Document:

exv10w1

 

Exhibit 10.1

EXECUTION COPY

ASSET PURCHASE AGREEMENT

by and among

ALLEGIANCE TELECOM, INC.

And

ALLEGIANCE TELECOM COMPANY WORLDWIDE

jointly and severally as Sellers

And

XO COMMUNICATIONS, INC.

as Buyer

February 18, 2004

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Page
	ARTICLE I DEFINITIONS	 	 	2	 
	 	1.1  	 	 	 	 	 	 	Defined Terms
	 	 	2	 
	 	1.2  	 	 	 	 	 	 	Other Defined Terms
	 	 	9	 
	ARTICLE II TRANSFER OF ASSETS AND LIABILITIES	 	 	12	 
	 	2.1  	 	 	 	 	 	 	Assets to be Sold
	 	 	12	 
	 	2.2  	 	 	 	 	 	 	Excluded Assets
	 	 	14	 
	 	2.3  	 	 	 	 	 	 	Liabilities to be Assumed by Buyer
	 	 	16	 
	 	2.4  	 	 	 	 	 	 	Excluded Liabilities
	 	 	17	 
	 	2.5  	 	 	 	 	 	 	Non-Transferred Assets
	 	 	18	 
	 	2.6  	 	 	 	 	 	 	Contract Assignment
	 	 	19	 
	 	2.7  	 	 	 	 	 	 	Alternative Structure
	 	 	19	 
	ARTICLE III CLOSING	 	 	19	 
	 	3.1  	 	 	 	 	 	 	Closing; Transfer of Possession; Certain Deliveries
	 	 	19	 
	 	3.2  	 	 	 	 	 	 	Purchase Price
	 	 	21	 
	 	3.3  	 	 	 	 	 	 	Earnest Money Deposit
	 	 	22	 
	 	3.4  	 	 	 	 	 	 	Working Capital Purchase Price Adjustment
	 	 	23	 
	 	3.5  	 	 	 	 	 	 	Cure Price Adjustment
	 	 	25	 
	 	3.6  	 	 	 	 	 	 	Performance Price Adjustment
	 	 	27	 
	 	3.7  	 	 	 	 	 	 	Allocation of Purchase Price
	 	 	29	 
	ARTICLE IV REPRESENTATIONS AND WARRANTIES OF SELLERS	 	 	29	 
	 	4.1  	 	 	 	 	 	 	Existence; Good Standing and Power
	 	 	29	 
	 	4.2  	 	 	 	 	 	 	Authority
	 	 	29	 
	 	4.3  	 	 	 	 	 	 	Execution and Binding Effect
	 	 	30	 
	 	4.4  	 	 	 	 	 	 	No Violation
	 	 	30	 
	 	4.5  	 	 	 	 	 	 	Third Party Approvals
	 	 	30	 
	 	4.6  	 	 	 	 	 	 	Financial Statements
	 	 	30	 
	 	4.7  	 	 	 	 	 	 	No Undisclosed Liabilities
	 	 	31	 
	 	4.8  	 	 	 	 	 	 	Title to Acquired Assets; Sufficiency
	 	 	31	 
	 	4.9  	 	 	 	 	 	 	Communications Licenses
	 	 	32	 
	 	  4.10	 	 	 	 	 	 	Absence of Certain Developments
	 	 	32	 
	 	4.11	 	 	 	 	 	 	Tangible Personal Property
	 	 	32	 
	 	4.12	 	 	 	 	 	 	Insurance
	 	 	32	 
	 	4.13	 	 	 	 	 	 	Accounts and Notes Receivable and Payable
	 	 	32	 
	 	4.14	 	 	 	 	 	 	Related Party Transactions
	 	 	33	 
	 	4.15	 	 	 	 	 	 	Suppliers
	 	 	33	 
	 	4.16	 	 	 	 	 	 	Fees and Expenses
	 	 	34	 
	 	4.17	 	 	 	 	 	 	Compliance With Laws; Licenses
	 	 	34	 
	 	4.18	 	 	 	 	 	 	Environmental Matters
	 	 	34	 
	 	4.19	 	 	 	 	 	 	Intellectual Property
	 	 	34	 
	 	4.20	 	 	 	 	 	 	Contracts
	 	 	35	 

i

 

TABLE OF CONTENTS
(continued)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Page
	 	4.21	 	 	 	 	 	 	Real Property
	 	 	35	 
	 	4.22	 	 	 	 	 	 	Taxes 
	 	 	36	 
	 	4.23	 	 	 	 	 	 	Employee Benefits; Labor Matters
	 	 	37	 
	 	4.24	 	 	 	 	 	 	Litigation
	 	 	38	 
	 	4.25	 	 	 	 	 	 	Network Facilities
	 	 	39	 
	 	4.26	 	 	 	 	 	 	Bank Accounts
	 	 	39	 
	 	4.27	 	 	 	 	 	 	Subsidiaries	 	 	39	 
	 	4.28	 	 	 	 	 	 	Limitations on
Sellers’ Representations and Warranties
	 	 	39	 
	ARTICLE V REPRESENTATIONS AND WARRANTIES OF BUYER	 	 	39	 
	 	5.1  	 	 	 	 	 	 	Existence, Good Standing and Power
	 	 	39	 
	 	5.2  	 	 	 	 	 	 	Authority
	 	 	40	 
	 	5.3  	 	 	 	 	 	 	Execution and Binding Effect
	 	 	40	 
	 	5.4  	 	 	 	 	 	 	No Violation
	 	 	40	 
	 	5.5  	 	 	 	 	 	 	Third Party Approvals
	 	 	40	 
	 	5.6  	 	 	 	 	 	 	Brokers and Finders
	 	 	41	 
	 	5.7  	 	 	 	 	 	 	Financing
	 	 	41	 
	 	5.8  	 	 	 	 	 	 	SEC Filings
	 	 	41	 
	 	5.9  	 	 	 	 	 	 	Capitalization
	 	 	41	 
	 	5.10	 	 	 	 	 	 	Limitations on
Sellers’ Representations and Warranties
	 	 	41	 
	ARTICLE VI COVENANTS OF THE PARTIES	 	 	41	 
	 	6.1  	 	 	 	 	 	 	Conduct of Business
	 	 	41	 
	 	6.2  	 	 	 	 	 	 	Transition; Operating Agreement
	 	 	43	 
	 	6.3  	 	 	 	 	 	 	Reorganization Process
	 	 	43	 
	 	6.4  	 	 	 	 	 	 	Insurance
	 	 	46	 
	 	6.5  	 	 	 	 	 	 	Access; Transition Committee; Information Rights
	 	 	46	 
	 	6.6  	 	 	 	 	 	 	Public Announcements
	 	 	47	 
	 	6.7  	 	 	 	 	 	 	Notification of Certain Matters
	 	 	47	 
	 	6.8  	 	 	 	 	 	 	Employees
	 	 	48	 
	 	6.9  	 	 	 	 	 	 	Further Agreements
	 	 	50	 
	 	6.10	 	 	 	 	 	 	Payment of Transfer Taxes and Tax Filings
	 	 	51	 
	 	6.11	 	 	 	 	 	 	Filing of Tax Returns
	 	 	51	 
	 	6.12	 	 	 	 	 	 	Proration of Taxes and Certain Charges
	 	 	52	 
	 	6.13	 	 	 	 	 	 	Best Efforts
	 	 	52	 
	 	6.14	 	 	 	 	 	 	HSR Act and General Governmental Consents
	 	 	52	 
	 	6.15	 	 	 	 	 	 	Bulk Sales
	 	 	54	 
	 	6.16	 	 	 	 	 	 	Sale Order
	 	 	54	 
	 	6.17	 	 	 	 	 	 	Competing Transaction
	 	 	54	 
	 	6.18	 	 	 	 	 	 	Disclosure Supplements
	 	 	54	 
	 	6.19	 	 	 	 	 	 	Communications Licenses
	 	 	55	 
	 	6.20	 	 	 	 	 	 	FCC Applications/State PUC Applications
	 	 	55	 
	 	6.21	 	 	 	 	 	 	Cooperation on Environmental Matters
	 	 	56	 

ii

 

TABLE OF CONTENTS
(continued)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Page
	 	6.22	 	 	 	 	 	 	Intentionally Omitted
	 	 	56	 
	 	6.23	 	 	 	 	 	 	Non-Compete Covenants
	 	 	56	 
	 	6.24	 	 	 	 	 	 	Use of Name
	 	 	56	 
	 	6.25	 	 	 	 	 	 	Further Assurances
	 	 	57	 
	 	6.26	 	 	 	 	 	 	Colocation/PRI Services Agreement
	 	 	57	 
	 	6.27	 	 	 	 	 	 	Operation of Acquired Assets
	 	 	57	 
	 	6.28	 	 	 	 	 	 	Registration Rights
	 	 	57	 
	 	6.29	 	 	 	 	 	 	Buyer Shareholder Approval
	 	 	57	 
	 	6.30	 	 	 	 	 	 	Sellers’ Disposition of XO Common Stock
	 	 	57	 
	 	6.31	 	 	 	 	 	 	Tax Matters
	 	 	58	 
	ARTICLE VII CONDITIONS TO OBLIGATIONS OF THE PARTIES	 	 	58	 
	 	7.1  	 	 	 	 	 	 	Conditions Precedent to Obligations of Buyer and Sellers
	 	 	58	 
	 	7.2  	 	 	 	 	 	 	Conditions Precedent to Obligations of Buyer
	 	 	60	 
	 	7.3  	 	 	 	 	 	 	Conditions Precedent to the Obligations of Sellers
	 	 	61	 
	 	7.4  	 	 	 	 	 	 	Conditions Precedent to Closing
	 	 	61	 
	 	7.5  	 	 	 	 	 	 	Satisfaction of All Closing Conditions; Early Funding Date
	 	 	62	 
	ARTICLE VIII TERMINATION	 	 	62	 
	 	8.1  	 	 	 	 	 	 	Termination of Agreement
	 	 	62	 
	 	8.2  	 	 	 	 	 	 	Effect of Termination
	 	 	63	 
	 	8.3  	 	 	 	 	 	 	Bankruptcy Events
	 	 	64	 
	ARTICLE IX MISCELLANEOUS	 	 	65	 
	 	9.1  	 	 	 	 	 	 	Expenses
	 	 	65	 
	 	9.2  	 	 	 	 	 	 	Assignment
	 	 	65	 
	 	9.3  	 	 	 	 	 	 	Parties in Interest
	 	 	65	 
	 	9.4  	 	 	 	 	 	 	Notices
	 	 	66	 
	 	9.5  	 	 	 	 	 	 	Choice of Law
	 	 	67	 
	 	9.6  	 	 	 	 	 	 	Entire Agreement; Amendments and Waivers
	 	 	67	 
	 	9.7  	 	 	 	 	 	 	No Recourse Against Third Parties
	 	 	67	 
	 	9.8  	 	 	 	 	 	 	Counterparts
	 	 	68	 
	 	9.9  	 	 	 	 	 	 	Confidentiality
	 	 	68	 
	 	9.10	 	 	 	 	 	 	Invalidity
	 	 	68	 
	 	9.11	 	 	 	 	 	 	Headings
	 	 	69	 
	 	9.12	 	 	 	 	 	 	Exclusive Jurisdiction
	 	 	69	 
	 	9.13	 	 	 	 	 	 	Waiver of Right to Trial by Jury
	 	 	69	 
	 	9.14	 	 	 	 	 	 	Specific Performance
	 	 	69	 
	 	9.15	 	 	 	 	 	 	Counting
	 	 	69	 
	 	9.16	 	 	 	 	 	 	Service of Process
	 	 	69	 
	 	9.17	 	 	 	 	 	 	Time of Essence; Effectiveness of the Closing Date
	 	 	69	 
	 	9.18	 	 	 	 	 	 	Exhibits and Schedules
	 	 	70	 
	 	9.19	 	 	 	 	 	 	Interpretation
	 	 	70	 

iii

 

TABLE OF CONTENTS
(continued)

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	Page
	 	9.20	 	 	 	 	 	 	Preparation of this Agreement
	 	 	70	 

iv

 

EXHIBITS

	 	 	 
	Exhibit A	 	
Bidding Procedures Order
	Exhibit B	 	
Voting and Lockup Agreement
	Exhibit C	 	
Sale Order
	Exhibit D	 	
Form of Bill of Sale
	Exhibit E	 	
Form of Assumption Agreement
	Exhibit F-1	 	
Form of Purchase Price Escrow Agreement
	Exhibit F-2	 	
Form of Adjustment Escrow Agreement
	Exhibit G	 	
Calculation of Base Working Capital
	Exhibit H	 	
Operating Agreement
	Exhibit I	 	
Intentionally Omitted
	Exhibit J	 	
Timetable
	Exhibit K	 	
Current Liabilities
	Exhibit L	 	
Sellers’ Severance Policy

v

 

ASSET PURCHASE AGREEMENT

          This ASSET PURCHASE AGREEMENT is dated as of February 18, 2004 by and
among Allegiance Telecom, Inc., a Delaware corporation
(“ATI”), Allegiance Telecom Company Worldwide, a Delaware
corporation (“ATCW” and, together with ATI,
“Sellers” and each individually, a
“Seller”), and XO Communications, Inc., a Delaware
corporation (“Buyer”).

WITNESSETH:

          WHEREAS, Sellers (together with the Operating Subsidiaries,
“Allegiance”) are engaged in the business of providing
certain telecommunication products and services, including local and
long-distance voice services, broadband and other Internet and data services
and wholesale services, to business, government and other institutional users
in major metropolitan areas across the United States (excluding any Excluded
Asset (as defined herein), the “Business”);

          WHEREAS, on May 14, 2003, each of ATI and ATCW and their direct and
indirect Subsidiaries commenced a case (collectively, the
“Cases”) under chapter 11 of title 11 of the United States
Code (the “Bankruptcy Code”) in the United States Bankruptcy
Court for the Southern District of New York (the “Bankruptcy
Court”), which cases are jointly administered under Case No.
03-13057;

          WHEREAS, the sale of assets and certain liabilities of the Business are
subject to the supervision and control of Sellers subject to the approval of
the Bankruptcy Court;

          WHEREAS, Sellers wish to sell to Buyer and Buyer wishes to purchase from
Sellers substantially all of the assets and to assume from Sellers certain
liabilities of the Business, pursuant to, inter alia,
sections 105, 363, 365, 1122, 1129 and 1146(c) of the Bankruptcy Code and the
applicable Federal Rules of Bankruptcy Procedure; provided,
however, that in the event Sellers shall have delivered an
Early Closing Election, Sellers shall not seek to sell the assets pursuant to
sections 1122 and 1129 of the Bankruptcy Code;

          WHEREAS, in connection with issuance of the XO Common Stock (as defined
herein), Buyer’s shareholder approval (as described in this Agreement) may be
required, and as a condition precedent to Sellers’ execution and delivery of
this Agreement, Cardiff Holding LLC, the holder of a majority of the capital
stock of Buyer, has entered into a Voting and Lockup Agreement (the
“Voting Agreement”) (attached hereto as Exhibit
B) and the Voting Agreement remains in full force and effect;

          WHEREAS, the Board of Directors of each Seller has determined that it is
advisable and in the best interests of Sellers’ estates and the beneficiaries
of such estates
to consummate the transactions contemplated by this Agreement, upon the
terms and conditions provided for herein; and

 

 

          NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, and subject to the terms and conditions hereof, the parties,
intending to be legally bound, hereby agree as follows:

ARTICLE I

DEFINITIONS

          1.1
Defined Terms. As used herein, the terms below shall
have the following respective meanings:

         “Adjustment Escrow Amount” means the greater of (i)
Seven Million Dollars ($7,000,000) and (ii) the sum of Five Million Dollars
($5,000,000) plus, to the extent positive, the Initial Working Capital
Adjustment.

         “Affiliate” means any Person directly or indirectly
controlling, controlled by or under common control with another Person where
“control” means the possession, directly or indirectly, of the power to direct
the management and policies of a Person, whether through the ownership of
voting securities, by contract or otherwise; provided,
however, that under no circumstances shall creditors of
Allegiance be considered Affiliates of Allegiance solely by virtue of their
ownership of creditor claims against Allegiance.

         “Affiliated Group” means any affiliated group of
corporations within the meaning of Section 1504 of the Internal Revenue Code
that joins in the filing of (or is otherwise required to file) a federal
consolidated Tax Return, as well as any other group of corporations filing (or
otherwise required to file) consolidating, combined or unitary Tax Returns
under state, local or foreign Law, of which a Seller is or was a member.

         “Agreement” means this Asset Purchase Agreement
(together with all schedules and exhibits referenced herein), as the same may
be amended from time to time.

         “Bankruptcy Plan” means Allegiance’s chapter 11 plan of
reorganization that includes the sale of the Acquired Assets to Buyer as
contemplated hereby, in a form reasonably acceptable to Buyer, unless an Early
Closing Election shall have been delivered.

         “Base Working Capital” means the Net Working Capital as
of September 30, 2003 equal to $16,099,016.

         “Bidding Procedures Order” means that certain order
dated January 15, 2004 (A) establishing bidding procedures and bid protections
in connection with the sale of substantially all of the assets of Sellers, (B)
approving the form and manner of notices in connection with such sale and (C)
setting a sale hearing date.

2

 

         “Business Day” means any day other than a Saturday,
Sunday or a legal holiday on which banking institutions in the State of New
York are not required to open.

         “COBRA” means section 4980B of the Internal Revenue
Code and Part 6 of Subtitle B of Title I of ERISA.

         “Communications Licenses” means the FCC Licenses and
the State PUC Licenses.

         “Confidentiality Agreement” means the agreement entered
into by and between ATI and XO Communications, Inc. dated December 9, 2003.

         “Confirmation Order” means a final, nonappealable order
to be entered by the Bankruptcy Court in the Cases confirming the Bankruptcy
Plan pursuant to section 1129 of the Bankruptcy Code.

         “Contract” means any contract, agreement, indenture,
note, bond, loan, instrument, lease, commitment or other arrangement or
agreement, including all amendments thereof and supplements thereto.

         “Cure Amounts” means all amounts payable in order to
effectuate, pursuant to section 365 of the Bankruptcy Code, the assumption by
Sellers and the assignment to the Buyer of any Assumed Contract.

         “Disclosure Schedules” means the various disclosure
schedules referred to herein.

         “Employee” means each active employee, full-time or
part-time, temporary or regular, of Allegiance. An “active employee” shall
include any current employee on Allegiance’s payroll records, regardless of
whether such employee is absent from work, including due to short term or long
term disability, military leave, leave of absence, illness, vacation or
workers’ compensation injury.

         “Environmental Laws” means all Laws relating to the
protection of the environment, or to any emission, discharge, generation,
processing, storage, holding, abatement, existence, Release, threatened Release
or transportation of any Hazardous Substances, including all Laws pertaining to
reporting, licensing, permitting, investigation or remediation of emissions,
discharges, Releases or threatened Releases of Hazardous Substances into the
air, surface water, groundwater or land, or relating to the manufacture,
processing, distribution, use, sale, treatment, receipt, storage, disposal,
transport or handling of Hazardous Substances.

         “Environmental Permits” means any Licenses required
pursuant to Environmental Laws for operation, installation or modification of
equipment, processes, facilities or for occupancy of any of the real property
owned or leased by Sellers or the Operating Subsidiaries.

3

 

         “ERISA” means the Employee Retirement Income Security
Act of 1974, as amended and the regulations promulgated thereunder.

         “Executory Contract” means any Contract that can be
assumed or rejected in accordance with the Bankruptcy Code.

         “Expense Reimbursement” means an amount payable to
Buyer in accordance with Section 8.2 or Section
8.3, to reimburse Buyer for reasonable and documented out-of-pocket
costs and expenses (including reasonable legal, accounting and financial
advisors’ fees and expenses) incurred by Buyer or its Affiliates in connection
with the investigation, negotiation, execution, delivery and performance of
this Agreement, the consummation of the transactions contemplated hereby and
the participation in and monitoring of the Cases, such expenses to be set forth
in a reasonably detailed written itemization of such expenses (the
“Expense Reimbursement Statement”).

         “Expense Reimbursement Statement” shall have the
meaning ascribed to such term in the definition of “Expense Reimbursement.”

         “FCC” means the Federal Communications Commission.

         “FCC Consent” means the grant by the FCC of its consent
to the transfer of the FCC Licenses in connection with the consummation of the
transactions contemplated hereby.

         “FCC Licenses” means all Licenses issued by the FCC
held by Sellers or the Operating Subsidiaries, as set forth on
Schedule 2.1(d) of the Disclosure Schedules.

         “GAAP” means generally accepted accounting principles
in the United States as in effect from time to time.

         “Governmental Entity” means any federal, state, local
or foreign government or any subdivision, agency, instrumentality, authority,
department, commission, board or bureau thereof or any federal, state, local or
foreign court, tribunal or arbitrator (including the Bankruptcy Court).

         “Hazardous Substances” means any substance or material
that: (i) is or contains asbestos, urea formaldehyde foam insulation,
polychlorinated biphenyls, petroleum or petroleum-derived substances or wastes,
radon gas or related materials, or (ii) requires investigation, removal or
remediation under any Environmental Law, or is defined, listed or identified as
a “hazardous waste,” “hazardous substance,” “toxic substance” or words of
similar import thereunder.

         “HSR Act” means the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and any successor law and the rules and
regulations promulgated thereunder or under any successor law.

         “Internal Revenue Code” means the Internal Revenue Code
of 1986, as amended, and the regulations promulgated thereunder.

4

 

         “Law” means any federal, state, local, municipal or
foreign statute, law, ordinance, regulation, rule, code, order, principle of
common law or judgment enacted, promulgated, issued, enforced or entered by any
Governmental Entity, or other requirement or rule of law.

         “Liabilities” means, as to any Person, all debts,
adverse claims, liabilities, commitments, responsibilities, damages and
obligations of any kind or nature whatsoever, direct, indirect, absolute or
contingent, of such Person, whether accrued, vested or otherwise, whether known
or unknown and whether or not actually reflected, or required to be reflected,
in such Person’s balance sheets or other books and records.

         “License” means all licenses, franchises, permits,
consents, waivers, registrations, certificates, and other governmental or
regulatory permits, authorizations or approvals required to be issued or
granted by a Governmental Entity for the operation of the Business and for the
ownership, lease or operation of Sellers’ or the Operating Subsidiaries’
properties.

         “Lien” means any lien, lease, right of first refusal,
servitude, claim, pledge, option, charge, hypothecation, easement, security
interest, right-of-way, encroachment, mortgage, deed of trust or any other
encumbrance, restriction or limitation whatsoever.

         “Litigation” means any claim, action, suit,
investigation or proceeding before any court, arbitrator or other Governmental
Entity.

         “Material Adverse Effect” means any event, effect or
change, individually or in the aggregate with such other events, effects or
changes, that has had, has or could reasonably be expected to have a material
adverse effect on the condition (financial or otherwise), Liabilities,
properties, assets (including intangible assets) or results of operations of
Allegiance or the Business, in either case taken as a whole;
provided that none of the following shall
be deemed to constitute and none of the following shall be taken into account
in determining whether there has been a Material Adverse Effect: any adverse
event, effect or change arising from or relating to (1) general business or
economic conditions; (2) national or international political conditions,
including the engagement of the United States in hostilities, whether or not
pursuant to the declaration of a national emergency or war, or the occurrence
of any military or terrorist attack upon the United States, or any of its
territories, possessions, or diplomatic or consular offices or upon any
military installation, equipment or personnel of the United States; (3)
financial, banking or securities market conditions (including any disruption
thereof and any decline in the price of any security (including any security or
creditor claims of or with respect to Allegiance) or any market index);
(4) changes in GAAP or any application of accounting standards after the date
hereof, including the American Institute of Certified Public Accountants
Statement of Position 90-7 “Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code” and Financial Accounting Standards Board in
Statement of Financial Accounting Standards No. 144 “Accounting for the
Impairment or Disposal of Long-Lived Assets;” (5) the taking of any action
specifically contemplated by this Agreement and the other agreements
contemplated

5

 

hereby or the announcement of the transactions contemplated by
this Agreement; or (6) changes in Law or binding directives issued by any
Governmental Entity.

         “Net Working Capital” for any date of determination,
means as of the close of business on such date, Working Capital Assets minus
Working Capital Liabilities.

         “Operational Restructuring Activities” means Sellers’
actions taken with the intent to preserve cash, improve the efficiency and
reduce the costs of the Business consisting of (i) reducing the number of
Employees to approximately 3,000 as of September 30, 2003; (ii) rejecting
Executory Contracts in the Cases (and from and after the date hereof, solely in
accordance with this Agreement); (iii) waiving, decommissioning or abandoning
assets and other rights that are not material to the operation of the Business
and in instances in which the estimated cost of salvaging or selling such
assets exceeds the anticipated proceeds; (iv) marketing and seeking to sell
certain Excluded Assets; and (v) taking other actions in the Cases specifically
approved by the Bankruptcy Court prior to the date hereof, whether such action
occurs prior to, on or subsequent to the date hereof.

         “Order” means any judgment, order, injunction, writ,
ruling, decree, stipulation or award of any Governmental Entity.

         “Ordinary Course of Business” means the ordinary and
usual course of normal day-to-day operations of the Business by Sellers and the
Operating Subsidiaries as debtors and debtors-in-possession in the Cases
consistent with past practice through the date hereof.

