Document:

EXODUS COMMUNICATIONS, INC. PROPRIETARY AND CONFIDENTIAL (rev 6/98)
                           EXODUS COMMUNICATIONS, INC.
                          INTERNET DATA CENTER SERVICES
                                   ORDER FORM

Customer Name:               Sales Online Direct Inc.
Form Date:                   06-29-99
Form No.:                    0629DD
Installation Site(s):        Sterling IDC
Type of Service(s):          New

<TABLE>
<CAPTION>

----------------------- ---------------------------------------------- ----- --------- ------------------ ------------
Internet Data Center    Brief Description                              Qty   Unit      Extended           Extended
Services                (Detailed description attached)                      Price     Non-Recurring      Monthly
                                                                                       Fees               Fees
----------------------- ---------------------------------------------- ----- --------- ------------------ ------------
----------------------- ---------------------------------------------- ----- --------- ------------------ ------------
<S>                     <C>                                            <C>   <C>                          <C>
Exo-Rack-100            Full Rack Common Colocation                    1     $1,000                       $1,000
                        Full rack includes:
                        o        4 Shelves, 1 Dedicated 20 Amp
                              Circuit
                        o        24x7 Reboot, Ping and URL
                              Monitoring (1 Server)
                        o        Bandwidth Reports (Daily)
                        o        IP Allocation, DNS Services
                        o        Assigned Project Manager
                        o        Wiring Channels
                        o        Wiring Porch Panel Power
                              Distribution Bars

----------------------- ---------------------------------------------- ----- --------- ------------------ ------------
----------------------- ---------------------------------------------- ----- --------- ------------------ ------------
Exo-Rack-100SU          Setup Full Rack Common Colo                    1     $1,100    $1,100
----------------------- ---------------------------------------------- ----- --------- ------------------ ------------
----------------------- ---------------------------------------------- ----- --------- ------------------ ------------
Exo-Ether-U1            1 Mbps Base burstable to 10mbps                1     $1100                        $700
----------------------- ---------------------------------------------- ----- --------- ------------------ ------------
----------------------- ---------------------------------------------- ----- --------- ------------------ ------------
Exo-Ether-SU            Setup Ethernet network                         1     $1100     $1,100
----------------------- ---------------------------------------------- ----- --------- ------------------ ------------
----------------------- ---------------------------------------------- ----- --------- ------------------ ------------
                                                                             Sub-Total $2,200             $1,700
----------------------- ---------------------------------------------- ----- --------- ------------------ ------------
----------------------- ---------------------------------------------- ----- --------- ------------------ ------------
                        Discount Applied                                               ($2,200)
----------------------- ---------------------------------------------- ----- --------- ------------------ ------------
----------------------- ---------------------------------------------- ----- --------- ------------------ ------------
                                                                                       $0                 $1,700
----------------------- ---------------------------------------------- ----- --------- ------------------ ------------

Variable Usage above 1 Mbps Base:

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

------------------------------- ----------------------------------------------------- -------------- -----------------
------------------------------- ----------------------------------------------------- -------------- -----------------
EXO-Ether-U1                    Variable Usage Cost per Megabit Above 1               1                          $900
                                Mbps Base Amount ($/megabit)
------------------------------- ----------------------------------------------------- -------------- -----------------
</TABLE>

Note:  The first "Full" month of service is Free.

                  COMPLETE THE FOLLOWING PAGE BEFORE SUBMITTING

                                                   CUSTOMER'S INITIALS _________

<PAGE>

                           EXODUS COMMUNICATIONS, INC.
                          INTERNET DATA CENTER SERVICES
                                   ORDER FORM

Customer Name           :  Sales Online Direct Inc.
      Form Date         :  06-29-99
      Form No.          :  0629DD

IMPORTANT INFORMATION:
---------------------
(1)      By submitting  this Internet Data Center  Services Order Form (Form) to
         Exodus Communications,  Inc. (Exodus),  Customer hereby places an order
         for the internet Data Center Services  described herein pursuant to the
         terms and  conditions  of the Internet Data Center  Services  Agreement
         between Customer and Exodus (IDC Agreement).
(2)      Billing, with the exception of Setup Fees, will commence on the earlier
         on the Installation  Date indicated below or the date Customer actually
         installs its equipment or Exodus begins providing  Internet Data Center
         Services.  All Setup  Fees will be billed  upon  receipt  of a Customer
         signed IDC Services Order Form.
(3)      Exodus will provide the Internet Data Center  Services  pursuant to the
         terms and  conditions of the IDC  Agreement,  which  incorporates  this
         Form.  The terms of this Form  supersede,  and by  accepting  this Form
         Exodus hereby rejects,  any conflicting or additional terms provided by
         Customer in connection  with Exodus'  provision of Internet Data Center
         Services.  If there is a conflict  between this Form and any other Form
         provided by Customer and  accepted by Exodus,  the Form with the latest
         date will control.
(4)      Exodus will not be bound by or required to provide Internet Data Center
         Services  pursuant  to this  Form or the IDC  Agreement  until  each is
         signed by an authorized representative of Exodus.

Customer to complete:

CUSTOMER HAS READ, UNDERSTANDS AND HEREBY SUBMITS THIS ORDER.

