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                                                                    EXHIBIT 10.1

[FOCAL LETTERHEAD]

                                 June ___, 2002

Robert C. Taylor, Jr.

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

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Dear Bob:

          This letter agreement (this "Agreement") will confirm the agreement
between you and Focal Communications Corporation, Inc. (together with its direct
and indirect subsidiaries, the "Company"), as follows:

     1.   SEPARATION FROM THE COMPANY

          By signing this Agreement you acknowledge that the termination of your
employment with the Company will be effective on _______, 2002 (the "Separation
Date"). As of the Separation Date, you will no longer be employed by the Company
and will no longer be required to fulfill any of the duties and responsibilities
associated with your position of employment with the Company.

     2.   SEVERANCE ARRANGEMENTS

          In exchange for your execution of this Agreement, including the
Release in paragraph 3 and the additional agreements in paragraph 4, the Company
agrees to the following:

     (a)  For a period of one year commencing on the Separation Date (the
          "Severance Period"), you will receive your salary at the same rate of
          pay as, and on the same schedule as was customary for, your salary in
          effect immediately prior to the Separation Date (I.E., $275,000 per
          annum).

     (b)  During the Severance Period, you will receive the same, if possible,
          or comparable medical benefits to those provided to you by the Company
          immediately prior to the Separation Date.

     (c)  Promptly after the separation date, the Company will pay to you in
          cash the amount of your unused vacation accrued through the Separation
          Date in accordance with the Company's policies.

     (d)  You will continue after the Separation Date to serve on the Company's
          Board of Directors (the "Board") as its Chairman (or, if after the
          date hereof the Board votes to designate another director as Chairman,
          as an outside director), and on such committees, and in such positions
          thereon, as the Board shall from time to time determine, in each case
          until the earliest to occur of your death, resignation,

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          failure to be re-elected by the Company's stockholders, or receipt of
          a request by a majority of the members of the Board (excluding you)
          for your removal (in which case you will promptly resign from the
          Board and all committees thereof). For so long as you serve as a
          member of the Board, you will be entitled to such compensation and
          expense reimbursement arrangements as are generally made available to
          other outside directors serving on the Company's Board, the terms of
          which are described on EXHIBIT A attached hereto.

     (e)  You will be retained by the Company as an outside consultant for a
          one-year term commencing on the Separation Date, subject to renewal by
          the Company for successive six-month terms upon written notice to you
          prior to the end of any such one-year or six-month term, as
          applicable. During the period in which you are retained as a
          consultant:

          (i)    you will provide to the Company and its Chief Executive Officer
                 up to 20 hours per calendar month (or such greater number of
                 hours as is requested by the Company and reasonably agreed to
                 by you) of such consulting and advisory services as the Chief
                 Executive Officer shall from time to time direct, subject to
                 your receipt of reasonable notice concerning the timing for
                 your consulting responsibilities;

          (ii)   you will receive a consulting payment of $5,000 per month,
                 which will cover up to 20 hours of consulting services in each
                 such calendar month; if the number of hours of consulting
                 services provided in any month exceeds 20 hours, such excess
                 hours will be billed and paid at a rate of $250 per hour; hours
                 worked in any particular day will be rounded to the next whole
                 hour and will be recorded and submitted to the Company in good
                 faith by you;

          (iii)  you will receive the same, if possible, or comparable medical
                 benefits to those provided to you by the Company immediately
                 prior to the Separation Date; and

          (iv)   you will be provided use of an executive office at Focal's
                 Chicago headquarters.

          Your service as a consultant will terminate upon your death,
          resignation, or termination by the Board or the Company's Chief
          Executive Officer; PROVIDED that upon any termination by the Board or
          the Company's Chief Executive Officer, you will be entitled to receive
          the consulting payments and continuation of benefits described in
          clauses (ii) and (iii) of the preceding sentence until the end of the
          one-year or six-month term (as applicable) in which such termination
          occurs. Your retention by the Company as a consultant will be as an
          independent contractor, and will not give rise to any employment
          relationship with the Company.

