EMPLOYMENT AGREEMENT

Exhibit 10.1

EMPLOYMENT AGREEMENT

     This EMPLOYMENT AGREEMENT, dated as of January 5, 2009 (this “ Agreement ”), is entered into by and between XO Holdings, Inc., a Delaware corporation (the “ Company ”), and Daniel J. Wagner (“ Employee ”).

     WHEREAS, the Company desires to hire Employee as the President — Business Services Sales and Marketing of the Company (or substantially similar sales and marketing position), effective as of the Effective Date (as defined below), subject to the terms and conditions contained herein.

     WHEREAS, Employee understands and accepts the terms and conditions of employment as set forth herein and desires to be so employed by the Company in such capacity.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties hereto set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

1. Employment

2. Term

     The employment period of Employee hereunder shall commence on January 13, 2009 (the “ Effective Date ”), and shall continue through December 31, 2012 (the “ Expiration Date ”), unless earlier terminated as set forth in this Agreement (the “ Term of Employment ”); provided , however , that Employee’s employment hereunder is contingent upon the following: (i) Employee must successfully pass a background check, which will include a Motor Vehicle Report, and a Pre-Employment Drug Test (instructions for which will be provided by Company and which must be completed within 72 hours of execution of this Agreement), (ii) Employee must sign all appropriate documents included with the employment package to be provided by Company, and (iii) Company must be in receipt of documentation proving Employee’s eligibility to work in the United States. If all of the conditions contained in clauses (i), (ii) and (iii) of this Section 2 are not satisfied, in the sole and absolute discretion of the Company, then this Agreement shall be void ab initio (other than Section 9(g) which shall remain in full force and effect).

3. Compensation

     For all services to be performed by Employee under this Agreement, during the Term of Employment, Employee shall be compensated in the following manner:

     (a)  Base Compensation

     The Company will pay Employee a salary (the “ Base Salary ”) at an annual rate of $450,000.00 per full year. The Base Salary shall be payable in accordance with the normal payroll practice of the Company and subject to all required deductions and withholdings.

     (b)  Annual Bonus

     So long as Employee is employed by the Company, in good standing, at the end of each fiscal year of the Company during the Term of Employment commencing with the fiscal year ending December 31, 2009, Employee will be eligible to receive following the end of such fiscal year a cash bonus payable in accordance with the terms and conditions, including performance goals, of The XO Annual Bonus Plan (as in effect on the date of this Agreement, the “ Bonus Plan ”). The target amount of any such cash bonus award payable to Employee (if performance goals are achieved) for each of the fiscal years ending December 31, 2009 and ending December 31, 2010 is 70% of Employee’s then current Base Salary in the applicable fiscal year, subject to adjustment (increase or decrease) as provided in Exhibit A . The target amount of any such cash bonus award payable to Employee (if performance goals are achieved) for the fiscal year ending December 31, 2011 is $1,500,000.00, subject to adjustment (increase or decrease) as provided in Exhibit A . The target amount of any such cash bonus award payable to Employee (if performance goals are achieved) for the fiscal year ending December 31, 2012 is $2,000,000.00, subject to adjustment (increase or decrease) as provided in Exhibit A . Any such cash bonus award in respect of any such fiscal year, if due under the Bonus Plan, shall be paid within 30 days after approval by the Compensation Committee of the Board but not later than December 31 of the year following such applicable fiscal year. Subject to the foregoing, such bonus, if any, will be payable in accordance with the terms and conditions, including performance goals, of the Bonus Plan, and the normal payroll practice of the Company and subject to all required deductions and withholdings. For the avoidance of doubt, Employee’s annual bonus for the fiscal year ending December 31, 2009, if any, shall not be pro-rated and shall be calculated as if Employee had been employed as of January 1, 2009, so long as Employee reports to the Company for his employment on the Effective Date. Subject to Section 5 below, such cash bonus, if any, shall be earned by Employee (subject to the terms and conditions, including performance goals, of the Bonus Plan as provided above) if Employee is employed by the Company on the last day of the applicable fiscal year but will be paid at the same time the annual cash bonus for such fiscal year is paid to active employees of the Company.

     (c)  One Time Cash Signing Bonus

     So long as Employee is employed by the Company on the Effective Date, the Company will pay to Employee within 30 days following the Effective Date a one-time cash bonus of $450,000.00. Subject to the foregoing, such bonus will be payable in accordance with the normal payroll practice of the Company and subject to all required deductions and withholdings.

