-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FVidptlf0GxMoyEuR2bsmzfJnJxxmDua37ndemz9Pli/B/27lXZFvfxG4EnH//BQ qat12+qHzZS62PV4Qi6EnQ== 0000927016-01-001009.txt : 20010224 0000927016-01-001009.hdr.sgml : 20010224 ACCESSION NUMBER: 0000927016-01-001009 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20010220 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: US LEC CORP CENTRAL INDEX KEY: 0001054290 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 562065535 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-54177 FILM NUMBER: 1550637 BUSINESS ADDRESS: STREET 1: 401 N TRYON ST STREET 2: STE 1000 CITY: CHARLOTTE STATE: NC ZIP: 28251 MAIL ADDRESS: STREET 1: 401 N. TRYON STREET STREET 2: SUITE 1000 CITY: CHARLOTTE STATE: NC ZIP: 28202 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: BAIN CAPITAL FUND VI LP CENTRAL INDEX KEY: 0001065042 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 043405560 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: TWO COPLEY PLACE STREET 2: 7TH FL CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6175723000 MAIL ADDRESS: STREET 1: TWO COPLEY PL STREET 2: 7TH FL CITY: BOSTON STATE: MA ZIP: 02116 SC 13D 1 0001.txt SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 _______________ SCHEDULE 13D (Rule 13d-101) UNDER THE SECURITIES EXCHANGE ACT OF 1934 (Amendment No. ________)/1/ US LEC Corp. - ------------------------------------------------------------------------------- (Name of Issuer) Class A Common Stock, $.01 par value - ------------------------------------------------------------------------------- (Title of Class of Securities) 90331S 10 9 - ------------------------------------------------------------------------------- (CUSIP Number) Ann Marie Viglione, Controller Two Copley Place, 7th Flr. Boston, Massachusetts 02116 (617) 572-3000 - ------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) February 11, 2001 - ------------------------------------------------------------------------------- (Date of Event Which Requires Filing of This Statement) [_] If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box Note. Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. (Continued on following pages) (Page 1 of 14 Pages) __________________ /1/ The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section of the Act but shall be subjects to all other provisions of the Act (however, see the Notes). - ------------------------- --------------------- CUSIP No. 90331S 10 9 13D Page 2 of 14 Pages - ------------------------- --------------------- - ------------------------------------------------------------------------------ NAME OF REPORTING PERSONS 1. S.S. or I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS Bain Capital Fund VI, L.P. EIN No.: 04-3405560 - ------------------------------------------------------------------------------ CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* 2. (a) [_] (b) [_] - ------------------------------------------------------------------------------ SEC USE ONLY 3. - ------------------------------------------------------------------------------ SOURCE OF FUNDS* 4. WC - ------------------------------------------------------------------------------ CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED 5. PURSUANT TO ITEM 2(d) or 2(e) - ------------------------------------------------------------------------------ CITIZENSHIP OR PLACE OF ORGANIZATION 6. Delaware - ------------------------------------------------------------------------------ SOLE VOTING POWER 7. NUMBER OF 3,032,467 shares of Class A Common Stocks SHARES ----------------------------------------------------------- SHARED VOTING POWER BENEFICIALLY 8. OWNED BY 0 ----------------------------------------------------------- EACH SOLE DISPOSITIVE POWER 9. REPORTING 3,032,467 shares of Class A Common Stock PERSON ----------------------------------------------------------- SHARED DISPOSITIVE POWER 10. 0 - ------------------------------------------------------------------------------ AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11. 3,032,467 shares of Class A Common Stock - ------------------------------------------------------------------------------ CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 12. [_] - ------------------------------------------------------------------------------ PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 13. 21.88% - ------------------------------------------------------------------------------ TYPE OF REPORTING PERSON* 14. PN - ------------------------------------------------------------------------------ Information given in response to each item shall be deemed incorporated by reference in all other items. Item 1. Security and Issuer. The class of equity securities to which this Statement on Schedule 13D (the "Statement") relates is the Class A Common Shares, $.01 par value per share --------- (the "Common Stock") of US LEC Corp., a Delaware corporation (the "Company"). ------------ ------- The principal executive offices of the Company are located at 401 N. Tryon Street, STE 1000, Charlotte, NC 28251. Item 2. Identity and Background. (a) This Statement is being filed by Bain Capital Fund VI, L.P., a Delaware limited partnership (either "Fund VI" or the "Reporting Person") in its capacity as Administrative Member of Bain Capital CLEC Investors, L.L.C., a Delaware limited liability company ("CLEC Investors"). Other Members of CLEC Investors affiliated with Fund VI who may be deemed to be beneficial owners of the securities covered by this Statement include the following: (1) Bain Capital VI Coinvestment Fund, L.P., a Delaware limited partnership ("Coinvestment Fund"), (2) BCIP Associates II, a Delaware ----------------- general partnership ("BCIP II"), (3) BCIP Associates II-B, a Delaware general ------- partnership ("BCIP II-B"), (4) BCIP Associates II-C, a Delaware general --------- partnership ("BCIP II-C"), (5) BCIP Trust Associates II, a Delaware general --------- partnership ("BCIP Trust II"), (6) BCIP Trust Associates II-B, a Delaware ------------- general partnership ("BCIP Trust II-B" and together with BCIP II, BCIP II-B, --------------- BCIP II-C, and BCIP Trust II, the "BCIP Entities"), (7) Brookside Capital ------------- Partners Fund, L.P., a Delaware limited partnership ("Brookside"), (8) Sankaty --------- High Yield Asset Partners, L.P., a Delaware limited partnership ("Sankaty"), (9) ------- Sankaty High Yield Partners II, L.P., a Delaware limited partnership ("Sankaty ------- II") and (10) PEP Investments PTY Ltd., an Australian company limited by shares - -- organized under the laws of New South Wales ("PEP" and together with Fund VI --- Coinvestment Fund, the BCIP Entities, Brookside, Sankaty, Sankaty II, the "CLEC Members"). Bain Capital Partners VI, L.P., a Delaware limited partnership ("Bain ---- Partners VI") is the sole general partner of Fund VI and Coinvestment Fund. Bain - ----------- Capital Investors VI, Inc., a Delaware corporation ("Bain Investors VI"), is the ----------------- sole general partner of Bain Partners VI. Mr. W. Mitt Romney is the sole shareholder, sole director, Chief Executive Officer and President of Bain Investors VI and thus is the controlling person of Bain Investors VI. The executive officers of Bain Investors VI are set forth on Schedule A hereto. Bain Capital, Inc., a Delaware corporation ("Bain Capital"), is the sole ------------ managing partner of the BCIP entities. Mr. W. Mitt Romney is the sole shareholder, sole director, Chief Executive Officer and President of Bain Capital and thus is the controlling person of Bain Capital. The executive officers of Bain Capital are set forth on Schedule B hereto. Brookside Capital Investors, L.P., a Delaware general partnership ("Brookside Investors LP") is the sole general partner of Brookside. Brookside ---------------------- Capital Investors, Inc., a Delaware Corporation ("Brookside Investors Inc.") is ----------------------- the sole general partner of Brookside Investors LP. Mr. W. Mitt Romney is the sole shareholder, sole director, Chief Executive Officer and President of Brookside Investors Inc. and thus is the controlling person of Brookside Investors Inc. Sankaty High Yield Asset Investors, LLC, a Delaware limited liability company ("Sankaty LLC") is the sole general partner of Sankaty. Sankaty High ----------- Yield Asset Investors, Ltd., a Bermuda company ("Sankaty Ltd.") is the managing ----------- member of Sankaty LLC. Mr. W. Mitt Romney is the sole shareholder, a director and President of Sankaty Ltd. and thus is the controlling person of Sankaty, Ltd. Sankaty High Yield Asset Investors II, LLC, a Delaware limited partnership ("Sankaty II LLC") is the general partner of Sankaty II. Sankaty Investors II, -------------- LLC, a Delaware limited liability company ("Sankaty Investors II") is the -------------------- managing member of Sankaty II LLC. By an Irrevocable Power of Attorney, dated August 17, 1998, previously filed with the Commission via EDGAR, PEP has appointed Bain Capital and each of its officers its attorneys-in-fact, with full power and authority to act, with respect to certain matters, including the right to vote and dispose of securities owned by PEP. (b) The principal business address of the Reporting Person, the CLEC Members, Bain Partners VI, Bain Investors VI, Bain Capital, Brookside Investors LP, Brookside Investors Inc., Sankaty LLC, Sankaty II LLC and Sankaty Investors II is Two Copley Place Boston, Massachusetts 02116. The principal business address of Sankaty Ltd. is Reid House, 31 Church Street, Hamilton HM 12, Bermuda. The principal business address of PEP is Level 34, The Chifley Tower, 2 Chifley Square, Sydney, New South Wales, Australia. The principal business address of W. Mitt Romney and each of the executive officers of Bain Investors VI and Bain Capital are set forth on Schedules A and B. (c) The principal business of Fund VI is that of an investment limited partnership. The principal business of Bain Partners VI is that of general partner of Fund VI. The principal business of Bain Investors VI is that of general partner of Bain Partners VI and ultimate general partner of Fund VI. The principal occupation of Mr. W. Mitt Romney and each of the executive officers of Bain Investors VI is set forth on Schedule A hereto. The principal business of the BCIP entities is that of investment general partnerships. The principal business of Bain Capital is that of a management company and managing partner of the BCIP Entities. The principal occupation of each of the executive officers of Bain Capital is set forth on Schedule B hereto. The principal business of Brookside is that of an investment limited partnership. The principal business of Brookside Investors LP is that of a general partner of Brookside. The principal business of Brookside Investors Inc. is that of general partner of Brookside Investors LP and ultimate general partner of Brookside. The principal business of Sankaty is that of an investment limited partnership. The principal business of Sankaty LLC is that of general partner of Sankaty. The principal business of Sankaty Ltd. is that of managing member of Sankaty LLC and ultimate general partner Sankaty. The principal business of Sankaty II is that of an investment limited partnership. The principal business of Sankaty II LLC is that of general partner of Sankaty II. The principal business of Sankaty Investors II is that of a managing member of Sankaty II LLC and ultimate general partner of Sankaty II. The principal business of PEP is that of an Australian investment company limited by shares. (d) None of the Reporting Person, CLEC Members, Bain Partners VI, Bain Investors VI or its executive officers, Bain Capital or its executive officers, W. Mitt Romney, Brookside Investors LP, Brookside Investors, Inc. or its executive officers, Sankaty Investors, Sankaty Ltd. or its executive officers, Sankaty II LLC, Sankaty Investors II or its executive officers has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) None of the Reporting Person, CLEC Members, Bain Partners VI, Bain Investors VI or its executive officers, Bain Capital or its executive officers, Sankaty Investors, Sankaty Ltd. or its executive officers, Sankaty II LLC, Sankaty Investors II or its executive officers, Brookside Investors, L.P., Brookside Investors, Inc. or its executive officers, or W. Mitt Romney has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. (f) Each of the Reporting Person, CLEC Members, Bain Partners VI, Bain Investors VI, Bain Capital, Brookside Investors L.P., Brookside Investors Inc., Sankaty Investors, Sankaty II LLC, Sankaty Investors II is organized under the laws of the State of Delaware. Mr. W. Mitt Romney and each of the executive officers listed on Schedule A and B is a citizen of the United States. Sankaty Ltd. is organized under the laws of Bermuda. PEP is organized under the laws of the New South Wales Australia. Item 3. Source and Amount of Funds or Other Consideration. CLEC Investors is party to a Stock Purchase Agreement (the "Agreement"), dated as of April 11, 2000, by and among the Company and the Persons listed on Schedule 1 attached thereto. As of the date of the Agreement, CLEC Investors purchased 100,000 shares of Series A Convertible Preferred Stock (the "Preferred Stock") using the working capital of its Members. As of April 11, 2001, CLEC Investors will have received an additional 6,136 shares of Preferred Stock through paid in kind dividends which accrued on a quarterly basis for a total amount of 106,136 shares of Preferred Stock. As of April 11, 2001, the 106,136 shares of Preferred Stock will be convertible into 3,032,467 shares of Common Stock based on a purchase price of $1,000.00 and a conversion price of $35.00. The Reporting Person did not borrow any funds to effectuate the transaction whereby the Reporting Person received securities which are the subject of this filing on Schedule 13D and plans to use the working capital of its Members at such time as it converts its shares of Preferred Stock to Common Stock. Item 4. Purpose of Transaction. The shares of Common Stock covered by this Statement are being held for investment purposes. The Reporting Person may assess the market for the purchase and sale of the Common Stock, as well as the Company's financial position and operations. Depending upon a continuing assessment and upon future developments and contingent upon restrictions contained in various agreements to which CLEC Investors and the Company are parties, the Reporting Person may determine, from time to time or at any time, to acquire or to sell or otherwise dispose of some or all of the Common Stock. In making any such determination, the Reporting Person will consider their goals and objectives, other business opportunities available to them, as well as general economic and stock market conditions. Pursuant to the Corporate Governance Agreement, dated as of April 11, 2000 (the "Corporate Governance Agreement"), entered into by certain Investors, including CLEC Investors, and management of the Company (collectively, the "Investors"), the Company increased the size of its Board of Directors from five directors to seven directors and appointed two directors designated by the Investors. Currently, Michael A. Krupka, an officer of Bain Investment VI and Bain Capital, serves as a director of the Company. The Reporting Person intends to continue to participate in the management of the Company. The Investors maintain the contractual right to nominate two persons to be included as nominees to the Board of Directors so long as they beneficially own at least 30 percent of the Common Stock issued or issuable upon conversion of the Series A Preferred Stock. For a more detailed description of the above arrangements, see the Corporate Goverance Agreement which is attached hereto as Exhibit 1 and is hereby incorporated by reference. Other than as stated herein, the Reporting Person does not have any plans or proposals which relate to or would result in any of the following: (a) an extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; (b) a sale or transfer of a material amount of assets of the Company or any of its subsidiaries; (c) any material change in the present capitalization or dividend policy of the Company; (d) any other material change in the Company's business or corporate structure; (e) changes in the Company's charter, bylaws, or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any person; (f) causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; (g) a class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934; or (h) any action similar to any of those enumerated above. Item 5. Interest in Securities of the Company. (a) and (b) The Reporting Person, by virtue of its role as Administrative Member of CLEC Investors, may be deemed to own all 106,136 shares of Preferred Stock held by CLEC Investors, which is convertible into 3,032,467 shares or 21.88% of the Company's outstanding Common Stock based on 10,825,666 shares outstanding as stated in the Company's quarterly report on Form 10-Q for the quarter ending September 30, 2000, filed with the Commission on November 11, 2000. The reporting person disclaims beneficial ownership of all but the 1,293,290 shares or 9.33% of the Company's outstanding Common Stock of which it holds a pecuniary interest. The other CLEC Members may be deemed to beneficially own Common Stock of the Company based on their pro-rata share of membership interests in CLEC Investors. The Coinvestment Fund may be deemed to hold 50,226 shares of Series A Preferred Stock convertible into 1,435,030 shares of Common Stock of the Company, representing 10.36% of Common Stock of the Company. Bain Partners VI, as the sole general partner of Fund VI and the Coinvestment Fund, may be deemed to share voting and dispositive power with respect to at least 2,728,320 shares of Common Stock of the Company, representing 19.69% of the Company's Common Stock, and as many as 3,032,467 shares of Common Stock of the Company representing 21.88% of the Company's Common Stock. Bain Investors VI, as the sole general partner of Bain Partners VI and the ultimate general partner of Fund VI and the Coinvestment Fund, may be deemed to share voting and dispositive with respect to at least 2,728,320 shares of Common Stock of the Company, representing 19.69% of the Company's Common Stock, and as many as 3,032,467 shares of Common Stock of the Company representing 21.88% of the Company's Common Stock. The filing of this statement by Bain Partners VI and Bain Investors VI shall not be construed as an admission that Bain Partners VI or Bain Investors VI is, for the purpose of Section 13(d) of the Exchange Act, the beneficial owner of such shares held by Fund VI and the Coinvestment Fund. The BCIP Entities, by virtue of their membership in CLEC Investors, may be deemed to beneficially own 118,722 shares or .857% of the Company's outstanding Common Stock (based on the conversion of 4,155 shares of Preferred Stock). BCIP II may be deemed to beneficially own 2,755 shares of Preferred Stock, convertible into 78,711 shares of Common Stock of the Company, or .568% of Common Stock of the Company. BCIP Trust II may be deemed to beneficially own 333 shares of Preferred Stock, convertible into 9,522 shares of Common Stock of the Company, or .069% of Common Stock of the Company. BCIP II-B may be deemed to beneficially own 448 shares of Preferred Stock, convertible into 12,791 shares of Common Stock of the Company, or .092% of Common Stock of the Company. BCIP Trust II-B may be deemed to beneficially own 165 shares of Preferred Stock, convertible into 4,719 shares of Common Stock of the Company, or .034% of Common Stock of the Company. BCIP II-C may be deemed to beneficially own 455 shares of Preferred Stock, convertible into 12,979 shares of Common Stock of the Company, or .094% of Common Stock of the Company. PEP, by virtue of its membership in CLEC Investors, may be deemed to beneficially own 151 shares of Preferred Stock convertible into 4,312 shares of Common Stock of the Company or .031% of the Company's Common Stock. Bain Capital, as the sole managing partner of the BCIP Entities and Attorney-in-Fact for PEP, may be deemed to share voting and dispositive power with respect to the 123,034 shares which may be deemed to be held by the BCIP Entities and PEP by virtue of their membership in CLEC Investors. The filing of this statement by Bain Capital shall not be construed as an admission that Bain Capital is, for the purpose of Section 13(d) of the Exchange Act, the beneficial owner of such shares held by the BCIP Entities or PEP . Brookside, by virtue of its membership in CLEC Investors, may be deemed to beneficially own 3,696 shares of Preferred Stock of the Company convertible into 105,606 shares or .762% of the Company's outstanding Common Stock. Brookside Investors LP, as the sole general partner of Brookside, may be deemed to share voting and dispositive power with respect to the 105,606 shares which may be deemed to be held by Brookside by virtue of its membership in CLEC Investors. Brookside Investors Inc., as the sole general partner of Brookside Investors LP and ultimate general partner of Brookside, may be deemed to share voting and dispositive power with respect to the 105,606 shares which may be deemed to be held by Brookside. The filing of this statement by Brookside Investors L.P. and Brookside Investors Inc. shall not be construed as an admission that Brookside Investors L.P. and Brookside Investors Inc. are, for the purpose of Section 13(d) of the Exchange Act, the beneficial owners of such shares held by Brookside. Sankaty, by virtue of its membership in CLEC Investors, may be deemed to beneficially own 528 shares of Preferred Stock convertible into 15,087 shares or .109% of the Company's outstanding Common Stock. Sankaty LLC, as the sole general partner of Sankaty, may be deemed to share voting and dispositive power with respect to the 15,087 shares which may be deemed to be held by Sankaty. Sankaty Ltd., as the managing member of Sankaty LLC and ultimate general partner of Sankaty, may be deemed to share voting and dispositive power with respect to the 15,087 shares which may be deemed to be held by Sankaty. The filing of this statement by Sankaty Ltd. shall not be construed as an admission that Sankaty LLC and Sankaty Ltd. are, for the purpose of Section 13(d) of the Exchange Act, the beneficial owners of such shares held by Sankaty. Sankaty II, by virtue of its membership in CLEC Investors, may be deemed to beneficially own 1,584 shares of Preferred Stock of the Company, which is convertible into 45,260 shares or .327% of the Company's outstanding Common Stock. Sankaty II LLC, as the sole general partner of Sankaty II, may be deemed to share voting and dispositive power with respect to the 45,260 shares of Common Stock which may be deemed to be held by Sankaty II by virtue of its membership in CLEC Investors. Sankaty Investors II, as the managing member of Sankaty II LLC and ultimate general partner of Sankaty, may be deemed to share voting and dispositive power with respect to the 45,260 shares which may be deemed to be held by Sankaty II. The filing of this statement by Sankaty II LLC and Sankaty Investors II shall not be construed as an admission that Sankaty II LLC and Sankaty Investors II are, for the purpose of Section 13(d) of the Exchange Act, the beneficial owners of such shares held by Sankaty II. Mr. W. Mitt Romney, in his capacity as sole shareholder, sole director, Chief Executive Officer and President of Bain Investors VI, Bain Capital, Brookside Investors Inc. and Sankaty Investors II and in his capacity as sole shareholder, a director and President of Sankaty Ltd may be deemed to share voting and dispositive power with respect to the shares held by CLEC members. The filing of this statement by Mr. W. Mitt Romney shall not be construed as an admission that he is, for the purpose of Section 13(d) of the Exchange Act, the beneficial owner of such shares based on their pro-rata share of membership interests in CLEC. (c) Not applicable (d) The Reporting Person, as Administrative Member of CLEC Investors, has the power to direct the receipt of dividends from or the proceeds from the sale of such shares of Common Stock to the CLEC Members based on their pro-rata share of membership interests in CLEC Investors. The Reporting Person and CLEC Members have the right to receive dividends or the proceeds from the sale of such shares of Common Stock. The interest held by Fund VI and Coinvestment Fund relates to 5% or more of the Common Stock. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Company. The Reporting Person is party to the following contracts, agreements and understandings with respect to securities of the Company: (i) Corporate Goverance Agreement. Pursuant to the Corporate Goverance Agreement, entered into as of April 11, 2000 by the Company and certain Investors (including CLEC Investors) and management of the Company, (collectively, "Investors") the Company increased the size of its Board of Directors from five directors to seven directors and appointed two directors designated by the Investors. The Investors maintain the right to nominate two persons to be included as nominees for election to the Board of Directors so long as they beneficially own 30% of the Common Stock issued or issuable upon conversion of the Series A Preferred Stock. (ii) Limited Liability Company Agreement. Pursuant to the Limited Liability Company Agreement of CLEC, dated as of April 11, 2000 by and among the Reporting Person, Coinvestment Fund, the BCIP Entities, PEP, Brookside, Sankaty, Sankaty II and RGIP LLC, the Reporting Person currently has the ability to control the disposition of shares of US LEC held by CLEC. (iii) Registration Rights Agreement. Pursuant to the terms of the Registration Rights Agreement, the parties have the right to require the Company to register the shares of Common Stock issuable upon conversion of the Series A Preferred Stock. At any time after the one year anniversary of the Closing Date, the Company will be required to file a registration statement on Form S-3 upon demand. If Form S-3 is not available at that time, then the Company will file a Registration Statement on such form then available to effect a registration of the Registerable Securities, subject to the consent of the investor. The Company will not be required to file more than three such demand registration statements. Pursuant to the terms of the Registration Rights Agreement, the holders of Registerable Securities have unlimited "piggyback" registration rights subject to underwriters' cutbacks. Item 7. Material to be Filed as Exhibits. 1. Corporate Governance Agreement, dated April 11, 2000, which is attached as Exhibit 1 hereto. 2. Limited Liability Company Agreement of Bain Capital CLEC Investors, LLC, dated as of April 11, 2000, which is attached as Exhibit 2 hereto. 3. Registration Rights Agreement, dated April 11, 2000, which is attached as Exhibit 3 hereto. SIGNATURES After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this Statement is true, complete and correct. Dated: February 20, 2001 BAIN CAPITAL FUND VI, L.P. By: Bain Capital Partners VI, L.P., its general partner By: Bain Capital Investors VI Inc., its general partner By /s/ Michael Krupka -------------------------- Michael Krupka Managing Director SCHEDULE A ---------- EXECUTIVE OFFICERS OF BAIN CAPITAL INVESTORS VI, INC.. Name/Title Business Address Principal Occupation ---------- ---------------- -------------------- W. Mitt Romney, Two Copley Place Managing Director of Chief Executive Officer, Boston, MA 02116 Bain Capital, Inc. President and Managing Director Joshua Bekenstein, Two Copley Place Managing Director of Treasurer and Managing Boston, MA 02116 Bain Capital, Inc Director Stephen Pagliuca, Two Copley Place Managing Director of Secretary and Managing Boston, MA 02116 Bain Capital, Inc. Director Edward W. Conard, Two Copley Place Managing Director of Director Boston, MA 02116 Bain Capital, Inc. Paul B. Edgerley, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Robert C. Gay, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Michael A. Krupka, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Jonathan Lavine, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Ronald P. Mika, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Mark E. Nunnelly, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Dwight M. Poler, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Joseph P. Pretlow, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Robert F. White, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. SCHEDULE B ---------- EXECUTIVE OFFICE RS OF BAIN CAPITAL, I NC. Name/Title Business Address Principal Occupation - ---------- ---------------- -------------------- W. Mitt Romney, Two Copley Place Managing Director of Chief Executive Officer, Boston, MA 02116 Bain Capital, Inc. President and Managing Director Joshua Bekenstein, Two Copley Place Managing Director of Treasurer and Managing Boston, MA 02116 Bain Capital, Inc Director Stephen Pagliuca, Two Copley Place Managing Director of Secretary and Managing Boston, MA 02116 Bain Capital, Inc. Director Roy Edgar Brakeman, III, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Edward W. Conard, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. John P. Connaughton, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Paul B. Edgerley, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Domenic J. Ferrante, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Robert C. Gay, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Michael A. Krupka, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Jonathan S. Lavine, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Ronald P. Mika, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Mark E. Nunnelly, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Dwight M. Poler, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Joseph P. Pretlow, Two Copley Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. Robert F. White, Two Copey Place Managing Director of Managing Director Boston, MA 02116 Bain Capital, Inc. EX-1 2 0002.txt CORPORATE GOVERNANCE AGREEMENT Exhibit 1 --------- CORPORATE GOVERNANCE AGREEMENT This Agreement is entered into as of April 11, 2000 by US LEC Corp., a Delaware corporation (the "Company"), and the Persons whose names are set forth ------- on Schedule 1 attached hereto (collectively, the "Investors"). ---------- --------- A. The Company and the Investors have entered into the Preferred Stock Purchase Agreement dated as of the same date as this Agreement (the "Purchase -------- Agreement"), pursuant to the terms and conditions of which (i) the Company is - --------- issuing and selling to the Investors, and the Investors are purchasing from the Company an aggregate of 200,000 shares of Preferred Stock and (ii) the Company is issuing an option to the Investors to purchase an aggregate of up to 100,000 shares of Option Preferred Stock pursuant to the terms of the Option Agreement. B. The parties' execution and delivery of this Agreement is a condition of their respective obligations to close under the Purchase Agreement. The parties agree as follows: 1. Definitions. Capitalized terms which are used in this Agreement and the foregoing recitations without being defined have the same meanings that they are given in the Purchase Agreement. In addition, the following terms have these meanings: "Acquisition Event" means (i) the Company has consolidated with, or merged with or into, any other Person and, in connection with any such consolidation or merger, the holders of the Company's Common Stock outstanding immediately prior to such transaction do not own, in the aggregate, at least 50% of the outstanding stock of the surviving entity in such transaction, or (ii) any Person has made a tender offer or exchange offer to acquire any of the Company"s Common Stock (each such offer, a "Tender Offer"), and, upon consummation of the ------------ Tender Offer, the holders of the Company's Common Stock outstanding immediately prior thereto do not own, in the aggregate, at least 50% of the outstanding stock of the Person that made the Tender Offer. "Board of Directors" or "Board" means the Company's board of directors. "Board Action" means (i) such action by the Company as is necessary to cause the majority of the members of the Board (including any incumbent Investor Directors) to be persons designated by the Permitted Owners of the Underlying Common Stock, including causing existing members of the Board to resign and filling the vacancies created with such designees or increasing the size of the Board and filling the vacancies created with such designees or (ii) calling a special meeting of the Company's stockholders for the purpose of electing such designees to fill such vacancies if they are not filled as provided in clause (i). The action required by the Company hereunder shall be taken as soon as practicable and shall include, if required, adoption by the Board of any necessary amendments to the Bylaws, the preparation and submission to the Company's stockholders of a proxy statement in connection with any special stockholders' meeting and the filing of any required reports with the Commission and The Nasdaq Stock Market. "Certificate of Designation" means the Certificate of Designation of the Company relating to the Preferred Stock filed with the Secretary of State of the State of Delaware, as amended, supplemented or otherwise modified. "Common Stock" means the Company's Class A Common Stock, Class B Common Stock and any other class of common stock created by the Company. "Initial Option Stock" means the shares of Option Preferred Stock actually issued by the Company to the Investors pursuant to the Option Agreement. "Initial Preferred Stock" means the 200,000 shares of Preferred Stock issued by the Company to the Investors at the Closing pursuant to the Purchase Agreement. "Investor Agent" means any person designated by the Permitted Owners to serve in such capacity pursuant to this Agreement. "Investor Director" means any person nominated or designated by the Permitted Owners to serve as a director of the Company pursuant to this Agreement. "Investor Observer" means any person designated by the Permitted Owners to serve as an observer at meetings of the Board pursuant to this Agreement; provided that no person may be designated to serve as an Investor Observer whose - ------------- association with the Company would, in the opinion of a majority of the directors, be materially damaging to the Company or who is a Competitor or acting as a representative of a Competitor; it being understood that no Person that is an executive of Bain Capital, Inc. or Thomas H. Lee Partners, L.P. shall be deemed to be a representative of a Competitor solely by virtue of the fact that Affiliates of such companies own securities of a Competitor. "Option Preferred Stock" means the Series B Convertible Preferred Stock of the Company, or any other capital stock of the Company into which such stock is reclassified or reconstituted. "Option Stock Designation" means the Certificate of Designation of the Company relating to the Option Preferred Stock to be filed with the Secretary of State of the State of Delaware in accordance with the terms and conditions of the Option Agreement, as subsequently amended, supplemented or otherwise modified. "Permitted Owner" means (i) an Investor, for as long as the Investor continues to be the beneficial owner of any shares of the Underlying Common Stock, and (ii) each Permitted Transferee, for as long as the Permitted Transferee continues to be the beneficial owner of any shares of Underlying Common Stock. "Permitted Transferee" means (i) any Affiliate of any Investor to whom an Investor or another Affiliate of any Investor Transfers shares of Preferred Stock or Option Preferred Stock, (ii) any other Person to whom an Investor or an Affiliate of any Investor Transfers shares of Preferred Stock or Option Preferred Stock with the prior written consent of the Board of Directors, (iii) any Person to whom a transferee described in clause (ii) Transfers shares of Preferred Stock or Option Preferred Stock with the prior written consent of the Board of Directors and (iv) any THL Holder and any of the funds affiliated with Bain Capital, Inc. and any general or limited partner of such funds; provided -------- that in no event shall any shares of Preferred Stock or Option Preferred Stock - ---- be transferred to a Competitor or a Person acting as a representative of a Competitor without the Company's prior written consent. No Transfer otherwise permissible shall be effective unless the Permitted Transferee agrees in writing expressly for the Company's benefit to be bound by the provisions of this Agreement, and in this event, the transferor shall not be liable for the transferee's performance of its obligations under this Agreement. "Preferred Stock" means the Series A Convertible Preferred Stock of the Company, or any other capital stock of the Company into which such stock is reclassified or reconstituted. "Series C Designation" means the Certificate of Designation of the Company relating to the Series C Preferred Stock to be filed with the Secretary of State of the State of Delaware in such form as is permitted by the Purchase Agreement, as amended, supplemented or otherwise modified. "Series C Preferred Stock" means the Series C Convertible Preferred Stock of the Company or any other capital stock of the Company into which such stock is reclassified or reconstituted. "THL Holder" means (i) any general or limited partner of the THL Entities (a "THL Partner") and any corporation, partnership, or other entity which is an ----------- Affiliate of the THL Entities or any THL Partner (collectively, the "THL --- Affiliates"), (ii) any managing director, general partner, director, limited - ---------- partner, officer or employee of the THL Entities or a THL Affiliate, or the heirs, executors, administrators, testamentary trustees, lifetime trustees, legatees or beneficiaries of any of the foregoing persons referred to in this clause (iii) (collectively, "THL Associates"), (iv) a charitable institution as -------------- defined in Section 501(c) of the Internal Revenue Code of 1986, as amended, which receives a bona fide gift by a THL Associate of shares of Preferred Stock or Option Preferred Stock, (v) a bank, financial institution or other lender which receives a bona fide pledge by a THL Associate of shares of Preferred Stock or Option Preferred Stock and (vi) any trust, the beneficiaries of which, or any corporation, limited liability company or partnership, the stockholders, members or general or limited partners of which include only the THL Entities, THL Affiliates, THL Associates, their spouses or their lineal descendents. "THL Entities" shall mean Thomas H. Lee Partners, L.P. and its affiliated entities. "Total Enterprise Value" means, as at any date of determination, the Market Price of the Company's issued and outstanding equity securities (excluding any Preferred Stock issued under the Certificate of Designation, any Option Preferred Stock issued under the Option Stock Designation and any Series C Preferred Stock issued under the Series C Designation), plus the Stated Value (as defined in the Certificate of Designation) of all issued and outstanding Preferred Stock, plus the Stated Value (as defined in the Option Stock Designation) of all issued and outstanding Option Preferred Stock, plus the Stated Value (as defined in the Series C Designation) of all issued and outstanding Series C Preferred Stock, plus the amount recorded on the Company's balance sheet attributable to any other issued and outstanding shares of securities that is not recorded in stockholders' equity in the Company's balance sheet, plus the face amount of any existing debt recorded on the Company's balance sheet, less the sum of the Company's cash and cash equivalents recorded on the Company's balance sheet. References herein to the Company's balance sheet mean the Company's most recent (i) audited year-end balance sheet, (ii) unaudited interim period balance sheet included in a Form 10-K, 10-Q or 8-K filed by the Company with the Commission or (iii) unaudited month-end balance sheet certified by the Company's Chief Financial Officer prior to the date of determination of Total Enterprise Value. "Transfer" means to sell, assign, transfer (voluntarily or involuntarily), exchange (by merger or otherwise) or otherwise dispose of or to grant a lien, encumbrance, pledge or other form of security interest, except that any Investor may create a security interest in shares of Preferred Stock and Option Preferred Stock to secure loans made to it so long as any Transfer pursuant to such security interest is subject to the terms of this Agreement. "Underlying Common Stock" means all shares of Common Stock issued or issuable upon conversion of the Initial Preferred Stock and the Initial Option Preferred Stock (which number shall be determined, with respect to any given date, based upon the Conversion Price of the Initial Preferred Stock or Initial Option Preferred Stock, as applicable, in effect as of such date without giving effect to the one year limitation on conversion) without regard to any preferential dividends that accrue or are issued or paid with respect to the Initial Preferred Stock or the Initial Option Stock. 2. Corporate Governance. 2.1 Appointment of Investor Directors and Designation of Investor ------------------------------------------------------------- Observers. Effective as of the Closing, the Company shall increase the size of - --------- its Board of Directors from five directors to seven directors, and, on the day immediately following the Closing, the Board shall appoint two Investor Directors designated by the Investors to fill the vacancies created and the Investors shall designate two persons to serve as Investor Observers. An Investor Director shall be appointed to each committee of the Board of Directors. 2.2 Maintenance of Directorships. ---------------------------- (a) For as long as the Permitted Owners beneficially own at least 30% of the Underlying Common Stock, Permitted Owners shall continue to have the right to nominate two persons who shall be included among the Company's nominees for election to the Board and to designate two persons to serve as Investor Observers. The Company shall nominate each person so designated and shall use reasonable efforts to have the two nominees of the Permitted Owners elected to the Board of Directors. The Company's obligations under this Section 2.2(a) shall be deemed satisfied if two persons are elected to the Board by holders of Preferred Stock and Option Preferred Stock pursuant to the Certificate of Designation and the Option Stock Designation and two persons designated by such Permitted Owners to serve as Investor Observers are serving in that capacity. (b) If at any time the Permitted Owners beneficially own less than 30% but at least 20% of the Underlying Common Stock, one of the two persons then serving as an Investor Director (as specified by the Permitted Owners) shall, if requested by the Board, immediately resign as a director and one of the two persons then serving as an Investor Observer (as specified by the Permitted Owners) shall immediately cease serving as an observer. For as long as the Permitted Owners beneficially own at least 20% of the Underlying Common Stock, the Permitted Owners shall continue to have the right to designate one person who shall be included among the Company's nominees for election to the Board of Directors and to designate one person to serve as an Investor Observer. The Company shall nominate the person so designated and shall use reasonable efforts to have the nominee of the Permitted Owners elected to the Board of Directors. The Company's obligations under this Section 2.2(b) shall be deemed satisfied if one person is elected to the Board by holders of Preferred Stock and Option Preferred Stock pursuant to the Certificate of Designation and the Option Stock Designation and one person designated by such Permitted Owners to serve as an Investor Observer is serving in that capacity. (c) If at any time Permitted Owners beneficially own less than 20% of the Underlying Common Stock, Permitted Owners shall cease to be entitled to nominate any person for election to the Board or any person as an Investor Observer, and the Investor Director currently serving as a director (or both Investor Directors currently serving as directors, as the case may be) shall, if requested by the Board, immediately resign, and the Investor Observer (or both Investor Observers, as the case may be) shall immediately cease serving as observers. 2.3 Removal and Replacement. ----------------------- (a) If at any time Permitted Owners notify the Board of Directors of their wish to remove any incumbent Investor Director as a director, that incumbent Investor Director shall immediately resign from the Board or the Board shall vote to remove the Investor Director (if his or her removal is permitted under the Bylaws and the DGCL). Removal of an incumbent Investor Director by the Board or the resignation of an incumbent Investor Director otherwise than at the request of the Permitted Owners shall require their prior written consent unless the removal is based upon the Investor Director's willful misconduct; provided that an incumbent Investor Director shall resign from the Board if a majority of the remaining directors determine in good faith that he or she has engaged in conduct that could be materially damaging to the Company or is a Competitor or acting as a representative of a Competitor; it being understood that no Person that is an executive of Bain Capital, Inc. or Thomas H. Lee Partners, L.P. shall be deemed to be a representative of a Competitor solely by virtue of the fact that Affiliates of such companies own securities of a Competitor. (b) If at any time a vacancy is created on the Board by reason of the incapacity, death, removal or resignation of an incumbent Investor Director, the Permitted Owners may designate a person to fill the vacancy (who promptly shall be appointed by the incumbent directors). If at any time an incumbent Investor Observer is unable to serve in that capacity by reason of his or her incapacity, death or resignation, the Permitted Owners may designate a person to fill the vacancy or may leave the position unfilled. (c) At each meeting of stockholders of the Company at which directors are elected, the nominees for directors proposed by the Company shall include the Investor Director or Investor Directors required pursuant to this Agreement. 2.4 Notice and Meetings; Compliance with Policies and Exchange Act. -------------------------------------------------------------- (a) Each incumbent Investor Director and Investor Observer shall receive notice of each meeting of the Board of Directors at the same time and in the same manner as other members of the Board. Each Investor Observer shall be entitled to receive all information provided generally to members of the Board of Directors and shall treat such information as confidential to the same extent as would be required by an Investor Director in the observance of his or her fiduciary responsibilities as a director of the Company. Any Investor Observer may be excluded from meetings of the Board during consideration by the Board of any matter that, in the opinion of counsel to the Company, is or may be subject to the attorney-client privilege and any materials relating to any such matter may be withheld from such observer. Each incumbent Investor Director shall be entitled to indemnification rights, travel and expense reimbursement and cash compensation (but not options or other equity-based compensation) substantially similar to those of other non-employee directors of the Company and each Investor Observer shall be entitled to such similar travel and expenses reimbursement. The Company shall at all times maintain a directors' and officer' insurance policy covering each incumbent Investor Director that provides in the aggregate substantially the same coverage as the policy covering the current directors of the Company as of the date of this Agreement. (b) Each Investor Director and Investor Observer shall comply with the policies established by the Company with respect to the timing of purchases or sales of the Company's Common Stock and shall in any event comply with the provisions of the Exchange Act and the rules of the Commission thereunder with respect to information they receive from the Company as Investor Directors or Investors Observers. Each Investor Director shall timely file all reports that he or she may be required to file under the Exchange Act and the rules of the Commission thereunder. 2.5 Actions by Permitted Owners. Any action by Permitted Owners under this --------------------------- Section 2 shall be by majority vote of the number of shares of Underlying Common Stock then beneficially owned by them, with each such share having one vote. 3. Certain Actions of the Company. 3.1 Investor Agents. Until the covenants in Section 3.2 terminate as provided in Section 3.5, the Permitted Owners shall appoint two persons to serve as Investor Agents to act in accordance with Sections 3.3, 3.4 and 5.2. Until the Permitted Owners notify the Company of the persons who they have designated as the Investor Agents, Michael A. Krupka and Anthony J. DiNovi shall be deemed to be the Investor Agents. 