Document:

<PAGE>

                                 Exhibit 10(a)

                             RETIREMENT AGREEMENT
                             --------------------

     THIS RETIREMENT AGREEMENT (the "Agreement") is made and entered into as of
the 22nd day of August, 2000, by and between Verne G. Istock ("Executive") and
BANK ONE CORPORATION, a Delaware corporation (the "Company").

                             STATEMENT OF PURPOSE

     Executive is employed as President of the Company. The parties hereto have
agreed that Executive shall resign as a director and officer of the Company and
its Affiliates effective as of September 19, 2000 and that Executive's
employment with the Company and its Affiliates will terminate effective
September 30, 2000 (the "Date of Termination"). The Company and Executive wish
to settle in full all matters and claims, contractual and non-contractual,
relating to Executive's employment with the Company and its Affiliates. The term
"Affiliate" means any business in which the Company owns a direct or indirect
25% or greater equity interest.

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

     1.   Termination of Employment. Executive hereby resigns from all
officerships, directorships and other positions with the Company and its
Affiliates as of September 19, 2000, and agrees to acknowledge such resignation
pursuant to the attached letter of resignation. The Company and Executive
acknowledge that Executive shall remain on the Company's or an Affiliate's
payroll as a non-officer and receive base salary at his current annual rate
through the Date of Termination at which date Executive's employment with the
Company shall be terminated.

     2.   Termination Benefits.  In consideration of Executive's agreement
relating to confidentiality, noncompetition and nonsolicitation set forth in
Paragraph 9 below, the Company agrees as follows:

     a.   Severance Benefits. Executive shall be entitled to a lump sum cash
severance payment in the amount of $8.2 million, to be paid in cash on October
6, 2000. Such severance amount shall be subject to all applicable withholding
and deductions.

     b.   Pension Benefits. Executive shall be entitled to an aggregate pension
benefit, payable in the form of a 50% joint and survivor annuity, of $2,230,000
per annum commencing as of October 1, 2000. Such pension benefit amount shall be
inclusive of all amounts to which Executive is entitled under all qualified and
nonqualified defined benefit pension plans or arrangements sponsored by the
Company or any of its Affiliates, including without limitation the Personal
Pension Account Plan, the Supplemental Personal Pension Account Plan and the
Supplemental Executive Retirement Plan. To the extent permitted under the
applicable pension plans, Executive may elect to receive such pension amount in
any other actuarially equivalent manner or to defer receipt thereof. To the
extent that the pension benefit provided by this paragraph exceeds the pension
benefit to which Executive would otherwise be entitled, payment of such excess
shall be made in accordance with the provisions of the Supplemental Executive
Retirement Plan. Executive will execute such forms as may be appropriate under
such plans to effect the foregoing payments.

     c.   Stock Awards. Executive's restricted stock awards granted February 16,
1999 and February 15, 2000 shall become unrestricted effective on his Date of
Termination. Each of Executive's outstanding stock options become exercisable,
if not already exercisable, on September 30, 2000 and shall continue to be
exercisable until the earliest of (i) September 30, 2005, (ii) the expiration
date of the option, or (iii) the date on which Executive violates the provisions
of Paragraph 9 below, determined without regard to the eighteen-month time
limitation otherwise applicable under Paragraphs 9(b) and 9(c) below.

     d.   Office Space and Secretarial Support.  The Company shall provide
Executive with reasonable office space, secretarial support and parking
privileges (equivalent to parking privileges for senior executives) for life, or
if earlier, until Executive commences full time employment with another
employer.

     3.   Other Benefits. Executive is a participant in certain stock incentive
plans and employee benefit plans maintained by the Company. This Agreement shall
not change the terms of such plans or the benefits earned by or due to Executive
thereunder for services rendered to the Company through the Date of Termination.
The benefits earned by or due to Executive in accordance with the terms of such
plans shall be paid or provided by the Company or such plans (as the case may
be) when due (whether such due date is on, before or after the Date of
Termination), and full payments and provision of such benefits shall discharge
fully all obligations of the
<PAGE>

Company and such plans with respect to Executive's benefits under such plans.
Notwithstanding the foregoing, Executive's pension benefits shall be paid in
accordance with the provisions of paragraph 2(b) above, and the severance
benefits set forth in Paragraph 2 (a) above shall be inclusive of all other
severance or pay continuation and all accrued vacation pay to which Executive
would otherwise be entitled from the Company and its Affiliates. Executive
acknowledges that he is not entitled to a bonus for 2000.

     4.   Tax Withholding and Reporting. The Company shall be entitled to
withhold from the benefits and payment described herein all income and
employment taxes required to be withheld by applicable law.

     5.   Release of the Company. In consideration of the Company entering into
this Agreement, Executive, on behalf of himself and his heirs, personal
representatives, successors and assigns, hereby releases and forever discharges
the Company, its Affiliates, and each and every one of their respective present
and former directors, officers, employees, agents, successors and assigns from
and against any and all claims, demands, damages, actions, causes of action,
costs and expenses, which Executive now has, may ever have had or may have
hereafter upon or by reason of any matter, cause or thing occurring, done or
omitted to be done prior to the date of this Agreement, that constitute
"Employment-Related Claims" or rights and claims Executive has or might have
under the Age Discrimination in Employment Act of 1967, as amended ("ADEA"),
Title VII of the Civil Rights Act of 1964, as amended, and the Americans with
Disabilities Act of 1990, as amended; provided, however, that this release shall
not apply to any claims which Executive may have for the payments or provision
of the benefits under this Agreement. For purposes of this Agreement,
"Employment-Related Claims" means all rights and claims Executive has or may
have related to his employment by or status as an employee, officer or director
of the Company or any of its Affiliates or to the termination of that employment
or status or to any employment practices and policies of the Company or its
Affiliates.