Installation Date:  August 11, 1999
                    ----------------------

Submitted By:       /s/ Richard Rotman       Submission Date: 7/14/99
                    ----------------------                    -----------------
                                                              (Effective Date of
                                                                IDC Agreement)
Print Name:         Richard Rotman
                    ----------------------

Title:              VP
                    ----------------------

Exodus Communications, Inc. Acceptance

/s/ Sallie J. Mclean                    Date: 8/5/99---------------------------
--------------------------------              ---------------------------------
(Authorized Signature)

                                            CUSTOMER'S INITIALS ________________

EXODUS COMMUNICATIONS, INC. PROPRIETARY AND CONFIDENTIAL (rev. 6/98)

<PAGE>

                           EXODUS COMMUNICATIONS, INC.

                     INTERNET DATA CENTER SERVICES AGREEMENT

THIS  INTERNET  DATA  CENTER  SERVICES  AGREEMENT  (this  "Agreement")  is  made
effective as of the  Submission  Date (July 14,  1999)  indicated in the initial
Internet  Data Center  Services  Order Form  accepted by Exodus,  by and between
Exodus  Communications,  Inc.  ("Exodus")  and  the  customer  identified  below
("Customer").

Parties:

CUSTOMER NAME:             SALES ONLINE DIRECT, INC.
ADDRESS:                   3743 BIRCH LANE
                           OWINGS MILLS, MD  21127

PHONE:                     410-581-1110
FAX:                       410-363-8698

EXODUS COMMUNICATIONS, INC.
2650 San Tomas Expressway
Santa Clara, CA  95055-1838
Phone:  (408) 346-2200
Fax:    (408) 346-2206

1.       INTERNET DATA CENTER SERVICES.

Subject to the terms and conditions of this  Agreement,  during the term of this
Agreement,  Exodus  will  provide to  Customer  the  services  described  in the
Internet  Data Center  Services  Order Form(s) (`IDC  Services  Order  Form(s)")
accepted by Exodus,  or  substantially  similar  services if such  substantially
similar  services would provide  Customer with  substantially  similar  benefits
("Internet  Data Center  Services").  All IDC Services  Order Forms  accepted by
Exodus are incorporated herein by this reference, each as of the Submission Date
indicated in such form.

2.       FEES AND BILLING.

          2.1. Fees.  Customer  will  pay  all  fees  due  according  to the IDC
               Services Order Form(s).

          2.2. Billing Commencement.  Billing for Internet Data Center Services,
other than Setup Fees,  indicated in the initial IDC  Services  Order Form shall
commence on the earlier to occur of (i) the "Installation Date" indicated in the
initial IDC Services  Order Form,  regardless of whether  Customer has commenced
use of the Internet Data Center  Services,  unless Customer is unable to install
the  Customer  Equipment  and/or use the  Internet  Data Center  Services by the
Installation Date due to the fault of Exodus,  then billing will not begin until
the date Exodus has remedied such fault (ii) the date the  "Customer  Equipment"
(Customer's computer hardware and other tangible equipment, as identified in the
Customer  Equipment  List which is  incorporated  herein by this  reference)  is

<PAGE>

placed by Customer in the "Customer  Area" (the  portion(s) of the Internet Data
Centers,  as defined in Section 3.1 below, made available to Customer  hereunder
for the placement of Customer Equipment) and is operational. All Setup Fees will
be billed upon  receipt of a Customer  signed IDC  Services  Order Form.  In the
event that Customer orders additional Internet Data Center Services, billing for
such services shall  commence on the date Exodus first provides such  additional
Internet Data Center Services to Customer or as otherwise  agreed to by Customer
and Exodus.

          2.3.  Billing and Payment  Terms.  Customer will be billed  monthly in
advance of the provision of Internet Data Center  Services,  and payment of such
fees will be due within thirty (30) days of the date of each Exodus invoice. All
payments  will be made in U.S.  dollars.  Late  payments  hereunder  will accrue
interest  at a rate of one and  one-half  percent  (1 1/2%)  per  month,  or the
highest rate allowed by applicable  law,  whichever is lower. If in its judgment
Exodus  determines  that  Customer  is  not  creditworthy  or is  otherwise  not
financially  secure,  Exodus may,  upon written  notice to Customer,  modify the
payment  terms to require full  payment  before the  provision of Internet  Data
Center Services or other  assurances to secure  Customer's  payment  obligations
hereunder.

          2.4. Taxes.  All payments  required by this Agreement are exclusive of
all national, state, municipal or other governmental excise, sales, value-added,
use, personal property,  and occupational taxes, excises,  withholding taxes and
obligations and other levies now in force or enacted in the future, all of which
Customer will be responsible for and will pay in full, except for taxes based on
Exodus' net income.

3.       CUSTOMER'S OBLIGATIONS.

          3.1.  Compliance with Law and Rules and  Regulations.  Customer agrees
that Customer will comply at all times with all applicable  laws and regulations
and Exodus' general rules and regulations  relating to its provision of Internet
Data  Center  Services,  as  updated  by Exodus  from time to time  ("Rules  and
Regulations"). Customer acknowledges that Exodus exercises no control whatsoever
over the content of the  information  passing  through its sites  containing the
Customer Area and equipment and  facilities  used by Exodus to provide  Internet
Data  Center  Services  ("Internet  Data  Centers"),  and  that  it is the  sole
responsibility  of Customer  to ensure that the  information  it  transmits  and
receives complies with all applicable laws and regulations.