         “Out of Region Business” means the operations of the
Business conducted outside of the states of Arizona, Colorado, Oregon,
Washington and Minnesota.

         “Permitted Lien” means (i) any Lien for Taxes not yet
due or delinquent; (ii) any statutory Lien arising in the Ordinary Course of
Business or by operation of Law with respect to a Liability that is not yet due
or delinquent; (iii) easements, leases, reservations, licenses or other matters
of record affecting any property or assets of Allegiance,
provided that such easements, leases, reservations, licenses
or other matters do not materially detract from the value of or impair the use
of such property or assets; and (iv) Liens on Acquired Assets in favor of
Allegiance’s secured lenders to be released at Closing.

         “Person” means an individual, a partnership, a joint
venture, a corporation, a business trust, a limited liability company, a trust,
an unincorporated organization, a joint stock company, a labor union, an
estate, a Governmental Entity or any other entity.

         “post-Petition” means any time after the commencement
of the Cases.

         “pre-Petition” means any time prior to the commencement
of the Cases.

6

 

         “Regulatory Transition Process” means the process as
set forth in this Agreement, the Operating Agreement, the Transition Plan and
other related documents for obtaining all approvals, consents (including
assignments of any permits and rights of way), certificates, waivers and other
authorizations required to be obtained from, or filings or other notices
required to be made with or to, any Governmental Entities having jurisdiction
over any of the Acquired Assets in order to consummate the transactions
contemplated by this Agreement and the other Transaction Documents and the
transfer of such Acquired Assets, including the Non-Transferred Assets, to
Buyer upon the receipt of such approvals.

         “Release” means any releasing, disposing, discharging,
injecting, spilling, leaking, leaching, pumping, dumping, emitting, escaping,
emptying, seeping, dispersal, migration, transporting, placing and the like,
including the moving of any materials through, into or upon, any land, soil,
surface water, groundwater or air, or otherwise entering into the environment.

         “Representative” means, with respect to any Person,
such Person’s officers, directors, employees, agents and representatives
(including any investment banker, financial advisor, accountant, legal counsel
or expert retained by or acting on behalf of such Person or its Subsidiaries).

         “Retail Ending Lines” means the number of lines in
service from Allegiance’s billing systems based upon line equivalency and
consistent with the methodology used to report retail ending lines on
Allegiance’s monthly flash reports. Line equivalency is defined per product and
is maintained by Allegiance’s Product Hierarchy database. For example, a
fully-utilized data T-1 is counted as 24 lines.

         “Sale Delay” means the failure to adhere to the
timeline attached hereto as Exhibit J with respect to the
Sale Order Approval Date.

         “Sale Hearing” means the hearing to be scheduled and
conducted by the Bankruptcy Court to consider approval and entry of the Sale
Order.

         “Sale Motion” means the motion or motions of Sellers
seeking approval and entry of the Bidding Procedures Order and the Sale Order.

         “Sale Order” means an order in the form of
Exhibit C hereto, and otherwise in form and substance
reasonably acceptable to ATI and Buyer.

         “Sale Order Approval Date” means the date the
Bankruptcy Court approves the Sale Order.

         “Scheduled Future Disconnects” means scheduled backlog
of line disconnects from Allegiance’s backlog report as determined by Sellers
in accordance with past custom and practice.

7

 

         “Scheduled Future Installs” means scheduled backlog of
line installs from Allegiance’s backlog report as determined by Sellers in
accordance with past custom and practice.

         “Sellers’ Knowledge” and any similar terms used herein
means the actual knowledge of Royce J. Holland, C. Daniel Yost, Thomas M. Lord,
G. Clay Myers, Christopher MacFarland, J. Timothy Naramore, Anthony J. Parella
or Mark B. Tresnowski, without any duty to investigate.

         “Shared Technologies” means Shared Technologies
Allegiance, Inc., a wholly owned Subsidiary of ATCW.

         “State PUC” means any state and local public service
and public utilities commission having regulatory authority over the Business,
as conducted in any given jurisdiction.

         “State PUC Consent” means the grant by any State PUC of
its consent to the assignment of the State PUC Licenses or any Non-Transferred
Assets associated with such Licenses, in connection with the consummation of
the transactions contemplated hereby.

         “State PUC Licenses” means all Licenses issued or
granted by the State PUC held by Sellers or any Operating Subsidiary in each
applicable jurisdiction, as set forth on Schedule 2.1(d) of the
Disclosure Schedules.

         “Subsidiary” means, with respect to any particular
Person, any corporation, limited liability company, partnership, association or
other business entity of which (i) if a corporation, a majority of the total
voting power of shares of stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a combination
thereof, or (ii) if a limited liability company, partnership, association or
other business entity, a majority of the partnership or other similar ownership
interest thereof is at the time owned or controlled, directly or indirectly, by
that Person or one or more Subsidiaries of that Person. For purposes hereof, a
Person or Persons shall be deemed to have a majority ownership interest in a
limited liability company, partnership, association or other business entity if
such Person or Persons shall be allocated a majority of limited liability
company, partnership, association or other business entity gains or losses or
shall
be or control any managing director or general partner of such limited
liability company, partnership, association or other business entity.

         “Tax” or “Taxes” means all taxes,
charges, fees, duties, levies or other assessments, including income, gross
receipts, net proceeds, ad valorem, turnover, real and personal property
(tangible and intangible), sales, use, franchise, excise, value added, license,
payroll, unemployment, environmental, customs duties, capital stock,
disability, stamp, leasing, lease, user, transfer, fuel, excess profits,
occupational and interest equalization, windfall profits, severance and
employees’ income withholding and Social

8

 

Security taxes imposed by the United
States or any other country or by any State, municipality, subdivision or
instrumentality of the United States or of any other country or by any other
tax authority, including interest, penalties or additions to tax attributable
to such Taxes or any Tax Return, and shall include any transferee or successor
liability in respect of Taxes (whether by contract or otherwise) and any
liability in respect of any Taxes as a result of being a member of any
Affiliated Group.

         “Tax Return” means any statement, report, return or
other information required to be filed with respect to any Tax (including any
attachments thereto and any amendment thereof) including any information
return, claim for refund, amended return or declaration of estimated Tax, and
including, where permitted or required, consolidating, combined or unitary
returns in which any Seller or Operating Subsidiary is or was included or
includable.

         “Transaction Documents” means this Agreement, the
Transition Services Agreement, the Purchase Price Escrow Agreement, the Master
Services Agreement, the Operating Agreement, the Voting Agreement, the
Adjustment Escrow Agreement and all Disclosure Schedules, certificates,
contracts and agreements being delivered or entered into pursuant to this
Agreement.

         “Transfer Tax” or “Transfer Taxes”
means any federal, state, county, local, foreign and other sales, use,
transfer, conveyance, documentary transfer, recording or other similar tax, fee
or charge imposed upon the sale, transfer or assignment of property or any
interest therein or the recording thereof, and any penalty, addition to tax or
interest with respect thereto, but such term shall not include any tax on,
based upon or measured by, the net income, gains or profits from such sale,
transfer or assignment of the property or any interest therein.

         “WARN Act” means the Worker Adjustment and Retraining
Notification Act of 1988, as amended, and any successor law, and the rules and
regulations promulgated thereunder and under any successor law, and any similar
state, local or foreign law, regulation or ordinance.

         “Working Capital Assets” means the consolidated current
assets of Allegiance set forth on Exhibit G, determined in
accordance with GAAP applied on a basis consistent with the most recent balance
sheet included in the Financial Statements to the extent they are included in
the Acquired Assets.

         “Working Capital Liabilities” means the consolidated
current liabilities of Allegiance set forth on Exhibit G,
determined in accordance with GAAP applied on a basis consistent with the most
recent balance sheet included in the Financial Statements to the extent they
are included in the Assumed Liabilities.

          1.2
Other Defined Terms. The following additional terms
shall have the meanings defined for such terms in the Sections set forth below:

9

 

	 	 	 
	Term	 	Section
	
	 	

	Accounting Referee	 	3.4(d)
	Acquired Assets	 	2.1
	Additional Amount	 	3.6(d)
	Adjustment Escrow Account	 	3.2(b)(iii)
	Adjustment Escrow Agent	 	3.2(b)(iii)
	Adjustment Escrow Agreement	 	3.2(b)(iii)
	Allegiance	 	Recitals
	Allocation Schedule	 	3.7
	Antitrust Laws	 	6.14(b)
	Approval Motions	 	6.3(a)
	Assumed Contracts	 	3.5(d)
	Assumed Contracts List	 	3.5(d)
	Assumed Liabilities	 	2.3
	ATCW	 	Preamble
	ATI	 	Preamble
	Avoidance Actions	 	2.2(e)
	Balance Sheet	 	4.6(a)
	Balance Sheet Date	 	4.6(a)
	Bankruptcy Code	 	Recitals
	Bankruptcy Court	 	Recitals
	bulk sale	 	6.15
	Business	 	Recitals
	Buyer	 	Preamble
	Buyer Group	 	9.7
	Cases	 	Recitals
	Cash and Cash Equivalents	 	2.2(a)
	Cash Purchase Price	 	3.2(a)
	Claim Over	 	9.7
	Claims	 	2.1(f)
	Closing	 	3.1(a)
	Closing Date	 	3.1(a)
	Committee	 	6.5(c)
	Competing Transaction	 	6.17(a)
	Deposit Adjustment Amount	 	3.5(b)
	Designated Change	 	6.14(b)
	Disclosure Statement	 	6.3(a)
	Early Closing Election	 	8.3(c)
	Early Funding Date	 	3.1
	Early Funding Date Working Capital	 	3.4(b)
	Earnest Money Deposit	 	3.3
	Employee Benefit Plans	 	4.23(a)

10

 

	 	 	 
	Term	 	Section
	
	 	

	Employee Schedule	 	6.8(a)
	Equipment	 	2.1(b)
	ERISA Affiliate	 	4.23(a)
	Estimated Early Funding Date Working Capital	 	3.4(a)
	Exchange Act	 	4.6(c)
	Excluded Assets	 	2.2
	Excluded Liabilities	 	2.4
	Exclusivity Period	 	6.3(d)(iii)
	Final Performance Adjustment Amount	 	3.6(b)
	Final Working Capital	 	3.4(i)
	Financial Statements	 	4.6(a)
	Form 10-Q	 	5.8
	good faith	 	6.3(b)
	Guidance	 	6.28(a)
	ILECs	 	3.5(a)
	ILEC Cure Amounts	 	3.5(a)
	ILEC Set Off Amounts	 	3.5(a)
	Initial Working Capital Adjustment	 	3.4(f)
	Intellectual Property	 	2.1(i)
	Liquidated Damages	 	8.2
	Losses	 	9.7
	Master Services Agreement	 	6.26
	Multiemployer Plan	 	4.23(d)
	multiple employer plan	 	4.23(a)
	No Action Relief	 	6.28(a)
	Non-Compete Covenants	 	6.1(j)
	Non-ILEC Cure Adjustment	 	3.5(c)
	Non-ILEC Cure Amounts	 	3.5(c)
	Non-ILEC Set Off Amounts	 	3.5(c)
	Non-Recourse Person	 	9.7
	Non-Transferred Assets	 	2.5
	Operating Agreement	 	7.2(g)
	Operating Subsidiaries	 	2.1(s)
	Owned Real Property	 	2.2(l)
	Performance Adjustment Amount	 	3.6(a)
	Personal Property Leases	 	2.1(c)
	Purchase Price	 	3.2
	Purchase Price Cash Escrow	 	3.2(b)
	Purchase Price Escrow Agent	 	3.2(b)
	Purchase Price Escrow Agreement	 	3.2(b)
	Purchase Price Escrow Amount	 	3.2(b)
	Purchase Price Stock Escrow	 	3.2(b)
	Real Property Leases	 	2.1(a)

11

 

	 	 	 
	Term	 	Section
	
	 	

	Required Interconnection Agreements	 	2.5 
	SEC	 	4.6(c)
	Securities Act	 	6.28 
	Seller Marks	 	6.24 
	Sellers	 	Preamble 
	Sellers’ Intentional Breach	 	8.2 
	Senior Credit Agreement	 	4.12 
	Shared Hosting Business	 	6.1 
	Shareholder Approval	 	6.29 
	Third Person	 	9.7 
	Total Gross End User Revenue	 	3.6(a) 
	Total Retail Net Ending Lines	 	3.6(a) 
	Transferred Employees	 	6.8(b) 
	Transition Plan	 	6.2(a) 
	Transition Services Agreement	 	7.3(d) 
	Voting Agreement	 	
Recitals
	XO Common Stock	 	 3.2(a)

ARTICLE II

TRANSFER OF ASSETS AND LIABILITIES

          2.1
Assets to be Sold. Subject to Sections
2.2, 2.5, 2.6,
2.7 and 6.2, the other provisions of this
Agreement and the Sale Order, at the Closing, Sellers shall sell, convey,
assign, transfer and deliver to Buyer or a designee of Buyer free and clear of
all Liens and Liabilities (other than Permitted Liens of the type included in
clause (iii) of the definition of Permitted Liens), and Buyer shall purchase,
acquire, and accept all of Sellers’ right, title and interest in and to all of
Sellers’ properties, assets and rights of every nature, kind and description,
tangible and intangible (including goodwill), whether real, personal or mixed,
whether accrued, contingent or otherwise and whether now existing or hereafter
acquired, including the following (collectively, the “Acquired
Assets”):

		
	 	     (a) The leases or subleases and all amendments thereto under which any of
Sellers is a lessor or lessee or sublessor or sublessee of real property
(collectively, the “Real Property Leases”) as set forth on
the Assumed Contracts List, including all improvements, fixtures and other
appurtenances thereto and rights in respect thereof and any related security
deposits;
	 
	 	     (b) The furniture, fixtures, equipment, machinery, supplies, vehicles,
inventory, and other tangible personal property, including the network
equipment assets and facilities owned or used by Sellers (collectively, the
“Equipment”);
	 
	 	     (c) The leases which relate to Equipment and leases of dark fiber
(collectively, the “Personal Property Leases”) as set forth
on the Assumed Contracts List;

12

 

		
	 	     (d) All Communications Licenses and any other Licenses, including those
listed on Schedule 2.1(d) of the Disclosure Schedules, to
the extent the same are transferable or assignable pursuant to section 365 of
the Bankruptcy Code or as otherwise permitted by Law (or, to the extent not
transferable or assignable, all right, title and interest in such Licenses, to
the fullest extent such right, title and interest may be transferred or
assigned); provided, that to the extent that Buyer does not
require any such Communications License or Licenses, it may in its sole
discretion decline to acquire such Communications License or Licenses by
providing written notice to Sellers prior to the Closing Date, in which case
such a License shall not be an Acquired Asset hereunder.
	 
	 	     (e) The Assumed Contracts not described in Section
2.1(a) or 2.1(c) above, including any related
security deposits (including the deposits described in Section
3.5(b) hereof), advance payments, customer advances and customer
deposits;
	 
	 	     (f) Except as set forth in Section 2.2(e) and
2.2(f), all rights, demands, claims, actions, rights of set
off, counterclaims and causes of action of any kind (collectively, the
“Claims”) brought by or for the benefit of any Seller or
Operating Subsidiary relating to the operation of the Business;
	 
	 	     (g) Accounts, notes and other receivables of Sellers (other than
pre-Petition carrier gross accounts receivable, including those of ILECs which
were recorded on the books and records of Sellers as of May 14, 2003, in an
amount up to $58.3 million);
	 
	 	     (h) Any books, records, files or papers of Sellers, whether in hard copy
or computer format, relating to the Acquired Assets or the Non-Transferred
Assets (upon such assets becoming Acquired Assets) or to the operation of the
Business, including management information systems or software owned by
Sellers, engineering information, sales and promotional literature, manuals
and data, sales and purchase correspondence, personnel and employment records,
customer lists, customer information, vendor lists, catalogs, research
material, source codes, carrier identification
codes, technical information, trade secrets, technology, know-how,
specifications, designs, drawings, processes and quality control data, if any,
or any other intangible property and applications for the same but excluding
any books, records, files or papers that relate to any Taxes of Sellers that
are Excluded Liabilities;
	 
	 	     (i) Any of Sellers’ right, title or interest in or to any of Sellers’
patents, patent registrations, patent applications, trademarks (including
“allegiancetelecom,inc.” and design), trademark registrations, trademark
applications, tradenames, copyrights, copyright applications, and copyright
registrations relating to the Business and the rights to sue for, and remedies
against, past, present and future infringements thereof and the rights of
priority and protection of interests therein under applicable laws
(collectively, the “Intellectual Property”);
	 
	 	     (j) Any computer software programs and databases used by any Seller or
Operating Subsidiary, whether owned, licensed, leased, or internally developed

13

 

		
	 	to the extent the same are transferable or assignable pursuant to section 365
of the Bankruptcy Code or as otherwise permitted by Law (or, to the extent not
transferable or assignable, all right, title and interest in such programs and
databases, to the fullest extent such right, title and interest may be
transferred or assigned);
	 
	 	     (k) All taxation matrixes utilized by Sellers in the determination of the
taxability of products sold by Sellers, other than those which are
commercially available;
	 
	 	     (l) Any telephone numbers, electronic mail addresses, carrier
identification codes and local exchange codes used by Sellers in the conduct
of the Business;
	 
	 	     (m) All of Sellers’ currently allocated, assigned, used and unused
internet protocol addresses, domain names, and autonomous system numbers from
applicable authorities governing the use and structure of the Internet,
including the American Registry for Internet Numbers;
	 
	 	     (n) All bank accounts and lock-boxes, including those listed on
Schedule 2.1(n) of the Disclosure Schedules;
	 
	 	     (o) All transferable rights of Sellers under or pursuant to all
warranties, representations and guarantees made by suppliers, manufacturers
and contractors to the extent relating to products sold, or services provided,
to Sellers or to the extent affecting any Acquired Assets;
	 
	 	     (p) All rights of Sellers under non-disclosure, confidentiality,
non-compete or non-solicitation agreements with employees or agents of Sellers
or with third parties;
	 
	 	     (q) All insurance claims and insurance proceeds (other than with respect
to any director and officer, errors and omissions, fiduciary and commercial
crime policies) in respect of an Acquired Asset or an Assumed Liability, and
with
respect to insurance proceeds, to the extent received by Allegiance after
the Early Funding Date;
	 
	 	     (r) All security, vendor, utility and other deposits;

      and

		
	 	     (s) All equity interests including capital stock held by ATCW in each of
its direct and indirect reorganized Subsidiaries, other than the stock of
Shared Technologies, and the corporate books and records relating to the
organization and existence of each such reorganized direct and indirect
Subsidiary (collectively, without including Shared Technologies, the
“Operating Subsidiaries”).

          2.2
Excluded Assets. The Acquired Assets shall not include
any of Sellers’ or the Operating Subsidiaries’ right, title or interest in or
to any assets or properties of

14

 

Sellers or the Operating Subsidiaries that are
expressly enumerated below (collectively, the “Excluded
Assets”):

		
	 	     (a) Subject
to Section 2.1(q), cash and cash equivalents,
short-term and long-term investments, or similar type investments, uncollected
checks and funds in transit to the extent there is a corresponding reduction
in accounts receivable included in Acquired Assets, Treasury bills and other
marketable securities existing as of the Closing Date (“Cash and Cash
Equivalents”);
	 
	 	     (b) Bank accounts and lock-boxes described as “Excluded Assets” on
Schedule 2.1(n) of the Disclosure Schedules;
	 
	 	     (c) Any security, vendor, utility or other deposits (but only to the
extent such deposits specifically relate to Excluded Assets or Excluded
Liabilities);
	 
	 	     (d) Any Contracts other than the Assumed Contracts;
	 
	 	     (e) All Claims that Sellers or any of their respective Affiliates may
have against any third party, including any Governmental Entity, for causes of
action based on Chapter 5 of the Bankruptcy Code (“Avoidance
Actions”) and for refund or credit of any type with respect to Taxes
accrued or paid with respect to periods (or any portion thereof) ending on or
prior to the Closing Date;
	 
	 	     (f) All Claims which Sellers or any of their respective Affiliates may
have against any third Person with respect to any Excluded Asset or Excluded
Liability;
	 
	 	     (g) The capital stock of Shared Technologies, which is a Subsidiary of
ATCW, but is not a Seller hereunder, its assets, and assets used primarily in
the Shared Technology business and set forth in Schedule 2.2(g) of
the Disclosure Schedules;
	 
	 	     (h) The Shared Hosting Business, including Contracts, accounts
receivable, equipment and Intellectual Property specifically related thereto;
	 
	 	     (i) The capital stock of each Seller and each Seller’s corporate books
and records relating to its organization and existence;
	 
	 	     (j) Any director and officer, errors and omissions, fiduciary or
commercial crime insurance policies and related insurance claims and insurance
proceeds;
	 
	 	     (k) All insurance policies;
	 
	 	     (l) Any real property which is owned by any of Sellers (“Owned
Real Property”) including any proceeds received in connection with
the sale thereof;

15

 

		
	 	     (m) Any loans or notes payable to any Seller or Operating Subsidiary
from any employee of any Seller or Operating Subsidiary, other than Ordinary
Course of Business employee advances;
	 
	 	     (n) Pre-Petition carrier gross accounts receivable, including those of
ILECs, which were recorded on Allegiance’s books and records as of May 14,
2003, in an amount up to $58.3 million; and
	 
	 	     (o) Any
assets set forth in Schedule 2.2(o) of the Disclosure
Schedules.

          2.3
Liabilities to be Assumed by Buyer. Subject to
Sections 2.4, 2.5 and
6.2, upon the transfer of the Acquired Assets on the Closing
Date, Buyer shall assume only the following Liabilities of Sellers
(collectively, the “Assumed Liabilities”):

		
	 	     (a) Liabilities arising out of or relating to the ownership of the
Acquired Assets and the operation of the Business by Buyer or any of its
assignees, including Liability for personal injury of customers or employees,
but in each case only to the extent that the event or state of facts giving
rise to such Liability occurs after the Early Funding Date;
	 
	 	     (b) (i) Liabilities under the Assumed Contracts, but only to the extent
that the event or state of facts giving rise to such Liability occurs after
the Early Funding Date, and (ii) any post-Petition Liabilities under the
Assumed Contracts incurred in the Ordinary Course of Business but only to the
extent such Liabilities are reflected in Allegiance’s financial statements as
of the Early Funding Date and taken into account in the determination of
Closing Working Capital;
	 
	 	     (c) (i) Liabilities under trade accounts payable arising in the Ordinary
Course of Business and (ii) current Liabilities arising in the Ordinary Course
of

Business under the accounts set forth on Exhibit K,
and in each case only to the extent that (x) the event or state of facts
giving rise to such Liability occurs post-Petition and (y) such Liabilities
are reflected in Allegiance’s financial statements as of the Early Funding
Date and taken into account in the determination of Closing Working Capital;
provided, however, that Buyer shall not
assume any of Sellers’ Liabilities for professional fees and other related
costs of administering the Cases;
	 
	 	     (d) Liabilities for fifty percent (50%) of any and all Transfer Taxes
due as a result of the transactions contemplated by this Agreement as set
forth in Section 6.10;
	 
	 	     (e) Liabilities for severance costs (the amount thereof in accordance
with Allegiance’s currently existing severance policy and past practice as
described in Exhibit L) related to non-Transferred
Employees who are Employees on the date hereof or hired in the Ordinary Course
of Business thereafter and are terminated at Buyer’s request after the date
hereof and Liabilities to Allegiance’s employees pursuant to Section
6.8(b); provided,
however, that in no event shall Buyer be responsible for
more than six (6) months of severance per Employee;

16

 

		
	 	     (f) Liabilities associated with customers of the Business, including
credits or refunds due such customers for any reason, to the extent that the
event or state of facts giving rise to such Liabilities occurs after the Early
Funding Date; and
	 
	 	     (g) Liabilities related to any obligations under Section 4980B of the
Internal Revenue Code to provide continuation of group medical coverage on and
after the Early Funding Date with respect to any employee or former employee
employed in connection with the Business or other qualified beneficiary but
only to the extent Buyer may be required to assume any such Liability by Law.

