IXC COMMUNICATIONS INC, 10-Q, 1997-08-06

IXC COMMUNICATIONS INC
10-Q, 1997-08-06
TELEPHONE COMMUNICATIONS (NO RADIOTELEPHONE)

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<PAGE> 1

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM 10-Q
------------------------

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 0-20803

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

IXC COMMUNICATIONS, INC.
(EXACT NAME OF REGISTRANT SPECIFIED IN ITS CHARTER)

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

<TABLE>
<S> <C>
DELAWARE 75-2644120
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
5000 PLAZA ON THE LAKE, SUITE 200,
AUSTIN, TEXAS 78746
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>

(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE) (512) 328-1112

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

The number of shares of Common Stock, $.01 par value, outstanding (the only
class of common stock of the Company outstanding) was 30,898,841 on July 31,
1997.

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<PAGE> 2

IXC COMMUNICATIONS, INC. AND SUBSIDIARIES

QUARTER ENDED JUNE 30, 1997

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of June 30, 1997 and
December 31, 1996............................................ 3
Condensed Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 1997 and 1996.................. 4
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1997 and 1996.......................... 5
Notes to Condensed Consolidated Financial Statements......... 6

Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................... 11
Item 3. Quantitative and Qualitative Disclosures About Market
Risks........................................................ 16

PART II. OTHER INFORMATION

Item 1. Legal Proceedings............................................ 17

Item 2. Changes in Securities........................................ 17

Item 3. Defaults Upon Senior Securities.............................. 17

Item 4. Submission of Matters to a Vote of Security Holders.......... 18

Item 5. Other Information............................................ 18

Item 6. Exhibits and Reports on Form 8-K............................. 19

SIGNATURE............................................................................ 22
</TABLE>

2
<PAGE> 3

IXC COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- ------------
(UNAUDITED) (SEE NOTE 1)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................................... $ 40,974 $ 61,340
Accounts receivable and other receivables, net of allowance for
doubtful accounts of $6,418 at June 30, 1997 and $4,030 at
December 31, 1996............................................ 62,436 47,568
Other current assets............................................ 3,593 2,197
--------- --------
Total current assets.................................... 107,003 111,105
Property and equipment............................................ 493,643 337,742
Less: accumulated depreciation.................................... (87,804) (69,133)
--------- --------
405,839 268,609
Escrow under Senior Notes......................................... -- 51,412
Investment in unconsolidated subsidiary........................... 11,070 5,486
Deferred charges and other non-current assets..................... 28,988 22,539
--------- --------
Total assets............................................ $ 552,900 $459,151
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and other current liabilities.................. $ 119,935 $ 74,945
Accrued interest................................................ 8,906 8,906
Current portion of long-term debt and capital lease
obligations.................................................. 6,450 6,750
--------- --------
Total current liabilities............................... 135,291 90,601
Long-term debt and capital lease obligations, less current
portion......................................................... 294,299 295,531
Other noncurrent liabilities...................................... 12,392 9,540
7 1/4% Junior Convertible Preferred Stock; $.01 par value;
authorized -- 3,000,000 shares of all classes of Preferred
Stock; 1,018,123 shares issued and outstanding (aggregate
liquidation preference of $101,813, including dividends of
$1,813, at June 30, 1997)....................................... 98,010 --
Stockholders' equity:
10% Junior Series 3 Cumulative Preferred Stock, $.01 par value;
authorized -- 3,000,000 shares of all classes of Preferred
Stock; 12,550 shares issued and outstanding (aggregate
liquidation preference of $20,004 at June 30, 1997).......... 13 13
Common stock, $.01 par value; 100,000,000 shares authorized:
shares issued and outstanding 30,799,560 at June 30, 1997 and
30,795,014 at December 31, 1996.............................. 308 308
Additional paid-in capital........................................ 121,551 123,434
Accumulated deficit............................................... (108,964) (60,276)
--------- --------
Total stockholders' equity.............................. 12,908 63,479
--------- --------
Total liabilities and stockholders' equity.............. $ 552,900 $459,151
========= ========
</TABLE>

See accompanying notes.

3
<PAGE> 4

IXC COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(DOLLARS AND NUMBER OF SHARES IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
--------------------- ---------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net operating revenues:
Private line................................ $ 38,494 $ 24,003 $ 69,363 $ 46,631
Switched long distance...................... 50,371 19,004 103,412 22,626
-------- -------- -------- --------
Net operating revenues.............. 88,865 43,007 172,775 69,257

Operating expenses:
Cost of communication services.............. 74,150 31,643 143,132 47,243
Operations and administration............... 18,664 10,786 35,231 21,203
Depreciation and amortization............... 13,363 6,644 23,365 12,654
-------- -------- -------- --------
Operating loss...................... (17,312) (6,066) (28,953) (11,843)
Interest income............................... 1,162 127 2,238 253
Interest income on escrow under Senior
Notes....................................... -- 2,080 203 4,637
Interest expense.............................. (8,014) (9,490) (15,760) (19,360)
Equity in net loss of unconsolidated
subsidiaries................................ (4,532) (9) (6,351) (14)
-------- -------- -------- --------
Loss before benefit for income taxes and
minority interest........................... (28,696) (13,358) (48,623) (26,327)
Benefit for income taxes...................... -- 1,402 252 2,765
Minority interest............................. (114) (111) (317) (204)
-------- -------- -------- --------
Net loss...................................... (28,810) (12,067) (48,688) (23,766)
Dividends applicable to preferred stock....... (2,288) (432) (2,758) (865)
-------- -------- -------- --------
Net loss applicable to common and common
equivalent stockholders..................... $(31,098) $(12,499) $(51,446) $(24,631)
-------- -------- -------- --------
Net loss per common and common equivalent
share....................................... $ (1.01) $ (0.50) $ (1.67) $ (0.99)
======== ======== ======== ========
Weighted average common and common equivalent
shares...................................... 30,799 25,011 30,799 25,011
======== ======== ======== ========
</TABLE>

See accompanying notes.

4
<PAGE> 5

IXC COMMUNICATIONS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
---------------------------
1997 1996
----------- -----------
<S> <C> <C>
Net cash provided by (used in) operating activities............... $ (5,988) $ 812

Investing activities
Release of funds from escrow under Senior Notes................. 69,428 36,525
Deposit into escrow under Senior Notes.......................... (18,152) --
Purchase of property and equipment.............................. (140,901) (32,783)
--------- --------
Net cash provided by (used in) investing activities............... (89,625) 3,742

Financing activities
Net proceeds from the sale of convertible preferred stock....... 96,197 --
Principal payments on long-term debt and capital lease
obligations.................................................. (9,230) (5,137)
Capital contribution to unconsolidated subsidiary............... (11,650) --
Other financing activities...................................... (70) (675)
--------- --------
Net cash provided by (used in) financing activities............... 75,247 (5,812)
--------- --------
Net decrease in cash and cash equivalents......................... (20,366) (1,258)
Cash and cash equivalents at beginning of period.................. 61,340 6,915
--------- --------
Cash and cash equivalents at end of period........................ $ 40,974 $ 5,657
========= ========

Supplemental disclosure of cash flow information:
Cash paid (received) for:
Interest..................................................... $ 18,518 $ 18,713
========= ========
Taxes........................................................ $ 89 $ (884)
========= ========
</TABLE>

See accompanying notes.

5
<PAGE> 6

IXC COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited Condensed Consolidated Financial Statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation for
the periods indicated have been included. Operating results for the three month
and six month periods ended June 30, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997. The Balance
Sheet at December 31, 1996 has been derived from the audited financial
statements at that date, but does not include all of the information and notes
required by generally accepted accounting principles for complete financial
statements. The accompanying financial statements should be read in conjunction
with the audited consolidated financial statements (including the notes thereto)
for the year ended December 31, 1996.

2. LOSS PER COMMON AND COMMON EQUIVALENT SHARE

Loss per common and common equivalent share is based on net loss less
preferred stock dividend requirements, divided by the weighted average common
and common equivalent shares outstanding during the period. Outstanding options
are included in the calculation to the extent they are dilutive. Loss per share
on a fully diluted basis is not presented as the fully diluted effect is either
antidilutive or not materially different from primary loss per common and common
equivalent share, as computed.

3. INCOME TAXES

The Company has determined that a valuation allowance should be applied
against a portion of the deferred tax assets related to the net operating loss
incurred in 1997 due to uncertainty regarding its realizability. The difference
between the tax benefit recorded for the six months ended June 30, 1997 and the
expected benefit at the federal statutory rate is primarily due to the valuation
allowance applied against the deferred tax assets.

4. COMMITMENTS AND CONTINGENCIES

During 1997, the Company has made and will continue to make material
commitments related to the expansion of its network.

During the first quarter of 1997, the Company entered into two agreements
with major long distance carriers for the sale of dark fiber for approximately
$219 million. Although these agreements provide for certain penalties if the
Company does not complete construction of the defined routes within the time
frame specified in the agreements, management does not anticipate that the
Company will incur any substantial penalties under these provisions.

On April 4, 1997 Tel-Central Communications, Inc. ("Tel-Central") filed a
complaint against IXC Long Distance, Inc., one of the Company's subsidiaries, in
the United States District Court in the Western District of Missouri, after the
Company terminated service to Tel-Central for failure to pay for services.
Tel-Central's complaint makes various state and federal law claims and seeks
damages of over $100 million and asks for punitive damages of $100 million. The
Company believes that Tel-Central's claims are without merit and that such
complaint is part of an attempt by Tel-Central to avoid payment of its
outstanding balance to the Company. On May 23, 1997, Tel-Central filed a
voluntary Chapter 11 petition in bankruptcy. On May 30, 1997, the Company filed
a motion to dismiss this action. The Tel-Central action is currently stayed as a
result

6
<PAGE> 7

IXC COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

of the Tel-Central's Chapter 11 bankruptcy proceeding. The Company believes that
it is unlikely that this suit will result in any material liability to the
Company.

From time to time the Company is involved in various legal proceedings
arising in the ordinary course of business, some of which are covered by
insurance. In the opinion of the Company's management, none of the claims
relating to such proceedings will have a material effect on the financial
condition or results of operations of the Company.

5. STOCK OPTIONS

During the quarter ended June 30, 1997, the Company granted 377,400 stock
options under the 1996 Stock Plan. At June 30, 1997 stock options covering
2,059,426 shares of common stock were outstanding.

6. PROSPECTIVE ACCOUNTING CHANGES

In February 1997, the FASB issued SFAS No. 128, "Earnings Per Share" ("SFAS
No. 128"), which simplifies the calculation of earnings per share. Under SFAS
No. 128, stock options and other equity instruments are excluded from the
calculation of "basic earnings per share", which will replace primary earnings
per share disclosures. SFAS No. 128 is effective for financial statements for
periods ending after December 15, 1997. The Company believes that the future
adoption of SFAS No. 128 will not have a significant impact on earnings per
share disclosures for the periods presented.

7. CONVERTIBLE PREFERRED STOCK

In April 1997 the Company issued $100 million of 7 1/4% Junior Convertible
Preferred Stock Due 2007 ("Convertible Preferred Stock"). The net proceeds of
approximately $96.2 million from the offering are being used to fund capital
expenditures and general corporate purposes. The Convertible Preferred Stock and
the common stock issuable upon conversion thereof have not been registered under
the Securities Act of 1933 and may not be offered or sold in the United States
absent registration or an applicable exemption from registration requirements.
On March 31, 2007, the Convertible Preferred Stock must be redeemed by the
Company at a price equal to the liquidation preference plus accrued and unpaid
dividends; thus it is "mandatorily redeemable" and is not included in
stockholders' equity. Dividends payable prior to or on June 30, 1999 are, at the
option of the Company, payable in cash or through the issuance of additional
shares of Convertible Preferred Stock equal to the dividend amount divided by
the liquidation preference of such additional shares. The registration rights
agreement entered into by the Company with the initial purchasers of the
Convertible Preferred Stock requires that the Company file a shelf registration
statement with the Securities and Exchange Commission ("SEC") for the benefit of
the holders of the Convertible Preferred Stock, with respect to the Convertible
Preferred Stock and the shares of common stock that may be issued upon
conversion thereof. In the event such shelf registration statement is not
declared effective by the SEC before September 1, 1997, the Convertible
Preferred Stock will accrue dividends at a rate per annum of 7 3/4% until the
shelf registration statement is declared effective. After March 31, 1999, to the
extent and for so long as the Company is not permitted to pay cash dividends on
the Convertible Preferred Stock by the terms of any then outstanding
indebtedness or any other agreement or instrument to which the Company is
subject, the Company will be required to pay dividends, which shall accrue at
the rate per annum of 8 3/4%, through the issuance of additional shares of
Convertible Preferred Stock. Payment of cash dividends on the Convertible
Preferred Stock is not currently permitted under the indenture for the Company's
12% Senior Notes due 2005 until certain financial conditions have been met.
During June 1997, the Company issued 18,123 additional shares of Convertible
Preferred Stock in satisfaction of its June 1997 dividend requirements.

7
<PAGE> 8

IXC COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

8. SUBSEQUENT EVENT

In July 1997 the Company announced an agreement with PSINet Inc. ("PSINet")
to acquire PSINet's broad spectrum of Internet services for resale to its
customers. Under the terms of the PSINet agreements, after consummation of the
transaction, the Company will provide PSINet with an indefeasible right to use
10,000 miles of OC-48 transmission capacity on its Network over a 20-year period
in exchange for 20% (post-issuance) of PSINet common stock. In addition, if the
value of the PSINet common stock received by the Company is less than $240
million at the earlier of one year after the final delivery of the transmission
capacity (scheduled for late-1999) or four years after closing, PSINet, at its
option, will pay the Company cash and/or deliver additional PSINet common stock
to bring the value of the Company's investment to $240 million. Upon delivery of
the transmission capacity to PSINet, the Company will also receive a maintenance
fee which, when all the capacity has been delivered, will be approximately $11.5
million per year. The Company expects to consummate the transactions
contemplated by the PSINet agreements upon the satisfaction of certain
conditions, including receipt of approval of PSINet stockholders. There can be
no assurance that such conditions will be satisfied or that the PSINet
transaction will be consummated.

9. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES

The Company conducts a significant portion of its business through
subsidiaries. The Senior Notes are unconditionally guaranteed, jointly and
severally, by certain wholly-owned direct and indirect subsidiaries (the
"Subsidiary Guarantors"). The obligations of each Subsidiary Guarantor are
limited to the minimum extent necessary to prevent the guarantee from violating
or becoming voidable under applicable law relating to fraudulent conveyance or
fraudulent transfer or similar laws affecting the rights of creditors generally.
Certain subsidiaries of the Company do not guarantee the Senior Notes (the
"Non-Guarantor Subsidiaries"). The claims of creditors of Non-Guarantor
Subsidiaries have priority over the rights of the Company to receive dividends
or distributions from such subsidiaries.

The equity method has been used by the Company with respect to investments
in subsidiaries. The equity method has been used by Subsidiary Guarantors with
respect to investments in Non-Guarantor Subsidiaries. Separate financial
statements for Subsidiary Guarantors are not presented based on management's
determination that they do not provide additional information that is material
to investors. Presented below is condensed consolidating financial information
for the Company, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries as
of and for the six months ended June 30, 1997.

8
<PAGE> 9

IXC COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

9. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES -- (CONTINUED)

CONDENSED CONSOLIDATING BALANCE SHEET

<TABLE>
<CAPTION>
JUNE 30, 1997
-------------------------------------------------------------------
NON-
SUBSIDIARY GUARANTOR
IXC GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
--------- ---------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents............. $ 21,463 $ 17,117 $ 2,394 $ -- $ 40,974
Accounts receivable and other
receivables, net................... -- 39,882 22,554 -- 62,436
Other current assets.................. 1,577 1,809 207 -- 3,593
--------- -------- -------- --------- ---------
Total current assets.......... 23,040 58,808 25,155 -- 107,003
Property and equipment, net............. 7,978 353,817 44,304 (260) 405,839
Escrow under Senior Notes............... -- -- -- -- --
Due from affiliates..................... 414,305 (17,033) 18,059 (415,331) --
Deferred charges and other assets....... (44,093) (16,245) 25,346 75,050 40,058
--------- -------- -------- --------- ---------
Total assets.................. $ 401,230 $379,347 $112,864 $ (340,541) $ 552,900
========= ======== ======== ========= =========
Current liabilities:
Accounts payable, accrued interest and
other current liabilities.......... $ 10,533 $ 84,692 $ 33,624 $ (8) $ 128,841
Due to affiliate...................... 4,041 (4,060) 19 -- --
Current portion of long-term debt and
capital lease obligations.......... -- 319 6,131 -- 6,450
--------- -------- -------- --------- ---------
Total current liabilities..... 14,574 80,951 39,774 (8) 135,291
Long-term debt and capital lease
obligations, less current portion..... 277,799 1,267 15,233 -- 294,299
Due to affiliates....................... (2,837) 338,202 79,966 (415,331) --
Other noncurrent liabilities............ 13 17,678 754 (6,053) 12,392
Convertible preferred stock............. 98,010 -- -- -- 98,010

Stockholders' equity (deficit):
Preferred stock....................... 13 -- 2,585 (2,585) 13
Common stock.......................... 308 4 2 (6) 308
Additional paid-in capital............ 121,550 33,285 33,018 (66,302) 121,551
Retained earnings (accumulated
deficit)........................... (108,200) (92,040) (58,468) 149,744 (108,964)
--------- -------- -------- --------- ---------
Total stockholders' equity
(deficit)................... 13,671 (58,751) (22,863) 80,851 12,908
--------- -------- -------- --------- ---------
Total liabilities and
stockholders' equity
(deficit)................... $ 401,230 $379,347 $112,864 $ (340,541) $ 552,900
========= ======== ======== ========= =========
</TABLE>

9
<PAGE> 10

IXC COMMUNICATIONS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(UNAUDITED)

9. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR
SUBSIDIARIES -- (CONTINUED)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1997
-------------------------------------------------------------------
NON-
SUBSIDIARY GUARANTOR
IXC GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ---------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net operating revenue:
Private line........................................... $ 40 79,343 6,999 (17,019) 69,363
Switched long distance................................. -- 47,828 93,795 (38,211) 103,412
-------- -------- -------- -------- --------
Net operating revenues.......................... 40 127,171 100,794 (55,230) 172,775
Operating expenses:
Cost of communication service.......................... -- 94,376 103,590 (54,834) 143,132
Operations and administration.......................... 96 23,758 11,773 (396) 35,231
Depreciation and amortization.......................... 726 16,941 5,741 (43) 23,365
-------- -------- -------- -------- --------
(782) (7,904) (20,310) 43 (28,953)
Interest income.......................................... 20,265 5,392 625 (24,044) 2,238
Interest income on escrow under Senior Notes............. 203 -- -- 203
Interest expense......................................... (18,046) (17,460) (4,298) 24,044 (15,760)
Equity in net loss of unconsolidated subsidiaries........ (49,879) (25,534) (4,914) 73,976 (6,351)
-------- -------- -------- -------- --------
Loss before benefit (provision) for income taxes and
minority interest...................................... (48,239) (45,506) (28,897) 74,019 (48,623)
Benefit (provision) for income taxes................... (449) (85) 786 252
Minority Interest...................................... (317) (317)
-------- -------- -------- -------- --------
Net loss................................................. $(48,688) $(45,591) $ (28,111) $ 73,702 $ (48,688)
======== ======== ======== ======== ========
</TABLE>

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1997
-------------------------------------------------------------------
NON-
SUBSIDIARY GUARANTOR
IXC GUARANTORS SUBSIDIARIES ELIMINATIONS CONSOLIDATED
-------- ---------- ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating activities...... $ 4,360 $(10,994) $ 1,467 $ (821) $ (5,988)
Investing activities:
Release of funds from escrow under Senior Notes........ 69,428 69,428
Deposits into escrow under Senior Notes................ (18,152) -- -- (18,152)
Purchase of property and equipment..................... (8,130) (120,330) (12,441) (140,901)
-------- -------- -------- -------- --------
Net cash provided by (used) in, investing activities... 43,146 (120,330) (12,441) -- (89,625)
Financing activities:
Net proceeds from convertible preferred stock.......... 96,197 -- -- -- 96,197
Payments from (advance to) affiliates.................. (187,444) 159,728 27,716 -- --
Principal payments on long-term debt and capital lease
obligations.......................................... (89) (2,933) (6,208) -- (9,230)
Capital contribution to unconsolidated subsidiary...... -- (2,130) (9,520) -- (11,650)
Other financing activities............................. (70) 3,231 (3,231) -- (70)
-------- -------- -------- -------- --------
Net cash provided by (used in) financing activities.... (91,406) 157,896 8,757 -- 75,247
Net increase (decrease) in cash and cash equivalents... (43,900) 26,572 (2,217) (821) (20,366)
Cash and cash equivalents at beginning of period....... 65,363 (9,455) 4,611 821 61,340
-------- -------- -------- -------- --------
Cash and cash equivalents at end of period............. $ 21,463 $ 17,117 $ 2,394 $ -- $ 40,974
======== ======== ======== ======== ========
</TABLE>

10
<PAGE> 11

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

Except for the historical information contained below, the matters
discussed in this item are forward-looking statements that involve a number of
risks and uncertainties. The Company's actual liquidity needs, capital resources
and results may differ materially from the discussion set forth in the
forward-looking statements. For a discussion of important factors that may cause
the actual results, performance or achievements of the Company to be materially
different from those expressed or implied by the forward-looking statements, see
"Business -- Risk Factors" in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1996. In light of such risks and uncertainties,
there can be no assurance that the forward-looking information contained in this
item will in fact transpire.

THREE AND SIX MONTHS ENDED JUNE 30, 1997 COMPARED WITH THE THREE AND SIX MONTHS
ENDED JUNE 30, 1996

Net operating revenue for the second quarter and year-to-date 1997
increased by 106.6% and 149.5% over the comparable 1996 periods, due mainly to
the continuing implementation of the Company's switched services business.
Revenue for the switched services business increased 165.1% and 357.0% for the
1997 second quarter and year-to-date over 1996. Billable minutes of use ("MOUs")
increased over 1996 by 218.1% to 636.2 million minutes for the quarter and
432.7% to 1.2 billion minutes year-to-date. Revenue for the Company's private
line business increased 60.4% for the quarter and 48.7% year-to-date over 1996
due to increased demand for capacity and the availability of additional capacity
resulting from the Company's network expansion.

Cost of communication services consists primarily of access charges paid to
Local Exchange Carriers ("LECs") and transmission lease payments to, and
exchanges with, other carriers. These costs increased 134.3% for the quarter and
203.0% year-to-date over 1996 due to additional leases supporting the Company's
private line and switched services businesses, MOUs obtained from other carriers
and access charges paid to LECs in connection with the switched services
business. The Company has historically had a relatively low cost of
communication services as a percentage of revenues because substantially all its
revenues were derived from private line services, generally provided at a
relatively low cost over its own network. Expenses in the switched services
business are substantially greater than the private line business due to the
relatively high cost of LEC access charges, leases for long distance circuits
and MOUs obtained from other carriers. The Company expects its cost of
communication services as a percentage of revenue to increase over historical
results if the switched services revenue becomes a larger share of the Company's
business.

Operations and administration expenses for the quarter and year-to-date for
1997 have increased 73.0% and 66.2% over 1996 primarily as a result of costs
associated with the Company's switched network. Although the Company has been
successful in establishing its nationwide switched services business with
significant revenues, EBITDA in the switched services business has fallen
significantly below the Company's expectations. In the first half of 1997, the
Company's EBITDA from switched services continued to be negative and the Company
believes it is likely to remain negative for the balance of the year. The
Company believes these results are due to two primary factors:

First, the Company typically prices its interstate services to customers at
a blended-average rate based upon the expected usage and mix of traffic between
high-access-cost and low-access-cost LATAs. Certain of IXC's customers have
generated switched traffic comprised of a substantially higher mix of minutes
originating or terminating in high-access-cost LATAs than was anticipated at the
time the customer contracts were negotiated and pricing established.

Second, the Company configures its switched network to account for the
expected traffic distribution of its customers. In certain areas, traffic volume
has been higher than expected causing certain of the Company's switches to run
at capacity and requiring the Company to overflow excess traffic onto other
carriers' switched networks at a substantial cost.

11
<PAGE> 12

The Company is attempting to improve EBITDA in the switched services
business by: examining the traffic distributions of its customers; identifying
customers generating an unprofitable mix of traffic, and where appropriate and
as contractually allowed, adjusting contract terms; pre-screening new contract
proposals to evaluate the financial impact of expected traffic distributions;
including provisions in certain new contracts to assure reasonable traffic
distributions; and adding switch capacity to reduce the cost of network overflow
traffic. The Company is also developing procedures to better analyze its
expected traffic patterns in order to enhance network efficiency. The Company
believes that efforts to maintain a profitable mix of switched minutes may slow
the growth rate of switched services revenue, but, coupled with anticipated
reductions in leased circuit expense as the network is completed, would provide
improvement in switched service operating results.

Depreciation and amortization for the quarter and year-to-date for 1997
increased 101.1% and 84.6% over the comparable 1996 periods due to the increase
in depreciable assets as a result of the Company's network expansion.
Depreciation and amortization will continue to increase in conjunction with
spending on capital assets to increase network capacity.

Interest income for the quarter and year-to-date for 1997 decreased over
1996 by $1.0 million and $2.4 million as proceeds from the Company's 1996 and
1997 debt and equity placements were used to construct the Company's network and
operate its business.

Interest expense for the quarter and year-to-date periods decreased over
1996 by $1.5 million and $3.6 million. Total interest costs for the year-to-date
1997 period were $19.2 million, compared to $19.9 million for the comparable
1996 period. Capitalization of interest reduced interest expense by $3.4 million
year-to-date in 1997 compared to $0.5 million in 1996.

Equity in net loss of unconsolidated subsidiaries increased by $4.5 million
for the second quarter and $6.3 million for the year-to-date 1997 over 1996 due
to the increased losses in the Mexican telecommunications investment described
below. Losses are expected to continue for this investment for the foreseeable
future.

The income tax benefit for the quarter and year-to-date for 1997 decreased
by $1.4 million and $2.5 million over 1996. This decrease occurred because the
tax benefit of the Company's losses are being fully reserved in 1997, whereas in
1996 the Company recognized tax benefits related to the favorable resolution of
federal income tax examinations.

The Company experienced a net loss of $48.7 million for the six months
ended June 30, 1997 as compared to a net loss of $23.8 million for the six
months ended June 30, 1996 as a result of the factors discussed above.

LIQUIDITY AND CAPITAL RESOURCES

The Company's private line operations have historically provided positive
cash flow (even in years of net losses, as in 1993 and 1995), which has provided
adequate liquidity to meet the Company's operational needs. However, the
Company's capital expenditures and, since the issuance of the Company's 12 1/2%
Senior Notes due 2005 (the "Senior Notes") in the fourth quarter of 1995, its
interest expense have been financed with the proceeds of debt and equity
securities.

Cash used in operating activities was $6.0 million for the six months ended
June 30, 1997 compared to cash provided by operations of $0.8 million in the
comparable period of 1996, primarily as a result of network expansion and
operational expenses associated with the development of the Company's switched
services business. The Company's switched services business is expected to
require cash to meet operating expenses until sufficient profitable traffic can
be routed over the Company's owned network.

Cash used in investing activities for the six months ended June 30, 1997
was $89.6 million compared to $3.7 million provided by investing activities for
the six months ended June 30, 1996. This increase was primarily the result of
increased purchases of property and equipment for the Company's fiber expansion
in

12
<PAGE> 13

1997. The Company's total capital expenditures were $140.9 million for the six
months ended June 30, 1997, including capital expenditures relating to the
construction of network routes and related equipment.

Cash provided by financing activities increased to $75.2 million for the
first six months of 1997 versus a use of cash of $5.8 million for the comparable
period in 1996. This variance is primarily due to the $96.2 million in net
proceeds provided by the issuance and sale of the Company's 7 1/4% Junior
Convertible Preferred Stock Due 2007 (the "Convertible Preferred Stock") in
April 1997, offset by $11.7 million of funding provided to the Company's Mexican
telecommunications investment.

The Company expects that its primary sources for cash over the next twelve
months will be cash on hand, cash generated by operations, the proceeds if any,
from offerings of debt and/or equity securities, the Proposed Credit Facility
(as herein defined), the NTFC Equipment Facility (as herein defined), additional
vendor financing the Company may seek and the anticipated proceeds of fiber
sales.

As of June 30, 1997, the Company had approximately $41.0 million in cash.
The Company expects that during the remainder of 1997 and 1998 it will generate
substantial additional cash from operations. On July 2, 1997, the Company
announced that it expects EBITDA for 1997 will be in the range of $20-$30
million, and that it expects EBITDA for 1998 will be $125 million or more. The
EBITDA estimates are based on a number of assumptions that, though considered
reasonable by the Company, are inherently subject to significant economic and
competitive uncertainties and contingencies beyond the control of the Company
and upon assumptions with respect to future business decisions which are subject
to change. Accordingly, there can be no assurance that the estimated EBITDA will
be achieved, and actual results may vary materially from those estimated.
Important factors that could cause actual estimated EBITDA results to differ
materially from those in the forward-looking statements set forth above include,
without limitation: (i) delays or cost overruns with respect to the network
expansion; (ii) delays by the Company's contractors and partners in cost-saving
arrangements in fulfilling their obligations; (iii) delays or
higher-than-expected costs in obtaining rights-of-way; (iv) delays in the
completion of the routes of the network expansion scheduled for completion in
1997; (v) an inability by the Company to continue to increase traffic on its
switched network, particularly higher margin traffic; (vi) an inability by the
Company to successfully commence service for new switched services on a
cost-effective basis (including the provision of billing information in an
accurate and timely manner) for volumes that it has not previously handled;
(vii) the loss of one or more large customers; (viii) increases in expenses;
(ix) decreases in the Company's rates caused by the competitive pressures and
(x) the inability to complete the fiber sales discussed below.

The Company seeks to supplement its sources of cash with debt and/or equity
offerings in an aggregate amount of at least $100 million in the third or fourth
quarter of 1997.

The Company is engaged in discussions with potential lenders regarding a
revolving credit facility (the "Proposed Credit Facility") under which it seeks
to borrow up to a certain percentage of eligible accounts receivable. Although
the total availability under the Proposed Credit Facility would vary from time
to time according to the aggregate amount of eligible accounts receivable, the
Company anticipates that the lender would impose a limit on borrowings under the
facility. There can be no assurance that the Company will obtain such a
facility. In addition in July 1997 the Company entered into a secured equipment
financing facility with NTFC Capital Corporation, an affiliate of Northern
Telecom Inc. ("Nortel") (the "NTFC Equipment Facility"), to provide up to $28
million in financing. The Company expects to borrow approximately $20 million
under this agreement in the third quarter in connection with the purchase of
certain equipment for use in its network.

In February 1997, the Company and a carrier entered into a contract
pursuant to which the carrier will purchase an indefeasible right to use fibers
from Chicago to Los Angeles (the "Chicago-Los Angeles Fiber Sale") which
following performance by the Company of its Obligations thereunder to the
satisfaction of such carrier will result in proceeds to the Company of
approximately $97.9 million. The Company expects to receive approximately
one-half of the proceeds during 1997, with the balance expected to be paid in
the first quarter of 1998. In February 1997, the Company entered into a contract
with another carrier pursuant to which the carrier will purchase an indefeasible
right to use fibers from Los Angeles to New York (the "New York-Los Angeles
Fiber Sale") which entitles the Company to receive following performance by the

13
<PAGE> 14

Company of its Obligations thereunder to the satisfaction of such carrier
approximately $121.0 million. Assuming that the network expansion proceeds
according to schedule, this amount will be due in January 1998. However, the
carrier has the option to pay this amount over a period of up to 24 months
commencing January 1998.

The Company anticipates the following uses for its available cash: (i) the
network fiber and optronic expansion and other capital expenditures; (ii) debt
service; (iii) lease payments; (iv) funding its joint venture in Mexico; and (v)
working capital.

The Company anticipates that capital expenditures for calendar year 1997
will be approximately $400 million for construction of its network expansion and
capacity upgrades, of which $140.9 million has been incurred through June 30,
1997. The Company anticipates that in the event customers require additional
facilities or elements of the network expansion are accelerated into 1997,
expenditures in 1997 may be increased. The preceding forward-looking statement
regarding capital expenditures for 1997 are based on certain assumptions as to
future events, many of which are not under the Company's control. Important
factors which could increase or decrease the amount of the capital expenditures
include construction delays or construction cost overruns, delays or higher than
expected costs in obtaining rights-of-way, or changes in the scope of the
network expansion and increased demands for capacity by the Company's customers.
The Company expects to continue to make substantial capital expenditures during
the remainder of 1997, in 1998 and thereafter. The Company frequently revises
its estimates of capital expenditures because of the rapid growth of the
Company's business and because the large, on-going network expansion is subject
to changes in timing, design, route and capacity, and variances from expected
costs.

The Company is required to make interest payments in the amount of $35.6
million on the Senior Notes each year. The Company's EBITDA is currently
insufficient to cover these debt service requirements. At June 30, 1997, the
aggregate liquidation preference of the Series 3 Preferred Stock was
approximately $20.0 million, including accrued and unpaid dividends. Such
dividends accrue at an annual rate of 10% (based on the liquidation preference)
plus interest. The Company is also required (except in certain limited
circumstances) to pay quarterly cash dividends on the Convertible Preferred
Stock (at an annual rate of 7 1/4%) beginning with the dividend payment required
to be made on June 30, 1999 (prior to such time these dividends may at the
Company's option be paid in cash or additional shares of Convertible Preferred
Stock). Payment of cash dividends on the Convertible Preferred Stock is not
currently permitted under the terms of the indenture (the "Indenture") for the
Senior Notes until certain financial conditions have been met. Additionally,
cash dividends cannot be paid on the Convertible Preferred Stock until all
current and accrued dividends have been paid in cash on the Series 3 Preferred
Stock. During June 1997, the Company issued 18,123 additional shares of
Convertible Preferred Stock in satisfaction of its dividend requirements.

The preceding forward-looking statements regarding the Company's sources of
cash are based on certain assumptions as to future events, many of which are not
within the Company's control. Important factors that could adversely affect the
Company's ability to generate cash as discussed above include: (i) delays or
cost overruns with respect to the network expansion; (ii) delays by the
Company's contractors and partners in cost-saving arrangements in fulfilling
their obligations; (iii) delays or higher-than-expected costs in obtaining
rights-of-way; (iv) delays in the completion of the routes of the network
expansion scheduled for completion in 1997; (v) an inability by the Company to
continue to increase traffic on its switched network, in particular, higher
margin traffic; (vi) an inability by the Company to successfully provide service
for its switched services business on a cost-effective basis (including the
provision of billing information in an accurate and timely manner) for volumes
that it has not previously handled, (vii) the loss of one or more large
customers; (viii) an inability to decrease expenses; (ix) decreases in the
Company's rates caused by competitive pressures, among other unknown factors;
and (x) an inability to successfully complete the Chicago-Los Angeles Fiber Sale
or the New York-Los Angeles Fiber Sale. The ability of the Company to supplement
cash through financing activities is subject to the ability of the Company to
find willing buyers of debt or equity instruments on terms acceptable to the
Company, market conditions generally, and, with respect to debt instruments, the
Company's ability to obtain any required consents from the Company's existing
bondholders.

14
<PAGE> 15

The Company is indirectly participating in the development of a long
distance network to engage in the telecommunications business in Mexico by
Marca-Tel S.A. de C.V. ("Marca-Tel"). The Company indirectly owns 24.5% of
Marca-Tel through its ownership of 50% of Progress International LLC ("Progress
International"), which owns 49% of Marca-Tel. The remaining 51% of Marca-Tel is
owned by a Mexican individual and Fomento Radio Beep, S.A. de C.V. The other 50%
of Progress International is owned by Westel International, Inc. ("Westel").

Progress International has provided all the capital required from Marca-Tel
shareholders in order to finance Marca-Tel. The Company and Westel have agreed
to jointly contribute funds to Progress International. From inception to June
30, 1997, the Company has provided approximately $23.9 million of the $35.7
million contributed or loaned to Progress International. Substantially all of
the funding of Progress International has been contributed to Marca-Tel.

Although the Company cannot accurately predict the capital that will be
required to implement the Marca-Tel business plan, it estimates that an
additional $40.0 million (and possibly significantly more) will be required by
Marca-Tel from its stockholders during the remainder of 1997 and 1998. The
Company and Westel have pursued and are continuing to pursue selling equity
interests in Progress International to one or more third parties who could
assist Progress International with the funding of Marca-Tel. However, there can
be no assurance that any such funding will be available on satisfactory terms or
at all. The Company is currently, and may remain, the primary source of funds
available to Progress International for investment in Marca-Tel. Since the
ownership interests of the Company and Westel in Progress International are to
be proportional to their respective capital contributions, the Company's
percentage ownership of Progress International, and therefore its indirect
ownership interest in Marca-Tel, could increase if it makes additional capital
contributions which are not matched by Westel. The Indenture contains
significant limitations on the amount the Company may invest in Progress
International and other non-majority owned entities.

Marca-Tel has deployed three switching centers and is constructing a fiber
optic route linking Mexico's three major cities (Mexico City, Monterrey and
Guadalajara), with interconnection to the Company's U.S. network at its border
crossing at Reynosa/McAllen. Marca-Tel has entered into a turn-key contract with
a major international supplier of telecommunications equipment for a portion of
this build that provides for interim vendor financing for the equipment and
fiber purchases as well as a portion of the construction work. The Company
anticipates that Marca-Tel may be able to obtain additional funding through some
combination of the following: (i) offerings of debt or equity securities; (ii)
other incurrences of debt; (iii) joint venture arrangements with third parties;
and (iv) additional vendor financing of equipment purchases. Initially, such
sources of capital likely will not be adequate to meet the needs of Marca-Tel,
and the Company anticipates that, until such sources are adequate to enable
Marca-Tel to continue to pursue its business plan, it may be necessary for
Progress International to fund the shortfall. The Company is not obligated to
continue to fund Progress International; however, if the Company does not fund
Progress International, or if Progress International does not fund Marca-Tel's
needs, the Company's interest in Progress International, and thus its indirect
interest in Marca-Tel, may be diluted or lost entirely. No assurance can be
given that adequate funding sources will be available from Progress
International or from third parties to implement Marca-Tel's business plan or,
if implemented, that such business plan will be successful.

The forward-looking statements set forth above with respect to the funding
of Marca-Tel and the successful completion and operation of Marca-Tel's fiber
optic system in Mexico are based on certain assumptions as to future events.
Important factors that could adversely affect Marca-Tel's ability to achieve the
results discussed above include that: (i) there will be no significant delays or
cost overruns with respect to the network expansion; (ii) the Company's
contractors and partners in cost-saving arrangements will perform their
obligations; (iii) rights-of-way can be obtained in a timely, cost-effective
basis; (iv) the routes of the network expansion scheduled for completion in 1997
are substantially completed on schedule; (v) Marca-Tel can successfully commence
service for its switched services business on a cost effective basis (including
the provision of billing information in an accurate and timely manner) for
volumes that it has not previously handled; and (vi) Marca-Tel can obtain
sufficient funds from the debt or equity offerings, joint venture arrangements,
accounts, additional vendor financing, or otherwise.

15
<PAGE> 16

Subsequent Event

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Not Applicable.

16
<PAGE> 17

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On April 4, 1997 Tel-Central Communications, Inc. ("Tel-Central") filed a
complaint against IXC Long Distance, Inc., one of the Company's subsidiaries, in
the United States District Court in the Western District of Missouri, after the
Company terminated service to Tel-Central for failure to pay for services.
Tel-Central's complaint makes various state and federal law claims and seeks
damages of over $100 million and asks for punitive damages of $100 million. The
Company believes that Tel-Central's claims are without merit and that the
complaint is part of an attempt by Tel-Central to avoid payment of its
outstanding balance to the Company. On May 23, 1997, Tel-Central file a
voluntary Chapter 11 petition in bankruptcy. On May 30, 1997, the Company filed
a motion to dismiss this action. The Tel-Central action is currently stayed as a
result of the Tel-Central's Chapter 11 bankruptcy proceeding. The Company
believes that it is unlikely that this suit will result in any material
liability to the Company.

ITEM 2. CHANGES IN SECURITIES

On April 1, 1997, the Company issued and sold 1,000,000 shares of 7 1/4%
Junior Convertible Preferred Stock Due 2007 (the "Convertible Preferred Stock")
in a private placement to two initial purchasers, which shares were subsequently
sold to "qualified institutional buyers" and certain "accredited investors" (as
defined in the Securities Act of 1933, as amended). The Convertible Preferred
Stock is convertible at the option of the holders, unless previously redeemed,
at any time after May 31, 1997, into shares of Common Stock at a rate (subject
to adjustment in certain events) of 4.263 shares of Common Stock for each share
of Convertible Preferred Stock, equivalent to a conversion price of $23.46 for
each share of Common Stock. Dividends on the Convertible Preferred Stock accrue
at a rate per annum of 7 1/4% per share on the liquidation preference thereof of
$100 per share ($7.25 per annum per share). Dividends payable prior to or on
June 30, 1999, are, at the option of the Company, payable (i) in cash or (ii)
through the issuance of additional shares of Convertible Preferred Stock equal
to the dividend amount divided by the liquidation preference of such additional
shares. The registration rights agreement entered into by the Company with the
initial purchasers of the Convertible Preferred Stock requires that the Company
file a shelf registration statement with the Securities Exchange Commission
("SEC") for the benefit of the holders of the Convertible Preferred Stock, with
respect to the Convertible Preferred Stock and the shares of common stock that
may be issued upon conversion thereof. In the event such shelf registration
statement is not declared effective by the SEC before September 1, 1997, the
Convertible Preferred Stock will accrue dividends at a rate per annum of 7 3/4%
until the shelf registration statement is declared effective. After March 31,
1999, to the extent and for so long as the Company is not permitted to pay cash
dividends on the Convertible Preferred Stock by the terms of any then
outstanding indebtedness or any other agreement or instrument to which the
Company is subject, the Company will be required to pay dividends, which shall
accrue at the rate per annum of 8 3/4%, through the issuance of additional
shares of Convertible Preferred Stock. Payment of cash dividends on the
Convertible Preferred Stock is not currently permitted under the Indenture for
the Company's 12% Senior Notes due 2005 until certain financial conditions have
been met. The Convertible Preferred Stock ranks junior to the Series 3 Preferred
Stock and senior to the Common Stock with respect to payment of dividends and
amounts upon liquidation, dissolution and winding up.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable

17
<PAGE> 18

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company's Annual Meeting of Stockholders was held on May 6, 1997 for
the purpose of electing directors (the Company's only proposal at the meeting).
The following Directors, being all the Directors of the Company, were elected at
the meeting, with the number of votes cast for or against each Director or
withheld from each Director, abstentions and broker non-votes being set forth
after his respective name:

<TABLE>
<CAPTION>
VOTES AGAINST BROKER
NAME VOTES FOR OR WITHHELD ABSTENTIONS NON-VOTES
- --------------------------------------------- ----------- ------------- ----------- ---------
<S> <C> <C> <C> <C>
Ralph J. Swett............................... 25,791,435 0 103,625 0
Richard D. Irwin+............................ 10,098.72 0 0 0
Wolfe H. Bragin.............................. 25,788,435 3,000 103,625 0
Carl W. McKinzie............................. 25,791,435 0 103,625 0
Phillip L. Williams.......................... 25,790,935 500 103,625 0
Joe C. Culp.................................. 25,791,435 0 103,625 0
</TABLE>

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

+ Mr. Irwin was elected a Director by the Series 3 Preferred Stock. There are
12,550 shares of Series 3 Preferred Stock issued and outstanding.

The Company furnished an Information Statement to stockholders of the
Company pursuant to Rule 14c-2 under the Securities Exchange Act of 1934 (the
"Exchange Act"), in connection with an amendment (the "Amendment") to the
Restated Certificate of Incorporation, as amended (the "Certificate of
Incorporation") of the Company to permit payment of dividends on the Convertible
Preferred Stock with additional shares of Convertible Preferred Stock. The
Amendment was approved by the Board. As required by the Delaware General
Corporation Law (the "DGCL") and the Certificate of Incorporation, the Amendment
was approved by the holders of a majority of the outstanding shares of Common
Stock and Series 3 Preferred Stock, voting as a class, and three-quarters
(3/4ths) of the outstanding shares of Series 3 Preferred Stock, voting as a
class, by written consent in lieu of a meeting pursuant to Section 228(a) of the
DGCL. The Amendment became effective upon the filing of a Certificate of
Amendment of the Certificate of Incorporation with the Secretary of State of
Delaware which, pursuant to Rule 14c-2 under the Exchange Act, did not take
place until a date at least 20 days following the date on which the Information
Statement was mailed to the stockholders of the Company. The Information
Statement also served as notice to stockholders of an action taken by less than
unanimous written consent as required by Section 228(d) of the DGCL. The
Information Statement was mailed on or about June 2, 1997 to persons who were
stockholders of record on May 6, 1997.

ITEM 5. OTHER INFORMATION

In January 1997, the Company entered into an agreement to purchase L.D.
Services, Inc. ("LDS"), a long-distance switchless reseller with 1996 revenues
of approximately $30.0 million. The agreement with LDS was terminated by the
parties in June 1997 following action by a state regulatory commission.

In July 1997 the Company announced an agreement with PSINet to acquire
PSINet's broad spectrum of Internet services for resale to its customers. Under
the terms of the PSINet agreements, after consummation of the transaction, the
Company will provide PSINet with an indefeasible right to use 10,000 miles of
OC-48 transmission capacity on its Network over a 20-year period in exchange for
20% (post-issuance) of PSINet common stock. In addition, if the value of the
PSINet common stock received by the Company is less than $240 million at the
earlier of one year after the final delivery of the transmission capacity
(scheduled for late-1999) or four years after closing, PSINet, at its option,
will pay the Company cash and/or deliver additional PSINet common stock to bring
the value of the Company's investment to $240 million. Upon delivery of the
transmission capacity to PSINet, the Company will also receive a maintenance fee
which, when all the capacity has been delivered, will be approximately $11.5
million per year. The Company expects to consummate the transactions
contemplated by the PSINet agreements upon the satisfaction of certain
conditions, including receipt of approval of PSINet stockholders. There can be
no assurance that such conditions will be satisfied or that the PSINet
transaction will be consummated.

18
<PAGE> 19

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(A) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------------
<C> <S>
3.1 + Restated Certificate of Incorporation of IXC Communications, Inc., as amended
3.2 Bylaws of IXC Communications, Inc., as amended (incorporated by reference to
Exhibit 3.2 of IXC Communications, Inc. Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997 (the "10-Q")).
4.1 Specimen certificate representing shares of Common Stock of IXC Communications,
Inc. (incorporated by reference to Exhibit 4.1 of IXC Communications, Inc.
Registration Statement on Form S-1 filed with the Commission on May 20, 1996, as
amended (File No. 333-4061) (the "S-1")).
4.2 Indenture dated as of October 5, 1995 by and among IXC Communications, Inc., on
its behalf and as successor-in-interest to I-Link Holdings, Inc. and IXC Carrier
Group, Inc., each of IXC Carrier, Inc., on its behalf and as
successor-in-interest to I-Link, Inc., CTI Investments, Inc., Texas Microwave,
Inc. and WTM Microwave, Inc., Atlantic States Microwave Transmission Company,
Central States Microwave Transmission Company, Telcom Engineering, Inc., on its
behalf and as successor-in-interest to SWTT Company and Microwave Network, Inc.,
Tower Communication Systems Corp., West Texas Microwave Company, Western States
Microwave Transmission Company, Rio Grande Transmission, Inc., IXC Long Distance,
Inc., Link Net International, Inc. (collectively, the "Guarantors") and IBJ
Schroder Bank & Trust Company, as Trustee, with respect to the 12 1/2% Series A
and Series B Senior Notes due 2005 (incorporated by reference to Exhibit 4.1 of
IXC Communications, Inc.'s and each of the Guarantor's Registration Statement on
Form S-4 filed with the Commission on April 1, 1996, as amended (File No.
333-2936) (the "S-4")).
4.3 Purchase Agreement dated October 5, 1995 by and among IXC Communications, Inc.,
and the Purchasers named therein (incorporated by reference to Exhibit 4.2 of the
S-4).
4.4 A/B Exchange Registration Rights Agreement dated as of October 5, 1995 by and
among IXC Communications, Inc., the Guarantors and the Purchasers named therein
(incorporated by reference to Exhibit 4.3 of the S-4).
4.5 Escrow Account and Disbursement Agreement dated as of October 5, 1995 by and
among IXC Communications, Inc., IBJ Schroder Bank & Trust Company, as Escrow
Holder, and IBJ Schroder Bank & Trust Company, as Collateral Agent (incorporated
by reference to Exhibit 4.4 of the S-4).
4.6 Escrow Account Security Agreement dated as of October 5, 1995 by and between IXC
Communications, Inc. and IBJ Schroder Bank & Trust Company (incorporated by
reference to Exhibit 4.5 of the S-4).
4.7 Form of 12 1/2% Series A Senior Notes due 2005 (incorporated by reference to
Exhibit 4.6 of the S-4).
4.8 Form of 12 1/2% Series B Senior Notes due 2005 and Subsidiary Guarantee
(incorporated by reference to Exhibit 4.8 of the S-1).
4.9 Amendment No. 1 to Indenture and Subsidiary Guarantee dated as of June 4, 1996 by
and among IXC Communications, Inc., the Guarantors and the Trustee (incorporated
by reference to Exhibit 4.11 of the S-1).
4.10 Stock Exchange Agreement dated as of June 10, 1996 by and between IXC
Communications, Inc., and Trustees of General Electric Pension Trust ("GEPT")
(incorporated by reference to Exhibit 4.12 of the S-1).
</TABLE>

19
<PAGE> 20

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------------
<C> <S>
4.11 Registration Rights Agreement dated as of June 10, 1996 by and among IXC
Communications, Inc., GEPT and certain stockholders of IXC Communications, Inc.
(incorporated by reference to Exhibit 4.13 of the S-1).
4.12 Purchase Agreement dated as of March 25, 1997 by and among IXC Communications,
Inc., Credit Suisse First Boston Corporation ("CS First Boston") and Dillon Read
& Co. Inc. ("Dillon Read") incorporated by reference to Exhibit 4.12 of the
10-Q).
4.13 Registration Rights Agreement dated as of March 25, 1997 by and among IXC
Communications, Inc., CS First Boston and Dillon Read (incorporated by reference
to Exhibit 4.13 of the 10-Q).
4.14 Amendment to Registration Rights Agreement dated as of March 25, 1995 between IXC
Communications, Inc. and GEPT (incorporated by reference to Exhibit 4.14 of the
10-Q).
4.15 + Registration Rights Agreement dated as of July 8, 1997 among IXC Communications,
Inc. and each of William G. Rodi, Gordon Hutchins, Jr. and William F. Linsmeier.
4.16 + Registration Rights Agreement dated as of July 8, 1997 among IXC Communications,
Inc. and each of William G. Rodi, Gordon Hutchins, Jr. and William F. Linsmeier.
10.1 Office Lease dated June 21, 1989 with USAA Real Estate Company, as amended
(incorporated by reference to Exhibit 10.1 of the S-4).
10.2 Equipment Lease dated as of December 1, 1994 by and between DSC Finance
Corporation and Switched Services Communications, L.L.C.; Assignment Agreement
dated as of December 1, 1994 by and between Switched Services Communications,
L.L.C. and DSC Finance Corporation; and Guaranty dated December 1, 1994 made in
favor of DSC Finance Corporation by IXC Communications, Inc. (incorporated by
reference to Exhibit 10.2 of the S-4).
10.3 Amended and Restated 1994 Stock Plan of IXC Communications, Inc., as amended.
10.4 Form of Non-Qualified Stock Option Agreement under the 1994 Stock Plan of IXC
Communications, Inc. (incorporated by reference to Exhibit 10.4 of the S-4).
10.5 Form of IXC Communications, Inc. Restricted Stock Agreement (incorporated by
reference to Exhibit 10.5 of the S-4).
10.6 Form of IXC Communications, Inc. Restricted Stock Agreement (incorporated by
reference to Exhibit 10.6 of the S-4).
10.7 Amended and Restated Development Agreement by and between Intertech Management
Group, Inc. and IXC Long Distance, Inc. (incorporated by reference to Exhibit
10.7 of the S-4).
10.8 Second Amended and Restated Service Agreement dated as of January 1, 1996 by and
between Switched Services Communications, L.L.C. and Excel Telecommunications,
Inc. (incorporated by reference to Exhibit 10.8 of the S-4).
10.9 Equipment Purchase Agreement dated as of January 16, 1996 by and between Siecor
Corporation and IXC Carrier, Inc. (incorporated by reference to Exhibit 10.9 of
the S-4).
10.10 1996 Stock Plan of IXC Communications, Inc., as amended.
10.11 IRU Agreement dated as of November 1995 between WorldCom, Inc. and IXC Carrier,
Inc. (incorporated by reference to Exhibit 10.11 of the S-4).
10.12 Outside Directors' Phantom Stock Plan of IXC Communications, Inc., as amended.
10.13 Business Consultant and Management Agreement dated as of January 3, 1995 by and
between IXC Communications, Inc. and Culp Communications Associates (incorporated
by reference to Exhibit 10.13 of the S-1).
</TABLE>

20
<PAGE> 21

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ---------------------------------------------------------------------------------
<C> <S>
10.14 Employment Agreement dated December 28, 1995 by and between IXC Communications,
Inc. and James F. Guthrie (incorporated by reference to Exhibit 10.14 of the
S-1).
10.15 Employment Agreement dated August 28, 1995, by and between IXC Communications,
Inc. and David J. Thomas (incorporated by reference to Exhibit 10.15 of the S-1).
10.16 Special Stock Plan of IXC Communications, Inc.
10.17 + Lease dated as of June 4, 1997 between IXC Communications, Inc. and Carramerica
Realty, L.P.
10.18 + Loan and Security Agreement dated as of July 18, 1997 among IXC Communications,
Inc., IXC Carrier, Inc. and NTFC Capital Corporation
10.19 * IRU and Stock Purchase Agreement dated as of July 22, 1997 between IXC Internet
Services, Inc. and PSINet Inc.
10.20 * Joint Marketing and Services Agreement dated on July 22, 1997 between IXC
Internet Services, Inc. and PSINet Inc.
11.1 + Statement of Computation of Earnings per Share.
27.1 + Financial Data Schedule.
</TABLE>

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

+ Filed herewith.

* To be filed by amendment.

(B) REPORTS ON FORM 8-K.

(1) Form 8-K dated April 1, 1997 and filed with the Commission on April 3, 1997
with respect to the Company's notice of offering of unregistered securities
pursuant to Rule 135c(d) of the Securities Act of 1933, as amended, with
respect to the sale of Convertible Preferred Stock, which occurred on April
1, 1997.

21
<PAGE> 22

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

IXC Communications, Inc.,
a Delaware corporation

August 4, 1997 By: /s/ JAMES F. GUTHRIE
------------------------------------
James F. Guthrie
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer and
Principal Financial Officer)

<PAGE> 1
EXHIBIT 3.1

RESTATED CERTIFICATE
OF
INCORPORATION, AS AMENDED

Fiber Optic Communications, Inc., a corporation organized and existing
under the laws of the State of Delaware, hereby certifies as follows:

1. The name of this corporation is Fiber Optic Communications,
Inc. Fiber Optic Communications, Inc. was originally incorporated under the
same name. The original Certificate of Incorporation of this corporation was
filed with the Secretary of State of the State of Delaware on July 27, 1992.

2. Pursuant to Sections 242 and 245 of the General Corporation
Law of the State of Delaware, this Restated Certificate of Incorporation has
been duly adopted and restates, integrates and further amends the provisions of
the Certificate of Incorporation of this corporation.

3. This Restated Certificate of Incorporation was duly consented
to, and adopted by, the holders of (i) a majority of the outstanding shares of
common stock, par value $.01 per share, of the Corporation and 10% Senior
Series 1 Cumulative Redeemable Preferred Stock, par value $.01 per share, of
this corporation ("Series 1 Preferred Stock"), consenting together as a class
and by (ii) over three-fourths (3/4s) of the outstanding shares of Series 1
Preferred Stock, acting without a meeting by unanimous written consent pursuant
to Section 228 of the General Corporation Law of the State of Delaware.

4. The text of the Restated Certificate of Incorporation as
heretofore amended or supplemented is hereby restated and further amended to
read in its entirety as follows:

FIRST: The name of this corporation (the "Corporation") is "IXC
Communications, Inc."

SECOND: The address of the registered office of the Corporation in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle, Delaware 19801. The name of its
registered agent at such address is The Corporation Trust Company.

THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may now or hereafter be organized under the
General Corporation Law of the State of Delaware as set forth in Title 8 of the
Delaware Code.

FOURTH: The total number of shares of stock which the Corporation
shall have authority to issue is one hundred and three million (103,000,000)
consisting of (i) one

<PAGE> 2
hundred million (100,000,000) shares of common stock, par value $.01 per share,
and (ii) three million (3,000,000) shares of preferred stock, par value $.01
per share. The preferred stock may be issued at any time, and from time to
time, in one or more series pursuant hereto or to a resolution or resolutions
providing for such issue duly adopted by the board of directors (the "Board")
of the Corporation (authority to do so being hereby expressly vested in the
Board), and such resolution or resolutions shall also set forth the voting
powers, full or limited, or none, of each such series of preferred stock and
shall fix the designations, preferences and relative, participating, optional
or other special rights and qualifications, limitations or restrictions of each
such series of preferred stock.

Upon the filing of this Second Amendment to Restated
Certificate of Incorporation which amends Article FOURTH to read as set forth
above, and without any further action on the part of the holders thereof, each
issued and outstanding share of common stock will be reclassified and changed
into 0.8083 shares of common stock.

FIFTH: The business and affairs of the Corporation shall be managed
by and under the direction of the Board. The exact number of directors of the
Corporation shall be fixed by or in the manner provided in the Bylaws of the
Corporation (the "Bylaws").

SIXTH: In furtherance and not in limitation of the powers conferred
by statute, the Board is expressly authorized:

(a) to adopt, repeal, rescind, alter or amend in any respect the
Bylaws, and to confer in the Bylaws powers and authorities upon the directors
of the Corporation in addition to the powers and authorities expressly
conferred upon them by statute;

(b) from time to time to set apart out of any funds or assets of
the Corporation available for dividends an amount or amounts to be reserved as
working capital or for any other lawful purpose and to abolish any reserve so
created and to determine whether any, and, if any, what part, of the surplus of
the Corporation or its net profits applicable to dividends shall be declared in
dividends and paid to its stockholders, and all rights of the holders of stock
of the Corporation in respect of dividends shall be subject to the power of the
Board so to do;

(c) subject to the laws of the State of Delaware, from time to
time to sell, lease or otherwise dispose of any part or parts of the properties
of the Corporation and to cease to conduct the business connected therewith or
again to resume the same, as it may deem best; and

(d) in addition to the powers and authorities hereinbefore and by
the laws of the State of Delaware conferred upon the Board, to execute all such
powers and to do all acts and things as may be exercised or done by the
Corporation; subject, nevertheless, to the express provisions of such laws, of
the Restated Certificate of Incorporation of the Corporation and its Bylaws.

<PAGE> 3
SEVENTH: Meetings of stockholders of the Corporation may be held
within or without the State of Delaware, as the Bylaws provide. The books
of the Corporation may be kept (subject to any provision of applicable law)
outside the State of Delaware at such place or places as may be designated
from time to time by the Board or in the Bylaws.

EIGHTH: The Corporation reserves the right to adopt, repeal, rescind,
alter or amend in any respect any provision contained in this Restated
Certificate of Incorporation in the manner now or hereafter prescribed by
applicable laws, and all rights conferred on stockholders herein are granted
subject to this reservation.

NINTH: The Corporation is to have perpetual existence.

TENTH: A director of this Corporation shall not be personally liable
to the Corporation or its stockholder for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, as the same exists or hereafter may be amended, or (iv) for
any transaction from which the director derived an improper personal benefit.
If the Delaware General Corporation Law hereafter is amended to authorize the
further elimination or limitation of the liability of directors, then the
liability of a director of the Corporation, in addition to the limitation on
personal liability provided herein, shall be limited to the fullest extent
permitted by the amended Delaware Corporation Law. No amendment to or repeal
of this Article Tenth shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such amendment or repeal.

ELEVENTH:

A. Designation of Two Series of Preferred Stock. There are
hereby provided two series of preferred stock designated and to be known as
"10% Senior Series 1 Cumulative Redeemable Preferred Stock" and "10% Junior
Series 3 Cumulative Redeemable Preferred Stock."

B. Definitions. As used in this Eleventh Article, the following
terms shall have the meanings indicated:

1. "Common Stock" shall mean the common stock, $.01 par
value per share, issued or to be issued by the Corporation.

2. "Original Issue Date" shall mean, with respect to any
share of Series Preferred Stock, the date of the original issuance of such
shares.

3
<PAGE> 4
3. "Preferred Stock" shall mean the preferred stock,
$.01 par value per share, issued or to be issued by the Corporation.

4. "Series 1 Preferred Stock" shall mean the 10% Senior
Series 1 Cumulative Redeemable Preferred Stock, $.01 par value per share,
issued or to be issued by the Corporation.

5. "Series 3 Preferred Stock" shall mean the 10% Junior
Series 3 Cumulative Redeemable Preferred Stock, $.01 par value per share,
issued or to be issued by the Corporation.

6. "Series Preferred Stock" shall mean, collectively,
the Series 1 Preferred Stock and the Series 3 Preferred Stock.

C. Number of Shares. The number of shares constituting the
Series 1 Preferred Stock shall be 2,000. The number of shares constituting the
Series 3 Preferred Stock shall be 12,550.

D. Rights, Preferences, Privileges and Restrictions. The voting
powers and relative rights, preferences, restrictions and other mattes relating
to the Series Preferred Stock are as follows:

1. Dividends.

(a) The holders of shares of Series 1 Preferred
Stock then outstanding shall be entitled to receive, prior to the payment of
any dividend on any other Preferred Stock of the Corporation or the Common
Stock of the Corporation, when, as and if declared by the Board, out of funds
legally available for the payment of dividends, cumulative dividends in an
annual amount equal to $100 per share, plus an amount determined by applying a
10% annual rate, compounded annually, to any accrued but unpaid dividend amount
from the last day of the period when such dividend accrues to the actual date
of payment of such dividend, and no more. The holders of shares of Series 3
Preferred Stock then outstanding shall be entitled to receive, prior to the
payment of any dividend on any other Preferred Stock of the Corporation (other
than the Series 1 Preferred Stock) or the Common Stock of the Corporation, when
as and if declared by the Board, out of funds legally available for the payment
of dividends, cumulative dividends in an annual amount equal to $100 per share,
plus an amount determined by applying a 10% annual rate, compounded annually,
to any accrued but unpaid dividend amount from the last day of the period when
such dividend accrues to the actual date of payment of such dividend, and no
more; provided, however, that the Corporation may pay dividends on the
Corporation's 7-1/4% Junior Convertible Preferred Stock due 2007 (the
"Convertible Preferred Stock") with additional shares of Convertible Preferred
Stock. Such dividends on the outstanding shares of Series Preferred Stock shall
be payable on such date as the Board may from time to time determine (each such
date being a "dividend payment date"). The Board may fix a record date for the
determination of holders of shares of Series Preferred Stock entitled to
receive payment of a dividend declared thereon, which record date shall not be
more than sixty (60) days prior to the date fixed for

4
<PAGE> 5
the payment thereof. Each such annual dividend shall be fully cumulative and
shall accrue from day to day (whether or not declared) from the first day of
each period in which such dividend may be payable as herein provided, except
that the first annual dividend with respect to each share of Series Preferred
Stock shall accrue from the Original Issue Date of such share or such other
date as determined by the Board, except that dividends with respect to each
share of Series 3 Preferred Stock shall accrue from August 14, 1992.
Dividends, when, as and if declared, shall be payable in cash.

(b) The holder of each outstanding fractional
share of Series Preferred Stock shall be entitled to a ratably proportionate
amount of all dividends accruing with respect to each outstanding share of
Series Preferred Stock with the same Original Issue Date and all such dividends
with respect to each such outstanding fractional share shall be fully
cumulative and shall accrue (whether or not declared) and shall be payable in
the same manner and at such times as provided for in Section 1(a).

(c) All dividends paid with respect to the
outstanding shares of Series Preferred Stock pursuant to Section 1(a) shall be
paid pro rata to the holders of each class entitled thereto. Each Series 1
Preferred Stock holder's pro rata share of such dividends shall be calculated
by multiplying the total dividends to be paid by the percentage of (i) the
aggregate accrued but unpaid dividends to the date such payment is made on all
issued and outstanding shares of Series 1 Preferred Stock represented by (ii)
the aggregate accrued but unpaid dividends to the date such payment is made on
all shares (including fractional shares) of Series 1 Preferred Stock held by
such holder, and no more. Each Series 3 Preferred Stock holder's pro rata
share of such dividends shall be calculated by multiplying the total dividends
to be paid by the percentage of (i) the aggregate accrued but unpaid dividends
to the date such payment is made on all issued and outstanding shares of Series
3 Preferred Stock represented by (ii) the aggregate accrued but unpaid
dividends to the date such payment is made on all shares (including fractional
shares) of Series 3 Preferred Stock held by such holder, and no more.

2. Liquidation Rights of Series Preferred Stock:

(a) In the event of any liquidation, dissolution
or winding up of the Corporation, whether voluntary or involuntary, the holders
of outstanding shares of Series Preferred Stock shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders, whether such assets are capital, surplus, or earnings, before any
payment or declaration and setting apart for payment of any amount shall be
made in respect of the outstanding shares of any other Preferred Stock of the
Corporation or Common Stock of the Corporation, an amount equal to $1,000 per
share of Series Preferred Stock then outstanding, plus all accrued but unpaid
dividends thereon to the date such payment is actually made, and no more. If
upon any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, the assets to be distributed among the holders of the
outstanding shares of Series Preferred Stock shall be insufficient to permit
the payment to such stockholders of the full preferential amounts set forth
above, then

5
<PAGE> 6
the entire assets of the Corporation to be distributed shall be distributed (i)
first, ratably among the holders of outstanding shares of Series 1 Preferred
Stock based on the full preferential amounts for the number of outstanding
shares of Series 1 Preferred Stock held by each holder and (ii) second, ratably
among the holders of outstanding shares of Series 3 Preferred Stock based on
the full preferential amounts for the number of outstanding shares of Series 3
Preferred Stock held by each holder. The Corporation will mail written notice
of such liquidation, dissolution or winding up, not less than sixty (60) days
prior to the payment date stated therein, to each record holder of Series
Preferred Stock.