          3.2.  Consumer's  Costs.  Customer  agrees  that  it  will  be  solely
responsible,  and at Exodus's requests will reimburse Exodus,  for all costs and
expenses (other than those included as part of the Internet Data Center Services
and except an otherwise  expressly provided herein) it incurs in connection with
this agreement.

          3.3. Access and Security.  Customer will be fully  responsible for any
charges,  costs expenses  (other than those included in the Internet Data Center
Services), and third party claims that may result from its use of, or access in,
the Internet Data Centers  and/or the Customer Area including but not limited to
any unauthorized use of any access devices provided by Exodus hereunder.  Except
with the advanced written consent of Exodus,  Customer's  access to the Internet
Data Centers will be limited solely to the individuals identified and authorized
by Customer to have access to the Internet  Data Centers and the Customer  Areas
in accordance  with this Agreement,  as identified in the Customer  Registration
Form,  as  amended  from  time to time,  which is  hereby  incorporated  by this
reference )"Representative").

          3.4. No Competitive Services:  Customer may not at any time permit any
Internet  Data Center  Services to be utilized for the provision of any services
that compete with any Exodus services, without Exodus prior written consent.
<PAGE>

          3.5. Insurance.

          (a) Minimum Levels. Customer will keep in full force and effect during
the terms of this Agreement : (i) comprehensive  general liability  insurance in
an amount not less than $5 million per occurrence for bodily injury and property
damage;  (ii)  employer's  liability  insurance  in an  amount  not less than $1
million per occurrence;  and (iii) workers' compensation  insurance in an amount
not less than required by applicable law. Customer also agrees that it will, and
will be solely  responsible for ensuring that it agents  (including  contractors
and  subcontractors)  maintain,  other  insurance  at levels so less than  those
required  by  applicable  law  and  customary  in  Customer's  and  its  agents'
industries.

          (b)  Certificates of Insurance.  Prior to installation of any Customer
Equipment in the Customer Area,  Customer will furnish Exodus with  certificates
of insurance which evidence the minimum levels of insurance set forth above.

          (c) Notification of Changes in Insurance  Coverage  Amounts.  Customer
will notify Exodus of any changes in the insurance  coverage amounts  stipulated
above.

4.       CONFIDENTIAL INFORMATION.

          4.1.  Confidential  Information.  Each party acknowledges that it will
have access to certain  confidential  information of the other party  concerning
the  other  party's  business,  plans,  customers,   technology,  and  products,
including   the  terms  and   conditions   of  this   Agreement   ("Confidential
Information").  Confidential  Information  will include,  but not be limited to,
each party's proprietary  software and customer  information.  Each party agrees
that it will not use in any way, for its own account or the account of any third
party,  except as  expressly  permitted by this  Agreement,  nor disclose to any
third party (except as required by law or to that party's attorneys, accountants
and  other  advisors  as  reasonably  necessary),   any  of  the  other  party's
confidential  Information  and will take  reasonable  precautions to protect the
confidentially of such information.

          4.2.   Exceptions.   Information  will  not  be  deemed   Confidential
Information  hereunder if such information:  (i) is known to the receiving party
prior to receipt from the disclosing  party directly or indirectly from a source
other than one having an obligation of  confidentiality to the disclosing party;
(ii) becomes known  (independently of disclosure by the disclosing party) to the
receiving  party  directly or  indirectly  from a source other than on having an
obligation of  confidentiality  to the disclosing party;  (III) becomes publicly
known or otherwise ceases to be secret or confidential,  except through a breach
of this Agreement by the receiving  party; or (iv) is independently developed by
the receiving party.

5.       REPRESENTATIONS AND WARRANTIES:

          5.1. Warranties by Customer.

          (a) Customer Equipment.  Customer represents and warrants that owns or
has the legal right and  authority,  and will  continues  to own or maintain the
legal right and authority  during the terms of this Agreement,  to place and use
the Customer  Equipment as  contemplated  by this  Agreement.  Customer  further
represents and warrants that its placement, arrangement, and use of the Customer
Equipment in the  Internet  Data Centers  complies  with the Customer  Equipment
Manufacturer's environmental and other specifications.

<PAGE>

          (b)  Customer's  Business.   Customer  represents  and  warrants  that
Customer's  services,  products,   materials,  data,  information  and  Customer
Equipment  used  by  Customer  in  connection  with  this  Agreement  as well as
Customer's  and its  permitted  customers'  and users' use of the Internet  Data
Center  Services  (collectively,  "Customer's  Business)  does  not  as  of  the
Installation  Date, and will not during the term of this  Agreement  operates in
any manner that would violate any applicable law or regulation.

          (c) Rules and Regulations. Customer has read the Rules and Regulations
and represents and warrants that Customer and Customer's  Business are currently
in full  compliance  with the Rule and  Regulations,  and will  remain to at all
times during the term of this Agreement.

          (d) Breach of  Warranties.  In the event of any breach,  or reasonably
anticipated breach, of any of the foregoing warranties, in addition to any other
remedies available at law or in equity,  Exodus will have the right immediately,
in Exodus' sole discretion, to suspend any related Internet Data Center Services
if deemed  reasonably  necessary by Exodus to prevent any harm to Exodus and its
business.

