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

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

i

TABLE OF CONTENTS
(continued)

ii

TABLE OF CONTENTS
(continued)

iii

TABLE OF CONTENTS
(continued)

iv

EXHIBITS

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

10

11

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”):

12

13

      and

          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”):

15

          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”):

16

          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”):

17

          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.

19

                    (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.

                    (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

20

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

          3.2 Purchase Price.

                         (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

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

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).

          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.

23

24

          3.5 Cure Price Adjustment.

25

          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.

          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

          3.6 Performance Price Adjustment.

27

28

          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.

30

          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.”

          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.

32

          4.14 Related Party Transactions.

          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.

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

          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.

35

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

36

          4.23 Employee Benefits; Labor Matters.

37

          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

          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:

41

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.

        6.3  Reorganization Process.

43

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.

45

       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.

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

46

        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.

               (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.

49

        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.

        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.

        6.14  HSR Act and General Governmental Consents.

52

53

        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.

        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.

55

        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.

56

        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.

        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.

57

        6.31  Tax Matters.

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:

58

59

        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:

60

        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:

        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:

61

          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:

               (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;

62

               (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.

        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.

64

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:

66

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.

        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.