          2.4
Excluded Liabilities. Buyer shall not assume, and
shall not be deemed to have assumed, any Liabilities of Sellers, and Sellers
shall be solely and exclusively liable and shall indemnify and hold harmless
Buyer and its Affiliates with respect to all Liabilities of Sellers other than
the Assumed Liabilities, including those Liabilities set forth below
(collectively, the “Excluded Liabilities”):

		
	 	     (a) Any Liabilities which arise, whether before, on or after the
Closing, out of, or in connection with, the Excluded Assets, including any
Contract which is not an Assumed Contract;
	 
	 	     (b) Any Liabilities under the Assumed Contracts or accounts payable to
the extent not assumed pursuant to Section 2.3;
	 
	 	     (c) Any Liabilities arising from a breach of an Assumed Contract to the
extent that the event or state of facts giving rise to such Liability occurs
prior to the Early Funding Date;
	 
	 	     (d) Any Liabilities arising out of, or in connection with, any pending
or threatened Litigation arising out of the operation of the Business to the
extent that the event or state of facts giving rise to such Liability occurs
prior to the Early Funding Date;
	 
	 	     (e) Any Liabilities arising out of or in connection with any
indebtedness of Sellers or any of their respective Affiliates to their
lenders, noteholders or otherwise (other than, to the extent provided in
Section 2.3, post-petition Liabilities relating to Assumed
Contracts which are characterized as capital leases by Sellers);
	 
	 	     (f) Any Liabilities for which Sellers have received an invoice which is
not taken into account in the determination of Early Funding Date Working
Capital;
	 
	 	     (g) Liabilities related to Shared Technologies or the Shared Hosting
Business;
	 
	 	     (h) Liabilities related to the Owned Real Property;
	 
	 	     (i) Any Liabilities of Sellers or any Affiliate thereof (or any
predecessor thereto) relating to Taxes (other than Transfer Taxes referred to
in Section

17

 

		
	 	2.3(d) and Taxes described on Exhibit
K), including all Taxes attributable to or incurred in any period
(or portion thereof) ending on or before the Early Funding Date;
	 
	 	     (j) All Liabilities of any Seller, any of their Affiliates or any
predecessor of any Seller resulting from, caused by or arising out of,
directly or indirectly, the conduct of the Business or any Sellers’ or any of
their Affiliates ownership, operation or lease of any properties or assets or
any properties or assets previously used in the Business by any Seller, any of
their Affiliates or any predecessor of any Seller or any of their Affiliates
at any time prior to the Early Funding Date, that constitute, may constitute
or are alleged to constitute a violation of or Liability arising under any
Environmental Law or other Law including any state or federal communications
law or regulation;
	 
	 	     (k) All Liabilities arising from or relating to the employment, or
termination of employment, of any Employee, former Employee, independent
contractor or contingent worker with respect to the Business, including
pursuant to Employee Benefit Plans, other than those specifically assumed
pursuant to Section 2.3 and 6.8 herein; and
	 
	 	     (l) All Liabilities arising from or relating to any collective
bargaining agreement, including any obligation for benefits to employees
covered thereunder and, specifically, any Multiemployer Plan liability.

          2.5Non-Transferred Assets. Notwithstanding the foregoing
provisions of Article II, and subject to Section
6.2 and the Operating Agreement,
the parties agree that, to the extent that as of the Closing (i) certain
of the Acquired Assets cannot be transferred to Buyer pending the issuance of
further FCC Consents or State PUC Consents or (ii) certain of the Acquired
Assets are associated with one or more interconnection agreements, for which
the ILEC’s consent is required and which are reasonably necessary, in Buyer’s
sole discretion, to the operation of the Acquired Assets (“Required
Interconnection Agreements”) and receipt of any ILEC consents or
expiration of any notice periods necessary to assign such Required
Interconnection Agreements remains pending as of the Closing, Sellers shall
retain such assets (the “Non-Transferred Assets”) pending
receipt of such consents or expiration of such notice periods. For the
avoidance of doubt, Buyer shall have the right, in its sole discretion, to
designate any Acquired Asset (including any Required Interconnection Agreement)
as a Non-Transferred Asset. During the period that the Non-Transferred Assets
are held by Sellers, Buyer will provide management services to Sellers pursuant
to the Operating Agreement. Upon receipt from time to time of any such
necessary consents, such Non-Transferred Assets as are subject to such consents
shall be transferred to Buyer and Buyer will assume all related Assumed
Liabilities; and within five (5) Business Days of Buyer’s written request,
Sellers will deliver a bill of sale and the requirements of Section
3.1 below shall have been deemed to be satisfied as if such
Non-Transferred Assets and related Assumed Liabilities had otherwise been
transferred to and assumed by Buyer at the Closing. With respect to assets
that are designated by Buyer as Non-Transferred Assets and which are not
subject to obtaining any further consents after the Closing, such
Non-Transferred Assets shall be transferred to Buyer and Buyer will assume all
related Assumed Liabilities, within five

18

 

(5) Business Days of Buyer’s written
request, at which time Sellers will deliver a bill of sale and the requirements
of Section 3.1 below shall have been deemed to be satisfied as
if such Non-Transferred Assets had otherwise been transferred to Buyer at the
Closing. In addition, Non-Transferred Assets shall include all of the Seller
Marks, which shall be licensed to Buyer upon the Closing as set forth in the
Operating Agreement. After the expiration or termination of the Operating
Agreement, upon the written request of Buyer, all right, title and interest in
and to the Seller Marks shall be transferred to and vest in Buyer.

     2.6 Contract Assignment. Notwithstanding any provision to
the contrary herein, Buyer and Sellers agree that there shall be excluded from
the Acquired Assets any Assumed Contract that is not assignable or transferable
pursuant to the Bankruptcy Code without the consent of any Person other than
Sellers or any Affiliate of Sellers, to the extent that such consent shall not
have been given on or prior to the Closing; provided,
however, that Sellers shall use commercially reasonable
efforts (including prosecution of appropriate motions pursuant to Section 365
of the Bankruptcy Code) to endeavor to obtain all necessary consents to the
assignment thereof, and, upon obtaining the requisite consents thereto, such
Acquired Asset shall be assigned to Buyer. Notwithstanding any provision to
the contrary herein, Buyer and Sellers agree that all reasonable out-of-pocket
costs and expenses (other than Cure Amounts) incurred relating to Sellers’
assignment to Buyer of the Assumed Contracts set forth on Schedule 2.6
of the Disclosure Schedules shall be shared equally between Buyer on
the one hand and Sellers on the other hand.

     2.7 Alternative Structure. Notwithstanding
Section 2.1, after the Sale Order Approval Date, Buyer shall
have the right, on at least fifteen (15) Business Days notice to ATI, to
require Sellers to transfer immediately prior to the Closing, some or all of
the Equipment or other Acquired Assets to one or more newly formed Delaware
limited liability companies to be formed and owned by one or more Sellers. If
Buyer gives such notice, the membership interests in such limited liability
companies shall be deemed Acquired Assets hereunder and Buyer shall acquire
such membership interests at the Closing without the payment of any additional
consideration. Buyer shall be permitted to give one or more notices pursuant
to this Section 2.7. In addition, at Buyer’s option, a
similar procedure will apply to any Equipment or other Acquired Assets which
constitutes a Non-Transferred Asset. Fifty percent (50%) of all reasonable
out-of-pocket costs and expenses incurred in connection with Sellers’
performance of this Section 2.7 shall be borne by each of
Buyer on the one hand and Sellers on the other hand.

ARTICLE III

CLOSING

     3.1 Closing; Transfer of Possession; Certain Deliveries.

		
	 	     (a) Unless this Agreement shall have been terminated and the transactions
herein contemplated shall have been abandoned pursuant to Article
VIII hereof, the closing of the transactions contemplated herein
(the “Closing”) shall take place no later than the fifth
(5th) Business Day following the date on which the conditions set forth in
Article VII have been satisfied or waived (other than those

19

 

		
	 	conditions with respect to actions of the parties to be taken at the Closing
itself, but subject to the satisfaction or waiver of such conditions), or on
such other date as the parties hereto shall mutually agree;
provided, however, that if the Closing
would be scheduled to occur less than two (2) Business Days after the receipt
of the performance reports for the prior month referred to in Section
6.5(d) hereof, Buyer shall not be required to close until two
(2) Business Days after its receipt of such performance reports. The Closing
shall be held at the offices of Kirkland & Ellis LLP, 153 East 53rd Street,
New York, New York 10022, at 5:00 p.m., local time, unless the parties hereto
otherwise agree. The actual time and date of the Closing are herein called
the “Closing Date.”

		
	 	     (b) At the Closing, Sellers shall deliver to Buyer:

                    (i) A duly executed bill of sale substantially in the form attached hereto
as Exhibit D;

                    (ii) A certified copy of the Sale Order;

                    (iii) The officer’s certificate required to be delivered pursuant to
Section 7.2(c) hereof;

                    (iv) Assignments of lease and customary title affidavits;

                    (v) A certification of non-foreign status for each Seller in the form
required under Treasury Regulation Section 1.1445-2(b); and

                    (vi) All other instruments of conveyance and transfer, in form and
substance reasonably acceptable to Buyer and Sellers, as may be necessary to
convey the Acquired Assets to Buyer or Buyer’s designee.

		
	 	     (c) At the Closing, Buyer and Sellers shall take the actions specified in
Section 3.2(c) and Buyer shall deliver to ATI (on behalf of
Sellers):

                    (i) All certificates required by all relevant taxing authorities that are
necessary to support any available exemption from the imposition of Transfer
Taxes;

                    (ii) Certified resolutions of the Board of Directors of Buyer authorizing
the execution, delivery and performance of the Transaction Documents and the
transactions contemplated by this Agreement;

                    (iii) To the extent shareholder approval is required, certified
resolutions of shareholders of Buyer authorizing the execution, delivery and
performance of the Transaction Documents and the transactions contemplated by
this Agreement;

                    (iv) The officer’s certificate required to be delivered pursuant to
Section 7.3(c); and

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                    (v) An assumption agreement substantially in the form attached hereto as
Exhibit E.

		
	 	     (d) Unless this Agreement shall have been terminated and the transactions
herein contemplated shall have been abandoned pursuant to Article
VIII hereof, no later than the fifth (5th) Business Day following
the date on which the conditions set forth in Sections 7.1,
7.2 and 7.3 have been satisfied or
waived, or at such other date as the parties hereto shall mutually agree (the
“Early Funding Date”), (i) Buyer shall (A) deliver (1) the
Cash Purchase Price, plus or minus, the applicable adjustments to the Purchase
Price as set forth in Section 3.2(b) below and (2) the XO
Common Stock, into escrow as described in Section 3.2, (B)
execute and deliver the Operating Agreement and (C) commence operation of the
Business under the terms of the executed Operating Agreement, (ii) Seller
shall execute and deliver the Operating Agreement and (iii) upon the Early
Funding Date, the risk of loss shall transfer to Buyer, and Buyer’s obligation
to close the transactions contemplated hereby shall become unconditional and
irrevocable.

          3.2
Purchase Price.

		
	 	     (a) The “Purchase Price” consists of: (i) Three
Hundred Eleven Million and Two Hundred Thousand Dollars ($311,200,000.00) (the
“Cash
Purchase Price”), as such amount is adjusted pursuant to
Section 3.2(b), and (ii) 45,380,000 shares of common stock
of Buyer, par value $.01 per share (the “XO Common Stock”)
(subject to adjustment for stock splits, stock dividends, share exchanges,
recapitalizations, share combinations and reorganizations and other similar
transactions occurring after the date hereof).

		
	 	     (b) In the event of an Early Funding Date, Buyer shall (i) wire transfer
the sum of:

                         (1) the Cash Purchase Price, plus or minus

                         (2) the Initial Working Capital Adjustment (if any) set forth
in Section 3.4(f), minus

                         (3) the Adjustment Escrow Amount, minus

                         (4) the Earnest Money Deposit, minus

		
	 	              (5) the portion of the Performance Adjustment Amount that is
to be settled in cash (if any) as determined in accordance with
Section 3.6(a), plus

                         (6) the Deposit Adjustment Amount (if any), plus

		
	 	              (7) the Non-ILEC Cure Adjustment set forth in
Section 3.5(c) (the Cash Purchase
Price, as so adjusted is referred to herein as the
“Adjusted Cash Purchase Price”) and

21

 

               (ii) deliver 45,380,000 shares of XO Common Stock (subject to adjustment
for stock splits, stock dividends, share exchanges, recapitalizations, share
combinations and reorganizations and other similar transactions occurring after
the date hereof) (the “Purchase Price Escrow Stock” and
together with the Adjusted Cash Purchase Price, the “Purchase Price
Escrow”), in each case into an escrow account (the “Purchase
Price Escrow Account”) with a bank to be mutually agreed upon to act
as escrow agent (the “Purchase Price Escrow Agent”) pursuant
to an escrow agreement, to be entered into on the Early Funding Date (the
“Purchase Price Escrow Agreement”), among ATI, ATCW, Buyer
and the Purchase Price Escrow Agent, substantially in the form of
Exhibit F-1 hereto, and otherwise in form and substance
reasonably acceptable to ATI, ATCW and Buyer. After the Early Funding Date and
until the Closing Date, Buyer shall make additional deposits of common stock of
Buyer in the event of any stock splits, stock dividends, share exchanges,
recapitalizations, share combinations and reorganizations and other similar
transactions occurring after the Early Funding Date.

               (iii) wire transfer the Adjustment Escrow Amount into an escrow account
(the “Adjustment Escrow Account”) with a bank to be mutually
agreed upon to act as escrow agent (the “Adjustment Escrow
Agent”) pursuant to an escrow agreement, to be entered into on the
Early Funding Date (the
“Adjustment Escrow Agreement”), among ATI, ATCW, Buyer
and the Adjustment Escrow Agent, substantially in the form of Exhibit
F-2 hereto, and otherwise in form and substance reasonably acceptable
to ATI, ATCW and Buyer.

Any payment Sellers are obligated to make to Buyer pursuant to
Sections 3.4 and/or 3.6 shall be paid from
the Adjustment Escrow Amount plus accrued interest thereon. After payment of
any required amounts pursuant to Sections 3.4 and
3.6, the Adjustment Escrow Agent shall release the residual
amounts of the Adjustment Escrow Amount remaining in the Adjustment Escrow
Account to ATI. Notwithstanding the provisions of this Section
3.2(b), in the event the Closing occurs before the Early Funding
Date, the Closing Date shall be substituted for the Early Funding Date for all
purposes and for all of the provisions of this Section
3.2(b).

		
	 	     (c) Upon the Closing Date, (i) Buyer shall, subject to the terms and
conditions of this Agreement, assume the Assumed Liabilities, and (ii) Buyer
and Sellers shall deliver a joint written notice to the Purchase Price Escrow
Agent directing the Purchase Price Escrow Agent to pay to ATI (on behalf of
Sellers) by wire transfer of immediately available funds to an account or
accounts designated by ATI (on behalf of Sellers) the Adjusted Cash Purchase
Price and the Earnest Money Deposit, to deliver to ATI (on behalf of Sellers)
the Purchase Price Escrow Stock and deliver to Buyer all earnings accrued
thereon in the Purchase Price Escrow Account.

          3.3
Earnest Money Deposit. On February 9, 2004, Buyer paid
an earnest money deposit equal to Thirty Million Dollars ($30,000,000) (the
“Earnest Money Deposit”) in immediately available funds, by
wire transfer to ATI. Within five (5) Business Days following the execution of
this Agreement, Sellers will deposit the Earnest Money Deposit into the
Purchase Price Escrow Account. At the Early Funding Date, the Earnest Money
Deposit shall be deducted from the Cash Purchase Price in

22

 

accordance with
Section 3.2(b). If Buyer terminates this Agreement in breach
of Section 8.1 hereof or if ATI terminates this Agreement
pursuant to Section 8.1(b) (when Buyer does not have the
right to terminate this Agreement pursuant to Section 8.1(b) due to breach of the Agreement by Buyer) or Section
8.1(d) pursuant to a breach by Buyer, then Buyer and Sellers shall
within two (2) Business Days of such termination (i) deliver a joint written
notice to the Purchase Price Escrow Agent to deliver the Earnest Money Deposit
to Sellers and (ii) deliver the accrued interest thereon to Buyer, by wire
transfer of immediately available funds, and Sellers shall have no further
obligations to Buyer, provided, that in
no event shall the payment of the Earnest Money Deposit limit any other
remedies Sellers may have against Buyer in the event of any such termination.
If this Agreement is terminated for any other reason, then Buyer and Sellers
shall within two (2) Business Days of such termination deliver a joint written
notice to the Purchase Price Escrow Agent to deliver the Earnest Money Deposit
plus accrued interest thereon to Buyer by wire transfer of immediately
available funds.

          3.4
Working Capital Purchase Price
Adjustment.

		
	 	     (a) Not less than five (5) Business Days prior to the Early Funding Date,
Sellers will prepare and deliver to Buyer a good faith estimate of the Net
Working Capital as of the close of business on the day immediately preceding
the Early Funding Date (the “Estimated Early Funding Date Working
Capital”). Sellers will prepare the Estimated Closing Working
Capital in accordance with GAAP and consistent with ATI’s preparation of its
unaudited balance sheet as of September 30, 2003.

		
	 	     (b) As promptly as practicable, but no later than sixty (60) Business
Days after the Early Funding Date, Buyer will prepare and deliver to ATI a
good faith calculation of Net Working Capital as of the Early Funding Date
(the “Early Funding Date Working Capital”). Buyer will
prepare the Early Funding Date Working Capital in accordance with GAAP and
consistent with ATI’s preparation of its unaudited balance sheet as of
September 30, 2003. Attached as Exhibit G is a schedule
showing the calculation of Base Working Capital.

		
	 	     (c) If Sellers disagree with Buyer’s calculation of Early Funding Date
Working Capital, Sellers may, within fifteen (15) Business Days after delivery
by Buyer of the statement pursuant to Section 3.4(b), deliver a notice to Buyer disagreeing with such calculation
and setting forth Sellers’ calculation of such amount. Any such notice of
disagreement shall specify those items or amounts as to which Sellers
disagree, and Sellers shall be deemed to have agreed with all other items and
amounts contained in the calculation of the Early Funding Date Working
Capital. If Sellers do not raise any objections to the Early Funding Date
Working Capital within the period described herein, the Early Funding Date
Working Capital will become final and binding upon Buyer and Sellers.

		
	 	     (d) If a notice of disagreement shall be duly delivered pursuant to
Section 3.4(c), Buyer and Sellers shall, during the
fifteen (15) days following such delivery, use their commercially reasonable
efforts to reach agreement on the disputed items or amounts in order to
determine, as may be required, the amount of

23

 

		
	 	Early Funding Date Working
Capital. If during such period, Buyer and Sellers are unable to reach such
agreement, they shall promptly thereafter cause representatives from the
Dallas office of Ernst & Young LLP (or, if the Dallas office of Ernst & Young
LLP is not independent of Buyer and Sellers, then an alternative “Big Four”
accounting firm mutually agreeable to Buyer and Sellers) which representatives
have not been engaged or employed within the past five (5) years by Buyer,
Sellers or any of their Affiliates (or, if Sellers and Buyer agree to another
nationally recognized independent accounting firm, such other firm) (the
“Accounting Referee”) to review this Agreement and the
disputed items or amounts for the purpose of calculating Early Funding Date
Working Capital (it being understood that in making such calculation, the
Accounting Referee shall be functioning as an expert and not as an
arbitrator). In making such calculation, the Accounting Referee shall
consider only those items or amounts as to which the parties have disagreed.
The Accounting Referee shall deliver
to Buyer and Sellers, as promptly as practicable (but in any case no
later than thirty (30) days from the date of engagement of the Accounting
Referee), a report setting forth such calculation. Such report shall be final
and binding upon Buyer and Sellers. The cost of such review and report shall
be borne by Buyer and Sellers in the reverse proportion that the aggregate
dollar amounts of disputed items which are resolved in favor of Buyer or
Sellers (as applicable) bears to the aggregate dollar amount of all disputed
items resolved by the Accounting Referee.

		
	 	     (e) Buyer and Sellers shall, and shall cause their respective
Representatives to, cooperate and assist in the calculation of Early Funding
Date Working Capital and in the conduct of the review referred to in
Section 3.4(d), including providing reasonable and
timely access to the books, records, work papers and personnel involved in
preparing these calculations.

		
	 	     (f) If Estimated Early Funding Date Working Capital (i) exceeds Base
Working Capital, then at the Early Funding Date, Buyer shall pay into the
Adjustment Escrow Account an additional amount of cash equal to such excess or
(ii) is less than Base Working Capital, then the Cash Purchase Price will be
reduced by an amount equal to such deficiency. Any adjustment pursuant to
this Section 3.4(f) is referred to herein as the
“Initial Working Capital Adjustment.”

		
	 	     (g) If Final Working Capital equals Estimated Early Funding Date Working
Capital, and if no further payments are or may become due pursuant to
Section 3.6 hereof, then within three (3) Business Days of
the later of the Closing Date or the final determination of such amount
pursuant to this Section 3.4, Buyer and Sellers shall deliver
a joint written notice to the Adjustment Escrow Agent pursuant to the
Adjustment Escrow Agreement instructing the Adjustment Escrow Agent to pay the
Adjustment Escrow Amount plus the accrued interest on such amount (by wire
transfer of immediately available funds) to Sellers.

		
	 	     (h) If Final Working Capital exceeds Estimated Early Funding Date Working
Capital, then within three (3) Business Days of the later of the Closing Date
or the final determination of such amount pursuant to this Section
3.4, Buyer shall pay such amount (by wire transfer of immediately
available funds) to Sellers and, if no further

24

 

		
	 	payments are or may become due
pursuant to Section 3.6 hereof, Buyer and Sellers shall
deliver a written notice to the Adjustment Escrow Agent pursuant to the
Adjustment Escrow Agreement instructing the Adjustment Escrow Agent to pay the
Adjustment Escrow Amount plus the accrued interest on such amount (by wire
transfer of immediately available funds) to Sellers.

		
	 	     (i) If Final Working Capital is less than Estimated Working Capital, then
within three (3) Business Days of the later of the Closing Date or the final
determination of such amount pursuant to this Section 3.4,
Sellers and Buyer shall deliver a written notice to the Adjustment Escrow
Agent pursuant to the Adjustment Escrow Agreement instructing the Adjustment
Escrow Agent to pay such deficit amount plus the accrued interest thereon out
of the Adjustment Escrow Account
(by wire transfer of immediately available funds) to Buyer;
provided that the Adjustment Escrow Account shall be the
sole source of payment for any such deficiency and in no event shall Sellers
be otherwise liable for any such deficiency. To the extent any Adjustment
Escrow Amount remains after payment of any such deficit, and if no further
payments are or may become due pursuant to Section 3.6
hereto, Buyer and Sellers shall deliver a written notice to the Adjustment
Escrow Agent pursuant to the Adjustment Escrow Agreement instructing the
Adjustment Escrow Agent to pay the remaining Adjustment Escrow Amount plus the
accrued interest on such amount (by wire transfer of immediately available
funds) to Sellers. For purposes of this Agreement, “Final Working
Capital” means Early Funding Date Working Capital (i) as shown in
Buyer’s calculation delivered pursuant to Section 3.4(b) if no notice of disagreement with respect thereto is duly
delivered pursuant to Section 3.4(c); or (ii) if
such a notice of disagreement is delivered, (A) as agreed by Buyer and Sellers
pursuant to Section 3.4(a) or (B) in the absence of
such agreement, as shown in the Accounting Referee’s calculation delivered
pursuant to Section 3.4(a).

		
	 	     (j) Any adjustment under this Section 3.4 shall be
treated as an adjustment to the Purchase Price for federal, state and local
income Tax purposes.

          3.5
Cure Price Adjustment.

		
	 	     (a) The Cure Amounts, if any, as determined by the Bankruptcy Court,
necessary to cure all defaults, if any, under Allegiance’s interconnection
agreements with incumbent local exchange carriers
(“ILECs”), together with any other payments made to settle
pre-Petition disputes between any of Sellers or the Operating Subsidiaries and
ILECs under such agreements, under tariffs or otherwise after the date hereof
(the “ILEC Cure Amounts”) shall be resolved in accordance
with this Section 3.5(a). Buyer and Sellers shall
work cooperatively and in good faith with respect to paying, objecting to and
settling the ILEC Cure Amounts, it being understood that all pre-Petition
accounts receivable of Sellers or the Operating Subsidiaries owed by ILECs
(the “ILEC Set Off Amounts”) shall be set off against the
ILEC Cure Amounts and thereby used as currency to pay the ILEC Cure Amounts.
Sellers shall pay all ILEC Cure Amounts (whether in cash or by application of
the ILEC Set Off Amounts). Buyer and Sellers agree that subject to this
Section 3.5(a), Buyer should have standing in

25

 

		
	 	the Cases with
regard to ILEC Cure Amounts and the parties shall take such position in the
Cases.

          Notwithstanding anything herein to the contrary (including
Section 6.1(k)), prior to the Sale Order Approval Date, as
between Buyer and Sellers, Sellers shall have sole control over their business
relationships, including without limitation, the exclusive right to negotiate
and settle with the ILECs, and shall be permitted to terminate, adopt and amend
interconnection agreements but shall not prior to such time settle any ILEC
Cure Amounts in a manner which would be injurious in any material respect to
Buyer without Buyer’s consent (which will not be unreasonably withheld) or take
any action (including as specified above) if the intent or reasonably
anticipated consequence thereof is or would be to injure in any material
respect to Buyer’s continuing relationship with such ILEC after the Closing
Date. Buyer shall be permitted to participate in any such negotiations and
shall be kept reasonably informed by Sellers of the process.

		
	 	     (b) If deposits are required by ILECs in connection with establishing new
interconnection agreements for the Business between the date hereof and the
Early Funding Date and such deposits are outstanding at the time of the Early
Funding Date, the Cash Purchase Price shall be increased by an amount (the
“Deposit Adjustment Amount”) equal to seventy-five percent
(75%) of the first $13 million of such deposits and one hundred percent (100%)
of the deposits above $13 million.

