EXHIBIT 10.21
BTI TELECOM CORP.
AMENDED AND RESTATED SHAREHOLDERS AGREEMENT
THIS AMENDED AND RESTATED SHAREHOLDERS AGREEMENT (this "Agreement") is made
as of the 12th day of January 2001, by and among BTI Telecom Corp., a North
Carolina corporation (the "Company"), ▇▇▇▇▇ ▇. ▇▇▇▇▇▇ ("▇▇▇▇▇▇") and Welsh,
Carson, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII, L.P., a Delaware limited partnership, WCAS
Information Partners, L.P., a Delaware limited partnership, and BTI Investors
LLC, a Delaware limited liability company (collectively, the "Investor," and
collectively with ▇▇▇▇▇▇, the "Shareholders").
WHEREAS, the Investor previously acquired 200,000 shares of Series A
Preferred Stock, par value $.01 per share (the "Series A Preferred Stock"), of
the Company and warrants (collectively, the "Series A Warrant") to purchase up
to an aggregate of 4,500,000 shares of Common Stock, no par value per share (the
"Common Stock"), of the Company (the "Series A Warrant Stock") pursuant to the
terms of a Series A Preferred Stock Purchase Agreement dated as of December 10,
1999 among the Company, FS Multimedia, Inc., a North Carolina corporation, and
the Investor (the "Series A Purchase Agreement");
WHEREAS, in connection with the purchase of Series A Preferred Stock and
the Series A Warrant pursuant to the terms of the Series A Purchase Agreement,
the parties hereto previously entered into a Shareholders Agreement dated as of
December 28, 1999 (the "Original Agreement");
WHEREAS, pursuant to the terms of Series B Preferred Stock Purchase
Agreements dated as of January 12, 2001 (together, the "Series B Purchase
Agreement"), Welsh, Carson, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ VIII, L.P., BTI Investors LLC and
▇▇▇▇▇▇ are acquiring shares of Series B Preferred Stock, par value $.01 per
share (the "Series B Preferred Stock"), of the Company and warrants
(collectively, the "Series B Warrants" and, together with the Series A Warrant,
the "Warrants") to purchase shares of Common Stock (the "Series B Warrant Stock"
and, together with the Series A Warrant Stock, the "Warrant Stock"); and
WHEREAS, in connection with the execution of the Series B Purchase
Agreement, the parties hereto desire to amend and restate the Original Agreement
in its entirety, and the parties are willing to execute this Agreement and to be
bound by the provisions hereof.
NOW, THEREFORE, in consideration of the foregoing, the agreements set forth
below, and the parties' desire to provide for continuity of ownership of the
Company to further the interests of the Company and its present and future
shareholders, the Company and the Shareholders hereby agree with each other as
follows.
1. Definition of Shares. As used in this Agreement, "Shares" shall mean
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and include any equity security or any security convertible or exchangeable into
an equity security of
the Company now owned or hereafter acquired by any Shareholders. Other terms
used as defined terms herein and not otherwise defined shall have the meanings
set forth in the Series B Preferred Stock Purchase Agreement between the Company
and the Investor or its Related Agreements (as such term is defined in such
Series B Preferred Stock Purchase Agreement).
2. Restrictions on Transfers. No Shareholder shall sell, pledge, encumber,
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assign, transfer or dispose of all or any of his or its Shares except in
compliance with the terms of this Agreement. Notwithstanding anything to the
contrary contained in this Agreement, any Shareholder may transfer without the
necessity of prior approval all or any of his or its Shares (a) by way of gift
to his spouse or to any of his lineal descendants or ancestors; (b) to any trust
for the sole benefit of any one or more of such Shareholder, his spouse or his
lineal descendants or ancestors; or (c) in a sale, assignment, transfer or other
disposition by the Investor to an affiliate or by a Shareholder that is a
partnership or limited liability company to a partner or member of such
partnership or limited liability company or retired partner or member who
retires after the date hereof, or to the estate of any such partner or member or
in a transfer by any partner or member in accordance with (a) or (b) hereof;
provided that, except as otherwise provided below, it shall be a condition to
any such transfer enumerated in items (a) through (c) above that any such
transferee shall agree in writing with the Company and the Shareholders, as a
condition to such transfer, to be bound by all of the provisions of this
Agreement in the same manner and to the same extent as the transferor.
Notwithstanding anything herein to the contrary, the proviso contained in the
immediately preceding sentence shall not be applied to any transfer by Investor
of its Shares to any partner of Investor pursuant to a distribution in respect
of the partnership interests in Investor in connection with which Investor
determines not to require such partners to have agreed in writing to be bound by
the terms of this Agreement or to be entitled to the benefit hereof. In addition
to the transfers described in the preceding sentence, ▇▇▇▇▇▇ was entitled to
cause the Company to redeem $65,000,000 of Common Stock at the per share price
of $8.55 pursuant to the Stock Repurchase Agreement attached as Exhibit G to the
Series A Purchase Agreement. If ▇▇▇▇▇▇ transfers any Shares pursuant to Section
4(c) subsequent to a Series A Qualified Public Offering, the transferees in any
such transfer shall not be bound by or entitled to the benefits of the terms of
this Agreement.