3.2 Actions. Subject to Section 3.5, the Company shall not, directly or ------- indirectly through any Subsidiary, do any of the following (whether in one or a series of related actions or transactions) without the approval of the Investor Agents: (a) increase the size of the Board to more than 11 directors; (b) amend, modify or change any provision of the Certificate of Incorporation, or Bylaws, other than (i) in a manner that would not reasonably be expected to adversely affect the holders of the Preferred Stock or Option Preferred Stock or (ii) as contemplated by the Transaction Documents; (c) incur any Indebtedness in excess of $200 million in the aggregate, other than (i) Indebtedness arising under the Senior Loan Agreement and (ii) Permitted Debt (as defined in subsections (ii), (iii), (v) and (vi) of the definition of Permitted Debt in the Senior Loan Agreement); (d) acquire an interest in or invest in any business (through an acquisition, purchase of assets, purchase of securities, formation of a division or otherwise) for cash or other consideration having a value in excess of $25 million if the business is outside the business of selling telecommunications- related services and activities reasonably related thereto; (e) declare or pay any dividend or make any distribution or other payment to holders of Common Stock or any other securities junior in right of payment to the Preferred Stock or Option Preferred Stock other than pursuant to Common Stock subdivisions or combinations as described in Section 4.3 of the Certificate of Designation or Option Stock Designation; (f) directly, or indirectly, purchase, redeem or retire any shares of the Company's capital stock or any shares of capital stock of its Subsidiaries which shares are not owned by the Company or a wholly-owned Subsidiary of the Company or make any offer to purchase, redeem or retire, any shares of the Company's outstanding capital stock, other than the Preferred Stock pursuant to Section 5 of the Certificate of Designation, Option Preferred Stock pursuant to Section 5 of the Option Stock Designation or Series C Preferred Stock pursuant to Section 5 of the Series C Designation, in each case as in effect on the date of initial issuance of any shares thereunder; provided that the Company may repurchase up to $100 million of the Common Stock at prices less than $30 per share (as adjusted for the events described in Section 4.3 of the Certificate of Designation or Option Stock Designation), but only if, in the written opinion of counsel to the Company in form and substance reasonably satisfactory to the Investor Agents, any of such purchases would not be treated as the receipt of cash or property by stockholders for purposes of Section 305(b)(2) of the Code; (g) enter into, or permit any Subsidiary to enter into, any transaction (including, without limitation, making any advance to or investment in a customer or any purchase, sale, lease or exchange of property or the rendering of any service), or amend any agreements in effect as of the date of this Agreement, with (i) any Affiliate of the Company (other than a Subsidiary) or (ii) any Person in which any Affiliate of the Company has, in the case of any private entity, an investment of at least $250,000 (the "Private Entity Threshold") or, in the case of a public entity, beneficially owns at least 5% of the publicly traded securities of any such entity that files or is required to file reports pursuant to Section 13(a) or 15(d) of the Exchange Act (the "Public Entity Threshold") or (iii) any Person in which any Affiliate of the Company has, in the case of any private entity, an investment of less than the Private Entity Threshold or, in the case of a public entity, beneficially owns less than the Public Entity Threshold unless such transaction is entered into on an arms- length basis; provided, however, that nothing contained in this Section 3.2(g) -------- ------- shall prohibit: (i) transactions existing as of the date hereof that are listed on Schedule 5.21 to the Purchase Agreement; (ii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options, stock purchase plans, stock ownership plans or other equity-based incentive or compensation plans and other reasonable fees, compensation, benefits and indemnities paid or entered into by the Company or its Subsidiaries in the ordinary course of business to or with its officers, directors or employees; provided, however, that neither -------- ------- Richard T. Aab nor Tansukh V. Ganatra shall be entitled to participate in any stock option, stock ownership, stock appreciation or similar equity- based plan; (iii) loans or advances to employees (other than Richard T. Aab and Tansukh V. Ganatra) in the ordinary course of business of the Company or any of its Subsidiaries not to exceed $1,000,000 in the aggregate at any one time outstanding; (iv) transactions between the Company and a wholly-owned Subsidiary or between wholly-owned Subsidiaries ; (v) payments to Three Morrocroft Centre, LLC in accordance with the terms of the Company's lease for the use and occupancy of its corporate offices in Charlotte, North Carolina; (vi) payments to Lincoln Harris LLC for real estate services in accordance with past practices, not to exceed $400,000 in any fiscal year; (vii) payments to an Affiliate of Richard T. Aab for the use by the Company's directors, executive officers and key employees for business purposes of an aircraft owned by such Affiliate, not to exceed $150,000 in any fiscal year, at rates no higher than those that could be obtained in an arms' length transaction with an unrelated third party; and (viii) sales contracts for telecommunication services entered into by the Company's sales representatives on an arms-length basis with customers in the ordinary course of business on terms which are consistent with past practices or which are consistent with practices in the industry at the time any such contract is negotiated and that provide for payments to the Company of not more than $5,000 per month or $60,000 per year by a single customer; (h) terminate the employment of or hire a replacement for any one of Tansukh V. Ganatra, Michael K. Robinson or Aaron D. Cowell, Jr. (each a "Key Employee"); provided that a Key Employee may be replaced by any other Key Employee or, if the position to be replaced is the Chief Executive Officer or President of the Company and the replacement is not a Key Employee, the replacement individual or individuals shall have been approved by a majority of the members of the Board which majority shall include at least one Investor Director; (i) acquire, or permit any Subsidiary to acquire, any interest in any Person or business (whether by purchase of assets, purchase of stock, merger or otherwise), involving an aggregate consideration (including assumed liabilities) equal to 20% or more of the Total Enterprise Value of the Company in any one transaction or series of related transactions; or (j) enter into, or become the subject of, or permit any Subsidiary to enter into or become the subject of, any transaction of merger, acquisition or consolidation, or convey, sell, lease, transfer or otherwise dispose of, or permit any Subsidiary to convey, sell, lease, transfer or otherwise dispose of, in one transaction or a series of transactions, all or any substantial part of the Company's or any Subsidiary's business or assets, whether now owned or hereafter acquired, other than (i) a merger or consolidation between the Company and any wholly-owned Subsidiary or between one wholly-owned Subsidiary and another, and (ii) acquisitions permitted pursuant to Section 3.1(i). 3.3 Notice Requirements and Default. ------------------------------- (a) The Company shall notify the Investor Agents of any inadvertent or other violation of a covenant in Section 3.2 within five Business Days of the occurrence thereof (which notice shall contain a brief description of such violation and the actions, if any, that the Company proposes to take to cure any such violation) (the "Company Notice"). In addition, the Investor Agents may notify the Company at any time that they believe there has been a violation of a covenant in Section 3.2 (the "Agent Notice"). (b) Upon the issuance of a Company Notice or Agent Notice, the Company shall, for a period of 30 days from the date of such notice, have the right to cure any violation specified in the Company Notice or Agent Notice or in the event that such breach is not susceptible to cure in such 30-day period and is susceptible to cure within 90 days, such longer period, not to exceed 90 days, so long as the Company is proceeding diligently and in good faith during such 90-day period to cure any such violation and notifies the Investor Agents of the Company's proposed curative actions (the "Cure Period"). The Investor Agents and Permitted Owners shall not take any action to hinder or delay the Company's efforts to cure any such violation. If, upon the expiration of the Cure Period, the Company has not cured any such violation to the reasonable satisfaction of the Investor Agents, then the Investor Agents may give notice to the Company that such violation is a default by the Company in the observance of the covenants in Section 3.2 (which notice shall specify the covenant or covenants as to which a default has occurred). Upon receipt of such notice by the Company (an "Event of Default"), the Investor Agents shall be entitled to exercise the remedies set forth in Section 3.4 that, do not by their terms, operate automatically upon an Event of Default. 3.4 Remedies Upon an Event of Default. --------------------------------- (a) If an Event of Default occurs with respect to the covenant in Section 3.2(a), the Investor Agents shall be entitled to take or cause the Company to take a Board Action. (b) If an Event of Default occurs with respect to a covenant in Section 3.2(b), (c), (d), (g), (i) or (j), the Investor Agents shall be entitled to take or cause the Company to take a Board Action and the Conversion Price of the Preferred Stock then in effect under the Certificate of Designation, and the Conversion Price of the Option Preferred Stock then in effect under the Option Stock Designation, shall each be automatically decreased by 10%; provided that for purposes of determining whether the remedies under this Section 3.4(b) shall apply, the dollar amount set forth in Section 3.2(c) shall be deemed to be $240 million and the dollar amount set forth in Section 3.2(d) shall be deemed to be $30 million. (c) If an Event of Default occurs with respect to a covenant in Section 3.2(e) or (f), the Conversion Price of the Preferred Stock then in effect under the Certificate of Designation, and the Conversion Price of the Option Preferred Stock then in effect under the Option Stock Designation shall each be automatically decreased by 10%. (d) If an Event of Default occurs with respect to the covenant in Section 3.2(h), the Investor Agents shall be entitled to nominate one additional Investor Director to the Board who shall serve in such capacity, subject to the provisions of Sections 2.3 and 2.4, until such time as the Permitted Owners cease to be entitled to nominate any person to the Board pursuant to Section 2.2(c). 3.5 Termination. The covenants in Section 3.2 shall terminate as follows. ----------- (a) The covenants in Sections 3.2(a), (b), (c), (d), (e) and (f) shall terminate when the Permitted Owners, in the aggregate, cease to beneficially own at least 50,000 shares of the Preferred Stock or at least 50,000 shares of Option Preferred Stock, in each case determined without regard to any preferential dividends that accrue or are issued or paid with respect to the Preferred Stock and the Option Preferred Stock. (b) The covenants in Sections 3.2(g) and (h) shall terminate when the Permitted Owners, in the aggregate, cease to beneficially own at least 25% of the Underlying Common Stock. (c) The covenant in Section 3.2(i) shall terminate upon the earlier of (A) the fourth anniversary of the Closing Date or (B) the redemption of the Preferred Stock pursuant to Section 5.2(b) of the Certificate of Designation and the Option Preferred Stock pursuant to Section 5.2(b) of the Option Stock Designation or (C) when the Permitted Owners, in the aggregate, cease to beneficially own at least 25% of the Underlying Common Stock. (d) The covenant in Section 3.2(j) shall terminate upon the earlier of (A) the fourth anniversary of the Closing Date or (B) the redemption of the Preferred Stock pursuant to Section 5.2(b) of the Certificate of Designation and the Option Preferred Stock pursuant to Section 5.2(b) or the Option Stock Designation or (C) when the Permitted Owners, in the aggregate, cease to beneficially own at least 25% of the Underlying Common Stock; provided that if -------- ---- (x) the Permitted Owners of Preferred Stock or Option Preferred Stock shall have converted all of such Preferred Stock or Option Preferred Stock into Common Stock pursuant to Section 5.2(a) of the Certificate of Designation or Section 5.2(a) of the Option Stock Designation at any time on or after the third anniversary of the Closing Date, (y) prior to the fourth anniversary of the Closing Date any of the actions described in Section 3.2(j) shall occur, and (z) as a result of such actions, the Permitted Owners receive less than the equivalent value (in cash or other consideration) of 150% of the Conversion Price in effect at the time their Preferred Stock or Option Preferred Stock, as applicable, was converted into Common Stock, then the Company shall pay to such Permitted Owners the deficiency in cash (which determination shall be made by the Company's independent auditors as soon as practicable whose determination, absent demonstrable error, shall be final) simultaneously with the consummation of any action in Section 3.2(j). 4. Restrictions on Transfer. No Investor shall Transfer any Preferred Stock, any rights under the Option Agreement or Option Preferred Stock except for (a) Transfers to Permitted Transferees, and (b) after the third anniversary of the Closing Date, Transfers of Preferred Stock or Option Preferred Stock in amounts greater than $50 million (determined based upon the Stated Value of such shares); provided that in no -------- ---- event shall shares of Preferred Stock, rights under the Option Agreement or Option Preferred Stock be transferred to a Competitor or any person acting as a representative of a Competitor. The foregoing restrictions on Transfers shall not apply to (i) the Transfer of any Preferred Stock or Option Preferred Stock which a Permitted Owner has a right to have redeemed pursuant to Section 5.1 of the Certificate of Designation or Section 5.1 of the Option Stock Designation but which for any reason the Company has failed to redeem within 30 days after the Permitted Owner's exercise of his or its redemption right or (ii) Transfers of any Preferred Stock, rights under the Option Agreement or Option Preferred Stock upon the occurrence of an Acquisition Event or Change of Control. Shares of Common Stock issued upon conversion of the Preferred Stock or the Option Preferred Stock shall not be subject to any restrictions on Transfer except such restrictions as may apply under the Securities Act or the rules of the Commission issued thereunder. 5. Miscellaneous. 5.1 Notices. All notices, requests, claims, demands and other ------- communications ("Notices") under this Agreement shall be in writing and sent by certified or registered mail, return receipt requested, a recognized overnight courier service, telecopier or personal delivery, as follows: (a) if to Company, to: US LEC Corp. Transamerica Square 401 N. Tryon Street, Suite 1000 Charlotte, North Carolina 28202 Attention: General Counsel Telecopier: (704) 319-3098 with a required copy to: Moore & Van Allen, PLLC 100 North Tryon Street, Floor 47 Charlotte, North Carolina 28202-4003 Attention: Barney Stewart III Telecopier: (704) 331-1151 (b) if to the Investors and/or the Investor Agents, in care of: Bain Capital, Inc. Two Copley Place Boston, Massachusetts 02116 Attention: Ian K. Loring Telecopier: (617) 572-3274 and Thomas H. Lee Partners, L.P. 75 State Street, 26/th/ Floor Boston, Massachusetts 02109 Attention: Anthony J. DiNovi Telecopier: (617) 227-3514 with a required copy to: Ropes & Gray One International Plaza Boston, Massachusetts 02110-2624 Attention: Philip J. Smith Telecopier: (617) 951-7050 All Notices shall be deemed to have been duly given: when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial overnight courier service; five business days after being deposited in the mail, postage prepaid, if mailed; and when receipt is acknowledged, if telecopied. A party may change its address for purposes of this Agreement by Notice in accordance with this Section 5.1. 5.2 Determinations, Requests or Consents. ------------------------------------ (a) Any amendment, supplement or modification of or to any provision of this Agreement, any waiver of any provision of this Agreement, and any consent to any departure of the Company from the terms of any provision of this Agreement, shall be effective (i) only if it is made or given in writing and signed by the Company and the holders of at least 51% of the Underlying Common Stock than beneficially owned by the Permitted Owners in accordance with this Section 5.2, and (ii) only in the specific instance and for the specific purpose for which made or given. All determinations, requests, consents, waivers or amendments to be made by the Permitted Owners in their opinion or judgment or with their approval or otherwise pursuant to this Agreement shall be made by Permitted Owners beneficially owning at least 51% of the Underlying Common Stock. (b) Notwithstanding the foregoing provisions of Section 5.2(a), any request by the Company for a consent to or waiver of a violation of a covenant in Section 3.2 shall be made in writing to the Investor Agent(s) and shall state clearly in bold face letters that it is a request for a consent or waiver with respect to the covenants set forth in Section 3.2 of this Agreement. The Investor Agents shall endeavor to respond in writing to such request within ten Business Days of the receipt thereof and, if the Investor Agent(s) fail to respond within such ten Business Day period, the violation that was the subject of the Company's request for a consent or waiver shall be deemed to have been denied. The Company shall be entitled to rely on any action or failure to act by the Investor Agent(s) pursuant to the foregoing sentence as an act or failure to act on behalf of, and binding upon, all of the Permitted Owners. 5.3 Entire Agreement. This Agreement supersedes all prior agreements ---------------- between the parties with respect to its subject matter and constitutes a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. 5.4 No Third Party Beneficiaries. Nothing in this Agreement shall be ---------------------------- considered to give any Person other than the parties (and Permitted Transferees) any legal or equitable right, claim or remedy under or in respect of this Agreement or any provision of this Agreement. This Agreement and all of its provisions are for the sole and exclusive benefit of the parties and their respective successors and permitted assigns. 5.5 Equitable Relief. In addition to any other remedies which may be ---------------- available (including any remedies available under Section 3.4), the Company and each Permitted Owner shall be entitled to seek equitable relief, including injunctive relief and specific performance, in the event of any breach of the provisions of this Agreement, the Certificate of Designation or the Option Stock Designation by another party. 5.6 Severability. If any provision of this Agreement is held invalid or ------------ unenforceable by a court of competent jurisdiction, the other provisions of this Agreement shall remain in full force and effect. Any provision of this Agreement which is held invalid or unenforceable only in part shall remain in full force and effect to the extent not held invalid or unenforceable. 5.7 Captions. The captions of sections of this Agreement are for -------- convenience only and shall not affect the construction or interpretation of this Agreement. 5.8 Construction. All references in this Agreement to "Section" or ------------ "Sections" refer to the corresponding section or sections of this Agreement. All words used in this Agreement shall be construed to be of the appropriate gender or number as the context requires. Unless otherwise expressly provided, the word "including" does not limit the preceding words or terms. 5.9 Counterparts. This Agreement may be executed in one or more ------------ counterparts, each of which shall be considered an original copy of this Agreement and all of which, when taken together, shall be considered to constitute one and the same agreement. 5.10 Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of Delaware without regard to that state's conflicts of laws principles. 5.11 Binding Effect. This Agreement shall apply to, be binding in all -------------- respects upon and inure to the benefit of parties and their respective successors and permitted assigns. IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. US LEC CORP. By:___________________________________ Name: Michael K. Robinson Title: Executive Vice President and Chief Financial Officer BAIN CAPITAL CLEC INVESTORS, L.L.C. By: Bain Capital Fund VI, L.P., its Administrative Member By: Bain Capital Partners VI, L.P., its General Partner By: Bain Capital Investors VI, Inc., its general partner By:___________________________________ Name: Title: Managing Director THOMAS H. LEE EQUITY FUND IV, L.P. By: THL Equity Advisors IV, LLC, its general partner By:___________________________________ Name: Title: THOMAS H. LEE FOREIGN FUND IV-B, L.P. By: THL Equity Advisors IV, LLC, its general partner By:___________________________________ Name: Title: THOMAS H. LEE FOREIGN FUND IV, L.P. By: THL Equity Advisors IV, LLC, its general partner By:___________________________________ Name: Title: PUTNAM INVESTMENT HOLDINGS, LLC By:___________________________________ Name: Title: 1997 THOMAS H. LEE NOMINEE TRUST By:___________________________________ Trustee THOMAS H. LEE CHARITABLE INVESTMENT LIMITED PARTNERSHIP By:___________________________________ Name: Title: _____________________________________ David V. Harkins THE HARKINS 1995 GIFT TRUST By:___________________________________ Trustee ______________________________________ Scott A. Schoen ______________________________________ C. Hunter Boll ______________________________________ Scott M. Sperling ______________________________________ Anthony J. DiNovi ______________________________________ Thomas M. Hagerty ______________________________________ Warren C. Smith, Jr. ______________________________________ Seth W. Lawry ______________________________________ Kent R. Weldon ______________________________________ Terrence M. Mullen ______________________________________ Todd M. Abbrecht ______________________________________ Charles A. Brizius ______________________________________ Scott L. Jaeckel ______________________________________ Soren L. Oberg ______________________________________ Thomas R. Shepherd ______________________________________ Wendy L. Masler ______________________________________ Andrew D. Flaster ROBERT SCHIFF LEE 1988 IRREVOCABLE TRUST By:___________________________________ Trustee ______________________________________ Stephen Zachary Lee ______________________________________ Charles W. Robins as Custodian for Jesse Lee ______________________________________ Charles W. Robins as Custodian for Nathan Lee ______________________________________ Charles W. Robins ______________________________________ James Westra ______________________________________ Adam A. Abramson ______________________________________ Joanne M. Ramos ______________________________________ P. Holden Spaht ______________________________________ Nancy M. Graham ______________________________________ Gregory A. Ciongoli ______________________________________ Wm. Matthew Kelly ______________________________________ Kevin F. Sullivan ______________________________________ Diane M. Barriere ______________________________________ Kim H. Oakley SCHEDULE 1 ---------- Investors