		
	 	     (c) The Cure Amounts, if any, as determined by the Bankruptcy Court,
necessary to cure all defaults, if any, under the Assumed Contracts, other
than the ILEC Cure Amounts (the “Non-ILEC Cure Amounts”)
shall be resolved in accordance with this Section 3.5(c).
Buyer and Sellers shall work cooperatively and in good faith with respect to
paying, objecting to and settling the Non-ILEC Cure Amounts, it being
understood that all pre-Petition accounts receivable of Sellers and the
Operating Subsidiaries owed by non-ILECs (the “Non-ILEC Set Off
Amounts”) shall be set off against the Non-ILEC Cure Amounts and
thereby used as currency to pay the Non-ILEC Cure Amounts. Buyer and Sellers
agree that given this Section 3.5(c), Buyer should have
standing in the Cases with regard to Non-ILEC Cure Amounts and the parties
shall take such position in the Cases. The treatment of the Non-ILEC Cure
Amounts and all matters related thereto under the Bankruptcy Plan shall be
reasonably acceptable to Buyer. Sellers shall pay all Non-ILEC Cure Amounts
(whether in cash or by application of the Non-ILEC Set Off Amounts);
provided that if the Non-ILEC Cure Amounts are more than
$11 million, the Cash Purchase Price shall be increased by an amount equal to
the lesser of (A) two-thirds of the amount by which the Non-ILEC Cure Amounts
exceed $11 million and (B) $8 million.

          The adjustment to the Cash Purchase Price pursuant to this
Section 3.5(c) is referred to herein as the
“Non-ILEC Cure Adjustment.” If as of the time of the Early
Funding Date any reserves are established with respect to disputed Non-ILEC
Cure Amounts pending resolution of such disputes, the Purchase Price
adjustment provided in this Section
3.5(c) shall be made, with respect to the agreed Non-ILEC Cure
Amounts, at the Early Funding Date, and with respect to any such reserved
amounts, within two (2) Business Days following the resolution of the
disputes.

26

 

		
	 	     (d) Subject to Section 8.3, (i) on February 13, 2004,
Buyer designated the (A) Real Property Leases identified on Schedule
4.21 of the Disclosure Schedules and (B) other Executory Contracts
that are designated with an asterisk on Schedule 4.20 that
are to be assumed by Allegiance and not rejected pursuant to section 365 of
the Bankruptcy Code and (ii) at least (20) days prior to the date of the
Bankruptcy Court’s confirmation of the Bankruptcy Plan, Buyer shall designate
other Executory Contracts that are to be assumed by Allegiance and not
rejected pursuant to section 365 of the Bankruptcy Code (collectively,
the “Assumed Contracts List”) (those Contracts ultimately
set forth on the Assumed Contracts List and as Additional Assumed Contracts
pursuant to Section 8.3, if applicable are referred to
herein as the “Assumed Contracts”). Such assumption and,
in the case of Assumed Contracts to which either Seller is a party, assignment
by Sellers shall be made at the Closing; provided,
however, that the assignment to Buyer of any Assumed
Contract related to Non-Transferred Assets shall occur on the later of (i) the
Closing or (ii) State PUC Consent or FCC Consent, as applicable. At Buyer’s
discretion, Allegiance agrees to assume or reject any Executory Contract, in
whole or in part, to the extent portions of such Executory Contracts are
severable. Buyer and Sellers agree to keep confidential and not disclose to
anyone except (x) legal counsel for the Creditors Committee in the Cases and
the agent to Sellers’ senior lenders, provided,
that, such counsel and agent have executed confidentiality
agreements reasonably acceptable to Buyer and Sellers prior to such disclosure
and (y) as otherwise required by Law, the Executory Contracts that are
identified by Buyer as Assumed Contracts.

          3.6 Performance Price Adjustment.

		
	 	     (a) At least two (2) Business Days prior to the Early Funding Date, ATI
shall prepare and deliver to Buyer a certificate setting forth the following:
(i) total Retail Ending Lines as determined by ATI in accordance with past
custom and practice, as of the last day of the last full calendar month prior
to the date of the Early Funding Date plus Scheduled Future
Installs less Scheduled Future Disconnects as of such day
(“Total Retail Net Ending Lines”) and (ii) total gross end
user revenue for the last full calendar month prior to the date of the Early
Funding Date (the “Total Gross End User Revenue”). The
Purchase Price shall be reduced by the greater of the following (the
“Performance Adjustment Amount”): (x) the product of
$625.00 and the amount, if any, by which the Total Retail Net Ending Lines for
Allegiance’s Out of Region Business is less than 730,000; and (y) the product
of fifteen (15) and the amount, if any, by which Total Gross End User Revenue
for Allegiance’s Out of Region Business is less than $28 million. To the
extent Cash and Cash Equivalents immediately prior to the Early Funding Date
exceed One Hundred Eighty Seven Million Dollars ($187,000,000), the
Performance Adjustment Amount (if any) shall reduce the Cash Purchase Price.
To the extent such Cash and Cash Equivalents immediately prior to the Early
Funding Date are less than or equal to One Hundred Eighty Seven Million
Dollars ($187,000,000), any remaining portion of the Performance Adjustment
Amount shall be a reduction in the number of shares of the XO Common Stock
(calculated using a $7.625 per share value). ATI’s certificate shall include
a calculation of the Performance Adjustment Amount.

27

 

		
	 	     (b) If Buyer disagrees with the certificate delivered by ATI pursuant to
Section 3.6(a) hereof, Buyer may, within thirty
(30) days after Early Funding Date, deliver a notice to ATI disagreeing with
the calculations contained in such certificate and setting forth Buyer’s
calculations. Any such notice of disagreement shall specify those items or
amounts as to which Buyer disagrees, and
Buyer shall be deemed to have agreed with all other items and amounts
contained in the calculation of the Performance Adjustment Amount. If Buyer
does not raise any objections to the Performance Adjustment Amount within the
period described herein, the Performance Adjustment Amount will become final
and binding upon Buyer and Sellers (the “Final Performance Adjustment
Amount”). In such event, if no further payments are or may become
due pursuant to Section 3.4 hereof, ATI, ATCW and Buyer shall
deliver a written notice to the Adjustment Escrow Agent pursuant to the
Adjustment Escrow Agreement instructing the Adjustment Escrow Agent to pay the
Adjustment Escrow Amount plus the accrued interest on such amount (by wire
transfer of immediately available funds) to ATI.

		
	 	     (c) If a notice of disagreement shall be duly delivered pursuant to
Section 3.6(b), Buyer and Sellers shall, during the
five (5) days following such delivery, use their commercially reasonable
efforts to reach agreement on the disputed items or amounts in order to
determine, as may be required, the Final Performance Adjustment Amount. If
during such period, Buyer and Sellers are unable to reach such agreement, they
shall promptly thereafter cause the Accounting Referee to review the disputed
items or amounts for the purpose of calculating the Final Performance
Adjustment Amount (it being understood that in making such calculation, the
Accounting Referee shall be functioning as an expert and not as an
arbitrator). In making such calculation, the Accounting Referee shall
consider only those items or amounts as to which the parties have disagreed.
The Accounting Referee shall deliver to Buyer and Sellers, as promptly as
practicable (but in any case no later than fifteen (15) days from the date of
engagement of the Accounting Referee), a report setting forth such
calculation. Such report shall be final and binding upon Buyer and Sellers.
The cost of such review and report shall be borne by Buyer and Sellers in the
reverse proportion that the aggregate dollar amounts of disputed items which
are resolved in favor of Buyer or Sellers (as applicable) bears to the
aggregate dollar amount of all disputed items resolved by the Accounting
Referee.

		
	 	     (d) If the parties hereto agree, or the Accounting Referee determines,
that the Final Performance Adjustment Amount is greater (the
“Additional Amount”) than the amount set forth in ATI’s
certificate delivered pursuant to Section 3.6(a),
then within two (2) Business Days of such determination pursuant to this
Section 3.6, Buyer and Sellers shall deliver a written notice
to the Adjustment Escrow Agent pursuant to the Adjustment Escrow Agreement
instructing the Adjustment Escrow Agent to pay the Additional Amount plus the
accrued interest on such amount (by wire transfer of immediately available
funds) to Buyer, and, if no further payments are or may become due pursuant to
Section 3.4 hereof, the balance of the Adjustment Escrow
Amount plus the accrued interest thereon to ATI. The Adjustment Escrow
Account shall be the sole source of payment for any payment obligation of
Sellers pursuant to Section 3.6.

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          3.7
Allocation of Purchase Price. Buyer shall, within 120
days after the Closing Date, prepare and deliver to Sellers a schedule (the
“Allocation Schedule”) allocating the Purchase Price and the
Assumed Liabilities among the Acquired Assets in accordance
with Treasury Regulation Section 1.1060-1 (or any comparable provisions of
state or local tax law) or any successor provision. ATI may propose to Buyer
specific changes in the Allocation Schedule within ten (10) days of the receipt
thereof. If no such changes are proposed in writing to Buyer within such time,
Sellers will be deemed to have agreed to the Allocation Schedule. If such
changes are proposed, Buyer and ATI will negotiate in good faith and will use
their best efforts to agree upon the Purchase Price allocation. If Buyer and
ATI cannot mutually resolve ATI’s reasonable objections to the Allocation
Schedule within ten (10) days after Buyer’s receipt of such objections, such
dispute with respect to the Allocation Schedule shall be presented to the
Accounting Referee, on the next day for a decision that shall be rendered by
the Accounting Referee within thirty calendar days thereafter and shall be
final and binding upon each of the parties. The fees, costs and expenses
incurred in connection therewith shall be shared in equal amounts by Buyer, on
the one hand, and Sellers, on the other hand. Buyer and Sellers each shall
report and file all Tax Returns (including amended Tax Returns and claims for
refund) consistent with the Allocation Schedule, and shall take no position
contrary thereto or inconsistent therewith (including in any audits or
examinations by any taxing authority or any other proceedings). Buyer and
Sellers shall cooperate in the filing of any forms (including Form 8594) with
respect to such allocation. Notwithstanding any other provisions of this
Agreement, the foregoing agreement shall survive the Closing Date.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLERS

          Sellers hereby, jointly and severally, represent and warrant to Buyer that
as of December 18, 2003 (unless another date is specified):

          4.1
Existence; Good Standing and Power. Each Seller and
Operating Subsidiary is a corporation validly existing and in good standing
under the laws of the state of its incorporation, and has all requisite power
and authority to own, lease and operate the Acquired Assets to be sold
hereunder and to carry on its business as presently conducted. Each Seller and
Operating Subsidiary is qualified or licensed to do business as a foreign
corporation and is in good standing in every jurisdiction where the nature of
the business conducted by it or the properties owned or leased by it requires
qualification, except where the failure to be so qualified, licensed or in good
standing would not reasonably be expected to have a Material Adverse Effect.
Each Seller has all requisite power and authority (a) to execute and deliver
this Agreement and the other Transaction Documents and (b) subject to entry of
the Sale Order, to perform its obligations hereunder and thereunder.

          4.2
Authority. The execution, delivery and performance of
this Agreement and the other Transaction Documents by each Seller, the
performance of Sections 6.17(a) and
6.17(b) by each Seller, and subject to entry of the Sale
Order, the performance by each Seller of its other obligations hereunder and
thereunder and the consummation by

29

 

each Seller of the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action on the part of each Seller.

          4.3
Execution and Binding Effect. This Agreement has been
and each of the other Transaction Documents has been or will be at Closing,
duly and validly executed and delivered by each Seller and constitutes, and,
following the entering of the Sale Order, this Agreement, the other Transaction
Documents and the transactions contemplated hereby and thereby will constitute
(assuming in each case the due and valid authorization, execution and delivery
thereof by the other parties hereto and thereto), a valid and legally binding
obligation of such Seller enforceable against such Seller in accordance with
its terms.

          4.4
No Violation. Except as disclosed in Schedule
4.4 of the Disclosure Schedules, the execution, delivery and
performance by each Seller of this Agreement, the other Transaction Documents
and the transactions contemplated hereby and thereby, do not and will not
conflict with or result in, with or without the giving of notice or lapse of
time or both, any violation of or constitute a breach or default, or give rise
to the creation of a Lien upon any of the Acquired Assets (or the assets of the
Operating Subsidiaries) or to any right of acceleration, payment, amendment,
cancellation or termination, under (a) the certificate of incorporation or
bylaws of any Seller or any Operating Subsidiary or any resolution adopted by
the board of directors of such Seller or any Operating Subsidiary and not
rescinded, (b) subject to entry of the Sale Order, any agreement or other
instrument to which any Seller or Operating Subsidiary is a party or by which
such Seller or Operating Subsidiary or any of its respective properties or
assets is bound, (c) subject to entry of the Sale Order, any Order of any
Governmental Entity to which any Seller or any Operating Subsidiary is bound or
subject, or (d) subject to entry of the Sale Order, any Law applicable to or
binding on any Seller or any of its respective properties or assets or any
Operating Subsidiary, except, in the case of clauses (b), (c) and (d) of this
Section 4.4, to the extent such conflict, violation, breach,
default, creation of Lien or right would not be reasonably expected to have a
Material Adverse Effect.

          4.5
Third Party Approvals. Except for (a) any approvals
required in order to comply with the provisions of the HSR Act, (b) any FCC
Consent and State PUC Consent as required by applicable Law, (c) the Sale Order
and (d) any other third party approvals as are reflected on Schedule 4.5
of the Disclosure Schedules hereto, including with respect to any
computer software program and databases, the execution, delivery and
performance by Sellers of this Agreement, the other Transaction Documents and
the transactions contemplated hereby and thereby, do not require any consents,
waivers, authorizations or approvals of, or filings with, any third Persons
which are both material to the Business and which have not been obtained by
Sellers.

          4.6
Financial Statements.

		
	 	     (a) ATI has delivered to Buyer copies of (i) the audited consolidated
balance sheets of ATI and its Subsidiaries as of December 31, 2002 and 2001
and the related audited consolidated statements of income and of cash flows of
ATI and its Subsidiaries for the years then ended and (ii) the unaudited
consolidated balance sheets

30

 

		
	 	of ATI and its Subsidiaries as at September 30,
2003 and the related consolidated statements of income and cash flows of ATI
and its Subsidiaries for the nine (9) month period then ended (such audited
and unaudited statements, including the related notes and schedules thereto,
are referred to herein as the “Financial Statements”).
Each of the Financial Statements has been prepared in accordance with GAAP
consistently applied throughout the periods presented and presents fairly in
all material respects the consolidated financial position, results of
operations and cash flows of ATI and its Subsidiaries as at the dates and for
the periods indicated.

          For the purposes hereof, the audited consolidated balance sheet of ATI and
its Subsidiaries as at December 31, 2002 is referred to as the
“Balance Sheet” and December 31, 2002 is referred to as the
“Balance Sheet Date.”

		
	 	     (b) ATI has delivered or made available to Buyer copies of each of
Sellers’ and each Operating Subsidiaries’ (i) post-Petition monthly latest
flash reports and (ii) post-Petition monthly operating reports that Sellers’
and the Operating Subsidiaries have filed with the Bankruptcy Court. To
Sellers’ Knowledge, each such monthly operating report is, and each monthly
operating report to be filed with the Bankruptcy Court will be, complete,
accurate and truthful. Each flash report to be delivered to Buyer pursuant to
Section 6.5(d) hereof will be prepared in good faith
consistent with past practice and based on the Sellers’ preliminary books and
records.

		
	 	     (c) Seller has made all required filings with the U.S. Securities and
Exchange Commission (the “SEC”) since December 31, 2001.
As of their respective dates of filing, all such filings complied as to form
in all material respects with the requirements of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), and the rules and
regulations of the SEC promulgated thereunder applicable to such SEC filings,
and such SEC filings did not 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 light of the circumstances under which they
were made, not misleading.

          4.7
No Undisclosed Liabilities. Except as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect, Allegiance has no indebtedness, obligation or Liability of any
kind (whether accrued, absolute, contingent or otherwise, and whether due or to
become due), that would have been required to be reflected in, reserved against
or otherwise described on a balance sheet of a Seller or Operating Subsidiary
or in the notes thereto in accordance with GAAP which (i) is not shown or
described on the Balance Sheet or the other Financial Statements or the notes
thereto, (ii) is not shown or described on Schedules 4.7, 4.9, 4.17(b)
and 4.20 of the Disclosure Schedules or (iii) was not
incurred in the Ordinary Course of Business since the Balance Sheet Date.

          4.8 Title to Acquired Assets; Sufficiency. Except as set
forth on Schedule 4.8 of the Disclosure Schedules, Sellers own
and have good title to each of the Acquired Assets (and the assets of the
Operating Subsidiaries to the extent such assets are not

31

 

Excluded Assets),
including the capital stock of the Operating Subsidiaries, and the Operating
Subsidiaries own and have good title to their assets other than the Excluded
Assets, in each case free and clear of all Liens other than Permitted Liens.
The Acquired Assets constitute all of the assets and properties used in or held
for use in the Business (other than the Excluded Assets) and are sufficient for
Buyer to conduct the Business (other than the Excluded Assets) from and
immediately after the Closing Date without interruption and in the Ordinary
Course of Business.

          4.9
Communications Licenses. Sellers and the Operating
Subsidiaries are the authorized legal holders or otherwise have rights to the
Communications Licenses, which licenses constitute all of the material
Licenses, from the FCC or the State PUCs that are necessary or required for
and/or used in the operation of the Business as presently operated. All the
Communications Licenses were duly obtained and are valid and in full force and
effect, unimpaired by any condition, except those conditions that may be
contained within the terms of such Communications Licenses which would not have
a Material Adverse Effect on the Business as presently operated. Except as set
forth on Schedule 4.9 of the Disclosure Schedules, Sellers
are in compliance in all material respects with the Communications Act of 1934,
as amended, and the rules, regulations and policies of the FCC and all
applicable State PUCs. There is not now pending or, to Sellers’ Knowledge,
threatened, any action by or before the FCC or any State PUC in which the
requested remedy is the revocation, suspension, cancellation, rescission or
modification of any of the Communications Licenses. Schedule 2.1(d)
of the Disclosure Schedules contains a complete and correct list of
Sellers’ Communications Licenses.

          4.10 Absence of Certain Developments. Except as expressly
contemplated by this Agreement or the Operational Restructuring Activities, as
set forth on Schedule 4.10 of the Disclosure Schedules or in
connection with the filing of the Cases, from the Balance Sheet Date through
December 18, 2003 Sellers have conducted the Business only in the Ordinary
Course of Business.

          4.11 Tangible Personal Property. All items of tangible
personal property which are Acquired Assets and which, individually or in the
aggregate, are material to the operation of the Business are in good condition
and in a state of good maintenance and repair (ordinary wear and tear excepted)
and are suitable for the purposes used.

          4.12 Insurance. Allegiance has insurance policies in full
force and effect for such amounts as are sufficient for all requirements of Law
and the Credit and Guaranty Agreement dated as of February 15, 2000 among
Allegiance and the lenders party thereto (the “Senior Credit
Agreement”).

          4.13 Accounts and Notes Receivable and Payable.

		
	 	     (a) All accounts and notes receivable of Sellers and the Operating
Subsidiaries have arisen from bona fide transactions in the Ordinary Course of
Business, and in the case of accounts and notes receivable that are not
Excluded Assets, are payable on ordinary trade terms and are reflected on the
books and records of Sellers

32

 

		
	 	and the Operating Subsidiaries in accordance with
GAAP consistently applied, including reserves for returns and doubtful
accounts.

		
	 	     (b) All accounts payable of Sellers and the Operating Subsidiaries
reflected in the Balance Sheet or arising after the date thereof are the
result of bona fide transactions in the Ordinary Course of Business and have
been paid, are not yet due and payable or are being disputed in good faith and
are reflected on the books and records of Sellers and the Operating
Subsidiaries in accordance with GAAP consistently applied.

          4.14 Related Party Transactions.

		
	 	     (a) Except as set forth in Schedule 4.14(a) of the Disclosure
Schedules, none of Sellers, any Affiliate of any Seller or any of
their respective directors and officers with a title of Senior Vice President
or higher (i) owns any direct or indirect material interest of any kind in, or
controls or is a director, officer, employee or partner of, or consultant to,
or lender to or borrower from or has a material right to participate in the
profits of, any Person which is (A) a competitor, supplier, customer,
landlord, tenant, of any Seller or Operating Subsidiary, (B) engaged in a
business related to the Business, or (C) a participant in any transaction
(including a loan transaction, other than employee advances in the Ordinary
Course of Business) to which any Seller or Operating Subsidiary is a party or
(ii) is a party to any Contract with any Seller or any Operating Subsidiary.

		
	 	     (b) Except as set forth in Schedule 4.14(b) of the Disclosure
Schedules, each Contract, agreement, or arrangement between any
Seller or Operating Subsidiary on the one hand, and any Affiliate of any
Seller or Operating Subsidiary or any director of any Seller or any officer of
Sellers with a title of Senior Vice President or higher on the other hand, is
on commercially reasonable terms no more favorable to the Affiliate, director,
officer or employee of such Seller or Operating Subsidiary than what any third
party negotiating on an arms-length basis would expect.

          4.15 Suppliers. Set forth on Schedule 4.15 of the
Disclosure Schedules is a complete and accurate
list of (a) the ten (10) most significant equipment suppliers and (b) the
ten (10) most significant maintenance suppliers (based upon dollars billed to
Allegiance) during the quarter ended September 30, 2003, showing the
approximate total billings to Allegiance from each such supplier during such
quarter. Except as set forth on Schedule 4.15 of the Disclosure
Schedules, since September 30, 2003, there has not been any (i)
termination, cancellation or curtailment of the business relationship of any
Seller or Operating Subsidiary, as applicable, with any of the suppliers set
forth on Schedule 4.15 of the Disclosure Schedules or (ii)
written notice from any of the suppliers set forth on Schedule 4.15 of
the Disclosure Schedules of an intent or request to so terminate,
cancel, curtail or change, and, to Sellers’ Knowledge, no written threat or
written indication that any such termination, cancellation, curtailment or
change is reasonably foreseeable, except, in each case, for such termination,
cancellation, curtailment or change which would not reasonably be expected to
result in, individually or in the aggregate, a Material Adverse Effect.

33

 

          4.16 Fees and Expenses. Sellers have engaged the firm of
Greenhill & Co., LLC to assist them in connection with the matters contemplated
by this Agreement and will be responsible for the fees and expenses of such
firm. Other than as described in the preceding sentence or as is payable by
Sellers or their Affiliates and not by Buyer, no broker, investment banker,
financial advisor or other Person is entitled to any broker’s, finder’s,
financial advisor’s or other similar fee or commission in connection with the
transactions contemplated by this Agreement, based upon arrangements made by or
on behalf of any Seller or any of their respective Affiliates.

          4.17 Compliance With Laws; Licenses.

		
	 	     (a) Except as set forth on Schedule 4.17(a) of the Disclosure
Schedules, since December 31, 2002 (i) Allegiance has complied in
all material respects with all Laws relating to the operation of the Business;
and (ii) no Seller or Operating Subsidiary has received any written or other
notice of or been charged with the violation of any Laws. To Sellers’
Knowledge, no Seller or Operating Subsidiary is under investigation with
respect to any material violation of any Laws.

		
	 	     (b) Schedule 4.17(b) of the Disclosure Schedules
contains a list of all material Licenses (other than Communications Licenses)
which are required for the operation of the Business as presently conducted
and as presently intended to be conducted. Except as set forth on
Schedule 4.17(b) of the Disclosure Schedules,
Allegiance currently has all such material Licenses which are required for the
operation of the Business as presently conducted. No Seller or Operating
Subsidiary is in default or violation, and no event has occurred which, with
notice or the lapse of time or both, would constitute a default or violation,
in any material respect of any term, condition or provision of such License to
which it is a party, to which the Business is subject or by which its
properties or assets are bound other than any such violation that would not
reasonably be expected to have a Material Adverse Effect.

          4.18 Environmental Matters. To Sellers’ Knowledge, except
as described on the attached Schedule 4.18 of the Disclosure
Schedules:

		
	 	     (a) Each Seller and Operating Subsidiary and the operations of each
Seller and Operating Subsidiary are in compliance with all applicable
Environmental Laws, except to the extent such noncompliance would not
reasonably be expected to have a Material Adverse Effect.

		
	 	     (b) No Seller or Operating Subsidiary is the subject of any Order or has
received any written notice of any violations or Liabilities, including any
investigatory, remedial or corrective obligations, arising under Environmental
Laws and relating to the operation of the Business, except notices of such
violation or Liability which would not reasonably be expected to have a
Material Adverse Effect.

          4.19 Intellectual Property. Schedule 4.19 of the
Disclosure Schedules contains an accurate and complete list of all
Intellectual Property owned by any Seller or Operating Subsidiary, other than
unregistered trademarks, tradenames and copyrights,

34

 

none of which is material
to the operation of the Acquired Assets. Except as set forth in
Schedule 4.19 of the Disclosure Schedules, there is no
pending, or to Sellers’ Knowledge, threatened claims or Litigation of any
nature materially affecting or relating to the Intellectual Property.
Schedule 4.19 of the Disclosure Schedules lists all written
notices or written claims currently pending or received by any Seller or
Operating Subsidiary that claim infringement of any material domestic or
foreign letters patent, patent applications, patent licenses, software licenses
and know-how licenses, trade names, trademark registrations and applications,
service marks, copyrights, copyright registrations or applications, trade
secrets, technical knowledge, know-how or other confidential proprietary
information. Except as set forth on Schedule 4.19 of the Disclosure
Schedules, there is, to Sellers’ Knowledge, no reasonable basis upon
which any claim may be asserted against any Seller or Operating Subsidiary for
material infringement or misappropriation of any of the foregoing. None of
Sellers, any Operating Subsidiary, or to Sellers’ Knowledge, any other Person,
is in material default or violation of any Contract pursuant to which any
Seller or Operating Subsidiary licenses Intellectual Property for the Business.