Notwithstanding anything herein to the contrary, each transfer of
Shares must be made in compliance with the 1933 Act and any applicable state and
foreign securities laws. Any attempt to transfer any Shares not in compliance
with this Agreement shall be null and void and neither the Company nor any
transfer agent shall give any effect in the Company's transfer records to such
transfer. No Shareholder shall enter into any agreement or arrangement of any
kind with any person or entity with respect to its Shares inconsistent with the
provisions of this Agreement, including, but not limited to, agreements or
arrangements with respect to the acquisition, disposition or voting of its or
his Shares.
3. Notice of Proposed Transfers. ▇▇▇▇▇▇ and each holder of a certificate
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representing Registrable Securities (as defined in Section 1.1 of the Amended
and Restated Investor Rights Agreement, dated as of the date hereof, by and
among the Company and the Investor (the "Investor Rights Agreement")) agrees to
comply in all respects with the provisions of this
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Section. Prior to any proposed sale, assignment, transfer or pledge of any
Registrable Securities, or of any of ▇▇▇▇▇▇'▇ Shares, unless (i) the transfer is
made to a person or entity described in the second sentence of Section 2 hereof
or the transfer is made to the Company, (ii) a registration statement under the
1933 Act will cover the proposed transfer, or (iii) such sale is made pursuant
to Rule 144, the holder thereof shall give written notice to the Company of the
holder's intention to effect such transfer, sale, assignment or pledge. Each
such notice shall describe the manner and circumstances of the proposed
transfer, sale, assignment or pledge in sufficient detail, and if requested by
the Company, shall be accompanied at such holder's expense by a written opinion
of legal counsel who shall, and whose legal opinion shall, be reasonably
satisfactory to the Company addressed to the Company, to the effect that the
proposed transfer of the Registrable Securities or ▇▇▇▇▇▇'▇ Shares may be
effected without registration under the 1933 Act. Each certificate evidencing
the Registrable Securities or ▇▇▇▇▇▇'▇ Shares transferred as above provided
shall bear, except if such transfer is made pursuant to Rule 144 or a public
offering, the appropriate restrictive legends set forth in Section 15 below,
except that such certificate shall not bear such restrictive legend if in the
opinion of counsel for such holder and the Company such legend is not required
in order to establish compliance with any provisions of the 1933 Act.
4. Prohibited Transfers. Notwithstanding anything herein to the
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contrary:
(a) The Investor shall not, prior to December 31, 2001, sell,
pledge, encumber, assign, transfer or dispose of all or any of its
Shares except in the event of (i) a liquidation, dissolution or
winding up of the Company, either voluntary or involuntary, (ii) a
transfer permitted pursuant to the second sentence of Section 2 or
(iii) through one transaction or a series of transactions, the sale,
assignment, lease or transfer of securities constituting a majority of
the voting securities of the Company to, or of all or substantially
all of its assets to, or a merger, consolidation or similar business
combination with or into, an entity, a majority of the voting power of
which is not owned or controlled, directly or indirectly, by one or
more shareholders of the Company immediately prior to the transaction.
For purposes of the preceding sentence, "control" shall mean ownership
of more than fifty percent of the voting power of an entity.
(b) The Investor shall not sell, assign or otherwise transfer any
of its Series A Preferred Stock, Series B Preferred Stock or Warrant
Stock to a Competitor or any person or entity that owns greater than
twenty-five percent (25%) of the outstanding shares (calculated on a
fully-diluted basis) of a Competitor and that actually designates at
least that number of members of the Board of Directors of such
Competitor that is proportional to its equity interest in such
Competitor. Notwithstanding the foregoing, the restrictions contained
in the preceding sentence shall not apply after December 31, 2001 if
the financial plan objectives for the fiscal year ended December 31,
2001, as described in Exhibit A attached hereto, have not been
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achieved by the Company during such period (a "2001 Plan Shortfall").
For purposes hereof, a person or entity shall be deemed a "Competitor"
if it is engaged in providing integrated communications services to
small and medium sized businesses and, at the time of the proposed
sale, assignment or transfer, directly competes with the Company in
the Company's markets.
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(c) Neither ▇▇▇▇▇ ▇▇▇▇▇▇ nor his transferees described in the
second or fourth sentences of Section 2, shall sell, pledge, encumber,
assign, transfer or otherwise dispose of Shares representing (on an as
converted basis) more than five percent (5%) of the Common Stock of
the Company owned by them as of the date hereof in any twelve (12)
month period, except for a transfer of shares described in the second
sentence of Section 2; provided that, no such transfer by ▇▇▇▇▇▇ to
the Company shall be permitted pursuant to this Section 4(c) without
the written consent of the Investor.