     Executive acknowledges and agrees that he has read this release in its
entirety and that this release is a general release of all known and unknown
claims, including rights and claims arising under ADEA. Executive and the
Company further acknowledge and agree that:

     i.   This release does not release, waive or discharge any rights or claims
          that may arise for actions or omissions after the date of this
          Agreement;
     ii.  Executive is entering into this Agreement and releasing, waiving and
          discharging rights or claims only in exchange for consideration which
          he is not already entitled to receive;
     iii. Executive has been advised, and is being advised by this release, to
          consult with an attorney before executing this Agreement.
     iv.  Executive has been advised, and is being advised by this release, that
          he has up to twenty-one (21) days within which to consider this
          release; and
     v.   Executive is aware that this release will not become effective or
          enforceable until seven (7) days following his execution of this
          Agreement and that he may revoke this release at any time during such
          period by delivering (or causing to be delivered) to the Company at
          the address provided in Paragraph 14 hereof written notice of his
          revocation of this release no later than 5:00 p.m. eastern time on the
          seventh (7th) full date following his execution of this Agreement.

Executive further agrees and covenants that neither he, nor any person,
organization or other entity on his behalf, will file, charge, claim, sue or
cause or permit to be filed, charged, or claimed, any action for personal
equitable, monetary or other similar relief against the Company or its
Affiliates (including any action for damages, injunctive, declaratory or other
relief), arising from or relating in any way to his employment relationship, and
the terms, conditions and benefits payments resulting therefrom, or his
retirement and the termination of his employment relationship with the Company,
except as may be necessary to enforce the obligations of the Company to the
Executive in accordance with the express terms of this Agreement or under any
other plans or programs of the Company in which Executive participated and under
which Executive has accrued a benefit, involving any matter occurring from the
beginning of Executive's employment with the Company and its Affiliates to the
date of these presents, or involving any continuing effects of any actions or
practices which may have arisen or occurred from the beginning of such
employment to the date of these presents.  Executive agrees and covenants that
if Executive, or any other person, organization or entity on his behalf, files,
charges, claims, sues or causes or permits to be filed, charged, or claimed, any
action prohibited by the preceding sentence for personal equitable, monetary or
other similar relief, despite Executive's agreement not to do so hereunder, then
Executive will pay all of the costs and expenses of the Company (including
reasonable attorneys' fees) incurred in the defense of any such action or
undertaking.

     6.   Release of Executive. In consideration of Executive's entering into
this Agreement, the Company, for itself and its Affiliates and their respective
predecessors, successors and assigns hereby releases and forever discharges
Executive and his heirs, personal representatives, successors and assigns from
and against any and all claims, demands, damages, actions, causes of action,
costs and expenses, of whatever kind or nature, in law, equity or otherwise,
which the
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          Company or any of said entities now has, may ever have had or may have
          hereafter upon or by reason of any matter, cause or thing occurring,
          done or omitted to be done prior to the date of this Agreement,
          relating to or arising out of Executive's status as an officer,
          director or employee of the Company or any of said entities or the
          termination of that status; provided, however, that this release shall
          not apply to any claims the Company or any of said entities or parties
          may have which arise out of or relate to the conviction of Executive
          for the commission of a felony involving dishonesty with respect to
          the Company or any of said entities or parties or arise out of any
          actions with respect to which the Company would be precluded from
          indemnifying Executive under applicable law. As of the date of this
          Agreement, the Company has no knowledge of any claims against
          Executive arising out of any of the events described above.

     7.   Cooperation. Executive agrees that he will assist the Company and its
Affiliates in the defense of any claims or potential claims that may be made or
threatened to be made against the Company and its Affiliates in any action, suit
or proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), and will assist the Company and its Affiliates in the prosecution
of any claims that may be made by the Company or any Affiliate in any
Proceeding, to the extent that such claims may relate to the period of
Executive's employment by the Company or its Affiliates. The Company will
consult with Executive, and make reasonable efforts to schedule such assistance
so as not to materially disrupt Executive's business and personal affairs.
Executive agrees, unless precluded by law, to promptly inform the Company if
Executive is asked to participate (or otherwise become involved) in any
Proceeding involving such claims that may be filed against the Company or any
Affiliate. Executive also agrees, unless precluded by law, to promptly inform
the Company if Executive is asked to assist in any investigation (whether
governmental or private) of the Company or any Affiliate (or their actions),
regardless of whether a lawsuit has then been filed against the Company or any
Affiliate with respect to such investigation. The Company agrees to reimburse
Executive for all of Executive's reasonable out-of-pocket expenses associated
with such assistance, including travel expenses.

