock Purchase
Agreement, unless the total amount of Registrable Securities owned by a Demand
Holder is less than the amounts referred to in both clauses (i) and (ii) above,
in which case the Minimum Size with respect to such Demand Holder shall be such
lesser amount.



                         (c)  Registration of Other Securities. Whenever the Company shall effect a
registration pursuant to this Section 2.1 in connection with an underwritten
offering by Demand Holders of Registrable Securities, no securities other than
Registrable Securities shall be included among the securities covered by such
registration if inclusion of such other securities would result in a request by
the managing underwriters for a reduction in the number of Registrable
Securities requested to be so registered.



                         (d)  Registration Statement Form. Registrations under this Section 2.1
shall be on such appropriate registration form of the Commission as, subject to
clause


3







 




 (a) above, shall be selected by the Company and as shall be reasonably
acceptable to the Demand Holder. The Company agrees to include in any such
registration statement all information that, in the opinion of counsel to a
Holder and counsel to the Company, is necessary or desirable to be included
therein.


                         (e)  Expenses. The Company shall pay all Registration Expenses in
connection with any registration requested pursuant to this Section 2.1.


                         (f)  Effective Registration Statement. A registration requested pursuant
to this Section 2.1 shall not be deemed to have been effected (including for
purposes of paragraph (b) of this Section 2.1) (i) unless a registration
statement with respect thereto has become effective and has been kept
continuously effective for a period of at least 365 days (or such shorter
period which shall terminate when all the Registrable Securities covered by
such registration statement have been sold pursuant thereto), (ii) if after it
has become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other
governmental agency or court for any reason not attributable to a Holder of
Registrable Securities covered by such registration statement and has not
thereafter become effective, or (iii) if the conditions to closing specified in
the underwriting agreement, if any, entered into in connection with such
registration are not satisfied or waived.


                         (g)  Selection of Underwriters. The underwriters of each underwritten
offering of the Registrable Securities so to be registered shall be selected by
the Demand Holders of a majority of the Registrable Securities included in such
registration request, subject to the Company’s approval, which approval shall
not be unreasonably withheld.


                         (h)  Right to Withdraw. If the managing underwriter of any underwritten
offering shall advise the Holders participating in such offering and
registration that the Registrable Securities covered by the registration
statement cannot be sold in such offering within a price range acceptable to
any such Holder, such Holder shall have the right to decline to participate in
such offering and registration. In addition, if such managing underwriter
shall advise such Holders that the Registrable Securities covered by the
registration statement cannot be sold in such offering within a price range
acceptable to Holders of a majority of the Registrable Securities included in
such registration, then the Holders of a majority of the Registrable Securities
so included shall have the right to notify the Company in writing that they
have determined that the registration statement shall be abandoned or
withdrawn, in which event the Company shall abandon or withdraw such
registration statement. In the event of such abandonment or withdrawal, such
request shall not be counted for purposes of the requests for registration to
which the Holders are entitled pursuant to this Section 2.1, and the Holders
that sought to participate in such offering and registration shall, on a pro
rata basis, pay, or reimburse the Company for, all Registration Expenses
related thereto.


                         (i)  Postponement. The Company shall be entitled once in any six-month
period to postpone for a reasonable period of time (but not exceeding 90 days)
the filing of any registration statement required to be prepared and filed by
it pursuant to this Section 2.1 if the Company determines, in its reasonable
judgment, that such registration and offering would materially interfere with
any material financing, corporate reorganization or other material


4







 




 transaction involving the Company or any significant subsidiary, or would
require premature disclosure thereof, and promptly gives the Holders
participating in such registration written notice of such determination,
containing a general statement of the reasons for such postponement (which the
Holders shall maintain in strict confidence) and an approximation of the
anticipated delay. If the Company shall so postpone the filing of a
registration statement, (i) the Company shall use its reasonable best efforts
to limit the delay to as short a period as is practicable and (ii) the Demand
Holders of a majority of the Registrable Securities included in such
registration shall have the right to withdraw the request for registration by
giving written notice to the Company at any time and, in the event of such
withdrawal, such request shall not be counted for purposes of the requests for
registration to which the Demand Holders are entitled pursuant to this Section
2.1.



                         (j)  Shelf Registration. If the Demand Holders request that the Company
effect a registration of Registrable Securities by means of shelf registration
pursuant to Rule 415 under the Securities Act (a “Shelf Registration
Statement”), in addition to the other requirements contained herein, the
Company shall, at its cost, use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the Prospectus
forming part thereof to be usable by any Holder until such time as all the
Registrable Securities covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement or cease to be outstanding
(the “Effectiveness Period”); provided, however, that the Effectiveness Period
in respect of the Shelf Registration Statement shall be extended to the extent
required to permit dealers to comply with the applicable prospectus delivery
requirements under the Securities Act and as otherwise provided herein.


             2.2.      Incidental Registration.


                         (a)  Right to Include Registrable Securities. If the Company at any time
proposes to register any of its securities for its own account or the account
of any other stockholder (including any Demand Holder) under the Securities Act
by registration on Form S-1, S-2 or S-3 or any successor or similar form(s)
(except registrations on any such Form or similar form(s) solely for
registration of securities in connection with an employee benefit plan or
dividend reinvestment plan or a merger or consolidation or incidental to an
issuance of securities under Rule 144A under the Securities Act), it will each
such time give prompt written notice to all of the Holders of its intention to
do so and of the Holders’ rights under this Section 2.2. Upon the written
request of any Holder (which request shall specify the maximum number of
Registrable Securities intended to be disposed of by such Holder), made as
promptly as practicable and in any event within 30 days after the receipt of
any such notice (10 days if the Company states in such written notice or gives
telephonic notice to the each of the Holders, with written confirmation to
follow promptly thereafter, stating that (i) such registration will be on Form
S-3 and (ii) such shorter period of time is required because of a planned
filing date), the Company shall use its reasonable best efforts to effect the
registration under the Securities Act of all Registrable Securities which the
Company has been so requested to register by such Holder; provided, however,
that if, at any time after giving written notice of its intention to register
any securities and prior to the effective date of the registration statement
filed in connection with such registration, the Company shall determine for any
reason not to register or to delay registration of


5






 




 such securities, the Company shall give written notice of such
determination and its reasons thereof to each of the Holders requesting
registration under this Section 2.2 (which such Holders will hold in strict
confidence) and (i) in the case of a determination not to register, shall be
relieved of its obligation to register any Registrable Securities in connection
with such registration (but not from any obligation of the Company to pay the
Registration Expenses in connection therewith), without prejudice, however, to
the rights of the Holders to request that such registration be effected as a
registration under Section 2.1 and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable
Securities, for the same period as the delay in registering such other
securities. No registration effected under this Section 2.2 shall relieve the
Company of its obligation to effect any registration upon request under Section
2.1. The Company will pay all Registration Expenses in connection with any
registration of Registrable Securities requested pursuant to this Section 2.2.


                         (b)  Right to Withdraw. Any Holder shall have the right to withdraw its
request for inclusion of its Registrable Securities in any registration
statement pursuant to this Section 2.2 at any time prior to the execution of an
underwriting agreement with respect thereto by giving written notice to the
Company of its request to withdraw.


                         (c)  Priority in Incidental Registrations. If the managing underwriter of
any underwritten offering shall inform the Company by letter of its belief that
the number of Registrable Securities requested to be included in such
registration, when added to the number of other securities to be offered in
such registration, would materially adversely affect such offering, then the
Company shall include in such registration, to the extent of the number which
the Company is so advised can be sold in (or during the time of) such offering
without so materially adversely affecting such offering, securities in the
following priority: (A) securities proposed to be included by the Company, (B)
on a pro rata basis in accordance with (i) the number of securities proposed to
be included by the stockholders (including Demand Holders), if any, triggering
such registration and (ii) the Registrable Securities requested by Holders to
be included in such registration pursuant to this Section 2.2 and then (C) any
other securities of the Company requested to be included in such registration
by any other holder having the right to include securities, on a pro rata
basis, based on the number of shares of Common Stock held, or obtainable by
exercise or conversion of other securities of the Company, by such holder.


                         (d)  Plan of Distribution. Any participation by Holders of Registrable
Securities in a registration by the Company shall be in accordance with the
Company’s plan of distribution, provided that the Holders of a majority of the
Registrable Securities included in such registration shall in consultation with
the Company have the right to select a co-managing underwriter.


             2.3.      Registration Procedures. If and whenever the Company is required to
use its reasonable best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Sections 2.1 and 2.2 hereof,
the Company shall as expeditiously as possible:




		
	 	                    (a) prepare and file with the Commission as soon as
practicable the requisite registration statement to effect such
registration (and



6







 





		
	 	shall include all financial statements required by the
Commission to be filed therewith) and thereafter use its reasonable
best efforts to cause such registration statement to become
effective; provided, however, that before filing such registration
statement (including all exhibits) or any amendment or supplement
thereto or comparable statements under securities or blue sky laws
of any jurisdiction, the Company shall as promptly as practicable
furnish such documents to each Holder and each underwriter, if any,
participating in the offering of the Registrable Securities and
their respective counsel, which documents will be subject to the
review and comments of each such Holder, each underwriter and their
respective counsel; and provided, further, however, that the
Company may discontinue any registration of its securities which
are not Registrable Securities at any time prior to the effective
date of the registration statement relating thereto;




		
	 	                    (b) notify each Holder of Registrable Securities covered by
any registration statement of the Commission’s requests for
amending or supplementing such registration statement and the
prospectus, and prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of
all Registrable Securities covered by such registration statement
for such period as shall be required for the disposition of all of
such Registrable Securities in accordance with the intended method
of distribution thereof; provided, that except with respect to any
such registration statement filed pursuant to Rule 415 under the
Securities Act, such period need not exceed 365 days;




		
	 	                    (c) furnish, without charge, to each Holder of Registrable
Securities covered by any registration statement and each
underwriter such number of conformed copies of such registration
statement and of each such amendment and supplement thereto (in
each case including all exhibits), such number of copies of the
prospectus contained in such registration statement (including each
preliminary prospectus and any summary prospectus) and any other
prospectus filed under Rule 424 under the Securities Act, in
conformity with the requirements of the Securities Act, and such
other documents, as such Holders and such underwriters may
reasonably request;




		
	 	                    (d) use its reasonable best efforts (i) to register or qualify
all Registrable Securities and other securities covered by such
registration statement under such securities or blue sky laws of
such States of the United States of America where an exemption is
not available and as each Holder of Registrable Securities covered
by such registration statement or any managing underwriter shall
reasonably request, (ii) to keep such registration or qualification
in effect for so long as such registration statement remains in
effect, and (iii) to take any other action which may be reasonably
necessary or advisable to enable each Holder of Registrable
Securities covered by a registration statement to consummate the



7







 





		
	 	disposition in such jurisdictions of the securities to be sold
by such Holders pursuant thereto, except that the Company shall not
for any such purpose be required to qualify generally to do
business as a foreign corporation in any jurisdiction wherein it
would not but for the requirements of this subsection (d) be
obligated to be so qualified or to consent to general service of
process in any such jurisdiction;




		
	 	                    (e) use its reasonable best efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other federal or state governmental
agencies or authorities as may be necessary in the opinion of
counsel to the Company and counsel to any Holder of Registrable
Securities covered by such registration statement to consummate the
disposition of such Registrable Securities;




		
	 	                    (f) furnish to each Holder and each underwriter, if any,
participating in the offering of the securities covered by such
registration statement, a signed counterpart of (i) an opinion of
counsel for the Company, and (ii) a “comfort” letter signed by the
independent public accountants who have certified the Company’s or
any other entity’s financial statements included or incorporated by
reference in such registration statement, covering substantially
the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of the
accountants’ comfort letter, with respect to events subsequent to
the date of such financial statements, as are customarily covered
in opinions of issuer’s counsel and in accountants’ comfort letters
delivered to the underwriters in underwritten public offerings of
securities (and dated the dates such opinions and comfort letters
are customarily dated) and, in the case of the legal opinion, such
other legal matters;




		
	 	                    (g) promptly notify each Holder and each managing underwriter,
if any, participating in the offering of the securities covered by
such registration statement (i) when such registration statement,
any pre-effective amendment, the prospectus or any prospectus
supplement related thereto or post-effective amendment to such
registration statement has been filed, and, with respect to such
registration statement or any post-effective amendment, when the
same has become effective; (ii) of any request by the Commission
for amendments or supplements to such registration statement or the
prospectus related thereto or for additional information; (iii) of
the issuance by the Commission of any stop order suspending the
effectiveness of such registration statement or the initiation of
any proceedings for that purpose; (iv) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of any of the Registrable Securities for sale under
the securities or blue sky laws of any jurisdiction or the
initiation of any proceeding for such purpose; (v) at any time when
a prospectus relating thereto is required to be delivered under the
Securities Act, upon discovery that, or upon the happening of any
event as a result of which, the prospectus included in such
registration



8







 





		
	 	statement, as then in effect, includes an untrue statement of
a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, in the light of the circumstances under which they were
made, and in the case of this clause (v), at the request of any
Holder of Registrable Securities covered by such registration
statement promptly prepare and furnish to such Holder and each
managing underwriter, if any, participating in the offering of the
Registrable Securities, a reasonable number of copies of a
supplement to or an amendment of such prospectus as may be
necessary so that, as thereafter delivered to such Holders, such
prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances under which they were made; and (vi) at
any time when the representations and warranties of the Company
contemplated by Section 2.4(a) or (b) hereof cease to be true and
correct;




		
	 	                    (h) otherwise comply with all applicable rules and regulations
of the Commission, and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering the
period of at least twelve months beginning with the first full
calendar month after the effective date of such registration
statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 promulgated
thereunder, and promptly furnish to each Holder of Registrable
Securities covered by a registration statement a copy of any
amendment or supplement to such registration statement or
prospectus;




		
	 	                    (i) provide and cause to be maintained a transfer agent and
registrar (which, in each case, may be the Company) for all
Registrable Securities covered by such registration statement from
and after a date not later than the effective date of such
registration statement;




		
	 	                    (j) (i) use its reasonable best efforts to cause all
Registrable Securities covered by such registration statement to be
listed on the NASDAQ “national market system” or the principal
securities exchange on which similar securities issued by the
Company are then listed (if any), if the listing of such
Registrable Securities is then permitted under the rules of such
exchange, or (ii) if no similar securities are then so listed, use
its reasonable best efforts to (x) cause all such Registrable
Securities to be listed on a national securities exchange or (y)
failing that, secure designation of all such Registrable Securities
as a NASDAQ “national market system security” within the meaning of
Exchange Act Rule 11Aa2-1 of the Commission or (z) failing that, to
secure NASDAQ authorization for such shares and, without limiting
the generality of the foregoing, to arrange for at least two market
makers to register as such with respect to such shares with the
National Association of Securities Dealers, Inc.;



9







 





		
	 	                    (k) deliver promptly to counsel to each Holder and each
underwriter, if any, participating in the offering of the
Registrable Securities, copies of all correspondence between the
Commission and the Company, its counsel or auditors and all
memoranda relating to discussions with the Commission or its staff
with respect to such registration statement;




		
	 	                    (l) use its reasonable best efforts to obtain the withdrawal
of any order suspending the effectiveness of the registration
statement;




		
	 	                    (m) provide a CUSIP number for all Registrable Securities, no
later than the effective date of the registration statement; and




		
	 	                    (n) in connection with any underwritten public offering, make
available its senior executive officers, directors and chairman and
otherwise provide reasonable assistance to the underwriters (taking
into account the needs of the Company’s business) in their
marketing of Registrable Securities.



