EXHIBIT 10.22
BTI TELECOM CORP.
REDEMPTION AGREEMENT
THIS REDEMPTION AGREEMENT (this "Agreement") is dated as of the 28th
day of December 1999, by and among BTI Telecom Corp., a North Carolina
corporation (the "Company") and Welsh, Carson, Anderson & Stowe 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"). Capitalized terms used herein and not otherwise
defined in this Agreement shall have the meanings assigned to them in the
Purchase Agreement (as defined below).
WHEREAS, in connection with the purchase by the Investor of 200,000
shares of the Series A Stock, par value $.01 per share, of the Company, pursuant
to a Series A Preferred Stock Purchase Agreement dated as of December 10, 1999
(the "Purchase Agreement"), the Company desires to provide the Investor certain
rights with respect to the redemption of the Series A Preferred Stock held by it
as an inducement to the Investor to purchase shares of the Series A Preferred
Stock;
NOW, THEREFORE, in consideration of the mutual agreements, covenants
and conditions contained herein, the Company and the Investor hereby agree as
follows.
1. Option to Sell Shares to Company. Following the date (such date
being hereinafter referred to as the "Liquidity Exercise Date") that is the
later of (a) the seventh anniversary of the date hereof or (b) six months after
the date on which all amounts owing under the 10 1/2% Senior Notes due 2007
issued by the Company pursuant to that certain Indenture, dated September 22,
1997, by and among the Company, Business Telecom, Inc. and First Trust of New
York, National Association, are repaid in full, if the Company receives from the
Investor or its transferees (collectively with the Investor, the "Holders")
holding a majority of the Series A Preferred Stock a written demand (the
"Investors' Notice") that the Company redeem all, but not less than all, of the
Series A Preferred Stock held by such Holders, the Company shall redeem all of
the Series A Preferred Stock then held by all the Holders on the terms herein
provided. The Company shall, within thirty (30) days after the Liquidity
Exercise Date, deliver a written notice (a "Redemption Notice") to the Holders
of their right to demand that the Company redeem Series A Preferred Stock held
by them. The Holders of a majority of the Series A Preferred Stock may, within
sixty (60) days after receipt of such notice, notify the Company that they
demand that the Company redeem all of the Series A Preferred Stock then held by
them. The Company shall repurchase all such Series A Preferred Stock under this
Agreement as set forth below. The demand to redeem Series A Preferred Stock
pursuant to this Section 1 shall be referred to as the "Option."
2. Price.
(a) The price to be paid by the Company for the Series A
Preferred Stock to be sold under the Option shall be as follows: (i) if the
redemption occurs prior to a Qualified
Public Offering (as defined in the Company's Amended and Restated Articles of
Incorporation), the redemption price shall be the higher of (A) the Fair Market
Value of the Common Stock issuable upon conversion of such Series A Preferred
Stock as of the Liquidity Exercise Date, or (B) the Series A Liquidation Amount
(as defined in the Company's Amended and Restated Articles of Incorporation); or
(ii) if the redemption occurs after a Qualified Public Offering, the redemption
price shall be the Series A Liquidation Amount. For purposes of this Agreement,
the Fair Market Value of the Common Stock issuable on conversion of the Series A
Preferred Stock shall be, as of a particular date, (i) with respect to one share
of Common Stock, if the aggregate Daily Prices of all of the outstanding shares
of Common Stock that have been registered pursuant to a public offering is at
least $200 million as of such date, the average (weighted by daily trading
volume) of the Daily Prices (defined below) per share of Common Stock for the 20
consecutive trading days immediately prior to such date or (ii) in any other
event, an amount determined in the manner described in clause (5) of the
definition of "Daily Price" below. "Daily Price" means (1) if the shares of such
Common Stock then are listed and traded on the New York Stock Exchange, Inc.
