EXHIBIT 10.23


                                BTI TELECOM CORP.


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                            INVESTOR RIGHTS AGREEMENT

                                December 28, 1999


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<PAGE>



                                BTI TELECOM CORP.

                            INVESTOR RIGHTS AGREEMENT

                                December 28, 1999

                                      INDEX

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<S>         <C>                                                                                                <C>
                                                                                                               PAGE

ARTICLE I.........................................................................................................1

   REGISTRATION RIGHTS............................................................................................1
      1.1   CERTAIN DEFINITIONS...................................................................................1
      1.2   DEMAND REGISTRATIONS..................................................................................3
      1.3   "PIGGY BACK" REGISTRATIONS............................................................................4
      1.4   EXPENSES OF REGISTRATION..............................................................................5
      1.5   REGISTRATION PROCEDURES...............................................................................6
      1.6   INDEMNIFICATION.......................................................................................8
      1.7   INFORMATION BY HOLDER................................................................................11
      1.8   LIMITATIONS ON REGISTRATION RIGHTS...................................................................11
      1.9   RESERVED.............................................................................................11
      1.10     RULE 144 REPORTING................................................................................11
      1.11     LISTING APPLICATION...............................................................................12
      1.12     RESERVED..........................................................................................12
      1.13     MARKET STAND OFF..................................................................................12
      1.14     DAMAGES...........................................................................................13
      1.15     TERMINATION OF REGISTRATION RIGHTS................................................................13

ARTICLE II.......................................................................................................13

   PREEMPTIVE RIGHTS.............................................................................................13
      2.1   RIGHT OF PURCHASE....................................................................................13
      2.2   DEFINITION OF NEW SECURITIES.........................................................................13
      2.3   NOTICE FROM THE COMPANY..............................................................................14
      2.4   SALE BY THE COMPANY..................................................................................14
      2.5   TERMINATION OF RIGHTS................................................................................15

ARTICLE III......................................................................................................15

   INFORMATION RIGHTS............................................................................................15
      3.1   ACCOUNTS AND REPORTS.................................................................................15
      3.2   INSPECTION...........................................................................................16
      3.3   MEETINGS OF THE BOARD OF DIRECTORS...................................................................17
      3.4   RESTRICTIONS ON INFORMATION RIGHTS...................................................................17

ARTICLE IV.......................................................................................................18

   MISCELLANEOUS.................................................................................................18
      4.1   RECAPITALIZATION, ETC................................................................................18
      4.2   SUCCESSORS AND ASSIGNS...............................................................................18
      4.3   ENTIRE AGREEMENT.....................................................................................18
      4.4   SEVERABILITY.........................................................................................18
      4.5   SHARES OWNED BY AFFILIATES...........................................................................18
      4.6   AMENDMENTS AND WAIVERS...............................................................................19
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<S>     <C>                                                                                                     <C>

      4.7   NOTICES..............................................................................................19
      4.8   COUNTERPARTS.........................................................................................20
      4.9   EFFECT OF HEADINGS...................................................................................20
      4.10     GOVERNING LAW.....................................................................................20
      4.12  SPECIFIC ENFORCEMENT.................................................................................19

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                                       ii

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                                BTI TELECOM CORP.

                            INVESTOR RIGHTS AGREEMENT


         THIS INVESTOR RIGHTS AGREEMENT (the "Agreement") is entered into 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 as defined terms
and not otherwise defined shall have the meanings set forth in the Series A
Purchase Agreement (as defined below) or its Related Agreements (as such term is
defined in the Series A Purchase Agreement).

         WHEREAS, in connection with the issuance and sale of shares of the
Company's Series A Preferred Stock (the "Series A Stock" or the "Preferred
Stock") and warrants (collectively, the "Warrant") to purchase shares of the
Company's Common Stock (the "Warrant Stock") to the Investor pursuant to that
certain Series A Preferred Stock Purchase Agreement, dated December 10, 1999, by
and among the Company, the Investor and FS Multimedia, Inc. (the "Series A
Purchase Agreement"), the Company desires to provide the Investor certain rights
with respect to registration of the shares of stock held by it and certain other
rights with respect to such shares as an inducement to the Investor to purchase
shares of the Series A Stock;

         NOW, THEREFORE, in consideration of the mutual agreements, covenants
and conditions contained herein, the Company and the Investor hereby agree as
follows.

                                    ARTICLE I

                               REGISTRATION RIGHTS

         The Company hereby grants to each of the Holders (as defined below) the
registration rights set forth in this Article I, with respect to the Registrable
Securities (as defined below) owned by such Holders.

         1.1      Certain Definitions. As used in this Agreement, the following
terms shall have the following meanings:

         "Conversion Value" shall mean the Series A Conversion Value as defined
in Article IV.4 of the Company's Amended and Restated Articles of Incorporation.

         "Holder" (collectively, "Holders") means the Investor and each of its
assignees who is then a record owner of Registrable Securities.


<PAGE>

         "Initiating Holder(s)" means the Investor or its assignees who in the
aggregate are holders of at least a majority of the Registrable Securities held
by all Holders and their assigns.

         "Person" means an individual, corporation, partnership, joint venture,
trust, limited liability company or any other entity, or unincorporated
organization or a government or agency or political subdivision thereof.

         "Qualified Public Offering" shall have the meaning set forth in Article
IV of the Company's Amended and Restated Articles of Incorporation.