     (f)  For purposes of the Restricted Stock Agreement, dated as of March 25,
          2002, between you and the Company (the "Restricted Stock Agreement"),
          50% of your

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          "Restricted Shares" will become "Vested Restricted Shares" under such
          agreement on the Separation Date. With respect to the remainder of
          your "Restricted Shares" under the Restricted Stock Agreement, such
          shares will vest over the period from January 1, 2003 through January
          1, 2006 in the percentages set forth in the vesting schedule in
          Section 2(a) of the Restricted Stock Agreement; PROVIDED that the
          acceleration of vesting provisions in Sections 2(b) and (c) will be
          terminated and will no longer be of any force or effect; AND PROVIDED
          FURTHER that vesting will cease and no "Restricted Shares" will vest
          under the Restricted Stock Agreement at any time after the date on
          which you cease both your service on the Company's Board pursuant to
          paragraph 2(c) and your service as a consultant pursuant to paragraph
          2(d) above.

     (g)  During the period in which you serve on the Company's Board pursuant
          to paragraph 2(c) and/or as a consultant pursuant to paragraph 2(d)
          above, the Company will (i) provide a DSL line in your home free of
          charge to you; (ii) provide you with an e-mail account hosted on the
          Company's server; and (iii) reimburse you for all reasonable
          out-of-pocket business expenses (including mobile phone charges)
          incurred by you as required in the course of performing your duties
          under this letter agreement, subject to the Company's policies
          regarding reimbursement of such expenses and the Company's
          requirements regarding reporting and documentation of such expenses.

     (h)  Promptly after the Separation Date, the Company will reimburse you for
          all reasonable out-of-pocket fees and expenses of one legal counsel to
          you incurred prior to the date hereof in connection with the review,
          negotiation, and execution of this letter agreement.

     All payments and other arrangements under this Section 2 (the "Severance
Arrangements") will be subject to any applicable withholding obligations of the
Company under applicable laws.

     Such Severance Arrangements will not be paid or become effective until this
agreement becomes effective and enforceable. You understand and agree that you
will not receive the payments and benefits described in this paragraph 2 unless
you execute this Agreement and do not breach this Agreement.

     Such Severance Arrangements shall not be considered compensation for
purposes of any employee benefit plan, program, policy or arrangement maintained
or hereafter established by the Company or any of its affiliates. You understand
that the Severance Arrangements made to you represent consideration for signing
this Agreement (including the Release set forth in paragraph 3) and are not
salary, wages or benefits to which you were already entitled. You also
acknowledge and represent that you have already received everything to which you
were entitled by virtue of your employment relationship with the Company.

     3.   RELEASE BY YOU

     (a)  You (for yourself, your heirs, assigns or executors) release and
          forever discharge the Company, any of its affiliates, and its and
          their directors, officers, agents and

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          employees from any and all claims, suits, demands, causes of action,
          contracts, covenants, obligations, debts, costs, expenses, attorneys'
          fees, liabilities of whatever kind or nature in law or equity, by
          statute or otherwise whether now known or unknown, vested or
          contingent, suspected or unsuspected, and whether or not concealed or
          hidden, which have existed or may have existed, or which do exist,
          through the date this letter agreement becomes effective and
          enforceable, ("Claims") of any kind, which relate in any way to your
          employment with the Company or the termination of that employment,
          except for those arising out of the performance of this letter
          agreement, your rights under the employee benefit plans of the Company
          and your rights to accrued, unused vacation and sick leave. Such
          released Claims include, without in any way limiting the generality of
          the foregoing language, any and all allegations, claims, or
          violations, arising under: Title VII or the Civil Rights Act of 1964,
          as amended; the Civil Rights Act of 1991; the Americans with
          Disabilities Act of 1990; the Equal Pay Act of 1963, as amended; the
          Family and Medical Leave Act of 1993; the Civil Rights Act of 1866, as
          amended; the Worker Adjustment Retraining and Notification Act, as
          amended; the Employee Retirement Income Security Act of 1974, as
          amended; any applicable Executive Order Programs; the Fair Labor
          Standards Act, as amended; or their state or local counterparts
          (including the Illinois Human Rights Act, as amended); or under any
          other federal, state or local civil or human rights law; or under any
          other local, state, or federal law, regulation or ordinance; or under
          any public policy, contract, or tort, or under common law; or arising
          under any policies, practices, or procedures of the Company; or
          arising out of any contract or agreement with the Company (other than
          under this Agreement); or any claim for wrongful discharge, breach of
          contract, infliction of emotional distress, or defamation; or any
          claim for costs, fees, or other expenses, including attorneys' fees
          incurred in these matters; PROVIDED that such released Claims
          specifically exclude any claims under the Age Discrimination in
          Employment Act of 1967, as amended (including the Older Workers
          Benefit Protection Act).