(d) The restrictions placed on the Investor in subsections (a) and
(b) of this Section 4 shall not apply to transfers from the Investor
to its limited partners or affiliates.
5. Election of Directors. At each annual meeting of the shareholders
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of the Company, and at each special meeting of the shareholders of the
Company called for the purpose of electing directors of the Company, and at
any time at which shareholders of the Company shall have the right to, or
shall, vote (whether by written consent or otherwise) for directors of the
Company, then, and in each event, the Shareholders shall vote all Shares
owned by them for the election of a Board of Directors consisting of not
more than ten directors, designated as follows:
(a) so long as Investor and its transferees described in the
second sentence of Section 2 beneficially own at least 12,000,000 (as
adjusted for stock splits, combinations, stock dividends,
recapitalizations and the like) shares of Common Stock (calculated
after giving effect to the conversion of the Series A Preferred Stock
and Series B Preferred Stock and, commencing at such time as each
Warrant becomes exercisable, the exercise or exchange of each Warrant
("Fully-Diluted Basis")), (i) three directors shall be designated by
the Investor and (ii) the remaining directors shall be designated by
the holders of a majority of the outstanding shares of Common Stock;
(b) so long as Investor and its transferees described in the
second sentence of Section 2 beneficially own at least 9,000,000 (as
adjusted for stock splits, combinations, stock dividends,
recapitalizations and the like), but less than 12,000,000 (as adjusted
for stock splits, combinations, stock dividends, recapitalizations and
the like) shares of Common Stock (calculated on a Fully-Diluted
Basis), (i) two directors shall be designated by the Investor, (ii)
one observer (who shall be entitled to attend each meeting of the
Board of Directors but shall not be entitled to vote or otherwise
exercise any right or authority granted to the members of the Board of
Directors) shall be designated by the Investor and (iii) the remaining
directors shall be designated by the holders of a majority of the
outstanding shares of Common Stock; and
(c) so long as Investor and its transferees described in the
second sentence of Section 2 beneficially own at least 6,000,000 (as
adjusted for stock splits, combinations, stock dividends,
recapitalizations and the like), but less than 9,000,000 (as adjusted
for stock splits, combinations, stock dividends, recapitalizations and
the like) shares of Common Stock (calculated on a Fully-Diluted
Basis), (i) one director shall be designated
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by the Investor, (ii) one observer (who shall be entitled to attend
each meeting of the Board of Directors but shall not be entitled to
vote or otherwise exercise any right or authority granted to the
members of the Board of Directors) shall be designated by the Investor
and (iii) the remaining directors shall be designated by the holders
of a majority of the outstanding shares of Common Stock; and
(d) so long as Investor and its transferees described in the
second sentence of Section 2 beneficially own in the aggregate less
than 6,000,000 (as adjusted for stock splits, combinations, stock
dividends, recapitalizations and the like) shares of Common Stock
(calculated on a Fully-Diluted Basis), all directors shall be
designated in the manner set forth in the Company's bylaws.
No party hereto shall vote to remove any member of the Board of
Directors designated in accordance with the aforesaid procedure unless the
persons or groups so designating such director specified above so vote, and
if such persons or groups so vote then the non-designating party or parties
shall likewise so vote. Any vacancy on the Board of Directors created by
the resignation, removal, incapacity or death of any person nominated by
the party which originally nominated such person under this Section 5 shall
be filled by another person designated in a manner so as to preserve the
constituency of the Board of Directors as provided above. The Company shall
use its best efforts to implement the provisions of this Section 5 and
shall take such actions as may be necessary in furtherance of the
foregoing.
6. Committees and Subsidiary Boards. The Board of Directors of each
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subsidiary of the Company at all times shall reflect the proportional
representation of the Board of Directors of the Company described in
Section 5. The Company shall vote its shares of stock of each subsidiary,
and each Shareholder shall take all other actions necessary, to ensure that
the composition of the Board of Directors of each such subsidiary is as set
forth above. For so long as the Investor is entitled to designate any
directors pursuant to Section 5, the Investor shall have the right to
designate at least one member of each committee of the Board of Directors
of the Company and the Board of Directors of each of its subsidiaries.
7. Restriction on Corporate Action. In addition to any action which
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is required by law or the Company's Second Amended and Restated Articles of
Incorporation (the "Articles of Incorporation"):
(a) (x) prior to a Series A Qualified Public Offering (as defined
in the Articles of Incorporation), the written approval of the holders
of a majority of the outstanding shares of Series A Preferred Stock
shall be required in order for the Company to, or permit any of its
subsidiaries to, and (y) prior to a Series B Qualified Public Offering
(as defined in the Articles of Incorporation) and after the Second
Closing, the written approval of the holders of a majority of the
outstanding shares of Series B Preferred Stock shall be required in
order for the Company to, or permit any of its subsidiaries to:
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(i) sell, transfer or otherwise dispose of assets of the
Company, or any of its subsidiaries, purchase the equity or assets of
another entity, or enter into a joint venture in a transaction in
which the Fair Market Value of the consideration (including cash,
Common Stock or the assumption of indebtedness) for such assets is
greater than $25,000,000;
(ii) make any material change in any year to the annual
operating and capital expenditure plan for the Company or any of its
subsidiaries presented to the Board of Directors or the board of
directors of any of the Company's subsidiaries for such year;
(iii) make any material change to the Company's 1997 Stock
Option Plan or adopt or make any material change to a new stock option
plan, stock purchase plan or other equity or equity-based incentive
compensation plan or arrangement; and
(iv) hire a new chief executive officer or chief operating
officer.