         "Registrable Securities" means (i) all shares of Series A Stock owned
by any Holder, (ii) all of the shares of the Company's common stock, no par
value per share (the "Common Stock"), issued or issuable upon conversion of the
shares of Preferred Stock owned by any Holder (the "Conversion Shares"), (iii)
all other shares of Common Stock now owned or hereafter acquired by any Holder;
(iv) all shares of Common Stock issuable with respect to securities of the
Company (including the Warrant) convertible into or exercisable for shares of
Common Stock now owned or hereafter acquired by any Holder; and (v) any Common
Stock or other securities issued in respect of the shares described in clauses
(i) through (iv) upon any stock split, stock dividend, recapitalization or other
similar event; provided, however, that shares of Common Stock or other
securities shall only be treated as Registrable Securities if and so long as (A)
they have not been sold to or through a broker or dealer or underwriter in a
public distribution or a public securities transaction, and (B) the registration
rights associated with such securities have not been terminated pursuant to
Section 1.15 hereof.

         The term "register" means to register under the Securities Act of 1933,
as amended (the "1933 Act") and applicable state securities laws for the purpose
of effecting a public sale of securities.

         "Registration Expenses" means all expenses incurred by the Company in
compliance with Sections 1.2 or 1.3 hereof, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, expenses of listing the
Registrable Securities on a securities exchange, reasonable fees and
disbursements of one counsel for all the selling Holders (which counsel shall be
selected by the Initiating Holders in the case of any registration requested
pursuant to Section 1.2), and the expense of any special audits incident to or
required by any such registration.

         "Selling Expenses" means all taxes, underwriting discounts and selling
commissions applicable to the sale of Registrable Securities.


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<PAGE>


         1.2      Demand Registrations.


                                    (a)     Demand for Registration. If the
Company shall receive from Initiating Holders a written demand that the Company
effect any registration (a "Demand Registration") of the Registrable Securities
(including a registration on Form S-3 or any successor form of registration
statement) having an anticipated net aggregate offering price (after deduction
of Selling Expenses) of at least $25,000,000, the Company will:

                           (i)      promptly give written notice of the proposed
         registration to all other Holders; and

                           (ii) as soon as practicable, use commercially
         reasonable efforts to effect such registration as may be so requested
         and as would permit or facilitate the sale and distribution of all or
         such portion of such Registrable Securities as are specified in such
         demand, together with such portion of the Registrable Securities of any
         Holder or Holders joining in such demand as are specified in a written
         demand given within twenty (20) days after receipt of written notice of
         such proposed registration from the Company, provided that the Company
         shall not be obligated to take any action to effect any such
         registration, pursuant to this Section 1.2:

                                    (A) Except as otherwise provided below,
                  after the Company has effected one (1) such registration
                  pursuant to this Section 1.2 and all of the Registrable
                  Securities included in such registration have been sold;

                                    (B) If the Company shall furnish to such
                  Holders a certificate signed by the President of the Company,
                  stating that in the good faith judgment of the Board of
                  Directors of the Company it would be significantly detrimental
                  to the Company and its shareholders for such Registration
                  Statement to be filed at the date filing would be required in
                  light of the existence, or in anticipation, of any acquisition
                  or financing activity involving the Company or the
                  unavailability for reasons beyond the Company's control of any
                  required financial statements, in which case the Company shall
                  have an additional period of not more than 90 days within
                  which to file such Registration Statement; provided, however,
                  that the Company shall not use this right more than once in
                  any 12-month period; or

                                     (C) Prior to December 31, 2002.

                  The Initiating Holders may, at any time prior to the effective
                  date of the registration statement relating to such
                  registration, revoke such request, without forfeiture of their
                  demand right under Section 1.2 and without liability (except
                  as set forth in Section 1.4) to any other Holder of
                  Registrable Securities requested to be registered pursuant to
                  this Section 1.2, by providing a written notice to the Company
                  revoking such request.


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<PAGE>


                  (b) Underwriting. If the Initiating Holders intend to
distribute the Registrable Securities covered by their demand by means of an
underwriting, they shall so advise the Company as part of their demand made
pursuant to this Section 1.2; and the Company shall include such information in
the written notice referred to in Section 1.2(a)(i). In such event, the right of
any Holder to registration pursuant to this Section 1.2 shall be conditioned
upon such Holder's participation in such underwriting and the inclusion of such
Holder's Registrable Securities in the underwriting to the extent provided
herein.

                  The Company shall, together with all holders of capital stock
of the Company proposing to distribute their securities through such
underwriting, enter into an underwriting agreement in customary form with the
underwriter or underwriters selected by a majority-in-interest of the Initiating
Holders and reasonably satisfactory to the Company. Notwithstanding any other
provision of this Section 1.2, if the managing underwriter shall advise the
Company that marketing factors (including, without limitation, an adverse effect
on the per share offering price) require a limitation of the number of shares to
be underwritten, then the Company shall so advise all Holders of Registrable
Securities that have requested to participate in such offering, and the number
of shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated pro rata among such Holders thereof in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders at the time of filing the Registration
Statement. No Registrable Securities excluded from the underwriting by reason of
the underwriter's marketing limitation shall be included in such registration.
If at least 50% of the Registrable Securities requested to be registered by the
Initiating Holders are not included in such registration, then the Initiating
Holders may request that the Company effect an additional registration under the
1933 Act of all or part of the Initiating Holders' Registrable Securities in
accordance with Section 1.2 and the Company shall pay the Registration Expenses
in connection with such additional registration.

                  If any Holder disapproves of the terms of the underwriting,
such Holder may elect to withdraw therefrom by written notice to the Company,
the underwriter and the Initiating Holders. The Registrable Securities so
withdrawn shall also be withdrawn from registration.

                  If the underwriter has not limited the number of Registrable
Securities to be underwritten, the Company may include securities for its own
account (or for the account of other shareholders) in such registration if the
underwriter so agrees and if the number of Registrable Securities would not
thereby be limited.