5.2.     Warranties and Disclaimer by Exodus.

          5.2(a) Service Level Warranty:  In the event Customer  experiences any
of the following and Exodus  determines in its reasonably  judgment that such in
ability was caused by Exodus'  failure to provide  Internet Data Center Services
for reasons within Exodus'  reasonable control and not as a result of any action
or inactions of Customer or any third parties (including  Customer Equipment and
third party equipment), Exodus, will, upon Customer's request in accordance with
paragraph (iii) below, credit Customer's account as described below:

                  (i) Inability to Access the Internet  (Downtime).  If Customer
is unable to transmit  and  receives  information  from  Exodus'  Internet  Data
Centers  (i.e.,  Exodus' LAN and WAN) to other portions of the Internet  because
Exodus failed to provide the Internet Data Center Services for more than fifteen
(15)  consecutive  minutes,  Exodus will credit Customer's  account the pro-rata
connectivity  charges (i.e.,  all bandwidth  related charges) for one (1) day of
service,   up to an aggregate  maximum credit of connectivity  charges for seven
(7) days of service in any one calendar (1) month. Exodus' scheduled maintenance
of the Internet Data Centers and Internet Data Center Services,  as described in
the Rules  and  Regulations,  shall  not be deemed to be a failure  of Exodus to
provide Internet Data Center Services. For purposes of the foregoing, "unable to
transmit and receive" shall mean sustained packet loss in excess of 50% based on
Exodus' measurements.

                  (ii) Packet  Loss and  Latency.  Exodus  does not  proactively
monitor the packet loss or transmission  latency of specific  customers.  Exodus
does,  however,  proactively  monitor the aggregate packet loss and transmission
latency within its LAN and WAN. In the event that Exodus discovers  (either from
its  own  efforts  or  after  being  notified  by  Customer)  that  Customer  is
experiencing  packet loss in excess or after being  notified by  Customer)  that
Customer is  experiencing  packet loss in excess of one  percent  (1%)  ("Excess
Packet Loss") or transmission  latency in excess of 120 milliseconds  round trip
time (based on Exodus;  measurements)  between  any two  Interest  Data  Centers
within Exodus' U.S. network  (collectively,  "Excess  Latency",  and with Excess
Packet Loss "Excess  Packet  Loss/Latency"),  and Customer  notifies  Exodus (or
confirm  that  Exodus  has  notified  Customer),  Exodus  will take all  actions
necessary to determine the source of the Excess Packet Loss/Latency.

<PAGE>

                      (A) Time to Discover Source of Excess Packet Loss/Latency,
Notification  of Customer.  Within two (2) hours of discovering the existence of
Excess  Packet  Loss/Latency,  Exodus will  determine  whether the source of the
Excess Packet  Loss/Latency is limited to the Customer  Equipment and the Exodus
equipment  connecting the Customer Equipment to Exodus' LAN ("Customer  Specific
Packet  Loss/Latency").  If the  Excess  Packet  Loss/Latency  is not a Customer
Specific  Packet  Loss/Latency,  Exodus will  determine not a Customer  Specific
Packet  Loss/Latency  within two (2) hours  after  determining  that it is not a
Customer Specific Packet Loss/Latency. In any event, Exodus will notify Customer
of the source of the Excess Packet  Loss/Latency within sixty (60) minutes after
identifying the source.

                      (B) Remedy of Excess Loss/Latency.  If  the  Excess Packet
Loss/Latency remedy is within the sole control of Exodus, Exodus will remedy the
Excess Packet Loss/Latency within two (2) hours of determining the source of the
Excess Packet  Loss/Latency.  If the Excess Packet  Loss/Latency  is caused from
outside of the Exodus  LAN or WAN,  Exodus  will  notify  Customer  and will use
commercially  reasonable effects to notify party(ies) responsible for the source
and cooperate with it (them) to resolve the problem as soon as possible.

                      (C) Failure  to  Determine  Source and/or Resolve Problem.
In the event  that  Exodus is unable to  determine  the source of and remedy the
Excess Packet Loss/Latency within the time periods described above (where Exodus
was solely in control of the source),  Exodus will credit Customer's account the
pro-rata connectively charges for one (1) day of service for every two (2) hours
after the time  periods  described  above that it takes  Exodus to  resolve  the
problem, up to an aggregate maximum credit of connectively charges for seven (7)
days of serious in any one (1) month.

                   (iii)  Customer  Must Request  Credit:  To receive any of the
credits  described in this section  5.2(a).  Customer  must notify Exodus within
three (3) business  days from the time  Customer  becomes  eligible to receive a
credit.  Failure to comply with  requirement  will forfeit  Customer's  right to
receive a credit.

                   (iv) Remedies Shall Not be Cumulative; Maximum Credit; In the
event that Customer is entitled to multiple credits  hereunder  arising from the
same event,  such credits shall not be cumulative and Customer shall be entitled
to receive only the maximum single credit  available for such event. In no event
will  Exodus  be  required  to credit  Customer  in any one (1)  calendar  month
connectivity  charges in excess of seven (7) days of service . A credit shall be
applied only to the month in which there was the incident  that  resulted in the
credit.  Customer  shall not be  eligible  to receive  any credit for periods in
which customer received any Internet Data Center Services free of charge.