     8.   Indemnification

     a.   The Company agrees that if Executive is made a party, or is threatened
to be made a party to any Proceeding, by reason of the fact that he was a
director, officer or employee of the Company or was serving at the request of
the Company as director, officer, member, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, including
service with respect to employee benefit plans, whether or not the basis of such
Proceeding is Executive's alleged action in an official capacity while serving
as director, officer, member, employee or agent, Executive shall be indemnified
and held harmless by the Company to the fullest extent permitted or authorized
by the Company's certificate of incorporation and bylaws against all cost,
expense, liability and loss (including without limitation, attorney's fees,
judgment, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by Executive in connection
therewith, and such indemnification shall continue as to Executive even though
he has ceased to be a director, member, employee or agent of the Company or
other entity and shall inure to the benefit of Executive's heirs, executors and
administrators. The Company shall advance to Executive all reasonable costs and
expenses incurred by him in connection with a Proceeding within 20 days after
receipt by the Company of a written request for such advance. Such request shall
include an undertaking by Executive satisfactory to the Company to repay the
amount of such advance if it shall ultimately be determined that he is not
entitled to be indemnified against such costs and expenses. This Paragraph 8(a)
shall also apply to Proceedings that have commenced before the date of this
Agreement.

     b.   The Company agrees to continue to cover Executive under its directors'
and officers' liability insurance policy as in effect from time to time until
such time as suits against Executive are no longer permitted by law.

     9.   Confidential Information/Noncompetition/Nonsolicitation. In
consideration for the severance benefits and supplemental pension benefits set
forth in Paragraph 2 above, Executive agrees as follows:

     a.   Executive shall hold in a fiduciary capacity for the benefit of the
Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses,
which shall have been obtained by Executive during the Executive's employment by
the Company or any of its affiliated companies and which shall not be or become
public knowledge (other than by acts by Executive or representatives of
Executive in violation of this Agreement). Executive shall not, without the
prior written consent of the Company or as may otherwise be required by law or
legal process, communicate or divulge any such information, knowledge or data to
anyone other than the Company and those designated by it.
<PAGE>

     b.   For eighteen months after the Date of Termination, Executive will not
directly or indirectly, own, manage, operate, control or participate in the
ownership, management, operation or control of or be connected as an officer,
employee, partner, director, consultant or otherwise with, or have any financial
interest in, any business engaged in the financial services business in the
states in which the Company or its Affiliates operate a commercial banking or
other financial services business which is in material competition with the
business conducted by the Company or its Affiliates. Ownership for personal
investment purposes only of less than 2% of the voting stock of any publicly
held corporation or less than 10% of the capital and/or profits interest in any
other entity shall not constitute a violation hereof.

     c.   For eighteen months after the Date of Termination, the Executive will
not, directly or indirectly, on behalf of the Executive or any other person,
solicit for employment any person employed by the Company or its Affiliates as
of the date hereof or known by the Executive at the time to be employed by the
Company or its Affiliates.

     d.   (i) Executive acknowledges and agrees that the restrictions contained
in this Paragraph 9 are reasonable and necessary to protect and preserve the
legitimate interests, properties, goodwill and business of the Company, that the
Company would not have entered into this Agreement in the absence of such
restrictions and that irreparable injury will be suffered by the Company should
Executive breach any of the provisions of this Paragraph. Executive represents
and acknowledges that Executive has been advised by the Company to consult
Executive's own legal counsel in respect of this Agreement; Executive has had
full opportunity, prior to execution of this Agreement, to review thoroughly
this Agreement with Executive's counsel, and the provisions of this Paragraph 9
are reasonable and these restrictions do not prevent Executive from earning a
reasonable livelihood.

   (ii)   Executive further acknowledges and agrees that a breach of any of the
restrictions in this Paragraph 9 cannot be adequately compensated by monetary
damages. Executive agrees that the Company shall be entitled to preliminary and
permanent injunctive relief, without the necessity of proving actual damages, as
well as provable damages and an equitable accounting of all earnings, profits
and other benefits arising from any violation of this Paragraph 9, which rights
shall be cumulative and in addition to any other rights or remedies to which the
Company may be entitled. In the event that any of the provisions of this
Paragraph 9 should ever be adjudicated to exceed the time, geographic, service,
or other limitations permitted by applicable law in any jurisdiction, it is the
intention of the parties that the provision shall be amended to the extent of
the maximum time, geographic, service, or other limitations permitted by
applicable law, that such amendment shall apply only within the jurisdiction of
the court that made such adjudication and that the provision otherwise be
enforced to the maximum extent permitted by law.

  (iii)   Executive irrevocably and unconditionally agrees that any suit, action
or other legal proceeding arising out of this Paragraph 9, including without
limitation, any action commenced by the Company for preliminary and permanent
injunctive relief and other equitable relief, may be brought in the United
States District Court for the Northern District of Illinois or if such court
does not have jurisdiction or will not accept jurisdiction, in any court of
general jurisdiction in Chicago, Illinois; consents to the non-exclusive
jurisdiction of any such court in any such suit, action or proceeding, and
waives any objection which Executive may have to the laying of venue of any such
suit, action or proceeding in any such court. Executive also irrevocably and
unconditionally consents to the service of any process, pleadings, notices or
other papers in a manner permitted by the notice provisions of this Paragraph 9.