The Company may require each Holder of Registrable Securities covered by a
registration statement to furnish the Company such information regarding such
Holder and the distribution of the Registrable Securities of such Holder as the
Company may from time to time reasonably request in writing.


     Each Holder agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in paragraph (g)(iii) or (v)
of this Section 2.3, such Holder will, to the extent appropriate, discontinue
its disposition of Registrable Securities pursuant to the registration
statement relating to such Registrable Securities until, in the case of
paragraph (g)(v) of this Section 2.3, its receipt of the copies of the
supplemented or amended prospectus contemplated by paragraph (g)(v) of this
Section 2.3 and, if so directed by the Company, will deliver to the Company (at
the Company’s expense) all copies, other than permanent file copies, then in
its possession, of the prospectus relating to such Registrable Securities
current at the time of receipt of such notice. If the disposition by a Holder
of its securities is discontinued pursuant to the foregoing sentence, the
Company shall extend the period of effectiveness of the registration statement
by the number of days during the period from and including the date of the
giving of notice to and including the date when such Holder shall have received
copies of the supplemented or amended prospectus contemplated by paragraph
(g)(v) of this Section 2.3; and, if the Company shall not so extend such
period, the request pursuant to which such registration statement was filed
shall not be counted for purposes of the requests for registration to which the
Holders are entitled pursuant to Section 2.1 hereof.


             2.4.      Underwritten Offerings.


                         (a)  Requested Underwritten Offerings. If requested by the underwriters
for any underwritten offering by the Holders pursuant to a registration
requested under Section 2.1, the Company shall enter into a customary
underwriting agreement (in the form of underwriting agreement used at such time
by the managing underwriter(s)) with a managing underwriter or underwriters
selected by the Demand Holders of a majority of the Registrable


10







 




 Securities included in such registration. Such underwriting agreement
shall be satisfactory in form and substance to Demand Holders of a majority of
the Registrable Securities included in such registration and shall contain such
representations and warranties by, and such other agreements on the part of,
the Company and such other terms as are generally prevailing in agreements of
the managing underwriter(s), including, without limitation, their customary
provisions relating to indemnification and contribution. Each Holder
participating in such registration shall be a party to such underwriting
agreement and may, at its option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such Holder and that any or all of the conditions precedent
to the obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of such Holder. No underwriting
agreement (or other agreement in connection with such offering) shall require
any Holder to make any representations or warranties to or agreements with the
Company or the underwriters other than representations, warranties or
agreements regarding the ownership of such Holder’s Registrable Securities and
such Holder’s intended method or methods of disposition or to furnish any
indemnity to any Person which is broader than the indemnity to be furnished by
such Holder pursuant to Section 2.6(b).


                         (b)  Incidental Underwritten Offerings. In the case of a registration
pursuant to Section 2.2 hereof, if the Company shall have determined to enter
into any underwriting agreements in connection therewith, all of the
Registrable Securities to be included in such registration shall be subject to
such underwriting agreements. Each Holder of Registrable Securities included
in such registration shall be a party to such underwriting agreement and may,
at its option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit of such Holder
and that any or all of the conditions precedent to the obligations of such
underwriters under such underwriting agreement be conditions precedent to the
obligations of such Holder. No underwriting agreement (or other agreement in
connection with such offering) shall require any Holder to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding the
ownership of such Holder’s Registrable Securities and such Holder’s intended
method or methods of disposition or to furnish any indemnity to any Person
which is broader than the indemnity to be furnished by such Holder pursuant to
Section 2.6(b).


             2.5.      Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give each Holder of Registrable
Securities covered by such registration statement, its underwriters, if any,
and its counsel, accountants and other representatives and agents the
opportunity to participate in the preparation of such registration statement,
each prospectus included therein or filed with the Commission, and each
amendment thereof or supplement thereto, and give each of them such access to
its books and records and such opportunities to discuss the business of the
Company with its officers and employees and the independent public accountants
who have certified its financial statements, and supply all other information
reasonably requested by each of them, as shall be necessary or appropriate, in
the opinion of such Holder and such underwriters’ respective counsel, to
conduct a reasonable


11







 




 investigation within the meaning of the Securities Act.


             2.6.      Indemnification.


                         (a)  Indemnification by the Company. The Company agrees that in the event
of any registration of any securities of the Company under the Securities Act,
the Company shall, and hereby does, indemnify and hold harmless each Holder,
its directors, officers, members, partners, agents and affiliates and each
other Person who participates as an underwriter in the offering or sale of such
securities and each other Person, if any, who controls such Holder or any such
underwriter within the meaning of the Securities Act, against any losses,
claims, damages, or liabilities, joint or several, to which such Holder or any
such director, officer, member, partner, agent or affiliate or underwriter or
controlling Person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities, joint or several (or
actions or proceedings, whether commenced or threatened, in respect thereof),
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any registration statement under
which such securities were registered under the Securities Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, (ii) any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein in light of the circumstances in which they were made not
misleading, or (iii) any violation by the Company of any federal, state or
common law rule or regulation applicable to the Company and relating to action
required of or inaction by the Company in connection with any such
registration, and the Company shall reimburse such Holder and each such
director, officer, member, partner, agent or affiliate, underwriter and
controlling Person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the Company shall not be liable
in any such case to a Holder or any such director, officer, member, partner,
agent, affiliate, or controlling Person to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect thereof) or
expense arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in such registration statement,
any such preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Holder,
specifically stating that it is for use in the preparation thereof. Such
indemnity shall remain in full force regardless of any investigation made by or
on behalf of a Holder or any such director, officer, member, partner, agent,
affiliate, underwriter or controlling Person and shall survive the transfer of
such securities by a Holder.


                         (b)  Indemnification by the Holders. As a condition to including any
Registrable Securities in any registration statement, the Company shall have
received an undertaking reasonably satisfactory to it from each Holder so
including any Registrable Securities to indemnify and hold harmless, severally
and not jointly (in the same manner and to the same extent as set forth in
paragraph (a) of this Section 2.6), the Company, and each director of the
Company, each officer of the Company and each other Person, if any, who
controls the Company within the meaning of the Securities Act, with respect to
any statement or alleged statement in or omission or alleged omission from such
registration statement, any preliminary prospectus, final


12







 




 prospectus or summary prospectus contained therein, or any amendment or
supplement thereto, but only to the extent such statement or alleged statement
or omission or alleged omission was made in reliance upon and in conformity
with written information furnished to the Company by or on behalf of such
Holder specifically stating that it is for use in the preparation of such
registration statement, preliminary prospectus, final prospectus, summary
prospectus, amendment or supplement; provided, however, that the liability of
such indemnifying party under this Section 2.6(b) shall be limited to the
amount of proceeds (net of expenses and underwriting discounts and commissions)
received by such indemnifying party in the offering giving rise to such
liability. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling Person and shall survive the transfer of such securities
by such Holder.


                         (c)  Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subsections of this Section 2.6, such
indemnified party shall, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action or proceeding; provided, however, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations under the preceding subsections of this
Section 2.6, except to the extent that the indemnifying party is actually
prejudiced by such failure to give notice, and shall not relieve the
indemnifying party from any liability which it may have to the indemnified
party otherwise than under this Section 2.6. In case any such action or
proceeding is brought against an indemnified party, the indemnifying party
shall be entitled to participate therein and, unless in the opinion of outside
counsel to the indemnified party a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, to
assume the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory
to such indemnified party; provided, however, that if the defendants in any
such action or proceeding include both the indemnified party and the
indemnifying party and if in the opinion of outside counsel to the indemnified
party there may be legal defenses available to such indemnified party and/or
other indemnified parties which are different from or in addition to those
available to the indemnifying party, the indemnified party or parties shall
have the right to select separate counsel to defend such action or proceeding
on behalf of such indemnified party or parties, provided, however, that the
indemnifying party shall be obligated to pay for only one counsel and one local
counsel for all indemnified parties. After notice from the indemnifying party
to such indemnified party of its election so to assume the defense thereof and
approval by the indemnified party of such counsel, the indemnifying party shall
not be liable to such indemnified party for any legal expenses subsequently
incurred by the latter in connection with the defense thereof other than
reasonable costs of investigation (unless the first proviso in the preceding
sentence shall be applicable). No indemnifying party shall be liable for any
settlement of any action or proceeding effected without its written consent.
No indemnifying party shall, without the consent of the indemnified party
(which consent shall not be unreasonably withheld or delayed), consent to entry
of any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation.


13







 



                         (d)  Contribution. If the indemnification provided for in this Section 2.6
shall for any reason be held by a court to be unavailable to an indemnified
party under subsection (a) or (b) hereof in respect of any loss, claim, damage
or liability, or any action in respect thereof, then, in lieu of the amount
paid or payable under subsection (a) or (b) hereof, the indemnified party and
the indemnifying party under subsection (a) or (b) hereof shall contribute to
the aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand, and the indemnified party on the other,
which resulted in such loss, claim, damage or liability, or action in respect
thereof, with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations, or (ii) if the allocation provided by
clause (i) above is not permitted by applicable law or if the allocation
provided in this clause (ii) provides a greater amount to the indemnified party
than clause (i) above, in such proportion as shall be appropriate to reflect
not only the relative fault but also the relative benefits received by the
indemnifying party and the indemnified party from the offering of the
securities covered by such registration statement as well as any other relevant
equitable considerations. The parties hereto agree that it would not be just
and equitable if contributions pursuant to this Section 2.6(d) were to be
determined by pro rata allocation or by any other method of allocation which
does not take into account the equitable considerations referred to in the
preceding sentence of this Section 2.6(d). 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. In addition, no Person shall be obligated to
contribute hereunder any amounts in payment for any settlement of any action or
claim effected without such Person’s consent, which consent shall not be
unreasonably withheld. Notwithstanding anything in this subsection (d) to the
contrary, no indemnifying party (other than the Company) shall be required to
contribute any amount in excess of the proceeds (net of expenses and
underwriting discounts and commissions) received by such party from the sale of
the Registrable Securities in the offering to which the losses, claims, damages
or liabilities of the indemnified parties relate.


                         (e)  Other Indemnification. Indemnification and contribution similar to
that specified in the preceding subsections of this Section 2.6 (with
appropriate modifications) shall be given by the Company and the Holders with
respect to any required registration or other qualification of securities under
any federal, state or blue sky law or regulation of any governmental authority
other than the Securities Act. The indemnification agreements contained in
this Section 2.6 shall be in addition to any other rights to indemnification or
contribution which any indemnified party may have pursuant to law or contract
and shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of any indemnified party and shall survive
the transfer of any of the Registrable Securities by a Holder.


                         (f)  Indemnification Payments. The indemnification and contribution
required by this Section 2.6 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills
are received or expense, loss, damage or liability is incurred.


14







 



             2.7.      Unlegended Certificates. In connection with the offering of any
Registrable Securities registered pursuant to this Section 2, the Company shall
(i) facilitate the timely preparation and delivery to each Holder and
underwriter, if any, participating in such offering, of unlegended certificates
representing ownership of such Registrable Securities being sold in such
denominations and registered in such names as requested by such Holder or such
underwriters and (ii) instruct any transfer agent and registrar of such
Registrable Securities to release any stop transfer orders with respect to any
such Registrable Securities.


             2.8.      No Required Sale. Nothing in this Agreement shall be deemed to
create an independent obligation on the part of any Holder to sell any
Registrable Securities pursuant to any effective registration statement.


     3.     Rule 144. The Company shall take all actions reasonably necessary to
enable each Holder of Registrable Securities to sell such securities without
registration under the Securities Act within the limitation of the exemptions
provided by (i) Rule 144, or (ii) any similar rule or regulation hereafter
adopted by the Commission including, without limiting the generality of the
foregoing, filing on a timely basis all reports required to be filed by the
Exchange Act. Upon the request of any Holder, the Company will deliver to such
Holder a written statement as to whether it has complied with such
requirements.


     4.     Amendments and Waivers. This Agreement may be amended, modified or
supplemented only by written agreement of the Company and Holders of a majority
of the Registrable Securities of each Purchaser and its Permitted Transferees,
provided, however, that any amendment that would materially and adversely
affect any particular Holder or Holders shall also require the written consent
of such Holder or Holders.


     5.     Notice. All notices and other communications hereunder shall be in
writing and, unless otherwise provided herein, shall be deemed to have been
given when received by the party to whom such notice is to be given at its
address set forth below, or such other address for the party as shall be
specified by notice given pursuant hereto:




	 
	(a)      If to Forstmann Little, to:
	 
	c/o Forstmann Little & Co.
	767 Fifth Avenue
	New York, NY 10153
	Attention: Sandra J. Horbach
	 
	With a copy to:
	 
	Fried, Frank, Harris, Shriver & Jacobson
	One New York Plaza
	New York, New York 10004
	Attention: Stephen Fraidin, Esq
	 
	(b)      If to Telmex, to:




15







 




	 
	Teléfonos de México, S.A. de C.V.
	Parque Via 190, Piso 10
	Colonia Cuauhtémoc
	06599 México, D.F
	Attention: Lic. Javier Mondragon Alarcon
	 
	With a copy to:
	 
	Latham & Watkins
	885 Third Avenue
	Suite 1000
	New York, NY 10022
	Attention: Charles M. Nathan, Esq
	 
	(c)      If to the Company, to it at:
	 
	XO Communications, Inc.
	11111 Sunset Hills Road
	Reston, VA 20190
	Attn: Gary D. Begeman, Esq
	 
	With a copy to:
	 
	Willkie Farr & Gallagher
	787 Seventh Avenue
	New York, NY 10019
	Attn: Bruce R. Kraus, Esq



     6.     Assignment; Third Party Beneficiaries. This Agreement shall be binding
upon and inure to the benefit of and be enforceable by the parties hereto and
their respective successors and permitted assigns. This Agreement may not be
assigned by the Company, without the prior written consent of the Holders. The
Purchasers and each of their Permitted Transferees may, at their election, at
any time or from time to time, assign their rights under this Agreement, in
whole or in part, to any purchaser or other transferee of shares of Registrable
Securities held by them to the extent such Person agrees in writing to be bound
by all of the provisions applicable hereunder to the transferring Holder;
provided, however, that (i) no Permitted Transferee or assignee of any
Purchaser shall have any demand rights pursuant to Section 2.1 unless such
demand rights are expressly assigned to such Permitted Transferee or assignee
in writing and (ii) no such assignment will increase the total number of
registrations pursuant to Section 2.1 or underwritten offerings the Company is
required to effect hereunder. If the Company is a party to any merger or
consolidation pursuant to which the Registrable Securities are converted into
or exchanged for securities or the right to receive securities of any other
Person (“Conversion Securities”), the issuer of such Conversion Securities
shall assume (in


16







 




 a writing delivered to each Holder) all obligations of the Company under
this Agreement. The Company shall not effect any merger or consolidation
unless the issuer of any Conversion Securities complies with the provisions of
this Section 6.