- ------------------------------------------------------------------------------------------------------------------- Name Number of Shares of Series A Preferred Stock Purchased ---- - ------------------------------------------------------------------------------------------------------------------- Bain Capital CLEC Investors, LLC 100,000.00 - ------------------------------------------------------------------------------------------------------------------- Thomas H. Lee Equity Fund IV, L.P. 83,533.00 - ------------------------------------------------------------------------------------------------------------------- Thomas H. Lee Foreign Fund IV-B, L.P. 8,113.00 - ------------------------------------------------------------------------------------------------------------------- Thomas H. Lee Foreign Fund IV, L.P. 2,859.00 - ------------------------------------------------------------------------------------------------------------------- Putnam Investment Holdings, LLC 1,374.00 - ------------------------------------------------------------------------------------------------------------------- 1997 Thomas H. Lee Nominee Trust 1,099.00 - ------------------------------------------------------------------------------------------------------------------- Thomas H. Lee Charitable Investment Limited Partnership 543.00 - ------------------------------------------------------------------------------------------------------------------- David V. Harkins 294.00 - ------------------------------------------------------------------------------------------------------------------- Scott A. Schoen 245.00 - ------------------------------------------------------------------------------------------------------------------- C. Hunter Boll 245.00 - ------------------------------------------------------------------------------------------------------------------- Scott M. Sperling 245.00 - ------------------------------------------------------------------------------------------------------------------- Anthony J. DiNovi 245.00 - ------------------------------------------------------------------------------------------------------------------- Thomas M. Hagerty 245.00 - ------------------------------------------------------------------------------------------------------------------- Warren C. Smith, Jr. 245.00 - ------------------------------------------------------------------------------------------------------------------- Seth W. Lawry 102.00 - ------------------------------------------------------------------------------------------------------------------- Kent R. Weldon 68.00 - ------------------------------------------------------------------------------------------------------------------- Terrence M. Mullen 54.00 - ------------------------------------------------------------------------------------------------------------------- Todd M. Abbrecht 54.00 - ------------------------------------------------------------------------------------------------------------------- Robert Schiff Lee 1998 Irrevocable Trust 50.00 - ------------------------------------------------------------------------------------------------------------------- Stephen Zachary Lee 50.00 - ------------------------------------------------------------------------------------------------------------------- Charles A. Brizius 41.00 - ------------------------------------------------------------------------------------------------------------------- The Harkins 1995 Gift Trust 33.00 - -------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------- Thomas R. Shepherd 29.00 - ------------------------------------------------------------------------------------------------------------------- Charles W. Robins as Custodian for Jesse Lee 25.00 - ------------------------------------------------------------------------------------------------------------------- Charles W. Robins as Custodian for Nathan Lee 25.00 - ------------------------------------------------------------------------------------------------------------------- Charles W. Robins 20.00 - ------------------------------------------------------------------------------------------------------------------- James Westra 20.00 - ------------------------------------------------------------------------------------------------------------------- Wendy L. Masler 20.00 - ------------------------------------------------------------------------------------------------------------------- Andrew D. Flaster 17.00 - ------------------------------------------------------------------------------------------------------------------- Scott L. Jaeckel 15.00 - ------------------------------------------------------------------------------------------------------------------- Soren L. Oberg 15.00 - ------------------------------------------------------------------------------------------------------------------- Adam A. Abramson 12.00 - ------------------------------------------------------------------------------------------------------------------- Joanne M. Ramos 12.00 - ------------------------------------------------------------------------------------------------------------------- P. Holden Spaht 12.00 - ------------------------------------------------------------------------------------------------------------------- Nancy M. Graham 12.00 - ------------------------------------------------------------------------------------------------------------------- Gregory A. Ciongoli 12.00 - ------------------------------------------------------------------------------------------------------------------- Wm. Matthew Kelly 12.00 - ------------------------------------------------------------------------------------------------------------------- Kevin F. Sullivan 2.00 - ------------------------------------------------------------------------------------------------------------------- Diane M. Barriere 2.00 - ------------------------------------------------------------------------------------------------------------------- Kim H. Oakley 1.00 - -------------------------------------------------------------------------------------------------------------------
EX-2 3 0003.txt LIMITED LIABILITY COMPANY AGREEMENT EXHIBIT 2 BAIN CAPITAL CLEC INVESTORS, L.L.C. LIMITED LIABILITY COMPANY AGREEMENT Dated as of April 11, 2000 - -------------------------------------------------------------------------------- THE INTERESTS EVIDENCED BY THIS LIMITED LIABILITY COMPANY AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE SOLD, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT AS PROVIDED IN ARTICLE IX HEREOF. - -------------------------------------------------------------------------------- TABLE OF CONTENTS ARTICLE I FORMATION AND PURPOSE...................................................................... -1- --------------------- 1.1 Formation.............................................................................. -1- --------- 1.2 Name................................................................................... -1- ---- 1.3 Registered Office/Agent................................................................ -1- ----------------------- 1.4 Purpose................................................................................ -2- ------- 1.5 Principal Place of Business............................................................ -2- --------------------------- 1.6 Fiscal Year............................................................................ -2- ----------- 1.7 Specific Powers........................................................................ -2- --------------- 1.8 Certificate............................................................................ -3- ----------- ARTICLE II MEMBERS................................................................................... -3- ------- ARTICLE III CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS.................................................. -3- --------------------------------------- 3.1 Specified Investment Contributions by Members.......................................... -3- --------------------------------------------- 3.2 Capital Contributions Generally........................................................ -4- ------------------------------- 3.3 Investment Accounts.................................................................... -5- ------------------- 3.4 Adjustments to Investment Accounts..................................................... -6- ---------------------------------- 3.5 Tax Allocations........................................................................ -6- --------------- 3.6 Other Activities of the Members........................................................ -6- ------------------------------- ARTICLE IV STATUS AND RIGHTS OF MEMBERS.............................................................. -6- ---------------------------- 4.1 Limited Liability...................................................................... -6- ----------------- 4.2 No Make-Up............................................................................. -7- ---------- 4.3 Return of Distributions of Capital..................................................... -7- ---------------------------------- ARTICLE V DISTRIBUTIONS.............................................................................. -7- ------------- 5.1 No Right to Withdraw................................................................... -7- -------------------- 5.2 Distributions.......................................................................... -7- ------------- ARTICLE VI DESIGNATION, RIGHTS, AND DUTIES OF THE ADMINISTRATIVE MEMBER.............................. -8- ------------------------------------------------------------ 6.1 Management by the Administrative Member................................................ -8- --------------------------------------- 6.2 Third Party Reliance................................................................... -9- -------------------- 6.3 Attribution of Income, Expense and Capital Contributions............................... -9- -------------------------------------------------------- 6.4 Tax Matters............................................................................ -9- ----------- 6.5 Officers; Agents....................................................................... -10- ---------------- 6.6 Other Activities of the Administrative Member.......................................... -10- --------------------------------------------- 6.7 Fiduciary Duties....................................................................... -10- ---------------- ARTICLE VII EXPENSES................................................................................. -10- --------
ARTICLE VIII BOOKS OR ACCOUNT, RECORDS AND REPORTS.......................................................... -11- ------------------------------------- ARTICLE IX TRANSFER OF MEMBERS' INTERESTS................................................................... -11- ------------------------------ ARTICLE X LIABILITIES AND INDEMNIFICATION OF THE MEMBERS.................................................... -11- ---------------------------------------------- 10.1 Liabilities of the Members, etc........................................................... -11- ------------------------------- 10.2 Indemnification........................................................................... -12- --------------- 10.3 Cost of Litigation........................................................................ -13- ------------------ ARTICLE XI DURATION AND DISSOLUTION OF THE COMPANY.......................................................... -13- --------------------------------------- ARTICLE XII REMOVAL, DISSOLUTION, ETC. OF MEMBERS........................................................... -14- ------------------------------------- 12.1 Removal of Members........................................................................ -14- ------------------ 12.2 Status of a Former Member................................................................. -14- ------------------------- 12.3 Acknowledgments; Full and Final Settlement................................................ -14- ------------------------------------------ 12.4 Contributions by Former Members........................................................... -15- ------------------------------- ARTICLE XIII AMENDMENTS; ADDITIONAL MEMBERS................................................................. -15- ------------------------------ 13.1 Consent to Amendments..................................................................... -15- --------------------- 13.2 Amendments by Administrative Member....................................................... -15- ----------------------------------- 13.3 Additional Members; Classes of Members.................................................... -15- -------------------------------------- 13.4 Binding Effect............................................................................ -16- -------------- 13.5 Filings................................................................................... -16- ------- ARTICLE XIV MISCELLANEOUS................................................................................... -16- ------------- 14.1 Waiver of Partition....................................................................... -16- ------------------- 14.2 Representations by the Members............................................................ -16- ------------------------------ 14.3 Entire Agreement.......................................................................... -17- ---------------- 14.4 Successors and Assigns.................................................................... -17- ---------------------- 14.5 Interpretation............................................................................ -17- -------------- 14.6 Captions.................................................................................. -17- -------- 14.7 Severability.............................................................................. -17- ------------ 14.8 Counterparts.............................................................................. -17- ------------ 14.9 Notices................................................................................... -18- ------- 14.10 Additional Documents...................................................................... -18- -------------------- 14.11 References................................................................................ -18- ---------- 14.12 Consent to Jurisdiction................................................................... -18- ----------------------- 14.13 WAIVER OF JURY TRIAL...................................................................... -19- -------------------- 14.14 Governing Law............................................................................. -19- ------------- 14.15 Power of Attorney......................................................................... -20- ----------------- 14.16 Tax Status................................................................................ -21- ---------- 14.17 No Third Party Rights..................................................................... -21- ---------------------
ARTICLE XV DEFINED TERMS................................................................................... -21- -------------
BAIN CAPITAL CLEC INVESTORS, L.L.C. LIMITED LIABILITY COMPANY AGREEMENT THIS LIMITED LIABILITY COMPANY AGREEMENT of Bain Capital CLEC Investors, L.L.C. is dated as of April 11, 2000 by and among the Members of the Company whose names are set forth on the signature pages hereto and listed on Schedule I. For purposes of this Agreement certain capitalized terms have - ---------- specifically defined meanings which are either set forth or referred to in Article XV. WHEREAS, the Members wish to form a limited liability company pursuant to and in accordance with the Act in order to conduct the business described herein; and WHEREAS, the Members wish to enter into this Agreement to provide for, among other things, the management of the business and affairs of the Company, the allocation of profits and losses among the Members, the respective rights and obligations of the Members to each other and to the Company, and certain other matters. NOW, THEREFORE, the Members agree as follows: ARTICLE I FORMATION AND PURPOSE --------------------- 1.1 Formation. The Members hereby form a limited liability company --------- pursuant to the Act effective retroactively to the filing of the Certificate with the Secretary of State of the State of Delaware. The rights, duties and liabilities of the Members shall be determined pursuant to the Act and this Agreement. To the extent that such rights, duties or obligations are different by reason of any provision of this Agreement than they would be in the absence of such provision, this Agreement shall, to the extent permitted by the Act, control. 1.2 Name. The name of the Company is Bain Capital CLEC Investors, ---- L.L.C. The business of the Company may be conducted under that name or, upon compliance with applicable laws, any other name that the Administrative Member deems appropriate or advisable. The Administrative Member shall file any fictitious name certificates and similar filings, and any amendments thereto, that the Administrative Member considers appropriate or advisable. 1.3 Registered Office/Agent. The registered office required to be ----------------------- maintained by the Company in the State of Delaware pursuant to the Act shall initially be c/o Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805. The name and address of the registered agent of the Company pursuant to the Act shall initially be Corporation Service Company, 1013 Centre Road, Wilmington, Delaware 19805. The Company may, upon -1- compliance with the applicable provisions of the Act, change its registered office or registered agent from time to time in the discretion of the Administrative Member. 1.4 Purpose. The Company is formed and continued for the object and ------- purpose of (a) making such investments as the Administrative Member may determine (the "Specified Investments"), and to engage in any and all activities --------------------- necessary, advisable, convenient or incidental to the making, management or disposition of such investments; and (b) engaging in any other activities as may be lawfully carried on by a limited liability company formed under the Act. 1.5 Principal Place of Business. The Company shall have its principal --------------------------- place of business at Two Copley Place, Boston, Massachusetts 02116, or at such other place or places as the Administrative Member may, from time to time, designate. 1.6 Fiscal Year. The fiscal year of the Company shall end on December 31 ----------- or on such other date in each year as is required by Code Section 706 and the regulations thereunder. 1.7 Specific Powers. Without limiting the generality of Section 1.4, the --------------- Company shall have the power and authority to take any and all actions necessary, appropriate, proper, advisable, incidental or convenient to or for the furtherance of the purpose set forth in Section 1.4, including, but not limited to, the power: 1.7.1 to conduct its business, carry on its operations and have and exercise the powers granted to a limited liability company by the Act or under any other applicable law in any jurisdiction, whether domestic or foreign, that may be necessary, convenient or incidental to the accomplishment of the purposes of the Company; 1.7.2 to negotiate, enter into, renegotiate, extend, renew, terminate, modify, amend, waive, perform and carry out contracts of any kind, including without limitation contracts with any Member or any Affiliate thereof, in connection with, convenient to, or incidental to the accomplishment of the purposes of the Company; 1.7.3 to purchase, take, receive, subscribe for or otherwise acquire, own, hold, vote, use, employ, sell, mortgage, lend, pledge, or otherwise dispose of, and otherwise use and deal in and with, shares or other interests in or obligations of corporations, associations, general or limited partnerships, trusts, limited liability companies, or individuals or direct or indirect obligations of the United States or of any government, state, territory, governmental district or municipality or of any instrumentality of any of them; 1.7.4 to sue and be sued, complain and defend, and participate in administrative or other proceedings, in its name; -2- 1.7.5 to elect and designate one or more managers of the Company and to appoint officers, employees, agents and representatives of the Company, and define their duties and fix their compensation; 1.7.6 to indemnify any Person in accordance with this Agreement; 1.7.7 to cease its activities and cancel its Certificate; 1.7.8 to pay, collect, compromise, litigate, arbitrate or otherwise adjust or settle any and all other claims or demands of or against the Company or to hold such proceeds against the payment of contingent liabilities; and 1.7.9 to make, execute, acknowledge and file any and all documents or instruments necessary, convenient or incidental to the accomplishment of the purpose of the Company. 1.8 Certificate. The filing by Colleen Sullivan of the Certificate as an ----------- "authorized person" within the meaning of the Act is hereby authorized and ratified in all respects, and the Administrative Member, Philip J. Smith, and Edward J. Hudson are designated as "authorized persons" within the meaning of the Act to execute, deliver and file any amendments, restatements or cancellation of the Certificate, and any other certificates necessary for the Company to qualify to do business in a jurisdiction in which the Company may wish to conduct business. ARTICLE II MEMBERS ------- The Company shall consist of the Members listed on Schedule I hereto and ---------- such substituted or additional Members as shall be admitted to the Company pursuant to the terms of this Agreement. No real or other property of the Company shall be deemed to be owned by any Member individually, but shall be owned by and title shall be vested solely in the Company. The interests of the Members in the Company shall constitute personal property. ARTICLE III CAPITAL CONTRIBUTIONS, CAPITAL ACCOUNTS --------------------------------------- -3- 1.9 Specified Investment Contributions by Members. With respect to each --------------------------------------------- Specified Investment, the Administrative Member shall offer to one or more of the Members (in such amounts as are determined in the sole discretion of the Administrative Member) the opportunity to make a contribution to the capital of the Company (a "Capital Contribution") with respect to such Specified -------------------- Investment, such that the aggregate of the Capital Contributions to be made by the Members would enable the Company to make such Specified Investment. In allocating Specified Investments among some or all of the Members, the Administrative Member shall be under no fiduciary or other duty to allocate any interest in any Specified Investments to any Member. With respect to each Specified Investment, each Member or Former Member who makes a Capital Contribution with respect thereto is sometimes referred to as a "Participating ------------- Member" and the amount of such Capital Contribution (and any Capital - ------ Contribution pursuant to Section 3.2.1 which is attributed by the Administrative Member to such Specified Investment) is sometimes referred to as one of such Member's or Former Member's "Investment Contributions." If any Member offered ------------------------ the opportunity to participate in a Specified Investment elects not to participate, the Administrative Member may (a) reduce the amount of such Specified Investment accordingly, (b) make all or any part of the amount offered to the non-participating Member available to the Participating Members in such proportions as the Administrative Member shall determine, or (c) do any combination of the foregoing. Investment Contributions of each Participating Member, as so determined, for each Specified Investment shall be set forth in Schedule I as from time to time in effect. - ---------- 1.10 Capital Contributions Generally. ------------------------------- 1.10.1 Each Member shall contribute to the Company each of the Capital Contributions it has elected to contribute pursuant to an offer from the Administrative Member pursuant to Section 3.1, provided, however, -------- ------- that the Administrative Member may permit Investment Contributions with respect to particular Specified Investments to be contributed over time upon demand of the Administrative Member in order to meet the capital contribution requirements of such underlying Specified Investments. 1.10.2 Each Member or Former Member shall also contribute to the Company Capital Contributions requested from time to time by the Administrative Member to fund expenses of the Company. Such Capital Contributions shall be made by Members or Former Members in proportion to balances in Investment Accounts (as defined below) to which such expenses relate, among the Members and Former Members pro rata, or on such other reasonable basis as the Administrative Member shall determine in its sole discretion. If for any reason a Member or Former Member fails to make a Capital Contribution requested in accordance with Section 3.2.1 or this Section 3.2.2 or any other payment provided for herein, then, in addition to any other remedy the Company may have, the Administrative Member may pursue any one or more of the following courses of action: (a) commence legal proceedings against the defaulting Member or Former Member to collect the due and unpaid amount plus interest thereon (at a per annum rate (the "Applicable Interest Rate") equal to the lesser ------------------------ -4- of (i) 4% plus the rate from time to time announced by Morgan Guaranty Trust Company of New York as its prime or base rate or (ii) the highest rate permitted by law) and the expenses of collection, including reasonable attorneys' fees, (b) remove the defaulting Member in accordance with the provisions of Article XII hereof, or (c) collect and apply toward the due and unpaid amount plus interest thereon at the Applicable Interest Rate any amounts owed to such defaulting Member or Former Member from the Company or any Company or other entity in which such defaulting Member or Former Member has invested that is affiliated with the Company or the Administrative Member (an "Affiliated Company"). Each Member or Former ------------------ Member hereby agrees that amounts owed to such Member or Former Member from the Company or any Affiliated Company may be collected and applied by the administrative member or the managing general partner of any Affiliated Company to amounts owed by such Members or Former Members to the Company or any Affiliated Company. The failure of any one or more Members or Former Members to make any capital contribution when due shall not relieve any other Member or Former Member of his obligation to make his contribution when due. 1.10.3 The Capital Contributions of each Member or Former Member pursuant to Sections 3.2.1 or 3.3.2 above shall be payable to the Company, at its principal office or such other place as the Administrative Member may designate, in immediately available funds on such dates as the Administrative Member may designate . 1.10.4 No Member or Former Member shall be entitled to demand or receive any distribution of or with respect to his Capital Contributions or Investment Accounts except as specifically provided in this Agreement. 1.10.5 Notwithstanding anything to the contrary in this Agreement, the Administrative Member may, in its sole discretion, cause the Company to invest in the securities of an issuer of a Specified Investment, including without limitation by purchase, exchange or in connection with the exercise of purchase rights with respect to securities of such issuer, any cash or other property received by the Company from such issuer in respect of such Specified Investment, in which event, at the sole discretion of the Administrative Member, either (x) the securities so purchased by the Company will be included in such Specified Investment or (y) the securities so purchased by the Company will be treated, for all purposes of this Agreement, as a new Specified Investment and the Investment Account of each Member with respect to such new Specified Investment will equal the amount by which such Member's Investment Account with respect to the original Specified Investment was reduced in connection with such new investment. 