(b) A consolidation or merger of the Corporation
with or into any other corporation or corporations or a sale of all or
substantially all of the assets of the Corporation shall not be deemed to be a
liquidation, dissolution, or winding up of the Corporation as those terms are
used in this Section 2 unless such consolidation, merger or sale shall be in
connection with a dissolution or winding up of the Corporation.

(c) The payment of preferential amounts pursuant
to this Section 2 with respect to each outstanding fractional share of Series 1
Preferred Stock shall be equal to a ratably proportionate amount of the
preferential amount payable with respect to each outstanding share of Series 1
Preferred Stock with the same Original Issue Date. The payment of preferential
amounts pursuant to this Section 2 with respect to each outstanding fractional
share of Series 3 Preferred Stock shall be equal to the ratably proportionate
amount of the preferential amount payable with respect to each outstanding
share of Series 3 Preferred Stock with the same Original Issue Date.

3. Voluntary Redemption by the Corporation.

(a) The Corporation, at the option of the Board,
may at any time or from time to time redeem the outstanding shares of Series 1
Preferred Stock in whole or in part from any source of funds legally available
therefor. The Corporation, at the option of the Board, may at any time or from
time to time redeem the outstanding shares of Series 3 Preferred Stock in whole
or in part from any source of funds legally available therefor, provided that
there shall then be no outstanding shares of Series 1 Preferred Stock.

(b) The redemption price for each outstanding
share of Series Preferred Stock shall be equal to $1,000 plus an amount equal
to any accrued and unpaid dividends on such share through the Redemption Date
(as defined below), whether or not declared (the "Redemption Price").

(c) In the event of a redemption of only a part
of the outstanding shares of a class of Series Preferred Stock, the Corporation
shall effect such redemption pro rata according to the number of shares held by
each holder of outstanding shares of such class of Series Preferred Stock.

6
<PAGE> 7
(d) At least ten (10) days and not more than
sixty (60) days prior to the date fixed for any redemption of shares of a class
of Series Preferred Stock (the "Redemption Date"), written notice (the
"Redemption Notice," and the class of Series Preferred Stock referenced in such
Redemption Notice shall be referred to herein as the "Redeemed Stock") shall be
sent, by registered mail, to each holder of record of the outstanding shares of
Redeemed Stock at his or her mailing address last shown on the records of the
Corporation. Any notice which is mailed in the manner herein provided shall be
conclusively presumed to have been duly given, whether or not the holder
received the notice, and failure duly to give the notice by mail, or any defect
in the notice, to any holder of shares of such class of Series Preferred Stock
designated for redemption shall not affect the validity of the proceedings for
the redemption of any other shares of such class of Series Preferred Stock.
The Redemption Notice shall state:

(i) whether all or less than all of the
outstanding shares of the class of Series Preferred Stock are to be redeemed
and the total number of shares being redeemed;

(ii) the number of outstanding shares of
Redeemed Stock held by the holder which the Corporation intends to redeem;

(iii) the Redemption Date and the
Redemption Price;

(iv) that from and after the Redemption
Date, dividends shall cease to accrue; and

(v) that the holder is to surrender to
the Corporation, in the manner and at the place designated, the certificate or
certificates representing the outstanding shares of Redeemed Stock to be
redeemed.

(e) On or before the Redemption Date, each holder
of outstanding shares of Redeemed Stock shall surrender the certificate or
certificates representing such shares to the Corporation, in the manner and at
the place designated in the Redemption Notice, and thereupon the Redemption
Price for such shares shall be payable to the order of the person whose name
appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be cancelled and retired. In the event less than
all of the shares represented by any such certificate or certificates are
redeemed, a new certificate or certificates shall be issued representing the
unredeemed shares. All shares of the class of Series Preferred Stock called
for redemption will cease to accrue dividends as of the Redemption Date. After
the Redemption Date, holders of such class of Series Preferred Stock shall no
longer be treated as stockholders of the Corporation with respect to the shares
of Series Preferred Stock being redeemed, except with respect to the right to
receive the Redemption Price, without interest, upon the surrender of their
respective certificates.

7
<PAGE> 8
(f) The Corporation may, at its option, on or
prior to the Redemption Date, deposit with its transfer agent or other
redemption agent selected by the Board of Directors of the Corporation, as a
trust fund, a sum sufficient to redeem the shares called for redemption, with
irrevocable instructions and authority to such transfer agent or other
redemption agent to give or complete the Redemption Notice and to pay to the
respective holders of such shares, as evidenced by a list of such holders
certified by an officer of the Corporation, the Redemption Price upon
surrender of their respective share certificates. Such deposit shall be
deemed to constitute full payment of such shares to their holders. In case
the holders of any shares shall not, within five (5) years after such deposit,
claim the amount deposited for redemption thereof, such transfer agent or
other redemption agent shall, upon demand, pay over to the Corporation the
balance of such amount so deposited and shall thereupon be relieved of all
responsibility to the holders thereof. Any interest accrued on any funds so
deposited shall belong to the Corporation, and shall be paid to it from time
to time on demand.

(g) All shares of Series 1 Preferred Stock which
shall have been redeemed pursuant to this Section 3 shall thereupon be
restored to the status of authorized but unissued shares of Series 1 Preferred
Stock.

(h) All shares of Series 3 Preferred Stock which
shall have been redeemed pursuant to this Section 3 shall thereupon be
restored to the status of authorized but unissued shares of Series 3 Preferred
Stock.

4. Voting Rights. Except as otherwise provided herein or by the
General Corporation Law of the State of Delaware, holders of outstanding shares
of Series 1 Preferred Stock shall have no voting rights. At all meetings of
the stockholders of the Corporation and in the case of any actions of
stockholders in lieu of a meeting, each share of Series 3 Preferred Stock shall
entitle the holder thereof to one vote. Except as otherwise provided herein or
by the General Corporation Law of the State of Delaware, the holders of Common
Stock and Series 3 Preferred Stock shall vote together as a single class, and
neither the Common Stock nor Series 3 Preferred Stock shall be entitled to vote
as a separate class on any matter to be voted on by shareholders of the
Corporation, except that the holders of the Series 3 Preferred Stock shall be
entitled to vote as a separate class to elect one member of the Board of
Directors of the Corporation.

5. Restrictions and Limitations. Except as otherwise provided by
the General Corporation Law of the State of Delaware, no amendment to this
Restated Certificate of Incorporation shall be made by the Corporation which
would change any of the terms, rights, preferences, privileges or restrictions
provided herein so as to affect adversely any shares of Series Preferred Stock
without the prior written consent of the holders of at least a majority of each
of the Series 1 Preferred Stock and the Series 3 Preferred Stock entitled to
vote thereon and outstanding at the time such action is taken; provided that no
amendment will change (i) the rate or times at which or the manner in which
dividends on any series of the Series Preferred Stock accrue or become payable,
(ii) the preferences with

8
<PAGE> 9
respect to dividends and liquidation payments set forth in Section 1 and 2 or
(iii) the percentage of the holders of the Series Preferred Stock required to
approve any changes described in clauses (i) or (ii) above, without the prior
written consent of the holders of at least three-fourths (3/4s) of each of the
Series 1 Preferred Stock and the Series 3 Preferred Stock, as applicable, then
outstanding; and, provided further, that no change in the terms hereof may be
accomplished by merger or consolidation of the Corporation with another
corporation unless the Corporation has obtained the prior written consent of
the holders of the applicable percentages of the Series 1 Preferred Stock and
the Series 3 Preferred Stock then outstanding.

IN WITNESS WHEREOF, the Corporation has caused this Restated
Certificate of Incorporation to be signed and attested by its duly authorized
officers this 31st day of January 1994.

/s/ Ralph J. Swett
-------------------------------
Ralph J. Swett, President

Attest:

/s/ John J. Willingham
- -----------------------------
John J. Willingham, Secretary

<PAGE> 10
CERTIFICATE OF OWNERSHIP AND MERGER
MERGING
IXC CARRIER GROUP, INC.
INTO
IXC COMMUNICATIONS, INC.
(PURSUANT TO SECTION 253 OF THE GENERAL
CORPORATION LAW OF DELAWARE)

IXC Communications, Inc., a Delaware corporation (the "Corporation"),
does hereby certify:

FIRST: That the Corporation is incorporated pursuant to the General
Corporation Law of the State of Delaware.

SECOND: That the Corporation owns all of the outstanding shares of each
class of the capital stock of IXC Carrier Group, Inc., a Delaware corporation
(the "Merging Corporation").

THIRD: That the Corporation, by the following resolutions of its Board
of Directors, duly adopted on the 6th day of October 1995, determined to merge
into itself the Merging Corporation on the conditions set forth in such
resolutions:

"RESOLVED, that the Corporation merge into itself its
subsidiary, IXC Carrier Group, Inc., a Delaware corporation, and assume
all of said subsidiary's liabilities and obligations;

FURTHER RESOLVED, that the President and Secretary of the
Corporation be, and they hereby are, directed to make, execute and
acknowledge a certificate of ownership and merger setting forth a copy
of the resolutions to merge IXC Carrier Group, Inc. into the
Corporation and to assume said subsidiary's liabilities and obligations
and the date of adoption thereof and to file the same in the office of
the Secretary of State of the State of Delaware and a certified copy
thereof in the Office of the Recorder of Deeds of New Castle County;
and

FURTHER RESOLVED, that the effective date of such merger is
November 30, 1995."

IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed and this certificate to be signed by Ralph J. Swett, its President, and
John J. Willingham, its Secretary, this 28th day of November 1995.

IXC COMMUNICATIONS, INC.,
a Delaware corporation

By: /s/ Ralph J. Swett
--------------------------------
Ralph J. Swett, President

ATTEST:

By: /s/ John J. Willingham
---------------------------------
John J. Willingham, Secretary [SEAL]
<PAGE> 11
IN WITNESS WHEREOF, this Certificate has been signed on this Thirteenth
day of March, 1997.

IXC COMMUNICATIONS, INC.

By: /s/ Ralph J. Swett
-----------------------------------
Ralph J. Swett, Chairman, President
and Chief Executive Officer

Attested by:

/s/ John J. Willingham
- --------------------------------------
John J. Willingham, Senior Vice
President and Assistant Secretary

30
<PAGE> 12
EXECUTION COPY

CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF 7 1/4% JUNIOR
CONVERTIBLE PREFERRED STOCK DUE 2007 AND
QUALIFICATIONS, LIMITATIONS AND RESTRICTIONS THEREOF

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

Pursuant to Section 151 of the
General Corporation Law of the State of Delaware

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

IXC Communications, Inc. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does
hereby certify that, pursuant to authority conferred upon the board of
directors of the Corporation (the "Board of Directors") by its Restated
Certificate of Incorporation (hereinafter referred to as the "Restated
Certificate of Incorporation"), and pursuant to the provisions of Section 151
of the General Corporation Law of the State of Delaware, said Board of
Directors, at a meeting duly called and held on March 28, 1997, duly approved
and adopted the following resolution (the "Resolution"):

RESOLVED that, pursuant to the authority vested in the Board of Directors by
its Certificate of Incorporation, the Board of Directors does hereby create,
authorize and provide for the issuance of 7 1/4% Junior Convertible Preferred
Stock Due 2007, par value $.01 per share, with a stated value initially of
$100 per share, consisting of up to 1,400,000 shares having the designation,
preferences, relative, participating, optional and other special rights and
the qualifications, limitations and restrictions thereof that are set forth
in the Restated Certificate of Incorporation and in this Resolution as
follows:

(a) Designation. There is hereby created out of the authorized and
unissued shares of Preferred Stock of the Company a series of Preferred Stock
designated as the "7 1/4% Junior Convertible Preferred Stock Due 2007" (the
"Convertible Preferred Stock"). The number of shares constituting the
Convertible Preferred Stock shall be 1,400,000. The liquidation preference of
the Convertible Preferred Stock shall be $100 per share (the "Liquidation
Preference").
<PAGE> 13

(b) Rank. The Convertible Preferred Stock will, with respect to dividend
rights and rights on liquidation, winding-up and dissolution, rank (i) senior
to all classes of common stock and to each other class of Capital Stock or
series of Preferred Stock established hereafter by the Board of Directors of
the Company, the terms of which do not expressly provide that it ranks senior
to, or on a parity with, the Convertible Preferred Stock as to dividend rights
and rights on liquidation, winding-up and dissolution of the Company
(collectively referred to, together with all classes of common stock of the
Company, as "Junior Stock"); (ii) on a parity with each other class of Capital
Stock or series of Preferred Stock established hereafter by the Board of
Directors of the Company, the terms of which expressly provide that such class
or series will rank on a parity with the Convertible Preferred Stock as to
dividend rights and rights on liquidation, winding-up and dissolution
(collectively referred to as "Parity Stock"); and (iii) junior to each share of
Series 3 Preferred Stock now or hereafter outstanding and junior to each class
of Capital Stock or series of Preferred Stock established hereafter by the
Board of Directors of the Company, the terms of which hereafter established
classes or series expressly provide that such class or series will rank senior
to the Convertible Preferred Stock as to dividend rights or rights on
liquidation, winding-up and dissolution of the Company (collectively referred
to as "Senior Stock"). The Company may not authorize, create or increase the
authorized amount of any class or series of Senior Stock without the approval
of the holders of at least two-thirds of the shares of Convertible Preferred
Stock then outstanding, voting or consenting, as the case may be, as one class.
All claims of the holders of the Convertible Preferred Stock, including claims
with respect to dividend payments, redemption payments, mandatory repurchase
payments or rights upon liquidation, winding-up or dissolution, shall rank
junior to the claims of the holders of any debt of the Company and all other
creditors of the Company.

(c) Dividends. (i) Holders of the outstanding shares of Convertible
Preferred Stock will be entitled to receive, when, as and if declared by the
Board of Directors of the Company, out of funds legally available therefor,
dividends on each share of the Convertible Preferred Stock at a rate per annum
equal to 7 1/4% of the Liquidation

2
<PAGE> 14
Preference of such share payable quarterly (each such quarterly period being
herein called a "Dividend Period"). In addition to the dividends described in
the preceding sentence, holders of outstanding shares of Convertible Preferred
Stock which are Transfer Restricted Securities will be entitled to additional
dividends (the "Additional Dividends"), when, as and if declared by the Board
of Directors of the Company, out of funds legally available therefor, with
respect to the shares of Convertible Preferred Stock, which Additional
Dividends shall accrue as follows if any of the following events occur (each
such event in clauses (A) and (B) below being herein called a "Registration
Default"): (A) if by August 31, 1997, the Shelf Registration Statement has not
been declared effective by the Commission; or (B) if after the Shelf
Registration Statement is declared effective (1) the Shelf Registration
Statement thereafter ceases to be effective; or (2) the Shelf Registration
Statement or the related prospectus ceases to be usable (in each case except as
permitted below) in connection with resales of Transfer Restricted Securities
in accordance with and during the periods specified herein because either (I)
any event occurs as a result of which the related prospectus forming part of
such Shelf Registration Statement would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were made
not misleading, or (II) it shall be necessary to amend such Shelf Registration
Statement or supplement the related prospectus, to comply with the Securities
Act or the Exchange Act or the respective rules thereunder.

Additional Dividends shall accrue on the shares of Convertible Preferred
Stock which are Transfer Restricted Securities from and including the date on
which any such Registration Default shall occur, to but excluding the date on
which all such Registration Defaults have been cured, at a rate of 7 3/4% per
annum.

A Registration Default referred to in clause (B) of paragraph (c)(i) shall
be deemed not to have occurred and be continuing in relation to the Shelf
Registration Statement or the related prospectus if (i) such Registration
Default has occurred solely as a result of (x) the filing of a post-effective
amendment to the Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be

3
<PAGE> 15
declared effective to permit Holders to use the related prospectus or (y) other
material events with respect to the Company that would need to be described in
the Shelf Registration Statement or the related prospectus and (ii) in the case
of clause (y), the Company proceeds promptly and in good faith to amend or
supplement the Shelf Registration Statement and related prospectus to describe
such events unless the Company has determined in good faith that there are
material legal or commercial impediments in doing so; provided, however, that
in any case if such Registration Default occurs for a continuous period in
excess of 45 days, Additional Dividends shall be payable in accordance with the
immediately preceding paragraphs of this paragraph (c)(i) from the day such
Registration Default initially occurs until such Registration Default is cured.

Any amounts of Additional Dividends due pursuant to clauses (A) or (B) of
this paragraph (c)(i) or pursuant to the proviso contained in the preceding
sentence will be payable on the regular dividend payment dates with respect to
the Convertible Preferred Stock and on the same terms and conditions and
subject to the same limitations as pertain at such time for the payment of
regular dividends. The amount of Additional Dividends will be determined by
multiplying the applicable Additional Dividends rate by the aggregate
liquidation preference of the outstanding shares of Convertible Preferred
Stock, multiplied by a fraction, the numerator of which is the number of days
such Additional Dividend rate was applicable during such period (determined on
the basis of a 360-day year comprised of twelve 30-day months), and the
denominator of which is 360.

All dividends on the Convertible Preferred Stock, including Additional
Dividends, to the extent accrued, shall be cumulative, whether or not earned or
declared, on a daily basis from the Issue Date or, in the case of additional
shares of Convertible Preferred Stock issued in payment of a dividend, from the
date of issuance of such additional shares of Convertible Preferred Stock, and
shall be payable quarterly in arrears on March 31, June 30, September 30 and
December 31 of each year (each a "Dividend Payment Date"), commencing on June
30, 1997 to holders of record on the March 15, June 15, September 15 and
December 15 immediately preceding the relevant Dividend Payment Date. Any
dividend on the Convertible Preferred Stock payable pursuant to this paragraph
(c)(i) on or prior to March 31, 1999 shall be, at the option of the Company,
payable (1) in cash or (2) through the issuance of a number of additional
shares

4
<PAGE> 16
(rounded to the nearest whole share) of Convertible Preferred Stock (the
"Additional Shares") equal to the dividend amount divided by the Liquidation
Preference of such Additional Shares. With respect to dividends accrued after
March 31, 1999, all dividends shall be payable in cash; provided, however, that
to the extent and for so long as the Company is prohibited by the terms of any
of its indebtedness then outstanding or by the terms of the Series 3 Preferred
Stock of the Company or any agreement or instrument to which the Company is
then subject, from paying cash dividends on the Convertible Preferred Stock,
such dividends will accrue on each share at the rate per annum equal to 8 3/4%
of the Liquidation Preference per share (instead of the 7 1/4% rate set forth
in the first paragraph of this paragraph (c)(i)) (together with any Additional
Dividends then payable, which for purposes of this paragraph shall be payable
at a rate of 0.50% over and above the 8 3/4% rate) payable through the issuance
of a number of Additional Shares (rounded to the nearest whole share) equal to
the dividend amount on such share divided by the Liquidation Preference of such
Additional Shares on the relevant Dividend Payment Date. Except as provided
herein, accrued and unpaid dividends, if any, will not bear interest or bear
dividends thereon.

(ii) All dividends paid with respect to shares of the Convertible Preferred
Stock pursuant to paragraph (c)(i) shall be paid pro rata to the holders
entitled thereto.

(iii) No full dividends may be declared or paid or set apart for the
payment of dividends by the Company on any Parity Stock for any period unless
full cumulative dividends in respect of each Dividend Period ending on or
before such period shall have been or contemporaneously are declared and paid
(or are deemed declared and paid) in full or declared and, if payable in cash,
a sum in cash sufficient for such payment set apart for such payment on the
Convertible Preferred Stock. If full dividends are not so paid, the
Convertible Preferred Stock will share dividends pro rata with the Parity
Stock.

(iv) The Company will not (A) declare, pay or set apart funds for the
payment of any dividend or other distribution with respect to any Junior Stock
or (B) redeem, purchase or otherwise acquire for consideration any Junior Stock
through a sinking fund or otherwise, unless (1) all accrued and unpaid
dividends with respect to the Convertible Preferred Stock and any Parity Stock
at the time such

5
<PAGE> 17
dividends are payable have been paid or funds have been set apart for payment
of such dividends and (2) sufficient funds have been paid or set apart for the
payment of the dividend for the current dividend period with respect to the
Convertible Preferred Stock and any Parity Stock. As used herein, the term
"dividend" does not include dividends payable solely in shares of Junior Stock
on Junior Stock or in options, warrants or rights to holders of Junior Stock to
subscribe or purchase any Junior Stock.

(v) Dividends on account of arrears for any past Dividend Period and
dividends in connection with any optional redemption may be declared and paid
at any time, without reference to any regular Dividend Payment Date, to holders
of record on such date, not more than 45 days prior to the payment thereof, as
may be fixed by the Board of Directors of the Company.

(vi) Dividends payable on the Convertible Preferred Stock for any period
other than a Dividend Period shall be computed on the basis of a 360-day
consisting year of twelve 30-day months and the actual number of days elapsed
in the period for which payable. Dividends payable on the Convertible
Preferred Stock for a full Dividend Period will be computed by dividing the per
annum dividend rate by four.

(vii) Certificates of Common Stock relating to Convertible Preferred Stock
surrendered for conversion by a registered Holder during the period from the
close of business on any regular record date next preceding any Dividend
Payment Date to the opening of business on such Dividend Payment Date (except
Convertible Preferred Shares called for redemption on a Redemption Date within
such period) must be accompanied by payment in cash of an amount equal to the
accrued but unpaid dividends thereon which such registered Holder is to receive
on such Dividend Payment Date with respect to the Convertible Preferred Stock
so surrendered.

(d) Liquidation Preference. (i) Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Company, holders of Convertible
Preferred Stock will be entitled to be paid, out of the assets of the Company
available for distribution to its stockholders, the Liquidation Preference of
the outstanding shares of Convertible Preferred Stock, plus, without
duplication, an amount in cash equal to all accumulated and unpaid dividends

6
<PAGE> 18
(whether or not earned or declared and including Additional Dividends, if any,)
thereon to the date fixed for liquidation, dissolution or winding-up (including
an amount equal to a prorated dividend for the period from the last Dividend
Payment Date to the date fixed for liquidation, dissolution or winding-up that
would have been payable had the Convertible Preferred Stock been the subject of
an Optional Redemption on such date) before any distribution is made on any
Junior Stock. If, upon any voluntary or involuntary liquidation, dissolution
or winding up of the Company, the amounts payable with respect to the
Convertible Preferred Stock and all Parity Stock are not paid in full, the
Convertible Preferred Stock and the Parity Stock will share equally and ratably
(in proportion to the respective amounts that would be payable on such shares
of Convertible Preferred Stock and the Parity Stock, respectively, if all
amounts payable thereon had been paid in full) in any distribution of assets of
the Company to which each is entitled. After payment of the full amount of the
Liquidation Preference of the outstanding shares of Convertible Preferred Stock
(and, if applicable, an amount equal to a prorated dividend), the holders of
shares of Convertible Preferred Stock will not be entitled to any further
participation in any distribution of assets of the Company.

(ii) For the purposes of this paragraph (d), neither the sale, conveyance,
exchange or transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property or assets of the
Company nor the consolidation or merger of the Company with or into one or more
other entities shall be deemed to be a liquidation, dissolution or winding-up
of the Company.

(e) Redemption. (i) Optional Redemption. (A) The Convertible Preferred
Stock shall not be redeemable prior to April 3, 2000. On or after April 3,
2000, each share of the Convertible Preferred Stock may be redeemed (subject to
the legal availability of funds therefor) at any time, in whole or in part, at
the option of the Company, at the redemption prices (expressed as a percentage
of the Liquidation Preference of such share) set forth below, plus, without
duplication, an amount in cash equal to all accrued and unpaid Liquidated
Damages and all accrued and unpaid dividends to the date fixed for redemption
(the "Optional Redemption Date") (including an amount in cash equal to a
prorated dividend for the period from the Dividend Payment Date immediately
prior to the Optional Redemption Date) (the

7
<PAGE> 19
"Optional Redemption Price"). Notwithstanding the foregoing, prior to April 1,
2002, the Company shall only have the option to redeem shares of Convertible
Preferred Stock if, during the period of 30 consecutive Trading Days ending on
the Trading Day immediately preceding the date that the Redemption Notice is
mailed to holders, the Closing Bid Price for the Common Stock exceeded 150% of
the Conversion Price effective on the date of such Redemption Notice for at
least 20 of such Trading Days. If redeemed during the 12-month period
beginning April 1 of each of the years set forth below (or in the case of the
year 2000, April 3), the Optional Redemption Price per share shall be the
applicable percentage of the Liquidation Preference of such share set forth
below plus, without duplication, in each case, an amount in cash equal to all
accrued and unpaid Liquidated Damages and all accrued and unpaid dividends
(including an amount equal to a prorated dividend from the immediately
preceding Dividend Payment Date to the Optional Redemption Date), if any, to
the Optional Redemption Date:

Year in which redemption occurs Percentage
------------------------------- ----------
<S> <C>
2000 . . . . . . . . . . . . . 104.83%
2001 . . . . . . . . . . . . . 104.03%
2002 . . . . . . . . . . . . . 103.22%
2003 . . . . . . . . . . . . . 102.42%
2004 . . . . . . . . . . . . . 101.61%
2005 . . . . . . . . . . . . . 100.81%
2006 . . . . . . . . . . . . . 100.00%
</TABLE>

(B) In the event of a redemption of only a portion of the then outstanding
shares of Convertible Preferred Stock, the Company shall effect such redemption
on a pro rata basis, except that the Company may redeem all of the shares held
by holders of fewer than 100 shares (or all of the shares held by holders who
would hold less than 100 shares as a result of such redemption), as may be
determined by the Company.

(ii) Mandatory Redemption. Each share of the Convertible Preferred Stock
(if not earlier redeemed or converted) shall be subject to mandatory redemption
in whole (to the extent of lawfully available funds therefor) on March 31, 2007
(the "Mandatory Redemption Date") at a price equal to 100% of the Liquidation
Preference of such share, plus, without duplication, all accrued and unpaid
Liquidated Damages and accrued and unpaid dividends thereon (including

8
<PAGE> 20
an amount equal to a prorated dividend thereon from the immediately preceding
Dividend Payment Date to the Mandatory Redemption Date), if any, to the
Mandatory Redemption Date (the "Mandatory Redemption Price").

(iii) Procedure for Redemption. (A) On and after the Optional Redemption
Date or the Mandatory Redemption Date, as the case may be (the "Redemption
Date"), unless the Company defaults in the payment of the applicable redemption
price, dividends will cease to accumulate on shares of Convertible Preferred
Stock called for redemption and all rights of holders of such shares will
terminate except for the right to receive the Optional Redemption Price or the
Mandatory Redemption Price, as the case may be, without interest; provided,
however, that if a notice of redemption shall have been given as provided in
paragraph (iii)(B) and the funds necessary for redemption (including an amount
in respect of all dividends that will accrue to the Redemption Date) shall have
been segregated and irrevocably set apart by the Company, in trust for the
benefit of the holders of the shares called for redemption, then dividends
shall cease to accumulate on the Redemption Date on the shares to be redeemed
and, at the close of business on the day on which such funds are segregated and
set apart, the holders of the shares to be redeemed shall, with respect to the
shares to be redeemed, cease to be stockholders of the Company and shall be
entitled only to receive the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be, for such shares without interest from the
Redemption Date.

(B) With respect to a redemption pursuant to paragraph (e)(i) or (e)(ii),
the Company will send a written notice of redemption by first class mail to
each holder of record of shares of Convertible Preferred Stock, not fewer than
15 days nor more than 60 days prior to the Redemption Date at its registered
address (the "Redemption Notice"); provided, however, that no failure to give
such notice nor any deficiency therein shall affect the validity of the
procedure for the redemption of any shares of Convertible Preferred Stock to be
redeemed except as to the holder or holders to whom the Company has failed to
give said notice or except as to the holder or holders whose notice was
defective. The Redemption Notice shall state:

(1) whether the redemption is pursuant to paragraph (e)(i) or (e)(ii)
hereof;

9
<PAGE> 21
(2) the Optional Redemption Price or the Mandatory Redemption Price, as
the case may be;

(3) whether all or less than all the outstanding shares of the Convertible
Preferred Stock are to be redeemed and the total number of shares of the
Convertible Preferred Stock being redeemed;

(4) the Redemption Date;

(5) that the holder is to surrender to the Company, in the manner, at the
place or places and at the price designated, his certificate or certificates
representing the shares of Convertible Preferred Stock to be redeemed; and

(6) that dividends on the shares of the Convertible Preferred Stock to be
redeemed shall cease to accumulate on such Redemption Date unless the Company
defaults in the payment of the Optional Redemption Price or the Mandatory
Redemption Price, as the case may be.

(C) Each holder of Convertible Preferred Stock shall surrender the
certificate or certificates representing such shares of Convertible Preferred
Stock to the Company, duly endorsed (or otherwise in proper form for transfer,
as determined by the Company), in the manner and at the place designated in the
Redemption Notice, and on the Redemption Date the full Optional Redemption
Price or Mandatory Redemption Price, as the case may be, for such shares shall
be payable in cash to the person whose name appears on such certificate or
certificates as the owner thereof, and each surrendered certificate shall be
canceled and retired. In the event that less than all of the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares.

(f) Voting Rights. (i) The holders of Convertible Preferred Stock, except
as otherwise required under Delaware law or as set forth in paragraphs (ii) and
(iii) below, shall not be entitled or permitted to vote on any matter required
or permitted to be voted upon by the stockholders of the Company.

(ii) (A) If (1) dividends on the Convertible Preferred Stock are in
arrears and unpaid for six or more Dividend Periods (whether or not
consecutive) (a "Dividend

10
<PAGE> 22
Default"); or (2) the Company fails to redeem the Convertible Preferred Stock on
March 31, 2007, or fails to otherwise discharge any redemption obligation with
respect to the Convertible Preferred Stock, then the number of directors
constituting the Board of Directors of the Company will be increased by two and
the Holders of the then outstanding shares of Convertible Preferred Stock
(together with the holders of Parity Stock upon which like rights have been
conferred and are exercisable), voting separately and as a class, shall have the
right and power to elect such two additional directors. Each such event
described in clauses (1) or (2) above is a "Voting Rights Triggering Event". A
Voting Rights Triggering Event shall not be deemed to have occurred if at the
time of such event there are less than 200,000 shares of Convertible Preferred
Stock then outstanding.

(B) The voting rights set forth in subparagraph (f)(ii)(A) above will
continue until such time as (x) in the case of a Dividend Default, all
dividends in arrears on the Convertible Preferred Stock are paid in full in
cash, (y) in all other cases, any failure, breach or default giving rise to
such Voting Rights Triggering Event is remedied or waived by the Holders of at
least two-thirds of the shares of Convertible Preferred Stock then outstanding
or (z) at any time there are less than 200,000 shares of Convertible Preferred
Stock outstanding, at which time the term of any directors elected pursuant to
the provisions of subparagraph (f)(ii)(A) above shall terminate and the number
of directors constituting the Board of Directors shall be decreased by two
(until the occurrence of any subsequent Voting Rights Triggering Event). At
any time after voting power to elect directors shall have become vested and be
continuing in the holders of Convertible Preferred Stock (together with the
holders of Parity Stock upon which like rights have been conferred and are
exercisable) pursuant to subparagraph (f)(ii)(A) hereof, or if vacancies shall
exist in the offices of directors elected by such holders, a proper officer of
the Company may, and upon the written request of the holders of record of at
least 25% of the shares of Convertible Preferred Stock then outstanding or the
holders of 25% of the shares of Parity Stock then outstanding upon which like
rights have been confirmed and are exercisable addressed to the secretary of
the Company shall, call a special meeting of the Holders of Convertible
Preferred Stock and the holders of such Parity Stock for the purpose of
electing the directors which such holders are entitled to elect pursuant to the
terms hereof;

11
<PAGE> 23
provided, however, that no such special meeting shall be called if the next
annual meeting of stockholders of the Company is to be held within 60 days
after the voting power to elect directors shall have become vested, in which
case such meeting shall be deemed to have been called for such next annual
meeting. If such meeting shall not be called by a proper officer of the
Company within 20 days after personal service to the secretary of the Company
at its principal executive offices, then the Holders of record of at least 25%
of the outstanding shares of Convertible Preferred Stock or the holders of 25%
of the shares of Parity Stock upon which like rights have been confirmed and
are exercisable may designate in writing one of their members to call such
meeting at the expense of the Company, and such meeting may be called by the
person so designated upon the notice required for the annual meetings of
stockholders of the Company and shall be held at the place for holding the
annual meetings of stockholders. Any holder of Convertible Preferred Stock or
such Parity Stock so designated shall have, and the Company shall provide,
access to the lists of holders of Convertible Preferred Stock and the holders
of such Parity Stock to be called pursuant to the provisions hereof. If no
special meeting of the Holders of Convertible Preferred Stock and the holders
of such Parity Stock is called as provided in this paragraph (f)(ii), then such
meeting shall be deemed to have been called for the next annual meeting of
stockholders of the Company or special meeting of the holders of any other
capital stock of the Company.

(C) At any meeting held for the purposes of electing directors at which the
Holders of Convertible Preferred Stock (together with the holders of Parity
Stock upon which like rights have been conferred and are exercisable) shall
have the right, voting together as a separate class, to elect directors as
aforesaid, the presence in person or by proxy of the holders of at least a
majority in voting power of the outstanding shares of Convertible Preferred
Stock (and such Parity Stock) shall be required to constitute a quorum thereof.

(D) Any vacancy occurring in the office of a director elected by the
Holders of Convertible Preferred Stock (and such Parity Stock) may be filled by
the remaining director elected by the Holders of Convertible Preferred Stock
(and such Parity Stock) unless and until such vacancy shall be filled by the
Holders of Convertible Preferred Stock (and such Parity Stock).

12
<PAGE> 24
(iii) (A) So long as any shares of the Convertible Preferred Stock are
outstanding, the Company will not authorize, create or increase the authorized
amount of any class or series of Senior Stock without the affirmative vote or
consent of holders of at least two-thirds of the shares of Convertible
Preferred Stock then outstanding, voting or consenting, as the case may be, as
one class, given in person or by proxy, either in writing or by resolution
adopted at an annual or special meeting (except that no such vote or consent
shall be required for the issuance of additional shares of Series 3 Preferred
Stock to be paid as dividends on such Series 3 Preferred Stock pursuant to the
terms of such Series 3 Preferred Stock).

(B) So long as any shares of the Convertible Preferred Stock are
outstanding, the Company will not amend this Certificate of Designation so as
to affect adversely the specified rights, preferences, privileges or voting
rights of Holders of shares of Convertible Preferred Stock or to authorize the
issuance of any additional shares of Convertible Preferred Stock (except to
authorize the issuance of additional shares of Convertible Preferred Stock to
be paid as dividends on the Convertible Preferred Stock, for which no consent
shall be necessary) without the affirmative vote or consent of Holders of at
least two-thirds of the issued and outstanding shares of Convertible Preferred
Stock, voting or consenting, as the case may be, as one class, given in person
or by proxy, either in writing or by resolution adopted at an annual or special
meeting.

(C) Except as set forth in paragraph (f)(iii)(A) or (B) above, (x) the
creation, authorization or issuance of any shares of any Junior Stock, Parity
Stock or Senior Stock, including the designation of a series of Convertible
Preferred Stock, or (y) the increase or decrease in the amount of authorized
Capital Stock of any class, including Preferred Stock, shall not require the
consent of Holders of Convertible Preferred Stock and shall not be deemed to
affect adversely the rights, preferences, privileges or voting rights of shares
of Convertible Preferred Stock.

(iv) In any case in which the Holders of Convertible Preferred Stock shall
be entitled to vote pursuant to this paragraph (f) or pursuant to Delaware law,
each Holder of Convertible Preferred Stock entitled to vote with respect to
such matters shall be entitled to one vote for each share of Convertible
Preferred Stock held.

13
<PAGE> 25
(v) Except as required by law, the Holders of the Convertible Preferred
Stock will not be entitled to vote on any merger or consolidation involving the
Company or a sale of all or substantially all the assets of the Company.

(g) Conversion. (i) At any time after 60 days from the Issue Date, at the
option of the Holder thereof, any share of Convertible Preferred Stock may be
converted at the Liquidation Preference thereof into fully paid and
nonassessable Common Stock (calculated as to each conversion to the nearest
1/100 of a share), at the Conversion Price, determined as hereinafter provided,
in effect at the time of conversion. Such conversion right shall expire at the
close of business on the Mandatory Redemption Date. In case a share of
Convertible Preferred Stock is called for optional redemption, such conversion
right in respect of the share of Convertible Preferred Stock so called shall
expire at the close of business on the applicable Optional Redemption Date,
unless the Company defaults in making the payment due upon redemption.

The price at which Common Stock shall be delivered upon conversion (herein
called the "Conversion Price") shall be initially $23.46 per share of Common
Stock. The Conversion Price shall be adjusted in certain instances as provided
in paragraph (g)(iv) and paragraph (g)(v).

(ii) In order to exercise the conversion privilege, the Holder of any share
of Convertible Preferred Stock to be converted shall surrender the certificate
for such share of Convertible Preferred Stock, duly endorsed or assigned to the
Company or in blank, at the office of the Transfer Agent or at any office or
agency of the Company maintained for that purpose, accompanied by written
notice to the Company in the form of Exhibit B that the Holder elects to
convert such share of Convertible Preferred Stock or, if fewer than all of the
shares of Convertible Preferred Stock represented by a single share certificate
are to be converted, the number of shares represented thereby to be converted.
Except as provided in paragraph (c)(viii), no payment or adjustment shall be
made upon any conversion on account of any dividends accrued on the shares of
Convertible Preferred Stock surrendered for conversion or on account of any
dividends on the Common Stock issued upon conversion. Such notice shall also
contain the office or the address to which the Company should deliver shares of
Common Stock issuable upon conversion (and any other payments or certificates
related thereto). Except as

14
<PAGE> 26
provided in paragraph (c)(viii), in no event shall the Company be obligated to
pay any converting Holder any unpaid dividend, whether or not in arrears, on
converted shares or any dividends on the shares of Common Stock issued upon
such conversion.

Shares of Convertible Preferred Stock shall be deemed to have been converted
immediately prior to the close of business on the day of surrender of such
shares of Convertible Preferred Stock for conversion in accordance with the
foregoing provisions, and at such time the rights of the Holders of such shares
of Convertible Preferred Stock as Holders shall cease, and the person or
persons entitled to receive the Common Stock issuable upon conversion shall be
treated for all purposes as the record holder or holders of such Common Stock
at such time. As promptly as practicable on or after the conversion date, the
Company shall issue and shall deliver to such office or agency as the
converting Holder shall have designated in its written notice to the Company a
certificate or certificates for the number of full Common Stock issuable upon
conversion, together with payment in lieu of any fraction of a share, as
provided in paragraph (g)(iii) hereof.

In the case of any conversion of fewer than all the shares of Convertible
Preferred Stock evidenced by a certificate, upon such conversion the Company
shall execute and the Transfer Agent shall authenticate and deliver to the
Holder thereof (at the address designated by such Holder), at the expense of
the Company, a new certificate or certificates representing the number of
unconverted shares of Convertible Preferred Stock.

(iii) No fractional Common Stock shall be issued upon the conversion of a
share of Convertible Preferred Stock. If more than one share of Convertible
Preferred Stock shall be surrendered for conversion at one time by the same
holder, the number of full shares of Common Stock which shall be issuable upon
conversion thereof shall be computed on the basis of the aggregate shares of
Convertible Preferred Stock so surrendered. Instead of any fractional share of
Common Stock which would otherwise be issuable upon conversion of any share of
Convertible Preferred Stock, the Company shall pay a cash adjustment in respect
of such fraction in an amount equal to the same fraction of the closing price
(as defined in paragraph (g)(iv)(7)) per share of Common Stock at the close of
business on the Business Day prior to the day of conversion.

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<PAGE> 27
(iv) The Conversion Price shall be adjusted from time to time by the
Company as follows:

(1) If the Company shall hereafter pay a dividend or make a distribution in
Common Stock to all holders of any outstanding class or series of Common
Stock of the Company, the Conversion Price in effect at the opening of
business on the date following the date fixed for the determination of
shareholders entitled to receive such dividend or other distribution shall be
reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date (as defined in paragraph (g)(iv)(7))
fixed for such determination and the denominator shall be the sum of such
number of outstanding shares and the total number of shares constituting such
dividend or other distribution, such reduction to become effective
immediately after the opening of business on the day following the Record
Date. If any dividend or distribution of the type described in this
paragraph (g)(iv)(i) is declared but not so paid or made, the Conversion
Price shall again be adjusted to the Conversion Price which would then be in
effect if such dividend or distribution had not been declared.

(2) If the Company shall offer or issue rights or warrants to all holders
of its outstanding Common Stock entitling them to subscribe for or purchase
Common Stock at a price per share less than the Current Market Price (as
defined in paragraph (g)(iv)(7)) on the Record Date fixed for the
determination of shareholders entitled to receive such rights or warrants,
the Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect at the opening of
business on the date after such Record Date by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date plus the number of shares of Common
Stock which the aggregate offering price of the total number of shares of
Common Stock subject to such rights or warrants would purchase at such
Current Market Price and of which the denominator shall be the number of
shares of Common Stock outstanding at the close of business on the Record
Date plus the total number of additional shares of Common Stock subject to
such

16
<PAGE> 28
rights or warrants for subscription or purchase. Such adjustment shall
become effective immediately after the opening of business on the day
following the Record Date fixed for determination of shareholders entitled to
purchase or receive such rights or warrants. To the extent that shares of
Common Stock are not delivered pursuant to such rights or warrants, upon the
expiration or termination of such rights or warrants the Conversion Price
shall again be adjusted to be the Conversion Price which would then be in
effect had the adjustments made upon the issuance of such rights or warrants
been made on the basis of delivery of only the number of shares of Common
Stock actually delivered. If such rights or warrants are not so issued, the
Conversion Price shall again be adjusted to be the Conversion Price which
would then be in effect if such date fixed for the determination of
shareholders entitled to receive such rights or warrants had not been fixed.
In determining whether any rights or warrants entitle the holders to
subscribe for or purchase Common Stock at less than such Current Market
Price, and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration received
for such rights or warrants, with the value of such consideration, if other
than cash, to be determined by the Board of Directors.

(3) If the outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Conversion Price in effect at
the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and,
conversely, if the outstanding shares of Common Stock shall be combined into
a smaller number of shares of Common Stock, the Conversion Price in effect at
the opening of business on the day following the day upon which such
combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.

(4) If the Company shall, by dividend or otherwise, distribute to all
holders of its shares of Common Stock shares of any class of capital stock of
the Company (other than any dividends or distributions

17
<PAGE> 29
to which paragraph (g)(iv)(1) applies) or evidences of its indebtedness, cash
or other assets (including securities, but excluding any rights or warrants
of a type referred to in paragraph (g)(iv)(2) and excluding dividends and
distributions paid exclusively in cash and excluding any capital stock,
evidences of indebtedness, cash or assets distributed upon a merger or
consolidation to which paragraph (g)(v) applies) (the foregoing hereinafter
in this paragraph (g)(iv)(4) called the "Distributed Securities"), then, in
each such case, the Conversion Price shall be reduced so that the same shall
be equal to the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on the Record Date (as
defined in paragraph (g)(iv)(7)) with respect to such distribution by a
fraction of which the numerator shall be the Current Market Price (determined
as provided in paragraph (g)(iv)(7)) of the Common Stock on such date less
the fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the Board
of Directors) on such date of the portion of the Distributed Securities so
distributed applicable to one share of Common Stock and the denominator shall
be such Current Market Price, such reduction to become effective immediately
prior to the opening of business on the day following the Record Date;
provided, however, that, in the event the then fair market value (as so
determined) of the portion of the Distributed Securities so distributed
applicable to one share of Common Stock is equal to or greater than the
Current Market Price on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each holder of Convertible Preferred
Stock shall have the right to receive upon conversion of a share of
Convertible Preferred Stock (or any portion thereof) the amount of
Distributed Securities such holder would have received had such holder
converted such share of Convertible Preferred Stock (or portion thereof)
immediately prior to such Record Date. If such dividend or distribution is
not so paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such dividend or
distribution had not been declared. If the Board of Directors determines the
fair market value of any distribution for purposes of this paragraph
(g)(iv)(4) by reference to the actual or when issued trading market for any
securities comprising all

18
<PAGE> 30
or part of such distribution, it must in doing so consider the prices in such
market over the same period used in computing the Current Market Price
pursuant to paragraph (g)(iv)(7) to the extent possible.

Rights or warrants distributed by the Company to all holders of Common Stock
entitling the holders thereof to subscribe for or purchase shares of the
Company's capital stock (either initially or under certain circumstances),
which rights or warrants, until the occurrence of a specified event or events
("Dilution Trigger Event"): (i) are deemed to be transferred with such
Common Stock; (ii) are not exercisable; and (iii) are also issued in respect
of future issuances of Common Stock, shall be deemed not to have been
distributed for purposes of this paragraph (g)(iv)(4) (and no adjustment to
the Conversion Price under this paragraph (g)(iv)(4) shall be required) until
the occurrence of the earliest Dilution Trigger Event, whereupon such rights
and warrants shall be deemed to have been distributed and an appropriate
adjustment to the Conversion Price under this paragraph (g)(iv)(4) shall be
made. If any such rights or warrants, including any such existing rights or
warrants distributed prior to the date hereof, are subject to subsequent
events, upon the occurrence of each of which such rights or warrants shall
become exercisable to purchase different securities, evidences of
indebtedness or other assets, then the occurrence of each such event shall be
deemed to be such date of issuance and record date with respect to new rights
or warrants (and a termination or expiration of the existing rights or
warrants without exercise by the holder thereof). In addition, in the event
of any distribution (or deemed distribution) of rights or warrants, or any
Dilution Trigger Event with respect thereto, that was counted for purposes of
calculating a distribution amount for which an adjustment to the Conversion
Price under this paragraph (g)(iv)(4) was made, (1) in the case of any such
rights or warrants which shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Price shall be readjusted
upon such final redemption or repurchase to give effect to such distribution
or Dilution Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price received
by a holder or holders of Common Stock with respect to such rights or

19
<PAGE> 31
warrants (assuming such holder had retained such rights or warrants), made to
all holders of Common Stock as of the date of such redemption or repurchase,
and (2) in the case of such rights or warrants which shall have expired or
been terminated without exercise by any holders thereof, the Conversion Price
shall be readjusted as if such rights and warrants had not been issued.

Notwithstanding any other provision of this paragraph (g)(iv)(4) to the
contrary, capital stock, rights, warrants, evidences of indebtedness, other
securities, cash or other assets (including, without limitation, any rights
distributed pursuant to any shareholder rights plan) shall be deemed not to
have been distributed for purposes of this paragraph (g)(iv)(4) if the
Company makes proper provision so that each holder of shares of Convertible
Preferred Stock who converts a share of Convertible Preferred Stock (or any
portion thereof) after the date fixed for determination of shareholders
entitled to receive such distribution shall be entitled to receive upon such
conversion, in addition to the Common Stock issuable upon such conversion,
the amount and kind of such distributions that such holder would have been
entitled to receive if such holder had, immediately prior to such
determination date, converted such share of Convertible Preferred Stock into
Common Stock.

For purposes of this paragraph (g)(iv)(4) and paragraphs (g)(iv)(1) and (2),
any dividend or distribution to which this paragraph (g)(iv)(4) is
applicable that also includes Common Stock, or rights or warrants to
subscribe for or purchase Common Stock to which paragraph (g)(iv)(2) applies
(or both), shall be deemed instead to be (1) a dividend or distribution of
the evidences of indebtedness, cash, assets, shares of capital stock, rights
or warrants other than (A) such shares of Common Stock or (B) rights or
warrants to which paragraph (g)(iv)(2) applies (and any Conversion Price
reduction required by this paragraph (g)(iv)(4) with respect to such dividend
or distribution shall then be made) immediately followed by (2) a dividend or
distribution of such Common Stock or such rights or warrants (and any further
Conversion Price reduction required by paragraph (g)(iv)(1) and (2) with
respect to such dividend or distribution shall then be made), except that (1)
the Record Date of such

20
<PAGE> 32
dividend or distribution shall be substituted as "the Record Date fixed for
the determination of stockholders entitled to receive such dividend or other
distribution", "Record Date fixed for such determination" and "Record Date"
within the meaning of paragraph (g)(iv)(1) and as "the Record Date fixed for
the determination of shareholders entitled to receive such rights or
warrants", "the date fixed for the determination of the shareholders entitled
to receive such rights or warrants" and "such Record Date" within the meaning
of paragraph (g)(iv)(2), and (2) any share of Common Stock included in such
dividend or distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the meaning of
paragraph (g)(iv)(1).

(5) If the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock cash (excluding any cash that is distributed upon
a merger or consolidation to which paragraph (g)(v) applies or as part of a
distribution referred to in paragraph (g)(iv)) in an aggregate amount that,
combined together with (1) the aggregate amount of any other such
distributions to all holders of its Common Stock made exclusively in cash
within the 12 months preceding the date of payment of such distribution, and
in respect of which no adjustment pursuant to this paragraph (g)(iv)(5) has
been made, and (2) the aggregate of any cash plus the fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a resolution of the Board of Directors) of consideration
payable in respect of any tender offer by the Company or a Subsidiary of the
Company for all or any portion of the Common Stock concluded within the 12
months preceding the date of payment of such distribution, and in respect of
which no adjustment pursuant to paragraph (g)(iv)(4) has been made, exceeds
12.5% of the product of the Current Market Price (determined as provided in
paragraph (g)(iv)(7)) on the Record Date with respect to such distribution
times the number of shares of Common Stock outstanding on such date, then,
and in each such case, immediately after the close of business on such date,
the Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the close of business on

21
<PAGE> 33
such Record Date by a fraction (i) the numerator of which shall be equal to
the Current Market Price on the Record Date less an amount equal to the
quotient of (x) the excess of such combined amount over such 12.5% amount
divided by (y) the number of shares of Common Stock outstanding on the Record
Date and (ii) the denominator of which shall be equal to the Current Market
Price on such Record Date; provided, however, that, if the portion of the
cash so distributed applicable to one share of Common Stock is equal to or
greater than the Current Market Price of the Common Stock on the Record Date,
in lieu of the foregoing adjustment, adequate provision shall be made so that
each holder of Convertible Preferred Stock shall have the right to receive
upon conversion of a share of Convertible Preferred Stock (or any portion
thereof) the amount of cash such holder would have received had such holder
converted such share of Convertible Preferred Stock (or portion thereof)
immediately prior to such Record Date. If such dividend or distribution is
not so paid or made, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such dividend or
distribution had not been declared.

(6) If a tender or exchange offer made by the Company or any of its
Subsidiaries for all or any portion of the Common Stock expires and such
tender or exchange offer (as amended upon the expiration thereof) requires
the payment to shareholders (based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased Shares (as defined
below)) of an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a resolution of the Board of Directors) that, combined
together with (1) the aggregate of the cash plus the fair market value (as
determined by the Board of Directors, whose determination shall be conclusive
and described in a resolution of the Board of Directors), as of the
expiration of such tender offer, of consideration payable in respect of any
other tender offers, by the Company or any of its Subsidiaries for all or any
portion of the Common Stock expiring within the 12 months preceding the
expiration of such tender offer and in respect of which no adjustment
pursuant to this paragraph (g)(iv)(6) has been made and (2) the aggregate
amount of any distributions to all holders of

22
<PAGE> 34
the Common Stock made exclusively in cash within 12 months preceding the
expiration of such tender offer and in respect of which no adjustment
pursuant to paragraph (g)(iv)(5) has been made, exceeds 12.5% of the product
of the Current Market Price (determined as provided in paragraph (g)(iv)(7))
as of the last time (the "Expiration Time") tenders could have been made
pursuant to such tender offer (as it may be amended) times the number of
shares of Common Stock outstanding (including any tendered shares) at the
Expiration Time, then, and in each such case, immediately prior to the
opening of business on the day after the date of the Expiration Time, the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the close of business on the date of the Expiration Time by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time multiplied by the
Current Market Price of the Common Stock on the Trading Day next succeeding
the Expiration Time and the denominator shall be the sum of (x) the fair
market value (determined as aforesaid) of the aggregate consideration payable
to shareholders based on the acceptance (up to any maximum specified in the
terms of the tender offer) of all shares validly tendered and not withdrawn
as of the Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (y) the product of
the number of shares of Common Stock outstanding (less any Purchased Shares)
at the Expiration Time and the Current Market Price of the Common Stock on
the Trading Day next succeeding the Expiration Time, such reduction (if any)
to become effective immediately prior to the opening of business on the day
following the Expiration Time. If the Company is obligated to purchase
shares pursuant to any such tender offer, but the Company is permanently
prevented by applicable law from effecting any such purchases or all such
purchases are rescinded, the Conversion Price shall again be adjusted to be
the Conversion Price which would then be in effect if such tender offer had
not been made. If the application of this paragraph (g)(iv)(6) to any tender
offer would result in an increase in the Conversion Price, no adjustment
shall be made for such tender offer under this paragraph (g)(iv)(6).

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<PAGE> 35
(7) For purposes of this paragraph (g)(iv), the following terms shall have
the meaning indicated:

"closing price" with respect to any securities on any day means the closing
price on such day or, if no such sale takes place on such day, the average of
the reported high and low prices on such day, in each case on The Nasdaq
National Market or the New York Stock Exchange, as applicable, or, if such
security is not listed or admitted to trading on such national market or
exchange, on the principal national securities exchange or quotation system
on which such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities exchange
or quotation system, the average of the high and low prices of such security
on the over-the-counter market on the day in question as reported by the
National Quotation Bureau Incorporated or a similar generally accepted
reporting service, or, if not so available, in such manner as furnished by
any New York Stock Exchange member firm selected from time to time by the
Board of Directors for that purpose, or a price determined in good faith by
the Board of Directors, whose determination shall be conclusive and described
in a resolution of the Board of Directors.

"Current Market Price" means the average of the daily closing prices per
share of Common Stock for the 10 consecutive trading days immediately prior
to the date in question; provided, however, that (A) if the "ex" date (as
hereinafter defined) for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Conversion
Price pursuant to paragraphs (g)(iv)(1), (2), (3), (4), (5) or (6) occurs
during such 10 consecutive trading days, the closing price for each trading
day prior to the "ex" date for such other event shall be adjusted by
multiplying such closing price by the same fraction by which the Conversion
Price is so required to be adjusted as a result of such other event, (B) if
the "ex" date for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Conversion
Price pursuant to paragraphs (g)(iv)(1), (2), (3), (4), (5) or (6) occurs on
or after the "ex" date for the issuance or distribution requiring such
computation and prior to the day in question, the closing price for each
trading day on and after the

24
<PAGE> 36
"ex" date for such other event shall be adjusted by multiplying such closing
price by the reciprocal of the fraction by which the Conversion Price is so
required to be adjusted as a result of such other event and (C) if the "ex"
date for the issuance or distribution requiring such computation is prior to
the day in question, after taking into account any adjustment required
pursuant to clause (A) or (B) of this proviso, the closing price for each
trading day on or after such "ex" date shall be adjusted by adding thereto
the amount of any cash and the fair market value (as determined by the Board
of Directors in a manner consistent with any determination of such value for
purposes of paragraphs (g)(iv)(4) or (5), whose determination shall be
conclusive and described in a resolution of the Board of Directors) of the
evidence of indebtedness, shares of capital stock or assets being distributed
applicable to one Common Stock as of the close of business on the day before
such "ex" date. For purposes of any computation under paragraph (g)(vi), the
Current Market Price on any date shall be deemed to be the average of the
daily closing prices per share of Common Stock for such day and the next two
succeeding trading days; provided, however, that, if the "ex" date for any
event (other than the tender offer requiring such computation) that requires
an adjustment to the Conversion Price pursuant to paragraph (g)(iv)(1), (2),
(3), (4), (5) or (6) occurs on or after the Expiration Time for the tender or
exchange offer requiring such computation and prior to the day in question,
the closing price for each trading day on and after the "ex" date for such
other event shall be adjusted by multiplying such closing price by the
reciprocal of the fraction by which the Conversion Price is so required to be
adjusted as a result of such other event. For purposes of this paragraph,
the term "ex" date (I) when used with respect to any issuance or
distribution, means the first date on which the Common Stock trades regular
way on the relevant exchange or in the relevant market from which the closing
price was obtained without the right to receive such issuance or
distribution, (II) when used with respect to any subdivision or combination
of Common Stock, means the first date on which the Common Stock trades
regular way on such exchange or in such market after the time at which such
subdivision or combination becomes effective and (III) when used with respect
to any tender or exchange offer means the first date on which the Common

25
<PAGE> 37
Stock trades regular way on such exchange or in such market after the
Expiration Time of such offer. Notwithstanding the foregoing, whenever
successive adjustments to the Conversion Price are called for pursuant to this
paragraph (g)(iv), such adjustments shall be made to the Current Market Price
as may be necessary or appropriate to effectuate the intent of this paragraph
(g)(iv) and to avoid unjust or inequitable results, as determined in good
faith by the Board of Directors.

"fair market value" shall mean the amount which a willing buyer would pay a
willing seller in an arm's-length transaction.

"Record Date" shall mean, with respect to any dividend, distribution or other
transaction or event in which the holders of Common Stock have the right to
receive any cash, securities or other property or in which the Common Stock
(or other applicable security) is exchanged for or converted into any
combination of cash, securities or other property, the date fixed for
determination of shareholders entitled to receive such cash, securities or
other property (whether such date is fixed by the Board of Directors or by
statute, contract or otherwise).

(8) No adjustment in the Conversion Price shall be required unless such
adjustment would require an increase or decrease of at least 1% in such
price; provided, however, that any adjustments which by reason of this
paragraph (g)(iv)(8) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under this
paragraph (g)(iv)(8) shall be made by the Company and shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may be.
No adjustment need be made for a change in the par value or no par value of
the Common Stock.

(9) Whenever the Conversion Price is adjusted as herein provided, the
Company shall promptly file with the Transfer Agent an Officers' Certificate
setting forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment. Promptly after
delivery of such certificate, the Company shall prepare a notice of such
adjustment of the Conversion Price setting forth the

26
<PAGE> 38
adjusted Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the Conversion
Price to each holder of Convertible Preferred Stock at such holder's last
address appearing on the register of holders maintained for that purpose
within 20 days of the effective date of such adjustment. Failure to deliver
such notice shall not affect the legality or validity of any such adjustment.

(10) In any case in which this paragraph (g)(iv) provides that an
adjustment shall become effective immediately after a Record Date for an
event, the Company may defer until the occurrence of such event issuing to
the holder of any share of Convertible Preferred Stock converted after such
Record Date and before the occurrence of such event the additional Common
Stock issuable upon such conversion by reason of the adjustment required by
such event over and above the Common Stock issuable upon such conversion
before giving effect to such adjustment.

(11) For purposes of this paragraph (g)(iv), the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury
of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of Common Stock. The Company shall
not pay any dividend or make any distribution on Common Stock held in the
treasury of the Company.

(v) In case of any consolidation of the Company with, or merger of the
Company into, any other corporation, or in case of any merger of another
corporation into the Company (other than a merger which does not result in
any reclassification, conversion, exchange or cancellation of outstanding
shares of Common Stock of the Company), or in case of any conveyance or
transfer of the properties and assets of the Company substantially as an
entirety, the holder of each share of Convertible Preferred Stock then
outstanding shall have the right thereafter, during the period such
Convertible Preferred Stock shall be convertible as specified in paragraph
(g)(i), to convert such share of Convertible Preferred Stock only into the
kind and amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance or transfer by a holder of the number of

27
<PAGE> 39
shares of Common Stock of the Company into which such share of Convertible
Preferred Stock might have been converted immediately prior to such
consolidation, merger, conveyance or transfer, assuming such holder of Common
Stock of the Company failed to exercise his rights of election, if any, as to
the kind or amount of securities, cash and other property receivable upon
such consolidation, merger, conveyance or transfer (provided that, if the
kind or amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance or transfer is not the same for each share
of Common Stock of the Company in respect of which such rights of election
shall not have been exercised ("nonelecting share"), then for the purpose of
this paragraph (g)(v) the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance or transfer
by each nonelecting share shall be deemed to be the kind and amount so
receivable per share by a plurality of the nonelecting shares). Such
securities shall provide for adjustments which, for events subsequent to the
effective date of the triggering event, shall be as nearly equivalent as may
be practicable to the adjustments provided for in this paragraph (g)(v). The
above provisions of this Section shall similarly apply to successive
consolidations, mergers, conveyances or transfers.

(vi) In case:

(1) the Company shall declare a dividend (or any other distribution) on its
Common Stock payable otherwise than in cash out of its earned surplus; or

(2) the Company shall authorize the granting to all holders of its Common
Stock of rights or warrants to subscribe for or purchase any shares of capital
stock of any class or of any other rights; or

(3) of any reclassification of the Common Stock of the Company (other than a
subdivision or combination of its outstanding Common Stock), or of any
consolidation or merger to which the Company is a party and for which approval
of any shareholders of the Company is required, or the sale or transfer of all
or substantially all the assets of the Company; or

28
<PAGE> 40
(4) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company;

then the Company shall cause to be filed with the Transfer Agent and at each
office or agency maintained for the purpose of conversion of the Convertible
Preferred Stock, and shall cause to be mailed to all holders at their last
addresses as they shall appear in the Convertible Preferred Stock Register, at
least 20 days (or 10 days in any case specified in clause (1) or (2) above)
prior to the applicable date hereinafter specified, a notice stating (x) the
date on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined or (y) the date
on which such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common Stock of record shall be
entitled to exchange their Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up. Failure to give the notice requested
by this Section or any defect therein shall not affect the legality or validity
of any dividend, distribution, right, warrant, reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up, or the vote
upon any such action.

(vii) The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized but unissued shares of Common Stock
(or out of its authorized shares of Common Stock held in the treasury of the
Company), for the purpose of effecting the conversion of the Convertible
Preferred Stock, the full number of Common Stock then issuable upon the
conversion of all outstanding shares of Convertible Preferred Stock.

(viii) The Company will pay any and all document, stamp or similar issue or
transfer taxes that may be payable in respect of the issue or delivery of
Common Stock on conversion of the Convertible Preferred Stock pursuant hereto.
The Company shall not, however, be required to pay any tax which may be payable
in respect of any transfer involved in the issue and delivery of shares of
Common Stock in a name other than that of the holder of the share of

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<PAGE> 41
Convertible Preferred Stock or the shares of Convertible Preferred Stock to be
converted, and no such issue or delivery shall be made unless and until the
Person requesting such issue has paid to the Company the amount of any such
tax, or has established to the satisfaction of the Company that such tax has
been paid.

(ix) (1) Notwithstanding any other provision in the preceding paragraphs
to the contrary, if any Change in Control occurs then, if the Company does not
elect to make a Change in Control Offer, the Conversion Price in effect shall
be adjusted immediately after such Change in Control as described below. In
addition, in the event of a Common Stock Change in Control (as defined in this
paragraph (g)(ix)), each share of the Convertible Preferred Stock shall be
convertible solely into common stock of the kind received by holders of Common
Stock as the result of such Common Stock Change in Control. For purposes of
calculating any adjustment to be made pursuant to this paragraph in the event
of a Change in Control, immediately after such Change in Control:

(A) in the case of a Non-Stock Change in Control (as defined in this
paragraph (g)(ix)), the Conversion Price shall thereupon become the lower of
(x) the Conversion Price in effect immediately prior to such Non-Stock Change
in Control, but after giving effect to any other prior adjustments, and (y)
the result obtained by multiplying the greater of the Applicable Price (as
defined in this paragraph (g)(ix)) or the then applicable Reference Market
Price (as defined in this paragraph (g)(ix)) by a fraction of which the
numerator shall be $100.00 and the denominator shall be the then current
Optional Redemption Price per share; and

(B) in the case of a Common Stock Change in Control, the Conversion Price in
effect immediately prior to such Common Stock Change in Control, but after
giving effect to any prior adjustments, shall thereupon be adjusted by
multiplying such Conversion Price by a fraction, of which the numerator shall
be the Purchaser Stock Price (as defined in this paragraph (g)(ix)) and the
denominator shall be the Applicable Price; provided, however, that in the
event of a Common Stock Change in Control in which (x) 100% of the value of
the consideration received by a holder of Common Stock is common stock of the
successor, acquiror, or other third

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<PAGE> 42
party (and cash, if any, is paid with respect to any fractional interests in
such common stock resulting from such Common Stock Change in Control) and (y)
all of the Common Stock will have been exchanged for, converted into, or
acquired for, common stock (and cash with respect to fractional interests) of
the successor, acquiror or other third party, the Conversion Price in effect
immediately prior to such Common Stock Change in Control shall thereupon be
adjusted by multiplying such Conversion Price by a fraction, of which the
numerator shall be one (1) and the denominator shall be the number of shares
of common stock of the successor, acquiror, or other third party received by
a holder of one share of Common Stock as a result of such Common Stock Change
in Control.

(3) For purposes of this paragraph (ix), the following terms shall have the
meanings indicated:

"Applicable Price" means (i) in the event of a Non-Stock Change in Control
in which the holders of the Common Stock receive only cash, the amount of
cash received by the holder of one share of Common Stock and (ii) in the
event of any other Non-Stock Change in Control or any Common Stock Change in
Control, the average of the Closing Bid Prices for the Common Stock during
the ten Trading Days prior to and including the record date for the
determination of the holders of Common Stock entitled to receive cash,
securities, property or other assets in connection with such Non-Stock Change
in Control or Common Stock Change in Control or, if there is no such record
date, the date upon which the holders of the Common Stock shall have the
right to receive such cash, securities, property or other assets, in each
case, as adjusted in good faith by the Board of Directors to appropriately
reflect any of the events referred to in paragraph (g)(iv)(1) through (6).

"Common Stock Change in Control" means any Change in Control in which more
than 50% of the value (as determined in good faith by the Board of Directors
of the Company) of the consideration received by holders of Common Stock
consists of common stock that for each of the ten consecutive Trading Days
referred to in the preceding paragraph has been admitted for listing or
admitted for listing subject to notice of issuance on a national securities
exchange or quoted on The Nasdaq

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<PAGE> 43
National Market; provided, however, that a Change in Control shall not be a
Common Stock Change in Control unless either (i) the Company continues to
exist after the occurrence of such Change in Control and the outstanding
shares of Convertible Preferred Stock continue to exist as outstanding shares
of Convertible Preferred Stock, or (ii) not later than the occurrence of such
Change in Control, the outstanding shares of Convertible Preferred Stock are
converted into or exchanged for shares of convertible preferred stock of a
corporation succeeding to the business of the Company, which convertible
preferred stock has powers, preferences and relative, participating, optional
or other rights, and qualifications, limitations and restrictions,
substantially similar to those of the Convertible Preferred Stock.

"Non-Stock Change in Control" means any Change in Control other than a
Common Stock Change in Control.