(b) prior to a Series B Qualified Public Offering and after the
Second Closing, the written approval of the holders of a majority of the
outstanding shares of Series B Preferred Stock shall be required in order
for the Company to, or permit any of its subsidiaries to:
(i) hire a new chief financial officer;
(ii) authorize, make or commit to make capital expenditures in
an amount that, individually or in the aggregate, exceeds (r) $18
million during the first quarter of fiscal year 2001, (s) $31 million
during the first two quarters of fiscal year 2001, (t) $44 million
during the first three quarters of fiscal year 2001, (u) $57 million
during fiscal year 2001, (v) $13 million during the first quarter of
fiscal year 2002, (w) $26 million during the first two quarters of
fiscal year 2002, (x) $39 million during the first three quarters of
fiscal year 2002, (y) $52 million during fiscal year 2002 or (z) the
amount contemplated in any operating and capital expenditure plan
approved by the Board of Directors thereafter;
(iii) incur any additional indebtedness or assume, guarantee,
endorse or otherwise become directly or contingently liable on or for
any indebtedness of any other person in an aggregate principal amount
that exceeds $35 million in any fiscal quarter; and
(iv) approve or authorize any increase in the size of the
Board of Directors or the board of directors of any Subsidiary.
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(c) after the earlier to occur of a Series A Qualified Public
Offering or, if the Second Closing has occurred, a Series B Qualified
Public Offering, the Company shall not, and shall not permit any of its
subsidiaries to:
(i) unless approved by a majority of the members of the Board
of Directors, sell, transfer or otherwise dispose of assets of the
Company or any of its subsidiaries, purchase the equity or assets of
another entity, or enter into a joint venture, in a transaction in
which the Fair Market Value of the consideration (including cash,
Common Stock or the assumption of indebtedness) for such assets is
greater than $25,000,000;
(ii) unless approved by a majority of the members of the Board
of Directors, make any material change in any year to the annual
operating and capital expenditure plan for the Company or any of its
subsidiaries presented to the Board of Directors or the board of
directors of any of the Company's subsidiaries for such year;
(iii) unless approved by a majority of the members of the Board
of Directors who are not also officers of the Company, make any
material change to the Company's 1997 Stock Option Plan or adopt or
make any material changes to a new stock option plan, stock purchase
plan or other equity or equity-based incentive compensation plan or
arrangement; and
(iv) unless approved by a majority of the members of the Board
of Directors who are not also officers of the Company, hire a new
chief executive officer or chief operating officer.
(d) after a Series B Qualified Public Offering and after the Second
Closing, the Company shall not, and shall not permit any of its
subsidiaries to:
(i) unless approved by a majority of the members of the Board
of Directors, authorize, make or commit to make capital expenditures
in an amount that, individually or in the aggregate, exceeds (r) $18
million during the first quarter of fiscal year 2001, (s) $31 million
during the first two quarters of fiscal year 2001, (t) $44 million
during the first three quarters of fiscal year 2001, (u) $57 million
during fiscal year 2001, (v) $13 million during the first quarter of
fiscal year 2002, (w) $26 million during the first two quarters of
fiscal year 2002, (x) $39 million during the first three quarters of
fiscal year 2002, (y) $52 million during fiscal year 2002 or (z) the
amount contemplated in any operating and capital expenditure plan
approved by the Board of Directors thereafter;
(ii) unless approved by a majority of the members of the Board
of Directors, incur any additional indebtedness or assume, guarantee,
endorse or otherwise become directly or contingently liable on or for
any indebtedness of any
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other person in an aggregate principal amount that exceeds $35 million
in any fiscal quarter;
(iii) unless approved by a majority of the members of the Board
of Directors who are not also officers of the Company, hire a new
chief financial officer; and
(iv) unless approved by a majority of the members of the Board
of Directors who are not also officers of the Company, approve or
authorize any increase in the size of the Board of Directors or the
board of directors of any Subsidiary.