1.11 Investment Accounts. A capital account shall be kept for each ------------------- Participating Member on the books of the Company with respect to each Specified Investment (each such -5- account is herein called an "Investment Account"), which shall be (a) increased ------------------ by the sum of (i) all Investment Contributions made by such Participating Member from time to time with respect to such Specified Investment plus (ii) such Participating Member's allocable shares of Specified Net Income or other income and gains as provided in Section 3.4, and (b) decreased by the sum of (i) such Participating Member's allocable share of Specified Net Loss or other losses, deductions and expenses as provided in Section 3.4, plus (ii) distributions to such Participating Member as provided in Article V, in each case with respect to such Specified Investment. 1.1 1.12 Adjustments to Investment Accounts. The Investment Accounts of ---------------------------------- Participating Members shall be adjusted as follows: (a) Specified Net Income and Specified Net Loss with respect to a Specified Investment shall be allocated to the Investment Account of the Participating Members (with respect to such Specified Investment) in proportion to each Participating Member's Investment Contribution (with respect to such Specified Investment). (b) All other income and gains of the Company shall be credited, and all other losses, deductions and expenses of the Company shall be debited, to the respective Investment Accounts of the Members and Former Members in the Administrative Member's sole discretion. 1.13 Tax Allocations. Items of income, gain, loss, deduction, expense and --------------- credit realized by the Company shall, for each fiscal period, be allocated, for federal, state and local income tax purposes, among the Participating Members in conformity with Section 3.4, subject, however, to any adjustment required to comply with Treasury Regulations. 1.14 Other Activities of the Members. Except as provided in any other ------------------------------- agreement to which they are a party (or by which they are bound), nothing in this Section 3.6 shall affect any obligation of any Member pursuant to any other agreement to which it may be party. Any Member may engage independently or with others in other business ventures of every nature and description. Neither the Company nor any other Members shall have any rights or obligations in and to such independent ventures or the income or profits derived therefrom. None of the Members nor any Affiliate of any Member shall be obligated to present any particular investment or business opportunity to the Company even if the opportunity is of a character which, if presented to the Company, could be undertaken by the Company. Each of the Members and its Affiliates shall have the right to undertake any such opportunity for itself for its own account or on behalf of another or to recommend any such opportunity to other Persons. ARTICLE IV STATUS AND RIGHTS OF MEMBERS ---------------------------- -6- 1.15 Limited Liability. Except as otherwise provided by the Act, the ----------------- debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member nor any other Indemnified Party shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being an Indemnified Party. All Persons dealing with the Company shall look solely to the assets of the Company for the payment of the debts, obligations or liabilities of the Company. 1.16 No Make-Up. In no event shall any Member or Former Member be required ---------- to make up any deficiency in such Member's or Former Member's Investment Accounts upon the dissolution or termination of the Company. 1.17 Return of Distributions of Capital. Except as otherwise expressly ---------------------------------- required by law, a Member or Former Member, in its capacity as such, shall have no liability either to the Company or any of the Company's creditors in excess of (a) the amount of its Capital Contributions actually made, (b) its share of any assets and undistributed profits of the Company, (c) its obligation to make Capital Contributions as required by this Agreement, and (d), to the extent required by law, the amount of any Distributions wrongfully distributed to it. Except as required by law or a court of competent jurisdiction, no Member, Former Member or investor in or partner of a Member or Former Member shall be obligated by this Agreement to return any Distribution to the Company or pay the amount of any Distribution for the account of the Company or to any creditor of the Company. However, if any court of competent jurisdiction holds that, notwithstanding the provisions of this Agreement, any Member or Former Member is obligated to return or pay any part of any Distribution, the obligation shall be that of such Member or Former Member alone, and not of any other Member or Former Member unless the court so provides. The amount of any Distribution returned to the Company by or on behalf of a Member or Former Member or paid by or on behalf of a Member or Former Member for the account of the Company or to a creditor of the Company shall be added to the account or accounts from which it was subtracted when it was distributed to the Member or Former Member. ARTICLE V DISTRIBUTIONS ------------- 1.18 No Right to Withdraw. No Member or Former Member shall have the right -------------------- to withdraw or demand distributions of any amount in or with respect to its Investment Accounts. 1.19 Distributions. The Administrative Member may in its sole discretion ------------- distribute to Participating Members any Specified Investment (or any portion thereof) or any other asset of the Company with respect to a Specified Investment, provided that any such distribution is then valued at the fair market value thereof as determined by the Administrative Member. The decision of the Administrative Member to distribute, retain or sell a Specified Investment (or any portion thereof) and its judgment as to the value thereof shall be binding and conclusive on -7- all parties hereto. Any such distribution shall be to Participating Members pro rata in proportion to the respective amounts of the positive balances in their Investment Accounts with respect to the Specified Investment. Notwithstanding anything to the contrary in this Agreement, in the case of a sale or other transaction that will result in Specified Net Income or Specified Net Loss, the Administrative Member may determine, with the consent of each Participating Member affected by such determination, that (i) the portion of the Specified Investment that will be included in such sale or other transaction shall be determined on a designated basis that is not proportional among the Participating Members according to their Investment Accounts, (ii) the Specified Net Income or Specified Net Loss resulting from such sale or other transaction will be allocated on the non-proportional basis so designated, and (iii) future allocations of Specified Net Income and Specified Net Loss from the Specified Investment will be adjusted appropriately (as determined by the Administrative Member in its sole discretion) to increase the share of Participating Members whose Specified Investment was included in the sale or other transaction on less than a proportional basis and to decrease the share of Participating Members whose Specified Investment was included in the sale or other transaction on more than a proportional basis. Notwithstanding anything to the contrary in this Agreement, in connection with a sale or other transaction that will result in Specified Net Income or Specified Net Loss with respect to a Specified Investment, the Administrative Member may determine, with the consent of each Participating Member receiving a distribution in kind, that some or all of the Participating Members will receive a distribution in kind of a portion of the Specified Investment in lieu of including such portion in the sale or other transaction. If any asset of the Company is distributed in kind, then for purposes of determining Specified Net Income or Specified Net Loss such asset shall be deemed to have been sold by the Company for an amount equal to its fair market value (net of related expenses) as determined by the Administrative Member. Notwithstanding the foregoing, the Administrative Member may withhold making a distribution to any Participating Member until such Participating Member has provided the Administrative Member with all necessary information and assurances (including an opinion of counsel satisfactory to the Administrative Member) requested by the Administrative Member to determine that such distribution will be in compliance with all applicable laws. Notwithstanding any provision to the contrary contained in this Agreement, the Company, and the Administrative Member on behalf of the Company, shall not make a distribution to any Member on account of its interest in the Company if such distribution would violate the Act. ARTICLE VI DESIGNATION, RIGHTS, AND DUTIES ------------------------------- OF THE ADMINISTRATIVE MEMBER ---------------------------- -8- 1.20 Management by the Administrative Member. The "Administrative Member" --------------------------------------- --------------------- of the Company shall be Bain Capital Fund VI, L.P. If Bain Capital Fund VI, L.P. ceases to be the Administrative Member for any reason, then a substitute therefor may be designated by a Majority in Interest of the Members. Except as limited by the Act, any other applicable law or this Agreement, the Administrative Member shall have the exclusive right and power to manage the business of the Company and is authorized to do on behalf of the Company all things which, in its sole judgement, are necessary or appropriate to carry out the Company's purpose. All determinations, decisions and actions of the Administrative Member may be made by it in its sole discretion and will be conclusive and binding on the Company and all Members. The Administrative Member shall have the power to delegate authority to engage in certain transactions to other Members in any manner that it determines, in its sole discretion. The Administrative Member shall devote such time to the business and affairs of the Company as it deems necessary in its sole discretion. The Administrative Member may employ, on behalf of the Company, such persons, firms or corporations (including accountants, attorneys and persons who are Members) as it deems advisable for the conduct of the business of the Company, on such terms and for such compensation as the Administrative Member may determine. No Member (other than a Member who is the Administrative Member), in its capacity as such or as an officer of the Administrative Member, shall take part in the control of the business of the Company, nor shall any Member (other than a Member who is the Administrative Member), in its capacity as such or as an officer of the Administrative Member, have any right or authority to act for or bind the Company, except as expressly permitted by the Administrative Member. Each Member and Former Member agrees that all determinations of the Administrative Member with respect to the internal management and operations of the Company under this Agreement, including without limitation all determinations under Articles III, V, VII, VIII, IX, XI, XII and XIV, shall be made solely by the Administrative Member or such other person specifically authorized to do so in writing by the Administrative Member, and not by any other Member or Former Member in his capacity as a managing director or other officer or employee of the Administrative Member. 1.21 Third Party Reliance. Third parties dealing with the Company are -------------------- entitled to rely conclusively upon the authority of the Administrative Member as set forth in this Agreement. 1.22 Attribution of Income, Expense and Capital Contributions. The -------------------------------------------------------- Administrative Member will in its sole discretion make determinations as to the attribution of each item of expense, deduction, loss, gain and income of the Company, and of Capital Contributions made pursuant to Section 3.2, to Investment Accounts or to such other accounts as the Administrative Member may determine in its sole discretion. -9- 1.23 Tax Matters. The Administrative Member is hereby designated as the ----------- "tax matters partner" within the meaning of Section 6231(a)(7) of the Code and analogous provisions of state, local or foreign law, to manage all administrative tax proceedings conducted at the Company level by the Internal Revenue Service with respect to Company matters, and is specifically directed and authorized to take whatever steps it, in its sole discretion, deems necessary or desirable to perfect such designation, including, without limitation, filing any forms or documents with the Internal Revenue Service and taking such other action as may from time to time be required under Treasury regulations. Expenses of administrative proceedings relating to the determination of Company items at the Company level undertaken by the Administrative Member, in its capacity as tax matters partner, will be deemed to be Company expenses. 1.24 Officers; Agents. The Administrative Member shall have the power to ---------------- appoint agents (who may be referred to as officers) to act for the Company with such titles, if any, as the Administrative Member deems appropriate and to delegate to such officers or agents such of the powers to manage the administrative affairs of the Company as are granted to the Administrative Member hereunder, including the power to execute documents on behalf of the Company, as the Administrative Member may in its discretion determine; provided, -------- however, that no such delegation by the Administrative Member shall cause it to - ------- cease to be the Administrative Member hereunder. The Administrative Member, in its discretion, may by written instrument signed by the Administrative Member ratify any act previously taken by an officer or agent acting on behalf of the Company. 1.25 Other Activities of the Administrative Member. Except as otherwise --------------------------------------------- specifically provided herein, the Administrative Member and its Affiliates may have business interests and engage in business activities in addition to those connected with the Company, which interests and activities may be similar to or different from those of the Company and may include without limitation acquiring interests as a partner, a stockholder, or otherwise in other entities. In conducting business activities or acquiring business interests whether different from or similar to those of the Company, the Administrative Member and its Affiliates shall, except as specifically provided to the contrary herein, be under no duty or obligation to make business opportunities available to the Company. 1.26 Fiduciary Duties. To the extent that, at law or in equity, the ---------------- Administrative Member has duties (including fiduciary duties) and liabilities relating thereto to the Company, any Member or any Former Member, the Administrative Member acting in connection with the Company's business or affairs shall not be liable to the Company, any Member or any Former Member for its good faith reliance on the provisions of this Agreement. The provisions of this Agreement, to the extent that they restrict the duties and liabilities of the Administrative Member otherwise existing at law or in equity, are agreed by the Members to replace such other duties and liabilities of the Administrative Member. -10- ARTICLE VII EXPENSES -------- The Company will pay all expenses related to its operations and formation not paid by third parties. No Member (including without limitation the Administrative Member and each of its Affiliates) or Former Member shall be entitled to receive any compensation from the Company by reason of its or his services. ARTICLE VIII BOOKS OR ACCOUNT, RECORDS AND REPORTS ------------------------------------- The Company shall maintain books and records on the basis utilized in preparing the Company's federal income tax return, incorporating the accrual or cash method of accounting, as the Administrative Member may determine in its sole discretion, and such other records as may be required in connection with the preparation and filing of the Company's federal and state income tax returns or other tax returns or reports and for purposes of the records specified in Article III. ARTICLE IX TRANSFER OF MEMBERS' INTERESTS ------------------------------ A Member's interest in the Company may not be sold, assigned, encumbered, pledged, hypothecated, mortgaged, exchanged, given away, or in any other way disposed of or transferred, in whole or in part, voluntarily or involuntarily, by operation of law or otherwise (a "Transfer") except that a Member's interest -------- in the Company may be Transferred with the prior written consent of the Administrative Member, which may be granted or withheld in the sole discretion of the Administrative Member. Any attempted Transfer not made in accordance with the provisions of this Article IX shall be null and void. ARTICLE X LIABILITIES AND INDEMNIFICATION OF THE MEMBERS ---------------------------------------------- 1.27 Liabilities of the Members, etc. Neither any Member nor any director, ------------------------------- officer, stockholder or controlling person of the Company or any Member (each of the foregoing being referred to as an "Indemnified Party") shall be liable, ----------------- responsible, or accountable, in damages or otherwise, to any Member or to the Company for any act or omission taken or suffered in compliance with this Agreement that does not constitute gross negligence, willful misfeasance, bad faith or a reckless disregard of duties involved in the conduct of its office. Each Indemnified Party shall be entitled to rely upon the advice of counsel selected by the Company, and shall not be liable, responsible, or accountable, in damages or otherwise, to any Member or to the Company, for any act or omission taken or suffered in good faith in reliance on such -11- advice. For all purposes of this Agreement, actions or omissions taken or suffered by the Administrative Member regarding any matter which this Agreement expressly or implicitly provides is in its discretion or sole discretion, shall be conclusively deemed not to constitute gross negligence, willful misfeasance, bad faith or a reckless disregard of duties involved in the conduct of its office. For all purposes of this Agreement, actions or omissions taken or suffered by an Indemnified Party that do not constitute gross negligence, willful misfeasance, bad faith or a reckless disregard of duties involved in the conduct of its, his or her office considering the interests, taken as a whole, of the Company and any other companies or entities which are advised by, or affiliated with, the Administrative Member, and the entities in which they have invested shall be conclusively deemed not to constitute gross negligence, willful misfeasance, bad faith or a reckless disregard of duties involved in the conduct of its, his or her office. 1.28 Indemnification. --------------- 1.28.1 The Company shall indemnify to the maximum extent permitted by applicable law each Indemnified Party from and against all losses and liabilities (including amounts paid in respect of judgments, fines or penalties, or settlements of litigation approved by the Administrative Member, and legal fees and expenses reasonably incurred in connection with any pending or threatened litigation or proceeding), in each case suffered by virtue of having served as an Indemnified Party or as a director, officer, employee, Member or agent of any Person in which the Company has invested, with respect to any action or omission taken or suffered in compliance with this Agreement that does not constitute gross negligence, willful misfeasance, bad faith or a reckless disregard of duties involved in the conduct of its, his or her office. The rights of each Indemnified Party under this Section 10.2 shall inure to the benefit of the heirs, legal representatives, successors and assigns of such Indemnified Party. However, it is expressly understood and agreed that no Indemnified Party shall have any right of exculpation, indemnification or otherwise under this Agreement with respect to any action or omission taken or suffered by such Person at any time after such Person's termination, removal or withdrawal (whether voluntary, involuntary, by operation of law or otherwise) as a Member or other Indemnified Party, or in respect of any controversy relating in any respect to such termination, removal or withdrawal, or in respect of any claim or cause of action of such Indemnified Party against the Company, the Administrative Member or any other Member. -12- 1.28.2 The Company may pay the expenses incurred by an Indemnified Party for which such Indemnified Party would be entitled to indemnification under this Agreement in investigating, preparing or defending any proceeding in advance of the final disposition thereof, upon receipt of an undertaking by such Indemnified Party to repay such payment to the Company if there is a final determination that it or he is not entitled to indemnification for such expense under this Agreement or that such indemnification is not permitted by law. 1.28.3 Notwithstanding anything to the contrary in this Agreement, including without limitation Sections 10.2.1 and 10.2.2, the Company's obligation to indemnify Indemnified Parties pursuant to Sections 10.2.1 and 10.2.2 shall be limited to assets of the Company. None of the provisions of this Section 10.2 shall be deemed to create or grant any rights in favor of Indemnified Parties which cannot be discharged out of the assets of the Company or in favor of anyone other than Indemnified Parties; this provision excludes, among others, any right of subrogation in favor of any insurer or surety. The rights of indemnification granted hereunder shall survive the dissolution, winding up and termination of the Company. 