         1.3      "Piggy Back" Registrations.

                  (a) If, at anytime after the earlier of six months after an
initial public offering of equity securities of the Company or the release of
the lock-up restrictions imposed by Section 1.13 hereof or otherwise imposed by
the Company's underwriters in connection with the Company's initial public
offering, the Company shall determine to register any of its


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securities, either for its own account or the account of a security holder or
holders exercising their registration rights, other than a registration relating
solely to employee benefit plans, a registration on Form S-4 relating solely to
a Rule 145 transaction or a registration on any registration form which does not
permit secondary sales, the Company will:

                  (i) promptly give to each Holder of Registrable Securities
         written notice thereof (which shall include the number of shares the
         Company or other security holder proposes to register and, if known,
         the name of the proposed underwriter); and

                  (ii) use its reasonable best efforts to include in such
         registration all the Registrable Securities specified in a written
         request or requests, made by any Holder within fifteen (15) days after
         the date of delivery of the written notice from the Company described
         in clause (i) above. If the managing underwriter advises the Company
         that marketing considerations require a limitation on the number of
         shares offered pursuant to any registration statement, then the Company
         may offer all of the securities it proposes to register for its own
         account or the maximum amount that the managing underwriter considers
         saleable and such limitation on any remaining securities that may, in
         the opinion of the managing underwriter, be sold will be imposed pro
         rata among all stockholders who are entitled to include shares in such
         registration statement according to the number of Registrable
         Securities and other securities with comparable rights with respect to
         registration each such stockholder requested to be included in such
         registration statement, provided that all other shares without
         contractual registration rights proposed to be included in such
         registration are first excluded.

                  (b) The Company shall select the underwriter for an offering
made pursuant to this Section 1.3. The Company may, at its option, terminate or
withdraw any registration statement filed pursuant to this Section 1.3 prior to
the effectiveness thereof.

                  (c) If any Holder disapproves of the terms of the
underwriting, such holder may elect to withdraw therefrom by written notice to
the Company, the underwriter and the Initiating Holders. The Registrable
Securities so withdrawn shall be withdrawn from registration.

         1.4 Expenses of Registration. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to
Section 1.2 or 1.3 shall be paid by the Company. All Selling Expenses incurred
in connection with any such registration, qualification or compliance shall be
borne by the holders of the securities registered, pro rata on the basis of the
number of their shares so registered. Notwithstanding the foregoing, the Company
shall not be liable for Registration Expenses in connection with a registration
that shall not have become effective due to a revocation by the Initiating
Holders requesting such registration under Section 1.2, and such Registration
Expenses shall be borne by the Initiating Holders who initially requested and
revoked such registration.


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         1.5 Registration Procedures. In the case of each registration effected
by the Company pursuant to this Article I, the Company will keep each Holder of
Registrable Securities included in such registration advised in writing as to
the initiation of each registration and as to the completion thereof. At its
expense, the Company will do the following for the benefit of such Holders:

                  (a) Keep such registration effective (and not subject to a
stop order or injunction) for a period of one hundred twenty (120) days or until
the Holder or Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs, and amend or
supplement such registration statement and the prospectus contained therein from
time to time to the extent necessary to comply with the 1933 Act and applicable
state securities laws;

                  (b) As expeditiously as possible, prepare and file with the
Securities and Exchange Commission (the "Commission") such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the 1933 Act with respect to the disposition of all securities
covered by such registration statement;

                  (c) Use its reasonable best efforts to register or qualify the
Registrable Securities covered by such registration under the applicable
securities or "blue sky" laws of such jurisdictions as the selling stockholders
may reasonably request; provided, that the Company shall not be obligated to
qualify to do business in any jurisdiction where it is not then so qualified or
otherwise required to be so qualified or to take any action which would subject
it to the service of process in suits other than those arising out of such
registration;

                  (d) Furnish such number of registration statements,
prospectuses and other documents incident thereto, including any amendment or
supplement thereto, as a Holder from time to time may reasonably request;
provided that the Company will, during the preparation of the registration
statement or prospectus or any amendment or supplement thereto, furnish in a
timely manner under the circumstances to each Holder including shares in such
registration copies of such registration statement or prospectus (or amendment
or supplement) as proposed to be filed (including, upon the request of such
Holder, documents to be incorporated by reference therein) which documents will
be subject to the reasonable review and comments of such Holder (and its
attorneys) and the Company will not file any registration statement, any
prospectus or any amendment or supplement thereto (or any such documents
incorporated by reference) containing any statements with respect to such Holder
to which such Holder shall reasonably object in writing;

                  (e) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to Section 1.2 hereof, the Company will
enter into any underwriting agreement reasonably necessary to effect the offer
and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and is entered into by the Holders including
Registrable Securities in such offering;


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<PAGE>


                  (f) Obtain a comfort letter from the Company's independent
public accountants consistent with applicable professional guidelines and
standards in customary form and covering such matters of the type customarily
covered by comfort letters and an opinion from the Company's counsel in
customary form and covering such matters of the type customarily covered in a
public issuance of securities, in each case addressed to the Holders, and
provide copies thereof to the Holders;

                  (g) Permit any attorney, accountant or other agent retained by
the Holders to inspect and copy such corporate documents as any such Holder,
attorney, accountant or agent may reasonably request;

                  (h) Promptly notify each Holder of the Registrable Securities
and each underwriter under such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the 1933 Act, of
the happening of an event of which the Company has knowledge as a result of
which the prospectus contained in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and promptly
prepare and furnish to such Holder a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to the purchasers of
Registrable Securities, such prospectus shall not include an untrue statement or
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing;