          4.20 Contracts. Except as set forth on Schedule
4.20 of the Disclosure Schedules, Schedule G of
Sellers’ schedule of assets and liabilities as filed with the Bankruptcy Court
contains a list of all pre-Petition material Contracts, including: (i) each
Executory Contract containing a Non-Compete Covenant, (ii) each Executory
Contract related to the purchases or sales of indefeasible rights of use or
leases of capacity and (iii) each interconnection agreement with an ILEC.
Schedule 4.20 of the Disclosure Schedules sets forth as of
December 18, 2003, each material Executory Contract to which any Seller or any
Operating Subsidiary is a party and by or to which any Seller, Operating
Subsidiary or any of their properties is currently bound or subject or may be
bound or subject. True and complete copies of all material Executory Contracts
have
been delivered or made available to Buyer. All of the Assumed Contracts
are valid, binding and enforceable in accordance with their respective terms,
except as designated on the attached Schedule 4.20 of the Disclosure
Schedules and except as such enforceability may be limited by (i)
applicable insolvency, bankruptcy, reorganization, moratorium or other similar
laws affecting creditors’ rights generally and (ii) applicable equitable
principles (whether considered in a proceeding at law or in equity). Except as
set forth on Schedule 4.20 of the Disclosure Schedules, no
Seller is, and to Sellers’ Knowledge, no other party thereto is, in material
default in the performance, observance or fulfillment of any obligation under
any Assumed Contract (other than any Cure Amounts to be paid hereunder by Buyer
or Sellers, as applicable), and, to Sellers’ Knowledge, no event has occurred,
which with or without the giving of notice or lapse of time, or both, would
constitute a material default thereunder. Except as set forth on
Exhibit A of Schedule 4.20 of the Disclosure
Schedules, Sellers have not entered into any material post-Petition
Contracts (including interconnection agreements).

           4.21 Real Property.

		
	 	     (a) Schedule 4.21(a) of the Disclosure Schedules
lists, all Real Property Leases relating to the operation of the Business to
which any Seller or any Operating Subsidiary is a party.

35

 

		
	 	     (b) Except as set forth on Schedule 4.21(b) of the Disclosure
Schedules, the Real Property Leases constitute all interests in real
property used or held for use as of December 18, 2003 in connection with the
Business by Sellers and the Operating Subsidiaries and which are necessary for
the continued operation of the Business by Sellers and the Operating
Subsidiaries as the Business was conducted as of December 18, 2003.

          4.22 Taxes. Except as described on the attached
Schedule 4.22 of the Disclosure Schedules:

		
	 	     (a) (i) all income Tax Returns and all other material Tax Returns required
to be filed by or on behalf of Sellers, the Operating Subsidiaries or any
Affiliated Group have been duly and timely filed with the appropriate
Governmental Entity in all material respects, in all jurisdictions in which
such Tax Returns are required to be filed (after giving effect to any valid
extensions of time in which to make such filings), and all such Tax Returns are
true, complete and correct in all material respects, (ii) except as prohibited
or stayed by the Bankruptcy Code, all Taxes payable by or on behalf of Sellers,
the Operating Subsidiaries or any Affiliated Group have been fully and timely
paid or adequately reserved for on Allegiance’s Financial Statements (in each
case, other than Taxes that, in the aggregate, are not material in amount), and
any Taxes not yet due have been adequately accrued in accordance with GAAP, and
(iii) no waivers of statutes of limitation have been given or requested with
respect to any Tax Return required to be filed by or on behalf of Sellers, the
Operating Subsidiaries or any Affiliated Group;
	 
	 	     (b) except as prohibited or stayed by the Bankruptcy Code, for all open
Tax years all Taxes required to be withheld, collected or deposited by Sellers
or the Operating Subsidiaries have been timely withheld, collected and
deposited in all material respects and, to the extent required by Law, all such
Taxes have been paid when due to the appropriate Governmental Entity and each
Seller and Operating Subsidiary is in compliance in all material respects with
respect to all withholding and information reporting requirements under all
applicable Laws;

		
	 	     (c) no federal, state, local or foreign Tax audits or administrative or
judicial Tax proceedings are pending or being conducted with respect to
Allegiance, and neither Allegiance nor any predecessor has received from any
federal, state, local or foreign Governmental Entity (including jurisdictions
where Sellers have not filed a Tax Return) any (A) notice indicating an intent
to open an audit or other review, or commence any other administrative or
judicial Tax proceeding that is still active, (B) request for information
related to Tax matters where the examination or investigation giving rise to
such request is still open, or (C) notice of deficiency or proposed adjustments
for any amount of Tax proposed, asserted, or assessed by any Governmental
Entity that remains unpaid. No written claim has been made by a Governmental
Entity in a jurisdiction where such Seller or Operating Subsidiary does not
file Tax Returns that such Seller or Operating Subsidiary is or may be subject
to taxation by that jurisdiction; and

36

 

		
	 	     (d) Buyer and the Acquired Assets will not be bound by a Tax sharing, Tax
allocation, Tax indemnity or other similar agreements or arrangements (whether
or not written) with respect to or involving Sellers or the Acquired Assets
after the Closing Date.

          4.23 Employee Benefits; Labor Matters.

		
	 	     (a) Schedule 4.23(a) of the Disclosure Schedules sets
forth a list of all material “employee benefit plans,” as defined in section
3(3) of ERISA (whether or not subject to ERISA) other than a “multiemployer
plan,” as defined in Section 3(37) of ERISA, and each material cafeteria,
material bonus, incentive or deferred compensation, severance, termination,
retention, change of control, stock option, stock appreciation, stock
purchase, phantom stock or other equity-based, loan, performance or other
employee or retiree benefit or compensation plan, program, arrangement,
agreement, policy or understanding, whether written or unwritten, under which
any Employee or former Employee (including any beneficiaries and dependents
thereof) is or may become eligible to participate or derive a benefit and that
is or has been maintained, established or contributed to or required to be
contributed to by Allegiance (“Employee Benefit Plans”).
With respect to each Employee Benefit Plan, a copy of each of the following
documents (if applicable) has been provided or made
available to Buyer: (i) the most recent plan document for any Employee
Benefit Plan covered by ERISA and all amendments thereto; (ii) the most recent
summary plan description; (iii) the most recent trust document or any third
party funding vehicle (including insurance) and all amendments thereto; (iv)
the two most recent Forms 5500 required to have been filed with the IRS and
all schedules thereto,
and the most recent IRS determination letter. All contributions required
to have been made by Allegiance under any Employee Benefit Plan or any
applicable Law to any trusts established thereunder or in connection therewith
have been made by the due date therefore (including any extensions). The
Employee Benefit Plans have been administered in accordance with their terms
in all material respects and are in compliance with applicable Law in all
material respects. Neither Allegiance nor any trade or business (whether or
not incorporated) which is or has ever been under common control, or which is
or has ever been treated as a single employer, with Allegiance under Section
414(b), (c), (m) or (o) of the Code (“ERISA Affiliate”)
have at any time within the last six years, maintained, contributed to, or had
any obligation to contribute to, or has any liability (fixed or contingent)
with respect to, any “single-employer plan” as defined in Section 4001(a)(15)
of ERISA or any plan subject to Sections 4063 or 4064 of ERISA
(“multiple employer plan”).

		
	 	     (b) Each Employee Benefit Plan intended to be qualified under Section
401(a) of the Code, and the trust (if any) forming a part thereof, is
qualified and tax exempt under Code Section 401(a) and 501(a) and has received
a favorable determination letter from the IRS as to its qualification under
the Code and to the effect that each such trust is exempt from taxation under
Section 501(a) of the Code, which determination letter covers the GUST
Amendments and to the Knowledge of Sellers, nothing has occurred since the
date of such determination letter that could reasonably be expected to
adversely affect such qualification or tax-exempt status.

37

 

		
	 	     (c) Allegiance does not provide nor is it obligated to provide, any life
insurance or health benefits, including prescription drugs (whether or not
insured) to any individual after his or her termination of employment or
service with any of the Sellers or the Operating Subsidiaries, except as may
be required under COBRA and at the expense of the individual or the
individual’s beneficiary and except as provided under
severance agreements. Sellers and their ERISA Affiliates which maintain a
“group health plan” within the meaning of Section 5000(b)(1) of the Code have
complied in all material respects with the notice and continuation
requirements of COBRA and the regulations thereunder and comparable state
laws.

		
	 	     (d) Schedule 4.23(d) of the Disclosure Schedules lists
each multiemployer plan (as defined in Section 4001(a)(3) of ERISA) to which
the Sellers or their ERISA Affiliates are obligated to contribute
(“Multiemployer Plan”), and there is no potential liability
under any other multiemployer plan to which the Sellers or their ERISA
Affiliates are, or within the preceding six (6) years were, obligated to
contribute. To Sellers’ Knowledge: (i) no condition exists and (ii) no event
has occurred with respect to any Multiemployer Plan that presents a material
risk of a complete or partial withdrawal of the Sellers or any ERISA Affiliate
under subtitle E of Title IV of ERISA and the Sellers and their ERISA
Affiliates have not, within the preceding six years, withdrawn in a complete
or partial withdrawal from any multiemployer plan or incurred any contingent
liability under Section 4204 of ERISA. To the Sellers’ Knowledge, no
Multiemployer Plan is in “reorganization” or “insolvent.”
	 
	 	     (e) There are no collective bargaining agreements with any labor union
representing Employees. There is no Employee labor strike, dispute, slowdown,
or stoppage pending or, to the Sellers’ Knowledge, threatened by Employees
against Allegiance. To Sellers’ Knowledge: (i) no collective bargaining
agreement is currently being negotiated and (ii) no organizing effort is
currently being made or has been threatened with respect to the Employees.
Allegiance is and has been in material compliance with all Laws relating to
employment practices, terms and conditions of employment (including
termination of employment), wages, hours of work and occupational safety and
health, and worker classification and at all times since November 23, 1999,
has been in material compliance with the requirements of the Immigration
Reform Control Act of 1986. Allegiance is in compliance with WARN and any
similar state or local “mass layoff” or “plant closing” Law in all material
respects. There is no unfair labor practice complaint pending or, to Sellers’
Knowledge, threatened against Allegiance before the National Labor Relations
Board.

		
	 	     (f) There is no Assumed Contract covering any person that, individually
or collectively, could give rise to the payment of any amount that would
constitute an “excess parachute payment” within the meaning the Section 280G
of the Internal Revenue Code or any similar provision of foreign, state or
local Law.

          4.24
Litigation. Except as set forth on Schedule
4.24 of the Disclosure Schedules and for Claims that will be
discharged pursuant to the Bankruptcy Court Order:

38

 

		
	 	     (a) other than the Cases, there is no Litigation pending or, to Sellers’
Knowledge, threatened against, relating to or affecting Allegiance or any
Subsidiary with respect to the Business or any of the Acquired Assets which
would reasonably be expected (i) to result in the issuance of an Order
restraining, enjoining or otherwise prohibiting or making illegal the
consummation of any of the transactions contemplated by this Agreement or (ii)
to have a Material Adverse Effect; and

		
	 	     (b) except for Orders of the Bankruptcy Court, there are no Orders
outstanding against Allegiance which would reasonably be expected to have a
Material Adverse Effect.

          4.25 Network Facilities. Schedule 4.25 of the
Disclosure Schedules contains certain information relating to
Allegiance’s network. Schedule 4.25 of the Disclosure
Schedules sets forth: (i) for each segment, the number of fibers,
fiber miles owned or leased by Allegiance, route and name of third party
provider, if any and (ii) for Allegiance’s IP backbone, route and circuit type
(including DS3s, OC3s, OC12s, OC48 and lambda waves). The information provided
on Schedule 4.25 of the Disclosure Schedules is accurate and
current in all material respects.

          4.26 Bank Accounts. Schedule 2.1(n) of the
Disclosure Schedules contains a true and complete list of all of
Allegiance’s bank accounts and lock-boxes.

          4.27 Subsidiaries. Except for ATCW, the Operating
Subsidiaries and Shared Technologies, ATI has no Subsidiaries.

          4.28 Limitations on Sellers’ Representations and Warranties.
Except for the representations and warranties contained in this Agreement,
Sellers make no other express or implied representation or warranty, including,
representations or warranties as to the condition of the Acquired Assets, their
contents, the income derived or potentially to be derived from the Acquired
Assets or the Business and Sellers hereby expressly disclaim all such
representations or warranties of any kind or nature, or the expenses incurred
or potentially to be incurred in connection with the Acquired Assets or the
Business. Sellers are not, and will not be, liable or bound in any manner by
express or implied warranties, guarantees, statements, promises,
representations or information pertaining to the Acquired Assets or the
Business, made or furnished by any Representatives or other person representing
or purporting to represent Sellers, unless and to the extent the same is
expressly set forth in this Agreement.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF BUYER

          Buyer hereby represents and warrants to Sellers as follows:

          5.1 Existence, Good Standing and Power. Buyer is a
corporation validly existing and in good standing under the laws of the State
of Delaware and has all requisite power and authority to own, lease and operate
the property it now owns, leases and operates. Buyer has all requisite power
and authority to conduct its business as presently conducted, to execute and
deliver this Agreement, the Transaction Documents

39

 

and to perform its
obligations hereunder and thereunder. Buyer is duly authorized, qualified and
licensed to transact business as a foreign corporation, and is in good
standing, in every jurisdiction where the nature of its business conducted by
it or the properties owned or licensed by it requires qualification, except
where that failure would not have a material adverse effect on Buyer or its
business, or the consummation of the transactions contemplated by this
Agreement.

          5.2 Authority. The execution, delivery and performance of
this Agreement and the Transaction Documents to which Buyer is or will be a
party and the consummation by Buyer of the transactions contemplated hereby and
thereby have been duly authorized by all necessary corporate action on the part
of Buyer.

          5.3 Execution and Binding Effect. This Agreement has been,
and each of the Transaction Documents to which Buyer is or will be a party has
been or will be at Closing, duly and validly executed and delivered by Buyer
and constitutes, and this
Agreement, the Transaction Documents and the transactions contemplated
hereby and thereby will constitute (assuming, in each case, the due and valid
authorization, execution and delivery thereof by the other parties thereto), a
valid and legally binding obligation of Buyer, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws relating to or affecting the rights
and remedies of creditors generally and to general principles of equity
(regardless of whether considered in a proceeding in equity or at law).

          5.4 No Violation. Except as disclosed in the attached
Schedule 5.4 of the Disclosure Schedules, the execution,
delivery and performance by Buyer of this Agreement and the Transaction
Documents and the transactions contemplated hereby and thereby, do not and will
not conflict with or result in, with or without the giving of notice or lapse
of time or both, any violation of or constitute a breach or default, or give
rise to any right of acceleration, payment, amendment, cancellation or
termination, under (a) the certificate of incorporation or bylaws of Buyer or
any resolution adopted by the board of directors of Buyer and not rescinded,
(b) any agreement or other instrument to which Buyer is a party or by which
Buyer or any of its properties or assets is bound, (c) any Order of any
Governmental Entity to which Buyer is bound or subject or (d) any Law
applicable to or binding on Buyer or any of its properties or assets except, in
the case of clauses (b)-(d), for such conflicts, violations, breaches, defaults
or creation of rights as would not, individually or in the aggregate, have a
material adverse effect on the business of Buyer or the ability of Buyer to
consummate the transactions contemplated by this Agreement and each of the
Transaction Documents.

          5.5 Third Party Approvals. Except for (a) any approvals
required in order to comply with the provisions of the HSR Act, (b) any FCC
Consent and State PUC Consent as required by applicable Law and (c) any other
third party approvals as are reflected on the attached Schedule 5.5 of
the Disclosure Schedules, the execution, delivery and performance by
Buyer of this Agreement and the Transaction Documents and the transactions
contemplated hereby and thereby do not require any consents, waivers,
authorizations or approvals of, or filings with, any third Persons which have
not been obtained by Buyer.

40

 

          5.6 Brokers and Finders. No broker, investment banker,
financial advisor or other Person is entitled to any broker’s, finder’s,
financial advisor’s or other similar fee or commission in connection with the
transactions contemplated by this Agreement, based upon arrangements made by or
on behalf of Buyer or any of its Affiliates.

          5.7 Financing. As of the date hereof and as of the Closing
Date, Buyer has and will have sufficient unrestricted funds on hand or
committed lines of credit to consummate the transactions contemplated by this
Agreement (including the payment of all fees and expenses incurred in
connection with the transactions contemplated hereunder).

          5.8 SEC Filings. Buyer has made all required filings with
the SEC since December 31, 2001. The Form 10-K filed with the SEC for Buyer’s
year ended December 31, 2002 and the Form 10-Q filed with the SEC for Buyer’s
quarter ended September 30, 2003 (the “Form 10-Q”), as of
the dates of their respective filings, each complied as to form in all material
respects with the requirements of the Exchange Act, and the rules and
regulations of the SEC promulgated thereunder applicable to such SEC filing and
such SEC filing did not 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 light of the circumstances under which they were made,
not misleading.

          5.9 Capitalization. The Form 10-Q sets forth the
authorized shares of capital stock of the Buyer as of the date hereof and the
number of shares of its common stock that were issued and outstanding as of
October 28, 2003. The XO Common Stock of Buyer to be delivered at Closing will
be validly and legally issued, free and clear of any and all Liens, and will be
fully paid and non-assessable.

          5.10 Limitations on Sellers’ Representations and Warranties.
Buyer acknowledges and agrees that it shall acquire the Acquired Assets “AS
IS,” “WHERE IS” and “WITH ALL FAULTS” on the Closing Date and after giving
effect to the Closing, subject to the terms and conditions of this Agreement.

ARTICLE VI

COVENANTS OF THE PARTIES

          6.1 Conduct of Business. Except for the Operational
Restructuring Activities, as expressly contemplated by this Agreement
(including the prosecution of the Cases) or as otherwise consented to by Buyer
in writing, during the period from the date of this Agreement and continuing
until the Early Funding Date, each Seller shall and shall cause each Operating
Subsidiary to:

		
	 	     (a) (i) conduct its business in the Ordinary Course of Business and (ii)
keep the Acquired Assets intact in accordance with the Ordinary Course of
Business and not transfer any of such assets to Shared Technologies;

41

 

		
	 	     (b) not knowingly take or fail to take any action if the intent of such
action or failure to act is or would be to cause any representation or
warranty of Sellers made in Article IV to be untrue or
incorrect if such representation or warranty were made immediately following
the taking or failure to take such action;

		
	 	     (c) not waive, release, grant, transfer or permit to lapse any rights of
value, to which any Seller or any Operating Subsidiary has any right on the
date of this Agreement other than immaterial waivers in the Ordinary Course of
Business;
	 
	 	     (d) comply in all material respects with all provisions of any Assumed
Contract to which such Seller or Operating Subsidiary is a party;

		
	 	     (e) comply in all material respects with all applicable Laws that relate
to or affect the operation of the Business;

		
	 	     (f) not enter into any new or amended contract, agreement, side letter or
memorandum of understanding with any unions representing Employees;

		
	 	     (g) notify Buyer in writing of any incidents or accidents occurring on or
after the date of this Agreement involving any property owned or operated by
any Seller or Operating Subsidiary that resulted or could reasonably be
expected to result in damages or losses in excess of One Million Dollars
($1,000,000);

		
	 	     (h) notify Buyer in writing of the commencement of any material
Litigation against any Seller or any Operating Subsidiary;

		
	 	     (i) not enter into any business or arrangement or otherwise take any
action that would reasonably be expected to have a material adverse impact on
the ability of the Sellers and the Buyer to obtain any material consents of
Governmental Entities necessary in connection with this Agreement;

		
	 	     (j) not enter into any Contract containing covenants purporting to limit
the freedom of any Seller or any of their respective Affiliates to compete or
participate in any line of business or activities in any geographic area
(“Non-Compete Covenants”);

		
	 	     (k) not enter into any material Contract or renew, fail to renew, extend,
terminate, reject, amend, modify or waive any material provision of any
Contract designated with an asterisk on Schedule 4.20 to the
Disclosure Schedules, except (i) that if within five (5) Business
Days after notice provided by Sellers to Buyer of its intent to take any such
actions, Buyer does not object in writing to Sellers, then Buyer shall be
deemed to have provided consent to such action and (ii) for those actions for
which a motion has been filed with the Bankruptcy Court on or prior to the
date hereof; and

		
	 	     (l) not enter into any agreement or understanding in excess of twelve
months with any other party containing any exclusivity or similarly
restrictive provision.

42

 

          Notwithstanding anything herein to the contrary, Sellers shall have the
right to consummate a sale of (i) the shared web hosting business segment of
the Business (the “Shared Hosting Business”), (ii) the Owned
Real Property, and/or (iii) the assets or capital stock of Shared Technologies,
and retain any proceeds from any such transactions as an Excluded Asset.

          Notwithstanding anything herein to the contrary, Allegiance shall have the
right, subject to Bankruptcy Court approval, but only after the Sale Order
Approval Date, to pay up to $100 million of the amount outstanding under its
Senior Credit Agreement.

       6.2   Transition; Operating Agreement.

		
	 	     (a) As promptly as practicable after the execution and delivery of this
Agreement and in any event within the earlier of (A) forty-five (45) days
thereafter and (B) the Closing Date, Sellers and Buyer shall use their best
efforts to (i) identify the Non-Transferred Assets and (ii) design and
implement a plan (the “Transition Plan”) to effectuate the
separation of the Non-Transferred Assets to be retained by Sellers, in order
to facilitate the transfer of the Non-Transferred Assets to Buyer as promptly
as possible upon subsequent receipt of any necessary consents. Such plan
shall include the ability of Sellers to (1) retain the stock of any Operating
Subsidiary containing a Non-Transferred Asset or (2) distribute any
Non-Transferred Asset to ATI, ATCW, any of their Affiliates or a trust
established for the purpose of acquiring each non-Transferred Asset. Subject
to applicable law, Buyer shall have ultimate discretion regarding the terms of
such Transition Plan; provided, that Buyer shall not require the transfer of
any Non-Transferred Assets in violation of any contractual obligations of
Sellers or that would otherwise adversely impact Sellers’, Operating
Subsidiaries’ or Shared Technologies’ Chapter 11 estate. The Transition Plan
shall be subject to amendment from time to time as reasonably appropriate to
achieve the foregoing objective and permit the Closing to occur on the Closing
Date. Sellers and Buyer shall exercise their best efforts to implement the
Transition Plan, as it may be amended from time to time, to provide for
separation of the Non-Transferred Assets prior to the Closing and the transfer
of Non-Transferred Assets as promptly as possible.

		
	 	     (b) Sellers and Buyer shall enter into an Operating Agreement
substantially in the form of Exhibit H hereto effective as
of the Early Funding Date. Pursuant to and as set forth in the Operating
Agreement, Buyer shall agree to provide management and related services to
Sellers, on behalf of Sellers and subject to the ultimate direction of Sellers
and consistent with all applicable law and regulation. Pursuant to
Sections 1.1 and 2.5, (i) at such time as
any necessary FCC Consent and/or State PUC Consent shall have been issued and
(ii) the parties shall have received any necessary ILEC consents, or the
notice period shall have expired, for the assignment of any Required
Interconnection Agreements, the corresponding Non-Transferred Assets shall be
transferred to Buyer and Buyer shall assume all related Assumed Liabilities.

        6.3  Reorganization Process.

43

 

		
	 	     (a) Unless Sellers shall have delivered an Early Closing Election,
Sellers shall, as soon as reasonably practicable after the date hereof,
prepare and file with the Bankruptcy Court: (i) a Disclosure Statement with
respect to the Bankruptcy Plan meeting the requirements of section 1125(b) of
the Bankruptcy Code (the “Disclosure Statement”); (ii) a
motion to approve the Disclosure Statement; and (iii) the Bankruptcy Plan
(items (i) through (iii) collectively, the “Approval
Motions”). Unless Sellers shall have delivered an Early Closing
Election, the Bankruptcy Plan, any and all exhibits and attachments to the
Bankruptcy Plan, the Disclosure Statement, and the other Approval Motions and the orders
approving the same (including the Confirmation Order) to the extent any of the
foregoing adversely impacts the Sale Assets shall be reasonably acceptable in
form and substance to the Buyer. Sellers and the Operating Subsidiaries shall
have the sole discretion to negotiate, propose and implement the terms of the
Bankruptcy Plan as they relate to the treatment of creditors and the
distributions on account of such creditors’ claims in any manner not
inconsistent with the Transaction Documents. Until the Closing, the Sellers
shall consult with the Buyer and obtain Buyer’s consent, which shall not be
unreasonably withheld, prior to taking any material action with respect to the
Cases. Unless Sellers shall have delivered an Early Closing Election, the
Buyer shall provide the Sellers with all information concerning the Buyer
required to be included in the Disclosure Statement. This Section
6.3(a) shall not be applicable if Sellers shall have delivered an
Early Closing Election.