1.29 Cost of Litigation. In the event that any Member or Former Member ------------------ initiates any proceeding against the Company or any Indemnified Party and a judgment or order not subject to further appeal or sole discretionary review is rendered in respect of such proceeding for the Company or such Indemnified Party, as the case may be, such Member or Former Member shall be solely liable for all costs and expenses of the Company or such Indemnified Party, as the case may be, attributable thereto. ARTICLE XI DURATION AND DISSOLUTION OF THE COMPANY --------------------------------------- The existence of the Company shall continue until the first to occur of the following events, but not upon any other event: (a) a determination by the Administrative Member, in its sole discretion, that the Company shall be dissolved, and its affairs wound up or (b) the occurrence of any other event that causes the dissolution of the Company under the Act. Upon such occurrence, unless the business of the Company is continued as permitted by the Act, the Company shall be wound up and terminated. In connection with the dissolution and winding up of the Company, the Administrative Member or, if there is no Administrative Member, a liquidator appointed by a Majority in Interest of the Members (the "Liquidator"), shall proceed to distribute the Specified ---------- Investments or, at the sole discretion of such Person or Persons, sell or liquidate the assets of the Company (including the conversion to cash or cash equivalents of its notes or accounts receivable) and make a final distribution of the assets (including Specified Investments, to the extent not otherwise sold by the Company) of the Company in the manner set forth in Section 5.2, provided that any distribution of any property other than cash is then valued at the fair market value thereof as determined in good faith by such Person or Persons, all in accordance with the Act. Upon the completion of such distribution of Company -13- property, the Company shall be terminated, and the Administrative Member or the Liquidator, as the case may be, shall cause the cancellation of all qualifications of the Company in jurisdictions other than the State of Delaware and shall cancel the Certificate in accordance with the Act. In the reasonable sole discretion of the Administrative Member, or the Liquidator, as the case may be, all or a portion of the distributions that would otherwise be made to the Members or the Former Members may be (a) distributed to a trust established for the benefit of the Members and Former Members for purposes of liquidating Company assets, collecting amounts owed to the Company and paying any liabilities or obligations of the Company or the Administrative Member or the Liquidator, as the case may be, arising out of, or in connection with, this Agreement or the Company's business or affairs, provided that the Administrative Member or the Liquidator, as the case may be, will use its best efforts to establish such trust as a pass-through entity for tax purposes; or (b) withheld, with respect to any Member or Former Member, to provide a reserve for the payment of such Member's or Former Member's share of future Company expenses and indemnification obligations, provided that such withheld amounts shall be distributed to the Members or Former Members as soon as the Administrative Member or the Liquidator, as the case may be, determines, in its reasonable sole discretion, that there are no more such Company expenses or indemnification obligations. The assets of any trust established in connection with clause (a) above shall be distributed to the Members or Former Members from time to time, in the reasonable sole discretion of the Administrative Member or the Liquidator, as the case may be, in the same proportions as the amount distributed to such trust by the Company would otherwise have been distributed to the Members or Former Members pursuant to this Agreement. ARTICLE XII REMOVAL, DISSOLUTION, ETC. OF MEMBERS ------------------------------------- 1.30 Removal of Members. Any Member may be removed by the Administrative ------------------ Member at any time and for any reason, with or without cause, with the effect that all interests of Members in the Company may be terminated "at will" at any time. All such decisions will be binding and conclusive on all Members and Former Members. A Member who is removed from the Company in accordance with this Article XII is referred to herein as a "Former Member." The date on which a Former ------------- Member is removed is referred to herein as his "Termination Date." ---------------- 1.31 Status of a Former Member. Each Former Member shall cease to be a ------------------------- Member of the Company, shall cease to be a Member within the meaning of the Act, and shall have no right to participate in any vote or consent of the Members. Former Members shall for all purposes (including federal income tax purposes) be allocated and report Company income consistent with the allocation rules provided for in Article III and shall be allocated and receive -14- distributions of Company income consistent with the distribution rules provided for in Article V. 1.32 Acknowledgments; Full and Final Settlement. Each Member hereby ------------------------------------------ acknowledges that investments made by the Company may suffer a diminution in value after the Termination Date of such Member and agrees to the maximum extent permitted by applicable law, that neither the Company nor the Administrative Member shall have any duty to any Former Member as to the preservation, enhancement or protection of assets of the Company. It is further agreed that allocations and distributions to a Former Member of his share of capital recovered by the Company and Specified Net Income and Specified Net Loss as determined by the Administrative Member in accordance with the provisions of this Agreement shall constitute full and final settlement of any and all claims that such Former Member might otherwise assert against the Company, its affiliates, and their respective Members, directors, officers, stockholders, employees, agents, successors and assigns, individually or in their official capacities, on account of such Former Member's removal as a Member and all matters pertaining thereto. Each Member hereby covenants and agrees that neither he nor any of his heirs, executors, administrators, successors, assigns or legal representatives will ever assert against the Company, its affiliates or their respective Members, directors, officers, stockholders, employees, agents, successors and assigns, individually or in their official capacities, any cause of action or claim arising out of or related to or in any way connected with his removal as a Member, other than a failure by the Company to make allocations and distributions to such Member, as a Former Member, of his share of capital recovered by the Company and Specified Net Income and Specified Net Loss as determined by the Administrative Member in accordance with the provisions of this Agreement. The Company's obligation to make such allocations and distributions to a Former Member is expressly contingent upon compliance by such Former Member with all of his obligations under this Article XII and failure by a Former Member to comply with such obligations will extinguish the Company's obligation to make allocations and distributions to him. 1.33 Contributions by Former Members. Each Member hereby covenants for ------------------------------- himself and his executors, administrators, estate, heirs, legal representatives, successors and assigns, that such Member will, at any time on demand after his removal from the Company, contribute to each of his former Members his proportionate share of any liability, judgment or cost of any kind (including the reasonable costs of the defense of any suit or action and any sums which may be paid in settlement thereof) that may be incurred by such former Members on account of or in connection with any matter or transaction occurring or state of affairs existing during the time he was a Member. Such proportionate share of liability, judgment or cost of any kind shall be determined according to this Agreement and the relevant Investment Accounts hereunder as they existed at the time such state of affairs, matter or transaction arose or occurred. -15- ARTICLE XIII AMENDMENTS; ADDITIONAL MEMBERS ------------------------------ 1.34 Consent to Amendments. Articles III, V, VI and XIII of this Agreement --------------------- may be modified or amended only with the written consent of the Administrative Member and a Majority in Interest of the Members. 1.35 Amendments by Administrative Member. Except as specified in Section ----------------------------------- 13.1, the Administrative Member shall have the authority to amend or modify any provision of this Agreement without any action by the other Members. No action of any Former Member shall be required for any amendment or modification of this Agreement. 1.36 Additional Members; Classes of Members. Any Person may be admitted to -------------------------------------- the Company as an additional or substitute Member only if (a) the Administrative Member in its sole discretion has consented in writing to the admission and (b) the Person has executed a counterpart of this Agreement (as modified or amended from time to time) and such other instruments as the Administrative Member deems necessary to confirm the undertaking of the Person to be bound by all the terms and provisions of this Agreement. The admission of a new Member in accordance with the foregoing does not require the consent of any other Person, including any other Member. In the event that any Members are admitted to the Company, the Administrative Member shall cause Schedule I to be updated to accurately reflect ---------- the information therein. No Member may Transfer its interest in the Company other than as contemplated by Article IX. The Members shall constitute a single class of Members for all purposes under the Act and this Agreement unless and to the extent that this Agreement specifically provides for different classes or groups of Members of the Company. 1.37 Binding Effect. Any amendment or modification of this Agreement -------------- pursuant to this Article XIII shall be binding on all Members. 1.38 Filings. The Administrative Member shall cause to be prepared and ------- filed any amendment to the Certificate that may be required to be filed under the Act as a consequence of any amendment to this Agreement. ARTICLE XIV MISCELLANEOUS ------------- 1.39 Waiver of Partition. Each of the Members hereby irrevocably waives ------------------- any and all rights that it may have to maintain any action for partition of any of the Company's property. 1.40 Representations by the Members. Each Member represents and warrants ------------------------------ that (a) the Member's interest in the Company is intended to be and is being acquired solely for the -16- Member's own account for the purpose of investment and not with a view to any sale or other disposition of all or any part thereof, (b) the Member is aware that interests in the Company have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), that such interests cannot be sold -------------- or otherwise disposed of unless they are registered thereunder or unless an exemption from such registration is available, that the Company has no present intention of so registering such interests under the Securities Act, and that accordingly such Member is able and is prepared to bear the economic risk of making a Capital Contribution and to suffer a complete loss of investment, (c) the Member's knowledge and experience in financial and business matters are such that the Member is capable of evaluating the risks of making a Capital Contribution, (d) the Member's determination to purchase the Member's interest in the Company, and make each Capital Contribution, has been, and in each case will be, made by such Member independent of and without reliance upon any other Member or Person other than such Member's investment advisor, if any, and independent of any statements or opinions as to the advisability of such purchase or Capital Contribution or as to the properties, business, prospects or condition (financial or otherwise) of any Person in which the Company may invest, or any other aspect of a Specified Investment, which may have been made or given by any such other Person, and (e) no Person other than such Member's investment advisor, if any, has acted or will act as an investment adviser with respect to such Member's investment in the Company or any Specified Investment or has provided or will provide any advice or information with respect to the value of an investment in the Company or any Specified Investment or the advisability of investing in, purchasing or selling an interest therein. The foregoing representations and warranties may be relied upon by the Company, and by the other Members, in connection with each Member's investment in the Company. 1.41 Entire Agreement. This Agreement constitutes the entire agreement ---------------- among the parties pertaining to the subject matter of this Agreement and supersedes all prior and contemporaneous agreements and understandings of the parties in connection with this Agreement. No prior, contemporaneous, or future covenant, representation, or condition not expressed in this Agreement or in an amendment to this Agreement adopted in accordance with Article XIII shall affect or be effective to interpret, change or restrict the express provisions of this Agreement. 1.42 Successors and Assigns. Except as herein otherwise specifically ---------------------- provided, this Agreement shall be binding upon and inure to the benefit of the parties and their legal representatives, heirs, administrators, executors, successors and assigns. 1.43 Interpretation. Wherever from the context it appears appropriate, each -------------- term stated in either the singular or the plural shall include the singular and the plural, and pronouns stated in the masculine, the feminine or neuter gender shall include the masculine, the feminine and the neuter. -17- 1.44 Captions. Captions contained in this Agreement are inserted only as a -------- matter of convenience and in no way define, limit or extend the scope or intent of this Agreement or any provision hereof. 1.45 Severability. If one or more of the provisions of this Agreement or ------------ any application of any such provision shall be invalid, illegal, or unenforceable in any respect, the validity, legality, and enforceability of any other provisions contained in this Agreement, and any other application of any such provision having any such invalid, illegal, or unenforceable application, shall not in any way be affected or impaired because of such invalidity, illegality, or unenforceability, and such other provisions shall be interpreted as being consistent with each other and with the omission of such invalid, illegal, or unenforceable provision or application to the extent possible. 1.46 Counterparts. This Agreement may be executed in various counterparts, ------------ all of which shall constitute but one and the same agreement among the parties, and shall be binding upon the respective parties. 1.47 Notices. All notices, demands and other communications under this ------- Agreement, other than notices of Specified Investment opportunities given pursuant to Section 3.1, shall be in writing and shall be deemed to have been given (a) by depositing the same in the United States mail, postage prepaid, certified or registered, return receipt requested, (b) by reputable express courier service (charges prepaid), or (c) by delivering same in person. Notices of Specified Investment opportunities given under Section 3.1 may be given orally or in accordance with the previous sentence. For purposes of notice, the addresses of the Members shall be as set forth in the records of the Company, and the address of the Company shall be as set forth in Section 1.5. Any Member may designate a different address to which notices or demands shall thereafter be directed and such designation shall be made by written notice to the Company at its address. 1.48 Additional Documents. If requested to do so by the Administrative -------------------- Member, each party hereto agrees to execute, with acknowledgment or affidavit, if required, any and all documents and writings and to do such further acts as may be necessary or expedient in connection with the creation of the Company and the achievement of its purposes, specifically including (a) any amendments to this Agreement and such certificates and other documents as the Administrative Member deems necessary or appropriate to qualify or continue the Company in all jurisdictions in which the Company conducts or plans to conduct business and (b) all such agreements, certificates, tax statements, tax returns and other documents as may be required of the Company or its Members by the laws of the United States of America, the State of Delaware or any other jurisdiction in which the Company conducts or plans to conduct business, or any political subdivision or agency thereof. 1.49 References. All references in this Agreement to any numbered Articles ---------- or Sections are, unless otherwise indicated, references to the Articles or Sections, as the case may -18- be, of this Agreement which are so numbered, as such may be amended. All references to numbered or lettered Schedules are references to the Schedules so numbered or lettered which are appended to this Agreement, as such Schedules may be amended from time to time. 1.50 Consent to Jurisdiction. Each Member and Former Member ----------------------- (a) irrevocably submits to the jurisdiction of the state courts of the State of Delaware and to the jurisdiction of the United States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement or relating to the subject matter hereof; (b) agrees that any such proceeding shall be brought or maintained only in such courts and that such party will not cause any such proceeding to be brought or maintained in any forum other than one of the above-named courts; (c) waives to the extent not prohibited by applicable law, and agrees not to assert by way of motion, as a defense or otherwise, in any such proceeding, any claim that he is not subject personally to the jurisdiction of the above-named courts, that he is immune from extraterritorial injunctive relief or other injunctive relief that might be awarded by one of the above-named courts, that his property is exempt or immune from attachment or execution by any of the above-named courts, that any such proceeding may not be properly brought or maintained in one of the above- named courts, that any such proceeding brought or maintained in the above- named courts should be dismissed on grounds of forum non conveniens, should be transferred to any court other than the above-named courts, or should be stayed or enjoined by (or by reason of the pendency of some other proceeding in) any court other than the above-named courts, or that this Agreement or the subject matter hereof may not be enforced in or by any of the above-named courts; and (d) provided that the proceeding in question has not been brought or maintained in violation of the preceding sentence, and so long as such proceeding is and remains pending before one of the above-named courts, consents to service of process in any such proceeding in any manner permitted by Delaware or federal law, hereby irrevocably appoints the Corporation Service Company, whose address is 1013 Centre Road, Wilmington, Delaware, or its successor, as such Member's or Former Member's agent for service of process in Delaware, agrees that service of process by registered or certified mail, return receipt requested, either to such agent or to him at his address in the records of the Company is reasonably calculated to give actual notice of any such proceeding and constitutes sufficient service of process in any such proceeding, and waives and agrees not to assert in any such proceeding (by way of motion, as a defense or otherwise) any claim that service of process made in accordance with this sentence does not constitute good and sufficient service of process. -19- 1.51 WAIVER OF JURY TRIAL. TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW -------------------- THAT CANNOT BE WAIVED, EACH MEMBER WAIVES, AND COVENANTS THAT SUCH PARTY WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM OR PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE SUBJECT MATTER HEREOF OR IN ANY WAY CONNECTED WITH THE DEALINGS OF ANY MEMBER OR THE COMPANY IN CONNECTION WITH ANY OF THE ABOVE, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT, TORT OR OTHERWISE. The Company or any Member may file an original counterpart or a copy of this Section 14.15 with any court as written evidence of the consent of the Members to the waiver of their rights to trial by jury. 1.52 Governing Law. This Agreement shall in all respects be governed by, ------------- interpreted and construed in accordance with, and all rights and remedies hereunder shall be governed by, the laws of the State of Delaware (other than its conflict of law provisions). In particular, it shall be construed to the maximum extent possible to comply with all of the terms and conditions of the Act. If, nevertheless, it shall be determined by a court of competent jurisdiction that any provision or wording of this Agreement shall be invalid or unenforceable under the Act or other applicable law, such invalidity or unenforceability shall not invalidate the entire Agreement. In that case, this Agreement shall be construed so as to limit any term or provision so as to make it enforceable or valid within the requirements of applicable law, and, in the event such term or provision cannot be so limited, this Agreement shall be construed to omit such invalid or unenforceable provisions. Each of the parties hereto agrees (a) that this Agreement involves at least $100,000 and (b) that this Agreement has been entered into by the parties hereto in express reliance upon 6 Del. C. (S)2708. ------- 1.53 Power of Attorney. Each of the Members does hereby irrevocably ----------------- constitute and appoint Bain Capital Fund VI, L.P. so long as it is the Administrative Member of the Company and any other Administrative Member of the Company, and the Liquidator, if any, appointed pursuant to Article XI (collectively, the "Managing Persons") the true and lawful attorney-in-fact and ---------------- agent of such Member, to execute, acknowledge, verify, swear to, deliver, record and file, in his or his assignees's name, place and stead, all instruments, documents and certificates which may from time to time be required by the laws of the United States of America, the State of Delaware and any other jurisdiction in which the Company conducts or plans to conduct business, or any political subdivision or agency thereof, to effectuate, implement and continue the valid existence of the Company, including, without limitation, the power and authority to execute, verify, swear to, acknowledge, deliver, record and file (a) all certificates and other instruments (including amendments to this Agreement) which the Managing Persons deem appropriate to qualify or continue the Company in all jurisdictions in which the Company conducts or plans to conduct business, (b) all instruments which the Managing Persons deem appropriate to reflect any amendment to this Agreement, including -20- any amendment that would (i) satisfy any requirements, conditions, guidelines or options contained in any opinion, directive, order, ruling or regulation of the Securities and Exchange Commission, the Internal Revenue Service, or any other federal or state agency or in any federal or state statute, compliance with which it deems to be in the best interest of the Company, (ii) change the name of the Company, or (iii) cure any ambiguity or correct or supplement any provision contained in this Agreement which may be incomplete or inconsistent with any other provision therein contained, (c) all conveyances and other instruments which the Managing Persons deem appropriate to reflect the dissolution and termination of the Company pursuant to the terms hereof, (d) all instruments relating to the admission of any Member, and (e) a certificate of assumed name and such other certificates and instruments as may be necessary under the fictitious or assumed name statutes from time to time in effect in the State of Delaware and all other jurisdictions in which the Company conducts or plans to conduct business. Any person dealing with the Company may conclusively presume and rely upon this power of attorney. It is expressly intended by each Member that the power of attorney granted by this Section 14.17 is coupled with an interest, shall be irrevocable, and shall survive and not be affected by the subsequent disability or incapacity of such Member (or if such Member is a corporation, Company, trust, association, limited liability company or other legal entity, by the dissolution or termination thereof). 1.54 Tax Status. The Members intend that the Company be treated as a ---------- partnership for federal and state income tax purposes and the Company shall file all tax returns on the basis consistent therewith. 