"Purchaser Stock Price" means, with respect to any Common Stock Change in
Control, the product of (i) the number of shares of common stock received in
such Common Stock Change of Control for each share of Common Stock, and (ii)
the average of the per share Closing Prices for the common stock received in
such Common Stock Change in Control for the ten consecutive Trading Days
prior to and including the record date for the determination of the holders
of Common Stock entitled to receive such common stock, or if there is no such
record date, the date upon which the holders of the Common Stock shall have
the right to receive such common stock, in each case, as adjusted in good
faith by the Board of Directors to appropriately reflect any of the events
referred to in paragraph (g)(iv)(1) through (6); provided, however, that if
no such Closing Prices exist, then the Purchaser Stock Price shall be set at
a price determined in good faith by the Board of Directors of the Company.

"Reference Market Price" shall initially mean $13.50 (which is an amount
equal to 66-2/3% of the reported last sale price for the Common Stock on The
Nasdaq National Market on March 25, 1997), and in the event of any adjustment
to the conversion prices other than as a result of a Change in Control, the
Reference Market Price shall also be adjusted so that the ratio of the
Reference Market Price to the Conversion Price

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<PAGE> 44
after giving effect to any such adjustment shall always be the same as the
ratio of $13.50 to the initial Conversion Price set forth in paragraph
(g)(i).

(h) Change in Control. (i) Upon the occurrence of a Change of Control
(the date of such occurrence being the "Change in Control Date"), the Company
shall be obligated to (1) purchase all or a portion of each holder's
Convertible Preferred Stock in cash pursuant to the offer described in
paragraph (h)(iii) (the "Change of Control Offer") at a purchase price equal to
100% of the Liquidation Preference, plus, without duplication, all accrued and
unpaid Liquidated Damages and all accrued and unpaid dividends, if any, to the
Change of Control Payment Date, including an amount in cash equal to a prorated
dividend for the period from the Dividend Payment Date immediately prior to the
Change of Control Payment Date to the Change of Control Payment Date or (2)
adjust the conversion price as provided under paragraph (g)(ix).
Notwithstanding the foregoing, the Company shall, prior to electing to make a
Change of Control Offer, make an offer to redeem all outstanding shares of
Series 3 Preferred Stock.

(ii) Prior to the mailing of the notice referred to in paragraph (h)(iii),
but in any event within 15 days following the date on which the Company knows
or reasonably should have known that a Change in Control has occurred, the
Company covenants that it shall promptly determine if the purchase of the
Convertible Preferred Stock would violate or constitute a default under the
Indenture or other indebtedness of the Company.

(iii) Within 15 days following the date on which the Company knows or
reasonably should have known that a Change in Control has occurred, the Company
must send, by first-class mail, postage prepaid, a notice to each holder of
Convertible Preferred Stock. Such notice shall state whether the Change of
Control Offer would be permitted under the Indenture or other indebtedness of
the Company, and if permitted, such notice shall contain all instructions and
materials necessary to enable such holders to tender Convertible Preferred
Stock pursuant to the Change of Control Offer. If the Change of Control Offer
would be permitted under the Indenture or other indebtedness of the Company,
such notice shall state:

(A) that a Change of Control has occurred, that the Change of Control Offer
is being made pursuant to

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<PAGE> 45
this paragraph (h) and that all Convertible Preferred Stock validly tendered
and not withdrawn will be accepted for payment;

(B) the purchase price (including the amount of accrued dividends, if any)
and the purchase date (which must be no earlier than 30 days nor later than
75 days from the date such notice is mailed, other than as may be required by
law) (the "Change of Control Payment Date");

(D) that, unless the Company defaults in making payment therefor, any share
of Convertible Preferred Stock accepted for payment pursuant to the Change of
Control Offer shall cease to accrue dividends after the Change of Control
Payment Date;

(E) that holders electing to have any shares of Convertible Preferred Stock
purchased pursuant to a Change of Control Offer will be required to surrender
such shares of Convertible Preferred Stock, properly endorsed for transfer,
together with such other customary documents as the Company and the Transfer
Agent may reasonably request to the Transfer Agent and registrar for the
Convertible Preferred Stock at the address specified in the notice prior to
the close of business on the Business Day prior to the Change of Control
Payment Date;

(F) that holders will be entitled to withdraw their election if the Company
receives, not later than five Business Days prior to the Change of Control
Payment Date, a telegram, a telex, facsimile transmission or letter setting
forth the name of the holder, the number of shares of Convertible Preferred
Stock the holder delivered for purchase and a statement that such holder is
withdrawing his election to have such shares of Convertible Preferred Stock
purchased;

(G) that holders whose shares of Convertible Preferred Stock are purchased
only in part will be issued a new certificate representing the unpurchased
shares of Convertible Preferred Stock; and

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<PAGE> 46
(H) the circumstances and relevant facts regarding such Change of Control.

If the Change of Control Offer would not be permitted under the Indenture
or other indebtedness of the Company, such notice shall state the Conversion
Price as adjusted pursuant to paragraph (g)(ix).

(iv) The Company will comply with any tender offer rules under the Exchange
Act which then may be applicable, including Rules 13e-4 and 14e-1, in
connection with any offer required to be made by the Company to repurchase the
shares of Convertible Preferred Stock as a result of a Change of Control. To
the extent that the provisions of any securities laws or regulations conflict
with provisions of this Certificate of Designation, the Company shall comply
with the applicable securities laws and regulations and shall not be deemed to
have breached its obligations under this Certificate of Designation by virtue
thereof.

(v) On the Change of Control Payment Date the Company shall (A) accept for
payment the shares of Convertible Preferred Stock validly tendered pursuant to
the Change of Control Offer, (B) pay to the holders of shares so accepted the
purchase price therefor in cash and (C) cancel and retire each surrendered
certificate. Unless the Company defaults in the payment for the shares of
Convertible Preferred Stock tendered pursuant to the Change of Control Offer,
dividends will cease to accrue with respect to the shares of Convertible
Preferred Stock tendered and all rights of holders of such tendered shares will
terminate, except for the right to receive payment therefor, on the Change of
Control Payment Date.

(vi) To accept the Change of Control Offer, the holder of a share of
Convertible Preferred Stock shall deliver, on or before the 10th day prior to
the Change of Control Payment Date, written notice to the Company (or an agent
designated by the Company for such purpose) of such holder's acceptance,
together with certificates evidencing the shares of Convertible Preferred Stock
with respect to which the Change of Control Offer is being accepted, duly
endorsed for transfer.

(i) Reissuance of Convertible Preferred Stock. Shares of Convertible
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged, shall not be reissued as shares of

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<PAGE> 47
Convertible Preferred Stock and shall (upon compliance with any applicable
provisions of the laws of Delaware) have the status of authorized and
unissued shares of Preferred Stock undesignated as to series and may be
redesignated and reissued as part of any series of Preferred Stock; provided,
however, that so long as any shares of Convertible Preferred Stock are
outstanding, any issuance of such shares must be in compliance with the terms
hereof.

(j) Business Day. If any payment, redemption or exchange shall be required
by the terms hereof to be made on a day that is not a Business Day, such
payment, redemption or exchange shall be made on the immediately succeeding
Business Day.

(k) Limitation on Mergers and Asset Sales. The Company may not consolidate
with or merge with or into, or convey, transfer or lease all or substantially
all its assets to, any person unless: (1) the successor, transferee or lessee
(if not the Company) is organized and existing under the laws of the United
States of America or any State thereof or the District of Columbia and the
Convertible Preferred Stock shall be converted into or exchanged for and shall
become shares of such successor, transferee or lessee, having in respect of
such successor, transferee or lessee substantially the same powers, preference
and relative participating, optional or other special rights and the
qualifications, limitations or restrictions thereon, that the Convertible
Preferred Stock had immediately prior to such transaction; and (2) the Company
delivers to the Transfer Agent an Officers' Certificate and an Opinion of
Counsel stating that such consolidation, merger or transfer complies with this
Certificate of Designation. The successor, transferee or lessee will be the
successor company.

(l) Certificates. (i) Form and Dating. The Convertible Preferred Stock
and the Transfer Agent's certificate of authentication shall be substantially
in the form of Exhibit A, which is hereby incorporated in and expressly made a
part of this Certificate of Designation. The Convertible Preferred Stock
certificate may have notations, legends or endorsements required by law, stock
exchange rule, agreements to which the Company is subject, if any, or usage
(provided that any such notation, legend or endorsement is in a form acceptable
to the Company). Each Convertible Preferred Stock certificate shall be dated
the date of its authentication. The terms of the Convertible

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<PAGE> 48
Preferred Stock certificate set forth in Exhibit A are part of the terms of
this Certificate of Designation.

(A) Global Convertible Preferred Stock. The Convertible Preferred Stock
sold in reliance on Rule 144A shall be issued initially in the form of one or
more fully registered global certificates with the global securities legend and
restricted securities legend set forth in Exhibit A hereto (the "Global
Convertible Preferred Stock"), which shall be deposited on behalf of the
purchasers represented thereby with the Transfer Agent, at its New York office,
as custodian for DTC (or with such other custodian as DTC may direct), and
registered in the name of DTC or a nominee of DTC, duly executed by the Company
and authenticated by the Transfer Agent as hereinafter provided. The number of
shares of Convertible Preferred Stock represented by Global Convertible
Preferred Stock may from time to time be increased or decreased by adjustments
made on the records of the Transfer Agent and DTC or its nominee as hereinafter
provided.

(B) Book-Entry Provisions. In the event Global Convertible Preferred Stock
is deposited with or on behalf of DTC, the Company shall execute and the
Transfer Agent shall authenticate and deliver initially one or more Global
Convertible Preferred Stock certificates that (a) shall be registered in the
name of DTC for such Global Convertible Preferred Stock or the nominee of DTC
and (b) shall be delivered by the Transfer Agent to DTC or pursuant to DTC's
instructions or held by the Transfer Agent as custodian for DTC.

Members of, or participants in, DTC ("Agent Members") shall have no rights
under this Certificate of Designation with respect to any Global Convertible
Preferred Stock held on their behalf by DTC or by the Transfer Agent as the
custodian of DTC or under such Global Convertible Preferred Stock, and DTC may
be treated by the Company, the Transfer Agent and any agent of the Company or
the Transfer Agent as the absolute owner of such Global Convertible Preferred
Stock for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall prevent the Company, the Transfer Agent or any agent of the
Company or the Transfer Agent from giving effect to any written certification,
proxy or other authorization furnished by DTC or impair, as between DTC and its
Agent Members, the operation of customary practices of DTC governing the

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<PAGE> 49
exercise of the rights of a holder of a beneficial interest in any Global
Convertible Preferred Stock.

(C) Certificated Convertible Preferred Stock. Convertible Preferred Stock
initially sold to certain "accredited investors" (as defined in Rule 501(a)(1),
(2), (3), (4), (5), (6) or (7) under the Securities Act) or sold in offshore
transactions pursuant to Regulation S under the Securities Act will be issued
in fully registered certificated form ("Certificated Convertible Preferred
Stock").

Except as provided in this paragraph (l)(i) or in paragraph (l)(iii), owners
of beneficial interests in Global Convertible Preferred Stock will not be
entitled to receive physical delivery of Certificated Convertible Preferred
Stock.

After a transfer of any Convertible Preferred Stock during the period of the
effectiveness of a Shelf Registration Statement with respect to such
Convertible Preferred Stock, all requirements pertaining to legends on such
Convertible Preferred Stock will cease to apply, the requirements requiring
that any such Convertible Preferred Stock issued to Holders be issued in global
form will cease to apply, and Certificated Convertible Preferred Stock without
legends will be available to the transferee of the Holder of such Convertible
Preferred Stock upon exchange of such transferring Holder's Convertible
Preferred Stock or directions to transfer such Holder's interest in the Global
Convertible Preferred Stock, as applicable.

(ii) Execution and Authentication. Two Officers shall sign the Convertible
Preferred Stock for the Company by manual or facsimile signature. The
Company's seal shall be impressed, affixed, imprinted or reproduced on the
Convertible Preferred Stock and may be in facsimile form.

If an Officer whose signature is on Convertible Preferred Stock no longer
holds that office at the time the Transfer Agent authenticates the Convertible
Preferred Stock, the Convertible Preferred Stock shall be valid nevertheless.

A Convertible Preferred Stock shall not be valid until an authorized
signatory of the Transfer Agent manually signs the certificate of
authentication on the Convertible Preferred Stock. The signature shall be
conclusive evidence

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<PAGE> 50
that the Convertible Preferred Stock has been authenticated under this
Certificate of Designation.

The Transfer Agent shall authenticate and deliver 1,000,000 shares of
Convertible Preferred Stock for original issue upon a written order of the
Company signed by two Officers or by an Officer and either an Assistant
Treasurer or an Assistant Secretary of the Company. In addition, the Transfer
Agent shall authenticate and deliver, from time to time, Additional Shares for
original issue upon order of the Company signed by two Officers or by an
Officer or either an Assistant Treasurer or Assistant Secretary of the Company.
Such orders shall specify the number of shares of Convertible Preferred Stock
to be authenticated and the date on which the original issue of Convertible
Preferred Stock is to be authenticated.

The Transfer Agent may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Convertible Preferred Stock. Unless limited
by the terms of such appointment, an authenticating agent may authenticate
Convertible Preferred Stock whenever the Transfer Agent may do so. Each
reference in this Certificate of Designation to authentication by the Transfer
Agent includes authentication by such agent. An authenticating agent has the
same rights as the Transfer Agent or agent for service of notices and demands.

(iii) Transfer and Exchange. (A) Transfer and Exchange of Certificated
Convertible Preferred Stock. When Certificated Convertible Preferred Stock is
presented to the Transfer Agent with a request to register the transfer of such
Certificated Convertible Preferred Stock or to exchange such Certificated
Convertible Preferred Stock for an equal number of shares of Certificated
Convertible Preferred Stock of other authorized denominations, the Transfer
Agent shall register the transfer or make the exchange as requested if its
reasonable requirements for such transaction are met; provided, however, that
the Certificated Convertible Preferred Stock surrendered for transfer or
exchange:

(1) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Transfer
Agent, duly executed by the Holder thereof or its attorney duly authorized in
writing; and

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<PAGE> 51
(2) in the case of Transfer Restricted Securities that are Certificated
Convertible Preferred Stock, are being transferred or exchanged pursuant to
an effective registration statement under the Securities Act or pursuant to
clause (I), (II) or (III) below, and are accompanied by the following
additional information and documents, as applicable:

(I) if such Transfer Restricted Securities are being delivered to the
Transfer Agent by a Holder for registration in the name of such Holder,
without transfer, a certification from such Holder to that effect in
substantially the form of Exhibit C hereto; or

(II) if such Transfer Restricted Securities are being transferred to the
Company or to a "qualified institutional buyer" ("QIB") in accordance with
Rule 144A under the Securities Act or pursuant to an exemption from
registration in accordance with Rule 144 or Regulation S under the
Securities Act, a certification to that effect (in substantially the form of
Exhibit C hereto); or

(III) if such Transfer Restricted Securities are being transferred to an
"accredited investor" as described in Rule 501(a)(1), (2), (3), (4), (5),
(6) or (7) under the Securities Act that is acquiring the Securities for its
own account, or for the account of such an accredited investor, in each case
in a minimum principal amount of $100,000 for investment purposes and not
with a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act, or in reliance on another exemption from
the registration requirements of the Securities Act: a certification to that
effect in substantially the form of Exhibit C hereto, and if the Company or
the Transfer Agent so requests, evidence reasonably satisfactory to them as
to the compliance with the restrictions set forth in the legend set forth in
paragraph (l)(iii)(G)(1) below.

(B) Restrictions on Transfer of Certificated Convertible Preferred Stock
for a Beneficial Interest in Global Convertible Preferred Stock. Certificated
Convertible Preferred Stock may not be exchanged for a

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<PAGE> 52
beneficial interest in Global Convertible Preferred Stock except upon
satisfaction of the requirements set forth below. Upon receipt by the
Transfer Agent of Certificated Convertible Preferred Stock, duly endorsed or
accompanied by appropriate instruments of transfer, in form satisfactory to
the Transfer Agent, together with:

(1) if such Certificated Convertible Preferred Stock is a Transfer
Restricted Security, certification that such Certificated Convertible
Preferred Stock is being transferred to a QIB in accordance with Rule 144A
under the Securities Act; and

(2) whether or not such Certificated Convertible Preferred Stock is a
Transfer Restricted Security, written instructions directing the Transfer
Agent to make, or to direct DTC to make, an adjustment on its books and
records with respect to such Global Convertible Preferred Stock to reflect an
increase in the number of shares of Convertible Preferred Stock represented
by the Global Convertible Preferred Stock,

then the Transfer Agent shall cancel such Certificated Convertible Preferred
Stock and cause, or direct DTC to cause, in accordance with the standing
instructions and procedures existing between DTC and the Transfer Agent, the
number of shares of Convertible Preferred Stock represented by the Global
Convertible Preferred Stock to be increased accordingly. If no Global
Convertible Preferred Stock is then outstanding, the Company shall issue and
the Transfer Agent shall authenticate, upon written order of the Company in the
form of an Officers' Certificate, a new Global Convertible Preferred Stock
representing the appropriate number of shares.

(C) Transfer and Exchange of Global Convertible Preferred Stock. The
transfer and exchange of Global Convertible Preferred Stock or beneficial
interests therein shall be effected through DTC, in accordance with this
Certificate of Designation (including applicable restrictions on transfer set
forth herein, if any) and the procedures of DTC therefor.

(D) Transfer of a Beneficial Interest in Global Convertible Preferred Stock
for a Certificated Convertible Preferred Stock.

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<PAGE> 53
(1) Any person having a beneficial interest in Convertible Preferred
Stock that is being transferred or exchanged pursuant to an effective
registration statement under the Securities Act or pursuant to clause (I),
(II) or (III) below may upon request, and if accompanied by the information
specified below, exchange such beneficial interest for Certificated
Convertible Preferred Stock representing the same number of shares of
Convertible Preferred Stock. Upon receipt by the Transfer Agent of written
instructions or such other form of instructions as is customary for DTC from
DTC or its nominee on behalf of any person having a beneficial interest in
Global Convertible Preferred Stock and upon receipt by the Transfer Agent of
a written order or such other form of instructions as is customary for DTC
or the person designated by DTC as having such a beneficial interest in a
Transfer Restricted Security only, and upon the following additional
information and documents (all of which may be submitted by facsimile):

(I) if such beneficial interest is being transferred to the person
designated by DTC as being the owner of a beneficial interest in Global
Convertible Preferred Stock, a certification from such person to that
effect (in substantially the form of Exhibit C hereto);

(II) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act or pursuant to an
exemption from registration in accordance with Rule 144 or Regulation S
under the Securities Act, a certification to that effect (in substantially
the form of Exhibit C hereto); or

(III) if such beneficial interest is being transferred to an "accredited
investor" as described in Rule 501(a)(1), (2), (3), (4), (5), (6) or (7)
under the Securities Act that is acquiring the security for its own
account, or for the account of such an accredited investor, in each case in
a minimum principal amount of $100,000 for investment purposes and not with
a view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act, or in reliance on another exemption from
the registration requirements of the Securities Act, a

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<PAGE> 54
certification to that effect from the transferor (in substantially the form
of Exhibit C hereto), and if the Company or the Transfer Agent so requests,
evidence reasonably satisfactory to them as to the compliance with the
restrictions set forth in the legend set forth in paragraph (l)(iii)(G)(1)
below;

then, the Transfer Agent or DTC, at the direction of the Transfer Agent, will
cause, in accordance with the standing instructions and procedures existing
between DTC and the Transfer Agent, the number of shares of Convertible
Preferred Stock represented by Global Convertible Preferred Stock to be reduced
on its books and records and, following such reduction, the Company will
execute and the Transfer Agent will authenticate and deliver to the transferee
Certificated Convertible Preferred Stock.

(2) Certificated Convertible Preferred Stock issued in exchange for a
beneficial interest in a Global Convertible Preferred Stock pursuant to this
paragraph (l)(iii)(D) shall be registered in such names and in such
authorized denominations as DTC, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Transfer Agent. The
Transfer Agent shall deliver such Certificated Convertible Preferred Stock to
the persons in whose names such Convertible Preferred Stock are so registered
in accordance with the instructions of DTC.

(E) Restrictions on Transfer and Exchange of Global Convertible Preferred
Stock. Notwithstanding any other provisions of this Certificate of Designation
(other than the provisions set forth in paragraph (l)(iii)(F)), Global
Convertible Preferred Stock may not be transferred as a whole except by DTC to
a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by
DTC or any such nominee to a successor depository or a nominee of such
successor depository.

(F) Authentication of Certificated Convertible Preferred Stock. If at any
time:

(1) DTC notifies the Company that DTC is unwilling or unable to continue as
depository for the Global Convertible Preferred Stock and a successor
depository for the Global Convertible Preferred Stock is not appointed by the
Company within 90 days after delivery of such notice;

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<PAGE> 55

(2) DTC ceases to be a clearing agency registered under the Exchange Act;

(3) there shall have occurred and be continuing a Voting Rights Triggering
Event; or

(4) the Company, in its sole discretion, notifies the Transfer Agent in
writing that it elects to cause the issuance of Certificated Convertible
Preferred Stock under this Certificate of Designation,

then the Company will execute, and the Transfer Agent, upon receipt of a
written order of the Company signed by two Officers or by an Officer and either
an Assistant Treasurer or an Assistant Secretary of the Company requesting the
authentication and delivery of Certificated Convertible Preferred Stock to the
persons designated by the Company, will authenticate and deliver Certificated
Convertible Preferred Stock equal to the number of shares of Convertible
Preferred Stock represented by the Global Convertible Preferred Stock, in
exchange for such Global Convertible Preferred Stock.

(G) Legend. (1) Except as permitted by the following paragraph (2), each
certificate evidencing the Global Convertible Preferred Stock and the
Certificated Convertible Preferred Stock (and all Convertible Preferred Stock
issued in exchange therefor or substitution thereof) shall bear a legend in
substantially the following form:

"THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) (AND THE COMMON STOCK
INTO WHICH THIS SECURITY IS CONVERTIBLE) WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES
SECURITIES ACT OF 1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED
HEREBY (OR THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A
THEREUNDER. THE HOLDER OF THE SECURITY EVIDENCED HEREBY (AND OF THE COMMON
STOCK INTO WHICH THIS SECURITY IN CONVERTIBLE) AGREES FOR THE

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<PAGE> 56
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND THE COMMON STOCK INTO
WHICH THIS SECURITY IS CONVERTIBLE) MAY BE RESOLD, PLEDGED OR OTHERWISE
TRANSFERRED, ONLY (1) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE
SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE 904 OF
REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (4) TO THE COMPANY OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES."

(2) Upon any sale or transfer of a Transfer Restricted Security (including
any Transfer Restricted Security represented by Global Convertible Preferred
Stock) pursuant to Rule 144 under the Securities Act or an effective
registration statement under the Securities Act:

(I) in the case of any Transfer Restricted Security that is a Certificated
Convertible Preferred Stock, the Transfer Agent shall permit the Holder
thereof to exchange such Transfer Restricted Security for a Certificated
Convertible Preferred Stock that does not bear the legend set forth above
and rescind any restriction on the transfer of such Transfer Restricted
Security; and

(II) in the case of any Transfer Restricted Security that is represented
by a Global Convertible Preferred Stock, the Transfer Agent shall permit the
Holder thereof to exchange such Transfer Restricted Security for a
Certificated Convertible Preferred Stock Security that does not bear the
legend set forth above and rescind any restriction on the transfer of such
Transfer Restricted Security, if the Holder's request for such exchange was
made in reliance on Rule 144 and the Holder certifies to that effect in
writing to the Transfer Agent (such certification to be in the form set
forth on the reverse of the Transfer Restricted Security).

45
<PAGE> 57
(H) Cancellation or Adjustment of Global Convertible Preferred Stock. At
such time as all beneficial interests in Global Convertible Preferred Stock
have either been exchanged for Certificated Convertible Preferred Stock,
redeemed, repurchased or canceled, such Global Convertible Preferred Stock
shall be returned to DTC for cancellation or retained and canceled by the
Transfer Agent. At any time prior to such cancellation, if any beneficial
interest in Global Convertible Preferred Stock is exchanged for Certificated
Convertible Preferred Stock, redeemed, repurchased or canceled, the number of
shares of Convertible Preferred Stock represented by such Global Convertible
Preferred Stock shall be reduced and an adjustment shall be made on the books
and records of the Transfer Agent with respect to such Global Convertible
Preferred Stock, by the Transfer Agent or DTC, to reflect such reduction.

(I) Obligations with Respect to Transfers and Exchanges of Convertible
Preferred Stock. (1) To permit registrations of transfers and exchanges, the
Company shall execute and the Transfer Agent shall authenticate Certificated
Convertible Preferred Stock and Global Convertible Preferred Stock as required
pursuant to the provisions of this paragraph (iii).

(2) All Certificated Convertible Preferred Stock and Global Convertible
Preferred Stock issued upon any registration of transfer or exchange of
Certificated Convertible Preferred Stock or Global Convertible Preferred
Stock shall be the valid obligations of the Company, entitled to the same
benefits under this Certificate of Designation as the Certificated
Convertible Preferred Stock or Global Convertible Preferred Stock surrendered
upon such registration of transfer or exchange.

(3) Prior to due presentment for registration of transfer of any shares of
Convertible Preferred Stock, the Transfer Agent and the Company may deem and
treat the person in whose name such shares of Convertible Preferred Stock are
registered as the absolute owner of such Convertible Preferred Stock and
neither the Transfer Agent nor the Company shall be affected by notice to the
contrary.

(4) No service charge shall be made to a Holder for any registration of
transfer or exchange upon surrender of any Convertible Preferred Stock

46
<PAGE> 58
Certificate at the office of the Transfer Agent maintained for that purpose.
However, the Company may require payment of a sum sufficient to cover any tax
or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Convertible Preferred Stock
Certificates.

(5) Upon any sale or transfer of shares of Convertible Preferred Stock
(including any Convertible Preferred Stock represented by a Global
Convertible Preferred Stock Certificate) pursuant to an effective
registration statement under the Securities Act, pursuant to Rule 144 under
the Securities Act or pursuant to an opinion of counsel reasonably
satisfactory to the Company that no legend is required:

(A) in the case of any Certificated Convertible Preferred Stock, the
Transfer Agent shall permit the holder thereof to exchange such
Convertible Preferred Stock for Certificated Convertible Preferred
Stock that does not bear the legend set forth in paragraph (iii)(G)
above and rescind any restriction on the transfer of such Convertible
Preferred Stock; and

(B) in the case of any Global Convertible Preferred Stock, such
Convertible Preferred Stock shall not be required to bear the legend
set forth in paragraph (iii)(G) above but shall continue to be subject
to the provisions of paragraph (iii)(D) hereof; provided, however,
that with respect to any request for an exchange of Convertible
Preferred Stock that is represented by Global Convertible Preferred
Stock for Certificated Convertible Preferred Stock that does not bear
the legend set forth in paragraph (iii)(G) above in connection with a
sale or transfer thereof pursuant to Rule 144 (and based upon an
opinion of counsel if the Company so requests), the Holder thereof
shall certify in writing to the Transfer Agent that such request is
being made pursuant to Rule 144 (such certification to be
substantially in the form of Exhibit C hereto).

47
<PAGE> 59
(iv) Replacement Certificates. If a mutilated Convertible Preferred
Stock certificate is surrendered to the Transfer Agent or if the Holder of a
Convertible Preferred Stock certificate claims that the Convertible Preferred
Stock certificate has been lost, destroyed or wrongfully taken, the Company
shall issue and the Transfer Agent shall countersign a replacement
Convertible Preferred Stock certificate if the reasonable requirements of the
Transfer Agent and of Section 8-405 of the Uniform Commercial Code as in
effect in the State of New York are met. If required by the Transfer Agent
or the Company, such Holder shall furnish an indemnity bond sufficient in the
judgment of the Company and the Transfer Agent to protect the Company and the
Transfer Agent from any loss which either of them may suffer if a Convertible
Preferred Stock certificate is replaced. The Company and the Transfer Agent
may charge the Holder for their expenses in replacing a Convertible Preferred
Stock certificate.

(v) Temporary Certificates. Until definitive Convertible Preferred Stock
certificates are ready for delivery, the Company may prepare and the Transfer
Agent shall countersign temporary Convertible Preferred Stock certificates.
Temporary Convertible Preferred Stock certificates shall be substantially in
the form of definitive Convertible Preferred Stock certificates but may have
variations that the Company considers appropriate for temporary Convertible
Preferred Stock certificates. Without unreasonable delay, the Company shall
prepare and the Transfer Agent shall countersign definitive Convertible
Preferred Stock certificates and deliver them in exchange for temporary
Convertible Preferred Stock certificates.

(vi) Cancellation. (A) In the event the Company shall purchase or
otherwise acquire Certificated Convertible Preferred Stock, the same shall
thereupon be delivered to the Transfer Agent for cancellation.

(B) At such time as all beneficial interests in Global Convertible
Preferred Stock have either been exchanged for Certificated Convertible
Preferred Stock, redeemed, repurchased or canceled, such Global Convertible
Preferred Stock shall thereupon be delivered to the Transfer Agent for
cancellation.

(C) The Transfer Agent and no one else shall cancel and destroy all
Convertible Preferred Stock certificates surrendered for transfer, exchange,
replacement

48
<PAGE> 60
or cancellation and deliver a certificate of such destruction to the Company
unless the Company directs the Transfer Agent to deliver canceled Convertible
Preferred Stock certificates to the Company. The Company may not issue new
Convertible Preferred Stock certificates to replace Convertible Preferred Stock
certificates to the extent they evidence Convertible Preferred Stock which the
Company has purchased or otherwise acquired.

(m) Additional Rights of Holders. In addition to the rights provided to
Holders under this Certificate of Designation, Holders shall have the rights
set forth in the Registration Rights Agreement.

(o) Certain Definitions. As used in this Certificate of Designation, the
following terms shall have the following meanings (and (1) terms defined in the
singular have comparable meanings when used in the plural and vice versa, (2)
"including" means including without limitation, (3) "or" is not exclusive and
(4) an accounting term not otherwise defined has the meaning assigned to it in
accordance with United States generally accepted accounting principles as in
effect on the Issue Date and all accounting calculations will be determined in
accordance with such principles), unless the content otherwise requires:

"Business Day" means each day which is not a Legal Holiday.

"capital stock" of any person means any and all shares, interests, rights to
purchase, warrants, options, participation or other equivalents of or interests
in (however designated) equity of such person, including any Preferred Stock,
but excluding any debt securities convertible into or exchangeable for such
equity.

49
<PAGE> 61
"Change in Control" or "Change of Control" means: (i) the sale, lease,
transfer, conveyance other disposition (other than by way of merger or
consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act), (ii) the adoption of a plan relating to the liquidation or dissolution of
the Company, (iii) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is that any
"person" (as defined above), (other than officers, directors and stockholders
of the Company and their affiliates on the date of this Certificate of
Designation), becomes the beneficial owner (as determined in accordance with
Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of more
than 50% of the voting stock of the Company or (iv) the first day on which a
majority of the members of the board of directors (excluding the directors
elected pursuant to paragraph (f) are not Continuing Directors.

"Closing Bid Price" means on any day the last reported bid price on such
day, or in case no bid takes place on such day, the average of the reported
closing bid and asked prices, in each case on the Nasdaq National Market or, if
the Common Stock is not quoted on such system, on the principal national
securities exchange on which such stock is listed or admitted to trading, or if
not listed or admitted to trading on any national securities exchange, the
average of the closing bid and asked prices as furnished by any independent
registered broker-dealer firm, selected by the Company for that purpose.

"Continuing Directors" means, as of any date of determination, any member of
the Board of Directors who (i) was a member of such Board of Directors on the
date of this Certificate of Designation or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board of Directors at the time of
such nomination or election.

"Default" means any event which is, or after notice or passage of time or
both would be, a Voting Rights Triggering Event.

"DTC" means The Depository Trust Company.

50
<PAGE> 62
"Exchange Act" means the Securities Exchange Act of 1934, as amended.

"Holders" means the registered holders from time to time of the Convertible
Preferred Stock.

"Indenture" means the Indenture dated as of October 5, 1995 between the
Company and IBJ Schroder Bank & Trust Company.

"Issue Date" means the date on which the Convertible Preferred Stock is
initially issued.

"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions are not required to be open in the State of New York.

"Liquidated Damages" means, with respect to any share of Convertible
Preferred Stock, the Additional Dividends then accrued, if any, on such share
pursuant to paragraph (c).

"Officer" means the Chairman of the Board of Directors, the President, any
Vice President, the Treasurer, the Secretary or any Assistant Secretary of the
Company.

"Officers' Certificate" means a certificate signed by two Officers.

"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Transfer Agent. The counsel may be an employee of or counsel
to the Company or the Transfer Agent.

"person" means any individual, corporation, partnership, joint venture,
limited liability company, association, joint-stock company, trust,
unincorporated organization, government or any agency or political subdivision
thereof or any other entity.

"Preferred Stock", as applied to the Capital Stock of any corporation, means
Capital Stock of any class or classes (however designated) which is preferred
as to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.

51
<PAGE> 63
"Registration Rights Agreement" means the Registration Rights Agreement
dated March 25, 1997 among the Company, Credit Suisse First Boston Corporation
and Dillon, Read & Co. Inc. with respect to the Convertible Preferred Stock.

"SEC" or "Commission" means the Securities and Exchange Commission.

"Securities Act" means the Securities Act of 1933.

"Series 3 Preferred Stock" means the 10% Junior Series 3 Preferred Stock of
the Company.

"Shelf Registration Statement" means a shelf registration statement filed
with the SEC to cover resales of Transfer Restricted Securities by holders
thereof, as required by the Registration Rights Agreement.

"Subsidiary" means any corporation, association, partnership, limited
liability company or other business entity of which more than 50% of the total
voting power of shares of capital stock or other interests 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 the Company, the Company and one or more
Subsidiaries or one or more Subsidiaries and any partnership the sole general
partner or the managing partner of which the Company or any Subsidiary or the
only general partners of which are the Company and one or more Subsidiaries or
one or more Subsidiaries.

"Trading Day" means, in respect of any securities exchange or securities
market, each Monday, Tuesday, Wednesday, Thursday and Friday, other than any
day on which securities are not traded on the applicable securities exchange or
in the applicable securities market.

"Transfer Agent" means the transfer agent for the Convertible Preferred
Stock appointed by the Company, which initially shall be ChaseMellon
Shareholder Services, L.L.C.

"Transfer Restricted Securities" means each share of Convertible Preferred
Stock (or the shares of Common Stock into which such share of Convertible
Preferred Stock is convertible) (including additional shares of Convertible
Preferred Stock issued in payment of dividends on the

52
<PAGE> 64
Convertible Preferred Stock, if any, as permitted in accordance with the terms
hereof) until (i) the date on which such security has been effectively
registered under the Securities Act and disposed of in accordance with the
Shelf Registration Statement or (ii) the date on which such security is
distributed to the public pursuant to Rule 144 under the Securities Act or is
saleable pursuant to Rule 144(k) under the Securities Act (or any successor
rule thereof) or would be saleable pursuant to Rule 144(k) under the Securities
Act had it not been held by, or had it never been held by, an affiliate of the
Company.

"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.

53
<PAGE> 65
IN WITNESS WHEREOF, said IXC Communications, Inc., has caused this
Certificate of Designation to be signed by John J. Willingham, its Senior Vice
President and Chief Financial Officer, this 31st day of March, 1997.

IXC COMMUNICATIONS, INC.,

by /s/ John J. Willingham
----------------------------------
Name: John J. Willingham
Title: Senior Vice President
and Chief Financial Officer

54
<PAGE> 66
EXHIBIT A

FORM OF CONVERTIBLE PREFERRED STOCK

FACE OF SECURITY

[THE SECURITY EVIDENCED HEREBY (OR ITS PREDECESSOR) (AND THE COMMON STOCK
INTO WHICH THIS SECURITY IS CONVERTIBLE) WAS ORIGINALLY ISSUED IN A TRANSACTION
EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED STATES SECURITIES ACT OF
1933 (THE "SECURITIES ACT") AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED IN ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY (OR THE COMMON
STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY (AND OF THE COMMON STOCK INTO WHICH THIS SECURITY IS
CONVERTIBLE) AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY (AND
THE COMMON STOCK INTO WHICH THIS SECURITY IS CONVERTIBLE) MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION COMPLYING WITH RULE
904 OF REGULATION S UNDER THE SECURITIES ACT, (3) PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF
AVAILABLE), (4) TO THE COMPANY OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT AND (B) IN ACCORDANCE WITH ALL APPLICABLE
SECURITIES LAWS OF THE STATES OF THE UNITED STATES.]*

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK,
TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OF PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH
OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY
PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON

__________________________________

* Subject to removal upon registration under the Securities Act of 1933 or
otherwise when the security shall no longer be a restricted security.
<PAGE> 67
IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO. HAS AN INTEREST
HEREIN.]**

[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE
CERTIFICATE OF DESIGNATION REFERRED TO BELOW.]**

IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH REGISTRAR AND
TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES
WITH THE FOREGOING RESTRICTIONS.

Number of Shares of Convertible
Certificate Number Preferred Stock
[ ] [ ]

CUSIP NO.: [ ]

7 1/4% Junior Convertible Preferred Stock Due 2007
(par value $0.01) (liquidation preference $100
per share of Convertible Preferred Stock)

IXC Communications, Inc.

IXC Communications, Inc., a Delaware corporation (the "Company"), hereby
certifies that [ ] (the "Holder") is the registered owner of fully paid
and non-assessable preferred securities of the Company designated the 7 1/4%
Junior Convertible Preferred Stock Due 2007 (par value $0.01) (liquidation
preference $100 per share of Convertible Preferred Stock) (the "Convertible
Preferred Stock"). The shares of Convertible Preferred Stock are transferable
on the books and records of the Registrar, in person or by a duly authorized
attorney, upon surrender of this certificate duly endorsed and in proper form
for transfer. The designation, rights, privileges,

__________________________________

** Subject to removal if not a global security.

2
<PAGE> 68
restrictions, preferences and other terms and provisions of the Convertible
Preferred Stock represented hereby are issued and shall in all respects be
subject to the provisions of the Certificate of Designation dated March [ ],
1997, as the same may be amended from time to time (the "Certificate of
Designation"). Capitalized terms used herein but not defined shall have the
meaning given them in the Certificate of Designation. The Company will provide
a copy of the Certificate of Designation to a Holder without charge upon
written request to the Company at its principal place of business.

Reference is hereby made to select provisions of the Convertible Preferred
Stock set forth on the reverse hereof, and to the Certificate of Designation,
which select provisions and the Certificate of Designation shall for all
purposes have the same effect as if set forth at this place.

Upon receipt of this certificate, the Holder is bound by the Certificate of
Designation and is entitled to the benefits thereunder.

Unless the Transfer Agent's Certificate of Authentication hereon has been
properly executed, these shares of Convertible Preferred Stock shall not be
entitled to any benefit under the Certificate of Designation or be valid or
obligatory for any purpose.

IN WITNESS WHEREOF, the Company has executed this certificate this [ ] day
of [ ], [ ].

IXC COMMUNICATIONS, INC.,

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

[Seal]
By:
-------------------------------
Name:
Title:

3
<PAGE> 69
TRANSFER AGENT'S CERTIFICATE OF AUTHENTICATION

This is one of the Convertible Preferred Stock referred to in the within
mentioned Certificate of Designation.

Dated: [ ], [ ]

CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
as Transfer Agent,

By:
---------------------------
Authorized Signatory

4
<PAGE> 70
REVERSE OF SECURITY

Dividends on each share of Convertible Preferred Stock shall be payable at a
rate per annum set forth in the face hereof or as provided in the Certificate
of Designation (including Additional Dividends).

The shares of Convertible Preferred Stock shall be redeemable as provided in
the Certificate of Designation. The shares of Convertible Preferred Stock
shall be convertible into the Company's Common Stock in the manner and
according to the terms set forth in the Certificate of Designation.

As required under Delaware law, the Company shall furnish to any Holder upon
request and without charge, a full summary statement of the designations,
voting rights preferences, limitations and special rights of the shares of each
class or series authorized to be issued by the Company so far as they have been
fixed and determined and the authority of the Board of Directors to fix and
determine the designations, voting rights, preferences, limitations and special
rights of the class and series of shares of the Company.

5
<PAGE> 71
ASSIGNMENT

FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of
Convertible Preferred Stock evidenced hereby to:
------------------------------

- -------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)

- -------------------------------------------------------------------------------
(Insert address and zip code of assignee)

and irrevocably appoints:

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

- -------------------------------------------------------------------------------
agent to transfer the shares of Convertible Preferred Stock evidenced hereby on
the books of the Transfer Agent and Registrar. The agent may substitute
another to act for him or her.

Date:
------------------------------

Signature:
-------------------------
(Sign exactly as your name appears on the other side of this Convertible
Preferred Stock Certificate)

Signature Guarantee:***
------------------------------------------------------

- ------------------------
*** (Signature must be guaranteed by an "eligible guarantor institution" that
is, a bank, stockbroker, savings and loan association or credit union
meeting the requirements of the Registrar, which requirements include
membership or participation in the Securities Transfer Agents Medallion
Program ("STAMP") or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in substitution for, STAMP,
all in accordance with the Securities Exchange Act of 1934, as amended.)

6
<PAGE> 72
EXHIBIT B

NOTICE OF CONVERSION

(To be Executed by the Registered Holder
in order to Convert the Convertible, Preferred Stock)

The undersigned hereby irrevocably elects to convert (the "Conversion") shares
of 7 1/4% Junior Convertible Preferred Stock (the "Convertible Preferred
Stock"), represented by stock certificate No(s). _______________ (the
"Convertible Preferred Stock Certificates") into shares of common stock
("Common Stock") of IXC Communications, Inc. (the "Company") according to the
conditions of the Certificate of Designations, Preferences and Rights of the
Convertible Preferred Stock (the "Certificate of Designation"), as of the date
written below. If shares are to be issued in the name of a person other than
the undersigned, the undersigned will pay all transfer taxes payable with
respect thereto and is delivering herewith such certificates. No fee will be
charged to the holder for any conversion, except for transfer taxes, if any. A
copy of each Convertible Preferred Stock Certificate is attached hereto (or
evidence of loss, theft or destruction thereof).

The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Convertible Preferred Stock shall be made pursuant to
registration of the Common Stock under the Securities Act of 1933 (the "Act"),
or pursuant to any exemption from registration under the Act.

Any holder, upon the exercise of its conversion rights in accordance with the
terms of the Certificate of Designation and the Convertible Preferred Stock,
agrees to be bound by the terms of the Registration Rights Agreement.

Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in or pursuant to the Certificate of Designation.

Date of Conversion: ________________________

Applicable Conversion Price: _______________

Number of shares of Convertible
Preferred Stock to be Converted: ____________

<PAGE> 73
Number of shares of
Common Stock to be Issued: _________________

Signature: _________________________________

Name: ______________________________________

Address:** _________________________________

Fax No.: ___________________________________

- -----------------------------
* The Company is not required to issue shares of Common Stock until the
original Convertible Preferred Stock Certificate(s) (or evidence of loss,
theft or destruction thereof) to be converted are received by the Company or
its Transfer Agent. The Company shall issue and deliver shares of Common
Stock to an overnight courier not later than three business days following
receipt of the original Convertible Preferred Stock Certificate(s) to be
converted.

** Address where shares of Common Stock and any other payments or certificates
shall be sent by the Company.

2
<PAGE> 74
EXHIBIT C

CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF CONVERTIBLE PREFERRED STOCK

Re: 7 1/4% Junior Convertible Preferred Stock Due 2007 (the "Convertible
Preferred Stock") of IXC Communications, Inc. (the "Company")

This Certificate relates to ____ shares of Convertible Preferred Stock held
in [ ] */ book-entry or [ ] */ definitive form by _______________ (the
"Transferor").

The Transferor*:

[ ] has requested the Transfer Agent by written order to deliver in exchange
for its beneficial interest in the Convertible Preferred Stock held by the
depository shares of Convertible Preferred Stock in definitive, registered form
equal to its beneficial interest in such Convertible Preferred Stock (or the
portion thereof indicated above); or

[ ] has requested the Transfer Agent by written order to exchange or
register the transfer of Convertible Preferred Stock.

In connection with such request and in respect of such Convertible Preferred
Stock, the Transferor does hereby certify that the Transferor is familiar with
the Certificate of Designation relating to the above captioned Convertible
Preferred Stock and that the transfer of this Convertible Preferred Stock does
not require registration under the Securities Act of 1933 (the "Securities
Act") because */:

[ ] Such Convertible Preferred Stock is being acquired for the Transferor's
own account without transfer.

[ ] Such Convertible Preferred Stock is being transferred to the Company.

[ ] Such Convertible Preferred Stock is being transferred (i) to a qualified
institutional buyer (as defined in Rule 144A under the Securities Act), in
reliance on Rule 144A or (ii) pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act (and, in the case of clause
(ii), based on an opinion of counsel if the Company so requests and together

__________________________________

*/Please check applicable box.
<PAGE> 75
with a certification in substantially the form of Exhibit E to the
Certificate of Designation).

[ ] Such Convertible Preferred Stock is being transferred to an accredited
investor within the meaning of Rule 501(a)(1), (2), (3), (4), (5), (6) or (7)
under the Securities Act pursuant to a private placement exemption from the
registration requirements of the Securities Act (together with a certification
in substantially the form of Exhibit D to the Certificate of Designation).

[ ] Such Convertible Preferred Stock is being transferred in reliance on and
in compliance with another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so requests).

-------------------------------
[INSERT NAME OF TRANSFEROR]

Date: By
------------------------------- -------------------------------

2
<PAGE> 76
EXHIBIT D

FORM OF CERTIFICATE
TO BE DELIVERED BY ACCREDITED INVESTORS

_____________, _____

ChaseMellon Shareholder Services, L.L.C.
Attention: [ ]

Ladies and Gentlemen:

In connection with our proposed purchase of certain 7 1/4% Junior
Convertible Preferred Stock Due 2007 (the "Convertible Preferred Stock"), of
IXC Communications, Inc., a Delaware corporation (the "Company"), we represent
that:

(i) we are an "accredited investor" within the meaning of Rule
501(a)(1),(2),(3),(4),(5),(6) or (7) under the Securities Act of 1933 (the
"Securities Act") (an "Accredited Investor"), or an entity in which all of
the equity owners are Accredited Investors;

(ii) any purchase of Convertible Preferred Stock will be for our own account
or for the account of one or more other Accredited Investors as to which we
exercise sole investment discretion;

(iii) we have such knowledge and experience in financial and business
matters that we are capable of evaluating the merits and risks of purchasing
Convertible Preferred Stock and we and any accounts for which we are acting
are able to bear the economic risks of our or their investment;

(iv) we are not acquiring Convertible Preferred Stock with a view to any
distribution thereof in a transaction that would violate the Securities Act
or the securities laws of any State of the United States or any other
applicable jurisdiction; provided that the disposition of our property and
the property of any accounts for which we are acting as fiduciary shall
remain at all times without our control; and

(v) we acknowledge that we have had access to such financial and other
information, and have been afforded the opportunity to ask such questions of
representatives of the Company and receive answers
<PAGE> 77
thereto, as we deem necessary in connection with our decision to purchase
Convertible Preferred Stock.

We understand that the Convertible Preferred Stock has not been registered
under the Securities Act, and we agree, on our own behalf and on behalf of each
account for which we acquire any Convertible Preferred Stock, that such
Convertible Preferred Stock may be offered, resold, pledged or otherwise
transferred only (i) to a person whom we reasonably believe to be a qualified
institutional buyer (as defined in Rule 144A under the Securities Act) in a
transaction meeting the requirements of Rule 144A, in a transaction meeting the
requirements of Rule 144 under the Securities Act, outside the United States to
a foreign person in a transaction meeting the requirements of Rule 904 under
the Securities Act (and, unless such transfer occurs in a transaction meeting
the requirements of Rule 144A, based upon an opinion of counsel, if the Company
so requests), (ii) to the Company or (iii) pursuant to an effective
registration statement, and, in each case, in accordance with any applicable
securities laws of any State of the United States or any other applicable
jurisdiction. We understand that the registrar will not be required to accept
for registration of transfer any shares of Convertible Preferred Stock, except
upon presentation of evidence satisfactory to the Company that the foregoing
restrictions on transfer have been complied with. We further understand that
the Convertible Preferred Stock purchased by us will bear a legend reflecting
the substance of this paragraph. We further agree to provide to any person
acquiring any of the Convertible Preferred Stock from us a notice advising such
person that resales of the Convertible Preferred Stock are restricted as stated
herein.

We acknowledge that you, the Company and others will rely upon our
confirmations, acknowledgements and agreements set forth herein, and we agree
to notify you promptly in writing if any of our representations or warranties
herein ceases to be accurate and complete.

2
<PAGE> 78
THIS LETTER SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF NEW YORK.

Very truly yours,

-------------------------------
(Name of Transferee)

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

3
<PAGE> 79
EXHIBIT E

FORM OF CERTIFICATE TO BE DELIVERED IN
CONNECTION WITH TRANSFERS PURSUANT TO REGULATION S

__________, ____

ChaseMellon Shareholder Services, L.L.C.
Attention: [ ]

Ladies and Gentlemen:

In connection with our proposed sale of certain 7 1/4% Junior Convertible
Preferred Stock Due 2007 (the "Convertible Preferred Stock") of IXC
Communications, Inc., a Delaware corporation ("the "Company"), we represent
that:

(i) the offer of the Convertible Preferred Stock was not made to a person
in the United States;

(ii) at the time the buy order was originated, the transferee was outside
the United States or we and any person acting on our behalf reasonably
believed that the transferee was outside the United States;

(iii) no directed selling efforts have been made by us in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S under the Securities Act of 1933 (the "Securities Act"), as
applicable; and

(iv) the transaction is not part of a plan or scheme by us to evade the
registration requirements of the Securities Act.

You and the Company are entitled to rely upon this letter and you are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with

<PAGE> 80
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.

Very truly yours,

----------------------------------
(Name of Transferor)

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

<PAGE> 1
EXHIBIT 4.15

REGISTRATION RIGHTS AGREEMENT

This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made
and entered into as of this 8th day of July 1997, by and between IXC
Communications, Inc., a Delaware corporation (the "Company"), and each of the
shareholders listed on the signature page hereof: William G. Rodi, Gordon
Hutchins, Jr. and William F. Linsmeier (collectively, the "Shareholders").

R E C I T A L S

A. The Company, IXC Long Distance, Inc., a Delaware
corporation ("IXC-LD"), the Shareholders, Telecom One, Inc., a Delaware
corporation ("Telecom One"), and IXC-Telecom One Acquisition Corp., a Delaware
corporation, have entered into a Stock Acquisition Agreement and Plan of Merger
dated January 10, 1997 (the "Acquisition Agreement") pursuant to which IXC-LD, a
wholly owned subsidiary of IXC, is acquiring from the Shareholders all of the
issued and outstanding shares of capital stock of Telecom One (the "Telecom One
Stock").

B. Pursuant to the terms of the Acquisition Agreement, the
Company is obligated to issue to the Shareholders a number of shares of common
stock, $.01 par value, of the Company (the "IXC Shares") as part of the
consideration for the Telecom One Stock purchased by the Company, and the terms
of the Acquisition Agreement require the Company to provide the Shareholders
certain registration rights with respect to the IXC Shares.

C. The Company and the Shareholders desire to enter into this
Agreement which provides registration rights with respect to the Initial Share
Amount, as such term is defined in the Acquisition Agreement.

A G R E E M E N T

In consideration of the foregoing recitals and the mutual
covenants and conditions contained herein, the parties, intending to be legally
bound, agree as follows:

ARTICLE 1
DEFINITIONS

1.1 Certain Defined Terms. For purposes of this Agreement, the
following terms shall have the following meanings:

"Act" shall mean the Securities Act of 1933, as
amended.

"Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Act.

<PAGE> 2

"Holder" shall mean the Shareholders and any person
beneficially owning Registerable Securities through permitted assignment thereof
in accordance with Article 5, below.

"Registerable Securities" for purposes of this
Agreement, shall mean the IXC Shares representing the Initial Share Amount (and
not the Final Share Amount) and any shares of the Company's common stock issued
as a dividend or other distribution with respect to, or in exchange for or in
replacement of the Initial Share Amount, excluding any Registerable Securities
sold by a person in a transaction in which its, his or her rights under this
Agreement are not assigned; provided further that shares which would otherwise
constitute Registerable Securities shall cease to be so once they have been sold
to the public.

"Register," "registered" and "registration" refer to
a registration effected by preparing and filing a registration statement in
compliance with the Act and the declaration or ordering of effectiveness of such
registration statement.

1.2 Other Defined Terms. All other capitalized terms used
herein but which are not otherwise defined shall have the meanings given to them
in the Acquisition Agreement.

ARTICLE 2
SHELF REGISTRATION

2.1 Shelf Registration. On or before July 31, 1997 or 30 days
after the Actual Closing Date, whichever is later, (such date is referred to as
the "Initial Filing Date"), the Company shall prepare and file with the
Commission, a registration statement on any appropriate form under the Act for
an offering to be made on a continuous basis covering all of the Registerable
Securities (the "Shelf Registration"). The Company shall use commercially
reasonable efforts to cause the Shelf Registration to become effective under the
Act on or about the date 45 days following the Initial Filing Date and, subject
to Permitted Interruptions and/or Necessary Interruptions, the Company shall use
its best efforts to keep the Shelf Registration continuously effective for the
lesser of (a) a period of two years from the date on which the Shelf
Registration becomes effective under the Act (the "Two Year Period"), (b) a
period ending on the date upon which all Registerable Securities covered by the
Shelf Registration have been sold, (c) a period ending on the date after which
restrictions on sales of securities by persons other than affiliates pursuant to
Commission Rule 144 (or any successor provision) terminate, or (d) a period
ending on the date after which the Holders no longer own any of the Registerable
Securities. The Company shall also, subject to Permitted Interruptions and/or
Necessary Interruptions, supplement or make amendments to the Shelf Registration
if required by the rules, regulations or instructions applicable to the
registration form used by the Company or if otherwise required by the Act. Each
of the Holders agrees to provide the Company with at least five business days
notice prior to selling any Registrable Securities while the Shelf Registration
remains effective.

<PAGE> 3

2.2 Limitations on Rights. The Company shall not be required
to prepare and file a registration statement with respect to the Registerable
Securities pursuant to Section 2.1, above, which is effected more than two years
after the date of this Agreement.

ARTICLE 3
REGISTRATION PROCEDURES

3.1 General. If and when the Company is required by the
provisions of this Agreement to effect, or use its best efforts to effect, the
registration of shares of Registerable Securities, the Company shall:

(a) Subject to Permitted Interruptions and/or Necessary
Interruptions, prepare and file with the Commission, within the time period
specified herein, a registration statement with respect to such shares and use
its best efforts to cause such registration statement to become and remain
effective for the periods provided herein;

(b) Subject to Permitted Interruptions and/or Necessary
Interruptions, prepare and file with the Commission such amendments and
post-effective amendments to each registration statement as may be necessary to
keep such registration statement continuously effective for the applicable
period; and cause the related prospectus to be supplemented by any required
prospectus supplement;

(c) Use its best efforts to notify the Holders promptly (i)
when a prospectus or any prospectus supplement or post-effective amendment
related to such Registerable Securities has been filed, and, with respect to
Registerable Securities, when the same has become effective, (ii) of the receipt
of any comments from the Commission, (iii) of any request by the Commission for
amendments or supplements to a registration statement or related prospectus or
for additional information, (iv) of the issuance by the Commission of any stop
order suspending the effectiveness of a registration statement of the initiation
of any proceeding for that purpose, (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registerable Securities for sale in any
jurisdiction of the United States of America or the initiation or threatening of
any proceeding for such purpose, (vi) of the happening of any event (the nature
and pendency of which need not be disclosed during a Permitted Interruption
and/or Necessary Interruption) which makes any statement made in such
registration statement or related prospectus or any document incorporated or
deemed to be incorporated therein by reference untrue or which requires the
making of changes in a registration statement or related prospectus so that such
documents will not contain any untrue statement of material fact or omit to
state any 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, and (vii) of the Company's reasonable determination that a
post-effective amendment to a registration statement would be appropriate;

<PAGE> 4

(d) Use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of a registration statement, or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registerable Securities for sale in any jurisdiction of the United States of
America, at the earliest possible moment;

(e) If reasonably requested by any Holder of Registerable
Securities covered by a registration statement, (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as such
Holder reasonably requests to be included therein or as may be required by
applicable law, (ii) make all required filings of such prospectus supplement or
such post-effective amendment as soon as the Company has received notification
of the matters to be incorporated in such prospectus supplement or
post-effective amendment, and (iii) supplement or make amendments to any
registration statement if reasonably requested by any Holder of Registerable
Securities covered by such registrations statement or as may be required by
applicable law;

(f) Furnish to the Holders of Registerable Securities covered
by the registration statement, without charge, at least one signed copy of the
registration statement or statements and any post-effective amendment thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits (including those previously furnished or
incorporated by reference), at the earliest practicable time under the
circumstances after the filing of such document;

(g) Deliver to each Holder of Registerable Securities covered
by a registration statement, without charge, as many copies of the prospectus or
prospectuses (including each preliminary prospectus) and any amendment or
supplement thereto as such person may reasonably request; the Company consents
to the use of such prospectus or any amendment or supplement thereto by each of
such Holders in connection with the offering and sale of Registerable Securities
covered by such prospectus or any amendment or supplement thereto;

(h) Prior to any public offering of Registerable Securities,
to use its best efforts to register or qualify or cooperate with the Holders of
Registerable Securities in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registerable
Securities for offer and sale under the securities or blue sky laws of such
state or local jurisdictions as any seller reasonably requests in writing;
subject to the provisions herein regarding Permitted Interruptions and/or
Necessary Interruptions, keep such registration or qualification (or exemption
therefrom) effective during the period such registration statement is required
to be kept effective and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdiction of the Registerable
Securities covered by the applicable registration statement; provided, however,
the Company shall not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified, (ii) take any action which could
subject it to general service of process in any such jurisdiction where it is
not then so subject, or (iii) subject itself to taxation in any such
jurisdiction;

<PAGE> 5

(i) Cooperate with the selling Holders of Registerable
Securities to facilitate the timely preparation and delivery of certificates
representing Registerable Securities to be sold, which certificates shall not
bear any restrictive legends;

(j) Subject to Permitted Interruptions and/or Necessary
Interruptions, cause the Registerable Securities covered by the applicable
registration statement to be registered with or approved by such other federal,
state and local governmental regulatory agencies or authorities in the United
States as may be necessary to enable the seller or sellers thereof to consummate
the disposition of such Registerable Securities; and

(k) Subject to Permitted Interruptions and/or Necessary
Interruptions, upon the occurrence of any event contemplated by Section
3(c)(iii), 3(c)(vi) or 3(c)(vii), above, as promptly as practicable thereafter,
prepare and file with the Commission a supplement or post-effective amendment to
the applicable registration statement or a supplement to the related prospectus
of any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Registerable
Securities being sold thereunder, such prospectus will not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.

3.2 Registration Expenses. Except as provided below, all of
the expenses incurred by the Company in effecting any registration requested
pursuant to Section 2.1, above, including, without limitation, all registration
and filing fees, printing expenses, expenses of compliance with Blue Sky laws
(including, without limitation, fees and disbursements of underwriters counsel
relating thereto), fees and disbursements of counsel for the Company, and
expenses of any audits incidental to or required by any such registration
("Registration Expenses") shall be paid by the Company. In either event,
notwithstanding anything in this Section 3.2 to the contrary, the Company shall
have no obligation to pay or otherwise bear (a) any underwriting discounts or
brokerage fees or commissions relating to the sale of Registerable Securities by
the Holders, or (b) any Registration Expenses if the payment of such expenses by
the Company is prohibited by the laws of a state in which such offering is
qualified and only to the extent so prohibited, or (c) any expenses of any
compliance with Blue Sky laws which pertains only to an individual Holder, or
(d) any fees and disbursements of counsel for the Holders.

ARTICLE 4
INDEMNIFICATION

<PAGE> 6

respect thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereof, incident to any registration or qualification
of the Registrable Securities, or which arise out of or are based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, or any violation by the
Company of any rule or regulation promulgated under the Act or any state
securities laws applicable to the Company and relating to action or inaction
required of the Company in connection with any such registration, qualification
or compliance, and will reimburse each such indemnified party for any legal and
any other expenses reasonably incurred by them in connection with investigating,
preparing or defending any such claim, loss, damage, liability or action. The
Company also shall indemnify any underwriter of the Registrable Securities,
their officers, directors, partners, members and agents and each person who
controls such underwriters on substantially the same basis as that of the
indemnification of the Holders provided in this Section 4.1.

The indemnity agreement contained in this Section 4.1 shall
not apply to amounts paid in settlement of any such loss, claim, damage or
liability or any action in respect thereof if such settlement is effected
without the consent of the Company, which consent shall not be unreasonably
withheld, nor shall the Company be liable to any Holder or its officers,
directors, partners, members or agents in any such case for any loss, claim,
damage, liability or any action in respect thereof to the extent that it arises
solely from or is based solely upon and is in conformity with written
information relating to such Holder furnished expressly for use in connection
with such registration by such Holder or its agents, nor shall the Company be
liable to any Holder for any such loss, claim, damage or liability or any action
in respect thereof to the extent it arises solely from or is based solely upon
(a) any untrue statement or alleged untrue statement of a material fact
contained in any registration statement or prospectus relating to the
Registrable Securities delivered by such Holder after the Company had provided
written notice to such Holder that such registration statement or prospectus
contained such untrue statement or alleged untrue statement of a material fact,
(b) any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
after the Company had provided written notice to such Holder that such
registration statement or prospectus contained such omission or alleged
omission, or (c) the failure of such Holder to deliver any preliminary or final
prospectus, or any amendments or supplements thereto, required under applicable
securities laws, including the Act, to be so delivered, provided that a
sufficient number of copies thereof had been timely provided by the Company to
such Holder.

<PAGE> 7

officers, directors, legal counsel and accountants, and each person who controls
the Company within the meaning of Section 15 of the Act, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering circular
or other document, or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Holder of any rule or regulation
promulgated under the Act or any state securities laws applicable to the Holder
and relating to action or inaction required by the Holder in connection with any
such registration, qualification or compliance, and will reimburse each such
indemnified person for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by or on behalf of such Holder and stated to be specifically for
use therein. Each Holder shall also indemnify and hold harmless any underwriter
of the Registrable Securities, their officers, directors, partners, members and
agents and each person who controls such underwriters on substantially the same
basis as that of the indemnification of the Company provided in this Section
4.2; provided, however, that in no event shall any indemnity obligation under
this Section 4.2 exceed the dollar amount of the net proceeds actually received
by such Holder from the sale of Registrable Securities which gave rise to such
indemnification obligations under such registration statement or prospectus.

4.3 Indemnification Procedures. Each person to be indemnified
pursuant to this Article 4 (the "Indemnified Party") will, promptly after its
receipt of written notice of the commencement of any action against such
Indemnified Party in respect of which indemnity may be sought from an
indemnifying person under this Article 4 (the "Indemnifying Party") notify the
Indemnifying Party in writing of the commencement thereof, provided, however,
that the failure of any person to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Agreement except to
the extent that such Indemnifying Party is actually materially and adversely
prejudiced by such failure to give notice. If any such action shall be brought
against any Indemnified Party and it shall notify an Indemnifying Party of the
commencement thereof, the Indemnifying Party will be entitled to participate
therein and, to the extent it may desire, jointly with any other Indemnifying
Party similarly notified, to assume the defense thereof with counsel
satisfactory to such Indemnified Party, and after notice from the Indemnifying
Party to such Indemnified Party of its election so to assume the defense
thereof, the Indemnifying Party will not be liable to such Indemnified Party
under this Article 4 for any legal or other expenses subsequently incurred by
such Indemnified Party in connection with the defense thereof other than
reasonable costs of investigation unless (a) the Indemnified Party shall have
employed counsel in an action in which the Indemnified Party and Indemnifying
Party are both defendants and there is a conflict of interest between such
parties that would prevent counsel from adequately representing both parties,
(b) the Indemnifying Party shall not have

<PAGE> 8

employed counsel satisfactory within the exercise of reasonable judgment of the
Indemnified Party to represent the Indemnified Party within a reasonable time
after the notice of the commencement of the action, or (c) the Indemnifying
Party has authorized the employment of counsel for the Indemnified Party at the
expense of the Indemnifying Party. The undertaking contained in this Section 4.3
shall be in addition to any liabilities which the Indemnifying Party may have
pursuant to law.

4.4 Contribution Obligations. If the indemnification provided
for in this Article 4 is held by a court of competent jurisdiction to be
unavailable to an Indemnified Party with respect to any loss, liability, claim,
damage or expense referred to therein, then the Indemnifying Party, in lieu of
indemnifying such Indemnified Party thereunder, shall contribute to the amount
paid or payable by such Indemnified Party as a result of such loss, liability,
claim, damage or expense in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and of the Indemnified
Party on the other in connection with the statements, actions or omissions which
resulted in such loss, liability, claim, damage or expense as well as any other
relevant equitable considerations. The relative fault of the Indemnifying Party
and of the Indemnified Party shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.

ARTICLE 5
TRANSFER OF REGISTRATION RIGHTS

The rights to cause the Company to register securities granted to a
Holder under Articles 2, above, may be transferred or assigned by such Holder to
a transferee or assignee in connection with any transfer or assignment of
Registerable Securities, provided that: (a) such transfer or assignment may
otherwise be effected in accordance with applicable securities laws, (b) prompt
written notice of such transfer or assignment is given to the Company, and (c)
such transferee or assignee expressly agrees in a writing delivered to the
Company to be bound by the provisions of this Agreement.

<PAGE> 9

ARTICLE 6
DISCONTINUANCE OF DISPOSITION OF REGISTERABLE SECURITIES

6.1 Certain Discontinuances. Each Holder of Registrable
Securities agrees by acquisition of such Registrable Securities that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 3(c)(iii), 3(c)(iv), 3(c)(v), 3(c)(vi) or 3(c)(vii), above,
or a Permitted Interruption and/or Necessary Interruption, such Holder will
forthwith discontinue disposition of any Registrable Securities covered by a
registration statement or prospectus until such Holder's receipt of the copies
of the supplemented or amended prospectus contemplated by Section 3(k), above,
or until it is advised in writing (the "Advice") by the Company that the use of
the applicable prospectus may be resumed, and has received copies of any
additional or supplemental filings which are incorporated or deemed to be
incorporated by reference in such prospectus.