		
	 	     (b) The Confirmation Order shall provide, among other things, that (i)
the Bankruptcy Plan has been proposed in good faith and not by any means
forbidden by Law, (ii) Buyer and its Affiliates, and their respective members,
shareholders, partners and Representatives are released from any claims of any
party related to Sellers, the Business or the Cases, whether arising prior to
or during the Cases, except for the Assumed Liabilities, (iii) Buyer and its
Affiliates, and their respective members, shareholders, partners and
Representatives have acted in “good faith” within the
meaning of section 1125(e) of the Bankruptcy Code in compliance with the
applicable provisions of the Bankruptcy Code and Bankruptcy Rules in
connection with all their respective activities relating to the solicitation
of acceptances to the Bankruptcy Plan and their participation in the
activities described in section 1125 of the Bankruptcy Code and are entitled
to the protections afforded by section 1125(e) of the Bankruptcy Code and the
exculpation and any other release provisions set forth in the Bankruptcy Plan
and (iv) all Persons are enjoined from commencing any action in violation of
such release and exculpation provisions. This Section 6.3(b) shall not be applicable if Sellers shall have delivered an
Early Closing Election.

		
	 	     (c) The Sellers shall take such actions and cause any filings and actions
to be taken by one or more of the Sellers as applicable in compliance with the
dates set forth in the timetable attached hereto as Exhibit
J; provided, however, that in
the event Sellers shall have delivered an Early Closing Election, any such
filings and actions relating to the Bankruptcy Plan or Disclosure Statement
shall no longer be required or subject to the timetable attached hereto as
Exhibit J.

		
	 	     (d) Prior to the Closing, neither any Seller nor any Operating Subsidiary
shall, without the prior written consent of Buyer:

44

 

               (i) seek or consent to the conversion of the Cases to cases under chapter
7 of the Bankruptcy Code or the appointment of a trustee or examiner with
managerial powers under section 1104 of the Bankruptcy Code;

               (ii) consent to any relief from the automatic stay under section 362 of
the Bankruptcy Code with respect to any Acquired Assets having an aggregate
market value of more than $150,000;

               (iii) file any plan of reorganization other than the Bankruptcy Plan, file
any material amendment to the Bankruptcy Plan, consent to the reduction of the
exclusivity period under section 1121 of the Bankruptcy Code for the filing of
a plan of reorganization (the “Exclusivity Period”) or fail
timely to file motions seeking to obtain orders of the Bankruptcy Court
extending the Exclusivity Period; provided,
however, that in the event Sellers shall have delivered an
Early Closing Election, this Section 6.3(d) (iii)
shall be inapplicable;

               (iv) sell or abandon, or file any motion to sell or abandon, any Acquired
Assets, other than sales in the Ordinary Course of Business or except as
contemplated by the Operational Restructuring Activities;

               (v) commence or continue to prosecute Avoidance Actions against any Seller
or Operating Subsidiary or related to the Business, or against any employee of,
creditor of or other party to a contract with any Seller or Operating
Subsidiary;

               (vi) commence or continue any Claims that Sellers or any of their
respective Affiliates may have against any active Employee of, creditor of or
other party to an existing Contract with any Seller or Operating Subsidiary
(other than Contracts that are Excluded Assets); or

               (vii) authorize, or commit or agree to take, any of the foregoing actions.

		
	 	     (e) At the Closing, Sellers shall reject in the Cases all Executory
Contracts that do not constitute Assumed Contracts other than any such
Executory Contracts (A) relating to the Excluded Assets or (B) assigned to any
other Person. At Buyer’s written request, Sellers shall delay the effective
date of the rejection of any Executory Contract designated by Buyer;
provided that, for any such delay in the
effective date, Buyer shall be responsible for all expenses directly or
indirectly arising due to such delay in effective date on or after the Closing
Date. Provided, further, that if Buyer
requests a delay in rejection of an Executory Contract that results in
rejection beyond the Closing Date, then Sellers shall retain such Executory
Contract and it shall be treated as a Non-Transferred Asset and subject to (i)
Sections 2.5 and 6.2 hereof, and (ii)
the Operating Agreement.

		
	 	     (f) At Buyer’s reasonable direction and sole expense, Sellers (i) shall
file all requisite pleadings with the Bankruptcy Court, or any other
applicable forum, to recharacterize any capital lease as a secured financing,
(ii) agree, after the Sale Order

45

 

		
	 	Approval Date, to assume or reject any
capital lease, in whole or in part, to the extent portions of such lease are
severable, and (iii) agree to allow Buyer to participate in any
negotiations with counterparties with respect to restructuring or
recharacterizing the capital leases. The Sale Order shall provide that the
Buyer has standing to participate in any disputes regarding such capital
leases.

       6.4   Insurance . Effective upon the Closing, to the extent
Allegiance’s insurance policies are designated by Buyer as Non-Transferred
Assets, Allegiance shall take all actions necessary to cause Buyer to be
designated as an additional loss-payee on such policies and shall maintain such
insurance policies on the same terms as currently in effect at Buyer’s sole
expense.

       6.5   Access; Transition Committee; Information Rights.

		
	 	     (a) Subject to any relevant Antitrust Laws, from the date hereof until
the Closing Date, Sellers shall allow Buyer’s employees and other
Representatives during regular business hours (and in a manner so as not to
interfere with the normal business operations of Sellers) to make such
investigation of the Sellers’ employees, the Business and Sellers’ books and
records related thereto, as Buyer reasonably deems necessary or advisable, and
Sellers shall instruct Sellers’ employees to cooperate in any such
investigation. Buyer shall be permitted to make extracts from or to make
copies of such books and records.1

		
	 	     (b) From and after the Closing Date, Buyer hereby acknowledges that it
shall grant to Sellers upon Sellers’ request full and complete access, as
promptly as practicable but in no event no later than two (2) days after
receiving a request, to any records related to Sellers’ operation of the
Business prior to the Closing Date, upon Sellers’ request, and Sellers shall
be permitted to copy, and retain a copy of, any such records. Buyer shall
keep such records in a manner consistent with Buyer’s past practice and such
records shall not be destroyed until the later of seven (7) years from the
Closing Date or the conclusion of all bankruptcy proceedings related to the
Business. Sellers hereby agree that from and after the Closing Date they will
grant to Buyer upon Buyer’s reasonable request access during normal business
hours (and instruct its employees to reasonably cooperate with Buyer), in a
reasonably prompt manner but in any event no later than five (5) days after
receiving a request, to any tax records relating to the Acquired Assets or to
Allegiance’s operation of the Business prior to the Closing Date (including
any Tax Liabilities for which Buyer may be held liable). Buyer shall be
permitted to copy, and retain a copy of, any such records (including any Tax
Returns). To the extent that any Seller retains any books and records related
to the Business, such Seller shall keep such records in a manner consistent
with Sellers’ past practice and such records shall not be destroyed before
such Seller offers such records to Buyer.

1  Note: During the period from the Early Funding Date through the Closing Date
the Operating Agreement shall contain broad access rights.

46

 

		
	 	     (c) Subject to any relevant Antitrust Laws, immediately upon the
Bankruptcy Court approval of the Sale Order and subject to compliance with any
regulatory restrictions, Allegiance and Buyer shall establish a joint
transition committee (the “Committee”) to plan the steps
necessary to efficiently implement the purchase of the Business by Buyer and
to agree upon changes to the Business which will increase operating
efficiencies. The Committee will be chaired by a Buyer Representative, shall
have one (1) individual from Communications Technology Advisors LLC
(“CTA”) (who shall be entitled to attend all meetings and
receive all documents prepared for the Committee) shall have appropriate
Representatives of both Allegiance and Buyer, and shall meet in person or
telephonically as frequently as shall be reasonably determined by Buyer. The
Committee shall establish working groups to discuss the following specific
aspects of the transactions contemplated hereby: (i) human resources, (ii)
network, (iii) operations, (iv) sales and marketing, (v) finance and (vi)
information technology and shall agree as promptly as possible as to actions
that will be taken to more efficiently operate the Business prior to Closing;
provided that no such actions implemented prior to Closing
shall have, or be reasonably expected to have, a detrimental impact on the
ability of Allegiance to conduct the auction in a manner customary in similar
proceedings, and further provided that all such actions
shall be conducted in full compliance with the relevant Antitrust Laws. All
reasonable costs associated with the establishment and the operation of the
Committee shall be borne by Buyer. Prior to any meetings of the Committee,
Allegiance and Buyer shall implement appropriate procedures for the protection
of the confidential information of both Allegiance and Buyer in the event the
transaction is not concluded for any reason.

		
	 	     (d) As soon as practicable, but in no event less than fifteen (15) days
after the end of each month, ATI shall provide Buyer with a copy of its
monthly flash report, together with a performance report of the Total Retail
Net Ending Lines (as of the end of the month covered by the flash report) and
Total Gross End User Revenue (as of the end of the month covered by the flash
report), including a certification as to the number of Scheduled Future
Installs and Scheduled Future Disconnects as of the end of the month covered
by the flash report.

        6.6  Public Announcements. Neither Seller nor any Operating
Subsidiary shall issue a press release or otherwise make any public statements
with respect to the transactions contemplated hereby, except as may be required
by Law, by obligations pursuant to any listing agreement with any national
securities exchange or over-the-counter market or with respect to filings to be
made with the Bankruptcy Court in connection with this Agreement (in which case
such Seller shall notify Buyer as promptly as practicable and prior to making
such public statement), without the prior consent of Buyer, which consent shall
not be unreasonably withheld or delayed. To the extent reasonably practicable,
Buyer shall consult with ATI before Buyer issues any press release or otherwise
makes any public statements with respect to the transactions contemplated
hereby and consider any comments ATI may have with respect thereto.

        6.7  Notification of Certain Matters. Allegiance shall give
prompt notice to Buyer, and Buyer shall give prompt notice to Allegiance, of
(i) any notice or other communication from any Person alleging that the consent
of such Person is or may be

47

 

required in connection with the transactions
contemplated by this Agreement and (ii) any written objection, litigation or
administrative proceeding that challenges the transactions contemplated hereby
or the entry of the Bidding Procedures Order or the Sale Order.

        6.8  Employees.

		
	 	     (a) Sellers shall deliver to Buyer not later than fifteen (15) Business
Days after the date of this Agreement: a complete and accurate schedule (the
“Employee Schedule”) setting forth, as of a recent date
prior to the delivery of the Employee Schedule, (x) the name and position of
each Employee, (y) the annual base salary or hourly rate, as applicable, for
each Employee and (z) the date each Employee commenced employment with
Allegiance. Sellers and Buyer shall cooperate in identifying those employees
for which Buyer shall offer full-time employment effective as of the Closing
Date.

		
	 	     (b) Buyer anticipates extending offers of employment to substantially all
of Allegiance’s Employees who provide services related to or associated with
the Acquired Assets. Buyer shall make offers of employment in accordance with
its normal hiring practices. Those Employees who accept Buyer’s offer of
employment effective as of the Closing Date are referred to as the
“Transferred Employees.” Following the Closing, Buyer
shall provide any Employee who does not receive an offer of employment from
the Buyer and any Employee who receives an offer of employment which does not
provide for the terms of employment described in Section 6.8 (d) with severance benefits in accordance with Allegiance’s
severance policies and past practice, provided,
however, any Transferred Employee shall not be eligible to
receive severance benefits pursuant to this Agreement.

		
	 	     (c) Pursuant to the “Alternative Procedure” provided in section 5 of
Revenue Procedure 96-60, 1996-2 C.B. 399, (i) Buyer and Sellers shall report
on a predecessor/successor basis as set forth therein, (ii) Sellers will be
relieved from filing a Form W-2 with respect to the Transferred Employees and
(iii) Buyer will undertake to file (or cause to be filed) a Form W-2 for each
such Transferred Employee for the year that includes the Closing Date
(including the portion of such year that such Employee was employed by
Allegiance). Sellers will provide Buyer on a timely basis with all payroll
and employment-related information with respect to each such Employee.
	 
	 	     (d)

               (i) Buyer shall grant each Transferred Employee service credit with
Sellers (based on the employment commencement date set forth in the Employee
Schedule), for purposes of eligibility and participation in the benefit plans,
programs and arrangements (including the vacation and the severance policies),
of Buyer, excluding
service credit for benefit accruals under the defined benefit pension plan
and eligibility for the retiree medical plan.

               (ii) Unless otherwise required by any collective bargaining agreement to
which any of Buyer’s employees are subject to as of the Closing Date, with

48

 

respect to Transferred Employees who will be subject to such collective
bargaining agreement after the Closing, effective on the Closing Date, Buyer
shall provide the Transferred Employees with (i) a salary or regular wage rate
and bonus opportunity (if applicable) which is substantially the same in the
aggregate as the salary or wage rate received or bonus opportunity available to
such Transferred Employee immediately prior to the Closing, (ii) a job location
no more than 75 miles from such Transferred Employee’s current job location and
(iii) health, welfare and other employee benefits on the same basis as
similarly situated employees of Buyer (or an Affiliate of Buyer), as determined
by Buyer and in accordance with the terms of the plans governing such benefits.

               (iii) As of the Closing Date, Buyer (or an Affiliate of Buyer) shall
credit the Transferred Employees for all deductibles and out-of pocket expenses
incurred by the Transferred Employees with respect to such benefits during the
calendar year in which the Closing Date occurs and shall further waive (to the
extent waived under Sellers’ employee benefit plans) all pre-existing
conditions, exclusions and waiting periods under Buyer’s employee benefit plans
for Transferred Employees.

               (iv) Except as otherwise provided in this Agreement, Buyer shall not
assume any Employee Benefit Plan or any liability or obligation thereunder,
and, except as expressly provided in this Section 6.8, the
terms of a Transferred Employee’s employment with Buyer (or an Affiliate) after
the Closing shall be upon such terms and conditions as Buyer, in its sole
discretion, shall determine.

		
	 	     (e) Sellers and any Operating Subsidiary shall cause the accounts of all
Transferred Employees under any tax-qualified defined contribution plan
maintained by Sellers or any Operating Subsidiary to become fully vested as of
the Closing, and shall permit distribution of such accounts in accordance with
the terms of any such plan. Notwithstanding the foregoing, Sellers or any
Operating Subsidiary shall amend such defined contribution plan to permit the
rollover of promissory notes evidencing outstanding participant loans of
Transferred Employees, without default of such loan, to a tax-qualified
defined contribution plan established by Buyer, and Buyer shall cause, as of a
specified date within 90 days of Closing as determined by Buyer, such plan to
accept such rollovers, provided that Allegiance has
provided the Buyer evidence satisfactory to the Buyer of the qualified status
of the Allegiance’s Internal Revenue Code Section 401(k) arrangement under
Internal Revenue Code Section 401(a). Buyer shall take all action necessary
and appropriate to ensure that, as of the Closing, Buyer maintains a
tax-qualified defined contribution plan.

		
	 	     (f) Allegiance shall cause, and Buyer agrees to assume, the health care
and dependent care flexible spending accounts (and any corresponding assets
and liabilities thereto) maintained with respect to Transferred Employees
under any cafeteria plan maintained by Allegiance to be transferred to Buyer’s flexible
benefits plan in accordance with IRS Revenue Ruling 2002-32.

		
	 	     (g) Allegiance shall not, at any time between the date hereof and the
Early Funding Date, or at any time prior to 60 days after the Early Funding
Date,

49

 

		
	 	effectuate a “plant closing” or “mass layoff,” as those terms are
defined in the WARN Act, affecting in whole or in part any site of employment,
facility, operating unit or Employee, without complying with the notice
requirements and other provisions of the WARN Act except to the extent arising
from Buyer’s actions, in which case Buyer shall be responsible for any
Liabilities related thereto. In order to protect all parties, to the extent
required by the WARN Act, Sellers agree to give notice in compliance with the
WARN Act in a form satisfactory to Buyer, to all Employees required under the
WARN Act to receive such notice not less than sixty (60) days and no more than
ninety (90) days prior to the anticipated Closing Date, and shall repeat such
notice, if necessary, due to any delay of Closing;
provided, however, to the extent any
Seller is unable to provide notice in compliance with the WARN Act due to any
act, omission or direction of Buyer, Buyer shall be responsible for any
Liabilities related thereto.

		
	 	     (h) Except where prohibited by law, Sellers shall provide promptly to
Buyer, at Buyer’s request, any information or copies of personnel records
(including addresses, dates of birth, dates of hire and dependent information)
relating to the Transferred Employees or relating to the service of
Transferred Employees with Sellers prior to the Closing. Sellers and Buyer
shall each cooperate with the other and shall provide to the other such
documentation, information and assistance as is reasonably necessary to effect
the provisions of this Section 6.8(h).

		
	 	     (i) As part of the Transition Plan, certain Employees of Sellers will be
retained by Sellers as of the Closing. Those Employees may or may not be
Transferred Employees as referenced in this Section 6.8. The
parties will cooperate in developing the Transition Plan such that, to the
extent permitted by law, such Employees are subject to the same terms and
conditions as they would have been if they had not been retained by Sellers at
Closing, and instead had become Transferred Employees or been terminated, as
the case may be, at Closing. For purposes of Sections
6.8(a), (b), (c),
(d), (e), (f) and
(h) in the case of an Employee who remains with the Sellers
subsequent to the Closing Date for the purposes of continuing to conduct the
Business with respect to the Non-Transferred Assets and who receives and
accepts an offer of employment from the Buyer post-Closing, references to the
“Closing Date” shall be replaced with the date of hire by the Buyer, or as
otherwise specified in the Operating Agreement.

        6.9  Further Agreements. Sellers authorize and empower
Buyer after the Closing Date to receive and to open all mail received by Buyer
relating to the Acquired Assets, the Business or the Assumed Liabilities and to
deal with the contents of such communications in any proper manner. Sellers
shall (a) promptly deliver to Buyer, any mail or other communication received
by them after the Closing Date, (b) promptly wire transfer in
immediately available funds to Buyer, any cash, electronic credit or
deposit received by Sellers and (c) promptly forward to Buyer, any checks or
other instruments of payment that it received, in each case relating to the
Acquired Assets, the Business or the Assumed Liabilities. Buyer shall (a)
promptly deliver to Sellers, any mail or other communication received by it
after the Closing Date, (b) promptly wire transfer in immediately available
funds to ATI, any cash, electronic credit or deposit received by Buyer and (c)
promptly forward to ATI, any checks or other instruments of payment that

50

 

it
receives, in each case relating to the Excluded Assets or any Excluded
Liabilities. From and after the Closing Date, Sellers shall refer all
inquiries with respect to the Business, the Acquired Assets and the Assumed
Liabilities to Buyer, and Buyer shall refer all inquiries with respect to the
Excluded Assets and the Excluded Liabilities to Sellers.

        6.10  Payment of Transfer Taxes and Tax Filings.

		
	 	     (a) Fifty percent (50%) of all Transfer Taxes arising out of the
transfer of the Acquired Assets and any Transfer Taxes required to effect any
recording or filing with respect thereto shall be paid by each of Buyer on the
one hand and Sellers on the other hand. The parties shall use commercially
reasonable efforts to have included in the Sale Order and Confirmation Order a
provision that provides that the transfer of the Acquired Assets shall be free
and clear of any stamp or similar taxes under section 1146(c) of the
Bankruptcy Code. At least twenty (20) Business Days prior to Closing, Sellers
shall submit to Buyer a list of all Transfer Taxes (by tax name, tax
jurisdiction and general description of the Acquired Assets subject to such
tax) that it anticipates collecting from Buyer at Closing. Buyer may submit
to Sellers evidence that it believes such Transfer Tax should not be
applicable. Sellers shall review such evidence in a timely and good faith
manner and respond to Buyer prior to Closing. Sellers and Buyer shall
cooperate to timely prepare and file any returns or other filings relating to
such Transfer Taxes, including any claim for exemption or exclusion from the
application or imposition of any Transfer Taxes.

		
	 	     (b) Each party shall furnish or cause to be furnished to the others,
upon request, as promptly as practicable, such information and assistance
relating to the Acquired Assets and the Business as is reasonably necessary
for filing of all Tax Returns, including any claim for exemption or exclusion
from the application or imposition of any Taxes or making of any election
related to Taxes, the preparation for any audit by any taxing authority and
the prosecution or defense of any claim, suit or proceeding relating to any
Tax Return.

		
	 	     (c) Sellers acknowledge and agree that Buyer shall have an
administrative expense claim with respect to Sellers’ share of any Transfer
Taxes arising out of the transfer of the Acquired Assets under this
Section 6.10 that have not been paid when due.

        6.11  Filing of Tax Returns.

          Sellers shall prepare and file, or cause to be prepared and filed, all Tax
Returns for or on behalf of Sellers and any Affiliated Group that are required
to be filed for periods that include or end on or prior to the Closing Date.
Subject to Section 2.3(c), Sellers shall pay, or
shall cause to be paid, all Taxes due and payable by Sellers with respect to
periods that include or end on or prior to the Closing Date when due.

51

 

        6.12  Proration of Taxes and Certain Charges. Except as
provided in Section 6.10, all real property Taxes, personal
property Taxes or similar ad valorem obligations levied with respect to the
Acquired Assets for any taxable period that includes the day before the Early
Funding Date and ends after the Early Funding Date, whether imposed or assessed
before or after the Early Funding Date, shall be prorated between Sellers and
Buyer as of 12:01 A.M. on the Early Funding Date. If any Taxes subject to
proration are paid by Buyer, on the one hand, or Sellers, on the other hand,
the proportionate amount of such Taxes paid (or in the event a refund of any
portion of such Taxes previously paid is received, such refund) shall be paid
promptly by (or to) the other after the payment of such Taxes (or promptly
following the receipt of any such refund). Notwithstanding the foregoing
proration, any interest, penalties or additions to Tax relating to a Tax that
is subject to proration shall be borne by the party whose actions or omissions
gave rise to such item, and shall be reimbursed (and any refund remitted)
consistent with the preceding sentence.

        6.13  Best Efforts.

		
	 	     (a) Subject to the terms and conditions of this Agreement, each of the
parties hereto shall use its respective best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties hereto in doing, all things necessary, proper
or advisable under applicable Laws and regulations to ensure that the
conditions set forth in this Agreement are satisfied and to consummate and
make effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including prosecuting confirmation of the
Bankruptcy Plan notwithstanding the objection of any party in interest.
Subject to the terms and conditions of this Agreement, the parties shall not
take any action or refrain from taking any action, the effect of which would
be to delay or impede the ability of Allegiance and Buyer to consummate the
transactions contemplated by this Agreement, unless in such party’s reasonable
judgment, taking such action or refraining from action is consistent with
achieving the ultimate objective of consummating the transactions contemplated
hereby.

		
	 	     (b) Without limiting the generality of the foregoing, the parties hereto
shall furnish to each other such necessary information and reasonable
assistance, as each may request in connection with preparation and filing of
applications and motion papers, including the Sale Motion needed to obtain
Bankruptcy Court approval of the transactions contemplated by this Agreement.

        6.14  HSR Act and General Governmental Consents.

		
	 	     (a) Subject to the terms and conditions of this Agreement, each of the
parties hereto shall use its respective best efforts to (1) obtain from any
Governmental Entity, any consents, licenses, permits, waivers, approvals,
authorizations or orders required to be obtained or made by Sellers or Buyer
or any of their respective Subsidiaries, or to avoid any action or proceeding
by any Governmental Entity (including those in connection with the HSR Act),
in connection with the authorization, execution and delivery of this Agreement
and the consummation of the transactions

52

 

		
	 	contemplated herein, (2) subject to
any restrictions under Antitrust Laws (as defined herein), to the extent
practicable, (A) promptly notify each other of any communication to that party
from any Governmental Entity with respect to this Agreement and the
transactions contemplated hereby, (B) permit a Representative of the other
party reasonably acceptable to the first party to attend and participate in
meetings (telephonic or otherwise) with any Governmental Entity and (C) permit
the other party to review in advance, as reasonable, any proposed written
communication to any Governmental Entity, and (3) make all necessary filings
(including, to the extent applicable, appropriate filing of a notification and
report form pursuant to the HSR Act on or prior to the date that is five (5)
Business Days after the date of execution of this Agreement), and thereafter
make any other required submissions, with respect to this Agreement and the
transactions contemplated hereby under any applicable Law. Sellers and Buyer
shall cooperate with each other in connection with the making of all such
filings, including (i) providing all information required or appropriate for
any application or other filing and (ii) as reasonably practicable, providing
copies of all such documents to the other party and its advisors prior to
filing and, if requested, accepting all reasonable additions, deletions or
changes suggested in connection therewith.

		
	 	     (b) In furtherance and not in limitation of the foregoing, the parties
shall use their best efforts to resolve such objections, if any, as may be
asserted with respect to the transactions contemplated by this Agreement under
any antitrust, competition or trade regulatory Laws of any Governmental Entity
(“Antitrust Laws”). The parties agree to take any action
(including agreeing to hold separate or to divest any of the Acquired Assets
(a “Designated Change”) that may be required by or would
otherwise resolve any objections made by (1) the applicable Governmental
Entity (including the Antitrust Division of the United States Department of
Justice or the Federal Trade Commission) in order to resolve any objections as
such Governmental Entity or authority may have to such transactions under such
Antitrust Law, or (2) by any domestic or foreign court or similar tribunal, in
any suit brought by a private party or Governmental Entity challenging the
transactions contemplated by this Agreement as violative of any Antitrust Law,
in order to (i) avoid material delay in the closing of such transactions or
(ii) avoid the entry of, or to effect the dissolution of, any injunction,
temporary restraining order or other order that has the effect of preventing
the consummation of any of such transactions. The entry by a court, in any
suit brought by a private party or Governmental Entity challenging the
transactions contemplated by this Agreement as violative of any Antitrust Law,
of an order or decree permitting the transactions contemplated by this
Agreement, but requiring a Designated Change, or
that would otherwise limit the Buyer’s freedom of action with respect to,
or its ability to retain, the Acquired Assets, shall not be deemed a failure
to satisfy the conditions specified in Section 7.1(a) or
Section 7.1(c) hereof. Notwithstanding any other provision
of this Agreement, nothing herein shall require Buyer or any of its Affiliates
to hold separate or to divest any of the businesses, product lines or assets
of Buyer or its Affiliates.