                   (v) Termination Option for Chronic Problems: If in any single
calendar month,  Customer would be able to receive credits totaling fifteen (15)
or more days (but for the  limitation in paragraph  (iv) above)  resulting  from

<PAGE>

three (3) or more events  during  such  calendar  month or, if any single  event
titling  customer to credits  under  paragraph  5.2(a)(i)  exits for a period of
eight (8)  consecutive  hours,  then,  Customer may terminate this Agreement for
causes and without  penalty by notifying  Exodus within five (5) days  following
the end of such calendar month.  Such  termination will be effective thirty (30)
days after receipt of such notice by Exodus.

THIS WARRANTY DOES NOT APPLY TO ANY INTERNET DATA CENTER SERVICES THAT EXPRESSLY
EXCLUDE  THIS  WARRANTY  (AS  DESCRIBED  IN THE  SPECIFICATION  SHEETS  FOR SUCH
PRODUCTS).  THIS SECTION 5.2(a) STATES  CUSTOMER'S SOLE AND EXCLUSIVE REMEDY FOR
ANY FAILURE BY EXODUS TO PROVIDE INTERNET DATE CENTER SERVICES.

          (b) No Other  Warranty.  Except FOR THE  EXPRESS  WARRANTY  SET OUT IN
SUBSECTION (a) ABOVE,  THE INTERNET DATA CENTER  SERVICES ARE PROVIDED ON AN "AS
IS" BASIS, AND CUSTOMER'S USE OF THE INTERNET DATA CENTER SERVICES IS AT ITS OWN
RISK.  EXODUS  DOES NOT MAKE,  AND HEREBY  DECLARES,  ANY AND ALL OTHER  EXPRESS
AND/OR  IMPLIED  WARRANTIES,   INCLUDING,  BUT  NOT  LIMITED  TO  WARRANTIES  OF
MERCHANTABILITY,  FITNESS FOR A PARTICULAR  PURPOSE,  NONINFRINGEMENT AND TITLE,
AND ANY WARRANTIES  ARISING FROM A COURSE OF DEALING,  USAGE, OR TRADE PRACTICE.
EXODUS  DOES  NOT  WARRANT  THAT  THE  INTERNET   DATA  CENTER   SERVICES   WILL
UNINTERRUPTED, ERROR-FREE, OR COMPLETELY SECURE.

          (c)  Disclaimer of Actions Causes by and/or Under the Control of Third
Parties.  EXODUS DOES NOT AND CANNOT CONTROL THE FLOW OF DATA TO OR FROM EXODUS'
INTERNET DATA CENTERS AND OTHER  PORTIONS OF THE INTERNET.  SUCH FLOW DEPENDS IN
LARGE PART ON THE  PERFORMANCE  OF INTERNET  SERVICES  PROVIDED OR CONTROLLED BY
THIRD PARTIES. AT TIMES,  ACTIONS OR INACTIONS CAUSED BY THESE THIRD PARTIES CAN
PRODUCE SITUATIONS IN WHICH EXODUS'  CUSTOMERS'  CONNECTIONS TO THE INTERNET (OR
PORTIONS  THEREOF)  MAY BE  IMPAIRED  OR  DISRUPTED.  ALTHOUGH  EXODUS  WILL USE
COMMERCIALLY  REASONABLE  EFFORTS TO TAKE ACTIONS IT DEEMS APPROPRIATE TO REMEDY
AND AVOID  SUCH  EVENT,  EXODUS  CANNOT  GUARANTEE  THAT  THEY  WILL NOT  OCCUR.
ACCORDINGLY, EXODUS DISCLAIMS ANY AND ALL LIABILITY RESULTING FROM ON RELATED TO
SUCH EVENTS.

6.       LIMITATIONS OF LIABILITY.

          6.1.  Personal  Injury.  EACH  REPRESENTATIVE  AND ANY  OTHER  PERSONS
VISITING THE INTERNET DATA CENTERS DOES SO AT ITS OWN RISK AND EXODUS ASSUMES NO
LIABILITY WHATSOEVER FOR ANY HARM TO SUCH PERSONS RESULTING FROM ANY CAUSE OTHER
THAN EXODUS'  NEGLIGENCE OR WILLFUL  MISCONDUCT  RESULTING IN PERSONAL INJURY TO
SUCH PERSONS DURING SUCH A VISIT.
<PAGE>

          6.2.  Damage to Customer  Equipment  or  Business.  EXODUS  ASSUMES NO
LIABILITY FOR ANY DAMAGE TO, OR LOSS RELATING TO, CUSTOMER'S  BUSINESS RESULTING
FROM ANY CAUSE WHATSOEVER. CERTAIN CUSTOMER EQUIPMENT, INCLUDING BUT NOT LIMITED
TO CUSTOMER EQUIPMENT LOCATED ON CYBERRACKS, MAY BE DIRECTLY ACCESSIBLE BY OTHER
CUSTOMERS.  EXODUS  ASSUMES  NO  LIABILITY  FOR ANY  DAMAGE  TO, OR LOSS OF, ANY
CUSTOMER EQUIPMENT  RESULTING FROM ANY CAUSE OTHER THAN EXODUS' GROSS NEGLIGENCE
OR WILLFUL MISCONDUCT. TO THE EXTENT EXODUS IS LIABLE FOR ANY DAMAGE TO, OR LOSS
OF, THE CUSTOMER EQUIPMENT FOR ANY REASON, SUCH LIABILITY WILL BE LIMITED SOLELY
TO THE THEN CURRENT VALUE OF THE CUSTOMER EQUIPMENT.