     (b)  In signing this Release you acknowledge that you intend that it shall
          be effective as a bar to each and every one of the Claims hereinabove
          mentioned or implied. You expressly consent that this Release shall be
          given full force and effect according to each and all of its express
          terms and provisions, including those relating to unknown and
          unsuspected Claims (notwithstanding any state statute that expressly
          limits the effectiveness of a general release of unknown, unsuspected
          and unanticipated Claims), if any, as well as those relating to any
          other Claims hereinabove mentioned or implied. You acknowledge and
          agree that this waiver is an essential and material term of this
          Release and without such waiver the Company would not have made the
          Severance Payments described in paragraph 2. You further agree that in
          the event you bring your own Claim in which you seek damages against
          the Company, or in the event you seek to recover against the Company
          in any Claim brought by a governmental agency on your behalf, this
          release shall serve as a complete defense to such Claims. You further
          agree that you are not aware of any pending charge or complaint of the
          type described in paragraph 3(a) as of the execution of this Release.

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     (c)  In signing this Release, you represent that you have made no
          assignment or transfer of any right, claim, demand, cause of action,
          or other matter covered by paragraph 3(a) above.

     (d)  By signing this letter agreement, you acknowledge that you:

          (1)    have carefully read and fully understand all of the provisions
                 of this letter agreement, and understand that you will be
                 giving up important rights (including, without limitation,
                 rights under the Title VII of the Civil Rights Act of 1964, as
                 amended; the Equal Pay Act of 1963; the Americans with
                 Disabilities Act of 1990; and the Employee Retirement Income
                 Security Act of 1974, as amended);

          (2)    knowingly and voluntarily agree with and consent to all of the
                 terms set forth in this letter agreement, and knowingly and
                 voluntarily agree to be legally bound by this letter agreement;
                 and

          (3)    have been advised and encouraged by the Company to consult with
                 an attorney prior to signing this letter agreement, and you
                 have either done so or, after careful reading and
                 consideration, have chosen not to of your own volition.

     4.   ADDITIONAL AGREEMENTS

          (a)    You agree not to disparage the Company, or its past and present
investors, officers or employees, and to keep all confidential and proprietary
information about the past or present business affairs of the Company
confidential unless a prior written release from the Company is obtained, or as
such disclosure is required under applicable law (in which case you will notify
the Company in writing in advance of such disclosure). The Company agrees that
will not disparage you, will upon your request deliver a positive written
reference regarding you for delivery to any future employer or business
relation, and will consult with you and obtain your reasonable approval in
preparing the initial press release or public statement regarding the
termination of your employment.

          (b)    You agree that you will continue to be bound by the terms of
your Executive Stock Agreement and Employment Agreement, dated as of November
27, 1996 and thereafter amended (your "Employment Agreement") that survive
termination of your employment, specifically Section 4 relating to restrictions
on transfer, Section 5(g) relating to confidentiality, Section 6 relating to
ownership of intellectual property, Section 7 relating to noncompetition and
nonsolicitation, Section 8 relating to notices, and Section 9 relating to
miscellaneous provisions. In addition, notwithstanding anything to the contrary
in Section 7 of the Employment Agreement, you will (without the payment of any
additional consideration other than as set forth in this letter Agreement)
continue to be bound by the terms of such Section 7 during the Severance Period;
PROVIDED that if, prior to the end of the Severance Period, the Board terminates
your service under paragraph 2(d) above as Chairman of the Board, either (i) the
Board will immediately after the date of such termination pay you in a lump sum
all severance amounts remaining to be paid to you under paragraph 2(a) above and
all consulting compensation remaining to be paid to you under paragraph 2(e)
above for the remainder of the

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one-year or six-month consulting term, as applicable, in which such termination
occurs (which lump sum payment will be in full satisfaction of the Company's
obligations under paragraphs 2(a) and 2(e) above; or (ii) if the Board fails or
declines to make such lump sum payment within 14 days after the date of such
termination, then, notwithstanding anything herein to the contrary, you will
thereafter no longer be bound by the terms of Section 7 of your Employment
Agreement and the Company will have no further obligation to make any payments
thereafter to you under paragraphs 2(a) and 2(e) above.

