PLEDGE AND SECURITY
AGREEMENT
THIS PLEDGE AND
SECURITY AGREEMENT (“Pledge Agreement”), dated
October 25, 2005, is by US LEC Corp., a Delaware corporation
(“Pledgor”), with its chief executive office at 6801
Morrison Boulevard, Charlotte, NC 28211, to and in favor of
Wachovia Bank, National Association, a National Banking Association
(“Pledgee”), having an office at 301 South College
Street, Charlotte, NC 28288-0479.
WHEREAS, Pledgor
is now the direct and beneficial owner of all of the issued and
outstanding shares of capital stock of US LEC of Georgia Inc., a
Delaware corporation, US LEC of North Carolina Inc., a Delaware
corporation, US LEC of South Carolina Inc., a Delaware corporation,
US LEC of Tennessee Inc., a Delaware corporation, US LEC of Alabama
Inc., a North Carolina corporation, US LEC Communications Inc., a
North Carolina Corporation, , US LEC of Florida Inc., a North
Carolina corporation, US LEC of Maryland Inc., a North Carolina
corporation, US LEC of Pennsylvania Inc., a North Carolina
corporation (each individually, “Issuer” and
collectively, “Issuers”) as set forth on Exhibit A
annexed hereto and made a part hereof (collectively, the
“Pledged Securities”);
WHEREAS, Pledgee
and Pledgor have entered into or are about to enter into financing
arrangements pursuant to which Pledgee may make loans and advances
and provide other financial accommodations to Pledgor as set forth
in the Loan and Security Agreement, dated of even date herewith, by
and among Pledgee, Pledgor and Issuers (as the same now exists or
may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, the “Loan Agreement”)
and the other agreements, documents and instruments referred to
therein or at any time executed and/or delivered in connection
therewith or related thereto, including, but not limited to, this
Pledge Agreement (all of the foregoing, together with the Loan
Agreement, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced,
being collectively referred to herein as the “Financing
Agreements”);
WHEREAS, in order
to induce Pledgee to enter into the Loan Agreement and the other
Financing Agreements and to make loans and advances and provide
other financial accommodations to Pledgor pursuant thereto, Pledgor
has agreed to secure the payment and performance of the Obligations
(as hereinafter defined) to Pledgee and to accomplish same by
(i) executing and delivering to Pledgee this Pledge Agreement,
(ii) subject to the terms and conditions of the Intercreditor
Agreement, delivering to Pledgee the Pledged Securities which are
registered in the name of Pledgor, together with appropriate powers
duly executed in blank by Pledgor, and (iii) delivering to
Pledgee any and all other documents which Pledgee deems necessary
to protect Pledgee’s interests hereunder;
NOW, THEREFORE, in
consideration of the premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Pledgor hereby agrees as follows:
1. GRANT OF
SECURITY INTEREST
To secure the
prompt payment and performance, observance and indefeasible payment
in full of all of the Obligations (as hereinafter defined), Pledgor
hereby pledges to Pledgee and grants to Pledgee a security interest
in and lien upon (a) the Pledged Securities, together with all
cash dividends, stock dividends, interests, profits, redemptions,
warrants, subscription rights, stock, securities options,
substitutions, exchanges and other distributions now or hereafter
distributed by Issuers or which may hereafter be delivered to the
possession of Pledgor or Pledgee with respect thereto,
(b) Pledgor’s books and records with respect to the
foregoing, and (c) the proceeds of all of the foregoing (all
of the foregoing being collectively referred to herein as the
“Collateral”).
The security
interest, lien and other interests granted to Pledgee pursuant to
this Pledge Agreement shall secure the prompt performance and
payment in full of any and all of the Obligations, as such term is
defined in the Loan Agreement.
3.
REPRESENTATIONS, WARRANTIES AND COVENANTS
Pledgor hereby
represents, warrants and covenants with and to Pledgee the
following (all of such representations, warranties and covenants
being continuing so long as any of the Obligations are
outstanding):
(a) The
Pledged Securities are duly authorized, validly issued, fully paid
and non-assessable capital stock of Issuers and constitute
Pledgor’s entire interest in Issuers and are not registered,
nor has Pledgor authorized the registration thereof, in the name of
any person or entity other than Pledgor or Pledgee.