     (d)  One Time Additional Relocation Reimbursement

     (i) In order to cover Employee for the relocation expenses of Employee and his immediate family, so long as (and conditioned upon both the following clauses (x) and (y) being satisfied in full) (x) Employee is employed by the Company on the date on which Employee and his immediate family relocates within a reasonable commuting distance of the Company’s principal executive offices and (y) the full time permanent residence of Employee and his immediate family is located within a reasonable commuting distance of the Company’s principal executive offices on or prior to December 31, 2010, the Company will pay to Employee within 30 days following the date on which Employee and his immediate family relocates within a reasonable commuting distance of the Company’s principal executive offices, a one-time relocation bonus of $100,000.00. For the avoidance of doubt, the payment of any such relocation bonus is conditioned on the relocation and establishment of the full time permanent residence of Employee and his immediate family within a reasonable commuting distance of the Company’s principal executive offices on or prior to December 31, 2010 such that in the event Employee relocates within a reasonable commuting distance of the Company’s principal executive offices and establishes his permanent full time residence in such location but his immediate family does not so relocate within a reasonable commuting distance of the Company’s principal executive offices or establish its permanent full time residence in such location, in each case, on or prior to December 31, 2010, no such relocation bonus shall be payable under this Section 3(d)(i) or otherwise. Any such bonus which is payable will be so paid to Employee (subject to the terms and conditions of such payment as provided herein) in lieu of any requirements of any relocation policy or precedent the Company may have in connection therewith and in consideration of such potential payment, Employee hereby waives any rights Employee may have to otherwise participate in any such relocation policy or any entitlement with respect to any such precedent. Subject to the foregoing, such one-time relocation bonus will be payable in accordance with the normal payroll practice of the Company and subject to all required deductions and withholdings.

     (ii) From January 13, 2009 through June 13, 2009, Employee shall be allowed to commute to work to the Company’s principal executive offices (or such other location as shall be mutually agreed to by the Company and the Employee) from Rochester, New York and the Company shall reimburse the reasonable and documented travel and lodging expenses of Employee in connection therewith consistent with the Company’s travel and expense policy. Reimbursement shall be made in 2009 within 60 days following submission of appropriate documentation of the expense, which documentation shall be submitted within 30 days of incurrence of the applicable expenses, and in any event no such expenses shall be eligible for reimbursement if submitted after August 31, 2009. The amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, and the Employee’s right to reimbursement may not be liquidated or exchanged for any other benefit. On or prior to June 13, 2009, Employee shall relocate within a reasonable commuting distance of the Company’s principal executive offices and at all times following June 13, 2009, during the Term of Employment, Employee’s full time permanent residence shall be located within a reasonable commuting distance of the Company’s principal executive offices. Employee shall use reasonable best efforts to relocate his immediate family within a reasonable commuting distance of the Company’s principal executive offices and to establish the full time permanent residence of his immediate family within a reasonable commuting distance of the Company’s principal executive offices as promptly as reasonably practicable following the date on which Employee relocates within a reasonable commuting distance of the Company’s principal executive offices as required by this Section 3(d)(ii) .

     (e)  Taxes

     All amounts paid to Employee under or pursuant to this Agreement, including, without limitation, the Base Salary and any bonuses or any other compensation or benefits, whether in cash or in kind, shall be subject to federal, state and, if applicable, local or foreign tax withholding and deductions imposed by any one or more federal, state, local and or foreign governments, or pursuant to any foreign or domestic applicable law, rule or regulation.

4. Benefits/Expense Reimbursement/Paid Time Off.

     Subject to any applicable “waiting period(s)” under the Company’s group health, major medical and other benefit plans and any 401(k) plans (collectively, the “ Benefit Plans ”), Employee shall be eligible, during the Term of Employment, to participate in all Benefit Plans, in each case as such may be provided by the Company generally to its employees, in the Company’s sole and absolute discretion from time to time, subject to and on a basis consistent with the terms, conditions, and overall administration of any such Benefit Plans, and subject to satisfaction of any eligibility, vesting or other terms and conditions set forth in any applicable governing plan documents in respect of any such Benefit Plans. Employee shall be entitled to reasonable reimbursement of reasonable and documented business expenses incurred on behalf of the Company, in accordance with the Company’s standard policies and procedures in respect thereof. Subject to Section 1(d) above, Employee shall be entitled to twenty (20) paid-time-off days ( e.g. , vacation days) per year to be accrued and used in accordance with the Company’s standard policies and procedures in respect thereof.

5. Termination of Employment

     The Term of Employment and the employment of Employee hereunder shall end, on the first to occur of any of the following (each a “ Termination Event ”):

     The Company may discharge Employee at any time, for any reason or no reason, with or without Cause. As used in this Agreement, “ Cause ” means: (i) dishonesty detrimental to the best interests of the Company or any of its affiliates; (ii) willful conduct of Employee involving any immoral acts which is reasonably likely to impair the reputation of the Company or any of its affiliates; (iii) willful disloyalty to the Company or the Board, (iv) willful refusal or failure of Employee to obey the reasonable and lawful directions of the CEO, the Chairman and/or the Board; provided , that in any dispute over whether any such directions were “reasonable”, Employee shall bear the burden of proof in any applicable proceedings, (v) neglect of duties and responsibilities, in any material respect, assigned to Employee,

(vi) commission of, or indictment for, a felony or conviction or plea of nolo contendere to a misdemeanor (other than a traffic violation) punishable by imprisonment under federal, state or local law, (vii) the engagement by Employee in the act of sexual harassment, (viii) the repeated use by Employee of a controlled substance without a prescription or the repeated use of alcohol which impairs Employee’s ability to carry out his duties and responsibilities, (ix) the material violation, as determined by the Company, based on the advice of its counsel, by Employee of any securities or employment laws or regulations, (x) material violation by Employee of any of the Company’s policies, (xi) material breach of this Agreement by Employee, including the representations, warranties and covenants of Employee set forth in Section 9(h), or any other agreement or documents entered into by the Company and Employee substantially simultaneously with the execution of this Agreement which material breach remains uncured (if curable) for a period of 30 days following the date the Company provides written notice to Employee detailing such material breach; provided , however , that any breach of Section 1(d) hereof by Employee shall be deemed not curable and Employee shall have no right to cure such breach, or (xii) embezzlement of funds and/or material misappropriation of property of the Company or any of its affiliates, or any act involving fraud with respect to the Company or any of its affiliates.