     7.     Remedies. The parties hereto agree that money damages or other remedy
at law would not be sufficient or adequate remedy for any breach or violation
of, or a default under, this Agreement by them and that, in addition to all
other remedies available to them, each of them shall be entitled to an
injunction restraining such breach, violation or default or threatened breach,
violation or default and to any other equitable relief, including without
limitation specific performance, without bond or other security being required.
In any action or proceeding brought to enforce any provision of this Agreement
(including the indemnification provisions thereof), the successful party shall
be entitled to recover reasonable attorneys’ fees in addition to its costs and
expenses and any other available remedy.


     8.     No Inconsistent Agreements. The Company will not, on or after the date
of this Agreement, enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holders in this Agreement
or otherwise conflicts with the provisions hereof. The Company further
represents and warrants that the rights granted to the Holders hereunder do not
in any way conflict with and are not inconsistent with any other agreements to
which the Company is a party or by which it is bound.


     9.     Descriptive Headings. The descriptive headings of the several sections
and paragraphs of this Agreement are inserted for reference only and shall not
control or otherwise affect the meaning hereof.


     10.     Governing Law. This Agreement shall be construed and enforced in
accordance with, and the rights and obligations of the parties hereto shall be
governed by, the laws of the State of New York, without giving effect to the
conflicts of law principles thereof. Each of the parties to this Agreement
hereby irrevocably and unconditionally consents to submit to the exclusive
jurisdiction of the courts of the State of New York and the United States of
America located in the County of New York for any action or proceeding arising
out of or relating to this Agreement (and agrees not to commence any action or
proceeding relating thereto except in such courts), and further agrees that
service of any process, summons, notice or document by U.S. registered mail to
its respective address set forth in Section 5 hereof shall be effective service
of process for any action or proceeding brought against it in any such court.
Each of the parties hereto hereby irrevocably and unconditionally waives any
objection to the laying of venue of any action or proceeding arising out of
this Agreement in the courts of the State of New York or the United States of
America located in the County of New York, and hereby further irrevocably and
unconditionally waives and agrees not to plead or claim in any such court that
any such action or proceeding brought in any such court has been brought in an
inconvenient forum.


     11.     Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all such
counterparts shall together constitute one and the same instrument.


17







 



     12.     Invalidity of Provision. The invalidity or unenforceability of any
provision of this Agreement in any jurisdiction shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or
the validity or enforceability of this Agreement, including that provision, in
any other jurisdiction. If any restriction or provision of this Agreement is
held unreasonable, unlawful or unenforceable in any respect, such restriction
or provision shall be interpreted, revised or applied in a manner that renders
it lawful and enforceable to the fullest extent possible under law.


     13.     Further Assurances. Each party hereto shall do and perform or cause
to be done and performed all further acts and things and shall execute and
deliver all other agreements, certificates, instruments, and documents as any
other party hereto reasonably may request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.


     14.     Entire Agreement; Effectiveness. This Agreement constitutes the
entire agreement, and supersedes all prior agreements and understandings, oral
and written, between the parties hereto with respect to the subject matter
hereof.


18







 



     IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
and delivered by their respective officers thereunto duly authorized.




	 
	XO COMMUNICATIONS, INC




	 	 	 
	By:	 	
___________________________
	 	 	
Name: Daniel F. Akerson
	 	 	
Title: Chairman and Chief Executive Officer




	 
	FORSTMANN LITTLE & CO. EQUITY
 PARTNERSHIP
VII, L.P.




	 	 	 
	By:	 	
___________________________
	 	 	
Name: Sandra J. Horbach,
	 	 	
Title: General Partner




	 
	FORSTMANN LITTLE & CO. SUBORDINATED
 DEBT AND
EQUITY MANAGEMENT BUYOUT
 PARTNERSHIP – VIII,
L.P.




	 	 	 
	By:	 	
___________________________
	 	 	
Name: Sandra J. Horbach,
	 	 	
Title: General Partner




	 
	TELÉFONOS DE MÉXICO, S.A. DE C.V.




	 	 	 
	By:	 	
___________________________
	 	 	
Name: Jaime Chico Pardo
	 	 	
Title: Director General




19








 



Exhibit D


AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION OF

XO COMMUNICATIONS, INC.


Pursuant to Sections [103 and 303] [242 and 245]

of the

Delaware General Corporation Law


*************


     XO COMMUNICATIONS, INC., a Delaware corporation, hereby certifies as
follows:


     The original Certificate of Incorporation of NM Acquisition Corp. (the
“Corporation”) was filed with the Secretary of State of the State of Delaware
on December 30, 1999 (the “Original Certificate of Incorporation”).


     The Original Certificate of Incorporation was amended and restated
pursuant to an Amended and Restated Certificate of Incorporation, which was
filed with the Secretary of State of the State of Delaware on June 8, 2000 (the
“First Amended and Restated Certificate of Incorporation”).


     The First Amended and Restated Certificate of Incorporation was further
amended pursuant to the Certificate of Merger of NEXTLINK Communications, Inc.
with and into the Corporation, pursuant to which the Corporation changed its
name to “NEXTLINK Communications, Inc.,” which was filed with the Secretary of
State of the State of Delaware on June 16, 2000.


     The First Amended and Restated Certificate of Incorporation, as amended,
was further amended pursuant to the Certificate of Merger of CONCENTRIC Network
Corporation with and into NEXTLINK Communications, Inc., which was filed with
the Secretary of State of the State of Delaware on June 16, 2000.


     The First Amended and Restated Certificate of Incorporation, as amended,
was further amended pursuant to a Certificate of Correction, which was filed
with the Secretary of State of the State of Delaware on July 5, 2000.


     The First Amended and Restated Certificate of Incorporation, as amended,
was further amended pursuant to a Certificate of Designation relating to the
Corporation’s Series G Cumulative Convertible Participating Preferred Stock,
par value $.01 per share, and a Certificate of Designation relating to the
Corporation’s Series H Convertible Participating Preferred Stock, par value
$.01 per share, which were filed with the Secretary of State of the State of
Delaware on July 5, 2000.


     The First Amended and Restated Certificate of Incorporation, as amended,
was further amended pursuant to a Certificate of Amendment, pursuant to which
the Corporation changed

 






 



its name to “XO Communications, Inc.,” which was filed with the Secretary
of State of the State of Delaware on October 20, 2000 to be effective as of
October 25, 2000.


     The First Amended and Restated Certificate of Incorporation, as amended,
was further amended pursuant to a Certificate of Amendment, which was filed
with the Secretary of State of the State of Delaware on June 5, 2001.


     The First Amended and Restated Certificate of Incorporation, as amended,
was further amended pursuant to the Certificate of Merger of Internex
Information Services, Inc., Delta Internet Services, Inc. and Anaserve, Inc.
with and into the Corporation, which was filed with the Secretary of State of
the State of Delaware on June 25, 2001 to be effective as of June 30, 2001.


     The First Amended and Restated Certificate of Incorporation, as amended,
was further amended pursuant to the Certificate of Merger of XO Technology
Services, Inc. with and into the Corporation, which was filed with the
Secretary of State of the State of Delaware on June 25, 2001 to be effective as
of June 30, 2001 (the First Amended and Restated Certificate of Incorporation,
as so amended to date, the “Current Certificate of Incorporation”).


     The Current Certificate of Incorporation is hereby amended and restated
pursuant to [the order of the United States Bankruptcy Court, [District] in
[(In re XO Communications, Inc., No. [    ] (_____))], and the Plan of
Reorganization confirmed therein in connection with the reorganization of the
Corporation under Title 11 of the United States Code and in accordance with
Sections 103 and 303 of the Delaware General Corporation Law.] [Sections 242
and Section 245 of the Delaware General Corporation Law and has been duly
proposed and adopted by the board of directors of the Corporation and the
stockholders of the Corporation, and all specifically affected classes or
series of stockholders, in accordance with Sections 242 and Section 245 of the
Delaware General Corporation Law. [INSERT DESCRIPTION OF OUT OF COURT
TRANSACTION HERE]]


     This Amended and Restated Certificate of Incorporation restates and
integrates and further amends the Current Certificate of Incorporation. The
text of the Current Certificate of Incorporation is hereby amended and restated
in its entirety as follows:


          1.     Name. The name of the corporation is:


                  XO COMMUNICATIONS, INC.


     XO Communications, Inc. is referred to as the “Corporation” hereafter in
this Amended and Restated Certificate of Incorporation.


          2.     Purpose. The nature of the business or purpose to be conducted or
promoted by the Corporation is to engage in any lawful act or activity for
which corporations may be organized under the Delaware General Corporation Law.


2






 


          3.     Shares.


    (a)  The Corporation shall have authority to issue ________________
(_________) shares of common stock of the Corporation, which shall be divided
into three classes, ________________ (_________) shares of Class A Common Stock,
par value $0.01 per share (the “Class A Common Stock”), ________________
(_________) shares of Class C Common Stock, par value $0.01 par share (the
“Class C Common Stock”), and two (2) shares of Class D Common Stock, par value
$0.01 per share (the “Class D Common Stock” and together with the Class A
Common Stock and the Class C Common Stock, the “Common Stock”). The
Corporation shall have authority to issue ________________ (_________) shares
of preferred stock, par value $0.01 per share (the “Preferred Stock”).


    (b)  Shares of Preferred Stock of the Corporation may be issued from time
to time in one or more classes or series, each of which class or series shall
have such distinctive designation or title as shall be fixed by the Board of
Directors and recorded in a Certificate of Designation adopted and filed as
required by Section 151 of the General Corporation Law of Delaware prior to the
issuance of any shares thereof. Each such class or series of Preferred Stock
shall have such voting powers, full or limited, or no voting powers, and such
preferences and relative participating, option or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated in such
resolution or resolutions providing for the issue of such class or series of
Preferred Stock as may be adopted from time to time by the Board of Directors
prior to the issuance of any shares thereof pursuant to the authority hereby
expressly vested in it, all in accordance with the laws of the State of
Delaware.


    (c)  Except with regard to the special voting power and conversion rights
provided in this paragraph 3, the Class A Common Stock, the Class C Common
Stock and the Class D Common Stock shall carry identical characteristics,
rights, preferences and limitations, including but not limited to participating
equally in any dividends when and as declared by the board of directors of the
Corporation (the “Board of Directors”) out of funds lawfully available therefor
and in any distribution resulting from a liquidation or distribution of assets,
whether voluntary or involuntary, in each case subject to any preferential
rights granted to any series of Preferred Stock that may be then outstanding.


    (d)  Holders of all classes of the Common Stock are entitled to vote on all
matters that come before the stockholders, including without limitation,
election of the directors to the Board of Directors. Subject to the
differential voting rights provided in this paragraph 3, holders of the Common
Stock shall vote together as a single class on all matters on which holders of
the Common Stock are entitled to vote. Each share of the Common Stock shall
have one (1) vote on all matters on which holders of the Common Stock are
entitled to vote.


    (e)  Each share of the Class C Common Stock may be converted, at any time
and from time to time at the option of the holder, into one share of the Class
A Common Stock. Such conversion shall be effected by the surrender of the
certificate representing the shares of Class C Common Stock to be converted at
the office of the Secretary of the Corporation (or at such additional place or
places as may from time to time be designated by the Secretary or any Assistant
Secretary of the Corporation) in such form and accompanied by all stock
transfer tax stamps, if any, as shall be required for such transfer. Upon such
surrender, the holder of such

3






 



shares of Class C Common Stock shall be entitled to become, and shall be
registered in the stock transfer records maintained by or on behalf of the
Corporation as, the holder of the number of shares of the Class A Common Stock
into which such shares of Class C Common Stock are convertible, and thereupon
there shall be issued and promptly delivered to such holder, at the address of
such holder provided to the Corporation at the time of surrender of the
certificate or certificates representing the shares of Class C Common Stock so
surrendered, a certificate or certificates for such number of shares of the
Class A Common Stock into which such shares of Class C Common Stock are
convertible.


     (f)  Each share of Class C Common Stock shall automatically be converted,
without any further action on behalf of the Corporation, into one share of
Class A Common Stock upon the Transfer (or presentment to the Corporation for
Transfer in the stock transfer records maintained by or on behalf of the
Corporation) of such share of the Class C Common Stock by a Class C Permitted
Transferee to a Class C Prohibited Transferee. Such conversion shall be
effective automatically upon the Transfer of title to such share of Class C
Common Stock from the Class C Permitted Transferee to the Class C Prohibited
Transferee, which Transfer of title shall be deemed to occur no later than the
presentment of the certificate representing such share of Class C Common Stock
to the Corporation for Transfer in the stock transfer records maintained by or
on behalf of the Corporation. In addition, each share of the Class C Common
Stock shall automatically be converted, without any further action on behalf of
the Corporation, into one share of the Class A Common Stock upon any of the
following events, which conversion shall be deemed effective immediately upon
the occurrence of such event: (i) at such time as Class C Permitted Transferees
shall own in the aggregate less than 10% of the total number of outstanding
shares of the Common Stock or (ii) the fourth anniversary of the date of the
original issuance of the first share or shares of the Class C Common Stock (the
“Original Class C Issuance Date”). Promptly upon the conversion of all shares
of Class C Common Stock into shares of Class A Common Stock pursuant to the
preceding sentence, the Secretary of the Corporation (or such other employee of
the Corporation as may be designated by the Secretary or any Assistant
Secretary of the Corporation) shall send a notice of such conversion to each
holder of shares of Class C Common Stock at the address of such holder as set
forth in the stock transfer records maintained by or on behalf of the
Corporation. Such notice shall state that all shares of Class C Common Stock
have automatically been converted into shares of Class A Common Stock and that
such holder shall have the right to surrender the certificate or certificates
representing shares of Class C Common Stock held by such holder at the office
of the Secretary of the Corporation (or at such additional place or places as
may be designated by the Secretary or any Assistant Secretary of the
Corporation) in such form and accompanied by all stock transfer tax stamps, if
any, as shall be required for such transfer. Upon such surrender, such holder
shall be entitled to be registered in the stock transfer records maintained by
or on behalf of the Corporation as the holder of the number of shares of the
Class A Common Stock into which such shares of Class C Common Stock are
convertible, and thereupon there shall be issued and promptly delivered to such
holder at the address of such holder set forth above, a certificate or
certificates representing such number of shares of the Class A Common Stock
into which such shares of Class C Common Stock are convertible.