    10.   Confidentiality. For the period during which this Agreement has not
been publicly disclosed by the Company, Executive hereby covenants and agrees to
keep in full confidence all information concerning this Agreement except (i) to
the extent disclosure is or may be required by a statute, by a court of law, by
any governmental agency having supervisory authority over the business of the
Company or by any administrative or legislative body (including a committee
thereof) with apparent jurisdiction to order him to divulge, disclose or make
accessible such information, (ii) to the extent disclosure to Executive's legal
counsel and personal financial advisors is reasonably necessary in connection
with Executive's consideration of the terms of this Agreement or Executive's
personal financial dealings, or (iii) to members of his immediate family.

    11.   Mutual Nondisparagement. Executive shall not make any public
statements, encourage others to make statements or release information intended
to disparage or defame the Company or any of its respective directors or
officers. The Company shall not make public statements, encourage others to make
statements or release information intended to disparage or defame Executive's
reputation. Notwithstanding the foregoing, nothing in this Paragraph 11 shall
prohibit any person from making truthful statements when required by order of a
court or other body having jurisdiction. Except to the extent consistent with
the press release to be issued by the Company (the content of which shall be
subject to approval by Executive prior to release) in connection with
Executive's termination of employment or with the prior written consent of the
Company, Executive will not make
<PAGE>

any direct or indirect written or oral statements to the press, television,
radio or other media concerning any matters pertaining to the business and
affairs of the Company, or any of its Affiliates, or any of their officers or
directors in their capacities as such, or pertaining to any matters related to
Executive's employment or termination of employment with the Company.

     12.  Resolution of Disputes. Except as otherwise provided in Paragraph 9,
any disputes arising under or in connection with this Agreement shall, at the
election of Executive, be resolved by binding arbitration, to be held in
Chicago, Illinois in accordance with the rules and procedures of the American
Arbitration Association. Judgment upon the award rendered by the arbitrators may
be entered in any court having jurisdiction thereof. Costs of the arbitration or
litigation, including without limitation, attorneys' fees of both parties, shall
be borne by the Company and the Executive in such proportion as the arbitrators
may determine to be appropriate.

     13.  Compliance with Law. Notwithstanding any provision contained in this
Agreement to the contrary, in the event the FDIC, Office of the Comptroller of
the Currency or the Federal Reserve Board commences a proceeding, action or
order challenging the payment to Executive of any benefit hereunder, or in the
event any such payment hereunder is otherwise prohibited by law, such benefit
payment shall be suspended until such time as the challenge is fully and finally
resolved and the applicable regulatory authority does not object to the payments
or until such payments are otherwise permitted by law. In the event that any
challenge to the payments required by this Agreement is initiated by a
regulatory authority or other person, the Company shall notify Executive of such
challenge and shall promptly proceed in good faith to attempt to resolve such
challenge in a manner that enables the Company to make to Executive all payments
required hereunder.

     14.  Notices. All notices, requests, demands or other communications under
this Agreement will be in writing and shall be deemed to have been duly given
when delivered in person or deposited in the United States mail, postage
prepaid, by registered or certified mail, return receipt requested, to the party
to whom such notice is being given as follows:

     As to Executive:

          Mr. Verne G. Istock
          [Address]

     As to the Company:

          Bank One Corporation
          1 Bank One Plaza
          Chicago, Illinois 60670
          Attention: Chief Legal Officer

Either party may change his or its address or the name of the person to whose
attention the notice or other communication shall be directed from time to time
by serving notice thereof upon the other party as provided herein.

     15.  Governing Law. This Agreement, and the rights and obligations of the
parties hereto, shall be governed by and construed in accordance with the laws
of the State of Delaware, without regard to principles of the conflicts of laws.
If any provision hereof is unenforceable, such provision shall be fully
severable, and this Agreement shall be construed and enforced as if such
unenforceable provision had never comprised a part hereof, the remaining
provisions hereof shall remain in full force and effect, and the court
construing the Agreement shall add as a part hereof a provision as similar in
terms and effect to such unenforceable provision as may be enforceable, in lieu
of the unenforceable provision.

     16.  Representations of the Company. The Company represents and warrants to
Executive that the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized on behalf of the Company by its Board of Directors and that all
corporate action required to be taken by the Company for the execution, delivery
and performance of this Agreement has been duly and effectively taken. The
Company acknowledges that Executive has relied upon such representations and
warranties in entering into this Agreement.

     17.  Prior Agreements. This Agreement sets forth the entire agreement
between the parties hereto, and fully supersedes any and all prior oral or
written agreements between the parties pertaining to the subject matter hereof.
Executive acknowledges that his Change in Control Employment Agreement,
effective as of October 1, 1999, shall terminate on the Date of Termination and
no benefits shall be payable thereunder.

     18.  Waiver of Breach. The waiver by Executive or the Company of a breach
of any provision of this Agreement shall not operate as or be deemed a waiver of
any subsequent breach by Executive or the
<PAGE>

Company. Continuation of benefits hereunder by the Company following a breach by
Executive of any provision of this Agreement shall not preclude the Company from
thereafter exercising any right that it may otherwise independently have to
terminate said benefits based upon the same violation.

     19.  Counterparts. This Agreement may be executed in more than one
counterpart, but all of which together will constitute one and the same
agreement.

     20.  Amendments. This Agreement may be amended or canceled only by mutual
agreement of the parties in writing without the consent of any other person. So
long as Executive shall live, no person, other than the parties hereto, shall
have any rights under or interest in this Agreement or the subject matter
hereof.

     IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company has
caused this Agreement to be executed by its duly authorized representative, all
as of the date first above written.

Witness:

          /s/ Judy M. Braga                     /s/ Verne G. Istock
          -----------------                     -------------------
                                                             Verne G. Istock

                                                BANK ONE CORPORATION

                                                By: /s/ Timothy P. Moen
                                                    -------------------
<PAGE>

                                  RESIGNATION
                                  -----------

To:  Bank One Corporation

I hereby resign from my positions as director and President of Bank One
Corporation and from all other offices and directorships I hold with Bank One
Corporation and all of its affiliated and subsidiary corporations, effective
September 19, 2000.

Dated: August 22, 2000                                    /s/ Verne G. Istock
                                                          -------------------
                                                    Verne G. Istock<PAGE>

                                                                     Exhibit 4.1

                                                                  EXECUTION COPY

                       FOCAL COMMUNICATIONS CORPORATION

                     Non-Qualified Stock Option Agreement
                     ------------------------------------
      (Time-Based Optioned Shares and Performance-Based Optioned Shares)

     THIS AGREEMENT (the "Agreement") is made as of June 1, 2000 (the "Date of
Grant") by and between Focal Communications Corporation, a Delaware corporation
(the "Company"), and ((FirstName)) ((LastName)) (the "Optionee").

          1.  Definitions.

          (a)  Capitalized terms used herein without definition shall have the
     meanings assigned to them in the Company's 1998 Equity and Performance
     Incentive Plan (the "Plan").

          (b)  "Catch-up Period" shall have the meaning assigned to it in
     Section 4(c).

          (c)  "Nasdaq Telecom Index" shall mean the Nasdaq Telecommunications
     Index or, if such index is at any time no longer maintained, a successor
     index selected by the Compensation Committee of the Board of Directors of
     the Company in its discretion.

          (d)  "Performance-Based Optioned Shares" shall mean Optioned Shares
     that vest in accordance with Section 4(b) of this Agreement.

          (e)  "Period," "Period Commencement Date," and "Period Termination
     Date" shall have the meanings assigned to them in Section 4(b) of this
     Agreement.

          (f)  "Successor Entity" shall mean a successor to the Company by
     merger, consolidation, or other business combination, or a purchaser of all
     or substantially all of the Company's assets or a majority of the Company's
     outstanding voting securities, as the case may be.

          (g)  "Time-Based Optioned Shares" shall mean Optioned Shares that vest
     in accordance with Section 4(a) of this Agreement.

          (h)  "Voting Power" shall mean, at any time, the votes relating to the
     then-outstanding securities entitled to vote generally in the election of
     Directors.

          2.  Grant of Stock Option.  Subject to and upon the terms, conditions,
and restrictions set forth in this Agreement and in the Plan, the Company hereby
grants to Optionee, as of the Date of Grant, a stock option (the "Option") to
purchase ((Shares)) shares of Common Stock (the "Optioned Shares"), consisting
of [**no.] Time-Based Optioned Shares and [**no.] Performance-Based Optioned
Shares. The Option may be exercised from time to

                                       1
<PAGE>

time in accordance with the terms of this Agreement. The price at which the
Optioned Shares may be purchased pursuant to this Option shall be $29.875 per
share, subject to adjustment as hereinafter provided (the "Option Price"). The
Option is intended to be a non-qualified stock option and shall not be treated
as an "incentive stock option" within the meaning of that term under Section 422
of the Internal Revenue Code, or any successor provision thereto.

          3.  Term of Option.  The term of the Option shall commence on the Date
of Grant and, unless earlier terminated in accordance with Section 7, shall
expire ten years from the Date of Grant.

          4.  Vesting of Option.

          (a)  Vesting Schedule for Time-Based Optioned Shares.  Subject to the
               -----------------------------------------------
     expiration or earlier termination of the Option, and except as otherwise
     provided in Sections 4(g) and 4(h), the Option shall vest and become
     exercisable with respect to the following percentages of the Time-Based
     Optioned Shares on the following vesting dates, provided that Optionee is
     then employed by the Company and shall have been continuously employed by
     the Company from the Date of Grant through such dates:

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

    Vesting Date                              Cumulative Percentage of Options
    ------------                              Vested on such Vesting Date
                                              ---------------------------
    ---------------------------------------------------------------------------

    12-month anniversary of Date of Grant     25%
    ---------------------------------------------------------------------------

    18-month anniversary of Date of Grant     37.5%
    ---------------------------------------------------------------------------

    24-month anniversary of Date of Grant     50%
    ---------------------------------------------------------------------------

    30-month anniversary of Date of Grant     62.5%
    ---------------------------------------------------------------------------

    36-month anniversary of Date of Grant     75%
    ---------------------------------------------------------------------------

    42-month anniversary of Date of Grant     87.5%
    ---------------------------------------------------------------------------

    48-month anniversary of Date of Grant     100%
    ---------------------------------------------------------------------------

          (b) Vesting Schedule for Performance-Based Optioned Shares.  Subject
              ------------------------------------------------------
     to the expiration or earlier termination of the Option, provided that
     Optionee is then employed by the Company and shall have been continuously
     employed by the Company

                                       2
<PAGE>

     from the Date of Grant through such dates, and except as otherwise provided
     in Sections 4(g) and 4(h), the Option shall vest and become exercisable
     with respect to 25% of the Performance-Based Optioned Shares if, as of any
     Period Termination Date, the per share price performance of the Common
     Stock on the Nasdaq National Market from the respective Period Commencement
     Date to such Period Termination Date was in the top quartile when compared
     to the per share price performance during such Period of all companies
     whose common stock was included in the Nasdaq Telecom Index on such Period
     Termination Date.