6. Effect of Termination of Employment

     In the event of termination of Employee’s employment hereunder, all rights of Employee under this Agreement, including all rights to compensation, shall end and Employee shall only be entitled to be paid (i) any amounts of Employee’s Base Salary previously earned (to the extent accrued and unpaid), payable in a cash lump sum amount within 30 days of the applicable date of termination, (ii) in accordance with the Company’s policy, unreimbursed business expenses of Employee, payable in a cash lump sum amount within 60 days of the applicable date of termination, (iii) in accordance with the Company’s policy, any amounts payable on account of accrued but unused vacation, payable in a cash lump sum amount within 30 days of the applicable date of termination, (iv) in the event Employee is terminated by the Company without Cause, resigns for Good Reason or Employee’s employment hereunder is terminated pursuant to Section 5(b) above, any amounts of Employee’s annual cash bonus previously earned in the fiscal year immediately preceding such termination (to the extent accrued and unpaid), payable in a cash lump sum amount within 90 days of the applicable date of termination (for the avoidance of doubt, no such amounts shall be payable under this Section 6(iv) in the event Employee is terminated for Cause or resigns without Good Reason), (v) in the event Employee is terminated by the Company without Cause (other than in the event Employee’s employment hereunder is terminated pursuant to (A) Section 5(b) above, in which case Employee shall not be entitled to any payments pursuant to this Section 6(v) or Section 6(vi) below, or (B) Section 5(d) above, in which case Employee shall not be entitled to any payments pursuant to this Section 6(v)), or resigns for Good Reason, a one-time severance payment in an amount equal to the greater of (x) 200% of Employee’s then current annual Base Salary and (y) the amount equal to the annual cash bonus under the Bonus Plan with respect to the applicable fiscal year in which the termination of employment occurs that Employee would have earned if Employee had been employed for the full applicable fiscal year (but only if applicable performance goals are

actually achieved) multiplied by a fraction the numerator of which shall be equal to the number of days of such fiscal year up to and including the date of such termination and the denominator of which shall be 365, payable (1) in the case of any payment pursuant to clause (x) of this Section 6(v) , in a cash lump sum amount (less all lawful and required deductions and withholdings) within 60 days of the applicable date of termination, but in no event later than 2-1/2 months following the end of the calendar year in which the termination occurs and (2) in the case of any payment pursuant to clause (y) of this Section 6(v) , in a cash lump sum amount (less all lawful and required deductions and withholdings) when other senior executives of the Company are paid their respective cash bonuses in the year following the applicable year of termination of employment (such amount payable pursuant to this Section 6(v) , the “ Severance Payment ”), and (vi) in the event Employee is terminated by the Company pursuant to Section 5(d) above, a one-time severance payment in an amount equal to 100% of Employee’s then current annual Base Salary, payable in a cash lump sum amount (less all lawful and required deductions and withholdings) within 60 days of the applicable date of termination (a “ Below 70% Severance Payment ”), but in no event later than 2-1/2 months following the end of the calendar year in which the termination occurs; provided , that, Employee shall only be entitled to be paid any such Severance Payment or Below 70% Severance Payment, as applicable, if and when, (x) Employee executes and delivers to the Company a release agreement in favor of the Company, its affiliates and their respective officers, directors, employees, agents and equity holders in respect of Employee’s employment with the Company and the termination thereof in the form substantially as set forth in Exhibit B attached hereto and as then provided by the Company to Employee and executes any other document or agreement reasonably requested by the Company and (y) such release agreement, once executed by Employee and delivered to the Company, becomes irrevocable and final under the applicable law. Such release shall be delivered to Employee by the Company within ten (10) days of the applicable date of termination (the date of such delivery, the “ Delivery Date ”) and executed by Employee and delivered to the Company, and shall be effective and irrevocable (subject to the 7 day revocation period provided in such release), within 45 days of the Delivery Date, and if Employee fails to so provide the Company with such an effective and irrevocable release (subject to the 7 day revocation period provided in such release) within such 45-day period, Employee shall have no right to any severance payments of whatever nature. ¹

     For the avoidance of doubt, (i) if the Term of Employment expires and Company and Employee do not mutually agree to extend the Term of Employment, such expiration shall in no event be deemed a termination of employment without Cause or a resignation of Employee for Good Reason or a termination pursuant to Section 5(d) above and Employee shall not be entitled to any Severance Payment or Below 70% Severance Payment in connection therewith and