                  (i) Use commercially reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make available to
Holders, as soon as reasonably practicable, an earnings statement covering a
period of twelve (12) months, beginning within three (3) months after the
effective date of the registration statement. The Company will use reasonable
best efforts to cause the earnings statement to satisfy the provisions of
Section 11(a) of the 1933 Act;

                  (j) Cause appropriate officers of the Company to attend and
participate in any "road shows" and analyst and investor presentations scheduled
in connection with any such registration and use its reasonable best efforts to
cooperate as reasonably requested by the Holders in the marketing of the
Registrable Securities; and

                  (k) Cooperate with the Holders of Registrable Securities to
take such actions as are reasonably required in order to facilitate the
disposition of Registrable Securities, including to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold, such certificates to be in such denominations and registered in such
names as such Holders may request at least two (2) business days prior to any
sale of Registrable Securities.


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<PAGE>


         1.6      Indemnification.

                  (a) The Company will, and hereby does, indemnify each Holder,
each of its officers, directors and partners, and each person controlling such
Holder within the meaning of the 1933 Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Article I, and
each underwriter, if any, and each person who controls such underwriter within
the meaning of the 1933 Act, against all claims, losses, damages and liabilities
(or actions in respect thereof) (i) arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
prospectus, offering circular or other document (including any related
registration statement, notification or the like) or any amendment or supplement
thereto incident to any such registration, qualification or compliance, or 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 not misleading,
or (ii) arising out of any violation by the Company of the 1933 Act or the
Securities Exchange Act of 1934, as amended, or securities act of any state or
any rule or regulation thereunder applicable to the Company and relating (in the
case of clause (ii)) to action or inaction required of the Company in connection
with any such registration, qualification or compliance, and will reimburse each
such Holder, each of its officers, directors and partners, and each person
controlling such Holder, each such underwriter and each person who controls any
such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending any such claim, loss, damage,
liability or action, whether or not resulting in any liability, provided that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement (or alleged untrue statement) or omission (or alleged omission)
based upon written information furnished to the Company by any such Holder or
underwriter and stated to be specifically for use therein.

                  (b) Each Holder, severally and not jointly, will, if
Registrable Securities held by it are included in the securities as to which
such registration, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers, and each underwriter, if any, of
the Company's securities covered by such a registration statement, each person
who controls the Company or such underwriter within the meaning of the 1933 Act
and the rules and regulations thereunder, and each of their officers, directors
and partners, 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, and will reimburse
the Company and such directors, officers, partners, persons, underwriters or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability or action, whether or not resulting in liability, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such registration
statement, prospectus, offering circular or other document in reliance upon and
in conformity with written information


                                       8
<PAGE>

furnished to the Company by such Holder and stated to be specifically for use
therein; provided, however, that the obligations of each Holder hereunder shall
be limited to an amount equal to the net proceeds received by such Holder from
the sale of Registrable Securities covered by such registration statement.

                  (c) Each party entitled to indemnification under this Section
1.6 (the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, but the
failure of any Indemnified Party to give such notice shall not relieve the
Indemnifying Party of its obligations under this Section 1.6 (except and to the
extent the Indemnifying Party has been materially prejudiced as a consequence
thereof). The Indemnifying Party shall be responsible for the payment of all
fees and expenses in connection with the defense of any such claim or any
litigation resulting therefrom and will be entitled to participate in, and to
the extent that it may elect by written notice delivered to the Indemnified
Party promptly after receiving the aforesaid notice from such Indemnified Party,
at its expense to assume, the defense of any such claim or any litigation
resulting therefrom, with counsel reasonably satisfactory to such Indemnified
Party, provided that the Indemnified Party may participate in such defense at
its expense, notwithstanding the assumption of such defense by the Indemnifying
Party, and provided, further, that if the defendants in any such action shall
include both the Indemnified Party and the Indemnifying Party and the
Indemnified Party shall have reasonably concluded that there may be legal
defenses available to it and/or other Indemnified Parties which are different
from or additional to those available to the Indemnifying Party, the Indemnified
Party or Parties shall have the right to select separate counsel to assert such
legal defenses and to otherwise participate in the defense of such action on
behalf of such Indemnified Party or Parties and the reasonable fees and expenses
of such counsel shall be paid by the Indemnifying Party. No Indemnifying Party,
in the defense of any such claim or litigation, shall, except with the consent
of each Indemnified Party, consent to entry of any judgment or enter into any
settlement which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party of a release from all
liability in respect to such claim or litigation. Each Indemnified Party shall
(i) furnish such information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with defense of such claim and litigation resulting
therefrom and (ii) shall reasonably assist the Indemnifying Party in any such
defense, provided that the Indemnified Party shall be entitled to be reimbursed
by the Indemnifying Party for its out-of-pocket expenses paid in connection with
such assistance.

                  (d) If the indemnification provided for in this Section 1.6 is
held by a court of competent jurisdiction to be unavailable to the Indemnified
Parties in respect of any losses, claims, damages or liabilities referred to
herein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such losses, claims, damages or liabilities (i) as between the
Company and the Holders holding Registrable Securities covered by a registration
statement on the one hand and the underwriters on the other, in such proportion
as is appropriate to reflect


                                       9
<PAGE>

the relative benefits received by the Company and such Holders on the one hand
and the underwriters on the other, from the offering of the Registrable
Securities, or if such allocation is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits but also
the relative fault of the Company and such Holders on the one hand and of such
underwriters on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations and (ii) as between the Company on the one
hand and each such Holder on the other, in such proportion as is appropriate to
reflect the relative fault of the Company and of each such Holder in connection
with such statements or omissions, as well as any other relevant equitable
considerations. The relative benefits received by the Company and such Holders
on the one hand and such underwriters on the other shall be deemed to be in the
same proportion as the total proceeds from the offering (net of underwriting
discounts and commissions but before deducting expenses) received by the Company
and such Holders bear to the total underwriting discounts and commissions
received by such underwriters, in each case as set forth in the table on the
cover page of the prospectus. The relative fault of the Company and such Holders
on the one hand and of such underwriters on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company and such Holders or by such
underwriters. The relative fault of the Company on the one hand and of each such
Holder on the other shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such party, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.