6.2 Permitted Interruptions and Necessary Interruptions.
Anything in this Agreement to the contrary notwithstanding, it is understood and
agreed that the Company shall not be required to prepare or file a registration
statement, amendment or post-effective amendment thereto or prospectus
supplement or to supplement or amend any registration statement or otherwise
facilitate the resale of Registrable Securities, and it shall be free
voluntarily to take or omit to take any other action that would result in the
impracticality of any such filing, supplement or amendment if such action is
taken or omitted to be taken by the Company in good faith and for valid business
reasons, including, without limitation, matters relating to acquisitions or
divestitures, so long as the Company shall, as promptly as practicable
thereafter, make such filing, supplement or amendment and, so long as the
Company shall as promptly as is practicable thereafter, comply with the
requirements of Section 3(k), above, if applicable (any period described in this
Section 6.2 (other than a Necessary Interruption (defined below)) during which
Holders of Registrable Securities are not able to sell such Registrable
Securities under a registration statement is herein called a "Permitted
Interruption"). The period between Permitted Interruptions shall not be less
than 30 days; provided, however, that if any event occurs which would make the
Registration Statement then in effect materially incorrect or misleading, the
Company shall not be required to keep the Registration Statement effective as of
such date and continuing for five business days thereafter and the Holders of
Registrable Securities shall not sell such securities during such period (each
such period is referred to as a "Necessary Interruption"). The Company hereby
agrees to notify each of the Holders of Registrable Securities of the occurrence
of, and the termination of, each Permitted Interruption and/or Necessary
Interruption (the nature and pendency of which need not be disclosed during such
Permitted Interruption and/or Necessary Interruption). Permitted Interruptions
shall not extend beyond 45 days during the first year of the Two Year Period and
60 days during the second year of the Two Year Period. Notwithstanding the
foregoing, there shall be no Permitted Interruptions during the 30-day period
immediately following the date the Shelf Registration initially becomes
effective.

<PAGE> 10

6.3 Standoff or Lock-Up Agreement. Each Holder of Registerable
Securities agrees in connection with any firmly underwritten public offering of
the Company's common stock that, upon request of the Company or the underwriters
managing any underwritten offering of the Company's securities, such Holder
shall not sell, make any short sale of, loan, grant any option for the purchase
of, or otherwise dispose of any Registerable Securities (other than those
included in the registration) without the prior written consent of the Company
or such underwriters, as the case may be, during the 14 days prior to, and
during the 90-day period (the "Lock-up Period") beginning on, the effective date
of the registration statement relating to such offering (except as part of such
registration statement). In order to enforce the foregoing covenant, the Company
may impose stop-transfer instructions with respect to the Registerable
Securities until the end of such period. In the event any of Ralph J. Swett,
John J. Willingham, Kenneth F. Hinther or John R. Fleming have entered into a
lock-up agreement with such underwriters relating to such offering with a
lock-up period longer than one day and shorter than 90 days, then such shorter
period shall be the Lock-up Period. The Company shall not be required to keep
any registration statement effective during any Lock-up Period.

ARTICLE 7
TERMINATION OF REGISTRATION RIGHTS

Notwithstanding any provision in this Agreement to the contrary, in no
event shall any Holder be entitled to request registration or inclusion in any
registration pursuant to Article 2, above, after the date on which all
Registrable Securities held by such Holder may be sold under Commission Rule 144
during any 90-day period.

ARTICLE 8
MISCELLANEOUS

8.1 Amendment. Any modification, amendment or waiver of this
Agreement or any provision hereof shall be effective only if in writing and
executed by the Holders of at least a majority of the Registrable Securities and
the Company.

8.2 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of California without regard to its conflicts
of laws principles.

8.3 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, permitted assigns, heirs, executors and
administrators of the parties hereto.

8.4 Notices. All notices and other communications required or
permitted hereunder shall be made in accordance with the Acquisition Agreement.

<PAGE> 11

8.5 Severability. If any provision of this Agreement shall be
judicially determined to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.

8.6 Entire Agreement. This Agreement, the Registration Rights
Agreement with respect to the Final Share Amount and the Acquisition Agreement
constitute the full and entire understanding and agreement between the parties
with regard to the subject matter hereof.

8.7 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

[SIGNATURES ON FOLLOWING PAGE]

<PAGE> 12

IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first set forth above.

IXC COMMUNICATIONS, INC.,
a Delaware corporation

By: /s/ James F. Guthrie
---------------------------------
Its: Executive Vice President

THE "SHAREHOLDERS":

/s/ William G. Rodi
- -------------------------------------
William G. Rodi

/s/ Gordon Hutchins, Jr.
- -------------------------------------
Gordon Hutchins, Jr.

/s/ William F. Linsmeier
- -------------------------------------
William F. Linsmeier

<PAGE> 1
EXHIBIT 4.16

REGISTRATION RIGHTS AGREEMENT

R E C I T A L S

C. The Company and the Shareholders desire to enter into this
Agreement which provides registration rights with respect to the Final Share
Amount, as such term is defined in the Acquisition Agreement.

A G R E E M E N T

In consideration of the foregoing recitals and the mutual
covenants and conditions contained herein, the parties, intending to be legally
bound, agree as follows:

ARTICLE 1
DEFINITIONS

1.1 Certain Defined Terms. For purposes of this Agreement, the
following terms shall have the following meanings:

"Act" shall mean the Securities Act of 1933, as
amended.

"Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Act.

<PAGE> 2

"Holder" shall mean the Shareholders and any person
beneficially owning Registerable Securities through permitted assignment thereof
in accordance with Article 5, below.

"Registerable Securities" for purposes of this
Agreement, shall mean the IXC Shares representing the Final Share Amount (and
not the Initial Share Amount) and any shares of the Company's common stock
issued as a dividend or other distribution with respect to, or in exchange for
or in replacement of the Final Share Amount, excluding any Registerable
Securities sold by a person in a transaction in which its, his or her rights
under this Agreement are not assigned; provided further that shares which would
otherwise constitute Registerable Securities shall cease to be so once they have
been sold to the public.

1.2 Other Defined Terms. All other capitalized terms used
herein but which are not otherwise defined shall have the meanings given to them
in the Acquisition Agreement.

ARTICLE 2
SHELF REGISTRATION

2.1 Shelf Registration. Within 30 days after the payment of
the Final Share Amount to the Stockholders, (such date is referred to as the
"Second Filing Date"), the Company shall prepare and file with the Commission, a
registration statement on any appropriate form under the Act for an offering to
be made on a continuous basis covering all of the Registerable Securities (the
"Shelf Registration"). The Company shall use commercially reasonable efforts to
cause the Shelf Registration to become effective under the Act on or about the
date 45 days following the Second Filing Date and, subject to Permitted
Interruptions and/or Necessary Interruptions, the Company shall use its best
efforts to keep the Shelf Registration continuously effective for the lesser of
(a) a period of two years from the date on which the Shelf Registration becomes
effective under the Act (the "Two Year Period"), (b) a period ending on the date
upon which all Registerable Securities covered by the Shelf Registration have
been sold, (c) a period ending on the date after which restrictions on sales of
securities by persons other than affiliates pursuant to Commission Rule 144 (or
any successor provision) terminate, or (d) a period ending on the date after
which the Holders no longer own any of the Registerable Securities. The Company
shall also, subject to Permitted Interruptions and/or Necessary Interruptions,
supplement or make amendments to the Shelf Registration if required by the
rules, regulations or instructions applicable to the registration form used by
the Company or if otherwise required by the Act. Each of the Holders agrees to
provide the Company with at least five business days notice prior to selling

<PAGE> 3

any Registrable Securities into the public market while the Shelf Registration
remains effective.

ARTICLE 3
REGISTRATION PROCEDURES

<PAGE> 4

which they were made, not misleading, and (vii) of the Company's reasonable
determination that a post-effective amendment to a registration statement would
be appropriate;

<PAGE> 5

jurisdiction where it is not then so qualified, (ii) take any action which could
subject it to general service of process in any such jurisdiction where it is
not then so subject, or (iii) subject itself to taxation in any such
jurisdiction;

<PAGE> 6

ARTICLE 4
INDEMNIFICATION

4.1 Indemnification by the Company. The Company will
indemnify, hold harmless and defend each Holder, its officers, directors,
partners, legal counsel and accountants, and each person who controls a Holder
within the meaning of Section 15 of the Act, against any and all expenses,
claims, losses, damages and liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment or
supplement thereof, incident to any registration or qualification of the
Registrable Securities, or which arise out of or are based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Act or any state securities laws
applicable to the Company and relating to action or inaction required of the
Company in connection with any such registration, qualification or compliance,
and will reimburse each such indemnified party for any legal and any other
expenses reasonably incurred by them in connection with investigating, preparing
or defending any such claim, loss, damage, liability or action. The Company also
shall indemnify any underwriter of the Registrable Securities, their officers,
directors, partners, members and agents and each person who controls such
underwriters on substantially the same basis as that of the indemnification of
the Holders provided in this Section 4.1.

<PAGE> 7

required under applicable securities laws, including the Act, to be so
delivered, provided that a sufficient number of copies thereof had been timely
provided by the Company to such Holder.

4.2 Indemnification by the Holders. Each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration, qualification or compliance is being effected,
indemnify the Company, and each of its officers, directors, legal counsel and
accountants, and each person who controls the Company within the meaning of
Section 15 of the Act, against all claims, losses, damages and liabilities (or
actions in respect thereof) arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any such registration
statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Holder of any rule or regulation promulgated under the Act or any state
securities laws applicable to the Holder and relating to action or inaction
required by the Holder in connection with any such registration, qualification
or compliance, and will reimburse each such indemnified person for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged omission)
is made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished
to the Company by an instrument duly executed by or on behalf of such Holder and
stated to be specifically for use therein. Each Holder shall also indemnify and
hold harmless any underwriter of the Registrable Securities, their officers,
directors, partners, members and agents and each person who controls such
underwriters on substantially the same basis as that of the indemnification of
the Company provided in this Section 4.2; provided, however, that in no event
shall any indemnity obligation under this Section 4.2 exceed the dollar amount
of the net proceeds actually received by such Holder from the sale of
Registrable Securities which gave rise to such indemnification obligations under
such registration statement or prospectus.

<PAGE> 8

Party of its election so to assume the defense thereof, the Indemnifying Party
will not be liable to such Indemnified Party under this Article 4 for any legal
or other expenses subsequently incurred by such Indemnified Party in connection
with the defense thereof other than reasonable costs of investigation unless (a)
the Indemnified Party shall have employed counsel in an action in which the
Indemnified Party and Indemnifying Party are both defendants and there is a
conflict of interest between such parties that would prevent counsel from
adequately representing both parties, (b) the Indemnifying Party shall not have
employed counsel satisfactory within the exercise of reasonable judgment of the
Indemnified Party to represent the Indemnified Party within a reasonable time
after the notice of the commencement of the action, or (c) the Indemnifying
Party has authorized the employment of counsel for the Indemnified Party at the
expense of the Indemnifying Party. The undertaking contained in this Section 4.3
shall be in addition to any liabilities which the Indemnifying Party may have
pursuant to law.

ARTICLE 5
TRANSFER OF REGISTRATION RIGHTS

<PAGE> 9

ARTICLE 6
DISCONTINUANCE OF DISPOSITION OF REGISTERABLE SECURITIES

<PAGE> 10

ARTICLE 7
TERMINATION OF REGISTRATION RIGHTS

ARTICLE 8
MISCELLANEOUS

8.2 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of California without regard to its conflicts
of laws principles.

8.4 Notices. All notices and other communications required or
permitted hereunder shall be made in accordance with the Acquisition Agreement.

<PAGE> 11

8.6 Entire Agreement. This Agreement, the Registration Rights
Agreement with respect to the Initial Share Amount and the Acquisition Agreement
constitute the full and entire understanding and agreement between the parties
with regard to the subject matter hereof.

8.7 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.

[SIGNATURES ON FOLLOWING PAGE]

<PAGE> 12

IN WITNESS WHEREOF, each of the parties has executed this Agreement as
of the date first set forth above.

IXC COMMUNICATIONS, INC.,
a Delaware corporation

By: /s/ James F. Guthrie
---------------------------------
Its: Executive Vice President
-----------------------------

THE "SHAREHOLDERS":

/s/ William G. Rodi
- -----------------------------------
William G. Rodi

/s/ Gordon Hutchins, Jr.
- -----------------------------------
Gordon Hutchins, Jr.

/s/ William F. Linsmeier
- -----------------------------------
William F. Linsmeier

<PAGE> 1
EXHIBIT 10.17

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

LEASE

CITY VIEW CENTRE,
AUSTIN, TEXAS

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

BETWEEN

IXC COMMUNICATIONS, INC.,
A DELAWARE CORPORATION
(TENANT)

AND

CARRAMERICA REALTY, L.P.
(LANDLORD)
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Lease Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
A. Types of Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
(1) Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(2) Operating Cost Share Rent . . . . . . . . . . . . . . . . . . . . . 2
(3) Tax Share Rent . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(4) Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(5) Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

B. Payment of Operating Cost Share Rent and Tax Share Rent . . . . . . . . . . . . . . 2
(1) Payment of Estimated Operating Cost Share
Rent and Tax Share Rent . . . . . . . . . . . . . . . . . . . . . . 2
(2) Correction of Operating Cost Share Rent . . . . . . . . . . . . . . 2
(3) Correction of Tax Share Rent . . . . . . . . . . . . . . . . . . . 3

C. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
(1) Included Operating Costs. . . . . . . . . . . . . . . . . . . . . . 3
(2) Excluded Operating Costs . . . . . . . . . . . . . . . . . . . . . 3
(3) Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(4) Lease Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(5) Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

D. Computation of Base Rent and Rent Adjustments . . . . . . . . . . . . . . . . . . . 5
(1) Prorations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
(2) Default Interest . . . . . . . . . . . . . . . . . . . . . . . . . 6
(3) Rent Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . 6
(4) Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . 6
(5) Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . 6

3. Preparation and Condition of Premises; Possession and Surrender of Premises . . . . . . . . 6
A. Condition of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
B. Tenant's Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
C. Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
D. Ownership of Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
E. Removal at Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

4. Project Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
A. Heating and Air Conditioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
B. Elevators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
C. Electricity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
D. Water . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
E. Janitorial Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
F. Interruption of Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
G. Building Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

5. Alterations and Repairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
A. Landlord's Consent and Conditions . . . . . . . . . . . . . . . . . . . . . . . . . 9
B. Damage to Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
C. No Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10

6. Use of Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
</TABLE>
<PAGE> 3

<TABLE>
<S> <C> <C>
7. Governmental Requirements and Building Rules . . . . . . . . . . . . . . . . . . . . . . . . 10

8. Waiver of Claims; Indemnification; Insurance . . . . . . . . . . . . . . . . . . . . . . . . 11
A. Waiver of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
B. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
C. Tenant's Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
D. Insurance Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
E. Landlord's Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

9. Fire and Other Casualty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
A. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
B. Restoration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

10. Eminent Domain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

11. Rights Reserved to Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
A. Name . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
B. Signs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
C. Window Treatments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
D. Keys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
E. Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
F. Preparation for Reoccupancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
G. Heavy Articles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
H. Show Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
I. Use of Lockbox . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
J. Repairs and Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
K. Landlord's Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
L. Building Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
M. Other Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

12. Tenant's Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
A. Rent Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
B. Assignment/Sublease or Hazardous Substances Default . . . . . . . . . . . . . . . . 14
C. Other Performance Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
D. Credit Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
E. Vacation or Abandonment Default . . . . . . . . . . . . . . . . . . . . . . . . . . 15

13. Landlord Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
A. Termination of Lease or Possession . . . . . . . . . . . . . . . . . . . . . . . . . 15
B. Lease Termination Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
C. Possession Termination Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
D. Landlord's Remedies Cumulative . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
E. WAIVER OF TRIAL BY JURY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
F. Litigation Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

14. Surrender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

15. Holdover . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

16. Subordination to Ground Leases and Mortgages . . . . . . . . . . . . . . . . . . . . . . . . 16
A. Subordination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
B. Termination of Ground Lease or Foreclosure of Mortgage . . . . . . . . . . . . . . . 16
C. Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
D. Notice and Right to Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
E. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

17. Assignment and Sublease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
</TABLE>

ii
<PAGE> 4

<TABLE>
<S> <C> <C>
A. In General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
B. Landlord's Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
C. Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
D. Change of Ownership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
E. Excess Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

18. Conveyance by Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

19. Estoppel Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

20. Security Deposit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

21. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

22. Tenant's Personal Property and Fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . 19

23. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
A. Landlord . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
B. Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

24. Quiet Possession . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

25. Real Estate Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

26. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
A. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
B. Date Payments Are Due . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
C. Meaning of "Landlord", "Re-Entry", "including" and "Affiliate" . . . . . . . . . . . 20
D. Time of the Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
E. No Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
F. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
G. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
H. Lease Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
I. No Oral Modification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
J. Right to Cure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
K. Captions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
L. Authority . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
M. Landlord's Enforcement of Remedies . . . . . . . . . . . . . . . . . . . . . . . . . 21
N. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
O. Landlord's Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
P. Light and Air Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Q. Singular and Plural . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
R. No Recording by Tenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
S. Exclusivity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
T. Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
U. Survival . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
V. Rent Not Based on Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
W. Building Manager and Service Providers . . . . . . . . . . . . . . . . . . . . . . . 22
X. Late Charge and Interest on Late Payments . . . . . . . . . . . . . . . . . . . . . 22
Y. Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>

iii

<PAGE> 5

<TABLE>
<S> <C> <C>
27. Unrelated Business Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

28. Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

29. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>

APPENDIX A - PLAN OF THE PREMISES
APPENDIX B - RULES AND REGULATIONS
APPENDIX C - TENANT IMPROVEMENT AGREEMENT
APPENDIX D - MORTGAGES CURRENTLY AFFECTING THE PROJECT
APPENDIX E - COMMENCEMENT DATE CONFIRMATION
APPENDIX F - EXPANSION
APPENDIX G - PREFERENTIAL RIGHT
APPENDIX H - RENEWAL OPTION
APPENDIX I - PARKING
APPENDIX J - JANITORIAL SPECIFICATIONS

<PAGE> 6

LEASE

THIS LEASE (the "Lease") is made as of June 4, 1997, between
CarrAmerica Realty, L.P. (the "Landlord") and the Tenant as named in the
Schedule below. The term "Project" means the building (the "Building") to be
known as "City View Centre" and the land (the "Land") located at 1120 South
Capital of Texas Highway, Austin, Texas 78746. "Premises" means that part of
the Project leased to Tenant described in the Schedule and outlined on Appendix
A.

The following schedule (the "Schedule") is an integral part of this
Lease. Terms defined in this Schedule shall have the same meaning throughout
the Lease.

SCHEDULE

1. TENANT: IXC COMMUNICATIONS, INC.
2. PREMISES: See Appendix A.
3. RENTABLE SQUARE FEET OF THE PREMISES: 105,000
4. TENANT'S PROPORTIONATE SHARE: 82.0075% (based upon a total of
128,037 rentable square feet in the Building)
5. SECURITY DEPOSIT: First and last months Rent in the amount of
$293,125.00
6. TENANT'S REAL ESTATE BROKER FOR THIS LEASE: CB Commercial
Real Estate Group
7. LANDLORD'S REAL ESTATE BROKER FOR THIS LEASE: CRW Associates,
Inc.
8. TENANT IMPROVEMENTS, IF ANY: See the Tenant Improvement
Agreement attached hereto as Appendix C.
9. COMMENCEMENT DATE: December 1, 1997, but if the Premises are
subject to new construction pursuant to Appendix C, then the Completion Date,
as defined therein, if it is later; Landlord and Tenant shall execute a
Commencement Date Confirmation substantially in the form of Appendix E promptly
following the Commencement Date.
10. TERMINATION DATE/TERM: Eighty-four (84) months after the
Commencement Date, or if the Commencement Date is not the first day of a month,
then after the first day of the following month.
11. GUARANTOR: None
12. BASE RENT:

<TABLE>
<CAPTION>
Annual Monthly
Period Base Rent Base Rent
- ------ --------- ---------
<S> <C> <C>
Lease Years 1-5 $1,680,000.00 [$16.00/SF NNN] $ 140,000.00

Lease Years 6-7 $1,837,500.00 [$17.50/SF NNN] $ 153,125.00
</TABLE>

The Base Rent is subject to adjustment upwards based on the increase in
rentable square feet of the Premises as a result of the Expansion Space as
outlined in Appendix F - Expansion.

1. Lease Agreement. On the terms stated in this Lease, Landlord
leases the Premises to Tenant, and Tenant leases the Premises from Landlord,
for the Term beginning on the Commencement Date and ending on the Termination
Date unless extended or sooner terminated pursuant to this Lease.

2. Rent.

A. Types of Rent. Tenant shall pay the following Rent
in the form of a check to Landlord at the following address:

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<PAGE> 7
CARRAMERICA REALTY, L.P.
t/a CITY VIEW CENTRE
P.O. Box __________
Atlanta, GA 30384-0566

or in such other manner as Landlord may notify Tenant:

(1) Base Rent in monthly installments in advance,
the first monthly installment payable concurrently with the execution of this
Lease and thereafter on or before the first day of each month of the Term in
the amount set forth on the Schedule.

(2) Operating Cost Share Rent in an amount equal
to (a) all Variable Operating Costs and Tenant's Proportionate Share of all
other Operating Costs incurred prior to the Second Expansion Date, and (b)
after the Second Expansion Date (as defined in Appendix F), the Tenant's
Proportionate Share of the Operating Costs, each paid monthly in advance
pursuant to Section 2B of this Lease. Definitions of Operating Costs, Variable
Operating Costs and Tenant's Proportionate Share, and the method for billing
and payment of Operating Cost Share Rent are set forth in Sections 2B, 2C and
2D.

(3) Tax Share Rent in an amount equal to the
Tenant's Proportionate Share of the Taxes for the applicable fiscal year of
this Lease, paid monthly in advance pursuant to Section 2B of this Lease. A
definition of Taxes and the method for billing and payment of Tax Share Rent
are set forth in Sections 2B, 2C and 2D.

(4) Additional Rent in the amount of all costs,
expenses, liabilities, and amounts which Tenant is required to pay under this
Lease, excluding Base Rent, Operating Cost Share Rent, and Tax Share Rent, but
including any interest for late payment of any item of Rent.

(5) Rent as used in this Lease means Base Rent,
Operating Cost Share Rent, Tax Share Rent and Additional Rent. Tenant's
agreement to pay Rent is an independent covenant, with no right of setoff,
deduction or counterclaim of any kind, except as expressly provided in this
Lease.

B. Payment of Operating Cost Share Rent and Tax Share
Rent.

(1) Payment of Estimated Operating Cost Share
Rent and Tax Share Rent. Landlord shall estimate the Operating Costs and Taxes
of the Project by April 1 of each fiscal year, or as soon as reasonably
possible thereafter. Landlord may revise these estimates whenever it obtains
more accurate information, such as the final real estate tax assessment or tax
rate for the Project, but in no event more than twice per fiscal year.

Within thirty (30) days after receiving the original
or revised estimate from Landlord, Tenant shall pay Landlord one- twelfth
(1/12th) of Tenant's Proportionate Share of this estimate, multiplied by the
number of months that have elapsed in the applicable fiscal year to the date of
such payment including the current month, minus payments previously made by
Tenant for the months elapsed. On the first day of each month thereafter,
Tenant shall pay Landlord one-twelfth (1/12th) of Tenant's Proportionate Share
of this estimate, until a new estimate becomes applicable.

(2) Correction of Operating Cost Share Rent.
Landlord shall deliver to Tenant a report for the previous fiscal year (the
"Operating Cost Report") by April 1 of each year, or as soon as reasonably
possible thereafter, setting forth in detail with each category of expense
itemized (a) the actual Operating Costs incurred, (b) the amount of Operating
Cost Share Rent due from Tenant, and (c) the amount of Operating Cost Share
Rent paid by Tenant. Within thirty (30) days after such delivery, Tenant shall
pay to Landlord the amount due minus the amount paid. If the amount paid
exceeds the amount due, Landlord

2
<PAGE> 8
shall apply the excess to Tenant's payments of Operating Cost Share Rent next
coming due, or if after the Termination Date, then within thirty (30) days
after such delivery.

(3) Correction of Tax Share Rent. Landlord shall
deliver to Tenant a report for the previous fiscal year (the "Tax Report") by
April 1 of each year, or as soon as reasonably possible thereafter, setting
forth (a) the actual Taxes, (b) the amount of Tax Share Rent due from Tenant,
and (c) the amount of Tax Share Rent paid by Tenant. Within thirty (30) days
after such delivery, Tenant shall pay to Landlord the amount due from Tenant
minus the amount paid by Tenant. If the amount paid exceeds the amount due,
Landlord shall apply any excess as a credit against Tenant's payments of Tax
Share Rent next coming due, or if after the Termination Date, then within
thirty (30) days after such delivery.

C. Definitions.

(1) Included Operating Costs. "Operating Costs"
means any expenses, costs and disbursements of any kind other than Taxes, paid
or incurred by Landlord in connection with the management (up to a maximum of
2.5% of gross Building Rent per year), maintenance, operation, insurance,
repair and other related activities in connection with any part of the Project
and of the personal property, fixtures, machinery, equipment, systems and
apparatus used in connection therewith, including the cost of providing those
services required to be furnished by Landlord under this Lease. Operating
Costs shall also include the costs of any capital improvements which reduce
Operating Costs provided the annual amortized cost does not exceed the actual
cost reasonably anticipated or improve safety, and those made to keep the
Project in compliance with governmental requirements enacted after the
Commencement Date applicable from time to time (collectively, "Included Capital
Items"); provided, that the costs of any Included Capital Item shall be
amortized by Landlord, together with an amount equal to interest at ten percent
(10%) per annum, over the estimated useful life of such item and such amortized
costs are only included in Operating Costs for that portion of the useful life
of the Included Capital Item which falls with the Term.

If the Project is not fully occupied during any
portion of any fiscal year, Landlord may adjust (an "Equitable Adjustment")
Operating Costs to equal what would have been incurred by Landlord had the
Project been fully occupied. This Equitable Adjustment shall apply only to
Operating Costs which are variable ("Variable Operating Costs") and therefore
increase as occupancy of the Project increases. Landlord may incorporate the
Equitable Adjustment in its estimates of Operating Costs.

If Landlord does not furnish any particular service
to a tenant other than Tenant who has undertaken to perform such service itself
and whose cost would have constituted an Operating Cost, Operating Costs shall
be increased by the amount which Landlord would have incurred if it had
furnished the service to such tenant.

In no event will Tenant be liable to Landlord for
more than actual Operating Costs.

(2) Excluded Operating Costs. Operating Costs
shall not include:

(a) costs, including permit, license,
and inspection costs, of alterations of tenant premises or vacant space;

(b) costs of capital improvements,
including without limitation, improvements, equipment and tools as determined
by GAAP, consistently applied, other than Included Capital Items;

(c) interest and principal payments on
mortgages or any other debt costs, or rental payments on any ground lease of
the Project;

3
<PAGE> 9

(d) real estate brokers' leasing
commissions, attorneys' fees, and other costs and expenses incurred in
connection with negotiations or disputes with prospective or actual tenants or
litigation to collect rent;

(e) legal fees, space planner fees and
advertising expenses incurred with regard to leasing the Building or portions
thereof;

(f) any cost or expenditure for which
Landlord is reimbursed, by insurance proceeds or otherwise, except by Operating
Cost Share Rent;

(g) the cost of any service furnished to
any tenant of the Project which Landlord does not make available to Tenant;

(h) depreciation (except on any Included
Capital Items);

(i) franchise, income taxes, or similar
taxes imposed upon Landlord (relating to the ownership of the Building);

(j) costs of correcting defects in
construction of the Building (as opposed to the cost of normal repair,
maintenance and replacement expected with the construction materials and
equipment installed in the Building in light of their specifications) following
the lapse of all warranties to Tenant;

(k) legal and auditing fees which are
for the benefit of Landlord such as collecting delinquent rents, preparing tax
returns and other financial statements, and audits other than those incurred in
connection with the preparation of reports required pursuant to Section 2B
above;

(l) the wages of any employee for
services not related directly to the management, maintenance, operation and
repair of the Building, except that the wages included in "Included Operation
Costs" shall be prorated to reflect the time such employee actually spent on
this Building versus other properties of Landlord;

(m) fines, penalties and interest;

(n) expenditures required by Landlord's
knowing or intentional failure to comply with laws, statutes or ordinance;

(o) overhead and profit paid to Landlord
or to subsidiaries or affiliates of Landlord for services in the Building to
the extent the same exceed the cost of such services rendered by unaffiliated
third parties on a competitive basis;

(p) Landlord's general corporate
overhead and general administrative expenses;

(q) rentals and other related expenses
incurred in leasing air conditioning systems, elevators or other equipment
ordinarily considered to be of a capital nature;

(r) damage and repairs necessitated by
the willful misconduct of Landlord or Landlord's employees, contractors or
agents;

(s) costs associated with the removal,
testing abatement, containment or any remedy necessary because of existence of
hazardous wastes on the Project based on laws in effect on the Commencement
Date;

<PAGE> 10

(t) expenditures incurred by Landlord
for the repair of casualty damage to the Buildings to the extent the repairs
are paid by applicable insurance proceeds;

(u) any management fees in excess of
2.5% of gross revenues; and

(v) costs associated with corrective or
remedial work on any warranty claim made on Landlord.

(3) Taxes. "Taxes" means any and all taxes,
assessments and charges of any kind, general or special, ordinary or
extraordinary, levied against the Project, which Landlord shall pay or become
obligated to pay in connection with the ownership, leasing, renting,
management, use, occupancy, control or operation of the Project or of the
personal property, fixtures, machinery, equipment, systems and apparatus used
in connection therewith. Taxes shall include real estate taxes, personal
property taxes, sewer rents, water rents, special or general assessments,
transit taxes, ad valorem taxes, and any tax levied on the rents hereunder or
the interests of Landlord under this Lease (the "Rent Tax"). Taxes shall also
include all fees and other costs and expenses paid by Landlord in reviewing any
tax and in seeking a refund or reduction of any Taxes, whether or not the
Landlord is ultimately successful.

For any year, the amount to be included in Taxes (a)
from taxes or assessments payable in installments, over the maximum allowable
payment term, shall be the amount of the installments (with any interest) due
and payable during such year, and (b) from all other Taxes, shall at Landlord's
election be the amount accrued, assessed, or otherwise imposed for such year or
the amount due and payable in such year. Any refund or other adjustment to any
Taxes by the taxing authority, shall apply during the year in which the
adjustment is made.

Taxes shall not include any net income (except Rent
Tax), capital, stock, succession, transfer, franchise, gift, estate or
inheritance tax, except to the extent that such tax shall be imposed in lieu of
any portion of Taxes.

(4) Lease Year. "Lease Year" means each
consecutive twelve-month period beginning with the Commencement Date, except
that if the Commencement Date is not the first day of a calendar month, then
the first Lease Year shall be the period from the Commencement Date through the
final day of the twelve months after the first day of the following month, and
each subsequent Lease Year shall be the twelve months following the prior Lease
Year.

(5) Fiscal Year. "Fiscal Year" means the
calendar year, except that the first fiscal year and the last fiscal year of
the Term may be a partial calendar year.

D. Computation of Base Rent and Rent Adjustments.

(1) Prorations. If this Lease begins on a day
other than the first day of a month, the Base Rent, Operating Cost Share Rent
and Tax Share Rent shall be prorated for such partial month based on the actual
number of days in such month. If this Lease begins on a day other than the
first day, or ends on a day other than the last day, of the fiscal year,
Operating Cost Share Rent and Tax Share Rent shall be prorated for the
applicable fiscal year.

(2) Default Interest. Any sum due from Tenant to
Landlord not paid when due shall bear interest from the date due until paid at
fifteen percent (15%) per annum.

5
<PAGE> 11
(3) Rent Adjustments. The square footage of (a)
the Premises as mutually agreed to between Landlord and Tenant's architects
upon completion of construction of the Building, and (b) the Building as set
forth in the Schedule, are conclusively deemed to be the actual square footage
thereof, without regard to any subsequent remeasurement of the Premises or the
Building. If any Operating Cost paid in one fiscal year relates to more than
one fiscal year, Landlord shall proportionately allocate such Operating Cost
among the related fiscal years.

(4) Books and Records. Landlord shall maintain
books and records reflecting the Operating Costs and Taxes in accordance with
GAAP accounting and management practices. Tenant and/or its certified public
accountant shall have the right to inspect Landlord's records at Landlord's
office upon at least seventy-two (72) hours' prior notice during normal
business hours one hundred eighty (180) days following the respective delivery
of the Operating Costs Report or the Tax Report. The results of any such
inspection shall be kept strictly confidential by Tenant and its agents, and
Tenant and/or its certified public accountant must agree, in their contract for
such services, to such confidentiality restrictions and shall specifically
agree that the results shall not be made available to any other tenant of the
Building. Unless Tenant sends to Landlord any written exception to either such
report within one hundred eighty (180) days, such report shall be deemed final
and accepted by Tenant. Tenant shall pay the amount shown on both reports in
the manner prescribed in this Lease, whether or not Tenant takes any such
written exception, without any prejudice to such exception. If Tenant makes a
timely exception, Landlord and Tenant shall cause a mutually acceptable
independent certified public accountant to issue a final and conclusive
resolution of Tenant's exception. Landlord shall pay the cost of such
certification if Landlord's original determination of annual Operating Costs or
Taxes overstated the amounts thereof by either (a) five percent (5%) or more in
any one fiscal year, or (b) three percent (3%) per year for any two (2) fiscal
years in a five (5) consecutive fiscal year period. Landlord and Tenant shall
split the cost of such certification if such original determination is
overstated by more than three percent (3%) but less than five percent (5%) in
any one fiscal year. In all other cases, such certification shall be at
Tenant's sole cost and expense.

(5) Miscellaneous. So long as Tenant is in
default of any obligation under this Lease beyond all applicable cure periods,
Tenant shall not be entitled to any refund of any amount from Landlord. If
this Lease is terminated for any reason prior to the annual determination of
Operating Costs Share Rent or Tax Share Rent, either party shall pay the full
amount due to the other within fifteen (15) days after Landlord's notice to
Tenant of the amount when it is determined. Landlord may commingle any
payments made with respect to Operating Costs Share Rent or Tax Share Rent,
without payment of interest.

3. Preparation and Condition of Premises; Possession and
Surrender of Premises.

A. Condition of Premises. Except to the extent of the
Tenant Improvements, the definition of the Base Building condition and any
latent defect, Landlord is leasing the Premises to Tenant "as is", without any
obligation to construct, alter, remodel, improve, repair or decorate any part
of the Premises. Landlord shall cause the Premises to be completed in
accordance with the Tenant Improvement Agreement attached as Appendix C.

B. Tenant's Possession. Tenant's taking possession of
any portion of the Premises shall be conclusive evidence that the portion of
the Premises taken was in good order, repair and condition, except for punch
list items and all latent defects. If Landlord authorizes Tenant to take
possession of any part of the Premises prior to the Commencement Date for
purposes of doing business, all terms of this Lease shall apply to such
pre-Term possession, including Base Rent at the rate set forth for the First
Lease Year in the Schedule prorated for any partial month.

6
<PAGE> 12

C. Maintenance. Throughout the Term, Tenant shall
maintain the Premises in their condition as of the Completion Date, loss or
damage caused by the elements, ordinary wear, and fire and other casualty
excepted, and at the termination of this Lease, or Tenant's right to
possession, Tenant shall return the Premises to Landlord in broom-clean
condition. To the extent Tenant fails to perform either obligation, Landlord
may, but need not, restore the Premises to such condition and Tenant shall pay
the cost thereof.

D. Ownership of Improvements. All Work as defined in
Section 5, partitions, hardware, equipment, machinery and all other
improvements and all fixtures except trade fixtures, and any other item
installed by Tenant at Tenant's expense, such as HVAC units or computer
flooring, which are not reasonably necessary for the comfortable use and
enjoyment of the Premises, constructed in the Premises by either Landlord or
Tenant, shall become Landlord's property upon installation without compensation
to Tenant, unless Landlord, at the time Landlord gives its consent to the
performance of such construction, elects in writing that such Work and other
improvements shall remain the property of Tenant, in which case such property
shall be subject to the provisions of Section 3E below.

E. Removal at Termination. Upon the termination of this
Lease or Tenant's right of possession, Tenant shall remove from the Project its
trade fixtures, furniture, moveable equipment and other personal property, any
improvements which Landlord elects shall be the property of Tenant pursuant to
Section 3D, and any improvements to any portion of the Project other than the
Premises. If Tenant does not timely remove such property, then Tenant shall be
conclusively presumed to have, at Landlord's election (i) conveyed such
property to Landlord without compensation or (ii) abandoned such property, and
Landlord may dispose of or store any part thereof in any manner at Tenant's
sole cost, without waiving Landlord's right to claim from Tenant all expenses
arising out of Tenant's failure to remove the property, and without liability
to Tenant or any other person. Landlord shall have no duty to be a bailee of
any such personal property. If Landlord elects abandonment, Tenant shall pay
to Landlord, upon demand, any expenses incurred for disposition. Upon Tenant's
removal of the property described in the first sentence of this subsection,
Tenant shall repair and/or restore any damage or condition which resulted from
the installation and/or removal of such property to a condition useable for
general office use, except for normal wear and tear.

4. Project Services.

Landlord shall furnish services as follows:

A. Heating and Air Conditioning. If at any time after
the Second Expansion Date the Premises contains less than one hundred percent
(100%) of the net rentable square feet of the Building, (a) Landlord shall
furnish heating and air conditioning to provide a comfortable temperature, in
Landlord's reasonable judgment, for normal business operations, during the
normal business hours of 7:00 a.m. to 6:00 p.m., Monday through Friday
(excluding New Year's Day, Memorial Day, Fourth of July, Labor Day,
Thanksgiving and Christmas) and 8:00 a.m. to 1:00 p.m. on Saturday, (b) if
Tenant installs or has installed equipment which adversely affects the
temperature maintained by the air conditioning system, Landlord shall first
notify Tenant of the problem and may install supplementary air conditioning
units in the Premises, and Tenant shall pay to Landlord upon demand as
Additional Rent the cost of installation, operation and maintenance thereof,
and (c) Landlord shall furnish heating and air conditioning after business
hours provided Tenant provides Landlord reasonable prior notice and pays
Landlord all then current charges for such additional heating or air
conditioning. Prior to the Second Expansion Date, and at all times thereafter
that the Premises contains one hundred percent (100%) of the net rentable
square feet of the Building, the cost of all heating and air conditioning and
any supplementary air conditioning equipment (i.e., other than pursuant to Base
Building Plans) for the Building provided by Landlord shall be a Variable
Operating Cost to be paid by Tenant, and provisions (a), (b), and (c) in this
Paragraph shall not apply.

7
<PAGE> 13

Tenant may provide a back-up generator and twenty-four hour
air conditioning in portions of the Premises and/or outside the Premises in
areas reasonably acceptable to the Landlord, at Tenant's sole cost and expense.

B. Elevators. Prior to the Second Expansion Date, and
at all times thereafter that the Premises contains 100% of the net rentable
square feet of the Building, Landlord shall provide passenger elevator service
on a 24-hour basis. In the event Tenant leases less than 100% of the net
rentable square feet of the Building after the Second Expansion Date, Landlord
shall provide passenger elevator service during normal business hours, except
in the case of an emergency. Landlord shall provide freight elevator service,
but if more than one tenant occupies the Building, only at Tenant's reasonable
advance notice and request.

C. Electricity. Landlord shall provide sufficient
electricity to operate normal office equipment as per Base Building Plans (as
defined in Appendix C). If any or all of Tenant's equipment requires
electricity consumption in excess of that which is necessary to operate normal
office equipment, such consumption shall be submetered by Tenant at Tenant's
expense in the event the Premises does not include all the rentable square feet
of the Building on or at any time after the Second Expansion Date.
Alternatively and/or in addition, if any or all of Tenant's equipment requires
electricity consumption in excess of the capacity of the Building and/or
Premises, any additional electrical equipment shall be installed by Landlord at
Tenant's expense.

D. Water. Landlord shall furnish hot and cold tap water
for drinking and toilet purposes. Tenant shall pay Landlord for water
furnished as requested by Tenant for any other purpose as Additional Rent at
reasonable rates fixed by Landlord.

E. Janitorial Service. Landlord shall furnish
janitorial service per the attached scope and schedule and Tenant shall have
the right to supplement and/or modify such services. Any supplemental services
shall be at Tenant's cost, and any reduction shall be credited on a pro rata
basis to Tenant provided that Landlord reasonably approves of the quality of
such janitorial services.

F. Interruption of Services. If any of the Building
equipment or machinery ceases to function properly for any cause, Landlord
shall use reasonable diligence to repair the same promptly. Landlord's
inability to furnish, to any extent, the Project services set forth in this
Section 4, or any cessation thereof resulting form any causes, including any
entry for repairs pursuant to this Lease, and any renovation, redecoration or
rehabilitation of any area of the Building shall not render Landlord liable for
damages to either person or property or for interruption or loss to Tenant's
business, nor be construed as an eviction of Tenant, nor work an abatement of
any portion of rent, nor relieve Tenant from fulfillment of any covenant or
agreement hereof. However, in the event that an interruption of the Project
services set forth in this Section 4 causes the Premises to be untenantable for
a period of at least ten (10) consecutive business days, monthly Rent shall be
abated proportionately.

G. Building Security. Landlord shall provide reasonable
after-hours security patrol and an electronic card key system based on
specifications provided by Tenant.

5. Alterations and Repairs.

A. Landlord's Consent and Conditions. Except as
otherwise provided in the Appendix C, Tenant shall not make any improvements or
alterations to the Premises (the "Work") without in each instance submitting
plans and specifications for the Work to Landlord and obtaining Landlord's
prior written consent (which consent shall not be unreasonably withheld,
conditioned or delayed) UNLESS (a) THE COST THEREOF IS LESS THAN $50,000, (b)
SUCH WORK DOES NOT IMPACT THE BASE STRUCTURAL COMPONENTS OR PRIMARY

8
<PAGE> 14

SYSTEMS OF THE BUILDING, (c) SUCH WORK WILL NOT IMPACT ANY OTHER TENANT'S
PREMISES, AND (D) SUCH WORK IS NOT VISIBLE FROM OUTSIDE THE PREMISES. Tenant
shall pay Landlord's actual third party reasonable costs for review of the
plans and all other items submitted by Tenant. Landlord will be deemed to be
acting reasonably in withholding its consent for any Work which (a) impacts the
base structural components or primary systems of the Building, (b) impacts any
other tenant's premises, or (c) is visible from outside the Premises.

Tenant shall reimburse Landlord for actual costs incurred for
review of the plans and all other items submitted by Tenant. Tenant shall pay
for the cost of all Work. All Work shall become the property of Landlord upon
its installation, except for Tenant's trade fixtures and for items which
Landlord requires Tenant to remove at Tenant's cost at the termination of the
Lease pursuant to Section 3E.

The following requirements shall apply to all Work:

(1) Prior to commencement, Tenant shall furnish
to Landlord building permits, certificates of insurance satisfactory to
Landlord, and, at Landlord's request, security for payment of all costs.

(2) Tenant shall perform all Work so as to
reasonably maintain peace and harmony among other contractors serving the
Project and shall reasonably avoid interference with other work to be performed
or services to be rendered in the Project.

(3) The Work shall be performed in a good and
workmanlike manner, meeting the standard for construction and quality of
materials in the building, and shall comply with all insurance requirements and
all applicable governmental laws, ordinances, codes, and regulations
("Governmental Requirements").

(4) Tenant shall perform all Work so as to
reasonably minimize or prevent disruption to other tenants, and Tenant shall
comply with all reasonable requests of Landlord in response to complaints from
other tenants.

(5) Upon completion, Tenant shall furnish
Landlord with contractor's affidavits and full and final statutory waivers of
liens, as-built plans and specifications.

B. Damage to Systems. If any part of the mechanical,
electrical or other systems in the Premises shall be damaged, Tenant shall
promptly notify Landlord, and Landlord shall diligently pursue repair such
damage. Landlord may also at any reasonable time make any repairs or
alterations which Landlord deems necessary for the safety or protection of the
Project, or which Landlord is required to make by any court or pursuant to any
Governmental Requirement. Tenant shall at its expense make all other repairs
necessary to keep the Premises, and Tenant's fixtures and personal property, in
good order, condition and repair, except ordinary wear and/or casualty damage;
to the extent Tenant fails to do so, after written notification from Landlord
and any applicable time period to cure, Landlord may make such repairs itself.
The cost of any repairs made by Landlord on account of Tenant's default, or on
account of the mis-use or neglect by Tenant or its invitees, contractors or
agents anywhere in the Project, shall become Additional Rent payable by Tenant
within thirty (30) days.

C. No Liens. Tenant has no authority to cause or permit
any lien or encumbrance of any kind to affect Landlord's interest in the
Project; any such lien or encumbrance shall attach to Tenant's interest only.
If any mechanic's lien shall be filed or claim of lien made for work or
materials furnished to tenant, then Tenant shall at its expense within then
(10) business days thereafter either discharge or contest the lien or claim.
If Tenant contests the lien or claim, then Tenant shall (i) within such ten
(10) business day period, provide Landlord adequate security for the lien or
claim, (ii) contest the lien or claim

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in good faith by appropriate proceedings that operate to stay its enforcement,
and (iii) pay promptly any final adverse judgment entered in any such
proceeding. If Tenant does not comply with these requirements, Landlord may
discharge the lien or claim, and the amount paid, as well as attorney's fees
and other expenses incurred by Landlord, shall become Additional Rent payable
by Tenant within thirty (30) days.

6. Use of Premises. Tenant shall use the Premises only for the
operation of a network control center and/or general office purposes (and any
other legal uses directly related thereto provided such use is consistent with
similar quality suburban building in Austin, Texas). Tenant shall not allow
any use of the Premises which will negatively affect the cost of coverage of
Landlord's insurance on the Project. Tenant shall not allow any inflammable or
explosive liquids or materials to be kept on the Premises other than those
typically used in normal office cleaning. Tenant shall not allow any use of
the Premises which would cause the value or utility of any part of the Premises
to diminish or would interfere with any other tenant or with the operation of
the Project by Landlord. Tenant shall not permit any nuisance or waste upon
the Premises, or allow any offensive noise or odor in or around the Premises.
Tenant may have a diesel generator on the Premises provided it is not
unreasonably noisy or odorous and it complies with all governmental
regulations.

Tenant may at its sole cost install, maintain, and from time to time
replace a microwave or satellite dish (a "Dish") on the roof of the Building,
provided that Tenant shall obtain Landlord's prior reasonable approval of the
proposed size, weight and location of the Dish and method for fastening the
Dish to the roof, and that Tenant will at its sole cost comply with all
Governmental Requirements and the conditions of any bond or warranty maintained
by Landlord on the roof. Landlord may supervise any roof penetration. Tenant
shall repair any damage to the Building caused by Tenant's installation,
maintenance, replacement, use or removal of the Dish. The Dish shall remain the
property of Tenant, and Tenant may remove the Dish at its cost at any time
during the Term. Tenant shall remove the Dish at its cost upon expiration or
termination of the Lease. Tenant shall protect, defend, indemnify and hold
harmless Landlord from and against claims, damages, liabilities, costs and
expenses of every kind and nature, including attorneys' fees, incurred by or
asserted against Landlord arising out of Tenant's installation, maintenance,
replacement, use or removal of the Dish.

If any governmental authority shall deem the Premises to be a "place
of public accommodation" under the Americans with Disabilities Act or any other
comparable law as a result of Tenant's use, Tenant shall either modify its use
to cause such authority to rescind its designation or be responsible for any
alterations, structural or otherwise, required to be made to the Building or
the Premises under such laws, however, Tenant shall have the right to pursue
appeal of such ruling prior to making any required changes to the Building or
Premises if such right is otherwise allowed by law.

7. Governmental Requirements and Building Rules. Tenant shall
comply with all Governmental Requirements applying to its use of the Premises.
Tenant shall also comply with all reasonable rules established for the Project
form time to time by Landlord which do not unreasonably interfere with the
operation of Tenant's business, including its network control center. The
present rules and regulations are contained in Appendix B. To the extent of
any conflict between the Project rules and regulations and this Lease, this
Lease shall control. Failure by another tenant to comply with the rules or
failure by Landlord to enforce them shall not relieve Tenant of its obligation
to comply with the rules or makem Landlord responsible to Tenant in any way.
Landlord shall use reasonable efforts to apply the rules and regulations
uniformly with respect to Tenant and tenants in the Building under leases
containing rules and regulations similar to this Lease.

Landlord shall place and keep the Building and all Building systems
(including, but not limited to fire, safety, security, elevators, etc.) in
compliance with all Government Requirements.

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8. Waiver of Claims; Indemnification; Insurance.

A. Waiver of Claims. To the extent permitted by law,
Tenant waives any claims it may have against Landlord or its officers,
directors, employees, agents or contractors for business interruption or damage
to property sustained by Tenant as the result of any negligent (except grossly
negligent) or other unintentional act or omission of Landlord.

To the extend permitted by law, Landlord waives any claims it
may have against Tenant or its officers, directors, employees, agents or
contractors for loss of rents or damage to property sustained by Landlord as
the result of any negligent (except grossly negligent) or unintentional act or
omission of Tenant.

B. Indemnification. Unless caused in whole or part by
the gross negligence or willful misconduct of Landlord, its agents, employees
or invitees, Tenant shall indemnify, defend and hold harmless Landlord and its
officers, directors, employees, agents and contractors against any claims by
any third party for injury to any person or damage to or loss of any property
occurring in the Project and arising from the use of the Premises or from any
other act or omission of Tenant or any of Tenant's employees, agents or
contractors. Tenant's obligations under this section shall survive the
termination of this Lease.

C. Tenant's Insurance. Tenant shall maintain insurance
as follows, with such other terms, coverages and insurers, as Landlord shall
reasonably require from time to time:

(1) Commercial General Liability Insurance, with
(a) Contractual Liability including the indemnification provisions contained in
this Lease, (b) a severability of interest endorsement, (c) limits of not less
than Two Million Dollars ($2,000,000) combined single limit per occurrence and
not less than Two Million Dollars ($2,000,000) in the aggregate for bodily
injury, sickness or death, and property damage, and umbrella coverage of not
less than Five Million Dollars ($5,000,000), and (d) Landlord and, if any,
Landlord's building manager or agent, mortgagee and ground lessor named as
additional insureds.

(2) Insurance against "All Risks" of physical
loss covering the replacement cost of all of Tenant's improvements, fixtures
and personal property. Tenant waives all rights of subrogation, and Tenant's
property insurance shall include a waiver of subrogation.

(3) Worker's compensation or similar insurance in
form and amounts required by law.

Tenant shall cause any contractor of Tenant performing work on
the Premises to maintain insurance as follows, with such other terms, coverages
and insurers, as Landlord shall reasonably require from time to time:

(1) Commercial General Liability Insurance,
including contractor's liability coverage, contractual liability coverage,
completed operations coverage, broad form property damage endorsement, and
contractor's protective liability coverage, to afford protection with limits,
for each occurrence, of not less than One Million Dollars ($1,000,000) with
respect to personal injury, death or property damage.

(2) Worker's compensation or similar insurance in
form and amounts required by law.

Tenant's insurance shall be primary and not contributory. The
company or companies writing any insurance which Tenant is required to maintain
under this Lease, as well as the form of such insurance, shall at all times be
subject to Landlord's approval, and

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any such company shall be licensed to do business in the state in which the
Building is located and shall have a Best rating of A VI or better.

D. Insurance Certificates. Tenant shall deliver to
Landlord certificates evidencing all required insurance no later than five (5)
days prior to the Commencement Date and each renewal date. Each certificate
will provide for the thirty (30) days prior written notice of cancellation to
Landlord, Tenant and any lien holder on the Project.

E. Landlord's Insurance. Landlord shall maintain
replacement cost "All-Risk" coverage insurance policies on the Building, and
public liability insurance policies covering the common areas of the Building,
each with such terms, coverages and conditions as are normally carried by
reasonably prudent owners of properties similar to the Project. Landlord and
Tenant waive all rights of subrogation, and the respective All-Risk coverage
insurance policies carried by Landlord and Tenant shall contain enforceable
waiver of subrogation endorsements.

9. Fire and Other Casualty.

A. Termination. If a fire or other casualty causes
substantial damage to the Building or the Premises, Landlord shall engage a
registered architect to certify within one (1) month of the casualty to both
Landlord and Tenant the amount of time needed to restore the Building and the
Premises to tenantability, using standard working methods. If the time needed
exceeds nine (9) months from the beginning of the restoration, or two (2)
months therefrom if the restoration would begin during the last twelve (12)
months of the Lease, then, either Landlord or Tenant may terminate this Lease
by notice to the other party within ten (10) days after the notifying party's
receipt of the architect's certificate. The termination shall be effective
thirty (30) days from the date of the notice and Rent shall be paid by Tenant
to that date, with a proportionable abatement of the space which is untenable
as a result of the fire or casualty.

B. Restoration. If a casualty causes damage to the
Building or the Premises but his Lease is not terminated for any reason, then
subject to the rights of any mortgagees or ground lessors, Landlord shall
obtain the applicable insurance proceeds and diligently restore the Building
and the Premises subject to current Governmental Requirements. Tenant shall
replace its damaged Additional Improvements, personal property and fixtures.
Rent shall be abated on a per diem basis during the restoration in proportion
to Tenant's reduced use of the Premises which is untenantable, except to the
extent that Tenant's negligence or intentional misconduct caused the casualty.

10. Eminent Domain. If a part of the Project is taken by eminent
domain or deed in lieu thereof which is so substantial that the Premises cannot
reasonably be used by Tenant for the operation of its business, then either
party may terminate this Lease effective as of the date of the taking. Rent
shall abate from the date of the taking in proportion to Tenant's reduced use
of the Premises taken. The entire award for a taking of any kind shall be paid
to Landlord, and Tenant shall have no right to share in the award. All
obligations accrued to the date of the taking shall be performed by each party.
Notwithstanding the foregoing to the contrary, Tenant shall have the right to
seek a separate award for business interruption, relocation costs, lost
property, etc., to the extent allowed by law.

11. Rights Reserved to Landlord.

Landlord may exercise at any time any of the following rights
respecting the operation of the Project without liability to the Tenant of any
kind:

A. Name. To change the name or street address of the
Building or the suite number(s) of the Premises provided Landlord reimburses
Tenant's reasonable costs,

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<PAGE> 18
not to exceed $15,000.00. During the Lease Term, Landlord will not name the
Building after a direct competitor of Tenant.

B. Signs. Provided such signs do not unreasonably
interfere with Tenant's sign, to install and maintain any signs on the exterior
and in the interior of the Building, and to approve at its sole discretion,
prior to installation, any of Tenant's signs in the Premises visible from the
common areas or the exterior of the Building, provided Tenant shall have the
right to exterior building signage equivalent to the signage utilized on the
adjacent Setting buildings.

C. Window Treatments. To approve, at its reasonable
discretion, prior to installation, any shades, blinds, ventilators or window
treatments of any kind, as well as any lighting within the Premises that may be
visible from the exterior of the Building or any interior common area.

D. Keys. To retain and use at any time passkeys to
enter the Premises or any door within the Premises, with the exception of any
of Tenant secure areas and the network control center. Tenant shall indemnify
and hold harmless Landlord, its employees, agents, independent contractors, and
all other persons or entities acting on Landlord's behalf, from all loss,
damage, cost and expense which results from Landlord's lack of access to the
network control center and/or any forced entry thereto in the event of an
emergency. Tenant shall not alter or add any lock or bolt, with the exception
of any of Tenant secure areas and the network control center.

E. Access. Upon prior reasonable notice to the parties
reasonably designated by Tenant except for normal cleanup or in case of
emergency, to have access to inspect the Premises, and to perform its
obligations, or make repairs, alterations, additions or improvements, as
permitted by this Lease.

F. Preparation for Reoccupancy. To decorate, remodel,
repair, alter or otherwise prepare the Premises for reoccupancy at any time
after Tenant abandons the Premises without payment of Rent, without relieving
Tenant of any obligation to pay Rent.

G. Heavy Articles. To approve the weight, size,
placement and time and manner of movement within the Building of any safe,
central filing system or other heavy article of Tenant's property. Tenant
shall move its property entirely at its own risk.

H. Show Premises. To show the Premises to prospective
purchasers, tenants, brokers, lenders, investors, rating agencies or others at
any reasonable time (except Landlord may only show the Premises to prospective
tenants and brokers if Tenant does not exercise its option to renew), provided
that Landlord gives prior reasonable notice to the parties reasonably
designated by Tenant and does not materially interfere with Tenant's use of the
Premises.

I. Use of Lockbox. To designate a lockbox collection
agent for collections of amounts due Landlord. In that case, the date of
payment of Rent or other sums shall be the date of the agent's receipt of such
payment or the date of actual collection if payment is made in the form of a
negotiable instrument thereafter dishonored upon presentment. However,
Landlord may reject any payment for all purposes as of the date of receipt or
actual collection by mailing to Tenant within 21 day after such receipt or
collection a check equal to the amount sent by Tenant.

J. Repairs and Alterations. Upon first notifying Tenant
in writing as to the location and duration of the project, obtaining Tenant's
reasonable approval to make repairs or alterations to the Project and in doing
so transport any required material through the Premises, to close entrances,
doors, corridors, elevators and other facilities in the Project, to open any
ceiling in the Premises, or to temporarily suspend services or use of common
areas

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in the Building, provided that Tenant shall have the right to cause Landlord
to reasonably reschedule any non-emergency work. Landlord may perform any such
repairs or alterations during ordinary business hours, except that Tenant may
require any Work in the Premises to be done after business hours if Tenant pays
Landlord for overtime and any other expenses incurred. Landlord may do or
permit any work on any nearby building, land, street, alley or way. All such
work conducted by Landlord shall be done in such a manner as to minimize any
material interference to Tenant's business.

K. Landlord's Agents. If Tenant is in default under
this Lease beyond any applicable cure periods, possession of Tenant's funds or
negotiation of Tenant's negotiable instrument by any of Landlord's agents shall
not waive any breach by Tenant or any remedies of Landlord under this Lease.

L. Building Services. To install, use and maintain
through the Premises, pipes, conduits, wires and ducts serving the Building,
provided that such installation, use and maintenance does not unreasonably
interfere with Tenant's use of the Premises.

M. Other Actions. To take any other action which
Landlord deems reasonable in connection with the operation, maintenance or
preservation of the Building, provided however that all such actions shall be
done ins such a manner so as to minimize any material interference with
Tenant's business.

12. Tenant's Default.

Any of the following shall constitute a default by Tenant:

A. Rent Default. Tenant fails to pay either (a) any
Base Rent when due, and in the case of only the first two (2) failures in any
twelve consecutive months, either failure is not cured by the later of three
(3) business days after written notice to Tenant or (b) any Additional Rent
after the expiration of thirty days written demand by Landlord, and in the case
of only the first two (2) failures in any twelve consecutive months, either
failure is not cured by the later of three (3) business days after written
notice to Tenant;

B. Assignment/Sublease or Hazardous Substances Default.
Tenant defaults in its obligations under Section 17 Assignment and Sublease or
Section 28 Hazardous Substances;

C. Other Performance Default. Tenant fails to perform
any other obligation to Landlord under this Lease, and this failure continues
for ten (10) days after written notice from Landlord, except that if Tenant
begins to cure its failure within the ten (10) day period but cannot reasonably
complete its cure within such period, then, so long as Tenant continues to
diligently attempt to cure its failure, the ten (10) day period shall be
extended to the duration of time as is reasonably necessary to complete the
cure;

D. Credit Default. One of the following credit defaults
occurs:

(1) Tenant commences any proceeding under any law
relating to bankruptcy, insolvency, reorganization or relief of debts, or seeks
appointment of a receiver, trustee, custodian or other similar official for the
Tenant or for any substantial part of its property, or any such proceeding is
commenced against Tenant and either remains undismissed for a period of thirty
days or results in the entry of an order for relief against Tenant which is not
fully stayed within seven days after entry;

(2) Tenant becomes insolvent or bankrupt, does
not generally pay its debts as they become due, or admits in writing its
inability to pay its debts, or makes a general assignment for the benefit of
creditors;

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(3) Any third party obtains a levy or attachment
under process of law against Tenant's leasehold interest.

E. Vacation or Abandonment Default. Tenant vacates or
abandons a majority of the Premises and is simultaneously in default under A,
B, C and/or D above.

13. Landlord Remedies.

A. Termination of Lease or Possession. If Tenant
defaults, Landlord may elect by notice to Tenant either to terminate this Lease
or to terminate Tenant's possession of the Premises without terminating this
Lease. In either case, Tenant shall immediately vacate the Premises and
deliver possession to Landlord, and Landlord may repossess the Premises and
may, at Tenant's sole cost, remove any of Tenant's signs and any of its other
property, without relinquishing its right to receive Rent or any other right
against Tenant.

B. Lease Termination Damages. If Landlord terminates
the Lease, Tenant shall pay to Landlord all Rent due on or before the date of
termination, plus Landlord's reasonable estimate of the aggregate Rent that
would have been payable from the date of termination through the Termination
Date, reduced by the rental value of the Premises calculated as of the date of
termination for the same period, taking into account reletting expenses and
market concessions, both discounted to present value at the rate of five
percent (5%) per annum. If Landlord shall relet any part of the Premises for
any part of such period before such present value amount shall have been paid
by Tenant or finally determined by a court, then the amount of Rent payable
pursuant to such reletting (taking into account any concessions) shall be
deemed to be the reasonable rental value for that portion of the Premises relet
during the period of the reletting.

C. Possession Termination Damages. If Landlord
terminates Tenant's right to possession without terminating the Lease and
Landlord takes possession of the Premises itself, Landlord may relet any part
of the Premises for such Rent, for such time, and upon such terms as Landlord
in it sole discretion shall determine, without any obligation to do so prior to
renting other vacant areas in the Building. Any proceeds from reletting the
Premises shall first be applied to the expenses of reletting, including
redecoration, repair, alteration, advertising, brokerage, legal, and other
reasonably necessary expenses. If the reletting proceeds after payment of
expenses are insufficient to pay the full amount of Rent under this Lease,
Tenant shall pay such deficiency to Landlord monthly upon demand as it becomes
due. Any excess proceeds shall be retained by Landlord.

D. Landlord's Remedies Cumulative. All of Landlord's
remedies under this Lease shall be in addition to all other remedies Landlord
may have at law or in equity. Waiver by Landlord of any breach of any
obligation by Tenant shall be effective only if it is in writing, and shall not
be deemed a waiver of any other breach, or any subsequent breach of the same
obligation. Landlord's acceptance of payment by Tenant shall not constitute a
waiver of any breach by Tenant, and if the acceptance occurs after Landlord's
notice to Tenant, or termination of the Lease or of Tenant's right to
possession, the acceptance shall not affect such notice or termination.
Acceptance of payment by Landlord after commencement of a legal proceeding or
final judgment shall not affect such proceeding or judgment. Landlord may
advance such monies and take such other actions for Tenant's account as
reasonably may be required to cure or mitigate any default by Tenant. Tenant
shall immediately reimburse Landlord for any such advance, and such sums shall
bear interest at the default interest rate until paid. Section 26(Y) of this
Lease shall not apply to this Section 13 and Landlord's right to exercise (or
not exercise) any and/or all remedies shall be in Landlord's sole and absolute
discretion.

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E. WAIVER OF TRIAL BY JURY. EACH PARTY WAIVES TRIAL BY
JURY IN THE EVENT OF ANY LEGAL PROCEEDING BROUGHT BY THE OTHER IN CONNECTION
WITH THIS LEASE. EACH PARTY SHALL BRING ANY ACTION AGAINST THE OTHER IN
CONNECTION WITH THIS LEASE IN A FEDERAL OR STATE COURT LOCATED IN TRAVIS
COUNTY, TEXAS, CONSENTS TO THE JURISDICTION OF SUCH COURTS, AND WAIVES ANY
RIGHT TO HAVE ANY PROCEEDING TRANSFERRED FROM SUCH COURTS ON THE GROUND OF
IMPROPER VENUE OR INCONVENIENT FORUM.

F. Litigation Costs. In the event litigation is filed
regarding or relating to this Lease which results in a judgment, the
non-prevailing party shall pay the prevailing party's reasonable attorneys'
fees and other costs in enforcing this Lease.

14. Surrender. Upon termination of this lease or Tenant's right
to possession, Tenant shall return the premises to Landlord in good order and
condition, ordinary wear and fire and other casualty damage excepted. If
Landlord requires Tenant to remove any alterations in accordance with Section 5
hereof, then Tenant shall remove the alterations in a good and workmanlike
manner and restore the Premises to its condition prior to their installation,
loss or damage caused by the elements and normal wear and tear excepted.

15. Holdover. If Tenant retains possession of any part of the
Premises after the Term, Tenant shall become a month-to-month tenant for the
entire Premises (or less than the entire Premises subject to Landlord approval,
which approval is in Landlord's absolute and sole discretion), upon all of the
terms of this Lease as might be applicable to such month-to-month tenancy,
except that Tenant shall pay all Operating Cost Share Rent, Tax Share Rent and
Base Rent at 100% of the last month's Base Rent for one month and thereafter at
120% of the Base Rent in effect during the last month of the Term, if with
Landlord's written consent (which consent is in Landlord's sole and absolute
discretion), or 150% of the Base Rent in effect during the last month of the
Term, if without Landlord's written consent, computed on a monthly basis for
each full or partial month Tenant remains in possession. Any amounts owing by
Tenant pursuant to this Section 15 shall be prorated based on any portion of
the premises not occupied by Tenant which has been leased and occupied by
another tenant for the conduct of its business. Tenant shall also pay Landlord
all of Landlord's direct and consequential damages. No acceptance of Rent or
other payments by Landlord under these holdover provisions shall operate as a
waiver of Landlord's right to regain possession or any other of Landlord's
remedies.

16. Subordination to Ground Leases and Mortgages.

A. Subordination. Provided that Tenant is provided a
Non-Disturbance Agreement in a form reasonably satisfactory to Tenant, this
Lease shall be subordinate to any present or future ground lease or mortgage
respecting the Project, and any amendments to such ground lease or mortgage, at
the election of the ground lessor or mortgagee as the case may be. If the
Lease is subordinate to any mortgages or other encumbrances upon the execution
hereof, Landlord shall deliver to Tenant prior to the Commencement Date a
Non-Disturbance Agreement from the holders of any such superior mortgages or
encumbrances in a form reasonably satisfactory to Tenant.

B. Termination of Ground Lease or Foreclosure of
Mortgage. If any ground lease is terminated or mortgage foreclosed or deed in
lieu of foreclosure given and the ground lessor, mortgagee, or purchaser at a
foreclosure sale shall thereby become the owner of the Project, Tenant shall
attorn to such ground lessor or mortgagee or purchaser without any deduction or
set off by Tenant, and this Lease shall continue in effect as a direct lease
between Tenant and such ground lessor, mortgagee or purchaser. The ground
lessor or mortgagee or purchaser shall be liable as Landlord only during the
time such ground lessor or mortgagee or purchaser is the owner of the Project.
At the request of Landlord, ground lessor

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or mortgagee, Tenant shall execute and deliver within ten (10) days of the
request any document furnished by the requesting party to evidence Tenant's
agreement to attorn.