		
	 	     (c) Buyer shall bear sole responsibility for all filing fees under the
HSR Act.

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        6.15  Bulk Sales. Each of the parties hereto waives
compliance with any applicable provisions of the Uniform Commercial Code
Article 6 (bulk sales or bulk transfers) or analogous provisions of Law, as
adopted in the states in which the Business is conducted, as such provisions
may apply to the transactions contemplated by this Agreement.

        6.16  Sale Order. Buyer and Sellers shall cooperate to
obtain entry of the Sale Order. With respect to the Assumed Contracts, Buyer
shall cooperate with Sellers to provide adequate assurance of future
performance as required by section 365 of the Bankruptcy Code.

        6.17  Competing Transaction.

		
	 	     (a) Following the Sale Order Approval Date and until such time as this
Agreement has been terminated (other than a termination by Sellers in
violation of this Agreement), Sellers shall not, nor shall it authorize or
permit any Representative of Sellers to, (A) directly or indirectly solicit,
initiate or encourage the submission of any offer or proposal concerning any
(x) sale, lease or other disposition directly or indirectly by merger,
consolidation, business combination, share exchange, joint venture or
otherwise, of any or all of the Acquired Assets, (y) issuance or sale of any
equity interests in any Seller, or (z) transaction pursuant to which any
Person will acquire beneficial ownership or the right to acquire beneficial
ownership of equity interests in any Seller (any of the foregoing, a
“Competing Transaction”), (B) directly or indirectly
participate in any discussions or negotiations regarding, or furnish to any
Person any information with respect to, or take any other action to facilitate
the making of, any proposal or expression of interest that constitutes or is
reasonably likely to lead to a Competing Transaction, or (C) enter into any
agreement with respect to any Competing Transaction.

		
	 	     (b) Allegiance shall not furnish information concerning their business,
properties or assets to any third party, except (i) in the Ordinary Course of
Business to potential and current vendors, customers and agents, (ii) to
Governmental Entities or (iii) pursuant to a confidentiality agreement with
terms and conditions no less restrictive than those contained in the
Confidentiality Agreement as modified by Section 9.9 below.
Allegiance shall not release any third party from, or waive any provision of,
any such confidentiality agreement to which any Seller is a party other
than to the extent a similar release or waiver was granted to Buyer.
Sellers shall use reasonable efforts to promptly provide, or identify and make
available to Buyer any non-public information concerning Sellers, the Acquired
Assets or the Business provided to any other Person after the date hereof
which was not previously provided to Buyer. To the extent that this
Section 6.17(b) conflicts with the Bidding Procedures
Order, the Bidding Procedures Order shall govern.

        6.18  Disclosure Supplements. Prior to the Early Funding
Date, Sellers shall deliver updated Disclosure Schedules hereto with respect to
any matter hereafter arising or any information obtained after the date hereof
which, if existing, occurring or known at or prior to the date of this
Agreement, would have been required to be set forth or

54

 

described in the
Disclosure Schedules, or which is necessary to complete or correct any
information in such schedule or in any representation and warranty of Sellers
which has been rendered inaccurate thereby. For purposes of determining the
satisfaction of the conditions set forth in Article VII
hereof, no such supplement or amendment shall be considered.

        6.19  Communications Licenses. Allegiance shall maintain the
validity of the Communications Licenses and, except as disclosed on
Schedule 4.9 of the Disclosure Schedules, comply in all
material respects with all requirements of the Communications Licenses and the
rules and regulations of the FCC and State PUCs. Allegiance shall use
reasonable commercial efforts to (a) refrain from taking any action which may
jeopardize the validity of any of the Communications Licenses or result in the
revocation, surrender or any adverse modification of, forfeiture of, or failure
to renew under regular terms, any of the Communications Licenses, (b) prosecute
with due diligence any pending applications with respect to the Communications
Licenses, including any renewals thereof, and (c) with respect to
Communications Licenses, make all filings and reports and pay all fees
necessary or reasonably appropriate for the continued operation of the
Business, as and when such approvals, consents, permits, licenses, filings, or
reports or other authorizations are necessary or appropriate.

        6.20  FCC Applications/State PUC Applications.

		
	 	     (a) As promptly as practicable after the execution and delivery of this
Agreement and in no event later than three (3) Business Days after the date of
execution of this Agreement, the parties hereto shall prepare and file, or
cause to be prepared and filed, the necessary application or applications with
the FCC seeking the FCC Consents. Each party shall provide the other party
with all information necessary for the preparation of such applications on a
timely basis, including those portions of such applications which are required
to be completed by the first party.

		
	 	     (b) As promptly as practicable after the execution and delivery of this
Agreement and in no event later than ten (10) Business Days after the date of
execution of this Agreement, the parties hereto shall prepare and file, or
cause to be prepared and
filed, the necessary application or applications with the State PUCs
seeking the State PUC Consents. Each party shall provide the other party with
all information necessary for the preparation of such applications on a timely
basis, including those portions of such applications which are required to be
completed by the first party. In addition, the parties hereto shall cooperate
to make any notice filings required in connection with this matter on a timely
basis.

		
	 	     (c) Each of Buyer and Sellers (or the Operating Subsidiaries where
applicable) shall bear its own expenses in connection with the preparation and
prosecution of the FCC applications and the State PUC applications. Subject
to the terms and conditions of this Agreement, each of the parties hereto
shall use its best efforts to prosecute the FCC applications and the State PUC
applications in good faith and with due diligence before the FCC and the State
PUCs and in connection therewith shall take such action or actions as may be
necessary or reasonably required in

55

 

		
	 	connection with the FCC applications and
the State PUC applications, including furnishing to the FCC and the State PUCs
any documents, materials, or other information requested by the FCC and the
State PUCs in order to obtain the FCC Consent and the State PUC Consents as
expeditiously as practicable. In addition, to the extent practicable, the
parties hereto shall use their best efforts to (i) promptly notify each other
of any communication to that party from the FCC or any State PUC with respect
to the FCC applications or the State PUC applications, as applicable, (ii)
permit a Representative of the other party reasonably acceptable to the first
party to attend and participate in meetings (telephonic or otherwise) with the
FCC or any State PUC and (iii) permit the other party to review in advance, as
reasonable, any proposed written communication to the FCC or any State PUC.
No party hereto shall knowingly take, or fail to take, any action if the
intent or reasonably anticipated consequence of such action or failure to act
is, or would be, to cause the FCC or any State PUC not to grant approval of
any FCC application or of any State PUC application or materially delay either
such approval, to the material detriment of the other party.

        6.21  Cooperation on Environmental Matters. Sellers agree to
cooperate with Buyer and to assist Buyer in identifying the permits required
under Environmental Laws required by Buyer to operate the business from and
after the Closing Date and either transferring existing Environmental Permits
of Buyer, where permissible, or obtaining new Environmental Permits for Buyer
(at Buyer’s sole expense).

        6.22   Intentionally Omitted.

        6.23  Non-Compete Covenants. Sellers shall use its
reasonable efforts to identify to Buyer those material Contracts containing
Non-Compete Covenants within ten (10) Business Days following the date of this
Agreement.

        6.24  Use of Name. Sellers hereby agrees that upon the
consummation of the transactions contemplated hereby, Buyer shall be granted a
license as set forth in the Operating
Agreement to the name “Allegiance Telecom” or similar names, and any other
names used in the business to be managed by Buyer pursuant to the Operating
Agreement, or any service marks, trademarks, trade names, identifying symbols,
logos, emblems or signs containing or comprising the foregoing or otherwise
used in the business to be managed by Buyer pursuant to the Operating
Agreement, including any name or mark confusingly similar thereto
(collectively, the “Seller Marks”) and Sellers shall not,
and shall not permit any of their Affiliates to, use such name or any variation
or simulation thereof, except in connection with the completion of the Cases.
In furtherance thereof, upon expiration or termination of the Operating
Agreement, Sellers shall remove, strike over or otherwise obliterate all Seller
Marks from all materials owned by Sellers or the Operating Subsidiaries and
used or displayed publicly including any sales and marketing materials,
displays, signs, promotional materials and other materials. On or before the
Closing, at Buyer’s expense, Sellers shall take any action reasonably requested
by Buyer to perfect the chain of title in all of Sellers’ registered trademarks
used in the Business.

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        6.25  Further Assurances. Buyer shall use commercially
reasonable best efforts to obtain any material Governmental Entity License,
approval or consent reasonably necessary to operate as a local exchange carrier
in any jurisdiction where the Business is operated and Buyer represents and
warrants that it or its Affiliate has and, Buyer shall, maintain through the
Closing Date such License, approval or consent in California, Illinois,
Michigan and Texas.

        6.26  Colocation/PRI Services Agreement. At the Early
Funding Date, if requested by ATI and subject to Bankruptcy Court approval,
ATCW or an Affiliate of ATCW and Buyer shall enter into a Master Services
Agreement (the “Master Services Agreement”), pursuant to
which Buyer shall provide colocation, primary rate interface and other services
to ATCW (or such Affiliate) on terms specified on
Schedule 6.26 of the
Disclosure Schedules and as otherwise mutually satisfactory to ATCW
and Buyer.

        6.27  Operation of Acquired Assets. Upon the Early Funding
Date and Buyer’s funding of the Purchase Price Escrow Amount and the Adjustment
Escrow Amount into the Purchase Price Escrow Account and the Adjustment Escrow
Account, respectively, Buyer shall operate the Acquired Assets in accordance
with the Operating Agreement; provided,
however, that Buyer shall not assume any management or
control of Sellers’ bankruptcy estate or the Bankruptcy Plan process.

        6.28  Registration Rights. Buyer agrees to use its best
efforts to ensure that the issuance and distribution of the XO Common Stock
complies with Section 1145 of the Bankruptcy Code.

		
	 	     (a) If Buyer is unable to obtain assurance to its satisfaction that the
issuance of the XO Common Stock will be exempt from registration under Section
5 of the Securities Act, as provided in section 1145 of the Bankruptcy Code,
Buyer will promptly and diligently file and cause to become effective, a
registration statement registering the XO Common Stock under the Securities
Act of 1933, as amended.
	 
	 	     (b) Buyer hereby agrees to cause its legal counsel to issue an opinion
reasonably requested by its transfer agent with respect to the issuance of the
XO Common Stock, including an opinion that no legend restricting the transfer
of such XO Common Stock is required.

        6.29  Buyer Shareholder Approval.

          Prior to the Early Funding Date, Buyer shall obtain the approval of its
shareholders to the extent required to issue the XO Common Stock (the
“Shareholder Approval”). Buyer shall give prompt written
notification to Sellers when the Shareholder Approval is obtained.

        6.30  Sellers’ Disposition of XO Common Stock.

          Sellers agree that they will not dispose of the XO Common Stock except
pursuant to the Bankruptcy Plan.

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        6.31  Tax Matters.

		
	 	     (a) Sellers shall use commercially reasonable efforts to provide good
faith estimates, prior to the Closing Date, of (i) the adjusted basis in the
Acquired Assets (or the amount of any excess loss accounts), (ii) each
Operating Subsidiary’s adjusted basis in its assets and properties, (iii) the
amount of any net operating loss, net capital loss, unused investment or other
credits, unused foreign tax credit, or excess charitable contribution (and the
carryovers of any of the foregoing) allocable to the Operating Subsidiaries,
as well as any limitations that might apply and (iv) the amount of any
deferred gain or loss allocable to the Operating Subsidiaries arising out of
any intercompany transactions.

		
	 	     (b) At Buyer’s written request, Sellers shall consider such tax elections
and other actions with respect to the Operating Subsidiaries that will not
adversely affect Sellers, including any election or elections under Section
338(h)(10) of the Internal Revenue Code of 1986, as amended.

		
	 	     (c) Buyer shall make a reasonable determination of the income tax
treatment of the transactions contemplated by this Agreement, (including
without limitation whether the transaction qualifies for a reorganization
under Section 368 of the Internal Revenue Code of 1986, as amended), and so
long as such determination is not adverse to Sellers, Sellers shall file all
tax returns in a manner consistent with such determination.

ARTICLE VII

CONDITIONS TO OBLIGATIONS OF THE PARTIES

        7.1  Conditions Precedent to Obligations of Buyer and
Sellers. The respective obligations of Buyer, on the one hand, and
Sellers, on the other hand, on the Early Funding Date shall be subject to the satisfaction
or waiver at or prior to the Early Funding Date of the following conditions:

		
	 	     (a) No Injunction. No preliminary or permanent
injunction or other order issued by, and no Litigation or Order by or before
any United States Governmental Entity nor any Law or Order promulgated or
enacted by any United States Governmental Entity shall be in effect or
pending which materially delays, restrains, enjoins or otherwise prohibits or
seeks to restrain, enjoin or otherwise prohibit the transactions contemplated
hereby; provided that with respect to pending Litigation,
such condition shall only apply to Litigation commenced by a Governmental
Entity.

		
	 	     (b) The Sale Order. The Bankruptcy Court shall have
entered the Sale Order, which approves this Agreement and all of the terms and
conditions hereof and authorizes Allegiance to consummate the transactions
contemplated hereby. The Sale Order shall provide that (A) this Agreement
results from Sellers having completed a full and complete auction process and,
so long as the Agreement has not been terminated in accordance with its terms,
Sellers shall not be entitled to entertain or enter into a Competing
Transaction; (B) the Acquired Assets sold to Buyer pursuant to this

58

 

		
	 	Agreement
shall be transferred to Buyer free and clear of all Liens (other than
Permitted Liens of the type included in clause (C) of the definition of
Permitted Liens) and Liabilities of any Person (other than Assumed
Liabilities), such Liens and Liabilities to attach to the Purchase Price
payable pursuant to Section 3.2(a); (D) the
Regulatory Transition Process is approved pursuant to sections 105, 363 and
365 of the Bankruptcy Code; (E) Buyer has acted in good faith within the
meaning of section 363(m) of the Bankruptcy Code and, as such, is entitled to
the protections afforded thereby; (F) this Agreement was negotiated, proposed
and entered into by the parties without collusion, in good faith and from
arm’s length bargaining positions; (G) Buyer is not acquiring or assuming any
of Sellers’ or any other Person’s Liabilities except as expressly provided in
this Agreement and in no event shall Buyer have any Liability or
responsibility for any Excluded Liability; (H) the transactions contemplated
herein shall be exempt from stamp, transfer, or similar taxes to the extent
provided by Section 1146(c) of the Bankruptcy Code; (I) Buyer will not have
any successor or transferee liability for liabilities of Sellers (whether
under federal or State law or otherwise) as a result of the sale, purchase,
transfer or assignment of the Acquired Assets, and will be exempt from any
so-called “bulk sale” laws in all applicable jurisdictions; (J) all Assumed
Contracts shall, at Closing, be assumed by Sellers and assigned to Buyer
pursuant to section 365 of the Bankruptcy Code and, as required by this
Agreement, Sellers shall be obligated to pay all Cure Amounts in respect
thereof, in accordance with this Agreement; (K) Buyer will have the right to
participate in any of Sellers’ negotiations and settlements regarding ILEC and
Non-ILEC Cure Amounts in accordance with Section 3.5, (L)
in accordance with Section 3.5 Buyer will have standing to
participate in any disputes before the Bankruptcy Court regarding ILEC and
non-ILEC Cure Amounts, (M) the Bankruptcy Court shall retain jurisdiction to
resolve any controversy or claim arising out of or relating to this Agreement,
or the breach hereof as provided in Section 9.12 hereof;
(N) all Liens held by Sellers’ senior secured lenders on the Non-Transferred
Assets shall be released at the Closing and the Buyer shall be granted a
Lien on all Non-Transferred Assets pending FCC Consent and State PUC Consent,
as applicable and (O) this Agreement and the transactions and instruments
contemplated hereby shall be specifically performable and enforceable against
and binding upon, and not subject to rejection or avoidance by, Sellers or any
chapter 7 or chapter 11 trustee of Sellers and its estate. Sellers shall
provide each applicable taxing authority in each jurisdiction in which it is
subject to Tax with copies of any motion for entry of the Sale Order at least
10 days prior to the hearing on such motion. In the event that the Bankruptcy
Court does not approve the Sale Order, Buyer shall, within one (1) Business
Day, decide and inform Sellers and the Bankruptcy Court and communicate to
Sellers whether Buyer consents to the Sale Order, as modified. For the
avoidance of doubt, if Buyer consents to modifications to the Sale Order, then
Buyer agrees that the condition in Section 7.1(b)
has been satisfied.

		
	 	     (c) HSR Act. Any applicable waiting period under the
HSR Act shall have expired or shall have been earlier terminated.

		
	 	     (d) Purchase Price Escrow Agreement. ATI, ATCW and
Buyer shall have entered into the Purchase Price Escrow Agreement, and such
agreement shall be in full force and effect.

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        7.2  Conditions Precedent to Obligations of Buyer. The
obligation of Buyer to fund on the Early Funding Date is subject to the
satisfaction (or waiver by Buyer) at or prior to the Early Funding Date of each
of the following additional conditions:

		
	 	     (a) Accuracy of Representations and Warranties. The
representations and warranties of Sellers contained herein shall be true and
correct, without regard to any qualifications concerning materiality or
Material Adverse Effect, as of the Early Funding Date (or, if made as of a
specific date, at and as of such date), with the same force and effect as
though such representations and warranties had been made on and as of the
Early Funding Date, except where the effect of all such inaccuracies of
representations and warranties would not reasonably be expected to, in the
aggregate, have a Material Adverse Effect.

		
	 	     (b) Performance of Agreements. Sellers shall have
performed and complied in all material respects with all material covenants
and material agreements contained in this Agreement required to be performed
or complied with by them prior to or on the Early Funding Date.

		
	 	     (c) Officer’s Certificate. Buyer shall have received
a certificate, dated the Early Funding Date, of an officer of Sellers to the
effect that the conditions specified in Sections 7.2(a) and (b) above have been fulfilled.

		
	 	     (d) [Intentionally Omitted].

		
	 	     (e) Sellers’ Deliveries. Sellers shall have delivered
to Buyer all items set forth in Section 3.1(b).

		
	 	     (f) Assumed Contracts. (i) All Contracts set forth on
Schedule 7.2(f) of the Disclosure Schedules relating to the
Sellers, or the extent an Early Closing Election is delivered, the Operating
Subsidiaries, shall have been assumed and validly assigned to Buyer, such
assignment to be effective as of the Closing Date, (and Sellers and the
Operating Subsidiaries, if applicable, shall have obtained all consents,
waivers and approvals (if any) necessary for such assumption and/or
assignment) and (ii) all of the other Assumed Contracts (other than those set
forth on Schedule 2.6 of the Disclosure Schedules or
Exhibit A to Schedule 4.5 of the Disclosure
Schedules) shall have been assumed by the applicable Seller and, to
the extent an Early Closing Election is delivered the applicable Operating
Subsidiary, and assigned to Buyer, such assignment to be effective as of the
Closing Date, (and Sellers and Operating Subsidiaries, if applicable, shall
have obtained all consents, waivers and approvals (if any) necessary for such
assumption and/or assignment), except, in the case of this clause (ii), where
the failure to assume and assign such Contracts would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse
Effect.

		
	 	     (g) Operating Agreement. Sellers and Buyer shall have
executed and delivered the Operating Agreement (the “Operating
Agreement”) attached hereto as Exhibit H, and
such agreement shall be in full force and effect.

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        7.3  Conditions Precedent to the Obligations of Sellers.
The obligation of Sellers to enter into the Operating Agreement on the Early
Funding Date is subject to the satisfaction (or waiver by Sellers) at or prior
to the Early Funding Date of each of the following additional conditions:

		
	 	     (a) Accuracy of Representations and Warranties. The
representations and warranties of Buyer contained herein shall be true and
correct, without regard to any qualifications concerning materiality or
material adverse effect, as of the Early Funding Date (or, if made as of a
specific date, at and as of such date), with the same force and effect as
though such representations and warranties had been made on and as of the
Early Funding Date, except where the effect of all such inaccuracies of
representations and warranties would not reasonably be expected to, in the
aggregate, have a material adverse effect on Buyer.

		
	 	     (b) Performance of Agreements. Buyer shall have
performed and complied in all material respects with all material covenants
and material agreements contained in this Agreement required to be performed
or complied with by it prior to or at the Early Funding Date.

		
	 	     (c) Officer’s Certificate. ATI shall have received a
certificate, dated the Early Funding Date, of an officer of Buyer to the
effect that the conditions specified in Sections 7.3(a) and
(b) above have been fulfilled.

		
	 	     (d) Transition Services Agreement for Shared
Technologies. Shared Technologies and Buyer shall have entered into
a Transition Services Agreement (the “Transition Services
Agreement”) in the form of Exhibit 7.3(d)
attached hereto.

		
	 	     (e) The Voting Agreement shall remain in full force and effect and
Cardiff Holding LLC shall not be in breach thereof.

		
	 	     (f) Shareholder Approval. Buyer shall have obtained
shareholder approval necessary to issue the XO Common Stock.

		
	 	     (g) Operating Agreement. Sellers and Buyer shall have
executed and delivered the Operating Agreement attached hereto as
Exhibit H, and such agreement shall be in full force and
effect.

		
	 	     (h) Master Services Agreement. Buyer and ATCW (or an
Affiliate thereof) shall have executed and delivered the Master Services
Agreement, if applicable, and such agreement shall be in full force and
effect.

        7.4  Conditions Precedent to Closing. The obligation of
Buyer and Sellers to close under this Agreement is subject to the satisfaction
(or waiver by Sellers) at or prior to the Closing Date of each of the following
additional conditions:

		
	 	     (a) Approval of Plan. (i) All conditions to the
“Effective Date” set forth in the Bankruptcy Plan (including the entry of the
Confirmation Order by the Bankruptcy Court) shall have been satisfied or duly
waived, with the express written

61

 

		
	 	consent of Buyer, such consent not to be
unreasonably withheld, in accordance with the applicable provisions of the
Bankruptcy Plan and (ii) the transactions contemplated by the Bankruptcy Plan
to occur on or prior to the Closing shall have been or shall be consummated
simultaneously with the Closing in accordance with the Bankruptcy Plan;
provided, that in the event of the
delivery by either Buyer or Seller of an Early Closing Election, this
Section 7.4(a) shall be deemed waived by both Buyers and
Sellers.

		
	 	     (b) Non-Transferred Assets. The Non-Transferred
Assets shall have been retained by Sellers.

		
	 	     (c) Sellers’ Deliveries. Sellers shall have delivered
to Buyer all items set forth in Section 3.1(b).
	 
	 	     (d)  Buyer’s Deliveries. Buyer shall have delivered to
Sellers all items set forth in Section 3.1(c).

          7.5 Satisfaction of All Closing Conditions; Early Funding
Date.

          
After the Early Funding Date, Section 7.1,
Section 7.2, and Section 7.3 shall be deemed
to be satisfied in their entirety and upon an Early Closing Election or
satisfaction of the condition set forth in Section 7.4(a),
Buyer’s and Sellers’ obligations to close the transactions contemplated by this
Agreement will be unconditional.

ARTICLE VIII

TERMINATION

          8.1
Termination of Agreement. This Agreement may be
terminated and the transactions contemplated hereby abandoned at any time prior
to the Closing:

		
	 	     (a) By mutual written consent of Buyer and ATI;

		
	 	     (b) By Buyer or ATI if neither the Early Funding Date nor the Closing
Date shall have occurred on or before August 18, 2004;
provided, however, that if neither the
Early Funding Date nor the Closing shall have occurred on or before such date
due to a breach of this Agreement by Buyer or any Seller, Buyer or ATI (if a
Seller is the breaching party), as the case may be, may not terminate this
Agreement pursuant to this Section 8.1(b);

		
	 	     (c) By Buyer, immediately if any of the following shall have occurred:

               (i) Any Seller (A) agrees in writing, (B) publicly announces its intention
(including by selecting a competing bidder at the Bankruptcy Court’s auction
relating to the transactions contemplated hereby), or (C) is authorized by its
board of directors to proceed with a Competing Transaction, irrespective of
whether such Competing Transaction is approved by the Bankruptcy Court and/or
consummated;

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               (ii) Prior to the Closing, any Seller abandons or files a motion with the
Bankruptcy Court to abandon all or any material portion of the Acquired Assets;

               (iii) Prior to the Closing, any Seller files any plan of reorganization
other than the Bankruptcy Plan, files any material amendment to the Bankruptcy
Plan, withdraws the Bankruptcy Plan or consents to the reduction of the
Exclusivity Period or fails timely to file motions to obtain orders of the
Bankruptcy Court extending the Exclusivity Period or the Bankruptcy Court
denies confirmation of the Bankruptcy Plan; provided,
however, that to the extent either Sellers or Buyer has
delivered an Early Closing Election, this Section
8.1(c)(iii) shall be inapplicable;

               (iv) The Bankruptcy Court terminates the Exclusivity Period or declines to
extend the Exclusivity Period; provided,
however, that to the extent either Sellers or Buyer shall
have delivered an Early Closing Election, this Section
8.1(c)(iv) shall be inapplicable;

               (v) The voluntary dismissal or conversion of any of the Cases to a case
under chapter 7 of the Bankruptcy Code; or

               (vi) Upon the appointment in the Cases of a trustee or examiner with
managerial powers under section 1104 of the Bankruptcy Code; or

              
 (vii) Prior to the Early Funding Date, any Order is entered by the
Bankruptcy Court which would result in the failure of any of the conditions to
the obligations of Buyer set forth in Section 7.1 or
7.2; provided, that following the Early
Funding Date, this Section 8.1(c) shall have no
further force or effect.