("NYSE"), the closing price on such day as reported on the NYSE Composite
Transactions Tape; (2) if the shares of Common Stock then are not listed and
traded on the NYSE, the closing price on such day as reported by the principal
national securities exchange on which the shares are listed and traded; (3) if
the shares of Common Stock then are not listed and traded on any such securities
exchange, the last reported sale price on such day on the National Market of the
National Association of Securities Dealers, Inc. Automated Quotation System
("NASDAQ"); (4) if the shares of Common Stock then are not traded on the NASDAQ
National Market, the average of the highest reported bid and lowest reported
asked price on such day as reported by NASDAQ; or (5) if there are no bid/asked
prices so reported, an amount agreed upon in good faith by the Company and a
representative designated by the Holders of a majority of the outstanding Series
A Preferred Stock, taking into account, in valuing such shares, all relevant
facts and circumstances; provided, however, that there shall be no discount to
reflect the fact that the shares represent a minority interest in the Company
and no premium to reflect any special voting or approval rights of the Holders
with respect to certain matters. If no such agreement is reached pursuant to
clause (5) above or clause (ii) of the definition of "Fair Market Value" within
thirty (30) days after notice is given to the Company of the Holders' exercise
of the Option the Fair Market Value shall be determined by appraisal as set
forth below.
(b) All appraisals shall be undertaken by two appraisers, one
selected by the Board of Directors of the Company and one selected by the
Holders of a majority of the outstanding Series A Preferred Stock. No Director
whose Series A Preferred Stock is being appraised or who is designated by or
affiliated with a person whose Series A Preferred Stock is being appraised shall
vote on the selection of the appraiser chosen by the Company. In the event the
Board of Directors or Holders fails to appoint an appraiser within a reasonable
period of time, the appraisal shall be undertaken by the remaining single
appraiser. The Fair Market Value shall be the fair market value (determined in
the manner described above) arrived at by the appraisers (based upon the number
of shares of Common Stock into which the Series A Preferred Stock is convertible
(as determined in the Company's Amended and Restated Articles of Incorporation))
within thirty (30) days following the appointment of the last appraiser to be
appointed. In the event that the two appraisers agree in good faith on such fair
market value within such a period of time, such agreed value shall be used for
these purposes. If the appraisers cannot agree but their valuations are within
10% of each other, the fair market value shall be the mean of the two
valuations. If the appraisers cannot agree and the differences in the valuations
are greater than
2
10%, the appraisers shall select a third appraiser who will calculate fair
market value independently (provided that such calculation shall not be more
than the value calculated by the appraiser selected by the Holders or less than
the value calculated by the appraiser selected by the Board of Directors) and,
except as provided in the next sentence, the fair market value of the shares
shall be the mean of the two fair market values arrived at by the appraisers who
are closest in amount. If one appraiser's valuation is the mean of the other two
valuations, such mean valuation shall be the fair market value. In the event
that the two original appraisers cannot agree upon a third appraiser within ten
(10) days following the end of the thirty (30) day period referred to above,
then the third appraiser, which appraiser shall be a nationally recognized
investment banking firm, shall be appointed by the American Arbitration
Association in Washington, D.C. If, following the final determination of the
purchase price for the shares, a Holder previously offering its shares for
repurchase shall choose not to sell any or all of its shares, then such Holder
shall so notify the Company within ten (10) days following receipt of the
results of the appraisal; provided that if a Holder shall choose not to sell any
of its shares, such Holder shall forfeit its Option hereunder. Notwithstanding
the foregoing, if a Holder chooses not to sell any of its shares as a result of
the Company's delay in repurchase pursuant to Section 3(b) below, such Holder
shall not be required to forfeit its Option. The expenses of the appraisers will
be borne by the Company.
3. Payment.
(a) Within sixty (60) days following either the agreement, as
provided above, of the Company and the Holders concerning the Fair Market Value
of the Series A Preferred Stock or the receipt of the results of the last of the
appraisals referred to above (the date of closing hereinafter referred to as the
"Redemption Date"), the Company shall purchase the Series A Preferred Stock
tendered to it at the price established by this Agreement (the "Redemption
Price"). The Company shall pay the Redemption Price for the tendered Series A
Preferred Stock on the Redemption Date.