     (g)  Each share of the Class D Common Stock may be converted, at any time
and from time to time at the option of the holder, into one share of the Class
A Common Stock. Such

4






 



conversion shall be effected by the surrender of the certificate or
certificates representing the shares of Class D Common Stock to be converted at
the office of the Secretary of the Corporation (or at such additional place or
places as may be designated by the Secretary or any Assistant Secretary of the
Corporation) in such form and accompanied by all stock transfer tax stamps, if
any, as shall be required for such transfer. Upon such surrender, the holder
of such shares of Class D Common Stock shall be entitled to become, and shall
be registered in the stock transfer records maintained by or on behalf of the
Corporation as, the holder of the number of shares of the Class A Common Stock
into which such shares of Class D Common Stock are convertible, and thereupon
there shall be issued and promptly delivered to such holder, at the address of
such holder provided to the Corporation at the time of surrender of the
certificate or certificates representing the shares of Class D Common Stock so
surrendered, a certificate or certificates representing such number of shares
of Class A Common Stock into which such Class D Common Stock is convertible.


     (h)  Each share of Class D Common Stock will automatically be converted,
without any further action on behalf of the Corporation, into one share of the
Class A Common Stock simultaneously upon the conversion of all outstanding
shares of the Class C Common Stock into the Class A Common Stock in accordance
with the terms of subparagraph 3(f), which conversion shall be deemed effective
immediately upon the occurrence of such event. Promptly upon the conversion of
all shares of Class D Common Stock into shares of Class A Common Stock pursuant
to this subparagraph (h), the Secretary of the Corporation (or such other
employee of the Corporation as may be designated by the Secretary or any
Assistant Secretary of the Corporation) shall send a notice of such conversion
to each holder of shares of Class D Common Stock at the address of such holder
as set forth in the stock transfer records maintained by or on behalf of the
Corporation. Such notice shall state that all shares of Class D Common Stock
have automatically been converted into shares of Class A Common Stock and that
such holder shall have the right to surrender the certificate or certificates
representing the shares of Class D Common Stock held by such holder at the
office of the Secretary of the Corporation (or at such additional place or
places as may be designated by the Secretary or any Assistant Secretary of the
Corporation) in such form and accompanied by all stock transfer tax stamps, if
any, as shall be required for such transfer. Upon such surrender, such holder
shall be entitled to be registered in the stock transfer records maintained by
or on behalf of the Corporation as the holder of the number of shares of the
Class A Common Stock into which such shares of Class D Common Stock are
convertible, and thereupon there shall be issued and promptly delivered to such
holder at the address of such holder as set forth in such stock transfer
records a certificate or certificates for such number of shares of the Class A
Common Stock into which shares of Class D Common Stock are convertible.


     (i)  At any time at which any shares of the Class C Common Stock or the
Class D Common Stock shall remain outstanding, the affirmative vote of the
holders of a majority of the outstanding shares of the Class C Common Stock and
the holders of a majority of the outstanding shares of the Class D Common
Stock, each voting as a separate class, shall be required before the
Corporation may enter into any agreement with respect to a Major Event. A
“Major Event” shall mean any merger (other than a merger of a wholly-owned
Subsidiary of the Corporation with and into the Corporation), consolidation,
reorganization or recapitalization of

5






 



the Corporation or any sale of all or a substantial portion of the assets
of the Corporation and its subsidiaries, taken as a whole.


     (j)  If the Corporation in any manner subdivides the outstanding shares of
one class of Common Stock into a greater number of shares of such class, the
shares of all other classes of Common Stock shall be similarly subdivided, and
if the Corporation in any manner combines the outstanding shares of one class
of Common Stock into a lesser number of shares of such class, the shares of all
other classes of Common Stock shall be similarly combined. Upon any such
subdivision or combination, the Corporation shall give notice thereof to each
holder of Common Stock at the address of such holder as set forth in the stock
transfer records maintained by or on behalf of the Corporation.


     (k)  The Corporation shall not be required to issue or deliver fractional
shares of any Common Stock to any holder of Common Stock upon any conversion of
Common Stock provided for in this paragraph 3. If more than one share of
Common Stock shall be held at the same time by the same holder, the Corporation
may aggregate the number of shares of Common Stock that would be issuable upon
any such conversion. If there are fractional shares of any Common Stock to be
issued to any holder, the Corporation shall, if such fractional shares are not
issued to such holder, pay cash in respect of such fractional shares in an
amount equal to the Fair Market Value thereof (without interest).


     (l)  If, at any time following the Original Class C Issuance Date but prior
to the Board Representation Date, shares of Class C Common Stock are
outstanding, the affirmative vote of a majority of the outstanding shares of
the Class C Common Stock, voting as a separate class, shall be required before
the Corporation or any Subsidiary of the Corporation may:



	 	(i)	 	acquire, by purchase, merger or otherwise, in one
transaction or a series of related transactions, any equity or
other ownership interest in, or assets of, any Person in
exchange for consideration with a Fair Market Value greater
than 20% of the consolidated Net Assets of the Corporation
determined in accordance with GAAP;
	 
	 	(ii)	 	authorize for issuance or issue any equity
securities or Equity Derivative Securities in one transaction
or a series of related transactions with a Fair Market Value
at the time of issuance in excess of $100 million (excluding
any Permitted Benefit Plan Issuance);
	 
	 	(iii)	 	incur Indebtedness in one transaction or a
series of related transactions in excess of $100 million in
aggregate principal amount (other than intercompany
Indebtedness and Indebtedness outstanding as of the Original
Class C Issuance Date (and borrowings pursuant to the terms
thereof), and any amendment or refinancing of such
Indebtedness in a principal amount not exceeding the principal
amount so refinanced and on financial and



6






 




	 	 	 	other terms no less favorable to the Corporation than
such outstanding Indebtedness);
	 
	 	(iv)	 	amend this Amended and Restated Certificate of
Incorporation or the bylaws of the Corporation (the “Bylaws”);
	 
	 	(v)	 	issue or agree to issue any Preferred Stock.



    [(m) The Corporation shall not create, designate, authorize or cause to be
issued any class or series of nonvoting stock. For purposes of this paragraph
3(m), any class or series of stock that has only such voting rights as are
mandated by the Delaware General Corporation Law shall be deemed to be
nonvoting subject to the restrictions of this subparagraph 3(m).] [(used if
bankruptcy case filed)]


           4.     Bylaws. In furtherance and not in limitation of the powers conferred
by statute, except as otherwise provided herein (including as provided in
paragraph 3(l)(iv)), the Bylaws may be made, altered, amended or repealed by
the stockholders or by a majority of the entire Board of Directors.


           5.     Registered Agent and Office. The name of the initial registered agent
of the Corporation and the address of its initial registered office are as
follows:



	 	 	 
	Name	 	
Address
	
	 	


	Corporation Service Company	 	
1013 Centre Road
	
	
	
	

	 	 	
Wilmington, DE 19805



           8.     Directors.


           (a)    The number of directors of the Corporation shall be determined in the
manner specified by the Bylaws and may be increased or decreased from time to
time in the manner provided therein.


           (b)    There is hereby established a five member committee (the “Executive
Committee”) consisting of, prior to the Board Representation Date, three
Forstmann Little Designees so long as Forstmann Little Beneficially Owns shares
of Common Stock representing 15% or more of the outstanding shares of Common
Stock or two Forstmann Little Designees so long as the Forstmann Little
Beneficially Owns shares of Common Stock representing at least 10% of the
outstanding shares of Common Stock but less than 15% of the outstanding shares
of Common Stock, and, prior to the Board Representation Date, one Telmex
Independent Designee (to the extent a Telmex Independent Designee has been
designated pursuant to Section 2.2(a) of the Stockholders Agreement) so long as
Telmex Beneficially Owns shares of Common Stock representing at least 10% of
the outstanding shares of Common Stock. After the Board Representation Date,
the Executive Committee shall include two Director designees of each Investor
so long as such Investor Beneficially Owns shares of Common Stock representing
15% or more of the outstanding shares of Common Stock or one Director designee
of each Investor so long as such Investor Beneficially Owns shares of Common
Stock representing at least 10% of

7






 



the outstanding shares of Common Stock but less than 15% of the
outstanding shares of Common Stock. The Chief Executive Officer of the
Corporation shall be a member of the Executive Committee. The Board of
Directors shall appoint the Executive Committee annually on a basis consistent
with the foregoing. The initial Executive Committee shall consist of the Chief
Executive Officer of the Corporation, three Forstmann Little Designees and one
Telmex Independent Designee. The Executive Committee, together with the Board
of Directors, shall, pursuant to Section 141(a) of the Delaware General
Corporation Law (the “DGCL”), exercise the powers and duties conferred and
imposed upon the Board of Directors by the DGCL as provided for herein.


           The Corporation shall not, directly or indirectly, and shall not permit
any of its Subsidiaries to, directly or indirectly, take any of the following
actions (except to the extent any such action is specifically authorized under
the Stockholders Agreement (to the extent it is in effect), the Stock Purchase
Agreement or the Registration Rights Agreement) without the approval of (x)
prior to the Board Representation Date, at least three-fifths of the members of
the Executive Committee, or (y) at and after the Board Representation Date, at
least two-thirds of the members of the Executive Committee:


           (i)  adopt a new Business Plan, materially modify the Business Plan or take
any action that would constitute a material deviation from the Business Plan;


           (ii)  approve or recommend a Major Event;


           (iii)  acquire, by purchase, merger or otherwise, in one transaction or a
series of related transactions, any equity or other ownership interest in, or
assets of, any Person in exchange for consideration with a Fair Market Value
greater than $100 million;


           (iv)  authorize for issuance or issue any equity securities or Equity
Derivative Securities in one transaction or a series of related transactions
with a Fair Market Value at the time of issuance in excess of $100 million
(excluding any Permitted Benefit Plan Issuance);


           (v)  purchase, redeem, prepay, acquire or retire for value any shares of
its capital stock or securities exercisable for or convertible into shares of
its capital stock other than as required by the terms of such capital stock or
securities;


           (vi)  declare, incur any liability to declare, or pay any dividends, or
make any distributions in respect of, any shares of its capital stock other
than as required under the terms of such capital stock;


           (vii)  redeem, retire, defease, offer to purchase or change any material
term, condition or covenant in respect of outstanding long-term Indebtedness
other than as required under the terms of such Indebtedness;


           (viii)  incur Indebtedness in one transaction or a series of related
transactions in excess of $100 million in aggregate principal amount (other
than intercompany Indebtedness and Indebtedness outstanding as of the Closing
Date (and borrowing pursuant to the terms thereof), and any amendment or
refinancing of such Indebtedness in a principal amount not exceeding the

8






 



principal amount so refinanced and on financial and other terms no less
favorable to the Company then such outstanding Indebtedness);


           (ix)  make any material change in its accounting principles or practices
(other than as required by GAAP or recommended by the Corporation’s outside
auditors), or remove the Corporation’s outside auditors or appoint new
auditors; or


           (x)  appoint, or terminate or modify the terms of the employment of, any
member of the Corporation’s senior management as set forth on Annex E to the
Stockholders Agreement, and any of their successors or replacements, and any
other persons of a similar level of authority and responsibility in the
organizational structure who are appointed after the Closing Date.


           Notwithstanding the foregoing, if any of the matters referred to in this
paragraph 8(b) are proposed to but not approved by the requisite three-fifths
majority (or, at and after the Board Representation Date, the requisite
two-thirds majority) of the Executive Committee, then the Investor Designees on
the Executive Committee shall attempt in good faith to resolve any objections
any such Investor Designee may have to the proposal and, if the Investor
Designees on the Executive Committee are unable to resolve in good faith the
disagreement within 30 days after the Executive Committee meeting at which the
matter was not approved, any member of the Executive Committee shall be
entitled to present such issue to the Board of Directors where the issue may be
adopted or rejected by a majority vote of the Board of Directors.


           The Executive Committee shall have such other powers and perform such
other duties as may from time to time be assigned to it by the Board of
Directors.


           (c)  Except as otherwise expressly provided herein, the Corporation shall
be managed by and under the direction of the Board of Directors. During such
time as Forstmann Little Beneficially Owns shares of Common Stock representing
at least 10% of the outstanding shares of Common Stock, the Board of Directors
may not take any action unless a quorum consisting of at least one Forstmann
Little Designee is present and during such time as Telmex Beneficially Owns
shares of Common Stock representing at least 10% of the outstanding shares of
Common Stock, the Board of Directors may not take any action unless a quorum
consisting of at least one Telmex Designee (which, prior to the Board
Representation Date, shall be a Telmex Independent Designee, to the extent a
Telmex Independent Designee has been designated pursuant to Section 2.2(a) of
the Stockholders Agreement) is present. So long as (i) an Investor
Beneficially Owns shares of Class A Common Stock representing at least 20% of
the outstanding shares of Common Stock and (ii) no Major Event or Acquisition
has occurred, the approval of at least one Director nominated or appointed by
such Investor pursuant to the Stockholders Agreement shall be required before
the Corporation may take any of the following actions:


           (i)  amend, alter or repeal the Certificate of Incorporation or Bylaws, or
any part thereof, or any amend, alter or repeal any constituent instruments of
any Corporation Subsidiary, or any part thereof;


           (ii)  enter into any transaction with any Affiliate (other than a wholly
owned Subsidiary of the Corporation), officer, director or stockholder of the
Corporation, except for

9






 



compensation and benefits paid to Directors and Officers in the ordinary
course of business and other than those entered into concurrently with or prior
to the Closing Date;


           (iii)  file any voluntary petition for bankruptcy or for receivership
(including a voluntary petition for the liquidation, dissolution or winding up
of the Corporation or any of its Subsidiaries other than a liquidation of a
Subsidiary in which all the assets of the liquidating Subsidiary are
distributed to the Corporation or another Subsidiary of the Corporation) or
make any assignment for the benefit of creditors;


           (iv)  adopt any stockholder rights plan or other anti-takeover provisions
in any document or instrument; or


           (v)   issue or agree to issue any Preferred Stock of the Company.