         -------------------------------------------------------------------
            Period        Period Commencement Date      Period Termination
            ------        ------------------------      ------------------
                                                               Date
                                                               ----
         -------------------------------------------------------------------
              1                 June 1, 2000               May 31, 2001
         -------------------------------------------------------------------
              2                 June 1, 2001               May 31, 2002
         -------------------------------------------------------------------
              3                 June 1, 2002               May 31, 2003
         -------------------------------------------------------------------
              4                 June 1, 2003               May 31, 2004
         -------------------------------------------------------------------

          (c)  Catch-up for Unvested Performance-Based Optioned Shares.  If any
               -------------------------------------------------------
     Performance-Based Optioned Shares do not vest on a Period Termination Date
     because of the application of Section 4(b), provided that Optionee is then
     employed by the Company and shall have been continuously employed by the
     Company from the Date of Grant through such dates, and except as otherwise
     provided in Sections 4(g) and 4(h), all such unvested Performance-Based
     Optioned Shares shall vest and become exercisable on such or a subsequent
     Period Termination Date if, as of the subject Period Termination Date, the
     per share price performance of the Common Stock from the Date of Grant to
     such Period Termination Date (a "Catch-up Period") was in the top quartile
     when compared to the per share price performance during such Catch-up
     Period of all companies whose common stock was  included in the Nasdaq
     Telecom Index on such Period Termination Date.

          (d)  Cliff Vesting for Performance-Based Optioned Shares.
               ---------------------------------------------------
     Notwithstanding Sections 4(b) and (c), any unvested Performance-Based
     Optioned Shares shall vest and become exercisable on May 31, 2010, provided
     that Optionee is then employed by the Company and shall have been
     continuously employed by the Company from the Date of Grant through such
     date.

          (e)  Exercise in Whole or in Part.  To the extent the Option is
               ----------------------------
     exercisable, it may be exercised in whole or in part.  In no event shall
     Optionee be entitled to acquire a fraction of one Optioned Share pursuant
     to the Option.  Optionee shall be entitled to the privileges of ownership
     with respect to Optioned Shares purchased and delivered to him or her only
     upon the exercise of all or part of the Option.

                                       3
<PAGE>

          (f)  Conversion of Options.  If the outstanding shares of Common
               ---------------------
     Stock are converted into or exchanged for a different number or kind of
     shares or other securities or other consideration, the Option shall be
     exchanged for or otherwise converted into economically and otherwise
     substantively equivalent (as determined by the Board in its good faith
     discretion in accordance with the Plan) options to purchase shares of stock
     or other equity securities of any Successor Entity.

          (g)  Acceleration of Vesting upon Discharge in Anticipation of or
               ------------------------------------------------------------
     Following a Change in Control.  If Optionee's employment is terminated by
     -----------------------------
     the Company in connection with or anticipation of a Change in Control, or
     if Optionee's employment is terminated by the Company or a Successor Entity
     at any time during the one-year period commencing on the date of a Change
     in Control, the Optioned Shares shall automatically vest and become
     immediately exercisable upon such termination of employment as follows:
     (i) all of the Time-Based Optioned Shares shall automatically vest and
     become immediately exercisable upon such termination and (ii) the
     Performance-Based Optioned Shares subject to vesting in Periods ending on
     or after the date of termination of employment (but not Performance-Based
     Optioned Shares that did not vest on  Period Vesting Date that occurred
     prior to the date of termination of employment because of the application
     of Section 4(b)) shall automatically vest and become immediately
     exercisable upon such termination.  For the purpose of this Section 4(g),
     Optionee's employment shall be deemed to have been terminated by the
     Company or a Successor Entity if Optionee's employment is actually
     terminated by the Company or a Successor Entity or is terminated by
     Optionee at any time during the one-year period commencing on the date of a
     Change in Control as a result of any of the following occurring in
     connection with or anticipation of a Change in Control:  (i) a material
     reduction in Optionee's total compensation without Optionee's consent (it
     being understood that a change in the form or measure of compensation,
     including but not limited to a change from salary-based compensation to
     commission-based compensation or a rearrangement of Optionee's compensation
     package to include a different combination of salary, bonus, commission,
     options, or other equity incentives, etc., shall not in and of itself
     constitute such a reduction), (ii) a significant adverse change in the
     nature or scope of Optionee's authority, power, function, responsibilities,
     or duties, or (iii) a relocation of Optionee's place of employment to a
     site that is more than 35 miles from Optionee's place of employment
     immediately prior to the Change in Control without Optionee's consent.

                                       4
<PAGE>

          (h)  Acceleration of Vesting Upon Retirement, Disability, or Death. In
               -------------------------------------------------------------
     the event of (i) Optionee's retirement from the Company after attaining age
     65, or, in the Board's sole discretion, Optionee's retirement after
     attaining age 55 but not age 65, (ii) Optionee's Disability (as defined in
     Section 7) if Optionee becomes Disabled while an employee of the Company
     and such Disability results in Optionee's separation of employment from the
     Company, or (iii) the death of Optionee if such death occurs while Optionee
     is employed by the Company, all Optioned Shares that would be subject to
     vesting within one year after the occurrence of such event (except for
     Performance-Based Optioned Shares that did not vest on Period Vesting Date
     that occurred prior to the date of termination because of the application
     of Section 4(b)), shall automatically vest and become immediately
     exercisable.