(b) Notwithstanding the other provisions of this Agreement,
the Company shall not be obligated to repurchase any Series A Preferred Stock to
the extent such repurchase would violate applicable law. If, on account of the
first sentence of this subparagraph (b) the Company cannot fund the entire
purchase price of all of the Series A Preferred Stock offered for redemption on
the Redemption Date, the Company shall pay for such remaining Series A Preferred
Stock when permitted; and any amounts not paid at the Redemption Date shall be
paid as soon as permitted. Upon redemption of any Series A Preferred Stock, all
rights of such Series A Preferred Stock shall terminate.
(c) Payment shall be made by check or wire transfer of funds
to such bank account as the Holders shall direct.
4. Termination of Option. Except as provided in Section 2(b) above, the
obligation of the Company to purchase the Series A Preferred Stock as provided
in this Agreement shall terminate if the Company does not receive the Investors'
Notice within sixty (60) after receipt by the Holders of the Redemption Notice.
In addition, the obligations of the Company to purchase the Series A Preferred
Stock shall terminate at such time as the Series A Preferred Stock is converted
into Common Stock or at such time as the Company elects to terminate certain
rights
3
of the Series A Preferred Stock pursuant to Article IV, Section 4(m) of
the Company's Amended and Restated Articles of Incorporation.
5. Amendments; Waivers and Consents. Any provision in this Agreement to
the contrary notwithstanding, changes in or additions to this Agreement may be
made if the Company shall obtain consent thereto in writing from the Holders
holding at least a majority of the Series A Preferred Stock; and compliance with
any covenant or provision herein set forth may be omitted or waived (in a
particular instance and either retroactively or prospectively) if the Company
shall obtain consent thereto in writing from the Holders holding at least a
majority of the Series A Preferred Stock. No failure or delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right, power or
privilege.
6. Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors and assigns, heirs, executors and administrators of the
parties hereto, provided that the Company may not assign its obligations under
this Agreement.
7. Entire Agreement. This Agreement, along with the Amended and
Restated Articles of Incorporation, the Series A Purchase Agreement, the
Warrant, the Shareholders Agreement and the Investor Rights Agreement,
constitutes the full and entire understanding and agreement among the parties
with regard to the subjects hereof and thereof and supersedes all prior
agreements and understanding between them or any of them as to such subject
matter. 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.
8. 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.
9. Notices. All notices and other communications between the Company
and the Holders shall be delivered in the manner set forth in the Investor
Rights Agreement.
10. 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
4
delivered via telecopier, with the intention that they shall have the same
effect as an original counterpart hereof.
11. Effect of Headings. The article and section headings herein are for
convenience only and shall not affect the construction hereof.
12. 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 of Series A Preferred Stock 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 of Series A Preferred Stock 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.
13. 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.
14. Specific Performance. Each of the parties 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 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.
[THE NEXT PAGE IS THE SIGNATURE PAGE.]
5
IN WITNESS WHEREOF, the parties have caused this Redemption Agreement
to be duly executed as of the date first above written.
COMPANY: BTI TELECOM CORP.
By: /s/ Peter T. Loftin
_________________________________________
Name: Peter T. Loftin
Title: Chief Executive Officer
INVESTOR: WELSH, CARSON, ANDERSON & STOWE VIII, L.P.
By: WCAS VIII Associates LLC, General Partner
By: /s/ Jonathan M. Rather
_______________________________________
Name: Jonathan M. Rather
Title: Member
WCAS INFORMATION PARTNERS, L.P.
By: WCAS Info Partners, General Partner
By: /s/ Jonathan M. Rather
_______________________________________
Name: Jonathan M. Rather
Title: Attorney-in-fact
BTI INVESTORS LLC
By: /s/ Jonathan M. Rather
________________________________________
Name: Jonathan M. Rather
Title: Authorized Person
6