           9.    Indemnification.


           (a)  The Corporation shall indemnify to the fullest extent permitted under
and in accordance with the laws of the State of Delaware any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative, by reason of the fact that he or she is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, trustee, employee or agent
of or in any other capacity with another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys’ fees
and costs), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or her in connection with such action, suit or
proceeding if he or she acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his or her conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action proceeding, had
reasonable cause to believe that his or her conduct was unlawful.


           (b)  Expenses incurred in defending a civil or criminal action, suit or
proceeding shall (in the case of any action, suit or proceeding against a
director of the Corporation) or may (in the case of any action, suit or
proceeding against an officer, trustee, employee or agent) be paid by the
Corporation in advance of the final disposition of such action, suit or
proceeding as authorized by the Board of Directors upon receipt of an
undertaking by or on behalf of the indemnified person to repay such amount if
it shall ultimately be determined that he or she is not entitled to be
indemnified by the Corporation as authorized in this paragraph 9.


           (c)  The indemnification and other rights set forth in this paragraph 9
shall not be exclusive of any provisions with respect thereto in the Bylaws or
any other contract or

10






 



agreement between the Corporation and any officer, director, employee or
agent of the Corporation.


           (d)  Neither the amendment nor repeal of this paragraph 9, subparagraph
(a), (b) or (c), nor the adoption of any provision of this Amended and Restated
Certificate of Incorporation inconsistent with this paragraph 9, subparagraph
(a), (b) or (c), shall eliminate or reduce the effect of this paragraph 9,
subparagraphs (a), (b) and (c), in respect of any matter occurring before such
amendment, repeal or adoption of an inconsistent provision or in respect of any
cause of action, suit or claim relating to any such matter which would have
given rise to a right of indemnification or right to receive expenses pursuant
to this paragraph 9, subparagraph (a), (b) or (c), if such provision had not
been so amended or repealed or if a provision inconsistent therewith had not
been so adopted.


           10.  Limitation of Director Liability. A director shall have no liability
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for any breach of the director’s duty of
loyalty to the Corporation or its stockholders, acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law by
the director, conduct violating Section 174 of the General Corporation Law of
Delaware, or for any transaction from which the director will personally
receive a benefit in money, property or services to which the director is not
legally entitled. If the General Corporation Law of Delaware is hereafter
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director shall be
eliminated or limited to the full extent permitted by the General Corporation
Law of Delaware, as so amended. Any repeal or modification of this paragraph
10 shall not adversely affect any right or protection of a director of the
Corporation existing at the time of such repeal or modification for or with
respect to an act or omission of such director occurring prior to such repeal
or modification. All references in this paragraph to a director shall also be
deemed to refer to any person who, pursuant to the provisions of this
Certificate of Incorporation, in accordance with Section 141(a) of the DGCL,
exercises or performs any of the powers or duties otherwise conferred or
imposed upon the Board of Directors by the DGCL.


           11.  Business Combinations with Interested Stockholders. The Corporation
hereby elects not to be governed by Section 203 of the Delaware General
Corporation Law.


           12.  Definitions. Any document referred to herein shall be provided to any
stockholder upon request without charge. For purposes of this Certificate of
Incorporation, the following capitalized terms shall have the following
meanings:


     “Acquisition” shall mean the acquisition by any “person” or any “group”
(as such terms are used for purposes of Rules 13d-1 and 13d-5 under the
Exchange Act) of more than 50% of the total number of outstanding shares of
Common Stock.


     “Affiliate” shall mean, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, “control” when used with respect to any specified Person means the
power to direct the management and policies of such Person directly or
indirectly, whether through ownership of voting securities, by contract or
otherwise; and the terms “controlling” and “controlled” having meanings
correlative to the foregoing.


11






 


     “Beneficial Ownership” shall have the meaning ascribed to such term in
Rules 13d-3 and 13d-5 under the Exchange Act, except that, solely for the
purpose of determining “Beneficial Ownership,” (i) a Person shall be deemed to
have “Beneficial Ownership” of all shares of Common Stock that such Person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time, and (ii) “Beneficial Ownership” shall be determined
without regard to any disclaimer of beneficial ownership and without regard to
the fact that one or more classes of the Common Stock is not registered under
the Exchange Act; provided, however, that an Investor shall be deemed to
Beneficially Own shares of Class A Common Stock only at such time, and to the
extent, that it has record ownership of shares of Class A Common Stock and
shall not be deemed to Beneficially Own shares of Class A Common Stock by
virtue of its ownership of shares of Class C Common Stock or Class D Common
Stock or any other option, warrant or security exercisable for or convertible
into shares of Class A Common Stock. Correlative meanings shall also be
ascribed to the terms “Beneficially Own” and “Beneficial Owner”.


     “Board Representation Date” means the earlier of (i) the first date on
which the Board of Directors has received written notice from Telmex that
Telmex desires to designate Directors to the Board pursuant to the Stockholders
Agreement, and Telmex has determined in good faith, after consultation with its
legal counsel, which counsel shall be an outside law firm of national
reputation, that one or more directors, officers or employees of Telmex or a
Subsidiary of Telmex can become Directors without violating Section 8 of the
Clayton Antitrust Act of 1914, as amended, and (ii) the first date upon which
any director, officer or employee of Telmex or a Subsidiary of Telmex is
elected or appointed as a Director.


     “Business Plan” shall mean the business plan of the Corporation, as
approved by each of the Investors prior to the Closing Date, and as the same
may be amended from time to time in accordance with the Stockholders Agreement.


     “Capital Lease” means a lease with respect to which the lessee is required
concurrently to recognize the acquisition of an asset and the incurrence of a
liability in accordance with GAAP.


     “Class C Permitted Transferee” means Telmex or one of its Subsidiaries.


     “Class C Prohibited Transferee” means any Person other than a Class C
Permitted Transferee.


     “Closing Date” shall mean the date on which the closing under the Stock
Purchase Agreement occurs.


     “Encumbrance” means, with respect to any Person, any mortgage, lien,
pledge, charge, claim, option, proxy, voting trust, security interest or other
encumbrance, or any interest or title of any vendor, lessor, lender or other
secured party to or of such Person under any conditional sale or other title
retention agreement or Capital Lease, upon or with respect to any property or
asset of such Person (including in the case of stock, stockholder agreements,
voting trust agreements and all similar arrangements).


12






 


     “Equity Derivative Securities” means any and all equity and debt
securities (or any hybrid or combination thereof) convertible into or
exchangeable or exercisable for, or which otherwise give the holder thereof the
right to acquire, any equity securities of the Corporation.


     “Exchange Act” shall mean the United States Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder.


     “Fair Market Value” means (i) in the case of cash, the amount thereof,
(ii) in the case of capital stock that has been publicly traded for a period of
at least 12 months, the Market Value thereof, and (iii) in the case of other
assets or securities, the fair market value thereof as determined in good faith
by the Board of Directors (which determination shall be conclusive and binding
on all stockholders).


     “Forstmann Little” shall mean, collectively, Forstmann Little & Co.
Equity Partnership-VII, L.P. and Forstmann Little & Co. Subordinated Debt and
Equity Management Buyout Partnership-VIII, L.P.


     “Forstmann Little Designee” or “Forstmann Little Designees” shall mean a
Director, or the Directors, nominated or appointed by Forstmann Little pursuant
to the Stockholders Agreement (other than Telmex Independent Designees).


     “GAAP” means generally accepted accounting principles set forth from time
to time in the opinions and pronouncements of the Accounting Principles Board
and the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board (or agencies with
similar functions of comparable stature and authority within the U.S.
accounting profession), that are applicable to the circumstances as of the date
of determination.


     “Guaranty” means, with respect to any Person, any obligation (except the
endorsement in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect guaranteeing
(whether by reason of being a general partner of a partnership or otherwise)
any indebtedness, dividend or other obligation of any other Person in any
manner, whether directly or indirectly, including (without limitation)
obligations incurred through an agreement, contingent or otherwise, by such
Person: (a) to purchase such indebtedness or obligation or any property
constituting security therefor; (b) to advance or supply funds (i) for the
purchase or payment of such indebtedness or obligation, or (ii) to maintain any
working capital or other balance sheet condition or any income statement
condition of any other Person or otherwise to advance or make available funds
for the purchase or payment of such indebtedness or obligation; (c) to lease
properties or to purchase properties or services primarily for the purpose of
assuring the owner of such indebtedness or obligation of the ability of any
other Person to make payment of the indebtedness or obligation; or (d)
otherwise to assure the owner of such indebtedness or obligation against loss
in respect thereof. In any computation of the Indebtedness or other
liabilities of the obligor under any Guaranty, the Indebtedness or other
obligations that are the subject of such Guaranty shall be assumed to be direct
obligations of such obligor.


13






 


     “Indebtedness” means, with respect to any Person, at any time, without
duplication, (a) its liabilities for borrowed money; (b) its liabilities for
the deferred purchase price of property acquired by such Person (excluding
accounts payable arising in the ordinary course of business but including all
liabilities created or arising under any conditional sale or other title
retention agreement with respect to any such property); (c) all liabilities
appearing on its balance sheet in accordance with GAAP in respect of Capital
Leases; (d) all liabilities for borrowed money secured by any Encumbrance with
respect to any property owned by such Person (whether or not it has assumed or
otherwise become liable for such liabilities); (e) all its liabilities in
respect of letters of credit or instruments serving a similar function issued
or accepted for its account by banks and other financial institutions (whether
or not representing obligations for borrowed money); (f) Swaps of such Person;
and (g) any Guaranty of such Person with respect to liabilities of a type
described in any of clauses (a) through (f) hereof.


     “Investor Designees” shall mean the Forstmann Little Designees and Telmex
Designees.


     “Market Value” means, as of any date of determination, (i) with respect to
shares of any class or series of capital stock traded (1) on the New York Stock
Exchange (the “NYSE”) or another national stock exchange or quoted on The
National Market System of the Nasdaq Stock Market (“Nasdaq NMS”), the average
of the reported closing bid and asked prices regular way of a share of such
class or series for the 30 trading days immediately preceding such date of
determination (the “Relevant Trading Period”), as reported, (x) in the case of
the NYSE, on the NYSE composite tape, and (y) in the case of any other national
securities exchange or Nasdaq NMS, publicly by such exchange or Nasdaq NMS, or
(2) solely or primarily in the over-the-counter market, the average of the bid
and asked prices of a share of such class or series in the over-the-counter
market during the Relevant Trading Period as furnished by any NYSE member firm
selected from time to time by the Corporation or (ii) with respect to any class
or series of capital stock not traded or quoted on the NYSE, any other national
stock exchange or Nasdaq NMS or in the over-the-counter market, the fair market
value of a share of such class or series as determined in good faith by the
Board of Directors (which determination shall be conclusive and binding on all
stockholders).


     “Net Assets” means, with respect to any Person, the total assets of such
Person minus the total liabilities of such Person, each as reflected on the
balance sheet of such Person for the most recently-ended fiscal quarter.


     “Permitted Benefit Plan Issuance” means any issuance of equity securities
or Equity Derivative Securities to directors, officers, employees in the
ordinary course of business pursuant to an employee stock purchase plan,
employee stock option plan or other similar compensation plan approved by the
compensation committee of the Board of Directors or the Board of Directors.


     “Person” means any individual, corporation, limited liability company,
partnership, trust or other entity, and shall include any successor (by merger
or otherwise) of such entity.


     “Preferred Stock” shall have the meaning set forth in paragraph 3(a)
herein.


14






 


     “Registration Rights Agreement” shall mean the Registration Rights
Agreement dated as of      , 2002 among the Investors and the
Corporation.


     “Stockholders Agreement” shall mean the Stockholders Agreement, dated as
of      , 2002, and as amended from time to time, by and among Forstmann
Little, [Telmex] (Telmex and Forstmann Little sometimes being herein
collectively referred to as the “Investors” and individually as an “Investor”),
and the Corporation.


     “Stock Purchase Agreement” shall mean the Stock Purchase Agreement, dated
January 15, 2002, by and among each of the Investors and the Corporation.


     “Swaps” means, with respect to any Person, payment obligations with
respect to interest rate swaps, currency swaps and similar obligations
obligating such Person to make payments, whether periodically or upon the
happening of a contingency.


     “Subsidiary” means, with respect to any Person, (i) a corporation more
than 50% of the outstanding voting stock of which is owned, directly or
indirectly, by such Person or by one or more other Subsidiaries of such Person
or by such Person and one or more Subsidiaries thereof or (ii) any other Person
(other than a corporation) in which such Person, or one or more other
Subsidiaries of such Person or such Person and one or more other Subsidiaries
thereof, directly or indirectly, has at least a majority ownership and power to
direct the policies, management and affairs thereof. Unless the context
otherwise requires, any reference to a Subsidiary is to a Subsidiary of the
Corporation.


     “Telmex” means Teléfonos de México, S.A. de C.V.


     “Telmex Designee” or “Telmex Designees” shall mean a Director, or the
Directors, appointed or nominated by Telmex pursuant to the Stockholders
Agreement (including the Telmex Independent Designees).


     “Telmex Independent Designees” means those individuals nominated by Telmex
in accordance with the Stockholders Agreement, who are independent of, and not
affiliated with, either Telmex or the Corporation.


     “Transfer” means, directly or indirectly, the sale, assignment,
conveyance, transfer or other disposition of, or pledge or other encumbrance
of, a security or interest, whether resulting from a contractual obligation of
the holder, by operation of law, by gift or for any other reason.


     IN WITNESS WHEREOF, said Corporation has caused this Amended and Restated
Certificate of Incorporation to be signed by its Senior Vice President and
Secretary this      th day of      , 2002.


     (436036.8)


	 
	 



	 
	Gary D. Begeman
	 
	Senior Vice President and Secretary





15









 



Exhibit E


RESTATED

BYLAWS

OF

XO COMMUNICATIONS, INC.


          These Bylaws are intended to conform to the mandatory requirements of the
General Corporation Law of Delaware (the “Act”). Any ambiguity arising between
these Bylaws and the discretionary provisions of the Act shall be resolved in
favor of the application of the Act.


ARTICLE I.


STOCKHOLDERS


     Section 1. Place.


          Stockholders meetings shall be held at the registered office of the
Corporation unless a different place shall be designated by the Board of
Directors.


     Section 2. Annual Meeting.


          The annual meeting of the Stockholders shall be held on the date and time
designated by the Board of Directors. The meeting shall be held for the purpose
of electing Directors and for the transaction of such other business as may
come before the meeting, whether stated in the notice of meeting or not, except
as otherwise expressly stated in the Certificate of Incorporation. If the
election of Directors shall not be held on the day designated herein, the Board
of Directors shall cause the election to be held at a special meeting of the
Stockholders on the next convenient day.


     Section 3. Special Meetings.