(e) Without the consent of the holders of a majority of the
outstanding shares of Series A Preferred Stock, during the period that ends
upon the later of (i) December 28, 2002 or (ii) the date which is 270 days
after the consummation of a Series A Qualified Public Offering (such
period, the "Series A Private Sale Restricted Period"), the Company shall
not sell any equity securities or securities convertible or exchangeable
into an equity security of the Company ("Equity Securities") to an entity
(or group of related entities) in a transaction other than a registered
public offering whereby as a result of such transaction the purchasing
entity or entities beneficially owns a number of Equity Securities in
excess of the number of Shares beneficially owned by the Shareholders (a
"Series A Qualifying Private Equity Sale"). During the two year period
starting the day after the end of the Series A Private Sale Restricted
Period, the Company shall not consummate a Series A Qualifying Private
Equity Sale unless the purchaser or purchasers in such transaction becomes
a party to and bound by this Agreement as a Shareholder hereunder.
(f) Without the consent of the holders of a majority of the
outstanding shares of Series B Preferred Stock, during the period that ends
upon the date which is 270 days after the consummation of a Series B
Qualified Public Offering (such period, the "Series B Private Sale
Restricted Period"), the Company shall not sell any Equity Securities to an
entity (or group of related entities) in a transaction other than a
registered public offering whereby as a result of such transaction the
purchasing entity or entities beneficially owns a number of Equity
Securities in excess of the number of Shares beneficially owned by the
Investor (a "Series B Qualifying Private Equity Sale"). During the two
year period starting the day after the end of the Series B Private Sale
Restricted Period, the Company shall not consummate a Series B Qualifying
Private Equity Sale unless the purchaser or purchasers in such transaction
becomes a party to and bound by this Agreement as a Shareholder hereunder.
8. Selection of Lead Underwriter for Initial Public Offering. The
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Company shall notify the Investor in writing (the "IPO Notice") of any decision
by the Board of Directors to undertake an initial underwritten public offering
pursuant to an effective registration statement under the Securities Act of
1933, as amended, covering the offer and sale of Common Stock for
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the account of the Company (the "IPO"), and shall identify in the IPO Notice the
name of a nationally recognized investment banking firm (the "Investment Bank")
to serve as lead underwriter to conduct the IPO. If such Investment Bank is not
acceptable to the Investor, the Investor may, no later than two business days
following delivery of the IPO Notice, deliver a written notice to the Company
rejecting such Investment Bank (the "Rejection Notice"). If no Rejection Notice
is delivered within such two business-day period, the proposed lead underwriter
will be deemed to be accepted. If a Rejection Notice is delivered, the Company
shall, no later than two business days following delivery thereof, propose in
writing two other Investment Banks to serve as lead underwriter for
consideration by the Investor (the "Second Proposal"). Within two business days
of receipt of the Second Proposal, the Investor may accept by written notice to
the Company (the "Acceptance Notice") one of the two Investment Banks named in
the Second Proposal. If no Acceptance Notice is delivered within such two
business-day period, the Company shall in its sole discretion select one of the
two Investment Banks specified in the Second Proposal to serve as lead
underwriter to conduct the IPO.
9. Appointment of Chief Executive Officer. The Investor shall have the
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right to appoint a replacement chief executive officer of the Company, which
person shall be acceptable to ▇▇▇▇▇▇. The Company agrees to compensate the
chief executive officer at competitive market rates. Upon appointment of a
replacement chief executive officer, ▇▇▇▇▇▇ will remain Chairman of the Board of
Directors.
10. Liquidity Provision. Notwithstanding anything to the contrary
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contained in this Agreement, if (i) the Second Closing has occurred and (ii)
there is a 2001 Plan Shortfall, the parties hereto agree as follows (and agree
to cause the Company to take all actions necessary to effect the following):
(a) Immediately following the determination of a 2001 Plan Shortfall,
the Company shall either (x) decrease the size of the Board of Directors by
removing directors who have not been designated by the Investor or (y)
increase the size of the Board of Directors by adding directors who have
been designated by the Investor, such that, in either case, the number of
directors designated by the Investor represents a majority of the Board of
Directors;
(b) If (i) the Company's annualized quarterly revenues for any fiscal
quarter in fiscal year 2002 are not greater than 110% of the Company's
annual fiscal year 2001 revenues (based in each case upon revenues as set
forth in the Company's regularly prepared financial statements that were
prepared in accordance with generally accepted accounting principles
applied in a manner consistent with past practice) or (ii) the
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Company's Cash Resources are less than $5 million at any time after
December 31, 2001, then at any time thereafter the Investor, in its sole
discretion, may deliver a written notice to the Company directing the
Company to effect a sale of the Company, and identifying an Investment
Bank, which firm shall be reasonably acceptable to the Board of Directors,
to conduct such sale in accordance with Section 11. "Cash Resources" means,
on any date, the sum of (x) unrestricted cash on the Company's balance
sheet as of such date and (y) amounts available to be borrowed by the
Company under its senior credit facilities; provided that there shall not
on such date have occurred and be continuing any material default under any
of (i) the Second Amended and Restated Loan Agreement dated as of September
22, 1997 between Business Telecom, Inc. and General Electric Capital
Corporation and the other lenders party thereto, as amended (the "GECC
Agreement"), (ii) the Loan Agreement dated as of September 8, 1999 among