                           The Company and the Holders agree that it would not
be just and equitable if contribution pursuant to this Section 1.6(d) were
determined by PRO RATA allocation (even if the underwriters were treated as one
entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Party as a
result of the losses, claims, damages or liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such Indemnified Party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 1.6(d), no
underwriter shall be required to contribute any amount in excess of the amount
by which the underwriting discount applicable to Registrable Securities
purchased by such underwriter in such offering exceeds the amount of any damages
which such underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission, and no
Holder shall be required to contribute any amount in excess of the amount by
which the net proceeds realized on the sale of the Registrable Securities of
such Holder exceeds the amount of any damages which such Holder has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent


                                       10
<PAGE>


misrepresentation. Each Holder's obligation to contribute pursuant to this
Section 1.6(d) is several in the proportion that the proceeds of the offering
received by such Holder bears to the total proceeds of the offering received by
all such Holders and not joint.

                  (e) No Holder shall be required to participate in a
registration pursuant to which it would be required to execute an underwriting
agreement in connection with a registration effected under Section 1.2 or 1.3
which imposes indemnification or contribution obligations on such Holder more
onerous than those imposed hereunder; provided, however, that the Company shall
not be deemed to breach the provisions of Section 1.2 or 1.3 if a Holder is not
permitted to participate in a registration on account of his refusal to execute
an underwriting agreement on the basis of this subsection (d).

         1.7 Information by Holder. Each Holder of Registrable Securities
included in any registration shall furnish to the Company such information
regarding such Holder and the distribution proposed by such Holder as the
Company may reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification or compliance referred to in
this Article I or otherwise required by applicable state or federal securities
laws.

         1.8 Limitations on Registration Rights. From and after the date of this
Agreement, the Company shall not enter into any agreement with any holder or
prospective holder of any securities of the Company giving such holder or
prospective holder (a) the right to require the Company, upon any registration
of any of its securities, to include, among the securities which the Company is
then registering, securities owned by such holder, unless under the terms of
such agreement, such holder or prospective holder may include such securities in
any such registration only to the extent that the inclusion of its securities
will not limit the number of Registrable Securities sought to be included by the
Holders of Registrable Securities or reduce the offering price thereof; or (b)
the right to require the Company to initiate any registration of any securities
of the Company unless the Holders are entitled to participate in such
registration on a pro rata basis with the Person who initiated such
registration.

         1.9 Reserved.

         1.10 Rule 144 Reporting. With a view to making available the benefits
of certain rules and regulations of the Commission which may permit the sale of
restricted securities (as that term is used in Rule 144 under the 1933 Act) to
the public without registration, the Company agrees to:

                  (a) make and keep public information available as those terms
are understood and defined in Rule 144 under the 1933 Act, at all times from and
after ninety (90) days following the effective date of the first registration
under the 1933 Act filed by the Company for an offering of its securities to the
general public;


                                       11
<PAGE>


                  (b) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
1933 Act and the Exchange Act at any time after it has become subject to such
reporting requirements; and

                  (c) so long as a Holder owns any Registrable Securities,
furnish to the Holder forthwith upon request a written statement by the Company
as to its compliance with the reporting requirements of Rule 144 (at any time
from and after ninety (90) days following the effective date of the first
registration statement filed by the Company for an offering of its securities to
the general public), and of the 1933 Act and Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed as a Holder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Holder to sell any such securities
without registration.

         1.11 Listing Application. If shares of any class of stock of the
Company shall be listed on a national securities exchange, the Company shall, at
its expense, include in its listing application all of the shares of the listed
class then owned by any Holder at the time the initial public offering by the
Company pursuant to a registration statement filed under the 1933 Act..

         1.12 Reserved.


         1.13 "Market Stand Off" Agreement. Each Holder hereby agrees that
during the 180 day period following the effective date of the initial public
offering by the Company pursuant to a registration statement filed under the
1933 Act and during the 180 day period (or such shorter period Peter T. Loftin
agrees to pursuant to a similar agreement with the Company) following the
effective date of any subsequent offering of the Company pursuant to a
registration statement filed under the 1933 Act, it shall not, to the extent
requested by the Company and any managing underwriter, publicly sell, make any
short sale of, or otherwise publicly transfer or dispose of (other than to
donees who agree to be similarly bound) any Common Stock held by it at any time
during such period except Common Stock included in such registration; provided
that Peter T. Loftin enters into a similar agreement with the Company. In order
to enforce the foregoing covenant, the Company may impose stop transfer
instructions with respect to the Registrable Securities of each Holder (and the
shares or securities of every other person subject to the foregoing restriction)
until the end of such period.

         The Company agrees that any agreement entered into after the date of
this Agreement pursuant to which the Company issues or agrees to issue any
privately placed securities shall contain a provision under which holders of
such securities agree not to effect any public sale of distribution of any such
securities during the periods described in Section 1.13 above, in each case
including a sale pursuant to Rule 144 (except as part of any such registration,
if permitted).