		
	 	     (d) By Sellers, on the one hand, or Buyer, on the other, if Buyer or
Sellers, as the case may be, materially breach any of its covenants under this
Agreement, unless such breach shall be cured within ten (10) Business Days
after such other party shall have received notice of such breach in accordance
with the terms hereof.

		
	 	     (e) Prior to the Early Funding Date, by Buyer if there is a breach of any
representation or warranty contained in Article IV hereof
(without regard to any qualifications concerning materiality or Material
Adverse Effect contained in Article IV), which breach, in
the aggregate with all other such breaches, if any, would give rise to a
failure of the condition set forth in Section 7.2(a) (with
the date of such termination being substituted for the references to Early
Funding Date therein) and which breach could not reasonably be expected to be
cured using reasonable efforts by the date set forth in Section
8.1(b); provided, that following the Early
Funding Date, this Section 8.1(e) shall have no further
force or effect.

        8.2  Effect of Termination. In the event of termination of
this Agreement pursuant to this Article VIII, written notice thereof shall be
given to the other party of this Agreement as promptly as practicable and this
Agreement shall terminate and the transactions contemplated hereby shall be
abandoned, without further action by Buyer or Sellers. If this Agreement is
terminated as provided herein there shall be no liability or

63

 

obligation on the
part of Sellers or Buyer, unless (i) this Agreement is terminated (A) by Buyer
pursuant to Section 8.1(b) when ATI does not have the right
to terminate this Agreement pursuant to Section 8.1(b) due
to breach of the Agreement by Sellers, or (B) by Buyer pursuant to
Section 8.1(c) or (d); or (ii) Buyer
terminates this Agreement pursuant to Section 8.1(e) as a
result of Sellers’ gross negligence or willful, wanton or reckless action or
inaction taken or not taken with an intent to cause the termination of this
Agreement or otherwise negatively
impact the transactions contemplated hereby (collectively, a
“Sellers’ Intentional Breach”) or Buyer elects not to close
because the condition set forth in Section 7.2(a) has not
been satisfied as a result of a Sellers’ Intentional Breach;
provided, however, that with respect to
any such termination of this Agreement pursuant to Section
8.1(b), (c) or (d) following
the Sale Order Approval Date, or (ii) Buyer’s election to terminate this
Agreement pursuant to Section 8.1(c) or not to close, in
each case because the condition set forth in Section 7.2(a)
has not been satisfied, as a result of a Sellers’ Intentional Breach following
the Sale Order Approval Date, Buyer shall be entitled to terminate this
Agreement immediate payment, as liquidated damages and not as a penalty, of (i)
the Expense Reimbursement (which Expense Reimbursement shall not exceed $10
million) and (ii) $30 million (the (“Liquidated Damages”).
Sellers and Buyer acknowledge that the damage suffered by the Buyer in the
event of any such termination would be impossible to calculate, and the
Liquidated Damages constitutes a reasonable estimate of such damages. In the
event prior to the Early Funding Date Buyer terminates this Agreement pursuant
to Section 8.1(e) or elects not to close, in each case
because the condition set forth in Section 7.2(a) has not
been satisfied as a result of some reason other than a Sellers’ Intentional
Breach, Buyer shall be entitled to immediate payment of the Expense
Reimbursement (which Expense Reimbursement shall not exceed $5 million).
Except as provided in Section 9.14, Buyer’s sole and
exclusive remedy under this Agreement shall be limited to the recovery of the
amounts set forth in this Section 8.2. None of the amounts
payable under this Section 8.2 or 8.3
shall prime the Liens held by the Sellers’ senior secured lenders and any such
amounts payable shall be subordinate to the carve out for professional fees and
fees under 28 U.S.C. § 1930 as provided in the Bankruptcy Court’s order
authorizing Sellers to use cash collateral that was entered in the Cases.

        8.3  Bankruptcy Events.

		
	 	     (a) At anytime prior to Closing, Sellers in their sole discretion, after
consultation with the statutory committee of unsecured creditors appointed in
the Chapter 11 Cases and the Sellers’ pre-Petition senior lenders, may deliver
an Early Closing Election to Buyer.

		
	 	     (b) In the event that Sellers fail to comply with the timeline set forth
on Exhibit J, or at anytime from and after June 30, 2004
and prior to Closing, Buyer may deliver an Early Closing Election to Sellers.

		
	 	     (c) In the event an Early Closing Election is delivered pursuant to the
terms hereof, the provisions of Section 3.5 hereof shall
apply; provided, however, that Sellers
shall serve, at least twenty (20) days prior to the Closing, the notice of
Sellers’ intent to assume and assign the Assumed Contracts on all non-debtor
parties to the

64

 

		
	 	Assumed Contracts, rather than at least twenty (20) days prior
to the hearing to confirm the Bankruptcy Plan. Within three (3) Business
Days of receipt by Sellers or Buyer, as applicable, of an Early Closing
Election notice, Buyer will provide to Sellers a list of Executory Contracts
to be assumed by Allegiance and in the case of Sellers, assigned to Buyer (the
“Additional Assumed
Contracts”) and Sellers shall immediately notify the
counterparties to such Additional Assumed Contracts substantially in the form
of notice attached to the Sale Order. Except as provided above, the Closing
following an Early Closing Election shall occur no sooner than twenty (20)
Business Days after the delivery of such notice. For the avoidance of doubt,
to the extent the Early Closing Election is exercised,
Section 7.4(a) shall have no further force and effect. For the purposes of this Agreement
“Early Closing Election” shall mean the delivery by Sellers
to Buyer or by Buyer to Sellers, as applicable, of a written irrevocable
election to close the transactions contemplated by this Agreement pursuant to
an asset sale rather than a sale of stock of the direct Subsidiaries of ATCW.
To the extent an Early Closing Election is delivered, the Operating
Subsidiaries shall be deemed to constitute Sellers under this Agreement and
each Operating Subsidiary shall sell its assets to Buyer. Notwithstanding
anything to the contrary contained herein, the Bankruptcy Plan shall provide
that Buyer is not assuming liabilities of the Operating Subsidiaries of the
types and in the nature of those listed in Section 2.4 in
connection with Buyer’s acquisition of the stock of the Operating Subsidiaries
in accordance with the terms and conditions hereof.

ARTICLE IX

MISCELLANEOUS

        9.1  Expenses. Except as set forth in this Agreement (e.g.,
Liquidated Damages provisions and the expense sharing arrangements set forth in
Sections 2.6, 2.7 and
6.10) and whether or not the transactions contemplated
hereby are consummated, each party shall bear its own costs and expenses
incurred or to be incurred by such party in connection with this Agreement and
the consummation of the transactions contemplated hereby.

        9.2  Assignment. Neither this Agreement nor any of the
rights or obligations hereunder may be assigned by Sellers without the prior
written consent of Buyer, or by Buyer without the prior written consent of ATI;
provided, however, that, Buyer may assign
its rights and obligations hereunder, in whole or in part, to any wholly-owned
Subsidiary of Buyer, provided that no such assignment shall
relieve Buyer of its liabilities and obligations hereunder if such assignee
does not perform such obligations and provided,
further that this Agreement may be assigned to one or more
trustees appointed by the Bankruptcy Court to succeed to the rights of Sellers.
Subject to the foregoing, this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
and except as otherwise expressly provided herein, no other Person shall have
any right, benefit or obligation hereunder.

        9.3  Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of Sellers and Buyer, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
person any rights, benefits or remedies of any

65

 

nature whatsoever under or by
reason of this Agreement. Without limiting the foregoing, no
direct or indirect holder of any equity interests or securities of either
Sellers (other than Sellers themselves) or Buyer (whether such holder is a
limited or general partner, member, stockholder or otherwise), nor any
Affiliate of either Sellers or Buyer, nor any Representative or other
controlling person of each of the parties hereto and their respective
Affiliates shall have any liability or obligation arising under this Agreement
or the transactions contemplated thereby.

        9.4  Notices. Unless otherwise provided herein, any notice,
request, instruction or other document to be given hereunder by any party to
any other party shall be in writing and shall be delivered in person or by
courier or facsimile transmission (with such facsimile transmission confirmed
by sending a copy of such notice, request, instruction or other document by
certified mail, return receipt requested, or overnight mail) or mailed by
certified mail, postage prepaid, return receipt requested (such mailed notice
to be effective on the date such receipt is acknowledged), as follows:

	 	 	 	 
	 	If to Sellers:
	 
	 	c/o Allegiance Telecom, Inc.
	 	700 E. Butterfield Road, Suite 400
	 	Lombard, IL 60148
	 	Attention:	 	
Mark B. Tresnowski, Esq.
	 	 	 	
Executive Vice President, General Counsel and
	 	 	 	
Secretary
	 	Fax: (630) 522-5250
	 
	 	With a copy to (which shall not constitute notice):
	 
	 	Kirkland & Ellis LLP
	 	153 East 53rd
	 	New York, NY 10022
	 	Attention:	 	
Jonathan S. Henes, Esq.
	 	 	 	
Kimberly Taylor, Esq.
	 	Fax: (212) 446-4900
	 
	 	If to Buyer:

	 
	 	XO Communications, Inc.
	 	11111 Sunset Hills Road
	 	Reston, Virginia 20190
	 	Attention: General Counsel
	 	Fax: (703) 547-2025
	 
	 	With a copy to (which shall not constitute notice):

	 
	 	Brown Rudnick Berlack Israels
	 	120 West 45th Street

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	 	New York, NY 10036
	 	Attention:	 	
Edward S. Weisfelner
	 	 	 	
Steven D. Pohl
	 	Fax:	 	
(212) 704-0196
	 	 	 	
(617) 856-8201

or to such other place and with such other copies as either party may designate
as to itself by written notice to the other party. Notices sent as provided
herein shall be deemed given on the date received by the recipient. If a
recipient rejects or refuses to accept a notice given pursuant to this Section,
or if a notice is not deliverable because of a changed address or fax number of
which no notice was given in accordance with the provisions hereof, such notice
shall be deemed to be received two (2) days after such notice was mailed
(whether as the actual notice or as the confirmation of a faxed notice) in
accordance with the terms hereof.

        9.5  Choice of Law. This Agreement shall be construed and
interpreted, and the rights of the parties shall be determined, in accordance
with the Bankruptcy Code and the substantive laws of the State of New York for
contracts expected and likely to be performed solely within such state without
regard to the conflict of laws principles thereof or of any other jurisdiction.

        9.6  Entire Agreement; Amendments and Waivers. This
Agreement (including the schedules and exhibits hereto) and the other
Transaction Documents constitute the entire agreement between the parties
pertaining to the subject matter hereof and supersede all prior agreements,
understandings, negotiations, and discussions, whether oral or written, of the
parties. No supplement, modification or waiver of this Agreement (including
any schedule hereto) shall be binding unless the same is executed in writing by
all parties. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar), and no such waiver shall constitute a continuing waiver unless
otherwise expressly provided.

        9.7  No Recourse Against Third Parties. Buyer agrees for
itself and for all of its officers, directors, shareholders, Affiliates,
attorneys, agents and any other parties making any claim by, through or under
the rights of such persons (collectively, the “Buyer Group”)
that no member of the Buyer Group shall have any rights against any creditor,
officer, director, shareholder (other than Sellers themselves), Affiliate,
attorney or agent of Allegiance (each, individually, a “Non-Recourse
Person”) for any damages, suits, claims, proceedings, fines,
judgments, costs or expenses (including attorneys’ fees and incidental,
consequential or punitive damages) (collectively, “Losses”)
that any Buyer Party may suffer in connection with this Agreement. If any
member of the Buyer Group makes a claim against any person or entity other than
Buyer that is not a Non-Recourse Person (a “Third Person”)
that in any way gives rise to a claim by such Third Party against any
Non-Recourse Person asserting that such Non-Recourse Person is or may be liable
to such Third Party with respect to any Losses arising in connection with this
Agreement (whether by way of indemnification, contribution, or otherwise on any
theory whatever) (a “Claim Over”), such member of the Buyer
Group shall reduce or

67

 

credit against any judgment or settlement such member of
the Buyer Group may obtain against such Third Party the full amount of any
judgment or settlement such Third Party may obtain against the Non-Recourse
Person on such Claim Over, and shall, as part of any settlement with such Third
Party, obtain from such Third Party for the benefit of such Non-Recourse Person
a satisfaction in full of such Third Party’s Claim Over against the
Non-Recourse Person. The provisions of this Section 9.7,
however, shall not apply as to any fraud claims.

        9.8  Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. Delivery of an executed
counterpart of a signature page to this Agreement by telecopy shall be as
effective as delivery of a manually executed counterpart of this Agreement. In
proving this Agreement, it shall not be necessary to produce or account for
more than one such counterpart signed by the party against whom enforcement is
sought.

        9.9  Confidentiality. Prior to the Closing and after any
termination of this Agreement, the provisions of the Confidentiality Agreement
shall continue in full force and effect; provided,
however, that effective as of the date hereof the provisions
of the Confidentiality Agreement restricting Buyer and its Affiliates from
discussing the transaction contemplated by this Agreement with third parties
shall no longer apply. After the Closing, Buyer shall no longer be subject to
the provisions of the Confidentiality Agreement, except to the extent the
confidential information specifically relates to Shared Technologies. In the
event of any conflict between the provisions of this Agreement and the
Confidentiality Agreement, the provisions of this Agreement shall prevail.
From and after the Closing, Sellers agree to keep confidential all confidential
information relating to the Business, and agree not to disclose such
information except as required by Law. Notwithstanding anything herein to the
contrary, Buyer and Sellers (and each Affiliate and person acting on behalf of
any such party) agree that each party (and each Representative of such party)
may disclose to any and all persons, without limitation of any kind, the tax
treatment and tax structure of the transaction and all materials of any kind
(including opinions or other tax analyses) that are provided to such party or
such person relating to such tax treatment and tax structure, except to the
extent necessary to comply with any applicable federal or state securities
laws. This authorization is not intended to permit disclosure of any other
information, including (i) any portion of any materials to the extent not
related to the tax treatment or tax structure of the transaction, (ii) the
identities of participants or potential participants in the transaction, (iii)
the existence or status of any negotiations, (iv) any pricing or financial
information (except to the extent such pricing or financial information is
related to the tax treatment or tax structure of the transaction) or (v) any other
term or detail not relevant to the tax treatment or the tax structure of the
transaction.

        9.10  Invalidity. If anyone or more of the provisions
contained in this Agreement (other than any of the provisions contained in
Article II or Article III hereof) or in any other instrument referred to
herein, shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, the parties shall use their best efforts, including

68

 

the
amendment of this Agreement, to ensure that this Agreement shall reflect as
closely as practicable the intent of the parties hereto on the date hereof.

        9.11  Headings. The table of contents and the headings of
the Articles and Sections herein are inserted for convenience of reference only
and are not intended to be a part of, or to affect the meaning or
interpretation of, this Agreement.

        9.12  Exclusive Jurisdiction. Without limiting any party’s
right to appeal any order of the Bankruptcy Court, (a) the Bankruptcy Court
shall retain exclusive jurisdiction to enforce the terms of this Agreement and
to decide any claims or disputes which may arise or result from, or be
connected with, this Agreement, any breach or default hereunder, or the
transactions contemplated hereby, and (b) any and all claims, actions, causes
of action, suits and proceedings related to the foregoing shall be filed and
maintained only in the Bankruptcy Court, and the parties hereby consent to and
submit to the jurisdiction and venue of the Bankruptcy Court and shall receive
notices at such locations as indicated in Section 9.4
hereof.

        9.13  Waiver of Right to Trial by Jury. Each party to this
Agreement waives any right to trial by jury in any action, matter or proceeding
regarding this Agreement or any provision hereof.

        9.14  Specific Performance. Each of the parties hereto
acknowledges that the other party hereto would be irreparably damaged in the
event any of the provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. Accordingly, each of the
parties hereto shall be entitled to an injunction or injunctions to prevent
breaches of the provisions of this Agreement and to enforce specifically this
Agreement and the terms and provisions thereof in any action instituted in any
court of the United States or any state thereof having subject matter
jurisdiction, in addition to any other remedy to which the parties may be
entitled, at law, in equity or pursuant to this Agreement.

        9.15  Counting. If the due date for any action to be taken
under this Agreement (including the delivery of notices) is not a Business Day,
then such action shall be considered timely taken if performed on or prior to
the next Business Day following such due date.

        9.16  Service of Process. Each party irrevocably consents to
the service of process in any action or proceeding by receipt of mailed copies
thereof by national courier service or registered United States mail, postage
prepaid, return receipt requested, to its address as specified in or pursuant
to Section 9.4 hereof. However, the foregoing shall not
limit the right of a party to effect service of process on the other party by
any other legally available method.

        9.17  Time of Essence; Effectiveness of the Closing Date.
With regard to all dates and time periods set forth or referred to in this
Agreement, time is of the essence. In the event the Closing Date occurs prior
to the occurrence of the Early Funding Date,

69

 

for purposes of Article II,
Sections 6.1, 7.1, 7.2, 7.3, and 8.1, all references to Early Funding Date
shall be replaced with references to the Closing Date.

        9.18  Exhibits and Schedules. The Exhibits and Schedules
attached to, delivered with and identified to this Agreement are a part of this
Agreement the same as if fully set forth herein and all references herein to
any Section of this Agreement shall be deemed to include a reference to any
Schedule named therein. Any disclosure made in any Schedule to this Agreement
which is applicable to another Schedule to this Agreement shall be deemed to be
made with respect to such other Schedule regardless of whether or not a
specific cross reference is made thereto if the relevance of such disclosure to
such other schedule is reasonably apparent on its face.

        9.19  Interpretation.

		
	 	     (a) Whenever the words “include,” “includes” or “including” are used in
this Agreement they shall be deemed to be followed by the words “without
limitation.”

		
	 	     (b) The words “hereof,” “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and Section, Schedule
and Exhibit references are to this Agreement unless otherwise specified.

		
	 	     (c) The meanings given to terms defined herein shall be equally
applicable to both singular and plural forms of such terms.

		
	 	     (d) Words denoting any gender shall include all genders. Where a word or
phrase is defined herein, each of its other grammatical forms shall have a
corresponding meaning.

		
	 	     (e) A reference to any party to this Agreement or any other agreement or
document shall include such party’s successors and permitted assigns.
	 
	 	     (f) A reference to any legislation or to any provision of any legislation
shall include any modification or re-enactment thereof, any legislative
provision substituted therefor and all regulations and statutory instruments
issued thereunder or pursuant thereto.

		
	 	     (g) All references to “$” and “dollars” shall be deemed to refer to
United States currency unless otherwise specifically provided.

		
	 	     (h) All references to any financial or accounting terms shall be defined
in accordance with GAAP.

        9.20  Preparation of this Agreement. Buyer and Sellers
hereby acknowledge that (i) Buyer and Sellers jointly and equally participated
in the drafting of this Agreement and all other agreements contemplated hereby,
(ii) Buyer and Sellers have been adequately represented and advised by legal
counsel with respect to this Agreement

70

 

and the transactions contemplated
hereby, and (iii) no presumption shall be made that any provision of this
Agreement shall be construed against either party by reason of such role in the
drafting of this Agreement and any other agreement contemplated hereby.

[Remainder of Page Intentionally Left Blank]

71

 

          IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of Sellers and Buyer as of the date first above
written.

	 	 	 	 	 
	 	 	SELLERS:
	 	 	 	 	 
	 	 	ALLEGIANCE TELECOM, INC.
	 	 	 	 	 
	 	 	By:	 	/s/ Mark B. Tresnowski
	 	 	 	 	

	 	 	 	 	Name:  Mark B. Tresnowski
	 	 	 	 	Title:    Executive
Vice President
	 	 	 	 	 
	 	 	ALLEGIANCE TELECOM COMPANY WORLDWIDE
	 	 	ADGRAFIX CORPORATION
	 	 	ALGX BUSINESS INTERNET, INC.
	 	 	ALLEGIANCE INTERNET, INC.
	 	 	ALLEGIANCE TELECOM INTERNATIONAL, INC.
	 	 	ALLEGIANCE TELECOM OF ARIZONA, INC.
	 	 	ALLEGIANCE TELECOM OF CALIFORNIA, INC.
	 	 	ALLEGIANCE TELECOM OF COLORADO, INC.
	 	 	ALLEGIANCE TELECOM OF FLORIDA, INC.
	 	 	ALLEGIANCE TELECOM OF GEORGIA, INC.
	 	 	ALLEGIANCE TELECOM OF ILLINOIS, INC.
	 	 	ALLEGIANCE TELECOM OF INDIANA, INC.
	 	 	ALLEGIANCE TELECOM OF MARYLAND, INC.
	 	 	ALLEGIANCE TELECOM OF MASSACHUSETTS, INC.
	 	 	ALLEGIANCE TELECOM OF MICHIGAN, INC.
	 	 	ALLEGIANCE TELECOM OF MINNESOTA, INC.
	 	 	ALLEGIANCE TELECOM OF MISSOURI, INC.
	 	 	ALLEGIANCE TELECOM OF NEVADA, INC.
	 	 	ALLEGIANCE TELECOM OF NEW JERSEY, INC.
	 	 	ALLEGIANCE TELECOM OF NEW YORK, INC.
	 	 	ALLEGIANCE TELECOM OF NORTH CAROLINA, INC.
	 	 	ALLEGIANCE TELECOM OF OHIO, INC.
	 	 	ALLEGIANCE TELECOM OF OKLAHOMA, INC.
	 	 	ALLEGIANCE TELECOM OF OREGON, INC.
	 	 	ALLEGIANCE TELECOM OF PENNSYLVANIA, INC.
	 	 	ALLEGIANCE TELECOM OF TEXAS, INC.
	 	 	ALLEGIANCE TELECOM OF THE DISTRICT OF COLUMBIA, INC.
	 	 	ALLEGIANCE TELECOM OF VIRGINIA, INC.
	 	 	ALLEGIANCE TELECOM OF WASHINGTON, INC.
	 	 	ALLEGIANCE TELECOM OF WISCONSIN, INC.
	 	 	ALLEGIANCE TELECOM PURCHASING COMPANY
	 	 	ALLEGIANCE TELECOM SERVICE CORPORATION
	 	 	COAST TO COAST TELECOMMUNICATIONS, INC.
	 	 	HOSTING.COM, INC.
	 	 	INTERACCESS TELECOMMUNICATIONS CO.

 

 

	 	 	 	 	 
	 	 	 	 	(Signatures Continued)
	 	 	 	 	 
	 	 	JUMP.NET, INC.
	 	 	VIRTUALIS SYSTEMS, INC.
	 	 	 	 	 
	 	 	By:	 	   /s/ Mark B. Tresnowski
	 	 	 	 	

	 	 	 	 	Name:  Mark B. Tresnowski
	 	 	 	 	Title:  Executive
Vice President

 

 

	 	 	 	 	 
	 	 	BUYER:
	 	 	 	 	 
	 	 	XO COMMUNICATIONS, INC.
	 	 	 	 	 
	 	 	By:	 	/s/ William Garahan
	 	 	 	 	

	 	 	 	 	Name: William
Garahan
	 	 	 	 	Title:  Senior
Vice President of Corporate Developmentexv10w48

 

RESTRICTED STOCK AWARD CERTIFICATE

June 12, 2003

Exhibit 10.48

Thomas M. Brandt, Jr.

474 Old Orchard Circle

Millersville, MD 21108 USA

Dear Thomas:

Pursuant to the terms and conditions of the TeleCommunication Systems, Inc.
Amended & Restated 1997 Stock Incentive Plan (the “Plan”), you have been
granted a Restricted Stock Award (the “Award”) for the number of shares (each
an “Award Share”, and collectively, the “Award Shares”) of the Class A common
stock, par value $0.01 per share (the “Common Stock”) of TeleCommunication
Systems, Inc. (the “Company”) as outlined below. This Certificate constitutes
part of and is subject to the terms and provisions of the attached Restricted
Stock Grant Agreement (the “Agreement”) which is incorporated herein by
reference.

Granted To: Thomas M. Brandt, Jr.
     
(the “Employee”)

Grant Date: April 14, 2003

Award Shares Granted: 85,000

Vesting Schedule: 3-year Vesting

28,333 on 04/14/2004

28,333 on 04/14/2005

28,334 on 04/14/2006

By my signature below, I hereby acknowledge receipt of this Award granted on
the Grant Date shown above, which has been issued to me under the terms and
conditions of the Agreement and the Plan. I understand that I will forfeit all
unvested Award Shares at the close of business on my last day of employment at
TCS. I further acknowledge receipt of the Plan Prospectus and the latest annual
report or other SEC filing, and agree to be bound by all of the terms and
conditions of the Award, as evidenced in the Agreement, and the Plan.

	 	 	 
	Signature: /s/ Thomas M. Brandt, Jr.
	 	Date: ________________
	                     Thomas M. Brandt, Jr.
	 	 

Note: If there are any discrepancies in the name or address shown above, please
make the appropriate corrections on this form.

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