Business Telecom, Inc. and Bank of America, National Association, and the
other lenders party thereto, as amended (the "BofA Agreement" and, together
with the GECC Agreement, the "Senior Debt Agreements"), or (iii) any other
senior credit facility of the Company, if the effect of such default is to
enable (or with the giving of notice or lapse of time or both would enable)
the lenders under the Senior Debt Agreements or other senior credit
facility to declare such debt to become due and payable prior to its stated
maturity. Upon the request of the Investor at any time and from time to
time after December 31, 2001, the Company will notify the Investor of the
amount of the Company's Cash Resources at such time, and will provide the
Investor with a reasonably detailed description of the facts and
calculations upon which such amount is based;
(c) The Company may, at its option, redeem all of the Series A
Preferred Stock and the Series B Preferred Stock for cash on or prior to
December 31, 2002. The redemption price per share shall be equal to the
greater of (i) $2,000 per share and (ii) an amount representing an Internal
Rate of Return (as defined in the Articles of Incorporation) on the
investment of holders of Series A Preferred Stock or Series B Preferred
Stock, as applicable, of at least 30% (the "Change in Control Amount"); and
(d) If the Company has not redeemed all of the Series A Preferred
Stock and Series B Preferred Stock in accordance with Section 10(c) by
December 31, 2002, then at any time thereafter the Investor, in its sole
discretion, may deliver a written notice (the "Sale Notice") to the Company
directing the Company to effect a sale of the Company. For purposes of this
Section 10(d), the Investment Bank which will conduct such sale in
accordance with Section 11 will be chosen as follows: the Investor will
identify an Investment Bank in the Sale Notice, which shall be reasonably
acceptable to the Board of Directors and ▇▇▇▇▇▇. If such Investment Bank is
not reasonably acceptable to ▇▇▇▇▇▇, ▇▇▇▇▇▇ may, no later than two business
days following delivery of the Sale Notice, deliver a written notice to the
Investor rejecting such Investment Bank (the "IB Rejection Notice"). If no
IB Rejection Notice is delivered within such two business-day period, the
proposed Investment Bank will be deemed to be accepted. If an IB Rejection
Notice is delivered, the Investor shall, no later than two business days
following delivery thereof, propose in writing two other Investment Banks
for consideration by ▇▇▇▇▇▇ (the "Second
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IB Proposal"). Within two business days of receipt of the Second IB
Proposal, ▇▇▇▇▇▇ may accept by written notice to the Investor (the "IB
Acceptance Notice") one of the two Investment Banks named in the Second IB
Proposal to conduct the sale hereunder. If no IB Acceptance Notice is
delivered within such two business-day period, the Investor shall in its
sole discretion select one of the two Investment Banks specified in the
Second IB Proposal to conduct the sale hereunder.
11. Sale of the Company. Upon delivery to the Company of a written notice
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referred to in Section 10(b) or 10(d), the Company and each other party hereto
agrees to use their respective best efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary or desirable to
effect the sale of the Company in accordance with the following provisions:
(a) The Investment Bank will establish procedures reasonably
acceptable to the Investor to effect an orderly sale of the Company with
the objective of achieving the highest practicable value for the
shareholders of the Company within a reasonable period of time. The Company
agrees to cooperate with the Investment Bank in accordance with such
procedures, and agrees to use its best efforts to reach agreement on the
optimum structure and the terms and conditions for the sale of the Company
(including whether such sale will be by merger or sale of assets or capital
stock) and will retain independent legal counsel of appropriate expertise,
reasonably acceptable to the Investor, to advise the Company on such sale.
The Company agrees to pay all reasonable fees and expenses of the
Investment Bank and such legal counsel, as well as the reasonable fees and
expenses of one law firm retained by the Investor in connection with such
sale. Any sale of the Company pursuant to this Section 11 shall require the
approval of the Investor.
(b) Each Shareholder shall (i) vote for, consent to and raise no
objections against any sale of the Company that is approved by the Investor
pursuant to this Section 11 and (ii) enter into such definitive agreements
as are customary for transactions of the nature of the sale of the Company.
If the sale of the Company is structured as a sale of shares of capital
stock, (i) each Shareholder shall agree to sell all of such holder's Shares
on the terms and conditions approved by the Investor and (ii) at the
closing of such sale each Shareholder will deliver to the purchaser(s) good
and valid title to all Shares owned by it, free and clear of all liens and
encumbrances, together with duly executed written instruments of transfer
with respect thereto, in form and substance reasonably satisfactory to the
purchaser(s). If the sale of the Company is structured as a sale of assets,
the Company agrees to execute and deliver or cause to be executed and
delivered all documents, certificates, agreements and other writings and to
take, or cause to be taken, all such actions as may be necessary or
desirable to vest in the purchaser(s) thereof good and marketable title to
such assets. If the sale of the Company is structured as a merger or
consolidation, each Shareholder shall waive any dissenters' rights,
appraisal rights or similar rights in conjunction with such merger or
consolidation. No Shareholder shall be subject to this Section 11(b)
unless, subject to the requirements of Section 11(c), all holders of shares
of capital stock of the Company shall receive the same proportion of
11
the aggregate consideration from such sale of the Company that such holder
would have received if such aggregate consideration had been distribution
by the Company in complete liquidation pursuant to the rights and
preferences set forth in the Articles of Incorporation as in effect
immediately prior to such sale of the Company and no holder of any shares
of capital stock of the Company shall receive with respect to such holder's
capital stock any consideration, directly or indirectly, from the purchaser
other than such proportionate consideration.