C. Security Deposit. Any ground lessor or mortgagee
shall be responsible for the return of any security deposit by Tenant only to
the extent the security deposit is received by such ground lessor or mortgagee.

D. Notice and Right to Cure. The Project is subject to
any ground lease and mortgage identified with name and address of ground lessor
or mortgagee in Appendix D to this Lease (as the same may be amended from time
to time by written notice to Tenant). Tenant agrees to send by registered or
certified mail to any ground lessor or mortgagee identified either in such
Appendix or in any later notice from Landlord to Tenant a copy of any notice of
default sent by Tenant to Landlord. If Landlord fails to cure such default
within the required time period under this Lease, but ground lessor or
mortgagee begins to cure within ten (10) days after such period and proceeds
diligently to complete such cure, then ground lessor or mortgagee shall have
such additional time as is necessary to complete such cure, including any time
necessary to obtain possession if possession is necessary to cure, and Tenant
shall not begin to enforce its remedies so long as the cure is being diligently
pursued.

E. Definitions. As used in this Section 16, "mortgage"
shall include "trust deed" and "mortgagee" shall include "trustee", "mortgagee"
shall include the mortgagee of any ground lessee, and "ground lessor",
"mortgagee", and "purchaser at a foreclosure sale" shall include, in each case,
all of its successors and assigns, however remote.

17. Assignment and Sublease.

A. In General. Tenant shall not, without the prior
consent of Landlord in each case, (i) make or allow any assignment or transfer,
by operation of law or otherwise, of any part of Tenant's interest in this
Lease, (ii) grant or allow any lien or encumbrance, by operation of law or
otherwise, upon any part of Tenant's interest in this Lease, (iii) sublet any
part of the premises, or (iv) permit anyone other than Tenant and its employees
to occupy any part of the premises. Tenant shall remain primarily liable for
all of its obligations under this Lease, notwithstanding any assignment or
transfer. No consent granted by Landlord shall be deemed to be a consent to
any subsequent assignment or transfer, lien or encumbrance, sublease or
occupancy. Tenant shall pay all of Landlord's reasonable attorneys' fees and
other expenses incurred in connection with any subsequent assignment or
transfer, lien or encumbrance, sublease or occupancy. Tenant shall pay all of
Landlord's reasonable attorneys' fees and other expenses incurred in connection
with any consent requested by Tenant or in reviewing any proposed assignment or
subletting, not to exceed $1,000.00 in each instance. Any assignment or
transfer, grant of lien or encumbrance, or sublease or occupancy without
Landlord's prior written consent shall be void. If Tenant shall assign this
Lease or sublet the premises in its entirety any rights of Tenant to renew this
Lease, extend the Term or to lease additional space in the Project will and
cannot be transferred to the assignee or subtenant, all such rights being
personal to the Tenant named herein.

B. Landlord's Consent. Landlord will not unreasonably
withhold, delay or condition its consent to any proposed assignment or
subletting. It shall be reasonable for Landlord to withhold its consent to any
assignment or sublease if (i) Tenant is in default under this Lease, (ii) the
proposed assignee or sublessee is a tenant in the Project or an affiliate of
such a tenant or a party that Landlord has identified as a prospective tenant
in the Project, (iii) the financial responsibility, nature of business, and
character of the proposed assignee or subtenant are not all reasonably
satisfactory to Landlord, (iv) in the reasonable judgment of Landlord the
purpose for which the assignee or subtenant intends to use the Premises (or a
portion thereof) is not in keeping with Landlord's standards for the Building
or are in violation of the terms of this Lease or any other leases in the
Project, (v) the proposed

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<PAGE> 23
assignee or subtenant is a government entity, or (vi) the proposed assignment
is for less than the entire Premises or for less than the remaining Term of the
Lease. The foregoing shall not exclude any other reasonable basis for Landlord
to withhold its consent.

C. Procedure. Tenant shall notify Landlord of any
proposed assignment or sublease at least fifteen (15) days prior to its
proposed effective date. The notice shall include the name and address of the
proposed assignee or subtenant, its corporate affiliates in the case of a
corporation and its partners in a case of a partnership, a proposed copy of the
proposed assignment or sublease, and reasonably sufficient information to
permit Landlord to determine the financial responsibility and character of the
proposed assignee or subtenant. As a condition to any effective assignment of
this Lease, the assignee shall execute and deliver in form satisfactory to
Landlord at least ten (10) days prior to the effective date of the assignment,
an assumption of all of the obligations of Tenant under this Lease. As a
condition to any effective sublease, subtenant shall execute and deliver in
form satisfactory to Landlord at least five (5) days prior to the effective
date of the sublease, an agreement to comply with all of Tenant's obligations
under this Lease, prorated as to the sublease terms, and at Landlord's option,
an agreement (except for the economic obligations which subtenant will
undertake directly to Tenant) to attorn to Landlord under the terms of the
sublease in the event this Lease terminates before the sublease expires.

D. Change of Ownership. If no default on the part of
Tenant has occurred and is continuing, Tenant may assign this Lease (including
all renewal, preferential and expansion rights contained in this Lease) to an
entity into which Tenant is merged or consolidated or to an entity to which
substantially all of Tenant's assets are transferred, without first obtaining
Landlord's written consent. If Tenant notifies Landlord at least ten (10)
business days prior to the proposed transaction, providing information
satisfactory to Landlord in order to determine the net worth both of the
successor entity and of Tenant immediately prior to such assignment, and
showing the net worth of the successor to be at least equal to the net worth of
Tenant.

E. Excess Payments. If Tenant shall assign this Lease
or sublet any part of the Premises for consideration in excess of the pro-rata
portion of Rent applicable to the space subject to the assignment or sublet,
then Tenant shall pay to Landlord as Additional Rent 50% of any such excess
immediately upon receipt.

18. Conveyance by Landlord. If Landlord shall at any time
transfer its interest in the Project or this Lease, Landlord shall be released
of any obligations occurring after such transfer, except the obligation to
return to Tenant any security deposit not delivered to its transferee, and
Tenant shall look solely to Landlord's successors for performance of such
obligations. This Lease shall not be affected by any such transfer.

19. Estoppel Certificate. Each party shall, within ten (10)
business days of receiving a request from the other party, execute, acknowledge
in recordable form, and deliver to the other party or its designee a
certificate stating, subject to a specific statement of any applicable
exceptions, that the Lease as amended to date is in full force and effect, that
the Tenant is paying Rent and other charges on a current basis, and that to the
best of the knowledge of the certifying party, other than exceptions as noted,
the other party has committed no uncured defaults and has no offsets or claims.
The certifying party may also be required to state the date of commencement of
payment of Rent, the Commencement Date, the Termination Date, the Base Rent,
the current Operating Cost Share Rent and Tax Share Rent estimates, the status
of any improvements required to be completed by Landlord, the amount of any
security deposit, and such other matters as may be reasonably requested.
Failure to deliver such statement within the time required set forth above and
within the expiration of three (3) business days after a second written request
shall be conclusive evidence against the non-certifying party that this Lease,
with any amendments identified by the requesting party, is in full force and
effect, that there are no uncured defaults by the requesting party, that not
more than one month's Rent has been paid in advance, that the non-certifying
party has not

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<PAGE> 24

paid any security deposit except as provided in this Lease, and that the
non-certifying party has no claims or offsets against the requesting party.

20. Security Deposit. Tenant shall deposit with Landlord on the
date of this Lease, security for the performance of all of its obligations in
the amount set forth on the Schedule. If Tenant defaults under this Lease,
Landlord may use any part of the Security Deposit to make any defaulted
payment, to pay for Landlord's cure of any defaulted obligation, or to
compensate Landlord for any loss or damage resulting from any default. To the
extent any portion of the deposit is used, Tenant shall within five (5) days
after demand from Landlord restore the deposit to its full amount. Landlord
may keep the Security Deposit in its general funds and shall not be required to
pay interest to Tenant on the deposit amount. If Tenant shall perform all of
its obligations under this Lease and return the Premises to Landlord at the end
of the Term, Landlord shall return all of the remaining Security Deposit to
Tenant. The Security Deposit shall not serve as an advance payment of Rent or
a measure of Landlord's damages for any default under this Lease.

If Landlord transfers its interest in the Project or this Lease,
Landlord may transfer the Security Deposit to its transferee. Upon such
transfer and acknowledgement of receipt from such transferee, Landlord shall
have no further obligation to return the Security Deposit to Tenant, and
Tenant's right to the return of the Security Deposit shall apply solely against
Landlord's transferee.

21. Force Majeure. Neither Landlord nor Tenant shall be in
default under this Lease to the extent either or both is unable to perform
either of its respective obligations on account of any strike or labor problem,
energy shortage, governmental pre-emption or prescription, national emergency,
or any other cause of any kind beyond the reasonable control of Landlord
("Force Majeure"), except for Tenant's obligation to pay Rent hereunder.

22. Tenant's Personal Property and Fixtures. Deleted.

23. Notices. All notices, consents, approvals and similar
communications to be given by one party to the other under this Lease, shall be
given in writing, mailed or personally delivered as follows:

A. Landlord. To Landlord as follows:

CarrAmerica Realty, L.P. t/a City View Centre
ATTN: Market Officer
First State Bank Building
400 W. 15th Street, Suite #1400
Austin, Texas 78701
512-472-5511 FAX

with a copy to:

CarrAmerica Realty Corporation
1700 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attn: Lease Administration

or to such other person at such other address as Landlord may designate by
notice to Tenant.

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<PAGE> 25
B. Tenant. To Tenant as follows:

1. Prior to Lease Commencement:

IXC Communications, Inc.
5000 Plaza on the Lake, Suite 200
Austin, Texas 78746
ATTN: General Counsel
w/copies to the Chief Financial Officer

2. After Lease Commencement:

IXC Communications, Inc.
1120 S. Capital of Texas Highway
Austin, Texas 78746
ATTN: General Counsel
w/copies to the Chief Financial Officer

or to such other person at such other address as Tenant may designate by notice
to Landlord.

Mailed notices shall be sent by United States certified or registered
mail, or by a reputable national overnight courier service, postage prepaid.
Mailed notices shall be deemed to have been given on the earlier of actual
delivery or three (3) business days after posting in the United States mail in
the case of registered or certified mail, and upon delivery in the case of
overnight courier.

24. Quiet Possession. So long as Tenant shall perform all of its
obligations under this Lease, Tenant shall enjoy peaceful and quiet possession
of the Premises against any party claiming through the Landlord.

25. Real Estate Broker. Tenant represents to Landlord that Tenant
has not dealt with any real estate broker with respect to this Lease except for
any Tenant Real Estate Broker listed in the Schedule, and no other broker is in
any way entitled to any broker's fees or other payment in connection with this
Lease. Tenant shall indemnify and defend Landlord against any claims by any
other broker or third party for any payment of any kind in connection with this
Lease. Landlord agrees to compensate Tenant Real Estate Broker listed in the
Schedule pursuant to a written commission agreement executed between Landlord
and such Tenant Real Estate Broker.

26. MISCELLANEOUS.

A. Successors and Assigns. Subject to the limits on
Tenant's assignment contained in Section 17, the provisions of this Lease shall
be binding upon and inure to the benefit of all successors and assigns of
Landlord and Tenant.

B. Date Payments Are Due. Except for payments to be
made by Tenant under this Lease which are due upon demand, Tenant shall pay to
Landlord any amount for which Landlord renders a statement of account within
thirty (30) days of Tenant's receipt of Landlord's statement.

C. Meaning of "Landlord", "Re-Entry", "including" and
"Affiliate". The term "Landlord" means only the owner of the Project and the
lessor's interest in this Lease from time to time. The words "re-entry" and
"re-enter" are not restricted to their technical legal meaning. The words
"including" and similar words shall mean "without limitation." The word
"affiliate" shall mean a person or entity controlling, controlled by or under
common control with the applicable entity. "Control" shall mean the power
directly or

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<PAGE> 26

indirectly, by contract or otherwise, to direct the management and policies of
the applicable entity.

D. Time of the Essence. Time is of the essence of each
provision of this Lease.

E. No Option. This document shall not be effective for
any purpose until it has been executed and delivered by both parties; execution
and delivery by one party shall not create any option or other right in the
other party.

F. Severability. The unenforceability of any provision
of this Lease shall not affect any other provision.

G. Governing Law. This Lease shall be governed in all
respects by the laws of the state of Texas.

H. Lease Modification. Tenant agrees to modify this
Lease in any way requested by a mortgagee which does not cause increased
expense to Tenant or otherwise materially adversely affect Tenant's interests
under this Lease or increase Tenant's obligations hereunder.

I. No Oral Modification. No modification of this Lease
shall be effective unless it is a written modification signed by both parties.

J. Right to Cure. If Landlord shall default in the
performance of any of its obligations under this Lease unless Landlord's
violation or failure to perform any of those obligations continues for a period
of 10 days after notice thereof has been delivered by Tenant to Landlord or, in
cases where the violation or failure to perform cannot be corrected within 10
days, Landlord does not begin to correct the violation or failure to perform to
completion within a reasonable time after receiving Tenant's notice, Tenant
may, without prejudice to any of its rights under this Lease or in law or in
equity, withhold payment of the Rent due and to accrue hereunder, up to a
maximum of the lessor of: (a) one month of the then current Rent under this
Lease, or (b) the extent necessary to cover the costs estimated by Tenant to
cure such default, so long as Landlord remains in default. Pursuit of the
foregoing remedies shall not preclude pursuit of any of the other remedies
herein provided or any other remedies provided by law or in equity, nor shall
pursuit of any remedy herein provided constitute an election of remedies or a
forfeiture or waiver of any damages accruing to Tenant by reason of the
violation of any of the terms, provisions and covenants herein contained.

Landlord may cure any default by Tenant; any expenses incurred
on behalf of Tenant or as a direct result of such breach shall become
Additional Rent due from Tenant on demand by Landlord.

K. Captions. The captions used in this Lease shall have
no effect on the construction of this Lease.

L. Authority. Landlord and Tenant each represents to
the other that it has full power and authority to execute and perform this
Lease.

M. Landlord's Enforcement of Remedies. Landlord may
enforce any of its remedies under this Lease either in its own name or through
an agent.

N. Entire Agreement. This Lease, together with all
Appendices, constitutes the entire agreement between the parties. No
representations or agreements of any kind have been made by either party which
are not contained in this Lease.

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<PAGE> 27

O. Landlord's Title. Landlord's title shall always be
paramount to the interest of the Tenant, and nothing in this Lease shall
empower Tenant to do anything which might in any way impair Landlord's title.

P. Light and Air Rights. Landlord does not grant in
this Lease any rights to light and air in connection with Project. Landlord
reserves to itself, the Land, the Building below the improved floor of each
floor of the Premises, the Building above the ceiling of each floor of the
Premises, the exterior of the Premises and the areas on the same floor outside
the Premises, along with the areas within the Premises required for the
installation and repair of utility lines and other items required to serve
other tenants of the Building.

Q. Singular and Plural. Wherever appropriate in this
Lease, a singular term shall be construed to mean the plural where necessary,
and a plural term the singular. For example, if at any time two parties shall
constitute Landlord or Tenant, then the relevant term shall refer to both
parties together.

R. No Recording by Tenant. Tenant shall not record in
any public records any memorandum or any portion of this Lease.

S. Exclusivity. Landlord does not grant to Tenant in
this Lease any exclusive right except the right to occupy its Premises.

T. Construction. The rule of construction that
ambiguities are resolved against the drafting party shall not apply to this
Lease. The Lease shall be construed to effectuate the normal and reasonable
expectations of a commercially sophisticated landlord and tenant.

U. Survival. All obligations of Landlord and Tenant
under this Lease shall survive the termination of this Lease.

V. Rent Not Based on Income. No rent or other payment
in respect of the Premises shall be based in any way upon net income or profits
from the Premises. Tenant may not enter into or permit any sublease or license
or other agreement in connection with the Premises which provides for a rental
or other payment based on net income or profit.

W. Building Manager and Service Providers. Landlord may
perform any of its obligations under this Lease through its employees or third
parties hired by the Landlord.

X. Late Charge and Interest on Late Payments. Without
limiting the provisions of Section 12A, if Tenant fails to pay any installment
of Rent or other charge to be paid by Tenant pursuant to this Lease within five
(5) business days after written notice by Landlord that the same is past due
and payable, then Tenant shall pay a late charge equal to $250. In addition,
interest shall be paid by Tenant to Landlord on any late payments of Rent from
the date due until paid at the rate provided in Section 2D(2), except to the
extent that Landlord is required by this Lease to provide written notice of
such non-payment, in which event such interest shall accrue from the date such
notice is provided. Such late charge and interest shall constitute additional
Rent due and payable by Tenant to Landlord upon the date of payment of the
delinquent payment referenced above.

Y. Approvals. Unless expressly stated otherwise in this
Lease, any approval or consent requested by either Landlord or Tenant from the
other shall not be unreasonably withheld or delayed. Furthermore, except to
the extent any right or action is expressly granted herein, neither Landlord
nor Tenant shall take any action which is likely to frustrate the other's
reasonable expectations concerning the benefits to be enjoyed under this Lease.

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<PAGE> 28

27. Unrelated Business Income. If Landlord is advised by its
counsel at any time that any part of the payments by Tenant to Landlord under
this Lease may be characterized as unrelated business income under the United
States Internal Revenue Code and its regulations, then Tenant shall enter into
any amendment proposed by Landlord to avoid such income, so long as the
amendment does not require Tenant to make more payments or accept fewer
services from Landlord, than this Lease provides.

28. Hazardous Substances. Other than small amounts of office
supplies (i.e., toner), cleaning and janitorial items used in the ordinary
course of Tenant's business, Tenant shall not cause or permit any Hazardous
Substances to be brought upon, produced, stored, used, discharged or disposed
of in or near the Project unless Landlord has consented to such storage or use
in its sole discretion. "Hazardous Substances" include those hazardous
substances described in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et
seq., any other applicable federal, state or local law, and the regulations
adopted under these laws. If any lender or governmental agency shall require
testing for Hazardous Substances in the Premises, Tenant shall pay for such
testing.

Landlord represents and warrants that the Premises will be constructed
free of all Hazardous Substances, and that Premises shall be maintained in
compliance with all environmental laws, rules and regulations.

If at any time during the Term or any renewals thereof, any Hazardous
Substances are found to be present in the Premises, the Building, the common
areas or on the land which were not caused or permitted by Tenant, Landlord
will take all steps necessary to cure all violations in compliance with all
applicable laws, rules, regulations and guidelines at Landlord's sole cost and
at no cost to Tenant as more particularly set forth in the Lease and which may
include the commencement of an operations and maintenance program if
non-friable asbestos is ever discovered to be present in the Premises.

29. Exculpation. Landlord shall have no personal liability under
this Lease; its liability shall be limited to its interest in the Project
and/or any Security Deposit to the extent Landlord does not transfer it to any
purchaser of the Project, and shall not extend to any other property or assets
of the Landlord. In no event shall any officer, director, employee, agent,
shareholder, partner, member or beneficiary of Landlord be personally liable
for any of Landlord's obligations hereunder.

IN WITNESS WHEREOF, the parties hereto have executed this Lease.

TENANT: LANDLORD:

IXC COMMUNICATIONS, INC., CARRAMERICA REALTY L.P.,
a Delaware Corporation t/a CITY VIEW CENTRE

By: /s/ RALPH J. SWETT By: CARRAMERICA REALTY G.P.
---------------------------- HOLDINGS, INC., a
Name: Ralph J. Swett Delaware Corporation,
Title: Chairman of the Board its General Partner

By: /s/ PHILIP L. HAWKINS
------------------------------
Name: Philip L. Hawkins
Title: Managing Director

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<PAGE> 29
APPENDIX A

PLAN OF THE PREMISES

(attach floor plans depicting the Premises)

APPENDIX A
Page 1 of 1

<PAGE> 30
APPENDIX B

RULES AND REGULATIONS

1. Tenant shall not place anything, or allow anything to be
placed near the glass of any window, door, partition or wall which may, in
Landlord's reasonable judgment, appear unsightly from outside of the Project.

2. The Project directory shall be available to Tenant solely to
display names and their location in the Project, which display shall be as
directed by Landlord.

3. The sidewalks, halls, passages, exits, entrances, elevators
and stairways shall not be obstructed by Tenant or used by Tenant for any
purposes other than for ingress to end and egress from the Premises. Tenant
shall lend its full cooperation to keep such areas free from all obstruction
and in a clean and sightly condition and shall move all supplies, furniture and
equipment as soon as received directly to the Premises and move all such items
and waste being taken from the Premises (other than waste customarily removed
by employees of the Building) directly to the shipping platform at or about the
time arranged for removal therefrom. The halls, passages, exits, entrances,
elevators, stairways, balconies and roof are not for the use of the general
public and Landlord shall, in all cases, retain the right to control and
prevent access thereto by all persons whose presence in the judgment of
Landlord, reasonably exercised, shall be prejudicial to the safety, character,
reputation and interests of the Project.

4. The toilet rooms, urinals, wash bowls and other apparatuses
shall not be used for any purposes other than that for which they were
constructed, and no foreign substance of any kind whatsoever shall be thrown
therein, and to the extent caused by Tenant or its employees or invitees, the
expense of any breakage, stoppage or damage resulting from the violation of
this rule shall be borne by Tenant.

5. Tenant shall not cause any unnecessary janitorial labor or
services by reason of Tenant's carelessness or indifference in the preservation
of good order and cleanliness.

6. Tenant shall not install or operate any refrigerating, heating
or air conditioning apparatus, or carry on any mechanical business without the
prior written consent of Landlord, which consent shall not be unreasonably
withheld; use the Premises for housing, lodging or sleeping purposes; or permit
preparation or warming of food in the Premises (warming of coffee, beverages,
and individual meals with employees and guests excepted). Tenant shall not
occupy or use the Premises or permit the Premises to be occupied or used for
any purpose, act or thing which is in violation of any Governmental Requirement
or which may be dangerous to persons or property.

7. Tenant shall not bring upon, use or keep in the Premises or
the Project any kerosene, gasoline or inflammable or combustible fluid or
material, or any other articles deemed hazardous to persons or property, or use
any method of heating or air conditioning other than that supplied by Landlord.

8. Landlord shall have sole power to direct electricians as to
where and how telephone and other wires are to be introduced. No boring or
cutting for wires is to be allowed without the consent of Landlord. The
location of telephones, call boxes and other office equipment affixed to the
Premises shall be subject to the approval of Landlord, which approval shall not
be unreasonably withheld or delayed.

APPENDIX B
Page 1 of 3
<PAGE> 31

9. Other than in Tenant's secure areas or the network control
center, no additional locks shall be placed upon any doors, windows or transoms
in or to the Premises. Other than in Tenant's secure areas or the network
control center, Tenant shall not change existing locks or the mechanism
thereof. Upon termination of the lease, Tenant shall deliver to Landlord all
keys and passes for offices, rooms, parking lot and toilet rooms which shall
have been furnished Tenant by Landlord.

In the event of the loss of keys so furnished, Tenant shall
pay Landlord's reasonable cost therefor. Tenant shall not make, or cause to be
made, any such keys and shall order all such keys solely from Landlord and
shall pay Landlord for any keys in addition to the two sets of keys originally
furnished by Landlord for each lock.

10. Tenant shall not install linoleum, tile, carpet or other floor
covering so that the same shall be affixed to the floor of the Premises in any
manner except as approved by Landlord, which approval shall not be unreasonably
withheld or delayed.

11. Tenant shall not take or permit to be taken in or out of other
entrances of the Building, or take or permit on other elevators, any item
normally taken in or out through the trucking concourse or service doors or in
or on freight elevators.

12. Tenant shall cooperate fully with Landlord to assure the most
effective operation of the Premises' or the Project's heating and air
conditioning, and shall refrain from attempting to adjust any controls, other
than room thermostats installed for Tenant's use. Tenant shall keep corridor
doors closed.

13. Peddlers, solicitors and beggars shall be reported to the
office of the Project or as Landlord otherwise requests.

14. No bicycle or other vehicle and no animals or pets shall be
allowed in the Premises, halls, freight docks, or any other parts of the
Building except that blind persons may be accompanied by "seeing eye" dogs.
Tenant shall not make or permit any noise, vibration or odor to emanate from
the Premises, or do anything therein tending to create, or maintain, a
nuisance, or do any act tending to injure the reputation of the Building.

15. Tenant acknowledges that Building security problems may occur
which may require the employment of extreme security measures in the day-to-day
operation of the Project.

Accordingly:

(a) Landlord may, at any time, or from time to time, or
for regularly scheduled time periods, as deemed advisable by Landlord and/or
its agents, in their sole discretion, require that persons entering or leaving
the Project or the Property identify themselves to watchmen or other employees
designated by Landlord, by registration, identification or otherwise.

(b) Tenant agrees that it and its employees will
cooperate fully with Project employees in the implementation of any and all
security procedures.

(c) Such security measures shall be the sole
responsibility of Landlord, and Tenant shall have no liability for any action
taken by Landlord in connection therewith, it being understood that Landlord is
not required to provide any security procedures and shall have no liability for
such security procedures or the lack thereof.

16. Tenant shall not do or permit the manufacture, sale, purchase,
of any fermented, intoxicating or alcoholic beverages without obtaining written
consent of Landlord.

APPENDIX B
Page 2 of 3
<PAGE> 32

17. Tenant shall not disturb the quiet enjoyment of any other
tenant.

18. Tenant shall not provide any janitorial services or cleaning
without Landlord's written consent which shall not be unreasonably withheld.

19. No equipment, mechanical ventilators, awnings, special shades
or other forms of window covering shall be permitted either inside or outside
the windows of the Premises without the prior written consent of Landlord, and
then only at the expense and risk of Tenant, and they shall be of such shape,
color, material, quality, design and make as may be approved by Landlord.

20. Tenant shall not during the term of this Lease canvas or
solicit other tenants of the Building for any purpose.

21. Tenant shall not exhibit, sell or offer for sale, Rent or
exchange in the Premises or at the Project any article, thing or service,
except those ordinarily embraced within the use of the Premises specified in
Section 6 of this Lease, without the prior written consent of Landlord.

22. Tenant shall not overload any floors in the Premises or any
public corridors or elevators in the Building.

23. Except for the provisions of Article 5, Tenant shall not do
any painting in the Premises, or mark, paint, cut or drill into, drive nails or
screws into, or in any way deface any part of the Premises or the Building,
outside or inside, without the prior written consent of Landlord.

24. Whenever Landlord's consent, approval or satisfaction is
required under these Rules, then unless otherwise stated, any such consent,
approval or satisfaction must be obtained in advance but such consent or
approval will not be unreasonably denied or delayed.

25. Tenant and its employees shall reasonably cooperate in all
fire drills conducted by Landlord in the Building.

APPENDIX B
Page 3 of 3
<PAGE> 33
APPENDIX C

TENANT IMPROVEMENT AGREEMENT

1. Tenant Improvements. The Building core and shell and all common areas
of the Building (the "Base Building") shall be fully built out (including all
men's and women's restrooms on all floors at Landlord's sole cost and expense
with all finishes (including paint and carpet) complete per Landlord's Base
Building plans dated February 16, 1997 (the "Base Building Plans"). Subsequent
revisions to the Base Building Plans are to be submitted to Tenant for its
review and approval, which approval shall not be unreasonably withheld or
delayed. Landlord shall cause to be performed the improvements (the"Tenant
Improvements") in the Premises provided for in the space plans and
specifications prepared by Tenant's architect and agreed to by Landlord and
Tenant (the "Plans"). The Tenant Improvements shall be performed by the
Landlord's Base Building general contractor (the "Contractor") subject to the
fee and general conditions negotiated between Tenant and the Contractor as
described in Appendix C-1. The scope of work and cost will be added to the
existing Base Building contact by change order and will be subject to all terms
and conditions of the Base Building contract. Tenant and Landlord shall mutually
select subcontractors and suppliers for the Tenant Improvements. Tenant shall
have the right to receive copies of bids and proposals; to review and assist in
the value engineering and selection of subcontractors and suppliers in the
Tenant Improvements; and to consult on the construction of the Tenant
Improvements. Tenant shall further have the right to contract directly with
subcontractors and suppliers for specialty equipment not customarily included in
general contracts for tenant improvements. Landlord shall use commercially
reasonable efforts to cause the Tenant Improvements to be Substantially
Completed (as defined below) on or before the Commencement Date specified in the
Schedule to the Lease, subject to Tenant Delay (as defined in Section 3 hereof)
and any Force Majeure (except that weather subject to Tenant Delay (as defined
in Section 3 hereof) and any Force Majeure (except that weather delays shall not
constitute Force Majeure after the Building is "weathered in"). Landlord will
not change any supervisory fee for the Tenant Improvements as hereinafter
defined.

Tenant shall deliver to Landlord for its approval plans and
specifications for any additional Tenant Improvements and/or changes, deletions
and substitutions thereto (the "Change Orders"). Landlord shall have three (3)
business days to review and approve said Change Orders and advise Tenant of the
changes required. Tenant shall revise and redeliver the plans and
specifications to Landlord within five (5) business days of Landlord's advice.
The Contractor will provide to Tenant a cost estimate to complete the Change
Orders, together with any anticipated schedule change and an itemized breakdown
of costs and unit prices within three (3) business days of receipt of such
information. Tenant shall approve or disapprove Contractor's estimates within
three (3) business days of receipt of same. Tenant shall pay for all
preparations and revisions of plans and specifications, and the construction of
Change Orders if the same cause the cost of the Tenant Improvements to exceed
the Landlord Contribution.

2. Landlord's Contribution. Tenant Improvements shall be built
out under the Supervision of the Landlord with Tenant consultation. No fee for
supervision shall be charged against the Landlord's Contribution by Landlord.
The cost to build out the Tenant Improvements shall be at the Landlord's sole
expense up to the amount of $22.00 per SF NRA times the total number of square
feet of net rentable area contained therein based upon such agreed plans and
specifications (the "Landlord's Contribution"). Building Standard items
provided as part of the Base Building and not chargeable against the Landlord
Contribution include:

(a) Ceiling grid and tile--purchased and stocked but not
installed.

APPENDIX C
Page 1 of 5

<PAGE> 34
(b) 2x4 lay in light fixtures at a rate of 1/80 RSF
purchased and stocked but not installed.

(d) HVAC system to include air handlers, internal and
external zones and thermostats. Distribution ductwork and grills are
chargeable to Landlord Contribution.

(e) Mini blinds on exterior windows.

Should Tenant desire to substitute for any of the above items, any other Tenant
Improvements, and/or any common area materials and/or specifications, credit
will be offered provided that such substitutions and requests for credits be
received prior to June 15, 1997. Should such substitutions result in an
increase in the cost of any of the above items, such increase in cost shall be
chargeable to Landlord's Contribution.

If the cost of Tenant Improvements does not exceed the
Landlord's Contribution, the Landlord shall be entitled to retain the savings.
If the cost of Tenant Improvements exceeds the Landlord's Contribution, Tenant
shall pay for such excess costs in monthly progress payments (in accordance
with Section 8 in this Appendix) during the construction period for Tenant
Improvements. Tenant payments hereunder will be subject to customary pay
application, retention and lien waiver provisions.

3. Commencement Date Delay. Commencement date shall be delayed
until the tenant Improvements have been Substantially Completed, as defined
below (the "Completion Date"), except to the extent that any delay which
actually effects the critical path shall be caused by any one or more of the
following (a "Tenant Delay"):

(a) Tenant's request for Change Orders whether or not any
such Change Orders are actually performed; or

(b) Contractor's performance of any Change Orders; or

(c) Tenant's request for materials, finishes or
installations requiring unusually long lead times that were not identified by
Tenant sufficiently early enough to meet the scheduled timetable; or

(d) Tenant delay in making progress payments; or

(e) Tenant's delay in providing, reviewing, revising or
approving plans and specifications beyond the periods set forth herein; or

(f) Tenant's delay in providing pricing set of documents
by August 1, 1997, and compete construction documents suitable for permitting
by July 15, 1997; or

(g) Tenant delays for more than two (2) business days
after receipt of a request for information by Landlord to provide the requested
information; or

(h) Any other act or omission by Tenant, its agents,
contractors or persons employed by any of such persons.

Landlord or Landlord's architect will promptly notify Tenant
of delays.

APPENDIX C
Page 2 of 5

<PAGE> 35
Notwithstanding the foregoing to the Contrary, Tenant shall
have the right to pay premium costs associated with any change order so as to
not cause a schedule delay.

If the Commencement Date is delayed for any reason, then
Landlord shall cause Landlord's Architect to certify the date on which the
Tenant Improvements would have been substantially completed but for such Tenant
Delay, or were in fact completed without any Tenant Delay. Disputes as to the
validity of delays as judged by the Landlord or the Landlord's architect will
be resolved by binding arbitration under the rules, procedures and guidelines
of the American Arbitration Association.

"Substantially Completed" shall mean the date upon which (a)
Landlord has sufficiently completed all Tenant Improvements as shown ont he
Plans (except for minor punch list items), (b) construction progress for the
required work is sufficient to qualify the Premises for issuance of the
Temporary Certificate of Occupancy for permanent occupancy, the Base Condition
(to be defined by the Base Building Plans) is complete and in compliance with
all applicable laws, and all of the Base Building Systems are operational to
the extent necessary to service the Premises for the normal operation of
Tenant's business, (d) Tenant has been provided with the number of parking
privileges and spaces to which it is entitled under the Lease (e) prior to the
date of Substantial Completion, Tenant and its vendors and subcontractors have
been allowed access to the premises (and other required portions of the Base
Building and site) in accordance with this Lease and a mutually agreed Tenant
Improvement Schedule to allow Tenant to install its freestanding work stations,
fixtures, furniture, equipment, telecommunication and computer cabling systems,
satellite dish, backup generator and any other item necessary to the normal
operation of Tenant's business in order to allow Tenant to occupy the Premises
over two (2) consecutive weekends after the Premises are Substantially
Completed.

A "Punch List" of uncompleted items mutually agreed upon by
Landlord and Tenant will be prepared prior to occupancy and mutually agreed
upon by Landlord and Tenant. All items will be corrected or completed within
four weeks after occupancy.

4. Access By Tenant Prior To Commencement of Term. Landlord
shall permit Tenant and its agents to enter the Premises prior to the
Commencement Date to prepare the Premises for Tenant's use and occupancy,
including the installation of equipment, furniture, fixtures and all related
cabling and electrical connections, without charge for the use of any Building
Services (including but not limited to loading dock, parking or freight
elevators). Landlord will make reasonable efforts to substantially complete
and make available the network operations center area for vendor equipment
installation and testing on approximately November 1, 1997. Tenant recognizes
and agrees that Base Building core and shell will not be completed and that
work will be ongoing in the Base Building and on the Land until completion on
or about December 1, 1997. Any permission to enter the Premises constitutes a
license only, conditioned upon Tenant's complying with the following
agreements:

(a) Landlord and Tenant agree to work in harmony and
coordinate a mutually acceptable schedule to satisfy their respective needs
with their respective agents, contractors, workmen, mechanics and suppliers and
with other tenants and occupants of the Building.

(b) Tenant agrees to obtain in advance Landlord's
approval of the contractors proposed to be used by Tenant and depositing with
Landlord in advance of any work (i) security satisfactory to Landlord for the
completion thereof, and (ii) the general contractor's affidavit for the
proposed work and the waivers of lien from the general contractor and all
subcontractor and suppliers of material; and

APPENDIX C
Page 3 of 5
<PAGE> 36
(c) Tenant agrees to furnish Landlord with such insurance
as Landlord may reasonably require against liabilities which may arise out of
such entry.

Landlord shall not be liable in any way for any injury, loss
or damage which may occur to any of Tenant's property or installations in the
Premises prior to the Commencement Date, except in case of Landlord's or
Landlord's general contractor and/or agents of Landlord's gross negligence or
intentional misconduct. Tenant shall protect, defend, indemnify and save
harmless Landlord from all liabilities, costs, damages, fees and expenses
arising out of the activities of Tenant or its agents, contractors, suppliers
or workmen in the Premises or the Building. Any entry and occupation permitted
under this Section shall be governed by Section 5 and all other terms of the
Lease.

5. Delay. In the event the Tenant Improvements are not
Substantially Completed by the Commencement Date of December 1, 1997, or such
later date caused by Force Majeure and/or Tenant Delay as referenced in
Articles 1 and 3 of Appendix C, then Landlord will pay Tenant $3,000 per day
until Tenant Improvements are Substantially Completed.

6. Move-In. Landlord shall arrange for the Premises to be
thoroughly cleaned at Landlord's reasonable cost and expense prior to and
immediately following the Tenant's move into the Premises. Tenant shall be
responsible for removal and disposal of all trash and waste caused by Tenant's
vendors and subcontractors.

7. Contractor Obligations. Any contact with the Contractor shall
require that Contractor comply with the following requirements.

(a) submit payment applications to Landlord and Tenant on
a monthly basis, with the right of both Landlord and Tenant to review each
payment application for conformance of work, review of schedules and values and
work in place;

(b) provide conditional and unconditional lien releases
from any and all subcontractors and vendors in conjunction with the monthly
payment applications;

(c) provide due diligence review and assist Tenant in
reviewing the Plans and existing conditions and provide feedback to Tenant's
architect;

(d) provide Landlord and Tenant copies of all contracts
with subcontractors pertaining to Tenant Improvements or Change Orders;

(e) provide full time supervision for the Project;

(f) take all prudent actions, remedial or otherwise, to
maintain the project schedule;

(g) maintain all industry safety standards and other
reasonable safety precautions in accordance with applicable law and provide
Landlord and Tenant reasonable protection and assurance to prevent damage,
injury and/or loss;

(h) provide in detail within twelve (12) business days
after receipt of the Plans, and itemized budget and an itemized project
schedule;

(i) provide and pay all labor, materials, equipment and
machinery, water, heat, and utilities, transportation and other facilities and
services necessary for proper execution of completion of the Tenant
Improvements, whether temporary or permanent and whether or not incorporated or
to be incorporated in the Tenant Improvements; except for utilities consumed in
the equipment installation and turn-on tune up of network operations center
from November 1, 1997 to December 1, 1997.

APPENDIX C
Page 4 of 5
<PAGE> 37
(j) supervise and direct the Tenant Improvements using
the Contractor's best skills and attention;

(k) be fully responsible for and have control over
construction means, methods, techniques, sequences and procedures for
coordinating all portions of the Tenant Improvements under the contract;

(l) take appropriate field measurements and verify field
conditions before commencing construction of Tenant Improvements; and

(m) review, approve and submit to Tenant's Architect show
drawings, product data, samples and submittals required by the contract
documents with promptness and in sequence as to cause no delay in the Tenant
Improvements and project schedule for Tenant's Architect's review and comment,
provided any such comments be referred to Contractor within four (4) business
days.

8. Payment Procedure. Landlord and Tenant shall each pay their
respective share of the Contractor's payment application within twenty (20)
days of receipt of same.

9. Tenant Contracts. Tenant shall provide to Landlord (a) copies
of any proposals, contracts, requests for payment, and partial or final lien
releases for work on the Premises directly contracted by Tenant, and (b) prior
to Tenant's occupancy for its intended purposes, final lien waivers in
connection with any such work.

10. Miscellaneous. Terms used in this Appendix C shall have the
meanings assigned to them in the Lease. The terms of this Appendix C are
subject to the terms of the Lease.

APPENDIX C
Page 5 of 5

<PAGE> 38
APPENDIX C-1
IXC COMMUNICATIONS, INC.
GENERAL CONTRACTOR'S AGREEMENT FOR TENANT IMPROVEMENTS
MAY 15, 1997

GENERAL CONDITIONS

Items included in the proposed general conditions: $79,7000
Preconstruction Services
Project Superintendent
Project Manager
Assistant Project Manager
Project Office
Filed Storage Shed
Jobsite Security for Jobsite Office
Temporary Fire Protection
Field Office Supplies
Temporary Toilets
Final Cleanup (in conjunction with sub trades)
Ice & Cups
Temporary Water (Consumption charges only)
Electrical for Construction (consumption charges only)
Postage & Delivery Services
Office Equipment
Barricades for General Conditions
Safety Inspections
Telephone & Fax Services
Computer Charges
Miscellaneous Small Tools (for general conditions)
Vehicle Rental for General Conditions
Vehicle Fuel, Maintenance & Repair for General Conditions
Vehicle Insurance for General Conditions
Payroll Taxes for General Conditions
Sales Taxes for General Conditions
Project Accounting Services
Jobsite Communications
Final Power Costs
Permit & Building Fees (excluded see below)

Other items which cannot be quantified at this time:
Insurance Other Than Identified Above - Builder's Risk charged at 21
cents per $1,000 dollar value. Performance & Payment Bond Premiums
Permit & Building Fees (based on final price) Costs for Printing

FEES AND OVERHEAD

General Contractor's Fee and Overhead - 4.7% on the direct costs.

CHANGE ORDER FEE

A fee will not be accessed for the first $25,000 of dollars of Change Orders.
After the net of $25,000 dollars of Change Orders has occurred, a General
Conditions and Fee of 8% will be added on the direct costs.

APPENDIX C-1
Page 1 of 1
<PAGE> 39
APPENDIX D

MORTGAGES CURRENTLY AFFECTING THE PROJECT

None.

APPENDIX D
Page 1 of 1
<PAGE> 40
APPENDIX E

COMMENCEMENT DATE CONFIRMATION

Landlord: CarrAmerica Realty, L.P.

Tenant: IXC Communications, Inc.

This Commencement Date Confirmation is made by Landlord and
Tenant pursuant to that certain Lease dated as of __________, 199_ (the
"Lease") for approximately ______________ SF NRA in the building commonly known
as City View Centre (the "Premises"). This Confirmation is made pursuant to
Item 9 of the Schedule to the Lease.

1. Lease Commencement Date, Termination Date.
Landlord and Tenant hereby agree that the Commencement Date of the Lease is
_________________, 199_, and the Termination Date of the Lease is
_________________, ____.

2. Acceptance of Premises. Tenant has inspected
the Premises and affirms that the Premises is acceptable in all respects in its
current "as is" condition.

3. Incorporation. This Confirmation is
incorporated into the Lease, and forms an integral part thereof. This
Confirmation shall be construed and interpreted in accordance with the terms of
the Lease for all purposes.

TENANT:

IXC Communications, Inc.,
a Delaware corporation

By:_______________________________
Name:_____________________________
Title:____________________________

LANDLORD:

CARRAMERICA REALTY L.P.,
t/a City View Centre

By: CARRAMERICA REALTY G.P.
HOLDINGS, INC., a Delaware
Corporation, its General partner

By:_______________________________
Name:_____________________________
Title:____________________________

APPENDIX E
Page 1 of 1
<PAGE> 41
APPENDIX F

EXPANSION

Beginning on or before the first day of the thirteenth (1th) month of
the Lease Term, (the "First Expansion Date"), Tenant shall lease for the
remaining Term approximately 11,899 (plus or minus 10%) additional square feet
of rentable area in the Building, the location to be mutually agreed by Tenant
and Landlord (the "First Expansion Space").

In addition, beginning on or before the first day of the nineteenth
(19th) month of the Term (the "Second Expansion Date:"), Tenant shall lease for
the remaining Term the balance of any unleased space in the Building (the
"Second Expansion Space").

The Landlord shall promptly cause the First and Second Expansion
Spaces (if not already so constructed) to be constructed and made ready for the
Tenant's occupancy by the First or Second Expansion Date, as applicable, in
accordance with the plans, specifications, and procedures referenced in
Appendix C prepared by Graeber, Simmons & Cowan. If plans and specifications
have not been agreed upon, Landlord and Tenant shall cooperate with each other
to finalize such agreeable plans and specifications by not later than 60 days
before the applicable Expansion Date.

The Premises shall be built out in accordance with Appendix C, as
applicable, except as otherwise provided in this Appendix F.

As to all Expansion Space that is built out for the Tenant as provided
above, the Tenant shall be required to accept and commence paying rent on the
Expansion Space upon the date that is the sooner to occur of (a) the date that
Tenant commences to occupy such space for its intended purposes, as opposed to
occupancy for the purposes of completing the make ready of such space or (b)
five (5) business days after the Landlord notifies the Tenant that such space
is Substantially Completed and provides to Tenant either a Certificate of
Occupancy or a certificate by the Landlord's or Tenant's Architect contractor
of the project that the applicable Expansion Space is Substantially Completed,
but in no event prior to the First Expansion Date or Second Expansion Date, as
applicable, (c) or the First Expansion Date or Second Expansion Date, as
applicable.

The Base Rent Rate for each Expansion Space shall be the same as the
Base Rent Rate of the initial Premises.

APPENDIX F
Page 1 of 1
<PAGE> 42
APPENDIX G

PREFERENTIAL RIGHTS

During the Term and any renewal thereof, Tenant shall have a
preferential right to lease (a "Preferential Right to Lease") any space which
becomes available on the complex of buildings owned by Landlord (provided
Landlord owns such space at the time) adjacent to the Building (collectively
the "Preferential Space"), subject to and subordinate to any preexisting
preferential, expansion or renewal rights to such Preferential Space belonging
to Holt, Rinehart & Winston, pursuant to the following terms and conditions:

1. Prior to marketing any portion of the Preferential Space to
any third party (except for existing lease rights held by Holt, Rinehart &
Winston as the execution date of this Lease, Landlord shall notify the Tenant
in writing of the availability of the Preferential Space, the date upon which
the Preferential Space is expected to be made available to Tenant, and the
market terms and conditions of the lease that Landlord proposes to offer to any
interested tenant for such Preferential Space (the "Notice"). If exercised
within the first Lease Year, Tenant may exercise any Preferential Right to
Lease and include the Preferential Space under this Lease, upon the terms and
conditions of this Lease (improvements to be constructed and costs to be
prorated based on the month's remaining in the Lease Term as the Expansion
Space), or upon the terms and conditions set forth in the Notice (the "Market
Terms"). If Tenant exercises any Preferential Right to lease after the last
day of the first Lease Year, then Tenant may exercise any Preferential to Lease
and include the Preferential Space under this Lease upon the Market Terms.
Tenant shall exercise any Preferential Right to Lease by delivering notice of
Tenant's election on or before the tenth (10) business day after the date of
Tenant's receipt of the Notice.

2. In the event Landlord does not receive notice of Tenant's
election to lease the Preferential Space described in the Notice within the
period provided above, the Landlord shall be free to lease such space to one or
more third parties on the terms substantially as proposed to Tenant for the
nine (9) month period following the end of the ten (10) day notice period,
otherwise Tenant's Preferential Rights as to that particular space is restored.

3. Any dispute between Landlord and Tenant as to the Market Terms
shall be resolved in accordance to the same procedure for determining renewal
Market Base Rent Rates during any renewal term in accordance with Appendix H.

APPENDIX G
Page 1 of 1

<PAGE> 43
APPENDIX H

RENEWAL OPTION

Tenant shall have the option to renew this Lease as to all or a
portion of the Premises for two (2) additional terms of seven (7) years each by
giving Landlord written notice of Tenant's desire to renew this Lease at least
twelve (12) months but no more than fifteen (15) months prior to the expiration
date of this Lease, or the first renewal option, as the case may be.

The Base Rent during each additional term shall be one hundred percent
(100%) of the Market Base Rent Rate (defined below) then in effect for
comparable space. As used in this Lease Agreement, the term "Market Base Rent
Rate" shall mean the average of the annual net Rent rates then being charged
for space comparable to the space for which the Market Base Rent Rate is being
determined, taking into consideration use, definition of net rentable area,
quality, age and location of the applicable building, and the time the
particular rate under consideration will become effective, but not accounting
for tenant improvements or other concessions. If any renewal option is
executed by Tenant hereunder, Landlord shall provide an allowance for
refurbishment up to a maximum of $5.00 per square feet of net rentable area.

Within fifteen (15) days of Landlord's receipt of Tenant's notice of
its exercise of an option to extend the term of this Lease, Landlord shall give
Tenant written notice of its calculation of Market Base Rent Rate as projected
for the commencement date of the renewal term, and if such calculation is
acceptable to Tenant it shall establish the Base Rent during the renewal term.
In connection with the determination of Market Base Rent Rate, Landlord shall
not be obligated to disclose the names of any tenants. If the calculation is
not acceptable to Tenant, Tenant shall notify Landlord of such fact within ten
(10) days of its receipt of the Landlord's calculation. Landlord and Tenant
shall use their best efforts to agree on a calculation of the Market Base Rent
Rate as projected for the commencement date for the applicable renewal term,
but in the event they are unable to agree within fifteen (15) days of
objection, the Landlord shall notify the Tenant within five (5) days after the
expiration of such fifteen (15) day period of its selection of an MIA real
estate appraiser (the "Landlord's Appraiser") to determine the Market Base Rent
Rate. The Tenant shall then notify the Landlord in writing of its selection of
an MIA real estate appraiser (the "Tenant's Appraiser") within five (5) days of
its receipt of the notice of the selection of Landlord's Appraiser. Both
Landlord's and Tenant's Appraiser must have at least five (5) years of full
time experience in the Austin area in appraisal of first class multi-tenant
office buildings. Both the Landlord's Appraiser and the Tenant's Appraiser
shall meet within fifteen (15) days of the selection of the Tenant's Appraiser
and determine the Market Base Rent Rate for the Leased Premises. If they are
able to agree on a Market Base Rent Rate, such value shall be the Market Base
Rent Rate during the applicable seven (7) year renewal term. In the event they
are not able to agree on a Market Base Rent Rate, the Market Base Rent Rate
shall be the average of their determinations provided that the difference
between them is less than or equal to ten percent (10%) of the average of both
determinations. If not within such ten percent (10%) difference, then the
Landlord's Appraiser and the Tenant's Appraiser shall pick a third MIA
appraiser who must pick only one of the appraisals within fifteen (15) days of
selection, which shall then constitute the Market Base Rent Rate.

The Landlord shall pay the cost of the appraisal prepared by the
Landlord's Appraiser, the Tenant shall pay the cost of the appraisal prepared
by the Tenant's Appraiser, and Landlord and Tenant shall split any third
appraiser's cost 50/50.

Except as provided above, all other terms and conditions of the Lease
shall apply to any renewal term.

APPENDIX H
Page 1 of 1
<PAGE> 44
APPENDIX I

PARKING

Tenant shall have the non-exclusive use of the parking lots for the
parking of its employees', customers', invitees', and visitors' automobiles
during business hours.

Landlord shall provide Tenant at no cost to Tenant covered and surface
parking for the entire Term of the lease and any renewals exercised pursuant to
this Lease on a ratio of 1 space for every 250 net rentable square feet leased
by Tenant, of which two hundred forty-one (241) will be covered parking spaces
(which, upon written request, Landlord will mark "IXC Reserved" or equivalent)
on the bottom level of the Building parking deck, provided that Landlord may,
upon sixty (60) days prior written notice (to be given not later than September
1, 1997) to Tenant, recapture and relocate up to fifty (50) such spaces in the
event and only to the extent Holt, Rinehart and Winston exercises any current
right it may have to such spaces.

Tenant agrees to (a) provide and continually update the name and
automobile license numbers of each employee who will be parking in the Building
parking lot, and (b) cooperate with any parking identification program
including compelling its employees to display a "parking sticker" in a
prominent location on the vehicle sticker.

Landlord will install at its cost and expense a card-accessibility
system at each motor vehicle point of entry in the parking deck.

APPENDIX I
Page 1 of 1

<PAGE> 45

APPENDIX J

JANITORIAL SPECIFICATIONS

The janitorial specifications for the Building are attached.

APPENDIX J
Page 1 of 1

<PAGE> 46
AMERICA

LIST OF SPECIFICATIONS

<TABLE>
<CAPTION>
Description Freq.
<S> <C>
OFFICE/ CARPET

Empty all trash receptacles and replace liners as necessary. 260

Remove all collected trash to designated area; making sure no bags are leaking. 260
Dust all horizontal surfaces. 260

Dust high and low areas (e.g., pictures, clocks, partition tops, wood work etc.) 12

Fully vacuum all carpets from wall to wall. 52
Vacuum all carpeted traffic lane areas. 208

Using approved spotter, spot clean carpeted area. 260
Spot clean all walls, light switches and doors. 52

Spot clean telephones and sanitize receivers. 12

Spot clean all partition glass, doors glass, and side glass. 260
Using tank vacuum or back pack, vacuum corner edges and chairs then traffic vacuum all 12
carpeted areas.

Clean all ceiling vents. 4
Dust all venetian blinds and window ledges. 12

Clean all baseboards. 4

Wash all wood walls using murphy's oil soap. After cleaning wipe with a wax product for 2
protection.
Clean both sides of all doors and hardware. 1

OFFICE/ TILE

Empty all trash receptacles and replace liners as necessary. 260

Remove all collected trash to designated area; making sure no bags are leaking. 260
Dust all horizontal surfaces. 260

Dust high and low areas (e.g., pictures, clocks, partition tops, wood work etc.) 12
Dust mop all hard surface floors with treated or electrostatic dust mop. 260

Mop all stains and spills, especially coffee and drink spills. 208

Damp mop entire area. 52
Spot clean all walls, light switches and doors. 52

Spot clean telephones and sanitize receivers. 12
Spot clean all partition glass, doors glass, and side glass. 260

Using tank vacuum or back pack, vacuum corners edges and chairs then traffic vacuum all tile 12
areas.
</TABLE>

APPENDIX J
Page 1 of 9
<PAGE> 47
AMERICA

LIST OF SPECIFICATIONS

<TABLE>
<CAPTION>
Description Freq.
<S> <C>
Clean all ceiling vents. 4
Clean all baseboards. 4

Using approved spotter, spot clean carpeted area. 260
Spot clean all walls, light switches and doors. 52

Spot clean telephones and sanitize receivers. 12

Spot clean all partition glass, doors glass, and side glass. 260
Using tank vacuum or back pack, vacuum corners edges and chairs then traffic vacuum all 12
carpeted areas.

Clean all ceiling vents. 4
Dust all venetian blinds and window ledges. 12

Clean all baseboards. 4

Wash all wood walls using murphy's oil soap. After cleaning wipe with a wax product for 2
protection.
Clean both sides of all doors and hardware. 1

4
Buff out marble floors.

EXAM ROOMS/ TILE

Empty all trash receptacles and replace liners as necessary. 260
Remove all collected trash to designated area; making sure no bags are leaking. 260

Dust all horizontal surfaces. 260
Dust high and low areas (e.g., pictures, clocks, partition tops, wood work etc.) 12

Dust mop all hard surface floors with treated or electrostatic dust mop. 260

Damp mop entire area. 260
Spot clean all walls, light switches and doors. 52

Spot clean telephones and sanitize receivers. 12
Spot clean all partition glass, doors glass, and side glass. 260

Using tank vacuum or back pack, vacuum corners edges and chairs then traffic vacuum all tile 12
areas.

Clean all ceiling vents. 4
Clean all baseboards. 4

Dust all venetian blinds and window ledges. 12
Wash all wood walls using murphy's oil soap. After cleaning wipe with a wax product for 2
protection.

Clean both sides of all doors and hardware. 1
</TABLE>

APPENDIX J
Page 2 of 9
<PAGE> 48
AMERICA

LIST OF SPECIFICATIONS

<TABLE>
<CAPTION>
Description Freq.
<S> <C>
Using a high speed floor machine spray buff all hard surface areas. 8
Machine scrub hard surface floor and apply one coat of polish, allow to dry, then buff; 3
making sure to wipe baseboards.

Strip hard surface floor and recoat with three coats of floor polish; making sure to wipe 1
baseboards.

ENTRY/ MARBLE

Dust all horizontal surfaces. 260
Dust high and low areas (e.g., pictures, clocks, partition tops, wood work etc.) 52

Dust mop all hard surface floors with treated or electrostatic dust mop. 260
Damp mop entire area. 260

Spot clean all walls, light switches and doors. 260

Spot clean all partition glass, doors glass, and side glass. 260
Using tank vacuum or back pack, vacuum corners edges and chairs then traffic vacuum all 12
marble areas.

Clean all ceiling vents. 4
Spot clean door glass and side glass. 260

Dust ceiling light lenses. 12

Clean all baseboards. 12
Empty all trash receptacles and replace liners, remove cig from sand and smooth. (interior 260
and exterior)

Vacuum walk-off mats. (interior and exterior) 260
Clean both sides of all doors and hardware. 1

260
Maintain building exterior including metal work, entrance doors, building trim and exterior
window frames and mullions.

Clean tile entry panels, mailboxes and courier drop boxes. (interior or exterior) 12
Buff out marble floors. 4

ENTRY/ TILE

Dust all horizontal surfaces. 260

Dust high and low areas (e.g., pictures, clocks, partition tops, wood work etc.) 52
Dust mop all hard surface floors with treated or electrostatic dust mop. 260

Damp mop entire area. 260
</TABLE>

APPENDIX J
Page 3 of 9
<PAGE> 49
AMERICA

LIST OF SPECIFICATIONS

<TABLE>
<CAPTION>
Description Freq.
<S> <C>
Spot clean all walls, light switches and doors. 260
Spot clean all partition glass, doors glass, and side glass. 260

Using tank vacuum or back pack, vacuum corners edges and chairs then traffic vacuum all 12
marble areas.
Clean all ceiling vents. 4

Spot clean door glass and side glass. 260

Dust ceiling light lenses. 12
Clean all baseboards. 12

Machine scrub hard surface floor; making sure to wipe baseboards. 4
Vacuum walk-off mats. (interior and exterior) 260

Clean both sides of all doors and hardware. 1

Empty all trash receptacles and replace liners, remove cig from sand and smooth. (interior 260
and exterior)
Maintain building exterior including metal work, entrance doors, building trim and exterior 260
window frames and mullions.

Clean tile entry panels, mailboxes and courier drop boxes. (interior or exterior) 12

KITCHEN/ TILE

Empty all trash receptacles and replace liners as necessary. 260

Remove all collected trash to designated area; making sure no bags are leaking. 260

Dust all horizontal surfaces. 260
Dust high and low areas (e.g., pictures, clocks, partition tops, wood work etc.) 12

Dust mop all hard surface floors with treated or electrostatic dust mop. 260

Mop all stains and spills, especially coffee and drink spills. 208
Damp mop entire area. 52

Clean all sinks. 260
Clean coffee machine and damp wipe countertop. 260

Spot clean all walls, light switches and doors. 260

Using tank vacuum or back pack, vacuum corners edges and chairs then traffic vacuum all tile 12
areas.
Clean all ceiling vents. 4

Clean all baseboards. 4
Clean both sides of all doors and hardware. 1
</TABLE>

APPENDIX J
Page 4 of 9

<PAGE> 50
AMERICA

LIST OF SPECIFICATIONS

<TABLE>
<CAPTION>
Description Freq.
<S> <C>
Using a high speed floor machine spray buff all hard surface area. 8
Machine scrub hard surface floor and apply one coat of polish, allow to dry, then buff; 3
making sure to wipe baseboards.

Strip hard surface floor and recoat with three coats of floor polish; making sure to wipe 1
baseboards.

CORRIDOR/ CARPET

Dust high and low areas (e.g., pictures, clocks, partition tops, wood work etc.) 52
Fully vacuum all carpets from wall to wall. 260

Using approved spotter, spot clean carpeted area. 260
Spot clean all walls, light switches and doors. 52

Spot clean all partition glass, doors glass, and side glass. 260

Spot clean all brass rails, elevator plates, doors, walls, phones, phone box, fixtures, and 260
glass.
Clean all baseboards. 4

Clean all ceiling vents. 4
Clean and polish all drinking fountains. 260

Dust ceiling light lenses. 4

Extract carpets using an automatic extractor. 4

RESTROOMS/ TILE

Clean and sanitize fixtures, mirrors, counters; polish chrome; mop floors; refill 260
dispensers; empty rubbish and spot clean partition.

Dust and clean all return air vents. 12

Fully clean all showers. 52
Wash all restroom partitions on both sides and hardware. 12

Clean toilets and urinals with an acid based cleaner. 52
Machine scrub all restroom floors using germicidal detergent; making sure to wipe 4
baseboards.

Clean both sides of all doors and hardware. 52

COMPUTER ROOM/ RAISED TILE

Empty all trash receptacles and replace liners as necessary. 260
</TABLE>

APPENDIX J
Page 5 of 9
<PAGE> 51
AMERICA

LIST OF SPECIFICATIONS

<TABLE>
<CAPTION>
Description Freq.
<S> <C>
Remove all collected trash to designated area; making sure no bags are leaking. 260
Dust mop all hard surface floors with treated or electrostatic dust mop. 260

ELEVATORS/ CARPET

Completely clean and vacuum carpeted elevator and tracks. 260

Clean and polish metal elevator threshold plates and door tracks. 12
Spot clean all brass rails, elevator plates, doors, walls, phones, phone box, fixtures, and 260
glass.

Using approved spotter, spot clean carpeted area. 260

ELEVATORS/ TILE

Completely clean and damp mop hard floor elevator. 260
Clean and polish metal elevator threshold plates and door tracks. 260

Spot clean all brass rails, elevator plates, doors, walls, phones, phone box, fixtures, and 260
glass.

STAIRWELL/ CONCRETE

Police stairs and pick up litter. 260
Broom sweep stairs, dust railings and spot clean. 52
</TABLE>

APPENDIX J
Page 6 of 9

<PAGE> 52
Other Contract Services

1. Janitor Closets, Equipment, and Materials shall be kept in a
clean, neat, and orderly condition at all times.

2. Property Management shall be notified of any of the following:

A. Defective or inoperative building equipment such as:
Lights out, toilets stopped up, etc..

B. Security issues and/or Safety issues such as: Broken
steps, Broken glass, and/or faulty locks, etc..

3. Carpet cleaning for tenant occupied areas, shall be done on a
request basis at a set price per/sq. ft., as an additional cost, plus all
applicable taxes.

4. Carpet cleaning for corridors will be included in contract
price, but to be listed as a separate line item.

5. An anti-static material shall be applied to all carpeting upon
request for an additional price per/sq. ft., plus all applicable taxes.

6. Outside window washing shall be furnished at an additional
price, per/sq. ft., or "By the Job", plus all applicable taxes.

7. Emergency cleaning will be accomplished, upon request for NO
additional charge, if rectified in less than a 1 1/2 hours, with on hand
equipment.

8. Construction clean is to be performed upon request for an
additional price, per/sq. ft., plus all applicable taxes.

9. Pressure washing of sidewalks and garages will be done upon
request, at a price per hour, or "By the Job", plus all applicable taxes.

10. Civil and criminal background checks will be performed on all
employees prior to them being sent to the work site.

11. All medical area must be cleaned and disinfected nightly using
a hospital grade disinfectant capable of killing HIV and Hepatitis B strains.
Which is OSHA requirements.

12. All supervisors and employees working in any medical offices
will be required to have been trained on established company procedure on the
handling of bio-hazard materials and blood pathogen according to OSHA
requirements. Hepatitis shots, MSDS sheets, and company procedures on
bio-hazard materials and blood pathogen will be kept on sight at all times.

13. Cleaning company must be willing to participate in building
recycling program, now and in the future.

14. All supplies cost, including paper supplies, to be included in
the contract bid. All supplies must be of a like quality to what is being
furnished at present time.

15. All marble floors are to be included in contract price, but to
be listed as a separate line item.

<PAGE> 53
16. All companies are required to supply property managers a
periodic calendar of scheduled work to be performed in each building. With a
copy to be kept at each site.

<PAGE> 1
EXHIBIT 10.18

LOAN AND SECURITY AGREEMENT

This LOAN AND SECURITY AGREEMENT ("Agreement"), is dated as of July 18,
1997, by and between the following parties:

LENDER/SECURED PARTY: NTFC CAPITAL CORPORATION, a Delaware
corporation with offices at 220 Athens Way,
Nashville, Tennessee 37228 and its assigns
("Lender")

BORROWER/DEBTOR: IXC CARRIER, INC., a Nevada corporation with
its principal place of business at 5000
Plaza on the Lake, Suite 200, Austin, Texas
78746 ("Borrower")

GUARANTOR: IXC COMMUNICATIONS, INC., a Delaware
corporation with its principal place of
business at 5000 Plaza on the Lake, Suite
200, Austin, Texas 78746 ("Guarantor")

This Loan and Security Agreement includes the general terms and conditions
contained herein and all the exhibits and schedules attached hereto, all of
which are incorporated herein. In the event of a conflict between the general
terms and conditions and any schedule, the additional terms and conditions
stated in the schedule shall control.

By executing this Loan and Security Agreement, Lender agrees to make loans to
Borrower, and Borrower agrees to borrow from Lender and to provide collateral to
secure such loans, all on the terms and conditions set forth herein.

IN WITNESS WHEREOF, the parties have executed this Loan and Security Agreement
by their duly authorized representatives:

LENDER: BORROWER:

NTFC CAPITAL CORPORATION IXC CARRIER, INC.

BY: /s/ LARRY MIDDLETON BY: /s/ JOHN J. WILLINGHAM
---------------------------- ----------------------------
TITLE: Secretary TITLE: Senior Vice President and
Chief Executive Officer
---------------------------- ----------------------------
DATE: 7/18/97 DATE: 7/18/97
----------------------------- -----------------------------

GUARANTOR:

IXC COMMUNICATIONS, INC.