     5.   CONFIDENTIALITY OF THIS LETTER AGREEMENT

          The contents of this letter agreement, including but not limited to
its financial terms, are strictly confidential. By signing this agreement you
agree and represent that you will maintain the confidential nature of the
agreement, except (a) to legal counsel, tax and financial planners, and
immediate family who agree to keep it confidential; (b) as otherwise required by
law, in which case you shall notify the Company in writing in advance of
disclosure; and (c) as necessary to enforce this letter agreement.

          The Company agrees that it will keep the contents of this letter
agreement confidential, except (a) to its executive staff and governing bodies,
as necessary or appropriate, and to its outside counsel and auditors; (b) as
otherwise required by law; and (c) as necessary to enforce this letter
agreement.

     6.   NO TRANSFER OR ASSIGNMENT

          You and the Company agree that no interest or right you have or any of
your beneficiaries has to receive payment or to receive benefits under this
Agreement shall be subject in any manner to sale, transfer, assignment, pledge,
attachment, garnishment, or other alienation or encumbrance of any kind, except
as required by law. Nor may such interest or right to receive payment or
distribution be taken, voluntarily or involuntarily, for the satisfaction of the
obligations or debts of, or other claims against you or your beneficiary,
including for alimony, except to the extent required by law.

     7.   NO ADMISSIONS

          This letter agreement shall not be construed as an admission of any
wrongdoing either by the Company, its affiliates, or its and their directors,
officers, agents and employees.

     8.   NO OTHER AGREEMENT

          This letter agreement contains the entire agreement between you and
the Company. No part of this letter agreement may be changed except in writing,
executed by both you and the Company

     9.   GOVERNING LAW

          This letter agreement shall be interpreted in accordance with the laws
of the State of Illinois. Whenever possible, each provision of this letter
agreement shall be interpreted in a manner as to be effective and valid under
applicable law, but if any provision shall be held to be

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prohibited or invalid under applicable law, such provision shall be ineffective
only to the extent of such prohibition or invalidity, without invalidating or
affecting the remainder of such provision or any of the remaining provisions of
this letter agreement.

     10.  COUNTERPARTS

          This Agreement may be executed in separate counterparts, each of which
is deemed to be an original and all of which taken together constitute one and
the same Agreement.

     11.  Conflicting Terms

          The terms of this agreement shall be read consistently with the terms
of other agreements between you and the Company; if terms of this Separation
Agreement are deemed to be inconsistent with or conflict with the terms of other
agreements between you and the Company, the terms of this agreement shall
control.

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          Please indicate your agreement by signing this letter and returning it
to us on or before _______, 2002.


                                               Very truly yours,

                                               FOCAL COMMUNICATIONS
                                               CORPORATION, INC.

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

Accepted and Agreed this _____ day of
________, 2002:


By:
      -------------------------------
      Robert C. Taylor, Jr.

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                                    EXHIBIT A
                           TO LETTER AGREEMENT BETWEEN
                              ROBERT C. TAYLOR, JR.
                      AND FOCAL COMMUNICATIONS CORPORATION
                               DATED JUNE 19, 2002

(a) Cash payment of $25,000 per year, payable in quarterly installments during
your term of service.

(b) Cash payment of $1,500 for each board meeting that you attend in person.

(c) Cash payment of $1,000 for each substantive committee meeting that you
attend in person.

(d) Initial grant of options to acquire 30,000 shares of Focal common stock,
with an exercise price equal to the fair market value of a share of Focal common
stock as of today, which options will vest 25% today and 25% on each of the
first 3 anniversaries of today that occur during your term of service.

(e) An additional grant of options on each anniversary of the date hereof that
occurs during your term of service, which will:

     (i) be exercisable for a number of shares of Focal common stock equal to
     the result obtained by dividing (x) $120,000 minus the total cash payments
     received by you under paragraphs (a) through (c) during the 12-month period
     preceding the date of grant, by (y) the fair market value of a share of
     Focal common stock on the date of grant;

     (ii) have an exercise price equal to the fair market value of a share of
     Focal common stock on the date of grant; and

     (iii) vest 33 1/3% on each of the first 3 anniversaries of the date of
     grant that occur during your term of service.

(f) Reimbursement of your reasonable out-of-pocket expenses incurred in
attending meetings of the Board of Directors and committees thereof.

The terms of the arrangements summarized above would be set forth in detail in
an outside Director Option Agreement between you and the Company.

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