(c) In any sale of the Company pursuant to this Section 11 as
permitted by Section 10(b) or 10(d), each holder of a share of Series A
Preferred Stock or Series B Preferred Stock will be entitled to receive the
Change in Control Amount in cash before any payments or distributions are
made in respect of the Common Stock or any other classes or series of
capital stock of the Company.
12. Determination of 2001 Plan Shortfall. The determination as to whether
------------------------------------
a 2001 Plan Shortfall has occurred shall be made in good faith by the Board of
Directors of the Company. Any such determination shall be based on the
Company's regularly prepared financial statements that were prepared in
accordance with generally accepted accounting principles applied in a manner
consistent with past practice. No later than February 15, 2002, the Board of
Directors shall deliver to the Investor written notice of its determination as
to whether or not a 2001 Plan Shortfall has occurred, together with a detailed
description of the facts and calculations upon which such determination was
based. If the Investor shall object to any such determination by the Board of
Directors, the Investor shall appoint either Price Waterhouse Coopers or ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇ as an independent accountant to determine whether a 2001 Plan Shortfall
has occurred. The expenses of such independent accountant shall be borne by the
Company. The Company will promptly afford to the Investor and its agents, upon
request, reasonable access to its books of account, financial and other records,
employees and auditors (and furnish financial and other data) to the extent
necessary to permit the Investor to determine any matter relating to its rights
and obligations hereunder.
13. Term. This Agreement shall terminate upon the first date on which
----
Investor and its transferees described in the second sentence of Section 2
beneficially own less than 6,000,000 (as adjusted for stock splits,
combinations, stock dividends, recapitalizations and the like) shares of Common
Stock (calculated on a Fully-Diluted Basis); provided that Section 5 hereof
shall terminate, if earlier, on the date on which such Section is required to
terminate under applicable law; provided further, that Sections 10 and 11 shall
terminate and be of no further force and effect (i) upon the consummation of a
Series B Qualified Public Offering in which the offering price per share of
Common Stock is equal to or greater than $7.00 per share or (ii) upon a final
determination pursuant to Section 12 that there was no 2001 Plan Shortfall.
Within 30 days prior to the date such Section 5 would otherwise terminate as a
result of the proviso to the previous sentence, the parties shall extend the
term of such Section for the maximum period permitted by applicable law.
12
14. Specific Enforcement. Each party hereto expressly agrees that the
--------------------
other parties hereto may be irreparably damaged if this Agreement is not
specifically enforced. Upon a breach or threatened breach of the terms or
covenants of this Agreement by any party hereto, the other parties hereto shall,
in addition to all other remedies, each be entitled to apply for a temporary or
permanent injunction, and/or a decree for specific performance, in accordance
with the provisions hereof.
15. Legend. Each certificate evidencing any of the Shares now owned or
------
hereafter acquired by the Shareholders shall bear a legend substantially as
follows, in addition to any other legends required by law, and each Shareholder
shall surrender to the Company the certificate(s) representing the Shares for
purposes of placement of the following legends:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT
BE SOLD, MORTGAGED, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY APPLICABLE STATE
SECURITIES LAWS, OR THE AVAILABILITY OF AN EXEMPTION FROM THE
REGISTRATION PROVISIONS OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
APPLICABLE STATE SECURITIES LAWS.
ANY SALE, ASSIGNMENT, TRANSFER OR OTHER DISPOSITION OF, OR THE VOTING
OF, THE SHARES REPRESENTED BY THIS CERTIFICATE IS RESTRICTED BY, AND
SUBJECT TO, THE TERMS AND PROVISIONS OF A SHAREHOLDERS AGREEMENT, AS
AMENDED FROM TIME TO TIME. A COPY OF SAID AGREEMENT IS ON FILE WITH
THE SECRETARY OF THE CORPORATION.
Each Shareholder consents to the Company's making a notation on its records and
giving instructions to any transfer agent of the Series A Preferred Stock, the
Series B Preferred Stock, the shares of Common Stock issued upon conversion of
the Series A Preferred Stock and Series B Preferred Stock, the Common Stock, the
Warrants, the Warrant Stock and any securities issued with respect to any of the
foregoing in order to implement the restrictions on transfer established in this
Agreement. Such legends shall be removed by the Company from any certificate at
such time as the Shares represented by such certificate cease to be subject to
the restrictions described in such legends.