BY: /s/ JOHN J. WILLINGHAM
----------------------------
TITLE: Senior Vice President and
Chief Executive Officer
----------------------------
DATE: 7/18/97
-----------------------------

<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1: DEFINITIONS..................................................................... 1
1.01. Certain Definitions......................................................... 1
1.02. Accounting Principles; Subsidiaries......................................... 8
1.03. UCC Terms................................................................... 8
1.04. General Construction; Captions.............................................. 8
1.05. References to Documents and Laws............................................ 8
1.06. Currency.................................................................... 8

ARTICLE 2: ADVANCES........................................................................ 9
2.01. Commitment.................................................................. 9
2.02. Note and Payment Terms...................................................... 9
2.03. Procedures for Borrowing.................................................... 10
2.04. Prepayments................................................................. 11
2.05. Computation of Interest..................................................... 12
2.06. Payments.................................................................... 12
2.07. Indemnity................................................................... 12
2.08. Use of Proceeds............................................................. 12
2.09. Fees........................................................................ 13
2.10. Lender's Expenses........................................................... 13
2.11. Guaranty.................................................................... 13

ARTICLE 3: COLLATERAL AND SECURITY AGREEMENT............................................... 13
3.01. Grant of Security Interest.................................................. 13
3.02. Priority of Security Interests.............................................. 14
3.03. Further Documentation; Pledge of Instruments................................ 14
3.04. Further Identification of Collateral........................................ 14
3.05. Remedies.................................................................... 14
3.06. Standard of Care............................................................ 15
3.07. Advances to Protect Collateral.............................................. 15
3.08. License to Use.............................................................. 15

ARTICLE 4: REPRESENTATIONS AND WARRANTIES.................................................. 15
4.01. Organization and Qualification.............................................. 15
4.02. Authority and Authorization................................................. 15
4.03. Execution and Binding Effect................................................ 15
4.04. Governmental Authorizations................................................. 16
4.05. Regulatory Authorizations................................................... 16
4.06. Material Agreement; Absence of Conflicts.................................... 16
4.07. No Restrictions............................................................. 16
4.08. Financial Statements........................................................ 16
4.09. Financial Accounting Practices.............................................. 17
4.10. Accurate and Complete Disclosure............................................ 17
4.11. No Event of Default; Compliance with Material Agreements.................... 17
4.12. Litigation.................................................................. 17
4.13. Rights to Property.......................................................... 17
4.14. Financial Condition......................................................... 17
</TABLE>

<PAGE> 3
<TABLE>
<S> <C> <C>
4.15. Taxes....................................................................... 18
4.16. No Material Adverse Change.................................................. 18
4.17. No Regulatory Event......................................................... 18
4.18. Trade Relations............................................................. 18
4.19. No Brokerage Fees........................................................... 18
4.20. Margin Stock; Regulation U.................................................. 18
4.21. Investment Company; Public Utility Holding Company.......................... 18
4.22. Personal Holding Company; Subchapter S...................................... 18
4.23. ERISA....................................................................... 18
4.24. Environmental Warranties.................................................... 19
4.25. Security Interests.......................................................... 19
4.26. Place of Business........................................................... 19
4.27. Location of Collateral...................................................... 19
4.28. Clear Title To Collateral................................................... 19
4.29. Assumed Names............................................................... 19
4.30. Transactions with Affiliates................................................ 19
4.31. NTI Supply Agreement........................................................ 19

ARTICLE 5: CONDITIONS OF CLOSING........................................................... 20
5.01. Closing Certificates........................................................ 20
5.02. Opinions of Counsel......................................................... 20
5.03. Closing Documents........................................................... 20

ARTICLE 6: CONDITIONS OF LENDING........................................................... 21
6.01. Conditions for Initial Advance.............................................. 21
6.02. Conditions for All Advances................................................. 21
6.03. Affirmation of Representations and Warranties............................... 23
6.04. Deadline for Funding Conditions............................................. 23

ARTICLE 7: AFFIRMATIVE COVENANTS........................................................... 23
7.01. Reporting and Information Requirements...................................... 23
7.02. Other Notices............................................................... 25
7.03. Notice of Pension-Related Events............................................ 25
7.04. Inspection Rights........................................................... 25
7.05. Preservation of Corporate Existence and Qualification....................... 26
7.06. Continuation of Business.................................................... 26
7.07. Insurance................................................................... 26
7.08. Payment of Taxes, Charges, Claims and Current Liabilities................... 27
7.09. Financial Accounting Practices.............................................. 28
7.10. Compliance with Laws........................................................ 28
7.11. Use of Proceeds............................................................. 28
7.12. Government Authorizations; Regulatory Authorizations........................ 28
7.13. Contracts and Franchises.................................................... 28
7.14. Consents.................................................................... 28
7.15. Financial Covenants......................................................... 28
7.16. Construction and Storage.................................................... 28
7.17. Upgrade Equipment........................................................... 29
</TABLE>

<PAGE> 4
<TABLE>
<S> <C> <C>
ARTICLE 8: NEGATIVE COVENANTS.............................................................. 29
8.01. Additional Indebtedness..................................................... 29
8.02. Restrictions on Liens and Sale of Collateral................................ 29
8.03. Prohibition of Mergers, Acquisitions, Name, Office or Business Changes, Etc. 29
8.04. Limitation on Equity Payments............................................... 30
8.05. Removal of Collateral....................................................... 30
8.06. Assumed Names............................................................... 30

ARTICLE 9: EVENTS OF DEFAULT............................................................... 30
9.01. Events of Default........................................................... 30
9.02. Consequences of an Event of Default......................................... 33
9.03. Exercise of Rights.......................................................... 33
9.04. Rights of Secured Party; Possession or Sale of Collateral................... 33
9.05. Notices, Etc. Waived........................................................ 34
9.06. Additional Remedies......................................................... 34
9.07. Application of Proceeds..................................................... 35
9.08. Discontinuance of Proceedings............................................... 35
9.09. Power of Attorney........................................................... 35
9.10. Regulatory Matters.......................................................... 36

ARTICLE 10: GENERAL CONDITIONS/MISCELLANEOUS............................................... 36
10.01. Modifications and Waivers................................................... 36
10.02. Advances Not Implied Waivers................................................ 36
10.03. Deviation from Covenants.................................................... 37
10.04. Holidays.................................................................... 37
10.05. Records..................................................................... 37
10.06. Notices..................................................................... 37
10.07. FCC and PUC Approval........................................................ 38
10.08. Lender Sole Beneficiary..................................................... 38
10.09. Lender's Review of Information.............................................. 38
10.10. No Joint Venture............................................................ 38
10.11. Severability................................................................ 38
10.12. Rights Cumulative........................................................... 38
10.13. Duration; Survival.......................................................... 39
10.14. Governing Law............................................................... 39
10.15. Counterparts .............................................................. 39
10.16. Successors and Assigns...................................................... 39
10.17. Participation............................................................... 40
10.18. Time of Essence............................................................. 40
10.19. Disclosures and Confidentiality............................................. 40
10.20. Jurisdiction and Venue...................................................... 41
10.21. Jury Waiver................................................................. 41
10.22. Limitation on Liability..................................................... 42
10.23. Borrower Waivers............................................................ 42
10.24. Schedules................................................................... 42
10.25. Agreement to Govern......................................................... 42
10.26. Entire Agreement............................................................ 42
</TABLE>

<PAGE> 5
SCHEDULES TO LOAN AND SECURITY AGREEMENT

<TABLE>
<S> <C>
Schedule 1 Borrower Information and Defined Terms
Schedule 1.01 Landlord Consents
Schedule 2.01 Maximum Advance Amounts
Schedule 2.02 Payment Terms and Governing Law
Schedule 2.09 Fees
Schedule 4.04 Required Consents
Schedule 4.05 Regulatory Authorizations
Schedule 4.07 Restrictions on Indebtedness
Schedule 4.08 Financial Statements
Schedule 4.12 Pending Litigation
Schedule 4.16 No Material Adverse Change
Schedule 4.17 Regulatory Event
Schedule 4.25 UCC Filing Offices
Schedule 4.26 Principal Offices and Location of Collateral
Schedule 4.29 Assumed Names
Schedule 4.30 Transactions with Affiliates
Schedule 6.02 Post-Closing Items
Schedule 7.07 Insurance/Certificate
Schedule 7.15 Financial Covenants
</TABLE>

EXHIBITS TO LOAN AND SECURITY AGREEMENT

<TABLE>
<S> <C>
Exhibit A Form of Note
Exhibit B Form of Borrowing Certificate
Exhibit C Form of Opinion of Counsel for Borrower and for Guarantor
Exhibit D Form of Landlord's Consent
Exhibit E Form of Environmental Certificate
Exhibit F Form of Assignment and Acceptance
Exhibit G Form of Certificate of Financial Condition
Exhibit H Form of Guaranty
</TABLE>

<PAGE> 6
LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT ("Agreement") is dated as of July ____,
1997 by and between IXC CARRIER, INC., a Nevada corporation ("Borrower"), IXC
COMMUNICATIONS, INC., a Delaware corporation ("Guarantor") and NTFC CAPITAL
CORPORATION, a Delaware corporation ("Lender"), with offices at 220 Athens Way,
Nashville, Tennessee 37228.

B A C K G R O U N D:

1 Borrower has entered into the NTI Supply Agreement, as defined in
Section 1.01 hereof, providing for Borrower's purchase of certain
telecommunications equipment and the license of associated software, all as
described therein, and has requested Lender to extend credit to Borrower to
finance such purchase and license.

2 Lender is willing to extend such credit to Borrower upon the terms and
conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained and intending to be legally bound hereby, the parties
hereto agree as follows:

ARTICLE 1: DEFINITIONS

1.01. Certain Definitions. Certain terms are defined on Schedule 1
hereto. In addition to other words and terms defined in the preamble hereof or
elsewhere in this Agreement, or on the Schedules hereto, the following words and
terms shall have the following meanings unless the context otherwise clearly
requires:

"Advance(s)": any advance or loan of funds made by Lender to Borrower
pursuant to this Agreement.

"Affiliate": as applied to any Person, any second Person directly or
indirectly controlling, controlled by, or under common control with that Person,
or related to such Person by blood, marriage or adoption, except for the
Trustees of the General Electric Pension Trust, Grumman Hill Associates, Inc.
and Grumman Hill Investments, L.P. For purposes of this definition and the
definition of "Subsidiary", a Person shall be deemed to control another Person
if such first Person possesses, directly or indirectly, the power to direct, or
to cause the direction of, the management and policies of such other Person,
whether through ownership of voting securities, by contract or otherwise.

"Assignment": an Assignment and Acceptance in the form of Exhibit F
hereto.

"Basic Agreements": a collective reference to this Agreement, the Note,
and the Security Documents.

"Borrower": IXC Carrier, Inc., a Nevada corporation.

"Borrowing Certificate": a certificate substantially in the form of
Exhibit B hereto.

<PAGE> 7
"Borrowing Date": any Business Day on which an Advance is made to
Borrower hereunder.

"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in Toronto, Canada or New York, New York are authorized
or required by law to close.

"Calendar Quarter": each three month period starting on each January 1,
April 1, July 1, and October 1, during the term of this Agreement.

"Cash": at any time, the cash, cash equivalents or marketable investment
grade securities held by Borrower free of any claims or encumbrances.

"Cash Flow": during any fiscal period of Guarantor, the sum of (i) net
income (or loss) (which may be a positive or negative number) for such period,
plus (ii) all non-cash items deducted in determining such net income (or loss),
minus (iii) all non-cash items added in determining such net income (or loss)
during such period, less (iv) any Equity Payments pursuant to Section 8.04
hereof.

"Certificate of Financial Condition": certificates substantially in the
form of Exhibit G hereto, one certificate to be executed by Borrower and one
certificate to be executed by Guarantor.

"Change in Control": means (a) any change in the direct or indirect
control of, or the ability or right to control, a majority of the voting shares
of common stock in the Borrower; or (b) a majority of the board of directors of
the Guarantor shall consist of directors other than (i) directors holding office
as of the Closing Date or (ii) directors whose election was recommended by such
directors or subsequent directors so recommended.

"Closing Date": July 18, 1997.

"Code": the Internal Revenue Code of 1986, as amended from time to time.

"Collateral": as defined in Section 3.01 hereof.

"Commitment": as defined in Section 2.01 hereof.

"Communications Law": any and all of (i) the Communications Act of 1934,
as amended, and any similar or successor federal statute, and the rules and
regulations of the FCC thereunder, (ii) any state law governing the provision of
telecommunications services, and the rules and regulations of the PUC, all as
the same may be in effect from time to time.

"Consent": a consent to a collateral assignment of the NTI Supply
Agreement or a Landlord Consent.

"Contingent Obligation": as to any Person, any obligation of such Person
guaranteeing, directly or indirectly, any Indebtedness, leases, dividends or
other obligations ("primary obligations") of any other Person (the "primary
obligor") in any manner, whether directly or indirectly, including, without
limitation, any obligation of such Person, whether or not contingent, (a) to
purchase any such primary obligation or any property constituting direct or
indirect security therefor, (b) to advance or supply funds (i) for the purchase
or payment of any such primary obligation or (ii) to maintain working capital or
equity capital of the primary obligor or otherwise to maintain the net worth or
solvency of the primary

2
<PAGE> 8
obligor, (c) to purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of the ability of
the primary obligor to make payment of such primary obligation or (d) otherwise
to assure or hold harmless the owner of such primary obligation against loss in
respect thereof.

"Conversion Date": as defined on Schedule 2.02 hereto.

"Debt Service": for any fiscal period of Guarantor, the sum of all
principal and interest payments that Guarantor is required to make during such
period on account of all of its Indebtedness including, without limitation, (a)
amounts due during such period on account of capitalized leases, (b) the then
current portion of any long-term Indebtedness, (c) amounts due on short-term
Indebtedness, and (d) amounts due under this Agreement and the Note.

"Debt Service Coverage Ratio": at the end of any fiscal period, the
ratio of Guarantor's Cash Flow for such fiscal period to Guarantor's Debt
Service for such fiscal period.

"Default": any of the conditions or occurrences specified in Section
9.01, whether or not any requirement for the giving of notice, the lapse of
time, or both, or any other condition has been satisfied.

"Default Rate": a rate of interest equal to the lesser of (i) three
percent (3%) over the Interest Rate, or (ii) the maximum permissible rate under
applicable law in effect at any time.

"ERISA": the Employee Retirement Income Security Act of 1974, as amended
from time to time, and any successor statute.

"Environmental Law": any current or future federal, state and local law
(including common law), statute, regulation, ordinance, rulings, codes, judicial
order, administrative order or terms of licenses or permits applicable to
environmental conditions (including without limitation conditions relating to
ambient air, surface water, groundwater, land surface or subsurface strata),
including without limitation all such laws governing employment, the generation,
use, storage, disposal or transportation of toxic or hazardous substances or
wastes (including, without limitation, asbestos and petroleum products), the
Comprehensive Environmental Response, Compensation and Liability Act, the
Resource Conservation and Recovery Act, the Superfund Amendment and
Reauthorization Act of 1986, the Toxic Substances Control Act, the Clean Air
Act, the Water Pollution Control Act, the Hazardous Waste Management Act, the
Mineral Lands and Leasing Act, the Surface Mining Control and Reclamation Act,
U.S. Department of Transportation Regulations, and all similar state and local
laws, regulations, all as now or hereafter amended.

"Equipment": the equipment and licensed or sub-licensed software
manufactured or supplied by NTI to Borrower at any time pursuant to the NTI
Supply Agreement or any purchase order issued by Borrower to NTI which is
acquired by Borrower with proceeds of any Advance (or for which Borrower is
reimbursed from the proceeds of any Advance), including installation and
construction services provided by NTI pursuant thereto, and any and all
additions, substitutions, and replacements to or of any of the foregoing,
together with all attachments, components, parts, improvements, upgrades, and
accessions installed thereon or affixed thereto.

"Equity Payment": any distribution of earnings or capital by a Person to
any Owner of such Person, or any redemption of stock interests, either directly
or indirectly, whether in cash or property or in obligations of the Borrower or
Guarantor.

3
<PAGE> 9
"Event of Default": any of the events specified in Section 9.01 hereof,
provided that any requirement for the giving of notice, the lapse of time, or
both, or any other condition, under Section 9.01 or otherwise, has been
satisfied.

"Financing Termination Date": as defined on Schedule 2.02 hereto.

"FCC": the Federal Communications Commission of the United States of
America, and any successor, in whole or in part, to its jurisdiction.

"First Borrowing Date": the date of the first borrowing by Borrower
hereunder.

"GAAP": subject to Section 1.02 hereof, generally accepted accounting
principles in the United States of America (as such principles may change from
time to time) applied on a consistent basis (except for changes in application
in which Borrower's and Guarantor's independent certified public accountants
concur), applied both to classification of items and amounts.

"General Intangibles": as defined in Section 3.01 hereof.

"Governmental Actions": actions by any Governmental Authority.

"Governmental Authority": the federal government, any state or political
subdivision thereof, any city or municipal entity, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.

"Guarantor": IXC Communications, Inc., a Delaware corporation.

"Guaranty": the Unconditional Guaranty Agreement dated the Closing Date,
executed by Guarantor, pursuant to Section 2.11 hereof, substantially in the
form of Exhibit H hereto.

"Indebtedness": as to any Person, at a particular time, (a) indebtedness
for borrowed money or for the deferred purchase price of property or services in
respect of which such Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which such Person otherwise assures a
creditor against loss, (b) obligations under leases which shall have been or
should be, in accordance with GAAP, recorded as capital leases in respect of
which obligations such Person is liable, contingently or otherwise, as obligor,
guarantor or otherwise, or in respect of which obligations such Person assures a
creditor against loss, (c) obligations of such Person to purchase or repurchase
accounts receivable, chattel paper or other payment rights sold or assigned by
such Person, and (d) indebtedness or obligations of such Person under or with
respect to letters of credit, notes, bonds or other debt instruments.

"Indenture": the Indenture associated with the $285,000,000 in 12 1/2%
Senior Notes Due 2005 issued by Guarantor on October 5, 1995.

"Initial Payment Date": as defined on Schedule 2.02 hereto.

"Interest Only Period": as defined on Schedule 2.02 hereto.

"Interest Payment Date": as defined on Schedule 2.02 hereto.

4
<PAGE> 10
"Interest Rate": as defined on Schedule 2.02 hereto.

"Landlord Consent": a consent substantially in the form of Exhibit D
hereto or in other form acceptable to Lender, for the locations reasonably
requested by Lender as identified on Schedule 1.01 hereto, to be executed by the
owner/landlord, sublessor and/or licensor (including carriers) of real property
where the Collateral is or is to be located.

"Law": any law (including common law), constitution, statute,
regulation, rule, ordinance, order, injunction, writ, decree or award of any
governmental body or court of competent jurisdiction or of any arbitrator
(including but not limited to ERISA, the Code, the UCC, any applicable tax law,
product safety law, occupational safety or health law, Communications Law,
Environmental Law and/or securities laws).

"Lender": NTFC Capital Corporation and its successors and assigns.

"Lender's Expenses": as defined in Section 2.10 hereof.

"Lien": any mortgage, pledge, hypothecation, lien (statutory or other),
judgment lien, security interest, security agreement, charge or other
encumbrance, or other security arrangement of any nature whatsoever, including,
without limitation, any installment contract, conditional sale or other title
retention arrangement, any sale of accounts receivable or chattel paper, and any
assignment, deposit arrangement or lease intended as, or having the effect of,
security and the filing of any financing statement under the UCC or comparable
law of any jurisdiction.

"Loan Documents": a collective reference to this Agreement, the Note,
the Security Documents, the Closing Memorandum, any Assignment and all other
documents, instruments, agreements and certificates evidencing or securing any
advance hereunder or any obligation for the payment or performance thereof
and/or executed and delivered in connection with any of the foregoing.

"Material Adverse Effect" or "Material Adverse Change": a material
adverse effect on, or material adverse change in, (i) the business, operations
or financial condition of Borrower or Guarantor, (ii) the ability of Borrower or
Guarantor to perform its obligations under this Agreement, the Note, or the
other Loan Documents, or (iii) the Lender's ability to enforce the rights and
remedies granted under this Agreement or the other Loan Documents, in all cases
whether attributable to a single circumstance or event or an aggregation of
circumstances or events.

"Maturity Date": the date defined on Schedule 2.02 hereto.

"Note": collectively, one or more promissory notes issued by Borrower to
Lender pursuant to this Agreement, and all extensions, renewals, modifications,
replacements, amendments, restatements and refinancings thereof.

"NTI": Northern Telecom Inc., a Delaware corporation.

"NTI Supply Agreement": the Supply Agreement No. IXC9501N dated June 17,
1996, between Borrower and NTI, together with any amendments or supplements
thereto and all purchase orders and invoices issued pursuant thereto, all as
approved by Lender.

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<PAGE> 11
"Obligations": all indebtedness, liabilities and obligations of Borrower
or Guarantor to Lender of any class or nature, whether arising under or in
connection with this Agreement and/or the other Loan Documents, whether now
existing or hereafter incurred, direct or indirect, absolute or contingent,
secured or unsecured, matured or unmatured, joint or several, whether for
principal, interest, premiums, fees, expenses, lease obligations, indemnities or
otherwise, including, without limitation, future advances of any sort, all
future advances made by Lender for taxes, levies, insurance and/or repairs to or
maintenance of the Collateral, the unpaid principal amount of, and accrued
interest on, the Note, and any expenses of collection or protection of Lender's
rights, including reasonable attorneys' fees.

"Organizational Documents": the articles or certificate of incorporation
and by-laws of a corporation and any other document governing the formation and
conduct of business by such entity.

"Owners": all presently existing and future shareholders of Borrower or
Guarantor and all other Persons with ownership interests in Borrower or
Guarantor.

"Payment Date": as defined on Schedule 2.02 hereto.

"PBGC": the Pension Benefit Guaranty Corporation established under Title
IV of ERISA or any other governmental agency, department or instrumentality
succeeding to its functions.

"Permits": all consents, licenses, notices, approvals, authorizations,
filings, orders, registrations, and permits required by any Governmental
Authority for the construction and operation of the Equipment (excluding
Regulatory Authorizations), issued or obtained as and when required in
accordance with all Requirements of Law.

"Permitted Encumbrances": the Liens permitted under Section 8.02 hereof.

"Person": an individual, corporation, limited liability company,
partnership, business or other trust, unincorporated association, joint venture,
joint-stock company, Governmental Authority or any other entity.

"Plan": any employee pension benefit plan to which Section 4021 of ERISA
applies and (i) which is maintained for employees of Borrower or Guarantor or
(ii) to which Borrower or Guarantor made, or was required to make, contributions
at any time within the preceding five (5) years.

"Proceeds": as defined in Section 3.01 hereof.

"PUC": the public utilities commission for the state or any other
jurisdiction in which the Borrower or Guarantor operates its telecommunications
business or any portion of the Equipment is located, or any successor agency,
and any successor, in whole or in part, to its functions or jurisdictions, and
any other Persons specified as such on Schedule 1 hereto.

"Regulatory Authorizations": all approvals, authorizations, licenses,
filings, notices, registrations, consents, permits, exemptions, registrations,
qualifications, designations, declarations, or other actions or undertakings now
or hereafter made by, to or in respect of any telecommunications governmental or
other regulatory authority, including, without limitation, any certificates of
public convenience and all grants, approvals, licenses, filings and
registrations from or to the FCC or PUC or under any Communications Law
necessary in order to enable the Borrower to own, construct, maintain and
operate

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<PAGE> 12
the Equipment, and any authorizations specified on Schedule 4.05 hereto.

"Regulatory Event": any of the following events: (i) Lender becomes
subject to regulation as a "carrier," a "telephone company," a "common carrier,"
a "public utility" or otherwise under any applicable law or governmental
regulation, federal, state or local, solely as a result of the transactions
contemplated by this Agreement and the other Loan Documents, or (ii) Borrower or
Guarantor becomes subject to regulation by any Governmental Authority in any way
that is materially different from the regulation existing at the Closing Date
and that could materially adversely affect Borrower's or Guarantor's ability to
perform its material obligations under the Loan Documents or Lender's rights
thereunder, or (iii) the FCC or PUC issues an order revoking, denying or
refusing to renew, or recommending the revocation, denial or non-renewal of, any
Regulatory Authorization that could materially adversely affect Borrower's or
Guarantor's ability to perform its material obligations under the Loan Documents
or Lender's rights thereunder.

"Reportable Event": (i) a reportable event described in Section 4043 of
ERISA and regulations thereunder, (ii) a withdrawal by a substantial employer
from a Plan to which more than one employer contributes, as referred to in
Section 4063(b) of ERISA, or (iii) a cessation of operations at a facility
causing more than twenty percent (20%) of Plan participants to be separated from
employment, as referred to in Section 4062(f) of ERISA.

"Required Consents": the Governmental Authority approvals or consents of
other Persons required with respect to the Borrower's or Guarantor's execution,
delivery and performance of this Agreement and the other Loan Documents, as
described in Section 4.04 hereto.

"Requirement of Law": as to any Person, the Organizational Documents of
such Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its properties or transactions or to
which such Person or any of its property or transactions is subject, including
without limitation, all applicable common law and equitable principles, all
provisions of all applicable state and federal constitutions, statutes, rules,
regulations and orders of governmental bodies, all Permits or Regulatory
Authorizations issued to Borrower or Guarantor, all Communications Laws, and all
Environmental Laws.

"Responsible Officer": with respect to a corporation, its President or
any Vice President or Treasurer; with respect to a partnership, its general
partner (or the President, any Vice President or Treasurer of any corporate
general partner, as applicable); with respect to a limited liability company, a
member or manager (or the President, any Vice President or Treasurer of any
corporate member or manager), or the President or any Vice President of any
other Person.

"SEC": the Securities and Exchange Commission.

"Security Documents": this Agreement, the Landlord Consents, the
Consents, the Guaranty, all financing statements, and any other documents
granting, evidencing, or perfecting any security interest or Lien with respect
to or securing any of the Obligations.

"Site(s)": any of the sites where Equipment is or is to be located.

"Software" and "Software Licenses": any software now or hereafter owned
by, or licensed to, Borrower or with respect to which Borrower has or may have
license or use rights.

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<PAGE> 13
"Subsidiary": as to any Person, any corporation or other entity that is
an Affiliate of such Person and of which shares of stock or equity interests
having ordinary voting power with respect to the election of one or more
directors or other managers of such corporation are at the time directly or
indirectly owned or controlled by such Person (regardless of any contingency
which does or may suspend or dilute the voting rights of such class).

"UCC": the Uniform Commercial Code as the same may from time to time be
in effect in the State of Tennessee, or the Uniform Commercial Code of another
jurisdiction, to the extent it may be required to apply to any item or items of
Collateral.

"Working Capital": unencumbered and unrestricted capital of Borrower or
Guarantor available for general operational purposes after provision for all
current liabilities.

1.02. Accounting Principles; Subsidiaries. Except as otherwise provided
in this Agreement, all computations and determinations as to accounting or
financial matters and all financial statements to be delivered pursuant to this
Agreement shall be made and prepared in accordance with GAAP (including
principles of consolidation where appropriate), consistently applied, and all
accounting or financial terms shall have the meanings ascribed to such terms by
GAAP. Any requirement to provide annual financial statements and quarterly
reports pursuant to this Agreement may be satisfied by providing copies of
reports filed with the SEC. All accounting and financial terms herein shall be
deemed to include references to consolidation principles, and covenants,
representations and agreements with respect to the Guarantor and its properties
and activities shall be deemed to refer to the Guarantor and its consolidated
Subsidiaries collectively.

1.03. UCC Terms. Except as otherwise provided or amplified (but not
limited) herein, terms used in this Agreement that are defined in the UCC shall
have the same meanings herein.

1.04. General Construction; Captions. All definitions and other terms
used in this Agreement shall be equally applicable to the singular and plural
forms thereof, and all references to any gender shall include all other genders.
The words "hereof", "herein" and "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section, subsection, schedule and
exhibit references are to this Agreement unless otherwise specified. The
captions and table of contents in this Agreement and the other Loan Documents
are for convenience only, and in no way limit or amplify the provisions hereof.

1.05. References to Documents and Laws. All defined terms and references
in this Agreement or the other Loan Documents with respect to any agreements,
notes, instruments, certificates or other documents shall be deemed to refer to
such documents and to any amendments, modifications, renewals, extensions,
replacements, restatements, substitutions and supplements of and to such
documents. All references to statutes and related regulations shall include any
amendments thereof and any successor statutes and regulations.

1.06. Currency. All defined terms and references in this Agreement or
the other Loan Documents with respect to Advances, payments, prepayments,
specific dollar amounts, or any other currency transaction shall be deemed to be
made in lawful money of the United States of America.

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<PAGE> 14
ARTICLE 2: ADVANCES

2.01. Commitment. Subject to the terms and conditions herein provided,
and so long as no Event of Default has occurred and is continuing hereunder,
Lender agrees to lend to Borrower from time to time before the Financing
Termination Date, an aggregate principal amount not to exceed the amount set
forth on Schedule 2.01 hereto as the maximum principal amount (the
"Commitment"). All amounts advanced hereunder shall be used solely for Equipment
and related services previously purchased from NTI, as identified on Schedule
2.01 hereto, or for the purchase of additional Equipment and related services
from NTI, as identified on the Borrowing Certificate for each Advance. Amounts
not exceeding the amount specified on Schedule 2.01 hereto may be used for legal
fees, charges, expenses and closing costs and other expenses incurred by
Borrower or incurred by Lender and payable by Borrower under Section 2.10
hereof.

2.02. Note and Payment Terms.

(a) Promissory Note. The Advances shall be evidenced by the Note
substantially in the form of Exhibit A hereto, with appropriate
insertions. The Note shall be executed by Borrower, payable to the order
of Lender, and shall evidence the obligation of Borrower to repay all
principal amounts advanced under or pursuant to this Agreement, together
with interest and all other amounts due thereunder. The Note shall be
dated the Closing Date, have a stated maturity that is the Maturity
Date, and bear interest at the Interest Rate from the First Borrowing
Date until the Note or any amount thereunder is paid in full (whether on
the Maturity Date, by acceleration or otherwise). All schedules attached
to the Note shall be deemed a part thereof. Any such schedule may be
amended by Lender from time to time to reflect changes in the amounts
includable thereon, but the failure to attach or amend any schedule
shall not diminish the obligation of Borrower to repay all amounts due
hereunder or on the Note.

(b) Interest Payments. Interest shall accrue on the principal
amount outstanding on the Note for each separate Advance at the
applicable Interest Rate for each Advance and shall be payable, in
arrears, on each Interest Payment Date. Interest only shall be payable
during the Interest Only Period, and thereafter all accrued interest
shall be payable, in arrears, with the principal payments described
below.

(c) Principal Payments. On the Conversion Date, the Note shall
automatically convert to a term certain of twenty (20) consecutive
quarters, and principal shall be paid in twenty (20) equal consecutive
quarterly installments, plus accrued interest, commencing on March 31,
1998 and on each Payment Date thereafter until the Maturity Date;
provided, however, that the principal payment amounts shall be
recalculated by Lender if any Advances are made hereunder after the
Conversion Date, based on the aggregate amount of all Advances made at
any time. The amount of each quarterly payment shall be calculated, at
the outset, by amortizing the amount of all principal amounts
outstanding on the Conversion Date. It is intended that the above
amortization schedule will fully amortize the principal amounts advanced
under the Note. The final payment shall be in an amount equal to all
outstanding principal, accrued and unpaid interest, premiums, expenses,
fees, penalties and all other unpaid charges due under the Note and this
Agreement.

(d) Late Payments and Default Rate. Notwithstanding the
foregoing, if Borrower shall fail to pay within ten (10) days after the
due date any principal amount or interest or other

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<PAGE> 15
amount payable under this Agreement or under the Note, Borrower shall
pay to Lender, to defray the administrative costs of handling such late
payments, an amount equal to interest on the amount unpaid, to the
extent permitted under applicable law, at the Default Rate (instead of
the Interest Rate), from the due date until such overdue principal
amount, interest or other unpaid amount is paid in full (both before and
after judgment) whether or not any notice of default in the payment
thereof has been delivered under Section 9.01 hereof. In addition, but
without duplication, upon the occurrence and during the continuance of
an Event of Default, all outstanding amounts hereunder shall bear
interest at the Default Rate (instead of the Interest Rate) until such
amounts are paid in full or such Event of Default is waived in writing
by Lender.

(e) Excess Interest. Notwithstanding any provision of the Note,
this Agreement or any other Loan Document to the contrary, it is the
intent of Lender and Borrower that Lender or any subsequent holder of
the Note shall never be entitled to receive, collect, reserve or apply,
as interest, any amount in excess of the maximum rate of interest
permitted to be charged by applicable Law, as amended or enacted from
time to time. In the event Lender, or any subsequent holder of the Note,
ever receives, collects, reserves or applies, as interest, any such
excess, such amount which would be excessive interest shall be deemed a
partial prepayment of principal and treated as such, or, if the
principal indebtedness and all other amounts due are paid in full, any
remaining excess funds shall immediately be applied to any other
outstanding indebtedness of Borrower due to Lender, and if none is
outstanding, shall be paid to Borrower. In determining whether or not
the interest paid or payable, under any specific contingency, exceeds
the highest lawful rate, Borrower and Lender shall, to the maximum
extent permitted under applicable law, (a) exclude voluntary prepayments
and the effects thereof as it may relate to any fees charged by Lender,
and (b) amortize, prorate, allocate, and spread, in equal parts, the
total amount of interest throughout the entire term of the indebtedness;
provided that if the indebtedness is paid and performed in full prior to
the end of the full contemplated term hereof, and if the interest
received for the actual period of existence hereof exceeds the maximum
lawful rate, Lender or any subsequent holder of any Note shall refund to
Borrower the amount of such excess or credit the amount of such excess
against the principal portion of the indebtedness, as of the date it was
received, and, in such event, Lender shall not be subject to any
penalties provided by any laws for contracting for, charging, reserving
or receiving interest in excess of the maximum lawful rate.

2.03. Procedures for Borrowing.

(a) Timing of Advances. Advances shall not be made more than
once per month. Each Advance (other than the last Advance) shall be in
an aggregate principal amount of not less than $100,000. No amounts may
be borrowed hereunder on or after the Financing Termination Date. Lender
is hereby authorized to retain from each Advance all amounts of Lender's
Expenses accrued and unpaid by Borrower, for which invoices have been
sent to Borrower at least five (5) Business Days before such Advance. In
any event, all outstanding legal fees, charges and expenses not paid by
Borrower prior to any Borrowing Date shall be paid before any Advance is
made or concurrently with such Advance.

(b) Borrowing Certificates. To request an Advance hereunder,
Borrower shall send to Lender, at least ten (10) Business Days prior to
the requested Borrowing Date, a completed Borrowing Certificate, along
with invoices, a copy of the relevant Federal Reserve Statistical
Release H.15 report quoting the applicable five (5) year constant
maturity Treasury Bill rate, and

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<PAGE> 16
such other supporting documentation as Lender may reasonably request.
Lender is hereby authorized to add to any Borrowing Certificate all
amounts payable by Borrower to Lender in respect of legal fees, charges
and expenses arising or incurred by Lender, to the extent such fees,
charges and expenses have then been incurred or charged and may be paid
from Advances.

(c) Transmission of Advances. Advances shall be made by wire
transfer to the account(s) specified in the applicable Borrowing
Certificate, except that (i) proceeds of the Advances may be
transmitted, at Lender's option, directly to an NTI account for payment
of any unpaid NTI invoices, and (ii) Advances shall be made to Borrower
only to the extent that Borrower provides Lender with satisfactory
evidence that the amount of such Advance has been paid to NTI. No
further authorization shall be necessary for any such direct
disbursements, and each such Advance shall satisfy pro tanto the
obligations of the Lender under this Agreement.

(d) Borrowing Dates. Advances shall be made by Lender on the
Borrowing Date specified in the applicable Borrowing Certificate if all
conditions for such Advance have been satisfied, or on such later
Business Day as all conditions for such Advance shall have been
satisfied, as determined by Lender.

(e) Advances After Default. At its option, after the occurrence
and continuance of a Default, Lender may but shall not be obligated to
make direct payment of a portion or all of an Advance to any Person
(including without limitation NTI, suppliers, sub-contractors and
materialmen) to whom Lender in good faith determines payment is due with
respect to the Equipment, and any proceeds so disbursed by Lender shall
be deemed disbursed as of the date on which the Person to whom payment
is made receives the same. No further authorization from Borrower shall
be necessary to warrant such direct payments, and the execution of this
Loan Agreement by Borrower shall, and hereby does, constitute an
irrevocable authorization and power of attorney so to make such direct
payments hereunder. All such direct payments are Advances and shall
satisfy pro tanto the obligations of Lender hereunder and shall be
secured by the Security Documents as fully as if made directly to
Borrower.

2.04. Prepayments.

(a) Voluntary Prepayments. On or after the Conversion Date, the
Borrower may, at its option, at any time and from time to time, prepay
the Advances in whole or in part, upon at least four (4) Business Day's
prior written notice to the Lender specifying the date and amount of
prepayment, in a minimum amount of $250,000, plus the premium described
below, and all accrued but unpaid interest thereon. Such notice shall be
irrevocable and the principal amount specified in such notice shall be
due and payable on the date specified together with accrued interest on
the amount prepaid. Any such prepayment shall be subject to a prepayment
premium equal to a percentage of the amount prepaid as follows: zero
percent (0%) if prepayment is made on the Conversion Date, and with
respect to any prepayment occurring after the Conversion Date, a
prepayment premium equal to the excess, if any, of (a) the present
value, as of the date of such prepayment, of all loan payments that, but
for such prepayment, would have been payable after the date of the
prepayment over (b) the principal amount of the note being prepaid. The
present value calculated pursuant to clause (a) of the preceding
sentence shall be determined by discounting the amounts of such
installments from their respective payment dates to the date of the
prepayment at a rate equal to the weighted average yield to maturity of
the United States Treasury securities with a maturity equal to the then
remaining average life of the Note plus one

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<PAGE> 17
half of one percent (1/2%).

Amounts prepaid may not be reborrowed and shall be applied as
provided in Section 2.04(c). Excess interest payments under Section
2.02(e) or prepayments made from insurance proceeds pursuant to Section
7.07(c) or with any condemnation proceeds shall not be subject to a
prepayment premium. No voluntary prepayments shall be permitted prior to
the Conversion Date.

(b) [intentionally deleted]

(c) Application of Prepayments. Any prepayments shall be applied
first to interest, then to premium, then to expenses, and then to the
installments of principal in reverse order of maturity. In addition,
principal installments shall be applied to each separate Advance with
the oldest Advance being prepaid first, until the remaining principal
outstanding on each such Advance is fully prepaid.

2.05. Computation of Interest. Interest shall be expressed as an annual
rate of interest, shall be compounded monthly, and shall be calculated daily on
the basis of a 360-day year for the actual days elapsed in the period during
which it accrues, at the applicable Interest Rate for each Advance.

2.06. Payments. All payments and prepayments to be made in respect of
principal, interest, prepayment premiums or other amounts due from Borrower
hereunder or under the Note shall be payable on or before 1:00 p.m., Nashville
time, on the day when due, without presentment, demand, protest or notice of any
kind, all of which are hereby expressly waived, and an action therefor shall
immediately accrue. Such payments shall be made to Lender at Lender's office at
220 Athens Way, Nashville, Tennessee 37228-1399, or such other location
specified in writing by Lender, in immediately available funds, without setoff,
recoupment, counterclaims or any other deduction of any nature.

2.07. Indemnity. Borrower hereby indemnifies Lender against any losses,
claims, penalties, expenses, actions, suits, obligations, liabilities and Liens
(and all costs and expenses, including reasonable attorneys' fees incurred in
connection therewith), that Lender has sustained or incurred or may sustain or
incur in connection with any of the Collateral, or the enforcement, performance
or administration of the Loan Documents, or as a consequence of any default by
Borrower in the performance or observance of any covenant or condition contained
in this Agreement or the Loan Documents, including without limitation, the
breach of any representation or warranty, any failure of Borrower to pay when
due (by acceleration or otherwise) any principal, interest, fee or any other
amount due hereunder or under the Note, and any failure of Borrower to comply
with all applicable Requirements of Law (collectively, "Claims") except to the
extent of any Claims caused solely by Lender's gross negligence or willful
misconduct. Borrower's obligations under this Section 2.07 shall be part of the
Obligations and shall be secured by the Collateral. Borrower agrees that upon
written notice by Lender of the assertion of any Claims, Borrower shall, at
Lender's option, either assume full responsibility for, or reimburse Lender for
the reasonable costs and expenses of, the defense thereof. Lender shall have no
liability for consequential or incidental damages of any nature. The provisions
of this Section 2.07 shall survive the termination of this Agreement and payment
of the Obligations.

2.08. [Intentionally deleted].

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<PAGE> 18
2.09. Fees. Borrower shall pay Lender the fees described on Schedule
2.09 hereto in connection with this Agreement.

2.10. Lender's Expenses. Borrower agrees (a) to pay or reimburse Lender
for all its reasonable costs, fees, charges and expenses incurred or arising in
connection with the negotiation, review, preparation and execution of this
Agreement, the Loan Documents, any commitment or proposal letter, or any
amendment, supplement, waiver, modification to, or restructuring of this
Agreement, the Obligations or the other Loan Documents, including, without
limitation, reasonable legal fees and disbursements, expenses, document charges
and other charges and expenses of Lender, (b) to pay or reimburse Lender for all
its reasonable costs, fees, charges and expenses incurred in connection with the
administration of the Advances or the enforcement, protection or preservation of
any rights under or in connection with this Agreement or any other Loan
Documents, including, without limitation, reasonable legal fees and
disbursements, audit fees and charges, and all out-of-pocket expenses, (c) to
pay, indemnify, and to hold Lender harmless from, any and all recording and
filing fees and taxes and any and all liabilities with respect to, or resulting
from any delay in paying, stamp, excise and other taxes (excluding income and
franchise taxes and taxes of similar nature), if any, which may be payable or
determined to be payable in connection with the execution and delivery or
recordation or filing of, or consummation of any of the transactions
contemplated by, or any amendment, supplement or modification of, or any waiver
or consent under or in respect of, this Agreement and the other Loan Documents.
All of the amounts described in this Section are referred to collectively as the
"Lender's Expenses", shall be payable upon Lender's demand, and shall accrue
interest at the Interest Rate in effect when such demand is made from five (5)
days after the date of demand until paid in full. All Lender's Expenses, and
interest thereon, shall be part of the Obligations and shall be secured by the
Collateral. The agreements in this Section 2.10 shall survive repayment of the
Obligations. All Lender's Expenses that are outstanding on any Borrowing Date
shall be paid before or with such advance. If Borrower has not paid to Lender
the amount of all Lender's Expenses billed to Borrower at least five (5)
Business Days before such Borrowing Date, Lender shall be authorized to retain
from any Advance on such Borrowing Date the amount of such Lender's Expenses
that remain unpaid. Borrower's obligation to pay Lender's Expenses shall not be
limited by any limitation on the amount of the Commitment that may be designated
as available for such purposes, and any amounts so designated shall be used to
pay Lender's Expenses accrued at the time of any Advance before any of
Borrower's legal fees or similar expenses.

2.11. Guaranty. The Guarantor shall unconditionally guarantee prompt and
full payment of all the Obligations pursuant to the Guaranty.

ARTICLE 3: COLLATERAL AND SECURITY AGREEMENT

3.01. Grant of Security Interest. Borrower (as debtor) hereby assigns to
Lender as collateral, and grants to Lender (as secured party) a continuing
security interest in and to, all of the Borrower's right, title and interest in
and to the following property, whether now owned or hereafter acquired or
arising, wherever located, together with all substitutions therefor and all
accessions, replacements and renewals thereof, and in all proceeds thereof
(collectively, the "Collateral"):

(a) All the Equipment and Borrower's rights under the NTI Supply
Agreement pertaining to such Equipment;

(b) All general intangibles and intangible property constituting
part of, or provided

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<PAGE> 19
by or through NTI in connection with, the Equipment, or necessary for
the proper operation of the Equipment, including without limitation
insurance proceeds and amounts due under insurance policies, licenses,
license rights, rights in intellectual property, Software, Software
Licenses, computer programming (including source codes, object codes and
all other embodiments of computer programming or information), refunds,
warranties and indemnification rights, and all amounts owed at any time
to Borrower by Lender or NTI (collectively, "General Intangibles"); and

(c) All proceeds and products of any of the foregoing, including
without limitation (i) any and all proceeds of any insurance, indemnity,
warranty or guaranty payable to the Borrower from time to time with
respect to any of the Collateral, (ii) any and all payments (in any form
whatsoever) made or due and payable to the Borrower from time to time in
connection with any requisition, confiscation, condemnation, seizure or
forfeiture of all or any part of the Collateral by any Governmental
Authority (or any Person acting under color of governmental authority),
and (iii) any and all cash proceeds and non-cash proceeds in the form of
equipment, inventory, contracts, accounts, general intangibles, chattel
paper, documents, instruments, securities, or other proceeds in
connection with the collateral (collectively, "Proceeds").

3.02. Priority of Security Interests. The security interests granted by
Borrower to Lender are and shall be continuing and indefeasible first-priority
security interests in the Collateral, subject to no Liens except for Liens
permitted under Section 8.02 hereof.

3.03. Further Documentation; Pledge of Instruments. At any time and from
time to time, upon the written request of the Lender, and at the sole expense of
the Borrower, the Borrower shall promptly execute, deliver and record any
documents, instruments, agreements and amendments, and take all such further
action, as the Lender may reasonably deem desirable in obtaining the full
benefits of this Agreement and of the rights and powers herein granted,
including, without limitation, the filing of any financing statements or
amendments under the UCC. Financing Statements or amendments thereto describing
the Equipment being purchased with the proceeds of each Advance (or for which
reimbursement is being requested) will be completed and filed at the time of
such Advance. The Borrower also hereby authorizes the Lender to file any such
financing statement or amendment thereto, without the signature of the Borrower,
or with a copy or telecopy of the Borrower's signature, to the extent permitted
by applicable law, or to execute any financing statement or amendment thereof on
behalf of the Borrower as Borrower's attorney-in-fact. If any amount payable
under or in connection with any of the Collateral shall be or become evidenced
by any promissory note or other instrument or any certificated securities, such
note, instrument or certificate shall be immediately pledged and delivered to
the Lender hereunder, duly endorsed in a manner satisfactory to the Lender.

3.04. Further Identification of Collateral. Borrower shall furnish to
the Lender from time to time statements and schedules further identifying and
describing the Collateral and such other reports in connection with the
Collateral as the Lender may reasonably request, all in reasonable detail.
Borrower shall identify Equipment to be purchased with proceeds of each Advance
on the Borrowing Certificate for such Advance.

3.05. Remedies. Lender shall have all the rights and remedies of a
secured party under the UCC, and shall be entitled to exercise any and all
remedies available under Article 9 hereof or otherwise available at law or in
equity upon the occurrence of an Event of Default.

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<PAGE> 20
3.06. Standard of Care. Lender shall be deemed to have exercised
reasonable care in the custody and preservation of any of the Collateral in its
possession if it takes such action for that purpose as Borrower requests in
writing, but Lender's failure to comply with any such request shall not of
itself be deemed a failure to exercise reasonable care, and no failure of Lender
to preserve or protect any rights with respect to such Collateral against prior
parties, or to do any act with respect to the preservation of such Collateral
not so requested by Borrower, shall be deemed a failure to exercise reasonable
care in the custody or preservation of such Collateral.

3.07. Advances to Protect Collateral. All insurance expense and all
expenses of protecting, storing, warehousing, insuring, handling, maintaining
and shipping the Collateral (including, without limitation, all rent payable by
Borrower to any landlord of any premises where any of the Collateral may be
located), and, any and all taxes shall be borne and paid by Borrower. Lender may
(but shall not be obligated to) make advances to preserve, protect or obtain any
of the Collateral, including advances to pay taxes, insurance and the like, and
all such advances shall become part of the Obligations owing to Lender hereunder
and shall be payable to Lender on demand, with interest thereon from the date of
such advance until paid at the Default Rate in effect on the date of such
advance.

3.08. License to Use. Lender is hereby granted a license or other right
to use, without charge, Borrower's labels, patents, copyrights, rights of use of
any name, trade secrets, tradenames, trademarks and advertising matter, or any
tangible or intangible property or rights of a similar nature, as it pertains to
the Collateral, in advertising for sale and selling any Collateral, and
Borrower's rights under all licenses and franchise agreements with respect to
the Collateral shall inure to Lender's benefit.

ARTICLE 4: REPRESENTATIONS AND WARRANTIES

Borrower and Guarantor hereby represent and warrant to Lender as
follows:

4.01. Organization and Qualification. Each of the Borrower and the
Guarantor is duly organized, validly existing and in good standing as a
corporation under the laws of its state of organization. Each of the Borrower
and the Guarantor is duly qualified to do business and in good standing in each
jurisdiction in which the failure to receive or retain such qualification would
have a Material Adverse Effect.

4.02. Authority and Authorization. Each of the Borrower and the
Guarantor has all requisite corporate right, power, authority and legal right to
execute and deliver and perform its obligations under this Agreement, to make
the borrowings provided for herein, and to execute and deliver and to perform
its obligations under the Note. The Borrower's and the Guarantor's execution,
delivery and performance of the Basic Agreements have been duly and validly
authorized by all necessary corporate proceedings on the part of each of the
Borrower and the Guarantor.

4.03. Execution and Binding Effect. This Agreement, the Note and all
other Basic Agreements have been or will be duly and validly executed and
delivered by the Borrower and the Guarantor, and constitute or, when executed
and delivered will constitute, the legal, valid and binding obligations of
Borrower and Guarantor enforceable in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, receivership, moratorium or other laws affecting creditors'
rights generally.

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<PAGE> 21
4.04. Governmental Authorizations. Except for the consents identified on
Schedule 4.04 hereto (the "Required Consents"), no authorization, consent,
approval, license, exemption or other action by, and no registration,
qualification, designation, declaration or filing with, any Governmental
Authority (other than the filing of financing statements and continuation
statements) is or will be necessary in connection with execution and delivery of
this Agreement, the Note or any other Loan Documents by Borrower or Guarantor,
consummation of the transactions herein or therein contemplated, performance of
or compliance by Borrower or Guarantor with the terms and conditions hereof or
thereof or the legality, validity and enforceability hereof or thereof.

4.05. Regulatory Authorizations. Borrower or Guarantor holds all
authorizations, permits and licenses required by the FCC or the PUC or any
Communications Law for the construction and operation of the Borrower's and
Guarantor's telecommunications system, and all such Regulatory Authorizations
are either: in full force and effect, are subject to no further administrative
or judicial review and are therefore final; or any Regulatory Authorizations
that are not in full force and effect will not have a material adverse affect on
the operations or financial condition of Borrower or Guarantor. Lender will not
by reason of the execution, delivery and performance (other than the enforcement
of remedies) of any of the Loan Documents, be subject to the regulation or
control of either the FCC or the PUC. The Regulatory Authorizations are
described on Schedule 4.05.

4.06. Material Agreement; Absence of Conflicts. The execution and
delivery of this Agreement, the Note and the other Loan Documents, the
consummation of the transactions herein or therein contemplated and the
performance of or compliance with the terms and conditions hereof or thereof by
Borrower and Guarantor will not (a) materially violate any applicable Law; (b)
conflict with or result in a material breach of or a default under the
Organizational Documents of the Borrower or the Guarantor or any agreement or
instrument to which Borrower or Guarantor is a party or by which Borrower or
Guarantor or its properties is bound; or (c) result in the creation or
imposition of any Lien upon any property (now owned or hereafter acquired) of
Borrower or Guarantor except as otherwise contemplated by this Agreement.

4.07. No Restrictions. Each of Borrower and Guarantor is not a party or
subject to any contract, agreement, or restriction in its Organizational
Documents that materially and adversely affects its business or the use or
ownership of any of its properties or operation of its business, except as set
forth on Schedule 4.07 hereto. Each of Borrower and Guarantor is not a party or
subject to any contract or agreement which restricts its right or ability to
incur Indebtedness, other than as set forth on Schedule 4.07, none of which
prohibit the Borrower's or Guarantor's execution of or compliance with this
Agreement. Neither Borrower nor Guarantor has agreed or consented to cause or
permit in the future (upon the happening of a contingency or otherwise) any of
the Collateral, whether now owned or hereafter acquired, to be subject to a Lien
that is not a Permitted Encumbrance.

4.08. Financial Statements. Guarantor has furnished to Lender the most
recent annual or quarterly financial statements of the Guarantor, certified by a
Responsible Officer of the Guarantor, including balance sheets and related
statements of income and retained earnings and changes in financial position, as
described on Schedule 4.08 hereof. Such financial statements (including the
notes thereto) present fairly the financial condition of Guarantor on a
consolidated basis as of the end of such fiscal period and the results of its
operations and the changes in its financial position for the fiscal period then
ended, all in conformity with GAAP (except that quarterly reports may omit
accompanying notes thereto and may be subject to year-end audit adjustments)
applied on a basis consistent with that of the preceding fiscal period. Any
projections and pro forma financial statements delivered by Guarantor to Lender
were

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<PAGE> 22
prepared in good faith, based on reasonable assumptions, including without
limitation, the cost of capital.

4.09. Financial Accounting Practices. Each of Borrower and Guarantor has
made and kept books, records and accounts which, in reasonable detail,
accurately and fairly reflect its respective transactions and dispositions of
its assets, and shall maintain a system of internal accounting controls
sufficient to provide reasonable assurances that (a) transactions are executed
in accordance with management's general or specific authorization, (b)
transactions are recorded as necessary (i) to permit preparation of financial
statements in conformity with GAAP and (ii) to maintain accountability for
assets, (c) access to assets is permitted only in accordance with management's
general or specific authorization and (d) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and appropriate
action is taken with respect to any differences.

4.10. Accurate and Complete Disclosure. No representation or warranty
made by Borrower or Guarantor under this Agreement is false or misleading in any
material respect (including by omission of material information necessary to
make such representation or warranty) and no statement made by Borrower or
Guarantor in any financial statement, certificate, report, exhibit or document
furnished by Borrower or Guarantor to Lender pursuant to or in connection with
this Agreement (including without limitation any filings with the Securities
Exchange Commission, the FCC or the PUC) was false or misleading as of the date
made in any material respect (including by omission of material information
necessary to make such representation, warranty or statement not misleading).
There are no facts that evidence or create a Material Adverse Effect, or, so far
as the Borrower and Guarantor can now foresee, will evidence or create a
Material Adverse Effect, which has not been set forth in the financial
statements referred to in Section 4.08 hereof or otherwise disclosed in writing
to the Lender prior to the First Borrowing Date.

4.11. No Event of Default; Compliance with Material Agreements. No event
has occurred and is continuing and no condition exists which constitutes a
Default or an Event of Default after giving effect to the Advance to be made on
the First Borrowing Date. As of the date hereof, each of Borrower or Guarantor
is not in violation of any term of its material agreements or instruments to
which it is a party or by which it or its properties is bound.

4.12. Litigation. Except as set forth in Schedule 4.12, there is no
pending action, suit or threatened proceeding by or before any Governmental
Authority against or affecting Borrower or Guarantor or any of their properties,
rights or licenses which if adversely decided would have a Material Adverse
Effect.

4.13. Rights to Property; Intellectual Property. Borrower has good and
marketable title, subject only to the Permitted Encumbrances, to the Collateral
and to all personal and real property purported to be owned by it as reflected
in the most recent balance sheet referred to in Section 4.08 hereof (except as
sold or otherwise disposed of in the ordinary course of business as no longer
used or useful in the conduct of the business). Borrower owns or possesses the
right to use all patents, trademarks, service marks, trade names, copyrights,
know-how, franchises, software and software licenses necessary for the operation
of its business, free from burdensome restrictions.

4.14. Financial Condition. Each of Borrower's and Guarantor's financial
condition is accurately described in the Certificate of Financial Condition
executed by Borrower and Guarantor pursuant hereto.

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<PAGE> 23
4.15. Taxes. Each of Borrower's and Guarantor's federal tax
identification numbers is set forth on Schedule 1 hereto. All tax returns
required to be filed by Borrower or Guarantor have been properly prepared,
executed and filed, and all taxes, assessments, fees and other governmental
charges upon Borrower or Guarantor or upon any of its respective properties,
incomes, sales or franchises which are shown to be due and payable thereon have
been paid, other than taxes or assessments the validity or amount of which
Borrower or Guarantor is contesting in good faith. The reserves and provisions
for taxes on the books of Borrower and Guarantor are adequate for all open years
and for its current fiscal period.

4.16. No Material Adverse Change. Since the date of the financial
statements referenced in Section 4.08, there has been no Material Adverse Change
and there exists no present condition or state of facts or circumstances which
would have a Material Adverse Effect or prevent Borrower or Guarantor from
conducting its business after the consummation of the transaction contemplated
by this Agreement.

4.17. No Regulatory Event. No Regulatory Event has occurred and is
continuing, except as described on Schedule 4.17 hereto.

4.18. Trade Relations. There exists no actual or threatened termination,
cancellation or limitation of, or any modification or change in, the business
relationship between Borrower or Guarantor and any carrier, any labor
organizations, any customer or any group thereof whose agreements with Borrower
or Guarantor or use of the Borrower's or Guarantor's Equipment individually or
in the aggregate are material to the business of Borrower or Guarantor, or with
any material supplier.

4.19. No Brokerage Fees. No brokerage or other fee, commission or
compensation is to be paid by Borrower or Guarantor to any Person in connection
with the loans to be made hereunder. Each of Borrower and Guarantor hereby
indemnifies Lender against any claims brought against Lender for brokerage fees
or commissions of any Person based on an agreement with Borrower or Guarantor
and agrees to pay all expenses incurred by Lender in connection with the defense
of any action or proceeding brought to collect any such brokerage fees or
commissions.

4.20. Margin Stock; Regulation U. Neither Borrower nor Guarantor is
engaged principally, or as one of its important activities, in the business of
extending credit for the purpose of purchasing or carrying margin stock. The
making of the Advances and the use of the proceeds thereof will not violate
Regulations G, U or X of the Board of Governors of the Federal Reserve System.

4.21. Investment Company; Public Utility Holding Company. Each of
Borrower and Guarantor is not an "investment company" or a "company controlled
by an investment company" within the meaning of the Investment Company Act of
1940, as amended, or a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.

4.22. Personal Holding Company; Subchapter S. Each of Borrower and
Guarantor is not a "personal holding company" as defined in Section 542 of the
Code, and Borrower is not a "Subchapter S" corporation within the meaning of the
Code.

4.23. ERISA. (i) With respect to any Plan, there is no Reportable Event
currently under consideration by the PBGC which may reasonably result in any
material liability to the PBGC with respect to any Plan, (ii) no Plan has been
terminated, (iii) no trustee has been appointed by any United

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<PAGE> 24
States District Court to administer any Plan, (iv) the PBGC has not instituted
proceedings to terminate any Plan or to appoint a trustee to administer any such
Plan, (v) neither the Borrower nor the Guarantor has withdrawn, completely or
partially, from any Plan and (vi) neither the Borrower nor the Guarantor has
incurred secondary liability for withdrawal liability payments under any Plan.

4.24. Environmental Warranties. Neither the Borrower nor the Guarantor
is in violation of any Environmental Laws applicable to Borrower, Guarantor or
their business or to the real or personal property owned, leased or operated by
Borrower or Guarantor that will have a material adverse affect on the operations
or financial condition of Borrower or Guarantor Neither Borrower nor Guarantor
has received notice of, or is aware of, any violations or alleged violations, or
any liability or asserted liability, under any such Environmental Laws that will
have a material adverse affect on the operations or financial condition of
Borrower or Guarantor.

4.25. Security Interests. The provisions of Article 3 hereof are
effective to create in favor of Lender a legal, valid and enforceable Lien on or
security interest in all of the Collateral, and, when the recordings and filings
described on Schedule 4.25 hereto have been effected in the public offices
listed on said Schedule 4.25, this Agreement will create a perfected
first-priority security interest in all right, title, estate and interest of
Borrower in the Collateral, and subject to no other Liens except for Permitted
Encumbrances. All action necessary or desirable to protect and perfect such
security interest in each item of the Collateral will have been duly taken prior
to the First Borrowing Date. The recordings and filings shown on said Schedule
4.25 are all the actions necessary or advisable in order to establish, protect
and perfect the interest of Lender in the Collateral.

4.26. Place of Business. The chief executive offices of Borrower and
Guarantor are identified on Schedule 4.26 hereto. The Borrower's and Guarantor's
principal places of business in the state(s) where the Equipment is located are
identified on Schedule 4.26 hereto. The Borrower's records concerning the
Collateral are kept at one or both of these addresses.

4.27. Location of Collateral. The Collateral is and will be kept at the
locations identified on Schedule 4.26 hereto or such other locations as may be
permitted under Section 8.05.

4.28. Clear Title To Collateral. The Borrower is the sole owner of each
item of the Collateral, having good and marketable title thereto, free and clear
of any and all Liens, claims, or rights of others, except for the security
interest granted herein to the Lender and the other Permitted Encumbrances.

4.29. Assumed Names. Except as set forth on Schedule 4.29 hereto,
Borrower or Guarantor does not conduct business under any assumed names or trade
names, and has not conducted business under any other names, or any assumed
names or trade names, at any time prior to the date hereof.

4.30. Transactions with Affiliates. No Affiliate and no officer,
director or Owner of the Borrower or Guarantor or any individual related by
blood, marriage, adoption or otherwise to any such officer, director or Owner or
Guarantor, or any Person in which any such officer, director, Owner, Guarantor
or individual related thereto owns any beneficial interest, is a party to any
agreement, contract, commitment or transaction with the Borrower or Guarantor or
has any material interest in any material property used by the Borrower or
Guarantor, except as set forth on Schedule 4.30 hereto.

4.31. NTI Supply Agreement. The NTI Supply Agreement has been duly
executed and delivered by the Borrower and NTI, is in full force and effect, and
a true, correct and complete copy

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<PAGE> 25
thereof (including all annexes, attachments and amendments thereto) has been
delivered to Lender, and there are no other side letters, waivers or other
agreements affecting the terms thereof.

ARTICLE 5: CONDITIONS OF CLOSING

On or before the Closing Date, the following conditions shall have been
satisfied:

5.01 Closing Certificates. A certificate of Borrower and a certificate
of Guarantor signed by a duly authorized Responsible Officer, certifying as to
(i) true copies of Organizational Documents of Borrower and Guarantor in effect
on such date; (ii) true copies of all corporate action taken by Borrower and
Guarantor and corporate action relative to this Agreement, the Note and the
other Loan Documents; (iii) the names, true signatures and incumbency of the
Responsible Officers of Borrower and Guarantor authorized to execute and deliver
this Agreement, the Note and the other Loan Documents; (iv) Certificates of Good
Standing (or equivalent certificate) for the Borrower and Guarantor, duly issued
by the Secretary of State of each state in which the Borrower and Guarantor do
business or intend to do business; and (v) such other matters as Lender shall
request.

5.02 Opinions of Counsel. Lender shall have received a written opinion
of counsel to Borrower, substantially in the form of Exhibit C hereto, dated as
of the Closing Date and in form and substance satisfactory to Lender.

5.03. Closing Documents. Lender shall have received the following
documents, all in form and substance satisfactory to Lender:

(a) Agreement. This Agreement, duly executed by Borrower and
Guarantor;

(b) Note. The Note, duly executed by Borrower;

(d) Insurance. Policies and certificates of insurance required
by Section 7.07, accompanied by evidence of the payment of the premiums
therefor;

(e) Financial Statements. The financial statements described in
Section 4.08 hereof;

(f) Balance Sheet. The most recent quarterly consolidated
balance sheet of the Guarantor filed with the SEC, certified by a
Responsible Officer as fairly presenting the financial condition of the
Guarantor.

(g) Certificate of Financial Condition. A Certificate of
Financial Condition duly executed by a Responsible Officer of the
Borrower and a Responsible Officer of the Guarantor.

(h) Guaranty. The Guaranty duly executed by Guarantor, together
with a legal opinion of Guarantor's counsel in the form and substance
satisfactory to Lender and such other supporting documentation as Lender
may reasonably require.

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<PAGE> 26
(i) Map or Survey and Layout. A detailed map or survey
describing in detail the Equipment by location by address or lot and
block plat or mileage marker, the necessary physical spaces and
locations owned or leased for operation of Equipment.

(j) Environmental Matters. Duly executed Environmental
Certificates, satisfactory to Lender, with respect to the locations of
the Equipment, substantially in the form of Exhibit E hereto.

ARTICLE 6: CONDITIONS OF LENDING

6.01. Conditions for Initial Advance. On or before the First Borrowing
Date, the following conditions shall have been met to Lender's satisfaction:

(a) Financing Statements. Lender shall have received all UCC-1
financing statements necessary to perfect the Liens granted hereby in
form and substance satisfactory to Lender, each duly executed by
Borrower, and duly recorded in all the offices identified on Schedule
4.25 hereto.

(b) Pre-Funding Lien Searches. Lender shall have received
satisfactory results of Lien searches in all jurisdictions reasonably
determined by Lender to be appropriate reflecting the filing of
financing statements in favor of Lender pursuant hereto and no other
Liens other than Permitted Encumbrances on any of the Collateral.

(c) Required Consents. Lender shall have received satisfactory
evidence of the Borrower's or Guarantor's obtaining the Required
Consents.

(d) Fees. Lender shall have received the fee(s) described in
Section 2.09 hereof.

6.02. Conditions for All Advances. The obligation of Lender to make any
Advance hereunder is subject to the Borrower's and Guarantor's performance of
its obligations hereunder on or before the date of such Advance, and to the
satisfaction of the following further conditions on or before the Borrowing Date
for any Advance, including the first Advance:

(a) Filings, Registrations and Recordings. Any financing
statements or other recordings required hereunder shall have been
properly filed, registered or recorded in each office in each
jurisdiction required in order to create in favor of the Lender a
perfected first- priority Lien on the Collateral, subject to no other
Lien; the Lender shall have received acknowledgment copies of all such
filings, registrations and recordations stamped by the appropriate
filing officer; and Lender shall have received results of searches of
such filing offices, and satisfactory evidence that any other Liens
(other than Permitted Encumbrances) on the Collateral have been duly
released, that all necessary filing fees, recording fees, taxes and
other expenses related to such filings, registrations and recordings
have been paid in full.

(b) Borrowing Certificate. Lender shall have received a duly
executed Borrowing Certificate in the form of Exhibit B, including a
detailed itemization of all costs of goods and

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<PAGE> 27
services to be paid with the proceeds of the Advance (or for which
reimbursement is being requested) and accompanied by supporting
documentation satisfactory to Lender, attached as Schedule 1 to the
Borrowing Certificate.

(c) Reporting Requirements. Borrower and Guarantor shall have
provided Lender with all relevant reports and information required under
Article 7 hereof.

(d) No Regulatory Event. No Regulatory Event (in either
Borrower's, Guarantor's or Lender's reasonable determination) shall have
occurred and be continuing or would exist upon the consummation of
transactions to occur on such Borrowing Date.

(e) No Default or Event of Default. No Default or Event of
Default shall have occurred and be continuing or would exist upon the
consummation of transactions to occur on such Borrowing Date.

(f) No Material Adverse Change. No Material Adverse Change shall
have occurred, or would occur after giving effect to such Advance, since
the date of the last financial statements delivered to Lender pursuant
to Section 4.08 or 7.01 hereof.

(g) Representations and Warranties. The representations and
warranties contained in Article 4 hereof shall be true on and as of the
date of each such Advance hereunder.

(h) Lender's Expenses. All closing costs, and other Lender's
Expenses shall have been paid in full, (or shall be paid first from such
Advance as provided in Section 2.03 hereof).

(i) Opinions. Lender shall have received from Borrower and
Guarantor such opinions of counsel for the Borrower and Guarantor as may
be reasonably acceptable to Lender in form and substance with respect to
the perfection and priority of the Liens created by the Security
Documents in each such jurisdictional location.

(j) Details, Proceedings and Documents. All legal details and
proceedings in connection with the transactions contemplated by this
Agreement shall be reasonably satisfactory to Lender and Lender shall
have received all such counterpart originals or certified or other
copies of such documents and proceedings in connection with such
transactions, in form and substance reasonably satisfactory to Lender,
as Lender may from time to time request.