                                       12
<PAGE>


         1.14 Damages. The Company recognizes and agrees that the holders of
Registrable Securities shall not have an adequate remedy if the Company fails to
comply with the provisions of this Article I, and that damages will not be
readily ascertainable, and the Company expressly agrees that in the event of
such failure any Holder of Registrable Securities shall be entitled to seek
specific performance of the Company's obligations hereunder and that the Company
will not oppose an application seeking such specific performance based on there
being an adequate remedy at law.

         1.15 Termination of Registration Rights. No Holder shall be permitted
to exercise the rights afforded under Sections 1.2 or 1.3 after the time when
such Holder owns less than one percent (1%) of the Company's outstanding shares
of Common Stock (computed on a fully-diluted basis).

                                   ARTICLE II

                                PREEMPTIVE RIGHTS

         2.1 Right of Purchase. The Company hereby grants to each Holder so long
as it shall own, of record or beneficially, any shares of Preferred Stock or
Common Stock, the right to purchase all or part of its pro rata share of New
Securities (as defined in Section 2.2 below) which the Company, from time to
time, proposes to sell and issue. A Holder's pro rata share, for purposes of
this preemptive right, is the fraction, the numerator of which is the number of
issued or issuable shares of Common Stock which such Holder owns and the
denominator of which is the total number of shares of Common Stock then
outstanding (both the numerator and the denominator being calculated on a
fully-diluted basis). Each Holder shall have a right of over-allotment pursuant
to this Article II such that to the extent a Holder does not exercise its
preemptive right in full hereunder, such additional shares of New Securities
which such Holder did not purchase may be purchased by the other Holders in
proportion to the total number of shares of New Securities which each such other
Holder elected to purchase compared to the total number of shares of New
Securities which all such other Holders elected to purchase.

         2.2 Definition of New Securities. "New Securities" shall mean any
capital stock of the Company whether now authorized or not, and rights, options
or warrants to purchase capital stock, and securities of any type whatsoever
that are, or may become convertible into or exchangeable for capital stock,
issued on or after the date hereof; provided that the term "New Securities" does
not include (i) Conversion Shares issuable upon conversion of the Preferred
Stock, (ii) Warrant Stock issuable upon exercise of the Warrant, (iii) Common
Stock issued as a stock dividend to holders of Common Stock or upon any stock
split, subdivision or combination of shares of Common Stock, (iv) Preferred
Stock issued as a dividend to holders of Preferred Stock or upon any stock
split, subdivision or combination of Preferred Stock, (v) shares of Common Stock
issuable upon exercise of options granted under the Company's 1997 Stock Option
Plan, or any other stock option plan approved unanimously by the Board of
Directors of the Company, (vi) securities issued in connection with the
acquisition of any other


                                       13
<PAGE>

corporation or business concern, whether by acquisition of assets or stock,
(vii) securities issued in connection with strategic or collaborative
relationships and approved unanimously by the Board of Directors of the Company,
and (viii) blank check preferred stock issued to the Company's shareholders
(including a pro rata issuance to the holders of Series A Preferred Stock), in
connection with a rights plan, in accordance with the Company's Articles of
Incorporation, and (ix) capital stock or securities exercisable for or
convertible into such capital stock issued in connection with any borrowings or
equipment lease financings from financial or other institutions regularly
engaged in the business of lending money or leasing equipment if such issuance
is approved unanimously by the Board of Directors of the Company.

         2.3 Notice from the Company. In the event the Company proposes to
undertake an issuance of New Securities, it shall give each Holder written
notice of its intention, describing the type of New Securities and the price and
the terms upon which the Company proposes to issue the same. Each Holder shall
have twenty (20) business days from the date of receipt of any such notice to
agree to purchase up to the Holder's pro rata share of such New Securities for
the price and upon the terms specified in the notice by giving written notice to
the Company and stating therein the quantity of New Securities to be purchased.
If any Holder decides not to purchase its full pro rata share of such New
Securities, the Company shall give to the other Holders written notice of their
ability to purchase such additional shares and such Holders shall have ten (10)
business days from the date of receipt of such notice to agree to purchase any
over-allotment amount pursuant to Section 2.1. The closing of the purchase of
the New Securities shall be at the Company's principal place of business within
fifteen (15) days following the expiration of the 20 (or 30) day period, or at
such other time or place as the Company and the Holders may determine; provided
that if any governmental, regulatory or other similar approval or consent is
required prior to the closing of the purchase of the New Securities, such
closing shall occur fifteen (15) days following the later to occur of (i) the
expiration of such 20 (or 30) day period, or (ii) receipt by the Company of such
approval or consent, unless the Company and the Holders otherwise agree.

         2.4 Sale by the Company. In the event any Holder fails to exercise in
full its preemptive right (after giving effect to the over-allotment provision
of Section 2.1 hereof), the Company shall have 120 days thereafter to enter into
written agreements that include the price and structure terms with respect to
the sale of the New Securities with respect to which the Holder's option was not
exercised on terms no more favorable to the purchaser than those set forth in
the notice in the notice provided pursuant to Section 2.3. To the extent the
Company does not (i) enter into written agreements that include the price and
structure terms with respect to the sale of all the New Securities offered
within said 120 day period, or (ii) consummate the transactions covered by
written agreements with respect to the sale of New Securities entered into
within said 120 day period on terms no more favorable (and with the same
purchaser or purchasers) than those set forth in such written agreements, the
Company shall not thereafter issue or sell such New Securities without first
again offering such securities to the Holders in the manner provided above.


                                       14
<PAGE>

         2.5 Termination of Rights. The rights granted to the Holders under this
Article II shall expire immediately prior to, and shall not apply in connection
with, the consummation of the Company's first Qualified Public Offering.