          Special meetings of the Stockholders may be called by the President or the
Board of Directors for any purpose at any time, and shall be called by the
President at the request of the holders of shares entitled to cast at least 25%
of votes eligible to be cast. Special meetings shall be held at such place or
places within or without the state of Delaware as shall be designated by the
Board of Directors and stated in the notice of such meeting. At a special
meeting no business shall be transacted and no corporate action shall be taken
other than that stated in the notice of the meeting.


     Section 4. Notice.


          Written or printed notice stating the place, hour and day of the meeting
and, in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) days nor more than
sixty (60) days before the date of the meeting, either personally or by mail,
by or at the direction of the President, the Secretary, or the officer or
persons calling the meeting to each Stockholder of record entitled to vote at
such meeting, or for such other notice period as may be required by the Act.
Such notice and the effective date thereof


 






 



shall be determined as provided in the Act.


     Section 5. Quorum.


          A majority of votes entitled to be cast by the shares issued, outstanding
and entitled to vote upon the subject matter at the time of the meeting,
represented in person or by proxy, shall constitute a quorum for the
transaction of business at any meeting of the Stockholders, unless the
representation of a larger number of shares shall be required by law, by the
Certificate of Incorporation or by these Bylaws, in which case the
representation of the number of shares so required shall constitute a quorum;
provided that at any meeting of the Stockholders at which the holders of any
class of stock of the Corporation shall be entitled to vote separately as a
class, the holders of a majority in number of the total outstanding shares of
such class, present in person or by proxy, shall constitute a quorum for
purposes of such class vote unless the representation of a larger number of
shares of such class shall be required by law, the Certificate of Incorporation
or by these Bylaws.


     Section 6. Adjourned Meetings.


          If there is no quorum present at any annual or special meeting the
Stockholders present may adjourn to such time and place as may be decided upon
by the holders of the majority of the shares present, in person or by proxy;
provided, that if the holders of any class of stock of the Corporation are
entitled to vote separately as a class upon any matter at such meeting, any
adjournment of the meeting in respect of action by such class upon such matter
shall be determined by the holders of a majority of the shares of such class
present in person or by proxy and entitled to vote at such meeting. When a
meeting is adjourned to another time or place, notice of such adjournment shall
be given in accordance with Section 4 of this Article, but if a quorum is
present, adjournment may be taken from day to day or to such time and place as
may be decided and announced by the Stockholders holding a majority of the
shares present in person or by proxy, and subject to the requirements of the
Act, no notice of such adjournment need be given; provided, that, any
adjournment of a meeting in respect of action by holders of any class of stock
of the Corporation that are entitled to vote separately as a class upon any
matter at such meeting, may be taken from day to day or to such time and place
as may be decided and announced by the holders of a majority of the shares of
such class present in person or by proxy and entitled to vote at such meeting.
At any such adjourned meeting at which a quorum is present, any business may be
transacted which could have been transacted at the meeting originally called.


     Section 7. Voting.


          Each Stockholder entitled to vote on the subject matter shall be entitled
to that number of votes provided in the Certificate of Incorporation for each
share of stock standing in the name of the Stockholder on the books of the
Corporation at the time of the closing of the transfer books for said meeting,
whether represented and present in person or by proxy. Except as otherwise
provided in the Certificate of Incorporation, these Bylaws or by law, Directors
shall be elected by a plurality of the votes cast at a meeting of Stockholders
by the Stockholders entitled to vote in the election and, whenever any
corporate action, other than the election of Directors is to be taken, it shall
be authorized by the affirmative vote of the holders of a majority


2






 



of the shares of each class represented at the meeting and entitled to
vote thereon. The Stockholders present at a duly organized meeting may continue
to transact business until adjournment, notwithstanding the withdrawal of
enough Stockholders to leave less than a quorum.


          The Secretary shall prepare and make, at least ten days before every
election of Directors, a complete list of the Stockholders entitled to vote,
arranged in alphabetical order and showing the address of each Stockholder and
the number of shares of each Stockholder. Such list shall be open at the
offices of the Corporation for said ten days, to the examination of any
Stockholder, and shall be produced and kept at the time and place of election
during the whole time thereof, and subject to the inspection of any Stockholder
who may be present.


     Section 8. Proxies.


          At all meetings of Stockholders, a Stockholder may vote in person or by
proxy executed in writing by the Stockholder or by his duly authorized attorney
in fact. No proxy shall be valid after eleven (11) months from the date of its
execution, unless otherwise provided in the proxy.


     Section 9. Record Date.


          The Board of Directors is authorized to fix in advance a date not
exceeding sixty days nor less than ten days preceding the date of any meeting
of the Stockholders, or the date for the payment of any dividend, or the date
for the allotment of rights, or the date when any change or conversion or
exchange of capital stock shall go into effect, or a date in connection with
obtaining the consent of Stockholders for any purposes, as a record date for
the determination of the Stockholders entitled to notice of, and to vote at,
any such meeting, and any adjournment thereof, or entitled to receive payment
of any such dividend, or to any such allotment of rights, or to exercise the
rights in respect of any such change, conversion or exchange of capital stock,
or to give such consent, and, in such case, such Stockholders and only such
Stockholders as shall be Stockholders of record on the date so fixed shall be
entitled to such notice of, and to vote at, such meeting, and any adjournment
thereof, or to receive payment of such dividend, or to receive such allotment
of rights, or to exercise such rights, or to give such consent, as the case may
be, notwithstanding any transfer of any stock on the books of the Corporation,
after such record date fixed pursuant to this Section.


     Section 10. Conduct of Meetings.


          The Chairman of the Board of Directors or, in his absence the Chief
Executive Officer, President, or the Vice President designated by the Chairman
of the Board, shall preside at all regular or special meetings of Stockholders.
To the maximum extent permitted by law, such presiding person shall have the
power to set procedural rules, including but not limited to rules respecting
the time allotted to Stockholders to speak, governing all aspects of the
conduct of such meetings.


3






 


ARTICLE II.


DIRECTORS


     Section 1. In General.


          The business and affairs of the Corporation shall be managed by a Board of
Directors which, prior to the Board Representation Date, shall consist of
twelve (12) Directors. At and after the Board Representation Date, the Board
of Directors shall consist of such greater number of Directors as may be fixed
from time to time by resolution of the Board of Directors, consistent with the
Stockholders Agreement (to the extent it is in effect). The initial members of
the Board of Directors shall be appointed in accordance with the Stockholders
Agreement and shall, subject to the Stockholders Agreement (to the extent it is
in effect), hold office until the first annual meeting of the Stockholders and
his or her successor shall have been duly elected and qualified (or until his
or her earlier death, resignation or removal). Thereafter, Directors shall be
appointed or nominated in accordance with the Stockholders Agreement (to the
extent it is in effect) and the term of such Directors shall begin upon each
Director’s election by the Stockholders as provided in Article I, Section 7
above, and shall continue until his or her successor shall have been elected
and qualified (or until his or her earlier death, resignation or removal).


     Section 2. Powers.


          The corporate powers, business, property and interests of the Corporation
shall be exercised, conducted and controlled by the Board of Directors, which
shall have all power necessary to conduct, manage and control its affairs, and
to make such rules and regulations as it may deem necessary as provided by the
Act; to appoint and remove all officers, agents and employees; to prescribe
their duties and fix their compensation; to call special meetings of
Stockholders whenever it is deemed necessary by the Board, to incur
indebtedness and to give securities, notes and mortgages for same, all in a
manner consistent with the Certificate of Incorporation and the Stockholders
Agreement (to the extent it is in effect). It shall be the duty of the Board
to cause a complete record to be kept of all the minutes, acts, and proceedings
of its meetings.


     Section 3. Vacancies.


          Subject to the terms of the Stockholders Agreement (to the extent it is in
effect), upon a vacancy on the Board of Directors occurring as a result of the
death, resignation or removal of any Director, the Board of Directors shall, by
the affirmative vote of a majority of the remaining Directors, appoint or
nominate a person to fill such vacancy. Any Director appointed (or nominated
and elected) to replace another Director shall serve for the remainder of the
term of the Director being replaced, subject to earlier death, resignation or
removal or until his successor shall have been duly elected and qualified.


          The Board may act notwithstanding any vacancy in its number but, if and so
long as its number is reduced below the number fixed by these Bylaws as the
quorum necessary for the transaction of business at meetings of the Board, the
continuing Directors or Director may act


4






 



only for the purpose of (i) filling such vacancy in accordance with the
terms of these Bylaws and the Stockholders Agreement (to the extent it is in
effect); or (ii) preserving the assets of the Corporation.


          In the event that at any time during the term of the Stockholders
Agreement there exist vacancies on the Board due to the death, resignation or
removal of a Forstmann Little Designee or a Telmex Designee, each of the
Investors agrees to use its best efforts to designate successors to fill any
such vacancies as promptly as practicable, but in no event later than the 30th
day following such vacancy (the period from the first date of such vacancy
until the earlier to occur of the filling of such vacancy or the 30th day
thereafter, the “Vacancy Period”); provided, however, that if such vacancy is
not filled during such 30-day period, the Investor that has the right to fill
such vacancy may do so at any time following such 30-day period. During the
Vacancy Period, no action (except for such Board actions as are required to
fill such vacancy in accordance with the terms of the Stockholders Agreement
(to the extent it is in effect)) may be taken by the Board until such vacancy
is filled or this requirement is waived by the Investor that has the right to
fill such vacancy.


     Section 4. Annual Meeting.


          There shall be an annual meeting of the Board of Directors which shall be
held at such time and at such place as shall be determined by the Board of
Directors.


     Section 5. Special Meeting.


          Special meetings may be called from time to time by the President or any
one of the Directors. Any business may be transacted at any special meeting.


     Section 6. Quorum.


          A majority of the Directors shall constitute a quorum. As long as the
Certificate of Incorporation so requires, a quorum of the Board of Directors
shall include at least one Forstmann Little Designee and one Telmex Designee
(which, prior to the Board Representation Date, shall be a Telmex Independent
Designee, to the extent a Telmex Independent Designee has been appointed
pursuant to Section 2.2(a) of the Stockholders Agreement). The act of a
majority of the Directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors. If less than a quorum is present at
a meeting, a majority of the Directors present may adjourn the meeting from
time to time without further notice, other than announcement at the meeting,
until a quorum shall be present. Interested Directors may be counted for
quorum purposes.


     Section 7. Notice and Place of Meetings.


          Notice of all Directors’ meetings shall be given in accordance with the
Act. No notice need be given of any annual meeting of the Board of Directors.
One day prior notice shall be given for all special meetings of the Board, but
the purpose of special meetings need not be stated in the notice.


          Meetings of the Board of Directors may be held at the principal office of
the


5






 



corporation, or at such other place as shall be stated in the notice of
such meeting. Members of the Board of Directors, or any committee designated by
the Board of Directors, shall, except as otherwise provided by law, the
Certificate of Incorporation or these Bylaws, have the power to participate in
a meeting of the Board of Directors, or any committee, by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation shall
constitute presence in person at this meeting.


     Section 8. Compensation.


          By resolution of the Board of Directors, each Director may either be (i)
reimbursed for his reasonable out-of-pocket expenses, if any, in connection
with performing his or her duties, including without limitation the reasonable
out-of-pocket expenses incurred by such person attending meetings of the Board
or any committee thereof or meetings of any board of Directors or other similar
managing body (and any committee thereof) of any Subsidiary of the Corporation
or (ii) paid a fixed fee for attending each meeting of the Board of Directors,
or both. No such payment shall preclude any Director from serving the
Corporation in any other capacity and receiving compensation therefor.


     Section 9. Removal or Resignation of Directors.


          Any Director may resign by delivering written notice of the resignation to
the Board of Directors or an officer of the Corporation. All or any number of
the Directors may be removed, with or without cause, at a meeting expressly
called for that purpose by a vote of the holders of the majority of the shares
then entitled to vote at an election of Directors. Except as set forth in the
preceding sentence, during the term of the Stockholders Agreement no Forstmann
Little Designee may be removed from office except by Forstmann Little and no
Telmex Designee may be removed from office except by Telmex. Forstmann Little
shall have the right to remove any Forstmann Little Designee and Telmex shall
have the right to remove any Telmex Designee, in each case, with or without
cause, at any time.


     Section 10. Presumption of Assent.


          A Director of the Corporation who is present at a meeting of the Board of
Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken, unless his dissent shall be manifested in
the manner required by the Act. Such right to dissent shall not apply to a
Director who voted in favor of such action.


     Section 11. Committees.


          The Board of Directors shall annually, during the term of the Stockholders
Agreement, appoint an Executive Committee in accordance with the Certificate of
Incorporation. Other committees of two or more Directors, may be appointed by
the Board of Directors, which committees shall hold office for such time and
have such powers and perform such duties as may from time to time be assigned
to them by the Board of Directors. The Board of Directors shall annually,
during the term of the Stockholders Agreement, appoint an Audit and a
Compensation Committee. Subject to the Stockholders Agreement (to the extent
it is in effect), the federal securities laws, and the rules and regulations of
the Securities and Exchange Commission and


6






 



any stock exchange or quotation system on which the Common Stock is quoted
or listed, so long as an Investor Beneficially Owns shares of Common Stock
representing at least 10% of the outstanding shares of Common Stock, at least
one of the Director designees of such Investor (which, as to Telmex, prior to
the Board Representation Date, shall be a Telmex Independent Designee, to the
extent a Telmex Independent Designee has been designated pursuant to Section
2.2(a) of the Stockholders Agreement) shall be entitled to sit on each
committee of the Board and the Corporation shall cause such designee to be
appointed to each of the committees of the Board as may be requested at any
time or from time to time by Forstmann Little or Telmex, as the case may be.


          Subject to the terms of the Certificate of Incorporation and the
Stockholders Agreement (to the extent it is in effect), any member of a
committee may be removed at any time, with or without cause, by a resolution of
a majority of the whole Board of Directors. Any vacancy in the Executive
Committee may be filled, subject to the terms of the Certificate of
Incorporation and the Stockholders Agreement (to the extent it is in effect),
from among the Directors by a resolution of a majority of the whole Board of
Directors.


ARTICLE III.


OFFICERS AND AGENTS – GENERAL PROVISIONS


     Section 1. Number, Election and Term.


          Officers of the Corporation shall be a Chief Executive Officer, President,
Secretary, and Treasurer. Officers shall be elected by the Board of Directors
at its first meeting, and at each regular annual meeting of the Board of
Directors thereafter. Each officer shall hold office until the next succeeding
annual meeting of the Directors and until his successor shall be elected and
qualified. Any one person may hold more than one office if it is deemed
advisable by the Board of Directors.


     Section 2. Additional Officers and Agents.


          The Board of Directors may appoint and create such other officers and
agents as may be deemed advisable and prescribe their duties.


     Section 3. Resignation or Removal.