1.55 No Third Party Rights. The provisions of this Agreement are for the --------------------- benefit of the Company, the Members and permitted assignees and no other Person, including creditors of the Company shall have any right or claim against the Company or any Member by reason of this Agreement or any provision hereof or be entitled to enforce any provision of this Agreement. ARTICLE XV DEFINED TERMS ------------- The following terms, when used in this Agreement, have the following meanings, unless otherwise expressly indicated: "Act" means the Delaware Limited Liability Company Act (6 Del. C. (S) 18- --- --- - 101, et seq.) as amended and in effect from time to time. ------ "Administrative Member" has the meaning given such term in Section 6.1. --------------------- "Affiliate" means, with respect to any specified Person, any Person that --------- directly or through one or more intermediaries controls or is controlled by or is under common control with the specified Person. As used in this definition, the term "control" means the possession, -21- directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise. "Affiliated Company" has the meaning given such term in Section 3.2.2. ------------------ "Agreement" means the Limited Liability Company Agreement of the Company --------- dated as of March ___, 2000, as amended from time to time. "Applicable Interest Rate" has the meaning given such term in Section ------------------------ 3.2.2. "Capital Contribution" means as to any Member, the amount contributed by -------------------- such Member (or its predecessors in interest in the Company) to the capital of the Company as provided in Sections 3.1 and 3.2. "Certificate" means the Certificate of Formation of the Company filed on ----------- February 1, 2000 and any and all amendments thereto and restatements thereof filed on behalf of the Company as permitted hereunder with the office of the Secretary of State of the State of Delaware. "Code" means the Internal Revenue Code of 1986, as amended. ---- "Company" means the limited liability company formed under and pursuant to ------- the Act and this Agreement. "Distribution" means the amount of cash and the fair market value of any ------------ other property distributed to a Member or a permitted assignee in respect of the Member's interest in the Company. "Former Member" has the meaning given such term in Section 12.1. ------------- "Indemnified Party" has the meaning given such term in Section 10.1. ----------------- "Investment Account" has the meaning given such term in Section 3.3. ------------------ "Investment Contribution" has the meaning given such term in Section 3.1. ----------------------- "Liquidator" has the meaning given such term in Article XI. ---------- "Majority in Interest of the Members" means, at any time, the Members ----------------------------------- holding Investment Accounts representing a majority of the aggregate amount of all Investment Accounts of the Partnership (measured without regard to the Specified Investments to which such Investment Accounts relate). -22- "Managing Persons" has the meaning given such term in Section 14.15. ---------------- "Members" means the Persons listed as members on the signature page to the ------- Agreement and any other Person that both acquires an Interest in the Company and is admitted to the Company as a Member pursuant to the Agreement. "Participating Member" has the meaning given such term in Section 3.1. -------------------- "Person" means an individual, partnership, limited liability company, ------ corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Securities Act" has the meaning given such term in Section 14.2. -------------- "Specified Investments" has the meaning given such term in Section 1.4. --------------------- "Specified Net Income" means, with respect to any Specified Investment -------------------- during any period, the net income, if any, of the Company attributable in the sole judgment of the Administrative Member to such Specified Investment for such period as determined for federal income tax purposes, provided that such income -------- shall be increased by the amount of all income of the Company attributable to such Specified Investment during such period that is exempt from federal income tax and decreased by the amount of all expenditures of the Company attributable to such Specified Investment during such period which are not deductible in computing the Company's income for federal income tax purposes and which do not constitute capital expenditures of the Company. "Specified Net Loss" means, with respect to any Specified Investment during ------------------ any period, the net loss, if any, of the Company attributable in the sole judgment of the Administrative Member to such Specified Investment for such period as determined for federal income tax purposes, provided that such loss -------- shall be decreased by the amount of all income of the Company attributable to such Specified Investment during such period that is exempt from federal income tax and increased by the amount of all expenditures of the Company attributable to such Specified Investment during such period which are not deductible in computing the Company's income for federal income tax purposes and which do not constitute capital expenditures of the Company. "Termination Date" has the meaning given such term in Section 12.1. ---------------- "Transfer" has the meaning given such term in Article IX. -------- -23- IN WITNESS WHEREOF, the parties have executed this Limited Liability Company Agreement as of the day and year first set forth above. Bain Capital Fund VI, L.P. Bain Capital VI Coinvestment Fund, L.P. By: Bain Capital Partners VI, L.P., their general partner By: Bain Capital Investors VI, Inc., its general partner By:______________________________________ Name: Title: Managing Director BCIP Associates II BCIP Trust Associates II BCIP Associates II-B BCIP Trust Associates II-B BCIP Associates II-C By: Bain Capital, Inc., their Managing Partner By:______________________________________ Name: Title: Managing Director PEP Investments Pty Ltd. By: Bain Capital, Inc., its attorney-in-fact By:______________________________________ Name: Title: Managing Director Brookside Capital Partners Fund, L.P. By:______________________________________ Name: Title: Managing Director Sankaty High Yield Asset Partners, L.P. By:______________________________________ Name: Title: Managing Director Sankaty High Yield Partners II, L.P. By:______________________________________ Name: Title: Managing Director RGIP, LLC By:______________________________________ Name: Title: Managing Member [Remainder of page intentionally left blank] SCHEDULE I ---------- SPECIFIED INVESTMENT: U.S. LEC CORP. SERIES A CONVERTIBLE PREFERRED STOCK - -------------------- Initial Capital Pro Rata Name of Member Commitment Percentage Bain Capital Fund VI, L.P. $ 42,648,130 42.6481% Bain Capital VI Coinvestment Fund, L.P. $ 47,322,184 47.3222% BCIP Associates II $ 2,595,563 2.5956% BCIP Trust Associates II $ 313,981 0.3140% BCIP Associates II-B $ 421,800 0.4218% BCIP Trust Associates II-B $ 155,640 0.1556% BCIP Associates II-C $ 428,043 0.4280% PEP Investments Pty Ltd. $ 142,160 0.1422% Brookside Capital Partners Fund, L.P. $ 3,482,500 3.4825% Sankaty High Yield Asset Partners, L.P. $ 497,500 0.4975% Sankaty High Yield Partners II, L.P. $ 1,492,500 1.4925% RGIP, LLC $ 500,000 0.5000% TOTAL $100,000,000 100.0000% ===== ============================== -26- EX-3 4 0004.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 3 REGISTRATION RIGHTS AGREEMENT This Agreement is entered into as of April 11, 2000 by US LEC Corp., a Delaware corporation (the "Company"), and the Persons whose names are set forth on the attached Schedule I (collectively, the "Investors"). A. The Company and the Investors have entered into a Series A Convertible Preferred Stock Purchase Agreement, dated as of the same date as this Agreement (the "Purchase Agreement"), pursuant to the terms and conditions of which (i) the Company is issuing and selling to the Investors, and the Investors are purchasing from the Company, an aggregate of up to 200,000 shares of Series A Convertible Preferred Stock and (ii) the Company is issuing an option (the "Option") to the Investors to purchase an aggregate of 100,000 shares of convertible preferred stock pursuant to the terms and conditions of an Option Agreement, dated as of the same date as this Agreement (the 200,000 shares of Series A Convertible Preferred Stock, the number of shares of convertible preferred stock (the "Option Stock") issued to the Investors upon the exercise of the Option, and any shares of convertible preferred stock issued as preferential dividends pursuant to the terms of the Series A Convertible Preferred Stock and Option Stock are collectively referred to herein as the "Preferred Shares"). B. The parties' execution and delivery of this Agreement is a condition of their respective obligations to close the Purchase Agreement. The parties agree as follows: 1. Definitions. Capitalized terms which are used in this Agreement without being defined have the same meanings that they are given in the Purchase Agreement. In addition, the following terms have these meanings: "Registrable Securities" means (i) any shares of Common Stock issued or issuable upon conversion of the Preferred Shares and (ii) any shares of Common Stock issued or issuable (A) as a dividend or distribution in respect of, or (B), in exchange for or replacement of, or (C) upon conversion or exercise of any warrant or other security issued or issuable as a dividend or distribution in respect of or in exchange for or replacement of, the Preferred Shares and any shares of Common Stock issued or issuable upon conversion of the Preferred Shares. Any Registrable Securities shall cease to be Registrable Securities (i) when they have been distributed to the public pursuant to a offering registered under the Securities Act or sold to the public through a broker, dealer or market maker in compliance with Rule 144 under the Securities Act (or any similar rule then in force) or repurchased by the Company or any Subsidiary or (ii) if and when they (or, in respect of issuable but not yet issued Registrable Securities, the underlying Preferred Shares or Common Stock) cease to be held by an Investor, a Permitted Transferee (as "Permitted Transferee" is defined in the Corporate Governance Agreement) or a transferee to whom an Investor or a Permitted Transferee has transferred Registrable Securities with a value of at least $50 million. "Registration Expenses" means all expenses incident to the Company's performance of or compliance with this Agreement, including all registration and filing fees, fees and expenses of compliance with securities or blue sky laws, printing expenses, messenger and delivery expenses, fees and disbursements of custodians, and fees and disbursements of counsel for the Company and all independent certified public accountants, underwriters (excluding discounts, commissions and underwriters' counsel fees) and other Persons retained by the Company. "Violation" means any of the following statements, omissions or violations: (i) any untrue statement or alleged untrue statement of a material fact contained or incorporated by reference in a registration statement pursuant to this Agreement, including any related preliminary or final prospectus, any amendment or supplement, or any document filed under state securities or "blue sky" laws, (ii) the omission or alleged omission to state a material fact required to be stated in any such registration statement, prospectus, amendment, supplement or document or necessary to make the statements in any such registration statement, prospectus, amendment, supplement or document not misleading, or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law, or any rule or regulation promulgated under the Securities Act, the Exchange Act or any state securities law. 2. Demand Registrations. 2.1 General. On or at any time after the second anniversary of ------- Closing, holders of a majority of the Registrable Securities then outstanding may request registration under the Securities Act of all or any portion of their Registrable Securities. All registrations requested pursuant to this Section 2.1 are referred to in this Agreement as "Demand Registrations." Holders of Registrable Securities then outstanding shall be limited to three Demand Registrations and each such Demand Registration must include an initial request to register Registrable Securities having an aggregate offering value of at least $20 million. In regard to Demand Registrations: (a) Each request for a Demand Registration shall specify the approximate number of Registrable Securities requested to be registered. Within 10 Business Days after receipt of any request for a Demand Registration, the Company shall give written notice of the requested registration to all other holders of Registrable Securities and, subject to Section 2.2 below, shall include in the registration all Registrable Securities with respect to which the Company has received written requests for inclusion within 15 Business Days after receipt of the Company's notice. (b) A Demand Registration shall not be counted as one of the three permitted Demand Registrations unless (i) it has become effective and (ii) the 2 Persons making the request are able to register and sell at least 75% of the Registrable Securities included in the registration. (c) The Company shall pay all Registration Expenses in connection with any Demand Registration whether or not it is counted as one of the three permitted Demand Registrations. (d) Demand Registrations shall be on Form S-2 or Form S-3 or any similar short-form registration statement, if available. Otherwise Demand Registrations shall be on Form S-1 or any similar long-form registration statement. (e) The Company shall have the right to select the managing underwriters in connection with an underwritten public offering of Registrable Securities, subject to the approval of a majority of the holders of the Registrable Securities included in any Demand Registration which approval shall not be unreasonably withheld, and holders of a majority of the Registrable Securities included in any Demand Registration shall have the right to select a co-managing underwriter, subject to the Company's approval which shall not be unreasonably withheld. (f) The holders of a majority of the Registrable Securities included in any Demand Registration shall have the right to select the investment banker(s) and manager(s) to administer an offering of Registrable Securities that is not an underwritten public offering, subject to the Company's approval which shall not be unreasonably withheld. 2.2 Priority on Demand Registrations. The Company will not include in -------------------------------- any Demand Registrations any securities which are not Registrable Securities without the prior written consent of the holders of a majority of the Registrable Securities included in such registration. If a Demand Registration is an underwritten offering and the managing underwriters advise the Company in writing that in their opinion the number of Registrable Securities and, if permitted hereunder, other securities requested to be included in such offering exceeds the number of Registrable Securities, and other securities, if any, that can be sold without adversely affecting the marketability of the offering, the Company shall include in the registration (i) first, the number of Registrable Securities requested to be included which in the opinion of the underwriters can be sold without adversely affecting the marketability of the offering, pro rata among the respective holders thereof on the basis of the number of Registrable Securities owned by each such holder, and (ii) second, other securities requested to be included in such Demand Registration, pro rata among the holders of such securities on the basis of the number of such securities owned by each such holder. 2.3 Restrictions on Demand Registrations. The Company shall not be ------------------------------------ obligated to effect more than two Demand Registrations in any 12-month period. The Company shall not be obligated to effect any Demand Registration within 180 days after the effective date of a previous Demand Registration or a previous registration in which 3 the holders of Registrable Securities were given piggyback rights pursuant to Section 3 and, in the case of a previous Demand Registration, were able to register and sell at least 75% of the Registrable Securities proposed to be included in such registration or, in the case of a previous Piggyback Registration, were able to register and sell at least 50% of the Registrable Securities proposed to be included in such registration. The Company may postpone for up to 90 days the filing or the effectiveness of a registration statement for a Demand Registration if a certificate signed by an executive officer of the Company is promptly furnished to the holders requesting the Demand Registration stating that the Board of Directors of the Company has determined that such a Demand Registration would reasonably be expected to have a material adverse effect on any proposal or plan by the Company to engage in any acquisition of assets (other than in the ordinary course of business) or any merger, consolidation, tender offer, reorganization or similar transaction. In addition, the Company may postpone for up to 180 days the filing of a registration statement for a Demand Registration if a certificate signed by an executive officer of the Company is promptly furnished to the holders requesting the Demand Registration stating that the Company intends to file a registration statement for a primary offering of its debt or equity securities within the next 60 days so long as the Company is at all times proceeding in good faith to make such registration statement effective. In the event the filing or the effectiveness of a registration statement is postponed pursuant to this Section 2.3, the holders of Registrable Securities initially requesting the Demand Registration shall be entitled to withdraw their request. If their request is withdrawn, the Demand Registration shall not count as one of the three permitted Demand Registrations and the Company will pay all Registration Expenses in connection with such registration. The Company may delay the filing or suspend the effectiveness of a Demand Registration pursuant to this Section 2.3 only once in any 12- month period. 3. Piggyback Registrations. 3.1 Right To Piggyback. After the first anniversary of Closing, ------------------ whenever the Company proposes to register any of its equity securities under the Securities Act (other than (i) pursuant to a Demand Registration or (ii) a registration on Form S-4 or Form S-8 or any successor or similar form) and the registration form to be used may be used for the registration of Registrable Securities (a "Piggyback Registration"), whether or not for sale for its own account, the Company shall give prompt written notice to all holders of Registrable Securities of its intention to effect such a registration and shall include in the registration all Registrable Securities with respect to which the Company has received written requests for inclusion within 15 Business Days after receipt of the Company's notice. Holders of Registrable Securities shall be entitled to unlimited Piggyback Registrations for their Registrable Securities. 3.2 Piggyback Expenses. The Registration Expenses of the holders ------------------ of Registrable Securities shall be paid by the Company in all Piggyback Registrations. 3.3 Priority on Primary Registrations. If a Piggyback Registration is --------------------------------- an underwritten primary registration on behalf of the Company, and the managing underwriters advise the Company in writing that in their opinion the number of securities 4 requested to be included in the registration exceeds the number that can be sold without adversely affecting the marketability of the offering, the Company shall include in the registration (i) first, the securities that ----- the Company proposes to sell, (ii) second, the Registrable Securities ------ requested to be included in the registration and any other securities requested to be included in such registration by the holders thereof who have been granted rights by the Company to participate in a Piggyback Registration pari passu with the holders of Registrable Securities pursuant to Section 10.1, pro rata among the holders of the Registrable Securities and the holders of such other securities on the basis of the number of the Registrable Securities and such other securities owned by each holder, and (iii) third, any other securities requested to be included in the ----- registration. 3.4 Priority on Secondary Registrations. If a Piggyback Registration ----------------------------------- is an underwritten secondary registration on behalf of holders of the Company's securities (other than on behalf of holders of Registrable Securities that have initiated a Demand Registration pursuant to Section 2), and the managing underwriters advise the Company in writing that in their opinion the number of securities requested to be included in the registration exceeds the number that can be sold without adversely affecting the marketability of the offering, the Company shall include in the registration (i) first, the securities requested to be included therein by the holders requesting such registration and the Registrable Securities requested to be included in the registration, pro rata among the holders thereof on the basis of the number of such securities and Registrable Securities owned by each such holder, and (ii) second, any other securities requested to be included in the registration. 3.5 Other Registrations. If the Company has previously filed a ------------------- registration statement with respect to Registrable Securities pursuant to Section 2 or pursuant to this Section 3, and if the previous registration has not been withdrawn or abandoned, the Company shall not file or cause to be effected any other registration of any of its equity securities or securities convertible or exchangeable into or exercisable for its equity securities under the Securities Act (except on Form S-4 or Form S-8 or any successor or similar forms), whether on its own behalf or at the request of any holder or holders of its securities, until a period of at least 180 days has elapsed from the effective date of the previous registration or, if shorter, a period of at least 60 days has elapsed from the date all securities covered by such registration have been disposed of. 4. Holdback Agreements. 4.1 Holders of Registrable Securities. Each holder of Registrable --------------------------------- Securities shall not effect any public sale or distribution (including sales pursuant to Rule 144) of equity securities of the Company, or any securities convertible into or exchangeable or exercisable for equity securities of the Company, during the seven days prior to and the 120-day period beginning on the effective date of any Demand Registration or any underwritten Piggyback Registration in which Registrable Securities are included (except as part of such underwritten offering), unless the underwriters managing the registered public offering otherwise agree. 5 4.2 Company. The Company shall not effect any public sale or ------- distribution of its equity securities, or any securities convertible into or exchangeable or exercisable for such securities, during such period prior to and following the effective date of any underwritten Demand Registration or any underwritten Piggyback Registration as the Company and the underwriters managing the offering may agree. 5. Registration Procedures. Whenever holders of Registrable Securities have requested that any Registrable Securities be registered pursuant to this Agreement, the Company shall use its reasonable best efforts to effect the registration and the sale of such Registrable Securities in accordance with the intended method of disposition. In this regard, the Company will as expeditiously as possible: (a) prepare and file with the Commission a registration statement with respect to such Registrable Securities and use its reasonable best efforts to cause the registration statement to become effective; (b) notify each holder of Registrable Securities of the effectiveness of each registration statement filed under this Agreement and prepare and file with the Commission any amendments and supplements to the registration statement and the prospectus that may be necessary to keep the registration statement effective for a period of either (i) not less than 120 days (subject to extension pursuant to Section 8.2), or if such registration statement relates to an underwritten offering, such longer period as in the opinion of counsel for the underwriters a prospectus is required by law to be delivered in connection with sales of Registrable Securities by an underwriter or dealer or (ii) such shorter period as will terminate when all of the securities covered by such registration statement have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement (but in any event not before the expiration of any longer period required under the Securities Act), and to comply with the provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement until such time as all of such securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof set forth in such registration statement; (c) furnish to each seller of Registrable Securities the number of copies of the registration statement, each amendment and supplement, the prospectus included in the registration statement (including each preliminary prospectus) and any other documents that each seller may reasonably request in order to facilitate the disposition of the seller's Registrable Securities; (d) use its best efforts to register or qualify the Registrable Securities under such other securities or blue sky laws of such jurisdictions as any seller reasonably requests and do any and all other acts and things which may be reasonably necessary or advisable to enable the seller to consummate the disposition in those jurisdictions of the Registrable Securities owned by the seller (but the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it would not otherwise be 6 required to qualify but for this subparagraph, (ii) subject itself to taxation in any such jurisdiction or (iii) consent to general service of process in any such jurisdiction); (e) notify each seller of Registrable Securities, at any time when a prospectus relating to those securities is required to be delivered under the Securities Act, of the happening of any event as a result of which the prospectus included in the registration statement contains an untrue statement of a material fact or omits any fact necessary to make the statements in the prospectus not misleading; and, at the request of any seller, the Company shall prepare a supplement or amendment to the prospectus so that, when delivered to purchasers of the Registrable Securities, the prospectus, as supplemented or amended, does not contain an untrue statement of a material fact or omit to state any fact necessary to make the statements in the prospectus not misleading; (f) cause all such Registrable Securities to be quoted on the Nasdaq National Market System and listed on any other exchange on which the Company's shares of Common Stock are listed; (g) provide a transfer agent and registrar for all such Registrable Securities not later than the effective date of the registration statement; (h) enter into such customary agreements (including underwriting agreements in customary form) and take all other actions that holders of a majority of the Registrable Securities being sold or the underwriters, if any, reasonably request in order to expedite or facilitate the disposition of the Registrable Securities; (i) make available for inspection by any seller of Registrable Securities, any underwriter participating in any disposition pursuant to the registration statement and any attorney, accountant or other agent retained by any such seller or underwriter, all financial and other records, pertinent corporate documents and properties of the Company, and cause the Company's officers, employees and independent accountants to supply all information reasonably requested by any such seller, underwriter, attorney, accountant or agent in connection with the registration statement; (j) otherwise use its best efforts to comply with all applicable rules and regulations of the Commission, and make available to its security holders, as soon as reasonably practicable, an earnings statement covering the period of at least twelve months beginning with the first day of the Company's first full calendar quarter after the effective date of the registration statement, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158; and (k) in the event of the issuance of any stop order suspending the effectiveness of a registration statement, or of any order suspending or preventing the use of any related prospectus or suspending the qualification of any securities included in the registration statement for sale in any jurisdiction, use its reasonable best efforts promptly to obtain the withdrawal of such order. 