                                   ARTICLE III

                               INFORMATION RIGHTS

         Without limiting any other covenants and provisions hereof, the Company
covenants and agrees that it will observe the following covenants until a
Holder's rights terminate pursuant to Section 1.15, unless the failure to comply
with any such covenant is waived by the Holders pursuant to the terms hereof.

         3.1 Accounts and Reports. The Company will, and will cause each of its
Subsidiaries to, maintain a standard system of accounts in accordance with
generally accepted accounting principles consistently applied ("GAAP") and the
Company will, and will cause each of its Subsidiaries to, keep full and complete
financial records. The Company will furnish to each Holder the information set
forth in this Section 3.1.

                  (a) Promptly after being filed with the Commission (or, if no
filing with the Commission is required, within forty-five (45) days after the
end of each fiscal quarter (except the last fiscal quarter of any fiscal year)),
copies of the unaudited consolidated balance sheet of the Company and its
Subsidiaries as of the end of such fiscal quarter and the related consolidated
statements of operations, shareholders' equity and cash flows for such fiscal
quarter and for that portion of the fiscal year ending as of the end of such
fiscal quarter, setting forth in comparative form in each case the consolidated
and consolidating budgeted figures for the corresponding periods and the
consolidated and consolidating actual figures for the corresponding periods in
the preceding fiscal year. To the extent that the Company's Form 10-Q filed with
the Commission satisfies the foregoing requirements, the Company may deliver to
each Holder a copy of the Company's Form 10-Q in lieu of providing such
information separately to each Holder.

                  (b) Promptly after being filed with the Commission (or, if no
filing with the Commission is required, within ninety (90) days after the close
of each fiscal year), a copy of the annual audited consolidated and
consolidating financial statements of the Company and its Subsidiaries
consisting of the consolidated and consolidating balance sheets and consolidated
and consolidating statements of operations, shareholders' equity and
consolidated and consolidating statements of cash flows, setting forth in
comparative form in each case the consolidated and consolidating figures for the
previous fiscal year, which financial statements shall be prepared in accordance
with GAAP. To the extent that the Company's Form 10-K filed with the Commission
satisfies the foregoing requirements, the Company may deliver to each Holder a
copy of the Company's filed Form 10-K in lieu of providing such information
separately to each Holder.


                                       15
<PAGE>


                  (c) Within twenty (20) days after the end of each monthly
accounting period in each fiscal year: (i) unaudited consolidating and
consolidated statements of operations, shareholders' equity and cash flows of
the Company and its Subsidiaries for such monthly period and for the period from
the beginning of the fiscal year to the end of such month, and unaudited
consolidating and consolidated balance sheets of the Corporation and its
Subsidiaries as of the end of such monthly period, setting forth in each case
comparisons to the corresponding period in the preceding fiscal year (all such
statements shall be prepared in accordance with GAAP) and (ii) a summary of such
monthly financial statements, in the form agreed upon by the Company and the
Holders, prepared by the Company's chief financial officer.

                  (d) Within one (1) day after filing thereof, copies of all
registration statements, proxy statements and all regular, special or periodic
reports or other documents which the Company files, or (to the Company's
knowledge) any of its officers or directors file with respect to the Company,
with the Commission, the National Association of Securities Dealers, Inc. or
with any securities exchange.

                  (e) At least twenty-four (24) hours or as soon as is
reasonably practicable prior to transmission or release thereof, copies of all
financial statements, proxy statements, reports and any other general written
communications which the Company sends to its stockholders, and copies of all
material press releases and other material public statements made by the Company
(or by any third party, of which the Company has knowledge).

                  (f) At least twenty-four (24) hours, or as soon as reasonably
practicable, prior thereto, notice of any telephonic or other meetings with
equity or high yield analysts or rating agencies that are open to public
participation.

                  (g) A copy of the operating and capital expenditure plan and
budget, ("Business Plan") for each fiscal year, when such Business Plan has been
approved by the Board of Directors. Such Business Plan shall be submitted to the
Board of Directors for approval, and discussed at a meeting of the Board held,
no later than March 31 of the fiscal year covered by the Business Plan.

         3.2 Inspection. At any reasonable time during normal business hours and
from time to time, but not more frequently than once per calendar quarter for
all Holders and transferees of Holders as a group, upon five (5) days written
notice, the Company (and each of its Subsidiaries) will permit any one or more
of the Holders, or any transferee of any such Holders, who then own, of record
or beneficially, or have the right to acquire, not less than 25% of the
Conversion Shares or Series A Stock or Warrant Stock, or any of the agents or
representatives of the foregoing Persons, to examine and make copies of and
extracts from the records and books of account of and visit the properties of
the Company (and any of its Subsidiaries) and to discuss the Company's affairs,
finances and accounts with any of its officers or directors; provided that any
Person or Persons exercising rights under this Section 3.2 shall (a) use all
reasonable efforts to ensure that any such examination or visit results in a
minimum of disruption to the operations of the Company and shall not occur more
than once per calendar quarter for all Holders and their transferees as a group
and (b) shall agree in


                                       16
<PAGE>

writing to keep any information of the Company disclosed to him in the course of
such inspection confidential pursuant to Section 4.7 hereof. The rights granted
under this Section 3.2 shall be in addition to any rights which any Holder may
have under Section 1.5(g) or under applicable law in its capacity as a
stockholder of the Company. Any Holder requesting inspection rights shall
deliver written notice of such request to the other Holders simultaneously with
the delivery of such notice to the Company.