          Any officer or agent of the Corporation may resign from such position by
delivering written notice of the resignation to the Board of Directors, but
such resignation shall be without prejudice to the contract rights, if any, of
the Corporation. Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever in its judgment the
best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed. Election or appointment of an officer or agent shall not of itself
create contract rights.


     Section 4. Vacancies.


          Vacancies in any office caused by any reason shall be filled by the Board
of


7






 



Directors at any meeting by selecting a suitable and qualified person to
act during the unexpired term.


     Section 5. Salaries.


          The salaries of all the officers, agents and other employees of the
Corporation shall be fixed by the Board of Directors and may be changed from
time to time by the Board, and no officer shall be prevented from receiving
such salary by reason of the fact that he or she is also a Director of the
Corporation. All Directors, including interested Directors, are specifically
authorized to participate in the voting of such compensation irrespective of
their interest.


ARTICLE IV.


DUTIES OF THE OFFICERS


     Section 1. Chairman of the Board.


          The Chairman of the Board, if any, shall be a member of the Board of
Directors and, subject to Sections 2 and 3 of this Article IV, shall preside at
all meetings of the Stockholders and Directors; perform all duties required by
the Bylaws of the Corporation, and as may be assigned from time to time by the
Board of Directors; and shall make such reports to the Board of Directors and
Stockholders as may be required.


     Section 2. Chief Executive Officer.


          The Chief Executive Officer, if any, shall have general charge and control
of the affairs of the Corporation subject to the direction of the Board of
Directors; sign as President all certificates of stock of the Corporation;
perform all duties required by the Bylaws of the Corporation, and as may be
assigned from time to time by the Board of Directors; and shall make such
reports to the Board of Directors and Stockholders as may be required. In
addition, if no Chairman of the Board is elected by the Board or if the
Chairman is unavailable, the Chief Executive Officer shall perform all the
duties required of such officer by these Bylaws.


     Section 3. President.


          The President shall, if no Chief Executive Officer shall have been
appointed or if the Chief Executive Officer is unavailable, perform all of the
duties of the Chief Executive Officer. If a Chief Executive Officer shall have
been appointed, the President shall perform such duties as shall be assigned by
the Board of Directors, and in the case of absence, death or disability of the
Chief Executive Officer, shall perform and be vested with all of the duties and
powers of the Chief Executive Officer, until the Chief Executive Officer shall
have resumed such duties or the Chief Executive Officer’s successor shall have
been appointed.


     Section 4. Vice President.


          The Vice President, or any of them, shall perform such duties as shall be
assigned by the Board of Directors, and in the case of absence, disability or
death of the President, the Vice President shall perform and be vested with all
the duties and powers of the President, until


8






 



the President shall have resumed such duties or the President’s successor
is elected. In the event there is more than one Vice President, the Board of
Directors may designate one or more of the Vice Presidents as Executive Vice
Presidents, who, in the event of the absence, disability or death of the
President shall perform such duties as shall be assigned by the Board of
Directors.


     Section 5. Secretary.


          The Secretary shall keep a record of the proceedings at the meetings of
the Stockholders and the Board of Directors and shall give notice as required
in these Bylaws of all such meetings; have custody of all the books, records
and papers of the Corporation, except such as shall be in charge of the
Treasurer or some other person authorized to have custody or possession thereof
by the Board of Directors; sign all Certificates of Stock of the Corporation;
from time to time make such reports to the officers, Board of Directors and
Stockholders as may be required and shall perform such other duties as the
Board of Directors may from time to time delegate. In addition, if no Treasurer
is elected by the Board, the Secretary shall perform all the duties required of
the office of Treasurer by the Act and these Bylaws.


     Section 6. Treasurer.


          Treasurer shall keep accounts of all monies of the Corporation received or
disbursed; from time to time make such reports to the officers, Board of
Directors and Stockholders as may be required, perform such other duties as the
Board of Directors may from time to time delegate.


     Section 7. Assistant Secretary.


          The Assistant Secretary, if any, shall assist the Secretary in all duties
of the office of Secretary. In the case of absence, disability or death of the
Secretary, the Assistant Secretary shall perform and be vested with all the
duties and powers of the Secretary, until the Secretary shall have resumed such
duties or the Secretary’s successor is elected.


     Section 8. Assistant Treasurer.


          The Assistant Treasurer, if any, shall assist the Treasurer in all duties
of the office of Treasurer. In the case of absence, disability or death of the
Treasurer, the Assistant Treasurer shall perform and be vested with all the
duties and powers of the Secretary, until the Treasurer shall have resumed such
duties or the Treasurer’s successor is elected.


ARTICLE V.


STOCK


     Section 1. Certificates.


          The shares of stock of the Corporation shall be evidenced by an entry in
the stock transfer records of the Corporation, and may be represented by stock
certificates in a form adopted by the Board of Directors and every person who
shall become a Stockholder shall be entitled, upon request, to a certificate of
stock. All certificates shall be consecutively numbered


9






 



by class. Certificates, if any, shall be signed by the Chairman of the
Board of Directors, the President or one of the Vice Presidents, and the
Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer,
provided, however, that where such certificates are signed by a transfer agent
or an assistant transfer agent or by a transfer clerk acting on behalf of the
Corporation and a registrar, the signature of any such officer may be
facsimile. If the Corporation shall be authorized to issue more than one class
of stock or more than one series of any class, the designations, preferences
and relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restriction of
such preferences and/or rights shall be set forth in full or summarized on the
face or back of the certificate which the Corporation shall issue to represent
such class or series of stock, provided that, except as otherwise provided in
Section 202 of the Act, in lieu of the foregoing requirements, there may be set
forth on the face or back of the certificate which the Corporation shall issue
to represent such class or series of stock, a statement that the Corporation
will furnish without charge to each Stockholder who so requests the
designations, preferences and relative, participating, optional or other
special rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.


     Section 2. Transfer of Certificates.


          Any certificates of stock transferred by endorsement shall be surrendered,
canceled and new certificates issued to the purchaser or assignee.


     Section 3. Transfer of Shares.


          Shares of stock shall be transferred only on the books of the Corporation
by the holder thereof, in person or by his attorney, and no transfers of
certificates of stock shall be binding upon the Corporation unless made in
accordance with the Stockholders Agreement, if applicable, and until the terms
of this Section and, with respect to certificated shares, the terms of Section
2 of this Article are met to the satisfaction of the Secretary of the
Corporation.


          The Board of Directors may make other and further rules and regulations
concerning the transfer and registration of shares of the Corporation, and may
appoint a transfer agent or registrar or both and may require all certificates
of stock to bear the signature of either or both.


          The stock ledgers of the Corporation, containing the names and addresses
of the Stockholders and the number of shares held by them respectively, shall
be kept at the principal offices of the Corporation or at the offices of the
transfer agent of the Corporation.


     Section 4. Lost Certificates.


          In the case of loss, mutilation or destruction of a certificate of stock,
a duplicate certificate may be issued upon such terms as the Board of Directors
shall prescribe.


     Section 5. Dividends.


          The Board of Directors may from time to time declare, and the Corporation
may then pay, dividends on its outstanding shares in the manner and upon the
terms and conditions


10






 



provided by the Act and in its Certificate of Incorporation.
Section 6. Working Capital.


          Before the payment of any dividends or the making of any distributions of
the net profits, the Board of Directors may set aside out of the net profits of
the Corporation such sum or sums as in their discretion they think proper, as a
working capital or as a reserve fund to meet contingencies. The Board of
Directors may increase, diminish or vary the capital of such reserve fund in
their discretion.


ARTICLE VI.


SEAL


          There shall be no corporate seal.


ARTICLE VII.


WAIVER OF NOTICE


          Whenever any notice is required to be given to any Stockholder or Director
of the Corporation, a waiver signed by the person or persons entitled to such
notice, whether before or after the time stated therein, shall be equivalent to
the giving of such notice.


ARTICLE VIII.


ACTION BY STOCKHOLDERS OR DIRECTORS 
WITHOUT A MEETING





          Any action required to be taken at a meeting of the Stockholders of the
Corporation, or any other action which may be taken at a meeting of the
Stockholders, may be taken without a meeting, if a consent in writing setting
forth the actions so taken shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares entitled to vote
thereon were present and voted with respect to the subject matter thereof. Such
consent shall have the same effect and force as a vote of said Stockholders.


          Any action required to be taken at a meeting of the Board of Directors of
the Corporation, or any other action which may be taken at a meeting of the
Board of Directors, or any committee thereof, may be taken without a meeting if
a consent in writing setting forth the actions so taken shall be signed by all
of the members of the Board of Directors or committee, as the case may be. Such
consent shall have the same effect and force as a unanimous vote of said
Directors or committee.


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ARTICLE IX.


MISCELLANEOUS


     Section 1. Fiscal Year.


          The fiscal year of the Corporation shall be fixed, and may be changed, by
resolution of the Board of Directors.


     Section 2. Notices.


          Except as otherwise expressly provided, any notice required by these
Bylaws to be given shall be sufficient if given as provided in the General
Corporation Law of Delaware.


     Section 3. Waiver of Notice.


          Any Stockholder or Director may at any time, by writing or by fax, waive
any notice required to be given under these Bylaws, and if any Stockholder or
Director shall be present at any meeting his presence shall constitute a waiver
of such notice.


     Section 4. Voting Stock of Other Corporations.


          Except as otherwise ordered by the Board of Directors, the Chairman of the
Board, Chief Executive Officer, President, Secretary or Treasurer, or any Vice
President, Assistant Secretary or Assistant Treasurer, shall have full power
and authority on behalf of the Corporation to attend and to act and to vote at
any meeting of the Stockholders of any corporation of which the Corporation is
a stockholder and to execute a proxy to any other person to represent the
Corporation at any such meeting, and at any such meeting such person shall
possess and may exercise any and all rights and powers incident to ownership of
such stock and which, as owner thereof, the Corporation might have possessed
and exercised if present.


ARTICLE X.


AMENDMENTS AND STOCKHOLDERS AGREEMENT


          Subject to the terms of the Stockholders Agreement (to the extent it is in
effect), any and all of these Bylaws may be altered, amended, repealed or
suspended by the affirmative vote of a majority of the Directors at any meeting
of the Directors or by the Stockholders as provided in the Certificate of
Incorporation. New Bylaws may be adopted in like manner.


          These Bylaws shall be read subject to and in accordance with the
Stockholders Agreement, until such time as the Stockholders Agreement
terminates in accordance with its terms. In the event of a conflict between
these Bylaws and the Stockholders Agreement (to the extent it is in effect),
the Stockholders Agreement shall prevail.


12






 


ARTICLE XI.


DEFINITIONS


          For purposes of these Bylaws, the following capitalized terms shall have
the following meanings:


          “Beneficial Ownership” shall have the meaning ascribed to such term in
Rules 13d-3 and 13d-5 under the Exchange Act, except that, solely for the
purpose of determining “Beneficial Ownership,” (i) a Person shall be deemed to
have “Beneficial Ownership” of all shares of Common Stock that such Person has
the right to acquire, whether such right is exercisable immediately or only
after the passage of time, and (ii) “Beneficial Ownership” shall be determined
without regard to any disclaimer of beneficial ownership and without regard to
the fact that one or more classes of the Common Stock is not registered under
the Exchange Act; provided, however, that an Investor shall be deemed to
Beneficially Own shares of Class A Common Stock only at such time, and to the
extent, that it has record ownership of shares of Class A Common Stock and
shall not be deemed to Beneficially Own shares of Class A Common Stock by
virtue of its ownership of shares of Class C Common Stock or Class D Common
Stock or any other option, warrant or security exercisable for or convertible
into shares of Class A Common Stock. Correlative meanings shall also be
ascribed to the terms “Beneficially Own” and “Beneficial Owner”.


          “Board Representation Date” shall mean the earlier of (i) the first date
on which the Board of Directors has received written notice from Telmex that
Telmex desires to designate Directors to the Board pursuant to the Stockholders
Agreement, and Telmex has determined in good faith, after consultation with its
legal counsel, which counsel shall be an outside law firm of national
reputation, that one or more directors, officers or employees of Telmex or a
Subsidiary of Telmex can become Directors without violating Section 8 of the
Clayton Antitrust Act of 1914, as amended, and (ii) the first date upon which
any director, officer or employee of Telmex or a Subsidiary of Telmex is
elected or appointed as a Director.


          “Exchange Act” shall mean the United States Securities Exchange Act of
1934 and the rules and regulations promulgated thereunder.


          “Forstmann Little Designee” or “Forstmann Little Designees” shall mean a
Director, or the Directors, nominated or appointed by Forstmann Little pursuant
to the Stockholders Agreement (other than Telmex Independent Designees).


          “Permitted Transferee” shall mean any Person to whom Restricted Securities
are Transferred (as such terms are defined in the Stockholders Agreement), in
accordance with the terms of the Stockholders Agreement.


          “Person” shall mean any individual, corporation, limited liability
company, partnership, trust or other entity, and shall include any successor
(by merger or otherwise) of such entity.


          “Stockholders Agreement” shall mean the Stockholders Agreement, dated as
of      , 2002, and as amended from time to time, by and among Forstmann Little
& Co. Equity


13






 



 Partnership-VII, L.P., a Delaware limited partnership (“Equity VII”),
Forstmann Little & Co. Subordinated Debt and Equity Management Buyout
Partnership-VIII, L.P., a Delaware limited partnership (“MBO VIII” and
collectively with Equity VII and their Permitted Transferees, “Forstmann
Little”), [Telefonos de Mexico, S.A. de C.V., a sociedad anonima de capital
variable organized under the laws of the United Mexican States] (together with
its Subsidiaries and its Permitted Transferees, “Telmex” and Telmex and
Forstmann Little sometimes being herein collectively referred to as the
“Investors” and individually as an “Investor”), and the Corporation.


          “Subsidiary” of any Person shall mean (i) a corporation more than 50% of
the outstanding voting stock of which is owned, directly or indirectly, by such
Person or by one or more other Subsidiaries of such Person or by such Person
and one or more Subsidiaries thereof or (ii) any other Person (other than a
corporation) in which such Person, or one or more other Subsidiaries of such
Person or such Person and one or more other Subsidiaries thereof, directly or
indirectly, has at least a majority ownership and power to direct the policies,
management and affairs thereof.


          “Telmex Designee” or “Telmex Designees” shall mean a Director, or the
Directors, appointed or nominated by Telmex pursuant to the Stockholders
Agreement (including the Telmex Independent Designees).


          “Telmex Independent Designees” means those individuals nominated by Telmex
in accordance with the Stockholders Agreement, who are independent of, and not
affiliated with, either Telmex or the Corporation.


14






 


IDENTIFICATION


          I hereby certify that I am the Secretary of XO Communications and that the
foregoing Bylaws were and are the Bylaws adopted by the Directors of the
Corporation at a duly constituted meeting of the Board of Directors.