          6.3.  Exclusions.  EXCEPT AS  SPECIFIED IN SECTIONS 6.1 AND 6.2, IN NO
EVENT WILL EXODUS AS LIABLE TO CUSTOMER, ANY REPRESENTATIVE,  OR ANY THIRD PARTY
FOR ANY CLAIMS ARISING OUT OF OR BELATED TO THIS AGREEMENT,  CUSTOMER EQUIPMENT,
CUSTOMER'S  BUSINESS  OR  OTHERWISE,   AND  ANY  LOST  REVENUE,   LOST  PROFITS,
REPLACEMENT GOODS, LOSS OF TECHNOLOGY, RIGHTS OR SERVICES, INCIDENTAL, PUNITIVE,
INDIRECT OR CONSEQUENTIAL DAMAGES, LOSS OF DATA, OR INTERRUPTIONS OR LOSS OF USE
OF SERVICES OR OF ANY CUSTOMER EQUIPMENT OR CUSTOMER'S BUSINESS, EVEN IF ADVISED
OF THE  POSSIBILITY  OF SUCH  DAMAGES,  WHETHER  UNDER THEORY OF CONTRACT,  TORT
(INCLUDING NEGLIGENCE), STRICT LIABILITY OR OTHERWISE.

          6.4. Maximum  Liability.  NOTWITHSTANDING  ANYTHING TO THE CONTRARY IN
THIS AGREEMENT,  EXODUS MAXIMUM AGGREGATE LIABILITY TO CUSTOMER RELATED TO OR IN
CONNECTION  WITH THIS  AGREEMENT  WILL BE  LIMITED TO THE TOTAL  AMOUNT  PAID BY
CUSTOMER TO EXODUS HEREUNDER FOR THE PRIOR TWELVE (12) MONTH PERIOD.

          6.5. Customer's Insurance. Customer agrees that it will not pursue any
claims  against  Exodus for any  liability  Exodus may have under or relating to
this Agreement  until Customer first makes claims against  Customer's  insurance
provider(s) and such insurance provider(s) finally resolve(s) such claims.

          6.6.  Basis of the  Bargain;  Failure of Essential  Purpose.  Customer
acknowledge  that Exodus his set its prices and entered  into this  Agreement in
reliance upon the limitations of liability and the disclaimers of the warranties
and damages set forth herein,  and that the same form an essential  basis of the
bargain  between  the  parties.  The  parties  agree  that the  limitations  and
exclusions of liability and disclaimers specified in this Agreement will survive
an apply even if found to have failed of their essential purposes.

7.       INDEMNIFICATION.

          7.1. Exodus Indemnification of Customer. Exodus will indemnify, defend
and hold  Customer  harmless  from and against  any and all costs,  liabilities,
losses, and expenses (including, but not limited to, reasonable attorneys' fees)
(collectively,  "Losses")  resulting from any claim, suit, action, or proceeding
(each, an "Action")  brought against  Customer  alleging (i) the infringement of
any third party  registered U.S.  copyright or issued U.S. patent resulting from
the provision of Internet Data Center  Services  pursuant to this Agreement (but
excluding  any  infringement  contributory  causes  by  Customer's  Business  or
Customer Equipment) and (ii) personal injury to Customer's  Representatives from
Exodus' gross negligence or willful misconduct.
<PAGE>

          7.2.  Customer's  Indemnification of Exodus.  Customer will indemnify,
defend and hold Exodus,  its affiliates  and customer  harmless from and against
any and all Losses  resulting  from or arising  out of any Action  brought by or
against Exodus,  its affiliates or customers  alleging:  (a) with respect to the
Customer's  Business:  (i0 infringement or  misappropriation of any intellectual
property rights; (ii) defamation,  libel, slander,  obscenity,  pornography,  or
violation of the rights of privacy or publicity;  or (ii) spamming, or any other
offensive,   harassing  or  illegal  conduct  or  violation  of  the  Rules  and
Regulations;  (b) any damage or destruction to the Customer Areas,  the Internet
Data  Centers or the  equipment  of Exodus or any other  customer by Customer or
Representative(s) or Customer's designees;  or (c) any other damage arising from
the Customer Equipment or Customer's Business.

          7.3.  Notice.  Each party will provide the other party prompt  written
notice upon of the existence of any such event of which it becomes aware, and in
opportunity to participate in the defense thereof.

8.       TERM AND TERMINATION.

          8.1.  Term.  This  Agreement will be effective for a period of one (1)
year from the  Installment  Date,  unless earlier  termination  according to the
provisions  of this  Section  8. The  Agreement  will  automatically  renew  for
additional terms of one (1) year each.

8.2.     Termination.

          (a) For Convenience.

                   (i) By Customer  During First Time Thirty Days.  Customer may
terminate this Agreement for  convenience by providing  written notice to Exodus
at any time  during the thirty  (30) day period  beginning  on the  Installation
Date.

                   (ii)  By  Either  Party.  Either  party  may  terminate  this
Agreement  for   convenience  at  any  time  effective  after  the  first  (1st)
anniversary  of the  Installation  Dates by  providing  ninety  (90) days' prior
written notice to the other party at any time thereafter.