          5.  Transferability of Option.  The Option granted hereby shall be
neither transferable nor assignable by Optionee other than by will or by the
laws of descent and distribution and may be exercised, during the lifetime of
Optionee, only by Optionee or, in the event of his or her legal incapacity, by
his or her guardian or legal representative acting on behalf of Optionee.  Any
purported transfer or encumbrance in violation of the provisions of this Section
5 shall be void, and the other party to any such purported transaction shall not
obtain any rights to or interest in the Option.

          6.  Notice of Exercise; Payment.  To the extent then exercisable, the
Option may be exercised by written notice to the Company stating the number of
Optioned Shares for which the Option is being exercised and the intended manner
of payment.  The date of such notice shall be the exercise date.  Payment equal
to the aggregate Option Price of the Optioned Shares being exercised shall be
tendered in full with the notice of exercise to the Company either (i) in cash
or by check acceptable to the Company, (ii) by the tender to the Company of
shares of Common Stock owned by Optionee for at least 6 months and registered in
the name of Optionee having an aggregate fair market value on the date of
exercise equal to the total Option Price, such fair market value to be
determined based on the Market Value per Share on the date of exercise, (iii) by
delivery of irrevocable instructions to a financial institution or broker to
deliver promptly to the Company sale or loan proceeds with respect to the shares
sufficient to pay the total Option Price, or (iv) by any combination of the
payment methods specified in clauses (i) through (iii) hereof.  Within ten days
thereafter, the Company shall direct the due issuance of the Optioned Shares so
purchased.

          7.  Conditions and Limitations on Right to Exercise Option.
Notwithstanding the provisions of Sections 3 and 4:

          (a) Except as otherwise provided in Section 7(b), the Option may not
     be exercised unless Optionee is, at the time of exercise, an employee of
     the Company or a Subsidiary (as defined in the Plan) and has been employed
     by the Company or a Subsidiary continuously since the Date of Grant.  If
     Optionee returns to active employment with the Company or a Subsidiary
     after having been on an approved leave of absence from the Company or a
     Subsidiary, Optionee shall be treated as if continuously employed during
     the period of such leave of absence.  The Option may not, however, be

                                       5
<PAGE>

     exercised by Optionee while on a leave of absence from active employment
     with the Company or a Subsidiary, unless such exercise is expressly
     approved in writing by the Board; and

          (b)  (i)  If Optionee ceases to be employed by the Company or a
     Subsidiary (other than by reason of death, Disability, or retirement), the
     Option, to the extent Optionee was entitled to exercise it at the date of
     termination of employment, may be exercised at any time within 30 days
     after such termination but not after the date of termination of the Option.
     Any part of the Option not so exercised shall expire. Notwithstanding the
     foregoing, if Optionee's employment is terminated for Cause (as defined
     below), then the Option shall terminate and be unexercisable.

               (ii) If Optionee's employment is terminated by reason of
     retirement, Disability or death, all or any part of the Option that has
     vested but not yet been exercised, or that is subject to vesting under
     Section 4(h), may be exercised at any time within one year after such
     termination but not after the date of expiration of the Option.

          As used in this Agreement, "Cause" means (i) Optionee's willful or
repeated failure substantially to perform the duties of his or her position with
the Company (other than any such failure resulting from his or her Disability
(as defined below)), which failure is not or cannot be cured within five
business days after the Company has given written notice thereof to Optionee
specifying in detail the particulars of the acts or omissions deemed to
constitute such failure; (ii) the engaging by Optionee in willful misconduct
which is materially injurious to the Company; (iii) the engaging by Optionee in
any act of moral turpitude that is reasonably likely to materially and adversely
affect the Company or its business; or (iv) Optionee's conviction of, or entry
of a plea of nolo contendere with respect to, any felony.  For purposes of this
definition, no act, or failure to act, on Optionee's part shall be considered
"willful" unless done, or omitted to be done, by Optionee in bad faith and
without reasonable belief that Optionee's action or omission was in the best
interests of the Company.  Optionee shall not be deemed to have been terminated
for Cause unless and until the board finds that Optionee's termination for Cause
is justified and has given Optionee written notice of termination, specifying in
detail the particulars of Optionee's conduct found by the Board to justify such
termination for Cause.

          As used in this Agreement, "Disability" means Optionee's inability,
due to illness, accident, injury, physical or mental incapacity or other
disability, to carry out effectively Optionee's duties and obligations to the
Company or to participate effectively and actively in the management of the
Company for a period of six months, as determined by the Board in its good faith
discretion.

          The Option shall not be exercisable for any number of Optioned Shares
in excess of the number of Optioned Shares for which the Option is then
exercisable under Sections 4 on the date of termination of employment.

                                       6
<PAGE>

          8.  No Employment Contract.  Nothing contained in this Agreement shall
confer upon Optionee any right with respect to continuance of employment by the
Company or a Subsidiary, or limit or affect in any manner the right of the
Company or a Subsidiary to terminate the employment or adjust the compensation
of Optionee.