	 
	 



	 
	[           ]
	 
	Secretary






(436859.10)



15









 



Exhibit F

Contractual Management Rights Letter


XO Communications, Inc.

11111 Sunset Hills Road

Reston, VA 20190


[Insert date]


[Insert name and address of Investor]


To [Insert name of Investor]:


This letter will confirm our agreement that, effective immediately and
continuing for so long as you (“you,” or “Investor”) hold any equity securities
of XO Communications, Inc. (the “Company”), you will be entitled to each of the
following contractual management rights relating to the Company (collectively,
the “Management Rights”):



	(1)	 	Investor shall be entitled to routinely consult with and advise
management of the Company with respect to the Company’s business and
financial matters, including management’s proposed annual operating plans,
and management will meet regularly during each year with representatives
of Investor (the “Representatives”) at the Company’s facilities at
mutually agreeable times for such consultation and advice, including to
review progress in achieving said plans. The Company shall give Investor
reasonable advance written notice of any significant new initiatives or
material changes to existing operating plans and shall afford Investor
adequate time to meet with management to consult on such initiatives or
changes prior to implementation. The Company agrees to give due
consideration to the advice given and any proposals made by Investor.
	 
	(2)	 	Investor may inspect all contracts, books, records, personnel, offices
and other facilities and properties of the Company and, to the extent
available to the Company after the Company uses reasonable efforts to
obtain them, the records of its legal advisors and accountants, including
the accountants’ work papers, and Investor may make such copies and
inspections thereof as Investor may reasonably request. The Company shall
furnish Investor with such financial and operating data and other
information with respect to the business and properties of the Company as
Investor may request. The Company shall permit the Representatives to
discuss the affairs, finances and accounts of the Company with, and to
make proposals and furnish advice with respect thereto, the principal
officers of the Company.



F-1






 






	(3)	 	The Company shall, after receiving notice from Investor as to the
identity of any Representative, (i) permit a Representative to attend all
meetings of the Board of Directors of the Company (the “Board”) and all
committees thereof as an observer, (ii) provide the Representative advance
notice of each such meeting, including such meeting’s time and place, at
the same time and in the same manner as such notice is provided to the
members of the Board (or such committee thereof), (iii) provide the
Representative with copies of all materials, including notices, minutes
and consents, distributed to the members of the Board (or such committee
thereof) at the same time as such materials are distributed to such Board
(or such committee thereof) and shall permit the Representative to have
the same access to information concerning the business and operations of
the Company and (iv) permit the Representative to discuss the affairs,
finances and accounts of the Company with, and to make proposals and
furnish advice with respect thereto to, the Board, without voting, and the
Board and the Company’s officers shall take such proposals or advice
seriously and give due consideration thereto. Reasonable costs and
expenses incurred by the Representative for the purposes of attending
Board (or committee) meetings and conducting other Company business will
be paid by the Company.



         Investor agrees, and shall cause each of its Representatives to agree, to
hold in confidence and trust and not use or disclose any confidential
information provided to or learned by it in connection with the exercise of
Investor’s Management Rights under this letter agreement, unless otherwise
required by law or unless such confidential information otherwise becomes
publicly available or available to it other than through this letter agreement.


         The rights set forth in this letter agreement are intended to satisfy the
requirement of contractual management rights for purposes of qualifying
Investor’s interests in the Company as venture capital investments for purposes
of the Department of Labor’s “plan assets” regulations, and in the event that,
after the date hereof, as a result of any change in applicable law or
regulation or a judicial or administrative interpretation of applicable law or
regulation, it is determined that such rights are not satisfactory for such
purpose, Investor and the Company shall reasonably cooperate in good faith to
agree upon mutually satisfactory management rights which satisfy such
regulations.


[signature page follows]


F-2






 



	 	 	 
	 	 	
Very truly yours,
	 
	 	 	
XO COMMUNICATIONS, INC.
	 
	 	 	
 



	 
	 	 	
By:
	 	 	
 

	 
	 	 	
Its:
	 	 	
 

	 
	AGREED AND ACCEPTED THIS	 	 
	 
	__ day of _______________.	 	 
	 
	[Insert name of Investor]	 	 
	 
	
 

	 	 
	 
	By:	 	 
	 


Its:	 	 
	 


	 	 




F-3









 



Exhibit G



Investor/Management Common Stock Terms1




	 	 	 
	

	Investor Stock	 	
To-be-designated (i) Class A Common Stock (to be held
by Forstmann Little), (ii) Class C Common Stock (to be
held by Telmex) and (iii) Class D Common Stock (to be
held by Forstmann Little).2
	 
	 	 	
The Investor Stock shall have the rights and
preferences set forth in the Amended and Restated
Certificate of Incorporation.
	

	Management Stock	 	
To-be-designated Class E Common Stock, par value $0.01
per share. The Management Stock will be issued to
certain agreed upon members of management of the
Company (collectively “Eligible Management Members”).
It is intended that the Management Stock shall have the
rights and preferences set forth herein and, to the
extent mutually agreed among the parties to the Stock
Purchase Agreement, in the Amended and Restated
Certificate of Incorporation.
	

	Number of Shares of Each
Class	 		Class A Common (Forstmann Little): 79,999,998 shares
        
	Class C Common (Telmex): 80,000,000 shares
        
	Class D Common (Forstmann Little): 2 shares
        
	Class E Common (Eligible Management Members):
4,000,000 shares3


	

	Purchase Price	 	
The Investors shall purchase shares of Investor Stock
for $5.00 per share in cash (the “Investor Stock
Purchase Price”). Management shall have the right, but
not the obligation, to purchase shares of Management
Stock for cash at a price equal to approximately
one-third of the Investor Stock Purchase Price (the
“Management Stock Purchase Price” and together with the
Investor Stock Purchase Price, the “Aggregate Stock
Purchase Price”)
	












	 	 	 
	1	 	
This Exhibit G is subject to Section 4.19(b) of the Stock Purchase
Agreement. The following sets forth only the indicative terms of the Class E
Common Stock. The definitive terms of such stock, which will be set forth in
the Amended and Restated Certificate of Incorporation, may differ from the
indicative terms set forth herein. Unless otherwise defined herein or the
context otherwise requires, capitalized terms used herein and defined in the
Stock Purchase Agreement, to which this Exhibit G is an Exhibit, shall be used
herein as therein defined.

	 
	2	 	
Some shares of the Company’s Class A Common Stock may remain outstanding
after the Closing of the Investment. All shares of the Company’s Class B
Common Stock shall be cancelled in connection with the Restructuring.

	 
	3	 	
This number of shares is based upon an investment of approximately $7
million by the Eligible Management Members. The amount of such investment may
vary between approximately $7 million and $8 million.




 






 




	 	 	 
	

	Closing	 	
Any purchase by Eligible Management Members of
Management Stock shall close simultaneously with the
Closing of the Investment.
	

	Vesting of Certain Rights	 	
Certain rights of the holders of Management Stock shall
vest over time in accordance with a schedule and
subject to such conditions as shall be mutually agreed
among the parties to the Stock Purchase Agreement prior
to the Closing.
	

	Voting Rights	 	
All shares of Investor Stock and Management Stock shall
have one vote per share. The classes of Investor Stock
shall have the special voting and other rights and
preferences set forth in the Amended and Restated
Certificate of Incorporation. Otherwise the Investor
Stock and the Management Stock shall have the same
voting rights and shall vote together as a single
class.
	

	Dividends	 	
The Investor Stock and the Management Stock shall
receive dividends in a ratio approximately equal to the
ratio between the Investor Stock Purchase Price and the
Management Stock Purchase Price.
	

	Liquidation	 	
Upon liquidation, the net assets of the Company shall
be distributed pro rata to the Company’s stockholders
such that each holder of Investor Stock and of
Management Stock shall receive:

	First, the lesser of (i) the amount of the Investor
Stock Purchase Price or Management Stock Purchase Price
paid in respect of such Investor Stock or Management
Stock or (ii) net assets of the Company in a ratio
approximately equal to the ratio between the Investor
Stock Purchase Price and the Management Stock Purchase
Price;

	Second, each holder of Investor Stock shall receive
net assets proportionate to its pro rata share of the
difference between the Investor Stock Purchase Price
and the Management Stock Purchase Price; and

	Third, each stockholder of the Company shall receive
its pro rata portion of the remaining net assets of the
Company.


	

	Non-Transferability	 	
The Management Stock may not be transferred, pledged or
otherwise disposed of except for (i) transfers upon
death to an heir, (ii) transfers back to the Company
and (iii) such additional permissible transfers as may
be mutually agreed among the parties to the Stock
Purchase Agreement prior to the Closing. In addition,
shares of Class A Common Stock into which Management
Stock shall be converted may be subject to transfer
restrictions to be mutually agreed among the parties to
the Stock Purchase Agreement prior to the
	




 






 




	 	 	 
	

	 	 	
Closing.
	 
	 	 	
The Investor Stock shall be transferable in accordance
with the terms of the Stockholders Agreement.
	

	Conversion to Management
Stock to Class A Common
Stock	 	 
	

	      Voluntary Conversion	 	
Each share of Management Stock shall be convertible, at
any time at the option of the holder, into shares of
Class A Common Stock at the Conversion Ratio (as
hereinafter defined)
	

	      Mandatory
Conversion of all
Shares
      of
Management Stock	 	
All shares of Management Stock or such portion of such
shares as shall be determined by a majority of the
Board of Directors shall automatically be converted
into shares of Class A Common Stock at the Conversion
Ratio upon the occurrence of certain events. These
events shall include, but may not be limited to, the
following:
	a Major Event (as defined in the Stockholders
Agreement)

	the sale by either Investor of 50% or more of the
shares of Investor Stock acquired by such Investor
under the Stock Purchase Agreement

	the sale by both Investors of 50% or more of the
aggregate number of shares of Investor Stock acquired
by the Investors pursuant to the Stock Purchase
Agreement (the sales referred to in item no. 2 above
and this item no. 3 being hereinafter referred to as a
“Major Investor Sale”)

	when the public trading price of the Class A Common
Stock exceeds an agreed upon price for an agreed upon
trading period

	the vote of a majority of the Board of Directors

	the vote of a majority of the members of the
Executive Committee of the Board of Directors

	upon a date to be mutually agreed among the parties
to the Stock Purchase Agreement prior to the Closing.


	

	      Automatic
Conversion Upon
     
Prohibited Transfer	 	
A share of Management Stock shall automatically be
converted into shares of Class A Common Stock at the
Conversion Ratio upon any prohibited transfer of such
share.
	

	Conversion Ratio	 	
A ratio or ratios to be mutually agreed among the
parties to the Stock Purchase Agreement prior to the
Closing, provided that in no event shall any conversion
ratio be greater than 1.00:1.00 (the “Conversion
Ratio”). The conversion ratio may vary based upon the
event or circumstance causing such conversion.
	





 






 




	 	 	 
	

	Drag-Along Rights	 	
The Management Stock shall be subject to customary
drag-along rights in the event of a Major Event or a
Major Investor Sale
	

	Tag-Along Rights	 	
The Management Stock shall have customary tag-along
rights in the event of a Major Event or Major Investor
Sale.
	

	Registration Rights	 	
Eligible Management Members shall have customary piggy
back (but not demand) registration rights with respect
to Management Stock, subject to customary
indemnification, cutback and similar provisions.
	

	Repurchase	 	
Management Stock may be repurchased by the Company or
the Investors from an Eligible Management Member under
certain circumstances to be specified, including, but
not limited to, employee termination, death or
disability, at prices and upon terms and subject to
conditions to be mutually agreed among the parties to
the Stock Purchase Agreement prior to the Closing.
	

	Documentation	 	
The purchase by Eligible Management Members of
Management Stock shall be pursuant to subscription
agreements between the Company and each Eligible
Management Member purchasing Management Stock
containing customary terms and conditions to be
mutually agreed among the parties to the Stock Purchase
Agreement prior to the Closing.


The Company will use its reasonable best efforts to
enter into subscription agreements with such Eligible
Management Members on or prior to the filing of the
Bankruptcy Case; provided, however, that the purchase
by Eligible Management Members of Management Stock
shall close simultaneously with the Closing of the
Investment.
	





 










 



Exhibit H

New Employee Stock Option Plan


     Concurrent with the Closing of the Investment and the Restructuring, the
Company shall have authorized and implemented an Employee Stock Option Plan
(the “New Option Plan”) providing for the grant of options (which may be
non-qualified options or incentive stock options, as recommended by management
and approved by the Investors, which approval shall not be unreasonably
withheld) (the “New Options”) to purchase shares of Class A Common Stock in an
amount up to 5.0% of the Common Stock outstanding after giving effect to the
issuance of Common Stock in connection with the Investment and the
Restructuring (including the Management Shares but excluding any Common Stock
issuable pursuant to the New Options) (the “Outstanding Common Stock”).
Shares of Class A Common Stock subject to New Options granted pursuant to the
New Option Plan shall be in addition to the Management Shares as contemplated
by Exhibit H to the Stock Purchase Agreement.


     The New Options shall have the following terms in addition to the terms
contemplated by the New Option Plan (which shall contain commercially
reasonable terms to be recommended by Company management and approved by the
Investors (such approval not to be unreasonably withheld)):



	 	 	 
	     Grant Date:	 	
The first set of New Options (the “Initial Options”)
shall be granted as of the later of (i) the Closing Date and (ii) if
the Company is “publicly held” (as defined in the regulations (the
“Regulations”) promulgated under Section 162(m) of the Code)
immediately following the Closing, the date on which stockholder
approval has been obtained such that the New Options constitute
“qualified performance-based compensation” (as defined in the
Regulations); subsequent New Options shall be granted from time to
time thereafter.
	 
	     Exercise Price:	 	
The exercise price for the Initial Options shall be $5.00
per share and the exercise price for any subsequently-granted New
Options shall be the fair market value of the Common Stock on the
date of grant.
	 
	     Grantees:	 	
Employees of the Company to be recommended by Company
management and approved by the Investors (such approval not to be
unreasonably withheld); grants to be made (i) by the Company’s
compensation committee or (ii) if the Company is “publicly held” (as
defined in the Regulations), by a



H-1






 




	 	 	 
	 	 	
committee of two or more “outside
directors” (as defined in the Regulations)
	 
	     Vesting:	 	
25% of the Initial Options shall vest on the Closing Date and
25% of the Initial Options shall vest on each of the first, second
and third anniversaries of the Closing Date, with the allocation of
such vested options among the employees as recommended by the
Company management and as approved by the Investors (such approval
not to be unreasonably withheld); 25% of any subsequently-granted
New Options shall vest on the grant date and 25% on each of the
first, second and third anniversaries thereof.
	 
	     Term of Options:	 	
10 years




H-2