          (b) For  Cause.  Either  party will have the right to  terminate  this
Agreement if: (i) the other party  breaches any materials  terms or condition of
this  Agreement  and fails to cure such  breach  within  thirty  (30) days after
receipt  of  written  notice of the same,  except in the case of  failure to pay
fees,  which must be cured within five (5) days after receipt of written  notice
from Exodus, (ii) the other party becomes the subject of a voluntary petition in
bankruptcy or any voluntary  proceeding  relating to  insolvency,  receivership,
liquidation,  or competition  for the benefit of  conditions;  or (ii) the other
party  becomes  the subject of an  involuntary  petition  in  bankruptcy  or any
involuntary  proceeding relating to insolvency,  receivership,  liquidation,  or
composition  for the benefit of  creditors,  if such  petition is not  dismissed
within sixty (60) days of filing.

          8.3. No Liability for Termination. Neither party will be liable to the
other for any termination or expiration of this Agreement in accordance with its
terms.
<PAGE>

          8.4. Effect of  Termination.  Upon the effective date of expiration or
termination of his Agreement (a) Exodus will  immediately  ceases  providing the
Internet Data Center Services,  (b) any and all payment  obligations of Customer
under this  Agreement will become due  immediately;  (c) within thirty (30) days
after such  expiration or termination,  each party till return all  Confidential
Information  of the other party in its  possession  at the time of expiration or
termination  and  will  not  make or  retain  any  copies  of such  Confidential
Information except as required to comply with any applicable legal or accounting
recordkeeping  requirement;  and (d) Customer will remove from the Internet Data
Centers all Customer Equipment and any of its other property within the Internet
Data Centers within five (5) days of such  expiration or termination  and return
the Customer Areas to Exodus in the same condition as it was on the Installation
Date,  normal wear and tear excepted.  If Customer does not remove such property
within such  five-day  period,  Exodus will leave the option to (i) move any and
all property to secure storage and charge. Customer for the cost of such removal
and storage, and/or (ii) liquidate the property in any reasonable manner.

          8.5. Customer Equipment as Security.  In the event that Customer fails
to pay Exodus all amounts owned Exodus under this Agreement  when due,  Customer
Agrees that upon  written  notice,  Exodus may take  possession  of any Customer
Equipment  and store it, at Customer's  expense,  until taken in full or partial
satisfaction of any lien or judgment, all without being liable to prosecution or
for damages.

          8.6. Survival.  The following provision will survive any expiration or
termination of the Agreement : Sections 2,3,4,5,6,7,8, and 9.

9.       MISCELLANEOUS PROVISIONS.

          9.1.  Force Majeure.  Except for the obligation to pay money,  neither
party will be liable  for any  failure  or delay in its  performance  under this
Agreement dues to any came beyond its reasonable control,  including act of war,
acts of God,  earthquake,  flood  embargo,  not,  sabotage,  labor  shortage  or
dispute,  governmental act or failure of the Internet, provided that the delayed
party:  (a) gives  the  party  prompt  notice  of such  cause,  and (b) uses its
reasonable  commercial  efforts to correct promptly such failure such failure or
delay in performance.

          9.2.  No Lease.  This  Agreement  is a services  agreement  and is not
intended to and will not  constitute  a lease of any real or personal  property:

<PAGE>

Customer  acknowledges and agrees that (i) it has been granted only a license to
occupy the Customer  Space and use the Internet  Data Centers and any  equipment
provided by Exodus in accordance with this Agreement, (ii) Customer has not been
granted any real  property  interest  in the  Customer  Space or  Internet  Data
Center,  and (iii) Customer has no rights as tenant or otherwise  under any real
property or landlord/tenant  lawn,  regulation,  or ordinances.  For good cause,
including the exercise of any rights under Section 8.5 above, Exodus may suspend
the right of any  Representative  or other  person to visit  the  Internet  Data
Centers.

          9.3.  Marketing.  Customer agrees that Exodus may refer to Customer by
trade name and  trademark,  and may briefly  describe  Customer's  Business,  in
Exodus;  marketing  materials  and web site.  Customer  hereby  grants  Exodus a
license to use any Customer trade names and trademark  solely in connection with
the rights granted to Exodus to this Section 9.3.

          9.4. Governmental  Regulations.  Customer will not export,  re-export,
transfer, or make available,  whether directly or indirectly, any regulated item
or  information  to anyone  outside the U.S. in connection  with this  Agreement
without first complying with all export control laws and  regulations  which may
be imposed by the U.S.  Governmental  and any country or organization of nations
within whose jurisdiction Customer operated or does business.

          9.5. Non-Solicitation. During the period beginning on the Installation
Data and ending on the first  anniversary  of the  termination  or expiration of
this Agreement in accordance  with its terms,  Customer agrees that it will not,
and will ensure that its affiliates do not,  directly or indirectly,  solicit or
attempt to solicit for  employment  any persons  employed by Exodus  during such
period.