7 6. Registration Expenses. 6.1 Payment by Company. All Registration Expenses shall be ------------------ borne as provided in this Agreement, except that the Company shall, in any event, pay its internal expenses (including all salaries and expenses of its officers and employees performing legal or accounting duties), the expense of any annual audit or quarterly review and the expenses and fees for listing the securities to be registered on the Nasdaq National Market System or any other exchange on which the Company's shares of Common Stock are listed. 6.2 Fees of Counsel. In connection with each Demand --------------- Registration and each Piggyback Registration, the Company shall reimburse the holders of Registrable Securities included in the registration for the reasonable fees and disbursements of one counsel chosen by the holders of a majority of the Registrable Securities included in such registration. 6.3 Payment by Holders. To the extent that Registration ------------------ Expenses are not required to be paid by the Company, each holder of securities included in any registration under this Agreement shall pay those Registration Expenses allocable to the registration of such holder's securities so included, and any Registration Expenses not so allocable shall be borne by all sellers of securities included in the registration in proportion to the aggregate selling price of the securities to be so registered. 7. Indemnification. 7.1 Indemnification by Company. The Company agrees to -------------------------- indemnify, to the extent permitted by law, each holder of Registrable Securities, each Person who controls such holder (within the meaning of the Securities Act), and their respective partners, shareholders, trustees, members, officers and directors against all losses, claims, damages, liabilities and expenses caused by any Violation, except insofar as the Violation is caused by or contained in any information furnished in writing to the Company by the holder expressly for use in a registration statement, prospectus, amendment, supplement or related document or is caused by the holder's failure to deliver a copy of the registration statement or prospectus or any amendment or supplements after the Company has furnished the holder with a sufficient number of copies. In connection with an underwritten offering, the Company shall indemnify such underwriters, their officers and directors and each Person who controls such underwriters (within the meaning of the Securities Act) to the same extent provided in this Section 7.1 with respect to the indemnification of holders of Registrable Securities. 7.2 Indemnification by Holder. In connection with any ------------------------- registration statement pursuant to which a holder of Registrable Securities is selling Registrable Securities, the holder shall furnish to the Company in writing such information and affidavits as the Company reasonably requests for use in connection with the registration statement or prospectus and, to the extent permitted by law, shall indemnify the Company, its directors and any of its officers who signs such registration statement and each Person who controls the Company (within the meaning of the Securities Act) 8 against any losses, claims, damages, liabilities and expenses resulting from any Violation to the extent that the Violation is caused by or contained in any information furnished in writing to the Company by the holder expressly for use in such registration statement, prospectus, amendment, supplement or related document. This obligation to indemnify shall be individual, not joint and several, for each holder and shall be limited to the net amount of proceeds received by the holder from the sale of Registrable Securities pursuant to the registration statement. 7.3 Procedures. Any Person entitled to indemnification under ---------- this Section 7 shall, promptly after the receipt of notice of the commencement of any action, investigation, claim or other proceeding against such indemnified party in respect of which indemnity may be sought from an indemnifying party under this Section 7, notify the indemnifying party in writing of the commencement thereof. The omission of any indemnified party so to notify an indemnifying party of any such action shall not relieve the indemnifying party from any liability which it may have to such indemnified party under this Section 7 unless, and only to the extent that, such omission results in the indemnifying party's forfeiture of substantive rights or defenses or the indemnifying party is otherwise irrevocably prejudiced in defending such proceeding. In case any such action, claim or other proceeding shall be brought against any indemnified party for which indemnification is claimed pursuant to Section 7.1, and it shall notify the Company of the commencement thereof, the Company shall be entitled to assume the defense thereof at its own expense, with counsel satisfactory to the Company; provided, that any such indemnified party may, at its own expense, retain separate counsel to participate in such defense. Notwithstanding the foregoing, in any action, claim or proceeding in which both the Company, on the one hand, and an indemnified party, on the other hand, is, or is reasonably likely to become, a party, such indemnified party shall have the right to employ separate counsel at the Company's expense and to control its own defense of such action, claim or proceeding if, (a) the Company has failed to assume the defense and employ counsel as provided herein, (b) the Company has agreed in writing to pay such fees and expenses of separate counsel or (c) in the reasonable opinion of counsel to such indemnified party, a conflict or likely conflict exists between the Company, on the one hand, and such indemnified party, on the other hand, that would make such separate representation advisable, provided, however, that the Company shall not in any event be required to pay the fees and expenses of more than one separate counsel (and if deemed necessary by such separate counsel, appropriate local counsel who shall report to such separate counsel). The Company agrees that it will not, without the prior written consent of an indemnified party, settle, compromise or consent to the entry of any judgment in any pending or threatened claim, action or proceeding relating to the matters contemplated hereby (if such indemnified party is a party thereto or has been actually threatened to be made a party thereto) unless such settlement, compromise or consent includes an unconditional release of such indemnified party from all liability arising or that may arise out of such claim, action or proceeding. The Company shall not be liable for any settlement of any claim, action or proceeding effected against an indemnified party without the prior written consent of the Company. The rights accorded to indemnified parties hereunder shall be in addition to any rights that any indemnified party may have at common law, by separate agreement or otherwise. 9 7.4 Survival. The indemnification under this Section 7 shall -------- remain in full force and effect regardless of any investigation made by or on behalf of the indemnified party or any officer, director or controlling Person of the indemnified party and shall survive the transfer of securities. The Company and each holder subject to Section 7.2 also agree to make such provisions as are reasonably requested by any indemnified party for contribution to the indemnified party in the event that the Company's or such holder's indemnification is unavailable for any reason. 8. Participation in Underwritten Registration. 8.1 Cooperation with Underwriters. No Person may participate ----------------------------- in any underwritten registration pursuant to this Agreement unless the Person (i) agrees to sell securities on the basis provided in the underwriting arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of the underwriting arrangements. In any event, however, no holder of Registrable Securities included in any underwritten registration shall be required to make any representations or warranties to the Company or the underwriters (other than representations and warranties regarding the holder and the holder's intended method of distribution) or to undertake any indemnification obligations to the Company or the underwriters except as otherwise provided in Section 7.2. 8.2 Discontinuance of Dispositions. Each Person that is ------------------------------ participating in any registration hereunder agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 5(e) above, such Person will forthwith discontinue the disposition of its Registrable Securities pursuant to the registration statement until such Person receives copies of a supplemented or amended prospectus as contemplated by such Section 5(e). In the event the Company shall give any such notice, the applicable time period mentioned in Section 5(b) during which a registration statement is to remain effective shall be extended by the number of days during the period from and including the date of the giving of such notice pursuant to this Section to and including the date when each seller of a Registrable Security covered by such registration statement shall have received the copies of the supplemented or amended prospectus contemplated by Section 5(e). 9. Current Public Information. The Company will timely file all reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the Commission thereunder, and will take such further action as any holder or holders of Registrable Securities may reasonably request, all to the extent required to enable such holders to sell Registrable Securities pursuant to Rule 144 adopted by the Commission under the Securities Act (as such rule may be amended from time to time) or any similar rule or regulation hereafter adopted by the Commission and pursuant to Form S-3 or any similar short form registration statement. Upon written request, the Company will deliver to such holders a written statement as to whether it has complied with such requirements. In addition, unless the Common Stock is listed for trading on the New York Stock 10 Exchange, the Company will continue to cause its Common Stock and any Common Stock issuable upon conversion of Purchaser Preferred Stock (including preferential dividends issued thereon) to be listed for trading on the Nasdaq National Market System. 10. Miscellaneous. 10.1 No Inconsistent Agreements. The Company shall not enter -------------------------- into any agreement with respect to its securities which is inconsistent with or violates the rights granted to the holders of Registrable Securities in this Agreement. Without limiting the generality of the foregoing, until the initial holders of Registrable Securities cease to hold at least 25% of the Underlying Common Stock, the Company shall not grant to any Person, other than Affiliates of the Company as of the date hereof, the right to request the Company to register any equity securities of the Company, or any securities convertible or exchangeable into or exercisable for such securities, without the prior written consent of the holders of a majority of the Registrable Securities. The Company may grant rights to other Persons to participate in Piggyback Registrations, however, so long as (i) such rights are subordinate to the rights of the holders of Registrable Securities with respect to such Piggyback Registrations as set forth in Sections 3.3 and 3.4 of this Agreement or (ii) such rights are pari passu with the rights of the holders of Registrable Securities with respect to such Piggyback Registration as set forth in Sections 3.3 and 3.4 of this Agreement and have been consented to by the holders of a majority of the Registrable Securities. 10.2 Notices. All notices, claims, demands and other ------- communications ("Notices") under this Agreement shall be in writing and sent by certified or registered mail, return receipt requested, a recognized overnight courier service, telecopier or personal delivery, as follows: (a) if to the Company, to: US LEC Corp. Transamerica Square 401 N. Tryon Street, Suite 1000 Charlotte, North Carolina 28202 Attention: General Counsel Telecopier: (704) 319-3098 with a required copy to: Moore & Van Allen, PLLC 100 North Tryon Street, Floor 47 Charlotte, North Carolina 28202-4003 Attention: Barney Stewart III Telecopier: (704) 331-1151 11 (b) if to the Investors, in care of: Bain Capital, Inc. Two Copley Place Boston, Massachusetts 02116 Attention: Ian K. Loring Telecopier: (617) 572-3274 and Thomas H. Lee Partners, L.P. 75 State Street, 26/th/ Floor Boston, Massachusetts 02109 Attention: Anthony J. DiNovi Telecopier: (617) 227-3514 with a required copy to: Ropes & Gray One International Plaza Boston, Massachusetts 02110-2624 Attention: Philip J. Smith Telecopier: (617) 951-7050 All Notices shall be deemed to have been duly given: when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial overnight courier service; five Business Days after being deposited in the mail, postage prepaid, if mailed; and when receipt is acknowledged by the individual to whom the telecopy is sent, if telecopied. A party may change its address for purposes of this Agreement by Notice in accordance with this Section 10.2. 10.3 Waiver. The rights and remedies of the Company and ------ holders of Registrable Securities are cumulative and not alternative. Neither the failure nor any delay by the Company or any holder of Registrable Securities in exercising any right, power or privilege under this Agreement shall operate as a waiver of that right, power or privilege, and no single or partial exercise of any right, power or privilege shall preclude any other or further exercise of that right, power or privilege or the exercise of any other right, power or privilege. All waivers shall be in writing signed by the party to be charged with the waiver, and no waiver that may be given by a party shall be applicable except in the specific instance for which it is given. 10.4 Amendment. This Agreement may not be amended except by a --------- written agreement signed by the Company and holders of a majority of the Registrable Securities. 10.5 Severability. If any provision of this Agreement is held ------------ invalid or unenforceable by a court of competent jurisdiction, the other provisions of this Agreement shall remain in full force and effect. Any provision of this Agreement which 12 is held invalid or unenforceable only in part shall remain in full force and effect to the extent not held invalid or unenforceable. 10.6 Captions. The captions of sections of this Agreement -------- are for convenience only and shall not affect this the construction or interpretation of this Agreement. 10.7 Construction. All references in this Agreement to ------------ "Section" or "Sections" refer to the corresponding section or sections of this Agreement. All words used in this Agreement shall be construed to be of the appropriate gender or number as the context requires. Unless otherwise expressly provided, the word" including" does not limit the preceding words or terms. 10.8 Counterparts. This Agreement may be executed in one or ------------ more counterparts, each of which shall be considered an original copy of this Agreement and all of which, when taken together, shall be considered to constitute one and the same agreement. 10.9. Entire Agreement. This Agreement supercedes all prior ---------------- agreements between the parties with respect to its subject matter and constitutes a complete and exclusive statement of the terms of the agreement between the parties with respect to its subject matter. 10.10 Governing Law. This Agreement shall be governed by the -------------- Laws of the State of Delaware without regard to conflicts of laws principles. 10.11 Binding Effect. This Agreement shall apply to, be -------------- binding in all respects upon and inure to the benefit of the parties and their respective successors and permitted assigns and transferees. 13 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the date first above written. US LEC CORP. By:_________________________________ Name: Michael K. Robinson Title: Executive Vice President and Chief Financial Officer BAIN CAPITAL CLEC INVESTORS, L.L.C. By: Bain Capital Fund VI, L.P., its Administrative Member By: Bain Capital Partners VI, L.P., its General Partner By: Bain Capital Investors VI, Inc., its general partner By: ________________________________ Name: Title: Managing Director THOMH. LEE EQUITY FUND IV, L.P. By: THL Equity Advisors IV, LLC, its general partner By: _________________________________ Name: Title: 14 THOMAS H. LEE FOREIGN FUND IV-B, L.P. By: THL Equity Advisors IV, LLC, its general partner By:___________________________________ Name: Title: THOMAS H. LEE FOREIGN FUND IV, L.P. By: THL Equity Advisors IV, LLC, its general partner By:___________________________________ Name: Title: PUTNAM INVESTMENT HOLDINGS, LLC By:___________________________________ Name: Title: 1997 THOMAS H. LEE NOMINEE TRUST By:___________________________________ Trustee 15 THOMAS H. LEE CHARITABLE INVESTMENT LIMITED PARTNERSHIP By: __________________________________ Name: Title: _____________________________________ David V. Harkins THE HARKINS 1995 GIFT TRUST By:__________________________________ Trustee _____________________________________ Scott A. Schoen _____________________________________ C. Hunter Boll _____________________________________ Scott M. Sperling _____________________________________ Anthony J. DiNovi _____________________________________ Thomas M. Hagerty _____________________________________ Warren C. Smith, Jr. _____________________________________ Seth W. Lawry 16 _____________________________________ Kent R. Weldon _____________________________________ Terrence M. Mullen _____________________________________ Todd M. Abbrecht _____________________________________ Charles A. Brizius _____________________________________ Scott L. Jaeckel _____________________________________ Soren L. Oberg _____________________________________ Thomas R. Shepherd _____________________________________ Wendy L. Masler _____________________________________ Andrew D. Flaster 17 ROBERT SCHIFF LEE 1988 IRREVOCABLE TRUST By:________________________________ Trustee ____________________________________ Stephen Zachary Lee ____________________________________ Charles W. Robins as Custodian for Jesse Lee ____________________________________ Charles W. Robins as Custodian for Nathan Lee ____________________________________ Charles W. Robins ____________________________________ James Westra ____________________________________ Adam A. Abramson ____________________________________ Joanne M. Ramos ____________________________________ P. Holden Spaht ____________________________________ Nancy M. Graham 18 ____________________________________ Gregory A. Ciongoli ____________________________________ Wm. Matthew Kelly ____________________________________ Kevin F. Sullivan ____________________________________ Diane M. Barriere ____________________________________ Kim H. Oakley 19 SCHEDULE 1 Purchasers
- ----------------------------------------------------------------------------------------------------------------- Number of Shares of Series A Preferred Name Stock Purchased ---- -------------- - ----------------------------------------------------------------------------------------------------------------- Bain Capital CLEC Investors, L.L.C. 100,000.00 - ----------------------------------------------------------------------------------------------------------------- Thomas H. Lee Equity Fund IV, L.P. 83,533.00 - ----------------------------------------------------------------------------------------------------------------- Thomas H. Lee Foreign Fund IV-B, L.P. 8,113.00 - ----------------------------------------------------------------------------------------------------------------- Thomas H. Lee Foreign Fund IV, L.P. 2,859.00 - ----------------------------------------------------------------------------------------------------------------- Putnam Investment Holdings, LLC 1,374.00 - ----------------------------------------------------------------------------------------------------------------- 1997 Thomas H. Lee Nominee Trust/1/ 1,099.00 - ----------------------------------------------------------------------------------------------------------------- Thomas H. Lee Charitable Investment Limited Partnership 543.00 - ----------------------------------------------------------------------------------------------------------------- David V. Harkins 294.00 - ----------------------------------------------------------------------------------------------------------------- Scott A. Schoen 245.00 - ----------------------------------------------------------------------------------------------------------------- C. Hunter Boll 245.00 - ----------------------------------------------------------------------------------------------------------------- Scott M. Sperling 245.00 - ----------------------------------------------------------------------------------------------------------------- Anthony J. DiNovi 245.00 - ----------------------------------------------------------------------------------------------------------------- Thomas M. Hagerty 245.00 - ----------------------------------------------------------------------------------------------------------------- Warren C. Smith, Jr. 245.00 - ----------------------------------------------------------------------------------------------------------------- Seth W. Lawry 102.00 - ----------------------------------------------------------------------------------------------------------------- Kent R. Weldon 68.00 - ----------------------------------------------------------------------------------------------------------------- Terrence M. Mullen 54.00 - ----------------------------------------------------------------------------------------------------------------- Todd M. Abbrecht 54.00 - ----------------------------------------------------------------------------------------------------------------- Robert Schiff Lee 1988 Irrevocable Trust 50.00 - ----------------------------------------------------------------------------------------------------------------- Stephen Zachary Lee 50.00 - ----------------------------------------------------------------------------------------------------------------- Charles A. Brizius 41.00 - ----------------------------------------------------------------------------------------------------------------- The Harkins 1995 Gift Trust 33.00 - ----------------------------------------------------------------------------------------------------------------- Thomas R. Shepherd 29.00 - ----------------------------------------------------------------------------------------------------------------- Charles W. Robins as Custodian for Jesse Lee 25.00 - ----------------------------------------------------------------------------------------------------------------- Charles W. Robins as Custodian for Nathan Lee 25.00 - ----------------------------------------------------------------------------------------------------------------- Charles W. Robins 20.00 - ----------------------------------------------------------------------------------------------------------------- James Westra 20.00 - ----------------------------------------------------------------------------------------------------------------- Wendy L. Masler 20.00 - ----------------------------------------------------------------------------------------------------------------- Andrew D. Flaster 17.00 - ----------------------------------------------------------------------------------------------------------------- Scott L. Jaeckel 15.00 - ----------------------------------------------------------------------------------------------------------------- Soren L. Oberg 15.00 - ----------------------------------------------------------------------------------------------------------------- Adam A. Abramson 12.00 - ----------------------------------------------------------------------------------------------------------------- Joanne M. Ramos 12.00 - ----------------------------------------------------------------------------------------------------------------- P. Holden Spaht 12.00 - -----------------------------------------------------------------------------------------------------------------
_____________________________ /1/ For legal purposes, certificate should be issued to "State Street Bank as Trustee for 1997 Thomas H. Lee Nominee Trust" 20 - ----------------------------------------------------------------------------------------------------------------- Nancy M. Graham 12.00 - ----------------------------------------------------------------------------------------------------------------- Gregory A. Ciongoli 12.00 - ----------------------------------------------------------------------------------------------------------------- Wm. Matthew Kelly 12.00 - ----------------------------------------------------------------------------------------------------------------- Kevin F. Sullivan 2.00 - ----------------------------------------------------------------------------------------------------------------- Diane M. Barriere 2.00 - ----------------------------------------------------------------------------------------------------------------- Kim H. Oakley 1.00 - ----------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------
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