(k) Consents. Lender shall have received all Consents duly
executed by all parties and in form satisfactory to Lender.

(l) Post-Closing Items. The post-closing items described on
Schedule 6.02 hereto, if any, shall have been completed in the time
permitted, and Borrower and Guarantor shall have provided Lender with
satisfactory evidence thereof.

(m) Financing Statements or Amendments. Lender shall have
received executed financing statements or amendments required by Section
3.03 hereof.

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<PAGE> 28
6.03. Affirmation of Representations and Warranties. Any Borrowing
Certificate or other request for any Advance hereunder shall constitute a
representation and warranty that (a) the representations and warranties
contained in Article 4 hereof are true and correct on and as of the date of such
request with the same effect as though made on and as of the date of such
request and (b) on the date of such request no Default or Event of Default has
occurred and is continuing or exists or will occur or exist after giving effect
to such Advance (for this purpose such Advance being deemed to have been made on
the date of such request). Failure of Lender to receive notice from Borrower or
Guarantor to the contrary before such Advance is made shall constitute a further
representation and warranty by Borrower and Guarantor that (x) the
representations and warranties of Borrower and Guarantor contained in the first
sentence of this Section 6.03 are true and correct on and as of the date of such
Advance with the same effect as though made on and as of the date of such
Advance and (y) on the date of the Advance no Default or Event of Default has
occurred and is continuing or exists or will occur or exist after giving effect
to such Advance.

6.04. Deadline for Funding Conditions. Lender shall have no obligation
to make any Advances hereunder if all of the conditions set forth in Article 5
and in Sections 6.01 and 6.02 hereof have not been fully satisfied, and the
first Advance made hereunder, by the Financing Termination Date.

ARTICLE 7: AFFIRMATIVE COVENANTS

Each of Borrower and Guarantor hereby agrees that as long as the
commitment hereunder remains in effect, the Note remains outstanding or unpaid
or any other amount is owing to Lender hereunder or under any of the Loan
Documents, Borrower and Guarantor shall keep and perform fully each and all of
the following covenants:

7.01. Reporting and Information Requirements.

(a) Annual Audit Reports. After the close of each fiscal year of
Guarantor, at the time of filing annual reports with the Securities
Exchange Commission ("SEC"), Guarantor shall furnish or cause to be
furnished to Lender audited statements of income, statements of cash
flow and retained earnings for such fiscal year and the Guarantor's
balance sheet as of the close of such fiscal year, and notes to each,
all in reasonable detail, and beginning with Guarantor's second full
fiscal year setting forth in comparative form the corresponding figures
for the preceding fiscal year, with such statements and balance sheet to
be certified without qualification by independent certified public
accountants of recognized national standing selected by Guarantor and
reasonably satisfactory to Lender.

(b) Quarterly Reports. After the end of each fiscal quarter, at
the time of filing quarterly reports with the SEC, Guarantor shall
furnish to Lender (i) unaudited consolidated statements of income,
statements of cash flow and retained earnings for Guarantor for such
quarter and for the period from the beginning of Guarantor's then
current fiscal year to the end of such quarter, and an unaudited
consolidated balance sheet of Guarantor as of the end of such quarter,
all in reasonable detail and certified by a Responsible Officer of
Guarantor as presenting fairly the financial position of Guarantor as of
the end of such quarter and the results of its operations and the
changes in its financial position for such quarter, in conformity with
GAAP (except for accompanying notes thereto), subject to year-end audit
adjustments, and (ii) upon

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<PAGE> 29
Lender's request, an aging of accounts payable and accounts receivable.

(d) Compliance Certificates. Within sixty (60) days after the
end of each Calendar Quarter, Borrower and Guarantor shall deliver to
Lender a certificate dated as of the end of such Calendar Quarter,
signed on behalf of Borrower and Guarantor by a Responsible Officer of
Borrower and Guarantor (i) stating that as of the date thereof no Event
of Default has occurred and is continuing or exists, or if an Event of
Default has occurred and is continuing or exists, specifying in detail
the nature and period of existence thereof and any action with respect
thereto taken or contemplated to be taken by Borrower or Guarantor; (ii)
stating that the signer has personally reviewed this Agreement and that
such certificate is based on an examination made by or under the
supervision of the signer sufficient to assure that such certificate is
accurate; and (iii) calculating and certifying Borrower's and
Guarantor's compliance with the financial covenants set forth in Section
7.15 hereof.

(e) Accountants' Certificate. Each set of year-end audited
consolidated statements and balance sheet delivered pursuant to Section
7.01(a) hereof shall be accompanied by a certificate or report dated the
date of such statement and balance sheet by the accountants who
certified such statements and balance sheet stating in substance that
they have reviewed this Agreement and that in making the examination
necessary for their certification of such statements and balance sheet
they did not become aware of any Default, or if they did become so
aware, such certificate or report shall state the nature and period of
existence thereof.

(f) Projections. If requested by Lender, Guarantor shall deliver
to Lender within thirty (30) days prior to the beginning of each
calendar year projections of its anticipated income, expenses, cash
flow, assets and liabilities for each month or quarter of such calendar
year, prepared in good faith and in a manner and format consistent with
other financial statements provided by Guarantor to Lender. Such
projections shall present fairly the anticipated financial condition of
the Guarantor and shall be certified by a Responsible Officer of the
Guarantor. Upon Lender's request, or following any material change in
the Guarantor's financial condition or business, such reports shall be
provided to Lender quarterly, within thirty (30) days prior to the
beginning of each Calendar Quarter.

(g) Amendments to Indenture. In the event that the Indenture is
amended or supplemented, the Guarantor shall deliver to Lender a copy of
the amendment or supplement to the Indenture within ten (10) days after
the execution of such amendment or supplement.

(h) Other Reports and Information. Promptly upon their becoming
available to Borrower or Guarantor, Borrower or Guarantor shall deliver
to Lender copies of (i) all regular or special reports or effective
registration statements which Borrower or Guarantor shall file with
Governmental Authorities, the FCC or the PUC (or any successor thereto)
or any securities exchange, (ii) financial statements, material reports,
and other information distributed by Borrower or Guarantor to its
creditors or the financial community in general, and (iii) all press
releases issued by or concerning Borrower or Guarantor or the Equipment.

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(i) Further Information. Borrower or Guarantor will promptly
furnish to Lender such other information (including any report by
independent auditors) in such form as Lender may reasonably request.

7.02 Other Notices. Promptly upon a Responsible Officer of Borrower or
Guarantor becoming aware of any of the following, Borrower or Guarantor shall
give Lender notice thereof, together with a written statement of a Responsible
Officer of Borrower or Guarantor setting forth the details thereof and any
action with respect thereto taken or contemplated to be taken by Borrower or
Guarantor:

(a) a Default or Event of Default;

(b) any Material Adverse Change;

(c) a material default or breach by Borrower or Guarantor under
any other contractual obligation to which it is a party or by which it
or its properties is bound, if the consequences of such breach of
default are material to the business, operations or financial condition
of Borrower or Guarantor;

(d) any event that the Borrower or Guarantor reasonably
determines would constitute a Regulatory Event;

(e) the commencement, existence or threat of any proceeding by
or before any Governmental Authority against Borrower or Guarantor
which, if adversely decided, would have a Material Adverse Effect;

(f) Borrower's or Guarantor's receipt of any notice of violation
of, or liability under, any Environmental Laws affecting Borrower or
Guarantor or any of their properties; or

(g) any Change in Control or any material change in the
management of Borrower or Guarantor.

7.03. Notice of Pension-Related Events. The Borrower or Guarantor shall
promptly furnish Lender with written notice upon the receipt by the Borrower or
Guarantor or the administrator of any Plan of any notice, correspondence or
other communication from the PBGC, the IRS, the Secretary of Treasury, the
Department of Labor, or any other Person, as the case may be, relating to (i)
any Reportable Event, (ii) any funding deficiency with respect to any Plan,
(iii) any liability, either primary or secondary, with respect to complete or
partial withdrawal from any Plan, (iv) proceedings to terminate any Plan or (v)
the appointment of a trustee for any Plan. Such notice shall be accompanied by
any pertinent documents including, but not limited to, the relevant notice,
correspondence or other communication and a statement of a Responsible Officer
of the Borrower or Guarantor describing the event or the action taken and the
reasons therefor.

7.04. Inspection Rights. Borrower shall upon reasonable notice permit
such persons as Lender may designate to visit and inspect the Collateral or any
other properties of Borrower, to examine its books and records and take copies
and extracts therefrom and discuss its respective affairs with its officers,
employees and independent engineers at such times and as often as Lender may
reasonably request. Borrower hereby authorizes such officers, employees, and
independent engineers to discuss with Lender the affairs of Borrower.

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7.05. Preservation of Corporate Existence and Qualification. Each of
Borrower and Guarantor shall maintain its existence, good standing and rights in
full force and effect in its jurisdiction of organization. Borrower and
Guarantor shall qualify to do business and remain qualified and in good standing
and shall obtain all necessary authorizations to do business in each
jurisdiction in which failure to receive or retain such would have a Material
Adverse Effect.

7.06. Continuation of Business. Borrower and Guarantor shall continue to
engage predominantly in the telecommunications service business, which may
include providing internet services, and shall acquire and maintain in full
force and effect all rights, privileges, franchises and licenses necessary for
the operation and maintenance of the Borrower's and Guarantor's
telecommunications system (including, without limitation any license or
authorization required by the FCC or any PUC).

7.07. Insurance.

(a) Borrower shall provide and maintain or cause to be
maintained at all times insurance in such forms and covering such risks
and hazards and in such amounts and with an insurance corporation with a
Best rating of "A" or above, licensed to do business in the states where
the Equipment and the Borrower are located, as may be satisfactory to
Lender, as shown on Schedule 7.07 hereto, and otherwise as may be
required by the Security Documents.

(b) Borrower shall cause (i) all liability insurance policies to
name Lender as an additional insured, (ii) all physical damage insurance
policies to contain a lender's or mortgagee's loss payable provision
acceptable to Lender with respect to the Collateral, (iii) all insurance
policies to provide that no assignment, cancellation, modification,
reduction in amount or adverse change in coverage thereof shall be
effective until at least thirty (30) days after receipt by Lender of
written notice thereof, (iv) all insurance policies to insure the
interests of Lender with respect to the Collateral regardless of any
breach of or violation by Borrower of any warranties, declarations or
conditions contained therein and (v) all insurance policies to provide
that Lender shall have no obligation or liability for premiums,
commissions, assessments or calls in connection with such insurance.
Lender shall be under no obligation to verify the adequacy or existence
of any insurance coverage. Borrower shall furnish Lender copies of, or
acceptable certificates with respect to, all such policies prior to the
Closing Date, and shall provide to Lender, at least thirty days prior to
each policy expiration date, evidence of the insurance being maintained
by Borrower in compliance with this Section 7.07(b). Certificates for
insurance required under subsection (i) above shall be in ACORD Form 27
(attached hereto at Schedule 7.07), and all certificates shall be
satisfactory in form and substance to Lender.

(c) If the Collateral is partially or totally damaged or
destroyed, Borrower shall give prompt notice to Lender, and all
insurance proceeds, less the costs of collection thereof, shall be paid
to or retained by Lender. Settlements, adjustments or compromises of any
claims for loss, damage or destruction to the Collateral shall be made
by Borrower as long as no Event of Default has occurred and is
continuing, and otherwise shall be made solely by Lender. Borrower
hereby authorizes and directs any affected insurance company to pay such
proceeds directly to Lender, and to rely on Lender's statement as to
whether an Event of Default has occurred. Borrower shall pay all costs
of collection of insurance proceeds payable on account of such damage or
destruction. If no Default or Event of Default has occurred and is
continuing on the date the Collateral is partially or totally damaged or
destroyed, Lender shall make available to Borrower the proceeds of any
physical damage insurance actually paid to Lender in respect of such
damage

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<PAGE> 32
or destruction of the Collateral (after deducting therefrom any sums
retained by Lender in reimbursement for costs of collection) to pay the
cost of restoration, and Borrower shall proceed promptly with the work
of restoration of the Collateral and shall pursue the work of
restoration diligently to completion. If any Default or Event of Default
has occurred and is continuing either on the date of such damage or
destruction or on the date such insurance proceeds are paid, or if any
Default or Event of Default shall occur prior to completion of such work
of restoration, then Lender, at its option, may apply such insurance
proceeds in payment of any of the Obligations, in such order as Lender
may elect in its sole discretion. Any insurance proceeds remaining after
completion of work or restoration shall, at Lender's election, be
applied in accordance with Section 2.04(c) hereof (but without
prepayment premium), or paid over to Borrower. Upon completion of any
restoration, Borrower shall deliver to Lender a certificate stating that
the restoration has been duly completed and accounting for the use of
any insurance proceeds in such restoration.

7.08. Payment of Taxes, Charges and Claims. Borrower or Guarantor shall
pay or discharge:

(a) on or prior to the date on which penalties thereto accrue,
all taxes, assessments and other government charges or levies imposed
upon it or any of its properties or income (including such as may arise
under Section 4062, Section 4063 or Section 4064 of ERISA, or any
similar provision of law);

(b) on or prior to the date when due, all lawful claims of
materialmen, mechanics, carriers, warehousemen, and other like persons
which could result in creation of a Lien upon any such property; and

(c) on or prior to the date when due, all other lawful claims
which, if unpaid, might result in the creation of a Lien upon any such
property (other than Permitted Encumbrances) or which, if unpaid, might
give rise to a claim entitled to priority over general creditors of
Borrower or Guarantor in a case under Title 11 (Bankruptcy) of the
United States Code, as amended, or in any insolvency proceeding or
dissolution or winding-up involving Borrower or Guarantor.

Notwithstanding the foregoing, Borrower shall be entitled to contest or
appeal the requirements of any Law or Governmental Authority or the payment of
any tax, assessment, charge, levy or claim, or any judgment entered against the
Borrower or Guarantor, or the creation of any carrier's, warehousemen's,
mechanic's, materialmen's, repairmen's or other like Liens on the Collateral
arising in the ordinary course of business (collectively, in this Section 7.08,
the "requirements"), as long as (i) such requirements are being contested in
good faith by appropriate proceedings diligently conducted; (ii) Borrower or
Guarantor has given Lender written notice of such requirements and its intent to
contest them, with supporting reasons for such contest, before the addition of
any interest or penalties that may accrue on such requirements; (iii) Borrower
or Guarantor maintains adequate cash reserves and makes other appropriate
provisions as may be required by GAAP to provide for any liability arising from
such requirements; (iv) the contesting of, or failure to comply with, such
requirements does not in any way jeopardize the Borrower's or Guarantor's
ability or authority to operate all or any part of the Collateral or the
continuing priority of Lender's security interests in the Collateral; (vi) the
contesting of, or failure to comply with, such requirements does not have a
Material Adverse Effect; and (vii) any foreclosure, attachment, execution, sale
or similar proceeding against the Borrower or Guarantor or any of its properties
in connection with any such requirements is duly stayed by posting of a bond or
security deposit or by other action sufficient under applicable law to stay such
foreclosure, attachment, execution,

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sale or other proceedings.

7.09. Financial Accounting Practices. Borrower or Guarantor shall make
and keep books, records and accounts which, in reasonable detail, accurately and
fairly reflect its transactions and dispositions of its assets and maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (a) transactions are executed in accordance with management's
general or specific authorization, (b) transactions are recorded as necessary
(i) to permit preparation of financial statements in conformity with GAAP and
(ii) to maintain accountability for assets, (c) access to assets is permitted
only in accordance with management's general or specific authorization and (d)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.

7.10. Compliance with Laws. Borrower and Guarantor shall comply in all
respects with all Laws applicable to Borrower and Guarantor, provided that
Borrower and Guarantor shall not be deemed to be in violation of this Section
7.10 as a result of any failure to comply which would not result in any
liability or exposure to Lender or any fines, penalties, injunctive relief or
other civil or criminal liabilities which, in the aggregate, would materially
affect the business, operations or financial condition of Borrower or Guarantor
or the ability of Borrower or Guarantor to perform its obligations under this
Agreement or the Note.

7.11. Use of Proceeds. Borrower shall use the proceeds of Advances
hereunder only as set forth in Section 2.01 hereof.

7.12. Government Authorizations; Regulatory Authorizations, Etc.
Borrower and Guarantor shall at all times obtain and maintain in force all
Regulatory Authorizations and all other authorizations, permits, consents,
approvals, licenses, exemptions and other actions by, and all registrations,
qualifications, designations, declarations and other filings with, any
Governmental Authority necessary in connection with execution and delivery of
this Agreement or the Note, consummation of the transactions herein or therein
contemplated, performance of or compliance with the terms and conditions hereof
or thereof or to ensure the legality, validity and enforceability hereof or
thereof.

7.13. Contracts and Franchises. Borrower and Guarantor shall comply with
all agreements or instruments to which it is a party or by which it or any of
its properties (now owned or hereafter acquired) may be subject or bound and
shall maintain any and all franchises it may have or hereafter acquire, provided
that Borrower and Guarantor shall not be deemed to be in violation of this
Section 7.13 as a result of any failure to comply with any agreement if such
failure would not have Material Adverse Effect.

7.14. Consents. Borrower or Guarantor shall obtain such Landlord's
Consents and other third party consents as Lender shall reasonably request to
protect its Liens and its access to the Collateral.

7.15. Financial Covenants. Guarantor shall comply with the financial
covenants set forth on Schedule 7.15 hereto.

7.16. Construction and Storage. The Collateral shall be installed and
equipped in full compliance with the Requirements of Law affecting the
Collateral except to the extent a failure to so comply would not have a Material
Adverse Effect on the construction or operation of the Collateral. All Equipment
financed with the proceeds of the Advances shall be safeguarded and stored until
installed in

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<PAGE> 34
appropriate storage facilities owned or leased by Borrower. In the event of any
cessation of construction for more than fifteen (15) successive calendar days,
Borrower shall make adequate provision, reasonably acceptable to Lender, for the
protection of all materials stored on site against deterioration, loss or
damage.

7.17. Upgrade Equipment. Borrower shall maintain the Equipment in good
working order and shall upgrade its software in accordance with industry
practice.

ARTICLE 8: NEGATIVE COVENANTS

Each of Borrower and Guarantor hereby agrees that so long as the
Commitment hereunder remains in effect or the Note remains outstanding and
unpaid or any other amount is owing to Lender hereunder or under any of the Loan
Documents, Borrower and Guarantor shall not directly or indirectly without prior
written consent of Lender, do or permit to exist any of the following:

8.01. Additional Indebtedness. Create, incur, assume or suffer to exist
at any one time any Indebtedness secured by a lien on the Collateral.

8.02. Restrictions on Liens and Sale of Collateral. Create or suffer to
exist any Lien on the Collateral or any part thereof, whether superior or
subordinate to the Lien of the Security Documents, or assign, convey, sell or
otherwise dispose of or encumber its interest in the Collateral, or any part
thereof (including, without limitation, execution of any lease), nor permit any
such action to be taken, except for the following permitted dispositions and
encumbrances (the "Permitted Encumbrances"): (i) the Lien created hereby and any
purchase money Liens in favor of NTI created by the NTI Supply Agreement; (ii)
Liens for taxes not yet due, or which are being contested in good faith and by
appropriate proceedings in accordance with Section 7.08 hereof; (iii) carriers',
warehousemen's, mechanics', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business which are overdue for a period not
longer than sixty (60) days or which are being contested in good faith and by
appropriate proceedings in accordance with Section 7.08 hereof; and (iv)
judgment liens with respect to which execution has been stayed within ten (10)
days by appropriate judicial proceedings and the posting of adequate security
which may not be any of the Collateral.

8.03. Prohibition of Mergers, Acquisitions, Name, Office or Business
Changes, Etc.

(a) Enter into or become the subject of, any transaction of
merger, acquisition or consolidation or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution), or convey, sell,
lease, transfer or otherwise dispose of, in one transaction or a series
of transactions, all or any substantial part of Borrower's or
Guarantor's business or assets, whether now owned or hereafter acquired,
unless the Guarantor is the surviving entity or the controlling
corporation of the surviving or resulting entity.

(b) Change its name or corporate structure without giving Lender
at least thirty (30) days advance written notice of such change, and
ensuring that any steps that Lender may deem necessary to continue the
perfection and priority of Lender's security interests in the Collateral
shall have been taken.

(c) Cease to engage predominantly in the telecommunications
service business (which may include providing internet services) or make
any material change in any of Borrower's or

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Guarantor's business objectives, purposes and operations.

8.04. Limitation on Equity Payments. Make any Equity Payment, except
that, as long as no Default or Event of Default has occurred and is continuing,
or would be caused thereby, and if no other provision contained herein will be
violated by the disbursement of such Equity Payment, Borrower or Guarantor may
make Equity Payments to the extent that such Equity Payments do not reduce
Guarantor's Debt Service Coverage Ratio below 1.25:1.00 or Guarantor's Cash
balance below $1,000,000.00, measured as of the day following such Equity
Payment, or violate the covenants of Section 4.07 or Section 4.09 in the
Indenture, as such sections may be amended from time to time, which are hereby
incorporated into this Agreement by reference until all of the Guarantor's
obligations under the Indenture are paid in full. In addition, Borrower may make
Equity Payments to Guarantor or to any other Restricted Subsidiary (as that term
is defined in the Indenture) at any time and such payments shall not be a
violation of this provision.

8.05. Removal of Collateral. Remove or permit the removal of any
material part of the Collateral (except for sales or leases of Inventory in the
ordinary course of business) from the locations identified on Schedule 4.25,
without giving Lender thirty (30) days prior written notice of such move and
ensuring that any steps the Lender may deem necessary to continue the perfection
and priority of Lender's security interest in the Collateral shall have been
taken.

8.06. Assumed Names. Transact or engage in business under any assumed
name, fictitious name, tradestyle or "d/b/a" except those identified on Schedule
4.29, without prior written notice to Lender.

ARTICLE 9: EVENTS OF DEFAULT AND REMEDIES

9.01. Events of Default. An Event of Default shall mean the occurrence
or existence of one or more of the following events or conditions (whatever the
reason for such Event of Default and whether voluntary, involuntary or effected
by operation of Law):

(a) Payment Default. If Borrower fails to pay any sum, whether
of principal or interest on the Note or any prepayment premiums, or any
other amount due hereunder or under the Note within ten (10) calendar
days after such amount becomes due; or

(b) False Statement. If any statement, representation or
warranty made by Borrower or Guarantor in any Loan Document or made in
any financial statement, certificate, report, exhibit or document
furnished to Lender pursuant to any Loan Document, proves to have been
untrue, incomplete, false or misleading in any material respect as of
the time when made (including by omission of material information
necessary to make such representation, warranty or statement not
misleading) and such untruth, falsity, misleading statement or omission
shall not have been corrected or remedied to the satisfaction of Lender
within twenty (20) calendar days after the earlier of Borrower's (or
Guarantor's) knowledge thereof or receipt of written notice thereof from
Lender; or

(c) Covenant Defaults. If Borrower or Guarantor defaults in the
performance or observance of any covenant or agreement in this
Agreement, and such default continues for a

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period of twenty (20) calendar days after the earlier of Borrower's or
Guarantor's knowledge thereof or receipt of written notice from Lender
thereof, except for specific Defaults listed elsewhere in this Section
9.01, as to which no notice or cure period shall apply unless specified;
or

(d) Failure of Conditions. If Borrower or Guarantor fails to
meet any condition of lending under Article 6 hereof, and such condition
is not waived by Lender;

(e) Undischarged Judgments. If one or more judgments for the
payment of money has been entered against Borrower or Guarantor in an
amount in excess of $100,000, and such judgment or judgments have
remained undischarged and unstayed for a period of thirty (30) calendar
days, unless the validity thereof is contested in compliance with
Section 7.08 hereof; or

(f) Attachments, etc. If a writ or warrant of attachment,
garnishment, execution, distraint or similar process has been issued
against Borrower or Guarantor or any of its properties which has
remained undischarged and unstayed for a period of thirty (30)
consecutive days and is not being contested in compliance with Section
7.08 hereof; or

(g) Default Under Third Party Agreements. If a default, or event
or condition which with notice or lapse of time or both would become a
default, occurs that gives the creditor the right to accelerate in
respect of any other obligation of Borrower or Guarantor for borrowed
money (including lease obligations)(in the present or in the future) in
the amount of $100,000 in the aggregate, or under any two or more such
other obligations of any amount; or

(h) Dissolution; Discontinuance of Business, Etc. If Borrower or
any Guarantor discontinues its usual business, dissolves, has its
Organizational Document revoked, winds up or liquidates itself or its
business; or

(i) Involuntary Bankruptcy or Receivership Proceedings. If a
receiver, custodian, liquidator, or trustee of Borrower or Guarantor or
of any of its property(s) is appointed by the order or decree of any
court or agency or supervisory authority having jurisdiction; or an
order is entered adjudicating Borrower or Guarantor as bankrupt or
insolvent; or any of the property of Borrower or Guarantor is
sequestered by court order; or a petition is filed against Borrower or
Guarantor under any state or federal bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution, liquidation,
or receivership law of any jurisdiction, whether now or hereafter in
effect, provided, however, that the above events shall not be an Event
of Default if Borrower or Guarantor successfully contests or appeals the
above proceedings and all proceedings are dismissed or otherwise
terminated within sixty (60) days; or

(j) Voluntary Bankruptcy. If Borrower takes affirmative steps to
prepare to file, or files, a petition in voluntary bankruptcy or to seek
relief under any provision of any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution, or
liquidation law of any jurisdiction, whether now or hereafter in effect,
or consents to the filing of any petition against it under any such law;
or

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(k) Assignments for Benefit of Creditors, Etc. If Borrower or
Guarantor makes an assignment for the benefit of creditors, or admits in
writing its inability to pay its debts generally as they become due, or
consents to the appointment of a receiver, trustee, or liquidator of
itself or of all or any part of its properties; or

(l) Non-compliance with Governmental Requirements. If Borrower
or Guarantor fails to comply with any requirement of any Governmental
Authority within twenty (20) calendar days after notice in writing of
such requirement shall have been given to Borrower or Guarantor by such
Governmental Authority, or such longer period of time permitted Borrower
or Guarantor by such Governmental Authority, if such failure to comply
will have a material adverse affect on the operations or financial
condition of the Borrower or the Guarantor; or

(m) Regulatory Authorizations. If any Regulatory Authorization
in connection with this Agreement or any other Loan Document or any such
Regulatory Authorization now or hereafter necessary or advisable to make
this Agreement or the other Loan Documents legal, valid, enforceable and
admissible in evidence or to permit Borrower or Guarantor to conduct its
business is not obtained or has ceased to be in full force and effect or
has been modified or amended or has been held to be illegal or invalid
or is revoked or terminated, and is not being contested by Borrower or
Guarantor in compliance with Section 7.08 hereof and Lender has
reasonably determined in good faith (which determination shall be
conclusive) that such event or occurrence may have a Material Adverse
Effect or a material adverse effect on Lender's rights under this
Agreement or any other Loan Documents; or

(n) Damage or Destruction. If the proceeds of any physical
damage insurance actually paid in respect of the partial or total damage
or destruction of the Collateral are insufficient to cover the cost of
the restoration thereof or if Lender determines that such damage or
destruction is so extensive that repair or restoration cannot be
expected within a time period short enough to prevent a Material Adverse
Effect;

(o) Consents. If Borrower or Guarantor fails to provide any
Consent required hereunder and Lender determines in its sole discretion
that such failure results in a material impairment of Lender's security
for the Advances; or

(p) Change in Control. If any Change in Control should occur
without Lender's prior written consent, which shall not be withheld
provided that the financial condition of the Borrower and Guarantor are
not materially adversely affected thereby and no other Default or Event
of Default occurs as a result thereof; or

(q) ERISA Defaults. If, with respect to any Plan, (i) there has
occurred a Reportable Event being considered by the PBGC which may
reasonably result in any material liability to the PBGC with respect to
any Plan, (ii) a Plan has been terminated, (iii) a trustee has been
appointed by a United States District Court to administer a Plan, (iv) a
PBGC or any other person has instituted proceedings to terminate a Plan
or to appoint a trustee to administer any such Plan, (v) either the
Borrower or the Guarantor has withdrawn, completely or partially, from
any Plan (vi) either the Borrower or the Guarantor has incurred
secondary liability for withdrawal liability payments under any Plan or
(vii) a Plan has failed to meet the minimum funding standards
established under the Code or ERISA; and, any such ERISA default will
have a material adverse

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<PAGE> 38
affect on the operations or financial condition of the Borrower or the
Guarantor; or

(r) Defaults Under Other Loan Documents. If any default,
misrepresentation or breach should occur under any Security Document or
other Loan Document, including the Indenture, and is not cured or waived
within the time permitted therein, or any such Loan Documents should
cease to be in full force and effect, or any party thereto should assert
any unenforceability of, or deny liability on, or admit inability to
perform under, any such Loan Document.

(s) Bulk Sale of All of Borrower's Assets. If Guarantor sells
all or substantially all of the assets of the Borrower without Lender's
prior written consent, which may be withheld in Lender's sole and
absolute discretion.

9.02. Consequences of an Event of Default. If any Event of Default shall
occur and be continuing or shall exist, Lender shall be under no further
obligation to make Advances hereunder, any remaining commitment hereunder shall
immediately terminate, with no further notice, and Lender may, by notice to
Borrower, declare the unpaid principal amount of the Note, interest accrued
thereon and all other amounts owing by Borrower hereunder or under the Note to
be immediately due and payable without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived, and an action
therefor shall immediately accrue. Such consequences shall occur automatically
upon the occurrence of an Event of Default under Section 9.01 (h), (i), (j) or
(k), without any notice or demand. Upon the occurrence of an Event of Default,
Lender may, in its sole discretion, exercise any and all remedies available to
it under this Article 9 or under any of the Loan Documents or under applicable
law without further notice or period of grace or opportunity to cure.

9.03. Exercise of Rights. Subject to any requirements for FCC or other
governmental approval upon the occurrence of any Event of Default, the rights,
powers and privileges provided in this Section and all other remedies available
to Lender under this Agreement or by statute or by rule of law may be exercised
by Lender at any time from time to time whether or not the Obligations shall be
due and payable, and whether or not Lender shall have instituted any foreclosure
or other action for the enforcement of this Agreement or the Note. No failure to
exercise nor any delay in exercising on the part of Lender, any right, remedy,
power or privilege hereunder or under any of the other Loan Documents shall
operate as a waiver thereof, nor shall any single or partial exercise of any
right, power or privilege hereunder or thereunder preclude any other or future
exercise thereof or the exercise of any other right, remedy, power or privilege.

9.04. Rights of Secured Party; Possession or Sale of Collateral. Without
limiting the generality of the foregoing, Lender shall have all the rights and
remedies of a secured party under the UCC, and Lender may, without demand and
without advertisement or notice, all of which Borrower and Guarantor waive, at
any time or times, sell and deliver any or all Collateral held by or for it at
public or private sale, for cash, upon credit or otherwise, at such prices and
upon such terms as Lender deems advisable, in its sole discretion, and/or
collect, or enforce the collection of, the Collateral. Lender may be the
purchaser at any such sale. Upon the occurrence of an Event of Default and upon
Lender's request, Borrower or Guarantor shall assemble, at its own expense, any
or all Equipment and other Collateral at a convenient place acceptable to Lender
and shall pay to Lender or reimburse Lender for, on demand, all costs of
collection of all amounts due, and enforcement of all rights hereunder,
including reasonable

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<PAGE> 39
attorneys' fees and legal expenses, and expenses of any repairs to any realty or
other property to which any of such Collateral may be affixed. Upon an Event of
Default Lender may, to the fullest extent permitted by applicable law, without
notice, advertisement, hearing or process of law of any kind, enter upon any
premises where any of the Collateral may be located and take possession of and
remove such Collateral.

9.05. Notices, Etc. Waived. Except as expressly provided in this Article
9, Borrower and Guarantor hereby expressly waive, to the fullest extent
permitted by applicable law, presentment, demand, protest, any and all notices
of any kind, advertisements, hearing or process of law in connection with the
exercise by Lender of any of its rights and remedies upon the occurrence of an
Event of Default. If any notification of intended disposition of any of the
Collateral is required by law, such notification shall be deemed reasonably and
properly given if given in accordance with Section 10.06 hereto at least ten
(10) days before such disposition.

9.06. Additional Remedies. Lender's remedies upon the occurrence and
during the continuance of an Event of Default shall include, in addition to, and
not in lieu of, such remedies as are available at law or in equity or provided
for in any of the Loan Documents, the following:

(a) Foreclosure; Receivership. Lender shall be entitled to file
one or more suits at law or in equity to collect the Obligations and/or
to foreclose on Lender's Liens on and security interests created by this
Agreement or the Security Documents. Lender may apply or require
Borrower or Guarantor to apply for any necessary transfers, assignments,
orders, consents or licenses in connection with the operation or
abandonment of the Collateral or any part thereof, and the Lender shall
also be entitled as a matter of right and without notice and without
requiring bond (notice and bond being hereby waived), without regard to
the solvency or insolvency of the Borrower or Guarantor at the time of
application and without regard to the value of the Collateral at that
time, to have a receiver appointed by a court of competent jurisdiction
in order to manage, protect, and preserve the Collateral and to continue
the operation of the business of Borrower or Guarantor, and to collect
all revenues and profits thereof and apply the same to the payment of
all expenses and other charges of such receivership until the sale or
other final disposition of the Collateral. Borrower and Guarantor hereby
consent to the appointment of such receiver.

(b) Right to Cure. If Borrower or Guarantor fail in any material
respect to perform or comply with any of their agreements contained
herein or in any of the other Loan Documents, Lender may take whatever
actions it may deem appropriate to perform or comply or otherwise cause
performance or compliance with such agreement, all at the risk, cost and
expense of Borrower and Guarantor.

(c) Setoff. If the unpaid principal amount of the Note, interest
accrued thereon or any other amount owing by Borrower hereunder or under
the Note shall have become due and payable (by acceleration or
otherwise), Lender shall have the right, in addition to all other rights
and remedies available to it, without notice to Borrower, to setoff
against and to appropriate and apply to such due and payable amounts any
debt owing to, and any other funds held in any manner for the account
of, Borrower by Lender. Such right shall exist whether or not Lender
shall have given notice or made any demand hereunder or under the Note,
whether or not such debt owing to or funds held for the account of
Borrower is or are matured or unmatured, and regardless of the existence
or adequacy of any collateral, guaranty or any other security, right

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or remedy available to Lender. Borrower hereby consents to and confirms
the foregoing arrangements and confirms Lender's rights of setoff.

9.07. Application of Proceeds. Any proceeds of any of the Collateral,
received by Lender through sale or disposition of the Collateral or otherwise,
may be applied by Lender toward the payment of the Obligations, including
expenses in connection with the Collateral (including reasonable fees and legal
expenses) in such order of application as Lender may from time to time elect.

9.08. Discontinuance of Proceedings. If Lender should proceed to enforce
any right or remedy under this Agreement or any other Loan Document, and then
discontinue or abandon such proceeding for any reason, all rights, powers and
remedies of Lender hereunder shall continue as if no such proceeding had been
taken.

9.09. Power of Attorney. For the purpose of carrying out the provisions
and exercising the rights, powers and privileges granted by the Loan Documents,
including, without limitation, this Article 9, each of Borrower and Guarantor
hereby irrevocably constitutes and appoints Lender its true and lawful
attorney-in-fact to execute, acknowledge and deliver any instruments and do and
perform any acts such as are referred to in the Loan Documents, including,
without limitation, this Article 9, in the name and on behalf of Borrower or
Guarantor, from time to time in Lender's reasonable discretion after the
occurrence and during the continuance of an Event of Default, in accordance with
the Loan Documents and any statute or rule of law. This power of attorney is a
power coupled with an interest and cannot be revoked. Borrower and Guarantor
hereby ratify all that said attorney-in-fact shall lawfully do or cause to be
done by virtue and in accordance with the terms hereof.

Without limiting the generality of the foregoing, Lender may after the
occurrence and during the continuance of an Event of Default do the following
without notice to or assent by Borrower or Guarantor to accomplish the purposes
of this Agreement:

(a) upon failure of Borrower to timely pay or discharge taxes or Liens
levied or placed on or threatened against the Collateral, effect any
repairs or any insurance called for by the terms of this Agreement or
any other Loan Document, and pay all or any part of the premiums
therefor and the costs thereof;

(b) (i) direct any party liable for any payment on any Collateral to
make payment of any and all monies due and to become due thereunder
directly to Lender or as Lender shall direct; (ii) in the name of
Borrower or its own name or otherwise, take possession of and endorse
and collect any checks, drafts, notes, acceptances, or other instruments
for the payment of monies due under, or otherwise receive payment of and
receipt for any and all monies, claims and other amounts due and to
become due at any time in respect of or arising out of any Collateral;
(iii) sign and endorse any invoices, freight or express bills, bills of
lading, storage or warehouse receipts, drafts against debtors,
assignments, verifications and notices in connection with the
Collateral; (iv) commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent jurisdiction
to collect all or any of the Collateral and to enforce any other right
in respect of any Collateral; (v) defend any suit, action or proceeding
brought against Borrower with respect to any Collateral; (vi) settle,
compromise or adjust any suit, action or proceeding described above upon
commercially reasonable terms under the circumstances and, in connection
therewith, give such discharges or releases as Lender may reasonably
deem appropriate; and (vii) generally sell, use, operate, transfer,
pledge, make any agreement with

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<PAGE> 41
respect to or otherwise deal with any of the Collateral as fully and
completely as though Lender were the absolute owner thereof for all
purposes, and, at Lender's option and Borrower's expense, at any time or
from time to time after the occurrence and during the continuance of an
Event of Default, all other acts and things that Lender reasonably deems
necessary to protect, preserve or realize upon the Collateral and
Lender's security interest therein, in order to effect the intent of
this Agreement and the other Loan Documents all as fully and effectively
as Borrower might do.

9.10. Regulatory Matters. Notwithstanding any provision to the contrary
contained herein, Lender will not exercise any right or remedy under this
Agreement that requires prior FCC or PUC approval without first obtaining such
approval. If counsel to Lender reasonably determines that the consent of the FCC
or PUC is required in connection with any of the actions that may be taken by
Lender in the exercise of its rights hereunder or under any of the other Loan
Documents, then Borrower or Guarantor, at their sole cost and expense, agree to
use their best efforts to secure such consent and to cooperate with Lender in
any action commenced by Lender to secure such consent. Upon the occurrence and
during the continuation of an Event of Default Borrower and Guarantor shall
promptly execute and/or cause the execution of all applications, certificates,
instruments and other documents and papers that may be required in order to
obtain any necessary governmental consent, approval or authorization, and if
Borrower or Guarantor fails or refuses to execute such documents, the clerk of
the court with jurisdiction may execute such documents on behalf of Borrower or
Guarantor.

ARTICLE 10: GENERAL CONDITIONS/MISCELLANEOUS

The following conditions shall be applicable throughout the term of this
Agreement:

10.01. Modifications and Waivers. This Agreement, the other Loan
Documents, or any provision thereof may not be changed, waived or terminated
orally, but only by an instrument in writing signed by the party against whom
enforcement of the change, waiver or termination is sought. No action or course
of dealing on the part of Lender, its officers, employees, consultants, or
agents, nor any failure or delay by Lender with respect to exercising any right,
power, or privilege of Lender under the Note, this Agreement, or any other Loan
Document shall operate as a waiver thereof, except as otherwise provided in this
Agreement. Any waiver shall be effective only to the extent and for the instance
specifically identified in such writing, and shall not be deemed to imply any
future waivers or other waivers. No amendment to the Loan Documents shall be
effective without written agreement signed by Borrower, Guarantor and Lender.

10.02. Advances Not Implied Waivers. No waiver of the requirements
contained in any Loan Document shall be effective unless in writing duly signed
by Lender. No Advance hereunder shall constitute a waiver of any of the
conditions of Lender's obligation to make further Advances nor, in the event
Borrower or Guarantor is unable to satisfy any such condition, shall any waiver
of such condition have the effect of precluding Lender from thereafter declaring
such inability to be an Event of Default as herein provided. Any Advance made by
Lender and any sums expended by Lender pursuant to the Loan Documents shall be
deemed to have been made pursuant to this Agreement, notwithstanding the
existence of an uncured Default or Event of Default. No Advance at a time when
an Event of Default exists shall constitute a waiver of any right or remedy of
Lender existing by reason of such Event of Default, including, without
limitation, the right to accelerate the maturity of the Indebtedness evidenced
by the Note or to foreclose the Lien on the Collateral or to refuse to make
further advances hereunder.

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<PAGE> 42
10.03. Deviation from Covenants. The procedure to be followed by
Borrower or Guarantor to obtain the consent of Lender to any deviation from the
covenants contained in this Agreement or any other Loan Document shall be as
follows:

(a) Borrower or Guarantor shall send a written notice to Lender
setting forth (i) the covenant(s) relevant to the matter, (ii) the
requested deviation from the covenant(s) involved, and (iii) the reason
for the requested deviation from the covenant(s); and

(b) Lender, within a reasonable time, will send a written notice
to Borrower or Guarantor, permitting or refusing the request, but in no
event will any deviation from the covenants of this Agreement or any
other Loan Document be effective without the express prior written
consent of Lender. Lender's failure to provide such written notice shall
be deemed a refusal of such request.

10.04. Holidays. Except as otherwise provided herein, whenever any
payment or action to be made or taken hereunder or under the Note shall be
stated to be due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day and such extension of
time shall be included in computing interest or fees, if any, in connection with
such payment or action.

10.05. Records. From time to time Lender may send Borrower statements of
the unpaid principal amount of the Note, the unpaid interest accrued thereon,
the Interest Rate or rates applicable to such unpaid principal amount, the
duration of such applicability, and the amount of Advances remaining available
under this Agreement, and each statement shall be deemed correct and
conclusively binding on Borrower (absent manifest error) unless Borrower
notifies Lender of an error in the statement in writing within thirty (30) days
of the date of any such statement is provided to Borrower.

10.06. Notices. All notices, requests, demands, directions and other
communications (collectively, "notices") required under the provisions of this
Agreement or any other Loan Document shall be in writing (including
communication by facsimile transmission) unless otherwise expressly permitted
hereunder and shall be sent by hand, by registered or certified mail return
receipt requested, by overnight courier service maintaining records of receipt,
or by facsimile transmission with confirmation in writing mailed first-class, in
all cases with charges prepaid, and any such properly given notice shall be
effective upon the earlier of receipt or (i) when delivered by hand, or (ii) the
third Business Day after being mailed, or (iii) the following Business Day if
sent by overnight courier service, or (iv) when sent by facsimile, answer back
received. All notices shall be addressed as follows:

If to Borrower or Guarantor, to the Notice Address set forth on
Schedule 1, with copies, if any, as set forth on Schedule 1.

If to Lender: NTFC Capital Corporation
220 Athens Way
Nashville, Tennessee 37228
Attention: Legal Department
Telecopy: (615) 734-5283

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With a copy to: NTFC Capital Corporation
220 Athens Way
Nashville, Tennessee 37228
Attention: Manager, Credit
Telecopy: (615) 734-5283

All notices shall be sent to the applicable party at the address stated
above or in accordance with the last unrevoked written direction from such party
to the other party hereto, given in accordance with the terms hereof.

10.07. FCC and PUC Approval. The exercise of any rights or remedies
hereunder or under any other Loan Document by Lender that may require FCC or PUC
approval shall be subject to obtaining such approval. Pending the receipt of any
PUC or FCC approval, Borrower and Guarantor shall not do anything to delay,
hinder, interfere with or obstruct the exercise of Lender's rights or remedies
hereunder or the obtaining of such approvals.

10.08. Lender Sole Beneficiary. All conditions of the obligation of
Lender to make any Advances hereunder are imposed solely and exclusively for the
benefit of Lender and its assigns and no other Person shall have standing to
require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Lender will refuse to make any Advances in the absence
of strict compliance with any or all such conditions, and no Person shall under
any circumstances be deemed to be a beneficiary of such conditions, any or all
of which may be freely waived in whole or in part by Lender at any time if in
its sole discretion it deems it advisable to do so. Inspections and approvals of
the Equipment, and the workmanship and materials used therein impose no
responsibility or liability of any nature whatsoever on Lender, and no Person
shall, under any circumstances, be entitled to rely upon such inspections and
approvals by Lender for any reason. Lender's sole obligation hereunder is to
make the Advances if and to the extent required by this Agreement or the Notes.

10.09. Lender's Review of Information. Each of Borrower and Guarantor
acknowledges and agrees that any review or analysis by Lender of financial
information, operating information, marketing data or other information provided
to Lender by or on behalf of Borrower and Guarantor at any time is and shall be
conducted solely for Lender's benefit and internal use and that Lender is under
no duty or obligation to make the results of such review or analysis available
to Borrower and Guarantor. Borrower and Guarantor are not relying, and will not
rely, on Lender for financial or business advice.

10.10. No Joint Venture. Nothing in any of the Loan Documents or in this
Agreement shall be deemed to constitute any kind of partnership, joint venture
or fiduciary relationship between the Lender and the Borrower or between the
Lender and the Guarantor or any Owners.

10.11. Severability. The provisions of this Agreement are intended to be
severable. If any provision of this Agreement or the other Loan Documents shall
be held invalid or unenforceable in whole or in part in any jurisdiction such
provision shall, as to such jurisdiction, be ineffective to the extent of such
invalidity or unenforceability without in any manner affecting the validity or
enforceability thereof in any other jurisdiction or the remaining provisions
hereof or thereof in any jurisdiction.

10.12. Rights Cumulative. All rights, powers and remedies herein given
to Lender are cumulative and not alternative, and are in addition to all
statutes or rules of law.

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10.13. Duration; Survival. All representations and warranties of
Borrower and Guarantor contained herein or made in connection herewith shall
survive the making of and shall not be waived by the execution and delivery of
this Agreement and the other Loan Documents, any investigation by Lender, or the
making of any Advances hereunder. All covenants and agreements of Borrower and
Guarantor contained herein shall continue in full force and effect from and
after the date hereof so long as it may borrow hereunder and until payment in
full of the Notes, interest thereon, all fees and all other Obligations of
Borrower and Guarantor. Without limitation, it is understood that all
obligations of Borrower and Guarantor to make payments to or indemnify Lender
shall survive the payment in full of the Notes and of all other Obligations.

10.14. Governing Law. This Agreement and the Notes and each of the other
Loan Documents shall be governed by and construed and enforced in accordance
with the internal laws of the State of Tennessee, except to the extent that the
laws of jurisdictions where the Collateral is located may be required to apply
to perfecting security interests in or exercising remedies with respect to the
Collateral.

10.15. Counterparts. This Agreement may be executed in any number of
counterparts (by facsimile transmission or otherwise) and by the different
parties hereto on separate counterparts, each of which, when so executed, shall
be deemed an original, but all such counterparts shall constitute but one and
the same instrument.

10.16. Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Lender and Borrower and their respective successors and
assigns; provided, however, that Borrower may not assign or transfer any of its
rights or obligations hereunder or under the other Loan Documents (in whole or
in part) without the prior written consent of Lender. Lender may assign,
transfer or pledge any of its respective rights or obligations hereunder,
including, without limitation, its lending obligation under the Commitment, or
under the other Loan Documents pursuant to an Assignment to one or more
commercial banks or other financial institutions without notice to or the prior
written consent of Borrower. Upon receipt of written notice from Lender of such
assignment, Borrower shall promptly acknowledge receipt thereof in writing. If
Borrower is given written notice of any assignment, it shall perform its
obligations with respect to this Agreement for the ratable benefit of the
applicable assignee(s), and, if so directed, shall pay all amounts due or to
become due hereunder directly to the applicable assignee(s) or to any other
party designated by such assignee(s). Borrower shall not assert against any such
assignee any set-off, defense or counterclaim that Borrower may have against
Lender or any person other than such assignee. Borrower shall also execute and
deliver to Lender such documentation as any such assignee may reasonably
require, including but not limited to amended promissory notes and
acknowledgment of or consent to the assignment which may require Borrower to
make certain representations or reaffirmations as to some of the basic terms and
covenants contained herein. Lender shall not be relieved of its obligations
hereunder as a result of any such sale, assignment, transfer, grant or pledge,
unless such assignee specifically assumes all or part of Lender's future
obligations hereunder pursuant to an Assignment, a copy of which shall be
delivered to Borrower and Guarantor, in which event after the date of such
Assignment, Borrower's obligations to any such assignee shall be proportionately
as set forth herein with respect to Lender, and Borrower shall not look to
Lender to perform any of such assignee's obligations hereunder, including,
without limitation, the portion of the Commitment so assigned, which arise after
the date thereof. Any assignee shall be entitled to rely on Borrower's
agreements as stated herein, as applicable, and shall be considered a third
party beneficiary thereof. Except to the extent otherwise required by the
context of this Agreement, the word "Lender" where used in this Agreement shall
mean and include any holder of any Note originally issued to Lender hereunder,
and any holders of replacement Notes, and any such holder of any Note shall be
bound by

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and have the benefits of this Agreement the same as if such holder had been a
signatory hereto.

10.17. Participation. Lender shall have the right to enter into one or
more assignment agreements, participation agreements, syndication agreements or
similar agreements with one or more participating lenders or other parties
approved by Lender on such terms and conditions as Lender shall deem advisable.
Borrower and Guarantor shall furnish a sufficient number of copies of reports
and certificates to Lender so that Lender and each participating lender shall
receive a copy of each such document.

10.18. Time of Essence. Time is of the essence of this Agreement and the
Note and the other Loan Documents.

10.19. Disclosures and Confidentiality.

(a) Each of Borrower, Guarantor and Lender (the "party" or
"parties") agrees that it will obtain written consent before using or
generating any press release, advertisement, publicity materials or
other publication in which the name or logo of a party or any of its
Affiliates is used or may be reasonably inferred, and will not
distribute any such materials in the absence of such prior written
approval.

(b) Each of the parties agrees that it will not, directly or
indirectly, disclose to any third party the terms of this Agreement or
the other Loan Documents or prior or future correspondence relating
thereto, or the transactions contemplated hereby, or any other
information regarding the parties learned during the course of
negotiation thereof. The term "third party" shall exclude only the
Borrower, the Guarantor, the Lender, their Affiliates and their
respective attorney(s) and certified public accountant(s). This Section
10.19(b) shall not restrict the disclosure of information if such
disclosure is required by law, by order of any court or by the order,
rule or regulation of any administrative agency, including without
limitation any requirements of the FCC, any PUC, or any state or federal
securities commissions (the "Commissions"); provided, however, that,
except for disclosures required by the FCC, PUC or Commissions, each
party shall provide the other parties with advance notice of any such
required disclosure of information so that each party may seek an
appropriate protective order and/or waive compliance with this Section.
The parties shall not oppose any action taken to obtain an appropriate
protective order or other reliable assurance that the information will
be accorded confidential treatment. The obligations set forth in this
Section 10.19(b) shall survive the termination of this Agreement.

(c) The disclosure of information by the parties will not be
restricted under this Agreement if such information (i) has been or
becomes published or is now, or in the future, in the public domain
through (A) no fault of the parties, (B) disclosure other than
unauthorized disclosure by the party to whom the information is
disclosed, or (C) disclosure to third parties by the disclosing party
without similar restriction; (ii) is property (other than proposal
letters, commitment letters or other correspondence between the parties)
within the legitimate possession of the receiving party prior to
disclosure hereunder; (iii) subsequent to disclosure hereunder, is
lawfully received from a third party having rights therein without
restriction of the third party's or receiving party's rights to
disseminate the information and without notice of any restriction
against its further disclosure; (iv) is disclosed with the written
approval of the other party; (v) is or becomes publicly available free
of any obligation to keep it confidential.

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(d) Each of Borrower and Guarantor authorizes Lender to discuss
with and furnish to any Affiliate of the Lender, to any government or
self-regulatory agency with jurisdiction over the Lender, to any other
Governmental Authority or to any assignee, successor, participant,
successor, or prospective assignee, successor or participant, all
financial statements, audit reports and other information pertaining to
the Borrower, the Guarantor and/or its Subsidiaries whether such
information was provided by Borrower or Guarantor or prepared or
obtained by the Lender or third parties. Neither the Lender nor any of
its employees, officers, directors or agents makes any representation or
warranty to any existing or prospective assignee, successor or
participant regarding any audit reports or other analyses of Borrower or
Guarantor that the Lender may distribute, whether such information was
provided by Borrower or Guarantor or prepared or obtained by the Lender
or third parties, nor shall the Lender or any of its employees,
officers, directors or agents be liable to any Person receiving a copy
of such reports or analyses for any inaccuracy or omission contained in
such reports or analyses or relating thereto.

(e) Every reference in this Agreement to disclosures of the
parties to Lender (except the financial statements), to the extent that
such references refer or are intended to refer to disclosures at or
prior to the execution of this Agreement, shall be deemed strictly to
refer only to written disclosures delivered to the parties concurrently
with the execution of this Agreement and referred to specifically in the
Loan Documents. The parties intend that such disclosures are to be
limited to those presented in an orderly manner at the time of executing
this Agreement and are not to be deemed to include expressly or
impliedly any disclosures that previously may have been delivered from
time to time to the parties, except to the extent that such previous
disclosures are again presented to the parties in writing concurrently
with the execution of this Agreement.

10.20. Jurisdiction and Venue. EACH OF THE BORROWER AND GUARANTOR HEREBY
IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE COURTS LOCATED IN DAVIDSON
COUNTY, TENNESSEE, INCLUDING WITHOUT LIMITATION FEDERAL COURTS SITTING IN THE
MIDDLE DISTRICT OF TENNESSEE AND THE CHANCERY COURT FOR DAVIDSON COUNTY,
TENNESSEE, FOR ANY SUIT BROUGHT OR ACTION COMMENCED IN CONNECTION WITH THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE OBLIGATIONS, AND AGREES NOT TO
CONTEST VENUE OR JURISDICTION IN ANY SUCH COURTS. In any such litigation, each
of Borrower and Guarantor waives personal service of any summons, complaint or
other process, and agree that the service thereof may be made by certified or
registered mail direct to Borrower and Guarantor at its address set forth in
Section 10.06 hereof. Within thirty (30) days after such mailing, Borrower and
Guarantor shall appear and answer to such summons, complaint or other process.
Should Borrower and Guarantor fail to appear or answer within the said 30-day
period, then such party shall be deemed in default and judgment may be entered
against Borrower and Guarantor for the amount or other relief as demanded in any
summons, complaint or other process so served. In the alternative, in its sole
discretion, Lender may effect service upon Borrower and Guarantor in any other
form or manner permitted by law. The choice of forum set forth herein shall not
be deemed to preclude the enforcement of any judgment obtained in such forum or
the taking of any action under this Agreement to enforce the same in any
appropriate jurisdiction.

10.21. Jury Waiver. BORROWER, GUARANTOR AND LENDER HEREBY KNOWINGLY AND
WILLINGLY WAIVE THEIR RIGHTS TO DEMAND A JURY TRIAL IN ANY ACTION OR PROCEEDING
INVOLVING THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, THE OBLIGATIONS, OR ANY
RELATIONSHIP BETWEEN THE LENDER, GUARANTOR AND

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BORROWER. EACH OF THE BORROWER AND GUARANTOR WARRANTS AND REPRESENTS THAT IT HAS
REVIEWED THE FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL
COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY THE COURT.

10.22. Limitation on Liability. LENDER SHALL HAVE NO LIABILITY UNDER OR
IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS FOR
SPECIAL, EXEMPLARY, PUNITIVE, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF
ANY SORT IN ANY SUIT BROUGHT OR ACTION COMMENCED IN CONNECTION WITH THIS
AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE OBLIGATIONS, AND, EXCEPT TO THE
EXTENT PROHIBITED BY LAW, EACH PARTY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR
RECOVER IN ANY SUCH ACTION ANY SPECIAL, EXEMPLARY, PUNITIVE, INCIDENTAL,
INDIRECT OR CONSEQUENTIAL DAMAGES OF ANY SORT OTHER THAN ACTUAL DAMAGES.

10.23. Borrower Waivers. To the fullest extent permitted by law, the
Borrower hereby waives (i) presentment, demand and protest and notice of
presentment, protest, default, non payment, maturity, release, compromise,
settlement, extension or renewal of any or all commercial paper, accounts,
contract rights, documents, instruments, chattel paper and guaranties at any
time held by Lender on which the Borrower may in any way be liable and hereby
ratifies and confirms whatever Lender may do in this regard; (ii) notice prior
to taking possession or control of the Collateral or any bond or security which
might be required by any court prior to allowing Lender to exercise any of
Lender's remedies, including the issuance of an immediate writ of possession,
except as expressly required in any of the Loan Documents; (iii) any marshalling
of assets, or any right to compel Lender to resort first to any Collateral or
other Persons before pursuing the Borrower for payment of the Obligations and
any defenses based on suretyship or impairment of Collateral; (iv) the benefit
of all valuation, appraisement and exemption laws; (v) any right to require
Lender to terminate its security interest in the Collateral or in any other
property of the Borrower until termination of this Agreement and the execution
by the Borrower and by any person whose loans to the Borrower are used in whole
or in part to satisfy the Obligations, of an agreement indemnifying Lender from
any loss or damage Lender may incur as the result of dishonored or unsatisfied
items of any account debtor applied to the Obligations; and (vi) notice of
acceptance hereof. The Borrower acknowledges that the foregoing waivers are a
material inducement to Lender's entering into this Agreement and that Lender is
relying upon the foregoing waivers in its future dealings with the Borrower.

10.24. Schedules. The Schedules and Exhibits attached to this Agreement
are an integral part hereof, and are hereby made a part of this Agreement.

10.25. Agreement to Govern. In case of any conflict between the terms of
this Agreement and any of the other Loan Documents, the terms of this Agreement
shall govern.

10.26. Entire Agreement. This Agreement, the other Loan Documents and
other documents, agreements and certificates executed by the parties
contemporaneously herewith or subsequent hereto constitute the entire agreement
of the parties and supersede all prior understandings and agreements, written or
oral, between the parties hereto relating to the subject matter hereof. Neither
the Borrower nor

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the Guarantor is entering into this Agreement in reliance on statements or
representations made by any Person other than as set forth herein.

[END OF GENERAL TERMS AND CONDITIONS. NEXT PAGE IS SCHEDULE 1.]

[SIGNATURES ARE ON COVER PAGE.]

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SCHEDULE 1 TO
LOAN AND SECURITY AGREEMENT

BORROWER AND GUARANTOR INFORMATION AND DEFINED TERMS

BORROWER'S FEDERAL EMPLOYER/TAX IDENTIFICATION NUMBER: 95-3769651

BORROWER'S AND GUARANTOR'S CHIEF EXECUTIVE OFFICES (INCLUDING COUNTY):

5000 Plaza on the Lake, Suite 200
Austin, Travis County, Texas 78746-1050

BORROWER'S NOTICE ADDRESS:

5000 Plaza on the Lake, Suite 200
Austin, Texas 78746-1050

WITH COPIES TO:
Riordan & McKinzie
695 Town Center Drive, Suite 1500
Costa Mesa, CA 92626

GUARANTOR'S NOTICE ADDRESS:

5000 Plaza on the Lake, Suite 200
Austin, Texas 78746-1050

WITH COPIES TO:
Riordan & McKinzie
695 Town Center Drive, Suite 1500
Costa Mesa, CA 92626

"PUC": the term "PUC" shall include, without limitation, the Arizona
Corporations Commission and the Oklahoma Corporations Commission.

BORROWER'S INITIALS: _________
LENDER'S INITIALS: _________

44
<PAGE> 50
SCHEDULE 2.01 TO
LOAN AND SECURITY AGREEMENT

MAXIMUM ADVANCE AMOUNTS

<TABLE>
<S> <C>
Maximum principal amount of all Advances: Twenty-Eight Million Dollars ($28,000,000.00)

Maximum amount to be used for
closing costs and legal fees: Fifty Thousand Dollars ($50,000.00)
</TABLE>

Equipment and Related Services Purchased from NTI:

<TABLE>
<CAPTION>
Invoice Invoice Equipment and Related Invoice
Date Number Services Description Amount
---- ------ -------------------- ------
<S> <C> <C> <C>
</TABLE>

BORROWER'S INITIALS: _________
LENDER'S INITIALS: _________

46
<PAGE> 51
SCHEDULE 2.02 TO
LOAN AND SECURITY AGREEMENT

PAYMENT TERMS AND GOVERNING LAW

"Conversion Date": the Financing Termination Date.

"Financing Termination Date": December 31, 1997.

"Initial Payment Date": March 31, 1998.

"Interest Only Period": the period beginning on the First Borrowing Date
and continuing through the Conversion Date.

"Interest Payment Date": the last Business Day of each Calendar Quarter.

"Interest Rate": a fixed interest rate equal to the lesser of (i) the
five (5) year constant maturity Treasury Bill rate as quoted in the Federal
Reserve Statistical Release H.15 report on the last business day of the week
ending two weeks prior to the week of the Borrowing Date plus 320 basis points
("Interest Rate") expressed as an annual rate of interest, compounded monthly,
and calculated on the basis of a 360-day year, or (ii) the maximum permissible
rate under applicable law in effect at any time.

So long as no event of default has occurred and is continuing, the
Interest Rate applying to each Advance shall be reduced (on a one-time basis) by
75 basis points when the Guarantor's public debt rating as of any Payment Date
equals or exceeds Standard and Poor's BBB- rating.

So long as no event of default has occurred and is continuing, the
Interest Rate applying to each Advance shall be reduced (on a one-time basis) by
an additional 25 basis points when the Guarantor's public debt rating as of any
Payment Date equals or exceeds Standard and Poor's BBB rating.

If, after the Guarantor attains a BBB rating, the Guarantor's debt
rating is subsequently downgraded from BBB (but not less than BBB-) as of any
Payment Date, then the Interest Rate applying to each Advance will be increased
by 25 basis points. If the Guarantor's debt rating is further downgraded as of
any Payment Date below BBB-, then the Interest Rate applying to each Advance
will be increased by an additional 75 basis points.

"Maturity Date": December 31, 2002, on which date all outstanding
principal, accrued and unpaid interest, premiums, expenses, fees, penalties and
all other unpaid charges due under the Note and this Agreement shall be finally
due and payable.

"Payment Date": the Initial Payment Date and the last Business Day of
each Calendar Quarter thereafter.

BORROWER'S INITIALS: _________
LENDER'S INITIALS: _________

47
<PAGE> 52
SCHEDULE 2.09 TO
LOAN AND SECURITY AGREEMENT

FEES

Legal Fees. The fees and disbursements of counsel to Lender in
connection with this transaction.

BORROWER'S INITIALS: _________
LENDER'S INITIALS: _________

48
<PAGE> 53
SCHEDULE 6.02 TO
LOAN AND SECURITY AGREEMENT

POST-CLOSING ITEMS

POST-CLOSING, PRE-FUNDING CONDITIONS

Without limiting the conditions set forth in this Agreement, Borrower must
provide the following:

1. Filing of UCC-1 Financial Statements with requisite filing offices.

2. Lender must have received satisfactory post-closing lien searches from
all applicable recording and filing offices reflecting the first
priority of all of Lender's Liens on Collateral.

3. Borrower must comply with all of the Conditions of Lending in Article 6
of this Agreement.

POST-CLOSING, POST-INITIAL FUNDING CONDITIONS

Without limiting the conditions set forth in the Agreement, Borrower must
provide the following Closing Documents that were not provided at closing:

None
BORROWER'S INITIALS: _________
LENDER'S INITIALS: _________

59
<PAGE> 54
SCHEDULE 7.15 TO
LOAN AND SECURITY AGREEMENT

FINANCIAL COVENANTS

(a) Debt Service Coverage Ratio. Guarantor shall maintain at all
times a Debt Service Coverage Ratio of not less than 1.25 to 1.00.

(b) Minimum Cash Balance. Guarantor shall maintain at all times
a Cash balance or immediately available lines of credit acceptable to
Lender of not less than $1,000,000.00.

(c) Senior Notes. Guarantor shall comply at all times with the
covenants contained in Sections 4.07 and 4.09 in the Indenture, as
amended from time to time, and such covenants are hereby incorporated
into this Schedule and this Agreement by reference, until all of the
Guarantor's obligations under the Indenture are paid in full.

BORROWER'S INITIALS: _________
LENDER'S INITIALS: _________

61
<PAGE> 55
EXHIBIT A

FORM OF
PROMISSORY NOTE

$28,000,000 (or such lesser amount as of _______, 1997
as may be advanced hereunder)

FOR VALUE RECEIVED, IXC CARRIER, Inc., a Nevada corporation ("Borrower")
promises and agrees to pay to the order of NTFC CAPITAL CORPORATION ("Lender"),
its successors, assigns or any subsequent holder of this Note at its offices
located at 220 Athens Way, Nashville, Tennessee, 37228-1399, or at such other
place as may be designated in writing by Lender or its assigns, in lawful money
of the United States of America in immediately available funds, Twenty-Eight
Million Dollars ($28,000,000) or such lesser amounts advanced pursuant to
Section 2.02 of the Loan Agreement (defined below), as noted on Schedule A
hereto, together with interest thereon and other amounts due as provided below.
Notations on the Schedules attached hereto are for convenience only, and the
failure of the Lender to make any notation on any Schedule, or any incorrect
notation by the Lender on any Schedule, shall not diminish the obligations of
the Borrower under this Note. This Note shall mature on December 31, 2002 (the
"Maturity Date").

This Note is issued pursuant to that certain Loan and Security Agreement
dated as of , 1997 by and between Borrower, IXC Communications, Inc., and Lender
(as it may be modified, amended or restated from time to time, the "Loan
Agreement"). Any term not otherwise defined in this Note shall have the same
meaning as in the Loan Agreement. Reference is made to the Loan Agreement,
which, among other things, permits the acceleration of the maturity hereof upon
the occurrence of certain events and for prepayments in certain circumstances
and upon certain terms and conditions. This Note is secured by, among other
things, the Collateral described in the Loan Agreement and the Security
Documents.