          9.  Taxes and Withholding.  If the Company or any Subsidiary shall be
required to withhold any federal, state, local or foreign tax in connection with
the exercise of the Option, and the amounts available to the Company or such
Subsidiary for such withholding are insufficient, Optionee shall pay the tax or
make provisions that are satisfactory to the Company or such Subsidiary for the
payment thereof.  Optionee may elect to satisfy all or any part of any such
withholding obligation by surrendering to the Company a portion of the Optioned
Shares that are issued or transferred to Optionee upon the exercise of the
Option, and the Optioned Shares so surrendered by Optionee shall be credited
against any such withholding obligation at the Market Value per Share of such
shares on the date of such surrender.

          10. Compliance with Law.  The Company shall make reasonable efforts
to comply with all applicable federal and state securities laws; provided,
however, notwithstanding any other provision of this Agreement, the Option shall
not be exercisable if the exercise thereof would result in a violation of any
such law.

          11. Adjustments.  The Board shall make or provide for such
adjustments in the number of Optioned Shares covered by the Option, in the
Option Price applicable to the Option, and in the kind of shares covered
thereby, as the Board may determine is equitably required to prevent dilution or
enlargement of Optionee's rights that otherwise would result from (a) any stock
dividend, stock split, combination of shares, recapitalization, or other change
in the capital structure of the Company, (b) any merger, consolidation, spin-
off, split-off, spin-out, split-up, reorganization, partial or complete
liquidation, or other distribution of assets or issuance of rights or warrants
to purchase securities, or (c) any other corporate transaction or event having
an effect similar to any of the foregoing.  In the event of any such transaction
or event, the Board may provide in substitution for the Option such alternative
consideration as it may determine to be equitable in the circumstances and may
require in connection therewith the surrender of the Option.

          12. Available Shares.  The Company shall at all times until the
expiration of the Option reserve and keep available, either in its treasury or
out of its authorized but unissued shares of Common Stock, the full number of
Optioned Shares deliverable upon the exercise of the Option.

          13. Relation to Other Benefits.  Any economic or other benefit to
Optionee under this Agreement shall not be taken into account in determining any
benefits to which Optionee may be entitled under any profit-sharing, retirement,
or other benefit or compensation plan maintained by the Company or a Subsidiary
and shall not affect the amount of any life insurance coverage available to any
beneficiary under any life insurance plan covering employees of the Company or a
Subsidiary.

                                       7
<PAGE>

          14.  Amendments.  Any amendment to the Plan shall be deemed to be an
amendment to this Agreement to the extent that the amendment is applicable
hereto; provided, however, that no amendment shall adversely affect the rights
of Optionee under this Agreement without Optionee's consent.

          15.  Rights as a Stockholder.  Optionee shall have none of the rights
of a stockholder with respect to the shares of Common Stock subject to the
Option until such shares are issued to Optionee upon exercise of the Option.

          16.  Severability.  In the event that one or more of the provisions of
this Agreement shall be invalidated for any reason by a court of competent
jurisdiction, any provision so invalidated shall be deemed to be separable from
the other provisions hereof, and the remaining provisions hereof shall continue
to be valid and fully enforceable.

          17.  Relation to Plan.  This Agreement is subject to the terms and
conditions of the Plan.  In the event of any inconsistent provisions between
this Agreement and the Plan, the Plan shall govern.  The Board acting pursuant
to the Plan, as constituted from time to time, shall, except as otherwise
expressly provided herein, has the right to determine any questions that arise
in connection with the Option or its exercise.

          18.  Successors and Assigns.  Without limiting Section 5 hereof, the
provisions of this Agreement shall inure to the benefit of, and be binding upon,
the successors, administrators, heirs, legal representatives and assigns of
Optionee, and the successors and assigns of the Company.

          19.  Notices.  Any notice to the Company provided for herein shall be
in writing to the Company, marked Attention: Corporate Secretary at Focal
Communications Corporation, 200 North LaSalle Street, Chicago, Illinois 60601,
and any notice to Optionee shall be addressed to Optionee at his or her address
currently on file with the Company.  Except as otherwise provided herein, any
written notice shall be deemed to be duly given if and when hand delivered, or
five business days after having been mailed by United States registered or
certified mail, return receipt requested, postage prepaid, or three business
days after having been sent by a nationally recognized overnight courier
service, addressed as aforesaid.  Any party may change the address to which
notices are to be given hereunder by written notice to the other party as herein
specified, except that notices of changes of address shall be effective only
upon receipt.

          20.  Governing Law.  The laws of the State of Delaware, without giving
effect to the principles of conflict of laws thereof, shall govern the
interpretation, performance, and enforcement of this Agreement.

                                       8
<PAGE>

          IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed on its behalf by its duly authorized officer as of the day and year
first above written.

                                        FOCAL COMMUNICATIONS CORPORATION

                                        By: _________________________
                                               Robert C. Taylor
                                               President and CEO

          The undersigned Optionee hereby acknowledges receipt of an executed
original of this Agreement and accepts the Option granted hereunder, subject to
the terms and conditions of the Plan and the terms and conditions hereinabove
set forth.

Dated:  June 1, 2000.

                                        _____________________________________
                                        (Signature of Optionee)

                                        _____________________________________
                                        Name (printed or typed)

                                       9

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