         3.3 Meetings of the Board of Directors. The Directors shall schedule
regular meetings not less frequently than once every calendar quarter. The
Company shall reimburse the Holders for all reasonable direct out-of-pocket
expenses incurred by any director designees of the Holders in attending Board
meetings and monthly strategy planning meetings.

         3.4 Restrictions on Information Rights. The Company shall not be
obligated pursuant to this Article III to provide trade secrets or confidential
information to any person whom the Company reasonably believes is a competitor
of the Company. Notwithstanding anything to the contrary contained herein, the
rights granted pursuant to this Article III may not be assigned or otherwise
conveyed by any Investor or by any subsequent transferee of any such rights
except in connection with a transfer of securities of the Company in which the
transferee acquires at least 25,000 shares of Common Stock (calculated on a
Fully-Diluted Basis) subject to adjustment for combinations, consolidations,
recapitalizations, stock splits, stock dividends and the like, or such lesser
number of shares representing all the shares of the shares owned by the
transferor.

         3.5 Confidentiality. The Company hereby agrees that the identity of the
Investor as a stockholder of the Company, and the terms and conditions of the
Investor's investment in the Company, are confidential and shall not be
disclosed by the Company or any of its affiliates to any person (other than the
Company's advisors, employees, investors, analysts and stockholders in the
ordinary course), and that no use of, or reference to, the name of the Investor
or any subsidiaries or affiliates of the Investor shall be made by the Company
or its affiliates, in each case without the prior written consent of the
Investor, except as may be required by applicable law, rule or regulation.


                                       17
<PAGE>


                                   ARTICLE IV

                                  MISCELLANEOUS


         4.1 Recapitalization, etc.. 4.1 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.

         4.2 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, however, that the Company may not transfer or assign
its obligations hereunder.

         4.3 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 Redemption 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.

         4.4 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.

         4.5 Shares Owned by Affiliates. For the purposes of applying all
provisions of this Agreement which condition the receipt of information or
access to information or exercise of any rights upon ownership of a specified
number or percentage of shares, the shares owned of record by any affiliate of a
Holder shall be deemed to be owned by such Holder. For the


                                       18
<PAGE>

purpose of this Agreement, the term "affiliate" shall mean any Person
controlling, controlled by or under common control with, a Holder and any
general or limited partner of a Holder.

         4.6 Amendments and Waivers. Amendments or additions to this Agreement
may only be made and compliance with any term, covenant, agreement, condition or
provision set forth herein may be omitted or waived only (in a particular
instance and either retroactively or prospectively) upon the written consent of
the Company and the holders of a majority of the then issued and issuable Series
A Stock, Conversion Shares and Warrant Stock (voting together as a class).
Prompt notice of any such amendment or waiver shall be given to any Person who
did not consent thereto. 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.

         4.7 Confidentiality. Each Holder will keep confidential information
provided to such Holder pursuant to Section 3.1, except that the Holders may
disclose such terms and information to their advisors, employees, investors or
potential investors, stockholders, successors and assigns in the ordinary
course. Notwithstanding the foregoing, information will not be treated as
confidential if it: (A) is or becomes generally available to the public other
than as a result of a disclosure by the recipient party or its agents,
representatives, affiliates, employees, officers or directors; (B) was available
to third parties on a nonconfidential basis prior to its disclosure by the
recipient party or its agents, representatives, affiliates, employees, officers
or directors; or (C) becomes available to the recipient party on a
nonconfidential basis from a Person (other than the recipient party, its agents,
affiliates, employees, officers or directors) who is not known to the Holders to
be otherwise bound by a confidentiality agreement with respect to the
information.

         Nothing herein shall deprive a recipient party from using or disclosing
information that is otherwise confidential to the extent required: (i) to comply
with applicable requirements of any governmental entity; (ii) to prepare, file
and disseminate tax returns in accordance with applicable law and financial
statements in accordance with generally accepted accounting practices
consistently applied; (iii) to exercise or enforce any of such recipient party's
rights hereunder or under any other agreement among one or more of the parties
hereto or to conduct any defense of any action brought against such recipient
party; and (iv) to respond to any court order or legal or administrative
process.


         4.8 Notices. All notices, requests, consents, reports and demands shall
be in writing and shall be hand delivered, sent by facsimile or other electronic
medium, or sent by express delivery or mailed, postage prepaid, to the Company
or to the Holders at the address set forth below or to such other address as may
be furnished in writing to the other parties hereto:


                                       19
<PAGE>


The Company:               BTI Telecom Corp
                           4300 Six Forks Road
                           Raleigh, NC 27609
                           Attention: Brian Branson

with a copy to:            Wyrick Robbins Yates & Ponton LLP
                           4101 Lake Boone Trail, Suite 300
                           Post Office Drawer 17803
                           Raleigh, NC 27619
                           Attention: Larry E. Robbins

The Investor:              Welsh, Carson, Anderson & Stowe
                           320 Park Avenue, Suite 2500
                           New York, NY  10022
                           Attention:  Sanjay Swani, John Almeida

with a copy to:            Davis Polk & Wardwell
                           450 Lexington Avenue
                           New York, NY  10017
                           Attention:  Carole Schiffman

         4.9 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 telecopier, with the
intention that they shall have the same effect as an original counterpart
hereof.

         4.10 Effect of Headings. The article and section headings herein are
for convenience only and shall not affect the construction hereof.

         4.11 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 conflict of laws provisions
thereof.

         4.12 Specific Enforcement. The Company expressly agrees that the
Holders 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 the Company, the Holders 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]


                                       20
<PAGE>


         IN WITNESS WHEREOF, this Investor Rights Agreement has been duly
executed and delivered by the parties 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



                                       21