Each Advance hereunder shall bear interest from the date of each such
Advance until such amount is due and payable (whether on any Payment Date, at
the Maturity Date, by acceleration, or otherwise), at a fixed interest rate
equal to the lesser of (i) the five (5) year constant maturity Treasury Bill
rate as quoted in the Federal Reserve Statistical Release H.15 Report (or the
equivalent of such Report) on the last business day of the week ending two weeks
prior to the week of the Borrowing Date plus 320 basis points ("Interest Rate")
expressed as an annual rate of interest, compounded monthly, and calculated on
the basis of a 360-day year, or (ii) the maximum permissible rate under
applicable law in effect at any time. So long as no event of default has
occurred and is continuing, the Interest Rate applying to each Advance shall be
reduced (on a one-time basis) by 75 basis points when the public debt rating of
IXC Communications, Inc. (the "Guarantor") as of any Payment Date equals or
exceeds Standard and Poor's BBB- rating. So long as no event of default has
occurred and is continuing, the Interest Rate applying to each Advance shall be
reduced (on a one-time basis) by an additional 25 basis points when the
Guarantor's public debt rating as of any Payment Date equals or exceeds Standard
and Poor's BBB rating. If, after the Guarantor attains a BBB rating, the
Guarantor's debt rating is subsequently downgraded from BBB (but not less than
BBB-) as of any Payment Date, then the Interest Rate applying to each Advance
will be increased by 25 basis points. If the Guarantor's debt rating is further
downgraded as of any Payment Date below BBB-, then the Interest Rate applying to
each Advance will be increased by an additional 75 basis points.

<PAGE> 56
Interest shall accrue on all principal amounts outstanding hereunder for
each separate Advance at the applicable Interest Rate for each Advance and shall
compound monthly and be payable quarterly in arrears through December 31, 1997
(the "Interest Only Period").

Following the end of the Interest Only Period, principal amounts
outstanding hereunder and interest shall be paid as follows:

Principal shall be paid in twenty (20) equal consecutive quarterly
installments, plus accrued interest, commencing on March 31, 1998 (the
"Initial Payment Date") and on the last Business Day of each Calendar
Quarter thereafter (each, a "Payment Date") until the Maturity Date;
provided, however, that the principal payment amounts shall be
recalculated by Lender if any Advances are made hereunder after the
Conversion Date, based on the aggregate amount of all Advances made at
any time. The amount of each quarterly payment shall be calculated, at
the outset, by amortizing the amount of all principal amounts
outstanding on the last day of the Interest Only Period (the "Conversion
Date"). It is intended that the above amortization schedule will fully
amortize the principal amounts advanced under this Note. The final
payment shall be in an amount equal to all outstanding principal,
accrued and unpaid interest, premiums, expenses, fees, penalties and all
other unpaid charges due under this Note and the Loan Agreement.

This Note is subject to prepayment pursuant to Section 2.04 of the Loan
Agreement. Any prepayments shall be applied first to interest, then to premium,
then to expenses, and then to the installments of principal in reverse order of
maturity. In addition, principal installments shall be applied to each separate
Advance with the oldest Advance being prepaid first, until the remaining
principal outstanding on each such Advance is fully prepaid.

Notwithstanding the foregoing, if Borrower shall fail to pay within ten
(10) days after the due date any principal amount or interest or other amount
payable under this Note, upon written notice to Borrower in accordance with
Section 2.02(d) of the Loan Agreement, Borrower shall pay to Lender, to defray
the administrative costs of handling such late payments, an amount equal to
interest on the amount unpaid, to the extent permitted under applicable law, at
a rate equal to the lesser of three percent (3%) over the Interest Rate or the
maximum permissible interest rate under applicable law (the "Default Rate")
(instead of the Interest Rate), from the due date until such overdue principal
amount, interest or other unpaid amount is paid in full (both before and after
judgment). In addition, but without duplication, upon the occurrence and during
the continuance of an Event of Default, all outstanding amounts hereunder shall
bear interest at the Default Rate (instead of the Interest Rate) until such
amounts are paid in full or such Event of Default is waived in writing by
Lender.

Notwithstanding any provision of this Note or the Loan Agreement to the
contrary, it is the intent of the Lender and the Borrower that the Lender or any
subsequent holder of this Note shall never be entitled to receive, collect,
reserve or apply, as interest, any amount in excess of the maximum rate of
interest permitted to be charged by applicable Law, as amended or enacted, from
time to time. In the event Lender, or any subsequent holder of this Note, ever
receives, collects, reserves or applies, as interest, any such excess, such
amount which would be excessive interest shall be deemed a partial prepayment of
principal and treated as such, or, if the principal indebtedness and all other
amounts due are paid in full, any remaining excess funds shall immediately be
applied to any other outstanding indebtedness of Borrower due to Lender, and if
none is outstanding, shall be paid to Borrower. In determining whether or not
the interest paid or payable, under any specific contingency, exceeds the
highest lawful rate, the Borrower and the Lender shall, to the maximum extent
permitted under applicable

2
<PAGE> 57
law, (a) exclude voluntary prepayments and the effects thereof as it may relate
to any fees charged by the Lender, and (b) amortize, prorate, allocate, and
spread, in equal parts, the total amount of interest throughout the entire term
of the indebtedness; provided that if the indebtedness is paid and performed in
full prior to the end of the full contemplated term hereof, and if the interest
received for the actual period of existence hereof exceeds the maximum lawful
rate, the Lender or any subsequent holder of the Note shall refund to the
Borrower the amount of such excess or credit the amount of such excess against
the principal portion of the indebtedness, as of the date it was received, and,
in such event, the Lender shall not be subject to any penalties provided by any
laws for contracting for, charging, reserving or receiving interest in excess of
the maximum lawful rate.

Provided that no Event of Default has occurred and is continuing, Lender
shall apply amounts received for payment under this Note first to interest, then
to premium, then to undisputed expenses due Lender after written advice thereof
to Borrower, then to principal in reverse chronological order. Upon the
occurrence and continuation of an Event of Default, all amounts received for
payment under this Note shall at the option of Lender be applied first to any
unpaid expenses due Lender under this Note or under any other documents
evidencing or securing the obligations of Borrower to Lender (upon written
advice thereof to Borrower), then to any unpaid late charges due under the Loan
Agreement, then to any unpaid interest accrued at the Default Rate (after the
expiration of any applicable cure period, but retroactive to the due date of any
uncured Event of Default under Section 9.01(a) of the Loan Agreement), then to
all other accrued but unpaid interest due under this Note and finally to the
reduction of outstanding principal due under this Note in reverse chronological
order.

Upon the occurrence of any one or more of the events specified in
Section 9.01 of the Loan Agreement (provided that any requirement for the lapse
of time, or any other condition, under Section 9.01 or otherwise, has been
satisfied), (each, an "Event of Default"), all amounts then remaining unpaid on
this Note shall be, or may be declared to be, immediately due and payable as
provided in the Loan Agreement, without further notice, at the option of the
Lender. Lender may waive any Event of Default before or after the same has been
declared and restore this Note to full force and effect without impairing any
rights hereunder, such right of waiver being a continuing one, but one waiver
shall not imply any additional or subsequent waiver. Time is of the essence of
this Note.

Demand, presentment, notice and protest are expressly waived, except for
notices to Borrower otherwise expressly required in the Loan Agreement or any
other Loan Document. Borrower jointly and severally waives presentment for
payment, protest, notice of protest, notice of nonpayment of this Note, demand
and all legal diligence in enforcing collection, and hereby expressly consents
to (i) any and all delays, extensions, renewals or other modifications of this
Note or any waivers of any term hereof, (ii) any release or discharge by Lender
of Borrower, (iii) any release, substitution or exchange of any security for the
payment hereof, (iv) any failure to act (except failure to advance funds to the
extent required under the Loan Agreement) on the part of Lender, and (vi) any
indulgence shown by Lender from time to time (without notice or further assent
from Borrower) and hereby agree that no such action, failure to act or failure
to exercise any right or remedy by Lender shall in any way affect or impair the
obligations of Borrower.

Borrower hereby irrevocably consents to the jurisdiction of the courts
located in Davidson County, Tennessee, including without limitation federal
courts sitting in the middle district of Tennessee and the Circuit or Chancery
courts for Davidson County, Tennessee, for any suit brought or action commenced
in connection with this note, any documents executed or delivered in connection
herewith,

3
<PAGE> 58
including without limitation the loan agreement, or any relationship between
lender and borrower, and agrees not to contest or challenge jurisdiction or
venue in any such courts.

Borrower irrevocably consents to the service of process of any such
courts in any such action or proceeding by the mailing of copies thereof by
registered or certified mail, postage prepaid, return receipt requested, to
Borrower at the address opposite its signature below or to such other address as
Borrower may have furnished to Lender in writing, and agrees that such service
shall become effective thirty (30) days after such mailing. However, nothing
herein shall affect the right of Lender or Borrower to serve process in any
other manner permitted by law or to commence legal proceedings or otherwise
proceed against Lender or Borrower in any other jurisdiction.

Borrower hereby knowingly, willingly and irrevocably waives its rights
to demand a jury trial in any action or proceeding involving this note, any
documents executed or delivered in connection herewith including without
limitation the loan agreement or any relationship between borrower and lender.
Borrower agrees that lender may file an original counterpart or copy of this
paragraph with any court as written evidence of borrower's express waiver of its
right to trial by jury.

In any action to enforce this note, Borrower hereby irrevocably and
unconditionally waives, to the extent permitted by applicable law, any and all
rights under the laws of any state to claim or recover any special, exemplary,
punitive, consequential or other damages other than actual direct damages.

In the event this Note is placed in the hands of one or more attorneys
for collection or enforcement or protection of the holder's rights described
herein or in the Loan Agreement or the other Loan Documents, and a court of
competent jurisdiction does not render a judgement against Lender on this Note
or the collection issue in dispute, the Borrower agrees to pay all reasonable
attorneys' fees and all court and other out-of-pocket costs incurred by the
holder hereof (each of which shall be due on demand unless disputed and in any
event shall bear interest at the rate then payable hereunder from five (5) days
after such demand is made until paid).

This Note is governed by and shall be construed in accordance with the
internal laws of the State of Tennessee. If any provision of this Note should
for any reason be invalid or unenforceable, the remaining provisions hereof
shall remain in full force and effect.

This Note may not be changed, extended or terminated except in writing.
No waiver of any term or provision hereof shall be valid unless in writing
signed by Lender.

Executed as of _____________________, 1997.

IXC CARRIER, INC.

By:_________________________________

Title:______________________________

4
<PAGE> 59
SCHEDULE A TO NOTE

Initial Payment Date: March 31, 1998
Maturity Date: December 31, 2002

<TABLE>
<CAPTION>
Amount Advanced Date Advanced Payment Amount Payment Date Interest
Rate
- --------------- ------------- -------------- ------------ ---------

5
<PAGE> 60
EXHIBIT B

FORM OF
BORROWING CERTIFICATE

Pursuant to Section 2.03(b) of the Loan and Security Agreement dated as
of __________, 1997 between IXC CARRIER, INC., a Nevada corporation (the
"Borrower"), IXC COMMUNICATIONS, INC., a Delaware corporation, and NTFC CAPITAL
CORPORATION (the "Lender"), (as amended, modified or supplemented from time to
time, the "Loan Agreement"), the undersigned Responsible Officer of the Borrower
hereby certifies as set forth below. Capitalized terms used herein which are
defined in the Loan Agreement shall have their defined meanings when used herein
(unless otherwise indicated).

1. The Borrower hereby represents and warrants that its representations
and warranties contained in Article 4 of the Loan Agreement are true and correct
on and as of the date of this Certificate.

2. Immediately prior to and immediately after the making of the Advance
requested hereunder, no Default or Event of Default has or will have occurred
and will be continuing under the Loan Agreement.

3. All other applicable conditions of Article 6 of the Loan Agreement
have been satisfied; all applicable covenants contained in Article 7 of the Loan
Agreement have been met; and no violations of Article 8 have occurred and remain
uncured.

4. The Borrowing Date on which the Advance is requested is _____________
___, 199__.

5. The total amount of the Advance requested hereunder is
$_____________, to be disbursed and allocated as follows:

(a) $_____________, to be paid directly to NTI for the purchase
by the Borrower of Equipment provided in accordance with the NTI Supply
Agreement (evidenced by the copies of unpaid NTI invoices attached to
this Certificate); and

(b) $_____________, to be paid to the Borrower as reimbursement
for amounts paid to NTI under the NTI Supply Agreement by Borrower, as
evidenced by the attached invoices and copies of Borrower's cancelled
checks in payment thereof.

6. The amount of the Advance described in 5(a) above (if any) is equal
to the amount due and owing on the date hereof under the NTI Supply Agreement.

7. The Advance requested on the date hereof is for a proper purpose as
set forth in Section 2.01 of the Loan Agreement.

8. The Equipment being purchased with proceeds of the Advance (or for
which reimbursement is being requested) is described on Schedule 1 attached
hereto.

9. A copy of the Federal Reserve Statistical Release H.15 report quoting
the five (5) year constant maturity Treasury Bill rate on the last business day
of the week ending two weeks prior to the week of the Borrowing Date is attached
hereto.

<PAGE> 61
10. Wire instructions for Advances to be disbursed to Borrower are as
follows:

Account Number: ____________________________
Account Name: ____________________________
Bank : ____________________________
ABA routing number: ____________________________

IN WITNESS WHEREOF, the undersigned has duly executed this Borrowing
Certificate in the name of the Borrower as of the ___ day of __________, 199__.

IXC CARRIER, INC.

By:_________________________________________

Title:______________________________________

<PAGE> 62
EXHIBIT C

FORM OF
OPINION OF COUNSEL FOR CORPORATE BORROWER
AND CORPORATE GUARANTOR

[CLOSING DATE]

NTFC Capital Corporation
220 Athens Way
Nashville, Tennessee 37228

Export Development Corporation
151 O'Connor
Ottawa, Canada K1A 1K3

Re: Equipment Loan and Security Agreement between NTFC Capital
Corporation, IXC Carrier, Inc. and IXC Communications, Inc.

Ladies and Gentlemen:

We have acted as counsel to IXC Carrier, Inc., a Nevada corporation
("Borrower"), and IXC Communications, Inc., a Delaware corporation ("Guarantor")
in connection with the preparation, execution and delivery of the Loan and
Security Agreement (the "Loan Agreement") dated as of June , 1997, between the
Borrower, the Guarantor and NTFC Capital Corporation ("Lender") and the
transactions contemplated by the Loan Agreement. This opinion is being furnished
to NTFC Capital Corporation pursuant to Section 5.02 of the Loan Agreement and
to Export Development Corporation in its capacity as an assignee pursuant to
that certain Assignment and Acceptance dated as of June ___, 1997. Capitalized
terms used herein without definition have the same meanings as in the Loan
Agreement.

In furnishing our opinion, we have examined such agreements,
certificates and other documents as we have deemed relevant and necessary as the
basis for our opinion, including the Certificates of Incorporation and the
By-laws of the Borrower and the Guarantor, each as amended to date. We have also
examined executed counterparts of the Loan Agreement, the Note, the Security
Documents, the NTI Purchase Agreement, the Guaranty, and all other Basic
Agreements and other Loan Documents (collectively, the "Agreements"). We have
relied as to factual matters on the representations and warranties of the
Borrower and the Guarantor set forth in the Loan Agreement and the Guaranty. We
have assumed the genuineness of all signatures (except those of the Borrower and
the Guarantor) and conformity to original documents of all documents furnished
to us as originals or photostatic copies.

We are licensed to practice in the State of [California] [Texas], and we
are familiar with the corporate laws of the State of Nevada, the Borrower's
state of incorporation, and the corporate laws of the State of Delaware, the
Guarantor's state of incorporation. Texas is the state in which (i) the Borrower
was formed, (ii) the Borrower's chief executive offices are located, and (iii)
the Equipment is or is to be located. We express no opinion as to any laws other
than the state laws of [California] [Texas], the corporate laws of the states of
Nevada and Delaware, and referenced federal law.

On the basis of the foregoing, and having regard to such legal
considerations as we have deemed relevant, we are of the opinion that:

1. The Borrower is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada, with full corporate power
and authority to carry on its business, to own

<PAGE> 63
or hold under lease its properties, and to enter into the Agreements to which it
is a party and to carry out the terms thereof. It is fully qualified to conduct
business and in good standing as a foreign corporation in the State of Texas and
in every other state where such qualification is necessary.

2. The Guarantor is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, with full corporate
power and authority to carry on its business, to own or hold under lease its
properties, and to enter into the Agreements to which it is a party and to carry
out the terms thereof. It is fully qualified to conduct business and in good
standing as a foreign corporation in every state where such qualification is
necessary.

3. Each of the Agreements to which it is a party has been duly
authorized, executed and delivered by the Borrower. Each of the Agreements to
which it is a party constitutes a legal, valid and binding obligation of the
Borrower enforceable in accordance with its respective terms except that such
enforceability is subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, receivership or other similar laws relating to or
affecting creditors' rights generally and the application of equitable
principles (whether enforcement is sought in equity or at law), and except that
certain of the remedial provisions contained in the Loan Agreement may be
further limited or rendered unenforceable by other applicable laws (but we do
not believe that such other laws and equitable principles make the remedies or
procedures afforded by the Agreements inadequate for the practical realization
of the benefits intended to be provided thereby).

4. Each of the Agreements to which it is a party has been duly
authorized, executed and delivered by the Guarantor. Each of the Agreements to
which it is a party constitutes a legal, valid and binding obligation of the
Borrower enforceable in accordance with its respective terms except that such
enforceability is subject to the effect of bankruptcy, insolvency,
reorganization, moratorium, receivership or other similar laws relating to or
affecting creditors' rights generally and the application of equitable
principles (whether enforcement is sought in equity or at law), and except that
certain of the remedial provisions contained in the Loan Agreement and the
Guaranty may be further limited or rendered unenforceable by other applicable
laws (but we do not believe that such other laws and equitable principles make
the remedies or procedures afforded by the Agreements inadequate for the
practical realization of the benefits intended to be provided thereby).

5. All consents and authorizations of, filings with and other acts by or
in respect of, any federal or State Governmental Authority required for the due
execution, delivery and performance by the Borrower and the Guarantor of the
Agreements to which each is a party, or the legality, validity or enforceability
thereof or the formation or operation of the Borrower and the Guarantor and
their respective businesses have been obtained or performed and are in full
force and effect.

6. The execution, delivery and performance of the Agreements to which
Borrower or Guarantor are parties and the taking of actions contemplated thereby
(i) do not and will not result in any violation of, or conflict with or
constitute a default under, any term of the Borrower's or the Guarantor's
Certificate of Incorporation or By-laws, each as amended to date, (ii) to the
best of our knowledge, based on due inquiry, do not and will not conflict with
or constitute a default under any agreement, instrument, order, judgment or
decree to which the Borrower or the Guarantor or their respective properties are
parties or subject, or (iii) do not and will not, except as contemplated by the
Loan Documents, result in the creation of any lien, charge or encumbrance upon
any of the capital stock or assets of the Borrower or the Guarantor. The
Borrower's and the Guarantor's execution, delivery, performance of and
compliance with the terms of the Agreements to which they are parties do not
violate any provision of any applicable federal, state or local law, rule or
regulation.

2
<PAGE> 64
7. There is no action, suit, proceeding or arbitration (whether or not
purportedly on behalf of the Borrower) pending or, to our knowledge, threatened
against the Borrower, before any court, arbitrator or grand jury or any
governmental body, agency or official or at law of any jurisdiction in which
there is a reasonable possibility of an adverse decision which would materially
and adversely affect the business, financial condition or properties of the
Borrower taken as a whole, or the ability of the Borrower to perform its
obligations under the Agreements to which it is a party. To our knowledge after
due inquiry, the Borrower is not in default with respect to any judgment, order,
writ, injunction, decree, rule or regulation of any court or governmental agency
or instrumentality of any jurisdiction, a default under which would materially
and adversely affect the business, financial condition or properties of the
Borrower taken as a whole.

8. There is no action, suit, proceeding or arbitration (whether or not
purportedly on behalf of the Guarantor) pending or, to our knowledge, threatened
against the Guarantor, before any court, arbitrator or grand jury or any
governmental body, agency or official or at law of any jurisdiction in which
there is a reasonable possibility of an adverse decision which would materially
and adversely affect the business, financial condition or properties of the
Guarantor taken as a whole, or the ability of the Guarantor to perform its
obligations under the Agreements to which it is a party. To our knowledge after
due inquiry, the Guarantor is not in default with respect to any judgment,
order, writ, injunction, decree, rule or regulation of any court or governmental
agency or instrumentality of any jurisdiction, a default under which would
materially and adversely affect the business, financial condition or properties
of the Guarantor taken as a whole.

9. The Borrower is not an "investment company" or a company "controlled"
by an "investment company," within the meaning of the Investment Company Act of
1940, as amended, or a "holding company," or a "subsidiary company" of a
"holding company," or an "affiliate" of a "holding company" or of a "subsidiary
company" of a "holding company," within the meaning of the Public Utility
Holding Company Act of 1935, as amended.

10. To the best of our knowledge based on due inquiry, the Borrower has
no Subsidiaries at the date hereof.

11. Courts in the State of Texas, applying Texas choice of law
principles should honor the choice of the parties to have the internal laws of
the State of Tennessee apply to this transaction, except to the extent the Texas
Uniform Commercial Code applies to this transaction.

12. If the laws of the State of Texas were applied, the Interest Rate,
Default Rate, fees, premiums and other amounts that the Borrower will be
required to pay under the terms of the Agreements do not violate any State of
Texas usury laws or laws limiting the lawfully chargeable amounts of such
interest, fees, premiums or other charges, either individually or in the
aggregate.*

13. The Loan Agreement is effective to create in favor of Lender a
legal, valid and enforceable security interest in all right, title and interest
of the Borrower in the Collateral in which a security interest may be created
under Article 9 of the Uniform Commercial Code as adopted in the State of Texas
(the "UCC"). The Borrower's Financing Statements, copies of which are attached
hereto as Exhibit A, are in appropriate form for filing pursuant to the UCC.
Upon the filing of the Financing Statements in the offices indicated in Exhibit
B hereto, the Loan Agreement will constitute a fully perfected lien on, and
security interest in, all rights, title and interest of the Borrower in all of
the Collateral described in the Loan Agreement in which a security interest may
be perfected under Article

- --------
* These opinions may be rendered by separate Texas counsel.

3
<PAGE> 65
9 of the UCC, subject to no other liens. No other filing is necessary in order
to perfect the priority of the Collateral described in the Loan Agreement over
subsequently recorded liens or security interests, including interests of owners
and encumbrancers of any real property where any of the Collateral may be
located.*

14. We have conducted a UCC-11 search dated __________, of the UCC
records in the Office of the Secretary of State of the State of Texas. Solely in
reliance on the results of that search, a copy of which is Exhibit C hereto, the
Lender will have a first priority security interest in the Collateral when the
Form UCC-1 Financing Statements in the form attached hereto are filed as
indicated in Paragraph 11 above. The first-priority security interest of the
Lender in and to the Collateral will not be affected or impaired by the terms of
any loan agreement or indenture or any other contract, agreement or instrument
to which the Borrower is a party, or under which it is bound.*

15. Under the laws of the State of Texas, there is no requirement that
Lender qualify to do business in that State, comply with the provisions of any
foreign lender statute or pay any state or local tax in that State in its
capacity as mortgagee or secured party in order to carry out the transactions
contemplated by, receive the benefits provided by, or enforce the provisions of,
the Security Documents. Except for nominal recording and filing fees, no
recording, filing, stamp, transfer, privilege, intangibles or other tax must be
paid in connection with the execution, delivery, filing, recordation or
enforcement of the Financing Statements, or the other Agreements.*

This opinion is rendered only for the benefit of NTFC Capital
Corporation and Export Development Corporation and their respective successors
and assigns, and may not be relied upon by other parties without our prior
written consent.

Very truly yours,

<PAGE> 66
EXHIBIT A TO
OPINION OF COUNSEL FOR BORROWER

COPIES OF BORROWER'S FINANCING STATEMENTS

SEE ATTACHED.

5
<PAGE> 67
FORM OF
LANDLORD'S CONSENT

THIS LANDLORD'S CONSENT ("Consent"), made and entered into this ___ day
of _________, 1997, by ____________, ("Landlord") in favor of NTFC CAPITAL
CORPORATION, a Delaware corporation ("Lender").

BACKGROUND:

A. Landlord is the owner of certain real property located in __________
County, ________, being more particularly described on Exhibit A attached hereto
(the "Premises").

B. The Premises have been leased to _____________ ("Lessee") by Lease
Agreement dated __________ (the "Lease") a memorandum of which is attached
hereto as Exhibit B and is of record at Book __________, Page __________, in the
Office of the [Recorder of Deeds] for __________ County, ___________.

C. Lender will be extending loans and other financial accommodations to
IXC Carrier, Inc. ("Borrower") for the purpose of financing Borrower's
acquisition of certain telecommunications equipment (the "Equipment"), part of
which may be located on the Premises.

D. As a condition to extending such loans and other financial
accommodations, Lender has required, among other things, that Borrower grant to
Lender security interests in the Equipment whether now owned or hereafter
acquired ("Collateral"), a portion of which Collateral is and may hereafter be
located on or about the Premises.

NOW, THEREFORE, in order to induce Lender to continue to extend
financial accommodations to Borrower, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Landlord hereby agrees with Lender as follows:

1. Landlord agrees that Lender's security interests and liens in the
Collateral shall be superior to any title or interest which the Landlord may at
any time have therein, and, during the term of this Agreement, Landlord will not
assert against any of the Collateral any title or any statutory, common law,
contractual or possessory lien, including, without limitation, rights of levy or
distraint for rent, all of which Landlord hereby subordinates in favor of
Lender.

2. Landlord hereby agrees that none of the Collateral is subject to the
Lease and hereby disclaims any and all right, title, interest or claim in or to
the Collateral and any cash or non-cash proceeds of the Collateral (except with
respect to the subordinated landlord lien referred to in Section 1 above). The
Collateral may be affixed to or used in conjunction with the Premises, but shall
remain the Lessee's personal property, subject to Lender's lien, at all times.
Landlord agrees not to impound or remove any of the Collateral from the Premises
as long as this Consent is in effect, except as set forth herein.

3. Landlord agrees that Lender may enter upon the Premises at any time
or times,

<PAGE> 68
during normal business hours, with reasonable advance notice to Landlord, to
inspect or to remove the Collateral therefrom, without charge, except for
reimbursement for any physical damage to the Premises caused by such removal.
Landlord will not hinder Lender's actions in enforcing its liens and remedies
with respect to the Collateral. Landlord agrees that Lender may conduct public
or private sales of the Collateral at the Premises and that interested parties
will be permitted access to the Premises during normal business hours, with
reasonable advance notice to Landlord, for the purpose of inspecting the
Collateral prior to any such sale.

4. Landlord agrees that as long as Landlord receives in a timely fashion
all rental payments as and when due, and as long as the obligations of the
Lessee to maintain the Premises are being fulfilled (whether by Lessee or, at
Lender's option, by Lender or any designee of Lender), Landlord will not
terminate the Lease or take any action to impound or remove the Collateral or to
require Lessee, Lender or Lender's designee to surrender possession of the
Premises until termination of the Lease.

5. In the event that Lessee defaults in its obligations under the Lease,
Landlord hereby agrees to give Lender written notice of default under the Lease,
at the same time and in the same manner as such notice is given to Lessee and
further agrees to allow the Collateral to remain on the Premises for a
reasonable time not less than ninety (90) days, during which time Lender may, at
its discretion, remove, sell or otherwise dispose of such Lender's Collateral as
Lender may elect, as long as Landlord receives the rental payments due under the
Lease, and as long as Lessee's obligations to maintain the Premises are being
fulfilled.

6. Landlord states that the Lease is presently in full force and effect,
that all rentals have been paid up to date, and that the Lease is not in
default.

7. This Consent shall remain in full force and effect until all
obligations of Lessee to Lender have been paid and satisfied in full and Lender
has terminated its financing agreements with Lessee.

8. The provisions of this Consent may not be modified or terminated
orally, and shall be binding upon the successors and assigns of the Landlord,
and upon any successor owner or transferee of the Premises and shall inure to
the benefit of the Lender and its successors and assigns. Notwithstanding any
other provision of this Consent or the Lease to the contrary, all of Lender's
right, title and interest in and to the Lease and any obligations thereunder may
be assigned and transferred to an affiliate or successor of Lender without
notice to Landlord, and to other parties with notice to Landlord.

9. All notices shall be in writing and shall be mailed by first class
registered or certified mail, postage prepaid, as follows:

(a) If to Lender:

NTFC Capital Corporation
220 Athens Way
Nashville, Tennessee 37228
Attention: Vice President, Marketing

2
<PAGE> 69
(b) If to Landlord:

_________________________
_________________________
_________________________
Attention: ______________

10. This Landlord's Consent may be recorded in any appropriate
locations.

11. This document shall in all respects be governed by and construed in
accordance with the laws of the State in which the Premises are located.

IN WITNESS WHEREOF, Landlord has executed this Landlord's Waiver and
Consent on the date first above written.

LANDLORD:

________________________________________

By:_____________________________________

Title:__________________________________

<PAGE> 70
[FORM OF NOTARY ACKNOWLEDGEMENT] [SAMPLE: VARIABLE BY STATE AND TYPE OF ENTITY]

[CORPORATION]

STATE OF ________________)
COUNTY OF _______________)

Before me, ____________ , a Notary Public of said County and State,
personally appeared ____________, with whom I am personally acquainted (or
proved to me on the basis of satisfactory evidence), and who, upon oath,
acknowledged himself/herself to be ____________ (or other officer authorized to
execute the instrument) of _________________, the within named bargainor, a
corporation, and that he/she as such _____________________executed the foregoing
instrument for the purposes therein contained, by signing the name of the
corporation by himself/herself as ___________________.

Witness my hand and seal, at Office in ____________________, this ______
day of ________________, 19______ .

----------------------------
Notary Public

My Commission Expires:____________

This Document Prepared By:

________________________________________
________________________________________
________________________________________

After Recording Return To:

________________________________________
________________________________________
________________________________________

4
<PAGE> 71
EXHIBIT A TO LANDLORD'S
WAIVER AND CONSENT

Property Description

5
<PAGE> 72
EXHIBIT E

FORM OF
ENVIRONMENTAL CERTIFICATE

In connection with the loans from NTFC Capital Corporation ("Lender")
to IXC Carrier, Inc. ("Borrower") pursuant to the Loan and Security Agreement
dated as of July __, 1997, between the Lender, the Borrower, and IXC
Communications, Inc. ("Guarantor") (the "Loan Agreement"), the Borrower and the
Guarantor hereby certify to, and agree with, the Lender as follows:

1. Neither the Borrower nor the Guarantor has actual knowledge of (a)
the presence of any hazardous Substances (as herein defined) on any of the real
property owned, leased or operated by the Borrower or Guarantor, or anticipated
to be necessary to be acquired by the Borrower or Guarantor, on which any
Equipment financed with proceeds of the Loan Agreement will be located (the
"Property"); (b) any spills, releases, discharges, or disposal of Hazardous
Substances that have occurred or are presently occurring on or onto the
Property; or (c) any spills or disposal of Hazardous Substances that have
occurred or are occurring off the Property as a result of any construction on or
operation and use of the Property.

2. To the best of the Borrower's and Guarantor's knowledge, the
Property and any previous or current operation concerning the Property are not
in violation of any applicable Environmental Law (as defined below), and neither
the Borrower nor the Guarantor has knowledge or has received any notice from any
governmental body, citizens' group, employee or other Person claiming that the
Property or operations or uses of the Property have or may result in any
violation of any Environmental Law or asserting that any Person has any
environmental liability with respect to the Property, or requiring or calling
attention to the need for, any work, repairs, construction, reclamation,
alterations or installation on or in connection with the Property in order to
comply with any Environmental Law with which the Borrower or Guarantor has not
complied (collectively, "Environmental Claims"). If there are any such notices
with which the Borrower or Guarantor has complied, the Borrower or Guarantor
shall provide the Lender with copies thereof. If the Borrower or Guarantor
receives any such notice or any other notice, it will immediately provide a copy
to the Lender.

3. To the best of the Borrower's and the Guarantor's knowledge, no
litigation, claim, action, investigation or administrative proceeding in respect
of any Environmental Law is pending or is proposed, threatened or anticipated
with respect to the Property or the use and operation thereof.

4. The Borrower and the Guarantor jointly and severally agree to
indemnify and hold the Lender harmless from and against any and all claims,
demands, damages, losses, liens, liabilities, interest, penalties, fines,
lawsuits, and other proceedings, costs and expenses (including, without
limitation, reasonable attorneys' fees and testing, assessment, investigation
and audit costs), arising directly or indirectly from or out of, or in any way
connected with (a) the presence or suspected presence of any Hazardous
Substances on the Property; (b) any violation or alleged violation of any
Environmental Law, whether attributable to events occurring before or after the
Borrower's or the Guarantor's acquisition of an interest in the Property, or (c)
any inaccuracy in the certifications contained herein. The Borrower and the
Guarantor agree that the Lender shall be entitled to require further information
and/or to request that the Borrower or Guarantor conduct environmental
assessments or audits (at the Borrower's or Guarantor's expense) if the Lender
has reason to suspect any environmental problems with the Property. In any such
event, the Borrower or Guarantor shall cooperate fully with the Lender and its
agents, and shall deliver to the Lender any environmental reports and
information relating to the Property that the Borrower or Guarantor may have.
All obligations of the Borrower or the Guarantor under this Certificate shall be
part of the "Obligations,"

<PAGE> 73
as defined in the Loan Agreement and shall survive termination of the Loan
Agreement and payment of the rest of the Obligations.

5. This Certificate shall be binding upon the Borrower and the
Guarantor and their respective heirs, legal representatives, successors and
assigns, and shall inure to the benefit of and may be relied upon by the Lender,
its successors and assigns. All of the Lender's right, title and interest in
this Certificate may be assigned in accordance with the terms of the Loan
Agreement.

6. The term "Environmental Law" means any current or future federal,
state and local law (including common law), statute, regulation, ordinance,
rulings, codes, judicial order, administrative order or terms of licenses or
permits applicable to environmental conditions in, on, under or around the
Premises, including without limitation, the Comprehensive Environmental
Response, Compensation and Liability Act, the Resource Conservation and Recovery
Act, the Superfund Amendment and Reauthorization Act of 1986, the Toxic
Substances Control Act, the Clean Air Act, the Clean Water Act, and the
Hazardous Waste Management Act, all as now or hereafter amended. The term
"release" means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping or disposing into the
environment. The term "environment" means any surface or groundwater, drinking
water supply, land, surface or subsurface strata or the ambient air. The term
"Hazardous Substance" means any substance or material defined or designated as
hazardous or toxic waste, hazardous or toxic material, a hazardous or toxic
substance, or infectious material, substance or waste or other similar term by
any Environmental Law, including without limitation, asbestos in friable form,
petroleum products, mining wastes, fly ash and agricultural chemical products.
Further, the terms "release," "environment" and "hazardous substance" shall have
any additional meanings as defined by any such Environmental Laws. Finally, to
the extent that any applicable state laws establish a meaning for "release" or
"hazardous substance" which is broader than as defined above, such broader
meaning shall apply.

IN WITNESS WHEREOF, the undersigned has executed this Certificate as of
this ___ day of July, 1997.

IXC COMMUNICATIONS, INC. IXC CARRIER, INC.

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

<PAGE> 74
STATE OF _________________ )
COUNTY OF ________________ )

Before me, ____________________, a Notary Public of said County and
State, personally appeared ____________________, with whom I am personally
acquainted (or proved to me on the basis of satisfactory evidence), and who,
upon oath, acknowledged himself/herself to be _____________ (or other officer
authorized to execute the instrument) of _______________, the within named
bargainor, a corporation, and that he/she as such ________________ executed the
foregoing instrument for the purposes therein contained, by signing the name of
the corporation by himself/herself as __________________.

Witness my hand and seal, at Office in __________________________, this
___ day of ___________________, 19___.

___________________________________
My Commission Expires:________________ Notary Public

Before me, __________________, a Notary Public of said County and
State, personally appeared ____________________, with whom I am personally
acquainted (or proved to me on the basis of satisfactory evidence), and who,
upon oath, acknowledged himself/herself to be ___________________ (or other
officer authorized to execute the instrument) of ____________________, the
within named bargainor, a corporation, and that he/she as such
_______________________ executed the foregoing instrument for the purposes
therein contained, by signing the name of the corporation by himself/herself as
___________________.

Witness my hand and seal, at Office in __________________________, this
___ day of ___________________, 19___.

___________________________________
My Commission Expires:________________ Notary Public

<PAGE> 75
EXHIBIT F

FORM OF
ASSIGNMENT AND ACCEPTANCE

Reference is made to the Loan and Security Agreement dated as of July
18, 1997 (as in effect on the date hereof, the "Loan Agreement"), among IXC
Carrier, Inc. ("Borrower"), IXC Communications, Inc. ("Guarantor"), and NTFC
Capital Corporation. Terms defined in the Loan Agreement are used herein with
the same meanings unless otherwise defined.

NTFC Capital Corporation ("Assignor") hereby sells and assigns, without
recourse, to Export Development Corporation ("Assignee"), and Assignee hereby
purchases and assumes, without recourse, from Assignor, effective as of the
Assignment Date set forth on Schedule A hereto, the Proportionate Share of the
Commitment set forth on Schedule A hereto, together with the Proportionate Share
of the Assignor's rights and interests in, to and under the Loan Agreement and
the other Loan Documents represented (the "Assigned Interest"), all as set forth
herein. The Assigned Interest includes the Proportionate Share of principal
owing to the Assignor on the applicable Assignment Date as set forth on Schedule
A hereto, and the right to receive interest and other payments in respect of
such Proportionate Share of principal amounts as they come due, subject to the
Assignor's finder's fee referenced below. After the Assignment Date, Assignee
shall fund its Proportionate Share of the Advances made to the Borrower under
the Loan Agreement.

Assignor represents and warrants that it is the sole legal and
beneficial owner, free and clear of any claims, liens or encumbrances, of the
Assigned Interest, the Assignor has not created any adverse claim upon the
Assigned Interest, and the interest is free and clear of any adverse claim.
Assignor also represents and warrants that it has provided to Assignee a true
and correct copy of the Loan Agreement (including the Schedules and forms of
Exhibits attached thereto), and that all Conditions of Closing and applicable
Conditions of Lending (including the post-closing items, if any, on Schedule
6.02 of the Loan Agreement) have been satisfied or waived with the written
approval of Assignee. Assignor further represents and warrants to Assignee that
to Assignor's knowledge, no Event of Default or condition or event which with
the passage of time, the giving of notice or both would constitute an Event of
Default, exists and is continuing under the Loan Agreement or the other Loan
Documents.

From and after the applicable Assignment Date, the Assignee shall have
the right to receive all payments due upon the applicable Assigned Interest and
arising from the proceeds of the sale of any Collateral or otherwise upon the
exercise of remedies available to the Lender in accordance with the provisions
of the Loan Agreement and the other Loan Documents (the "Payments"), but without
recourse against the Assignor. Assignee shall pay Assignor a "finder's fee"
equal to twenty-five basis points (.25%) of Assignee's Proportionate Share of
each Advance. Such finder's fee shall be paid by Assignee within two (2)
Business Days following Assignee's receipt of the first interest payment made in
connection with such Advance.

<PAGE> 76
Assignor shall require the Borrower to execute two replacement Notes,
evidencing the retained interest of the Assignor and the Assigned Interest,
respectively, and to deliver such replacement Notes upon the surrender to the
Borrower of the original Note.

The Assignor further represents and warrants that Assignee has no
obligation to fund advances or to make loans in excess of the Proportionate
Share of the Commitment set forth on Schedule A hereto.

From and after the Assignment Date, (i) the Assignee shall be a party
to and be bound by the provisions of the Loan Agreement, and to the extent of
the Assigned Interest, have the rights and obligations of a Lender thereunder
and under the other Loan Documents and (ii) the Assignor shall, to the extent of
the Assigned Interest, relinquish its rights and be released from its
obligations under the Loan Agreement, except as provided herein.

All demands, notices, requests, consents, and communications hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered by courier services, messenger, or telecopy at, or if duly deposited
in the mails, by certified or registered mail, postage prepaid - return receipt
requested, to the following addresses, or such other addresses as may be
furnished hereafter by notice in writing, to the following parties:

(A) in the case of the Assignee:

Export Development Corporation
151 O'Connor
Ottawa, Canada K1A 1K3
Telephone: (613) 598-3034
Facsimile: (613) 598-6858

(B) in the case of Assignor:

NTFC Capital Corporation NTFC Capital Corporation
220 Athens Way 14131 Midway Road
Nashville, TN 37228 Suite 630
Attn: Lawrence W. Middleton Dallas, TX 75244
Telephone: (615) 734-5272 Attn: Brett Woodard
Facsimile: (615) 734-5283 Telephone: (972) 341-2756
Facsimile: (972) 341-2755

<PAGE> 77
This Assignment and Acceptance may be executed in counterparts and
shall be governed by and construed in accordance with the laws of the State of
Tennessee. The terms set forth above are hereby agreed to as of the ___ day of
_________, ____.

NTFC CAPITAL CORPORATION, as Assignor

By:_____________________________________
Name:___________________________________
Title:__________________________________

EXPORT DEVELOPMENT CORPORATION, as Assignee

By:_____________________________________
Name:___________________________________
Title:__________________________________

<PAGE> 78
SCHEDULE A TO
ASSIGNMENT AND ACCEPTANCE

Name of Assignor: NTFC Capital Corporation

Name and address of Assignee: Export Development Corporation
151 O'Connor
Ottawa, Canada K1A 1K3

Effective Date of Assignment: July 18, 1997

Assigned Interest
i) Principal Amount of Advances Assigned: USD -0-

ii) Percentage of Unfunded Commitments Assigned:

Assigned to Assignee: 71.428571%

Retained by Assignor: 28.571429%

Total: 100 %
-------

<PAGE> 79
EXHIBIT G

FORM OF
CERTIFICATE OF FINANCIAL CONDITION

IXC Carrier, Inc. a Nevada corporation (the "Borrower"), acting by and
through its Senior Vice President and Chief Financial Officer, and IXC
Communications, Inc., a Delaware corporation (the "Guarantor"), acting by and
through its Senior Vice President and Chief Financial Officer, provide this
Certificate in connection with that certain Loan and Security Agreement of even
date herewith executed between NTFC Capital Corporation ("Lender"), Borrower and
Guarantor (the "Loan Agreement"), pursuant to which the Lender has agreed to
make loans to the Borrower in the maximum aggregate principal amount of
$28,000,000.00, as evidenced by certain promissory notes issued by Borrower to
the order of the Lender or its assigns. Borrower and Guarantor hereby certify to
Lender:

1. Capitalized terms used herein and not otherwise defined herein are
used as defined in the Loan Agreement.

2. The financial statements and all other documents relating to the
Guarantor's present or projected future financial condition provided to the
Lender in connection with the Loan Agreement have been prepared by or prepared
under the supervision of a Responsible Officer of the Guarantor, with due
diligence and in full awareness of the reliance of the Lender on the information
contained therein in reaching its decision to make the Advances. The financial
statements are the most recent annual or quarterly financial statements of the
Guarantor, and such financial statements are in conformity with GAAP (except
that quarterly reports may omit accompanying notes thereto and may be subject to
year-end audit adjustments).

3. The Borrower believes that, as a result of the Advances and any
obligations incurred in connection therewith and the other transactions
contemplated by the Loan Agreement, it has not incurred and will not incur debts
beyond its ability to satisfy them as they mature, and will have a positive cash
flow after paying all of its anticipated indebtedness when due, including the
obligations due to the Lender under the Loan Documents.

4. After giving effect to the Advances and the obligations incurred in
connection therewith and the other transactions contemplated by the Loan
Agreement, the Borrower anticipates that it will have sufficient proceeds from
its operating cash flow in the ordinary course of business, sufficient to pay
its interest expense and current maturities of long-term indebtedness when due.
The Borrower expects its cash flow to be sufficient to provide the cash needed
to repay existing long-term indebtedness as such matures.

5. Immediately after giving effect to the transactions contemplated by
the Loan Agreement and the other Loan Documents, the fair saleable value of the
assets of the Borrower will exceed the aggregate amount of all of the Borrower's
then outstanding indebtedness.

6. Based on the present and anticipated needs for capital of the
business conducted, or anticipated to be conducted in the future, by the
Borrower, and after giving effect to the Advances, the Borrower will not be left
with unreasonably small capital to finance the needs and anticipated needs of
such business.

<PAGE> 80
IN WITNESS WHEREOF, the Borrower and the Guarantor have caused the
execution of this Certificate this ____ day of _____________, 1997.

IXC CARRIER, INC.

By:
--------------------------------,
Senior Vice President

IXC COMMUNICATIONS, INC.

By:
--------------------------------,
Senior Vice President

<PAGE> 81
EXHIBIT H

FORM OF
UNCONDITIONAL GUARANTY AGREEMENT

THIS UNCONDITIONAL GUARANTY AGREEMENT (the "Guaranty"), dated as of
July __, 1997, made by IXC COMMUNICATIONS, INC., a Delaware corporation (the
"Guarantor"), in favor of NTFC CAPITAL CORPORATION, a Delaware corporation (the
"Lender"), and any assignee of the Lender.

RECITALS:

A. Guarantor desires to induce the Lender to enter that certain Loan
and Security Agreement dated as of July __, 1997 (the "Loan Agreement"), by and
between Lender, Guarantor, and IXC Carrier, Inc., a Nevada corporation
("Borrower") which is a wholly owned subsidiary of the Guarantor, to finance the
acquisition of Equipment, as hereinafter defined, pursuant to the terms of the
Loan Agreement. Such financings shall be referred to herein from time to time as
the "Loans".

B. The Lender is willing to enter into the Loan Agreement, and advance
the Loans, subject to the terms and conditions set forth in the Loan Agreement
and the other Loan Documents, as hereinafter defined, (as amended, modified,
supplemented or replaced from time to time) but only so long as Guarantor
unconditionally guarantees the timely performance and payment by Borrower of
each and every obligation under the Loan Documents, subject only to the
limitations stated herein.

C. Guarantor acknowledges that the Lender would not be willing to enter
into the Loan Documents without the guaranty by Guarantor under the terms of
this Guaranty.

D. Guarantor owns one hundred percent (100%) of the outstanding capital
stock of Borrower, and Guarantor expects to increase its business, and the
business of its other direct and indirect Affiliates, through the use of the
Equipment by Borrower and will receive direct and indirect benefit from the
Lender's extension of credit to Borrower.

NOW, THEREFORE, in order to induce the Lender to enter into the Loan
Documents with Borrower and for other good and valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Guarantor hereby agrees
as follows:

TERMS:

ARTICLE I

DEFINITIONS

SECTION 1.1. Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof):

"Equipment" has the meaning assigned to that term in the Loan
Agreement.

"Guaranteed Obligations" has the meaning assigned to that term
in Section 2.1 hereof.

"Guarantor" has the meaning assigned to that term in the
preamble hereof, and its

<PAGE> 82
successors and permitted assigns, and shall include without limitation:
(i) the Guarantor as debtor-in-possession or any trustee in any
bankruptcy proceeding; (ii) any trustee, receiver, custodian,
conservator, or other similar appointee over Guarantor or over any of
Guarantor's property pursuant to any court proceeding of any kind or
otherwise; and (iii) any successor person.

"Guaranty" means this Unconditional Guaranty Agreement, as the
same may be amended, supplemented, amended and restated or otherwise
modified from time to time.

"Borrower" has the meaning assigned to that term in the first
recital hereto, and its successors and assigns, and includes without
limitation: (i) the Borrower as debtor-in-possession or any trustee in
any bankruptcy proceeding; (ii) any trustee, receiver, custodian,
conservator, or other similar appointee over Borrower or over any of
Borrower's property pursuant to any court proceeding of any kind or
otherwise; and (iii) any successor person.

"Loan Agreement" has the meaning assigned to that term in the
first recital hereto.

"Loans" has the meaning assigned to that term in the first
recital hereto.

"Loan Documents" has the meaning assigned to that term in the
Loan Agreement.

SECTION 1.2. Loan Documents Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Guaranty, including
its preamble and recitals, have the meanings provided in the Loan Documents.

ARTICLE II

GUARANTY

SECTION 2.1. Guaranty. Guarantor hereby unconditionally and irrevocably
guarantees, subject to the limitations expressed herein, the full and prompt
payment when due, whether at stated maturity, by acceleration or otherwise
(including, without limitation, all amounts which would have become due but for
the operation of the automatic stay under Section 362(a) of the Federal
Bankruptcy Code, 11 U.S.C. 362(a)), of any and all indebtedness and obligations
of any kind and character whatsoever of Borrower to the Lender and any and all
extensions, renewals and replacements of such indebtedness, arising under any of
the Loan Documents including, but not limited to, the Loan Agreement, the Note,
or any other document executed by Borrower in connection therewith, or of
Guarantor hereunder, whether such indebtedness is:

(i) characterized as the payment of principal, interest,
premiums, fees, costs, expenses, lease obligations,
indemnities, or otherwise;

(ii) presently existing or hereafter incurred or arising;

(iii) from time to time reduced and thereafter increased or
entirely extinguished and thereafter reincurred;

(iv) foreseen or unforeseen, direct or indirect, absolute or
contingent, primary or secondary, secured or unsecured,
matured or unmatured, of the same class or type or of
different classes or types;

(v) created by or arising under contract, tort, guaranty,
overdraft, recovery of

<PAGE> 83
avoided payments or otherwise;

(vi) contracted for by Borrower alone or jointly and severally
with another or others;

(vii) incurred by Borrower prior to, during, or after any
filing by Borrower or against Borrower of any petition or
request for liquidation, reorganization, arrangement,
adjudication as a bankrupt, relief as a debtor, or other
relief under bankruptcy, insolvency, or similar laws now or
hereafter in affect in the United States of America or any
state or territory thereof or any foreign jurisdiction, and
notwithstanding Borrower's legal status as a debtor or a
debtor-in-possession or Borrower's discharge in any such
proceeding;

(viii) created or incurred with or without notice to
Guarantor; and/or

(ix) for future advances of any sort, including, without
limitation, future advances made by Lender for taxes, levies,
insurance and/or repairs to or maintenance of the Collateral
or for expenses of collection or protection of Lender's
rights, including reasonable attorney's fees.

The foregoing obligations are referred to herein collectively as the "Guaranteed
Obligations." This Guaranty constitutes a guaranty of payment when due and not
merely of collection, and Guarantor specifically agrees that it shall not be
necessary or required that the Lender or any holder of any Loan exercise any
right, assert any claim or demand or enforce any remedy whatsoever against the
Borrower before or as a condition to the Guaranteed Obligations of any Guarantor
hereunder.

SECTION 2.2. Acceleration of Guaranty. Guarantor agrees that, in the
event of the dissolution or insolvency of the Borrower or Guarantor, or the
inability or failure of the Borrower or Guarantor to pay debts as they become
due, or an assignment by the Borrower or Guarantor for the benefit of creditors,
or the commencement of any case or proceeding in respect of the Borrower or
Guarantor under any bankruptcy, insolvency or similar laws, and if such event
shall occur at a time when any of the Guaranteed Obligations of the Borrower may
not then be due and payable, Guarantor will pay to the Lender forthwith the full
amount which would be payable hereunder by Guarantor if all such Guaranteed
Obligations were then due and payable.

SECTION 2.3. Guaranty Absolute. This Guaranty shall be construed as a
continuing, absolute, unconditional and irrevocable guarantee of payment and
shall remain in full force and effect until all Guaranteed Obligations of the
Borrower have been paid in full, all obligations of Guarantor hereunder have
been paid in full and all Loan Documents shall have terminated. Guarantor
guarantees that the Guaranteed Obligations will be paid strictly in accordance
with the terms of the Loan Agreement, and that all other Guaranteed Obligations
shall be paid strictly in accordance with the terms of the Loan Documents,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of the Lender with
respect thereto. The liability of Guarantor under this Guaranty shall be
absolute and unconditional irrespective of:

(a) any lack of validity, legality or enforceability of the
Loan Agreement, the Note, any other Loan Document or any other
agreement or instrument relating to any thereof;

(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Guaranteed Obligations, or any
compromise, renewal, extension, acceleration or release with respect
thereto, or any other amendment or waiver of or any consent to
departure from the Loan Agreement, any Schedule or any other Loan
Document;

<PAGE> 84
or amendment or waiver of or consent to departure from any other
guaranty, for all or any of the Guaranteed Obligations;

(d) the failure of the Lender or any holder of a Loan
Document:

(i) to assert any claim or demand or to enforce any
right or remedy against the Borrower or any other person or
entity (including any other guarantor) under the provisions of
the Loan Agreement, any Schedule or any other Loan Document or
otherwise, or

(ii) to exercise any right or remedy against any
other guarantor of, or collateral securing, any Guaranteed
Obligations of the Borrower;

(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
the Loan Agreement, any Schedule, or any other Loan Document;

(f) any defense, set-off or counter-claim which may at any
time be available to or be asserted by the Borrower against the Lender;

(g) any reduction, limitation, impairment or termination of
the Guaranteed Obligations of the Borrower for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and Guarantor hereby waives any right to or
claim of) any defense or setoff, counterclaim, recoupment or
termination whatsoever by reason of the invalidity, illegality,
non-genuineness, irregularity, compromise, unenforceability of, or any
other event or occurrence affecting, the Guaranteed Obligations of the
Borrower or otherwise; or

(h) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, the
Borrower or Guarantor.

SECTION 2.4. Reinstatement, etc. Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Guaranteed Obligations is
rescinded or must otherwise be restored by any the Lender or any holder of any
Loan Document, upon the insolvency, bankruptcy or reorganization of the Borrower
or otherwise, all as though such payment had not been made.

SECTION 2.5. Waiver. Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Guaranteed
Obligations and this Guaranty and any requirement that the Lender protect,
secure, perfect or insure any security interest or lien or any property subject
thereto or exhaust any right or take any action against the Borrower or any
other person or entity (including any other guarantor) or any collateral.

SECTION 2.6. Waiver of Subrogation. Guarantor hereby irrevocably waives
any claim or other rights which it may now or hereafter acquire against the
Borrower that arise from the existence, payment, performance or enforcement of
Guarantor's obligations under this Guaranty or any other Loan Document,
including any right of subrogation, reimbursement, exoneration, or
indemnification, any right to participate in any claim or remedy of the Lender
against the Borrower or any collateral which the Lender now has or hereafter
acquires, whether or not such claim, remedy or right arises in equity, or under
contract, statute or common law, including the right to take or receive from the
Borrower, directly or indirectly, in cash or other property or by set-off or in
any manner, payment or security on account of such claim or other rights. If any
amount shall be paid to Guarantor in violation of the preceding sentence and the
Guaranteed Obligations shall not have been paid in cash in full and the Loan
Documents

<PAGE> 85
have not been terminated, such amount shall be deemed to have been paid to
Guarantor for the benefit of, and held in trust for, the Lender, and shall
forthwith be paid to the Lender to be credited and applied upon the Guaranteed
Obligations, whether matured or unmatured. Guarantor acknowledges that it will
receive direct and indirect benefits from the financing arrangements
contemplated by the Loan Agreement and the other Loan Documents and that the
waiver set forth in this Section is knowingly made in contemplation of such
benefits.

SECTION 2.7. Successors, Transferees and Assigns; Transfers of Loans,
etc. This Guaranty shall:

(a) be binding upon Guarantor, and its successors, transferees
and assigns; and

(b) inure to the benefit of and be enforceable by the Lender
and its successors, transferees and assigns.

Without limiting the generality of clause (b), to the extent the Lender assigns
or otherwise transfers (in whole or in part) any Loan or Loan Documents held by
it to any other person or entity, and such other person or entity shall
thereupon become vested with the corresponding rights and benefits granted to
the Lender under this Guaranty.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

SECTION 3.1. Representations and Warranties. Guarantor hereby
represents and warrants to the Lender as follows:

(a) Guarantor is a corporation duly organized, validly
existing and in good standing under the laws of its state of
incorporation and has full corporate power and authority to enter into
this Guaranty and to carry out the transactions contemplated hereby and
thereby.

(b) The execution and delivery by Guarantor of this Guaranty
and the consummation by Guarantor of the transactions contemplated
hereby have been duly authorized by Guarantor. This Guaranty has been
duly executed and delivered by Guarantor and constitutes the legal,
valid and binding obligation of Guarantor enforceable against Guarantor
in accordance with its terms, subject, as to enforcement only, to
bankruptcy, insolvency, reorganization, moratorium or similar laws at
the time in effect affecting the enforceability of the rights of
creditors generally.

(c) The execution and delivery of this Guaranty and the
consummation by Guarantor of the transactions contemplated hereby have
not resulted, and will not (with or without the lapse of time or the
giving of notice or both) result, (i) in any breach of any of the terms
or provisions of, or constitute a default under, the charter or bylaws
of Guarantor, any agreement, license or other instrument, any law, rule
or regulation or any judgment, decree or order of any court to which
Guarantor is a party or by which its property may be bound, or (ii) in
the creation or imposition of any claim, lien charge or encumbrance of
any-nature whatsoever upon, or give to others any claim, interest or
right, with respect to any of the properties, assets, contracts or
licenses of Guarantor.

<PAGE> 86
ARTICLE IV

MISCELLANEOUS

SECTION 4.1. Loan Document. This Guaranty is a Loan Document executed
pursuant to the Loan Agreement and shall (unless otherwise expressly indicated
herein) constitute a Guaranteed Obligation.

SECTION 4.2. Binding on Successors, Transferees and Assigns;
Assignment. In addition to, and not in limitation of Section 2.7, this Guaranty
shall be binding upon Guarantor and its successors, permitted transferees and
permitted assigns and shall inure to the benefit of and be enforceable by the
Lender and its successors, transferees and assigns (to the full extent provided
pursuant to Section 2.7); provided, however, that Guarantor may not transfer or
assign any of its obligations hereunder without the prior written consent of the
Lender, unless the assignment is part of a transaction of merger, acquisition or
consolidation, and the Guarantor is either the surviving entity or the
controlling corporation of the surviving or resulting entity. In any event, no
assignment will operate to relieve Guarantor of its obligations hereunder.

SECTION 4.3. Amendments, Etc. No amendment or waiver of any provision
of this Guaranty nor consent to any departure by Guarantor therefrom shall in
any event be effective unless the same shall be in writing and signed by the
Lender and Guarantor, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.

SECTION 4.4. Addresses for Notices. All notices and other
communications provided for hereunder shall be in writing or by facsimile
transmission and, if to Guarantor, mailed, given by facsimile transmission or
delivered to it, addressed to it at _____________________________ (facsimile
number (____) ___________), and if to the Lender, mailed, telexed, given by
facsimile transmission or delivered to it, addressed to it at 220 Athens Way,
Nashville, Tennessee 37228, Attention: Legal Department (facsimile number (615)
734-5283), with a copy to the Lender Corporation, 220 Athens Way, Nashville,
Tennessee 37228, Attention: Manager, Credit, (facsimile number (615) 734-5110),
or as to each party at such other address as shall be designated by such party
in a written notice to each other party complying as to delivery with the terms
of this Section. Any notice, if mailed and properly addressed with postage
prepaid, shall be deemed given when received; any notice,'if transmitted by
facsimile transmission or delivery, shall be deemed given when received.

SECTION 4.5. No Waiver; Remedies. No failure on the part of the Lender
to exercise, and no delay in exercising, any right hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any right hereunder
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law or equity.

SECTION 4.6. Continuing Guaranty. This Guaranty is a continuing
guaranty and shall (a) remain in full force and effect until final payment in
full of the Guaranteed Obligations and all other amounts payable under this
Guaranty, subject to reinstatement in accordance with Section 2.4 hereof, (b) be
binding upon Guarantor, its successors and permitted assigns, and (c) inure to
the benefit of and be enforceable by the Lender for its benefit and the benefit
of the Lender and its successors, transferees and assigns.

SECTION 4.7. Severability. Any provision of this Guaranty which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions of this Guaranty or affecting the validity
or enforceability of such provisions in any other jurisdiction.

<PAGE> 87
SECTION 4.8. Consent to Jurisdiction and Venue; Waivers.

(a) GUARANTOR HEREBY IRREVOCABLY CONSENTS TO THE JURISDICTION
OF THE FEDERAL COURTS SITTING IN THE MIDDLE DISTRICT OF TENNESSEE, AND
IF NO FEDERAL JURISDICTION EXISTS, TO THE JURISDICTION AND VENUE OF THE
STATE COURTS OF TENNESSEE FOR ANY SUIT BROUGHT OR ACTION COMMENCED IN
CONNECTION WITH THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR THE
OBLIGATIONS, AND AGREES NOT TO CONTEST VENUE OR JURISDICTION IN ANY
SUCH COURTS. IN ANY SUCH LITIGATION, GUARANTOR WAIVES PERSONAL SERVICE
OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, AND AGREES THAT THE SERVICE
THEREOF MAY BE MADE BY CERTIFIED OR REGISTERED MAIL DIRECT TO GUARANTOR
AT ITS ADDRESS SET FORTH IN SECTION 10.06 HEREOF. IN THE ALTERNATIVE,
IN ITS SOLE DISCRETION, LENDER MAY EFFECT SERVICE UPON GUARANTOR IN ANY
OTHER FORM OR MANNER PERMITTED BY LAW. THE CHOICE OF FORUM SET FORTH
HEREIN SHALL NOT BE DEEMED TO PRECLUDE THE ENFORCEMENT OF ANY JUDGMENT
OBTAINED IN SUCH FORUM OR THE TAKING OF ANY ACTION UNDER THIS AGREEMENT
TO ENFORCE THE SAME IN ANY APPROPRIATE JURISDICTION.

(b) GUARANTOR AND LENDER HEREBY KNOWINGLY AND WILLINGLY WAIVE
THEIR RESPECTIVE RIGHTS TO DEMAND A JURY TRIAL IN ANY ACTION OR
PROCEEDING INVOLVING THIS GUARANTY, ANY OTHER LOAN DOCUMENT, THE
GUARANTEED OBLIGATIONS, OR ANY RELATIONSHIP BETWEEN THE LENDER AND
GUARANTOR. GUARANTOR WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THE
FOREGOING WAIVERS WITH ITS LEGAL COUNSEL AND HAS KNOWINGLY AND
VOLUNTARILY WAIVED ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION WITH
LEGAL COUNSEL. IN THE EVENT OF LITIGATION, THIS AGREEMENT MAY BE FILED
AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.

(c) THE LENDER SHALL HAVE NO LIABILITY UNDER OR IN CONNECTION
WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS FOR SPECIAL,
EXEMPLARY, PUNITIVE, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF
ANY SORT IN ANY SUIT BROUGHT OR ACTION COMMENCED IN CONNECTION WITH
THIS GUARANTY, THE OTHER LOAN DOCUMENTS, OR THE GUARANTIED OBLIGATIONS,
AND, EXCEPT TO THE EXTENT PROHIBITED BY LAW, EACH PARTY WAIVES ANY
RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH ACTION ANY SPECIAL,
EXEMPLARY, PUNITIVE, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES OF
ANY SORT OTHER THAN ACTUAL DAMAGES.

(d) TO THE EXTENT THAT GUARANTOR HAS OR HEREAFTER MAY ACQUIRE
ANY IMMUNITY FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS
(WHETHER THROUGH SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT,
ATTACHMENT IN AID OF EXECUTION, EXECUTION OR OTHERWISE) WITH RESPECT TO
ITSELF OR TO ITS PROPERTY, GUARANTOR HEREBY IRREVOCABLY WAIVES SUCH
IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS GUARANTY.

(e) BY EXECUTING THIS GUARANTY, GUARANTOR HEREBY IRREVOCABLY
AND UNCONDITIONALLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR
PROCEEDINGS ARISING OUT OF OR IN CONNECTION WITH THIS GUARANTY BROUGHT
IN ANY OF THE AFORESAID COURTS, AND HEREBY FURTHER IRREVOCABLY AND
UNCONDITIONALLY WAIVES AND AGREES

<PAGE> 88
NOT TO PLEAD ANY CLAIM THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

SECTION 4.9. Governing Law. This Guaranty shall be governed by and
construed in accordance with the internal laws of the State of Tennessee.

IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written, and the Lender has accepted it by its duly authorized
officer.

IXC COMMUNICATIONS, INC.

By:___________________________________
Title:________________________________

NTFC CAPITAL CORPORATION

By:___________________________________
Title:________________________________

<PAGE> 1

EXHIBIT 11.1

IXC COMMUNICATIONS, INC. AND SUBSIDIARIES

COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE

FOR THE THREE MONTH AND SIX MONTH PERIODS ENDED JUNE 30, 1997 AND 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
EARNINGS
Net income (loss)................................. $(28,810) $(12,067) $(48,688) $(23,766)
Less: Dividends applicable to preferred
stock........................................ (2,288) (432) (2,758) (865)
-------- -------- -------- --------
Net income (loss) applicable to common
stockholders................................... $(31,098) (12,499) $(51,446) $(24,631)
======== ======== ======== ========
PRIMARY
Weighted average number of shares outstanding..... 30,799 24,335 30,799 24,335
Add: Effect, for periods including and prior to
the initial public offering (IPO), of common
stock options issued within one year of the
IPO............................................ -- 833 -- 833
Less: Assumed repurchase of shares under the
treasury stock method.......................... -- (157) -- (157)
-------- -------- -------- --------
Number of shares used to compute earnings (loss)
applicable to common shareholders.............. 30,799 25,011 30,799 25,011
======== ======== ======== ========
FULLY DILUTED
Weighted average number of shares outstanding..... 30,799 24,335 30,799 24,335
Add: Effect, for periods including and prior to
the IPO, of common stock options issued within
one year of the IPO............................ -- 833 -- 833
Less: Assumed repurchase of shares under the
treasury stock method.......................... -- (157) -- (157)
-------- -------- -------- --------
Number of shares used to compute earnings (loss)
applicable to common shareholders.............. 30,799 25,011 30,799 25,011
======== ======== ======== ========
PRIMARY LOSS PER COMMON AND COMMON EQUIVALENT
SHARE.......................................... $ (1.01) (0.50) $ (1.67) $ (0.99)
======== ======== ======== ========
FULLY DILUTED LOSS PER COMMON AND COMMON
EQUIVALENT SHARE............................... $ (1.01) $ (0.50) $ (1.67) $ (0.99)
======== ======== ======== ========
</TABLE>

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 40,974,000
<SECURITIES> 0
<RECEIVABLES> 68,854,000
<ALLOWANCES> 6,418,000
<INVENTORY> 0
<CURRENT-ASSETS> 107,003,000
<PP&E> 493,643,000
<DEPRECIATION> 87,804,000
<TOTAL-ASSETS> 552,900,000
<CURRENT-LIABILITIES> 135,291,000
<BONDS> 285,000,000
98,010,000
12,550
<COMMON> 308,000
<OTHER-SE> 12,587,000
<TOTAL-LIABILITY-AND-EQUITY> 552,900,000
<SALES> 0
<TOTAL-REVENUES> 172,775,000
<CGS> 0
<TOTAL-COSTS> 143,132,000
<OTHER-EXPENSES> 58,596,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,760,000
<INCOME-PRETAX> (48,940)
<INCOME-TAX> 252,000
<INCOME-CONTINUING> (48,688)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (48,688)
<EPS-PRIMARY> (1.67)
<EPS-DILUTED> (1.67)

</TABLE>