13
16. Notices. All notices and other communications between the parties
-------
hereto shall be delivered in the manner set forth in the Investor Rights
Agreement.
17. Further Assurances. Subject to the terms and conditions of this
------------------
Agreement, each of the parties hereto will use its best efforts to take, or
cause to be taken, all actions and to do, or cause to be done, all things
necessary or desirable to consummate the transactions contemplated by and to
carry out the intent and purpose of this Agreement. Each of the parties hereto
agrees to execute and deliver such other documents, certificates, agreements and
other writings and to take such other actions as may be necessary or desirable
in furtherance of the foregoing.
18. Entire Agreement. This Agreement, along with the Articles of
----------------
Incorporation, the Investor Rights Agreement, the Series A Purchase Agreement,
the Series B Purchase Agreement, the Warrants, the redemption agreement dated as
of December 28, 1999 among the Company and the Investor, and the Redemption
Agreement, constitutes the full and entire understanding and agreement among the
parties with regard to the subjects hereof and thereof and supercedes all prior
agreements and understanding between them or any of them as to such subject
matter.
19. Amendment. Neither this Agreement nor any provision hereof may be
---------
waived, modified, amended or terminated except by a written agreement signed by
the parties hereto. Each of the Shareholders represents that he or it is not a
party to any other agreement which would prevent him or it from performing his
or its obligations hereunder. No waiver of any breach or default hereunder
shall be considered valid unless in writing, and no such waiver shall be deemed
a waiver of any subsequent breach or default of the same or similar nature.
20. Governing Law. This Agreement shall be deemed a contract made under
-------------
the laws of the State of North Carolina and together with the rights and
obligations of the parties hereunder, shall be construed under and governed by
the laws of such State without regard to the conflicts of laws provisions
thereof.
21. Severability. Any invalidity, illegality or limitation of the
------------
enforceability with respect to any party of any one or more of the provisions of
this Agreement, or any part thereof, whether arising by reason of the law of any
such person's domicile or otherwise, shall in no way affect or impair the
validity, legality or enforceability of the remainder of this Agreement with
respect to such party or the validity, legality or enforceability of this
Agreement with respect to any other party. In case any provision of this
Agreement shall be invalid, illegal or unenforceable, it shall to the extent
practicable, be modified so as to make it valid, legal and enforceable and to
retain as nearly as practicable the intent of the parties, and the validity,
legality, and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
22. Successors and Assigns. Except as otherwise expressly provided
----------------------
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto; provided that (i) the Company may not assign
14
its obligations under this Agreement and (ii) the Investor may not assign its
rights under Sections 5, 6 or 7 to any person other than a person described in
the second sentence of Section 2.
23. Recapitalization, etc. In the event that any capital stock or other
---------------------
securities are issued in respect of, in exchange for, or in substitution of, any
Shares by reason of any reorganization, recapitalization, reclassification,
merger, consolidation, spin-off, partial or complete liquidation, stock
dividend, split-up, sale of assets, distribution to stockholders or combination
of the Shares or any other change in capital structure of the Company,
appropriate adjustments shall be made with respect to the relevant provisions of
this Agreement so as to fairly and equitably preserve, as far as practicable,
the original rights and obligations of the parties hereto under this Agreement.
24. No Inconsistent Agreements. The Company will not hereafter enter into
--------------------------
any agreement with respect to its securities which is inconsistent with, or
grant rights superior to the rights granted to the Shareholders pursuant to,
this Agreement.
25. Captions. Captions are for convenience only and are not deemed to be
--------
part of this Agreement.
26. Counterparts. This Agreement may be executed in multiple
------------
counterparts, each of which shall constitute an original but all of which shall
constitute but one and the same instrument. One or more counterparts of this
Agreement or any exhibit hereto may be delivered via facsimile, with the
intention that they shall have the same effect as an original counterpart
hereof.
27. No Third Party Beneficiaries. This Agreement shall not confer any
----------------------------
rights or remedies upon any person or entity other than the parties hereto and
their respective successors and permitted assigns.
15
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
COMPANY: BTI TELECOM CORP.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Executive Officer
▇▇▇▇▇▇: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇
INVESTOR: WELSH, CARSON, ▇▇▇▇▇▇▇▇
& ▇▇▇▇▇ VIII, L.P.
By: WCAS VIII Associates LLC,
General Partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇. Rather
-----------------------
Name: ▇▇▇▇▇▇▇▇ ▇. Rather
Title: Member
WCAS INFORMATION PARTNERS, L.P.
By: WCAS Info Partners,
General Partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇. Rather
-----------------------
Name: ▇▇▇▇▇▇▇▇ ▇. Rather
Title: Attorney-in-fact
BTI INVESTORS LLC
By: /s/ ▇▇▇▇▇▇▇▇ ▇. Rather
-----------------------
Name: ▇▇▇▇▇▇▇▇ ▇. Rather
Title: Authorized Person
16