          9.6. Governing Law: Dispute  Resolution,  Severability:  Waiver.  This
Agreement is made under and will be governed by and construed in accordance with
the  laws of the  State  of  California  (except  that  body of law  controlling
conflicts of law) and specifically  excluding from application to this Agreement
that law known as the United  Nations  Convention on the  International  Sale of
Goods. Any dispute relating to the terms,  interpretation or performance of this
Agreement  (other  than  claims  for  preliminary  injunctive  relief  or  other
pre-judgment  remedies)  will be resolved at the request of either party through
binding  arbitration.  Arbitration  will be  conducted  in Santa  Clara  County,
California,  under the rules and  procedures  of the  Judicial  Arbitration  and
Mediation Society ("JAMS").  The parties will request that JAMS appoint a single
arbitrator  possessing  knowledge  of online  services  agreements;  however the
arbitration will proceed even if such a person is unavailable.  In the event any
provision of this Agreement is held by a tribunal of competent  jurisdiction  to
be contrary to the law, the remaining  provisions of this  Agreement will remain
in full force and effect.  The waiver of any breach of default of this Agreement
will not constitute a waiver of any subsequent  breach or default,  and will not
act to amend or negate the rights of the waiving party.

          9.7.  Assignment;  Notices.  Customer  may not  assign  its  rights or
delegate  its duties  under this  Agreement  either in whole or in part  without
consent of Exodus,  except this  Customer may assign this  Agreement in whole as
part  of  a  corporate  reorganization,   consolidation,   merger,  or  sale  of
substantially all of its assets. Any attempted  assignment or delegation without
such consent will be void. Exodus may assign this Agreement in whole or in part.
This Agreement will bind and inure to the benefit of each party's successors and
permitted assigns. Any notice or communication required or permitted to be given
hereunder may be delivered by hand, deposited with an overnight courier, sent by
confirmed  facsimile,  or mailed by registered or certified mail, return receipt
requested,  postage prepaid,  in each case to the address of the receiving party
indicated  on the  signature  page  hereof,  or at  such  other  address  as may
hereafter  be  furnished  in writing by either  party hereto to the other . Such
notice will be deemed to have been given as of the date it is delivered,  mailed
or sent, which is earlier.

          9.8.  Relationship  of Parties.  Exodus and Customer  are  independent
contractors   and  this  Agreement  will  not  establish  any   relationship  of
partnership,  joint venture, employment,  franchise or agency between Exodus and
Customer.  Neither  Exodus nor Customer will have the power to bind the other or
incur  obligations  on the other's  behalf  without the  other's  prior  written
consent, except as otherwise expressly provided herein.

          9.9. Entire  Agreement;  Counterparts.  This Agreement,  including all
documents  incorporated  herein  by  reference,  constitutes  the  complete  and
exclusive  agreement  between the  parties  with  respect to the subject  matter
hereof,  and  supersedes  and  replaces  any and all  prior  or  contemporaneous

<PAGE>

discussions,  negotiations,  understandings  and  agreements,  written  or oral,
regarding  such subject  matter.  This  agreement may be executed in two or more
counterparts,  each of  which  will be  deemed  an  original,  but all of  which
together shall constitute one and the same instrument.

Customer's and Exodus'  authorized  representatives  have read the foregoing and
all documents  incorporated therein and agree and accept such terms effective as
of the date first above written.

CUSTOMER                             EXODUS COMMUNICATIONS, INC.

Signature: /s/ Richard Rotman        Signature: /s/ Sallie J. McLean
           -------------------------            --------------------------------

Print Name: Richard Rotman           Print Name:  Sallie J. McLean

Title: Vice President                Title:
                                            ------------------------------------

<PAGE><PAGE>

                                                                   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"), Peter T. Loftin ("Loftin") 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," and
collectively with Loftin, 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, Anderson & Stowe VIII, L.P., BTI Investors LLC and
Loftin 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
         --------------------
and include any equity security or any security convertible or exchangeable into
an equity security of

<PAGE>

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,
         -------------------------
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, Loftin 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 Loftin 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. Loftin and each holder of a certificate
         ----------------------------
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

                                       2
<PAGE>

Section. Prior to any proposed sale, assignment, transfer or pledge of any
Registrable Securities, or of any of Loftin's 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 Loftin's Shares may be
effected without registration under the 1933 Act. Each certificate evidencing
the Registrable Securities or Loftin's 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
              --------------------
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
                                ---------
          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.

                                       3
<PAGE>

              (c) Neither Peter Loftin 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 Loftin 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
              ---------------------
     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

                                       4
<PAGE>

          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
              --------------------------------
     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
              -------------------------------
     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:

                                       5
<PAGE>

               (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.

                                       6
<PAGE>

          (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

                                       7
<PAGE>

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

                                       8
<PAGE>

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
          --------------------------------------
right to appoint a replacement chief executive officer of the Company, which
person shall be acceptable to Loftin.  The Company agrees to compensate the
chief executive officer at competitive market rates.  Upon appointment of a
replacement chief executive officer, Loftin will remain Chairman of the Board of
Directors.

     10.  Liquidity Provision. Notwithstanding anything to the contrary
          -------------------
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

                                       9
<PAGE>

     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 Loftin. If such Investment Bank is
     not reasonably acceptable to Loftin, Loftin 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 Loftin (the "Second

                                      10
<PAGE>

     IB Proposal"). Within two business days of receipt of the Second IB
     Proposal, Loftin 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
          -------------------
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
<PAGE>

     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 Arthur
Andersen 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
<PAGE>

     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
<PAGE>

     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
<PAGE>

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
<PAGE>

     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/ Peter T. Loftin
                                             -----------------------
                                          Name:  Peter T. Loftin
                                          Title: Chief Executive Officer

LOFTIN:                                    /s/ Peter T. Loftin
                                          --------------------------
                                          Peter T. Loftin

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

                                      16

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