(b) The
Collateral is directly, legally and beneficially owned by Pledgor,
free and clear of all claims, liens, pledges and encumbrances of
any kind, nature or description, except for the pledge, lien and
security interest in favor of Pledgee and the pledges, claims,
liens, encumbrances and security interests permitted under the Loan
Agreement.
(c) The
Collateral is not subject to any restrictions relative to the
transfer thereof and Pledgor has the right to transfer and
hypothecate the Collateral free and clear of any liens,
encumbrances or restrictions except for the liens in favor of
Senior Secured Note Trustee as permitted under the terms of the
Loan Agreement.
(d) The
Collateral is duly and validly pledged to Pledgee and no consent or
approval of any governmental or regulatory authority or of any
securities exchange or the like, nor any consent or approval of any
other third party, was or is necessary to the validity and
enforceability
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of this Pledge
Agreement.
(e) Pledgor
authorizes Pledgee to: (i) store, deposit and safeguard the
Collateral, (ii) perform any and all other acts which Pledgee in
good faith deems reasonable and/or necessary for the protection and
preservation of the Collateral or its value or Pledgee’s
security interest therein, including, without limitation, upon the
occurrence of an Event of Default, and after notice to Pledgor,
transferring, registering or arranging for the transfer or
registration of the Collateral to or in Pledgee’s own name
and receiving the income therefrom as additional security for the
Obligations and (iii) pay any charges or expenses which
Pledgee deems necessary for the foregoing purpose, but without any
obligation to do so. Any obligation of Pledgee for reasonable care
for the Collateral in Pledgee’s possession shall be limited
to the same degree of care which Pledgee uses for similar property
pledged to Pledgee by other persons.
(f) If at any
time after the date hereof Pledgor shall become entitled to receive
or acquire, or shall receive any stock certificate, or option or
right with respect to the stock of any Issuer (including without
limitation, any certificate representing a dividend or a
distribution or exchange of or in connection with reclassification
of the Pledged Securities) whether as an addition to, in
substitution of, or in exchange for any of the Collateral or
otherwise, Pledgor agrees to accept same as Pledgee’s agent,
to hold same in trust for Pledgee and to deliver same forthwith to
Pledgee or Pledgee’s agent or bailee in the form received,
with the endorsement(s) of Pledgor where necessary and/or
appropriate powers and/or assignments duly executed to be held by
Pledgee or Pledgee’s agent or bailee subject to the terms
hereof, as further security for the Obligations.
(g) Pledgor
shall not, without the prior consent of Pledgee, directly or
indirectly, sell, assign, transfer, or otherwise dispose of, or
grant any option with respect to the Collateral, nor shall Pledgor
create, incur or permit any further pledge, hypothecation,
encumbrance, lien, mortgage or security interest with respect to
the Collateral except as otherwise provided in the Loan
Agreement.
(h) So long
as no Event of Default (as hereinafter defined) has occurred and is
continuing, Pledgor shall have the right to vote and exercise all
corporate rights with respect to the Pledged Securities, except as
expressly prohibited herein, and to receive any cash dividends
payable in respect of the Pledged Securities.
(i) Pledgor
shall not permit any Issuer, directly or indirectly, to issue,
sell, grant, assign, transfer or otherwise dispose of, any
additional shares of capital stock of any Issuer or any option or
warrant with respect to, or other right or security convertible
into, any additional shares of capital stock of any Issuer, now or
hereafter authorized, unless all such additional shares, options,
warrants, rights or other such securities are made and shall remain
part of the Collateral subject to the pledge and security interest
granted herein.
(j) Pledgor
shall pay all charges and assessments of any nature against the
Collateral or with respect thereto prior to said charges and/or
assessments being delinquent.
(k) Pledgor
shall promptly reimburse Pledgee on demand, together with interest
at the highest rate then applicable to the Obligations set forth in
the Loan Agreement, for any charges,
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assessments or
expenses paid or incurred by Pledgee in its discretion for the
protection, preservation and maintenance of the Collateral and the
enforcement of Pledgee’s rights hereunder, including, without
limitation, reasonable attorneys’ fees and legal expenses
incurred by Pledgee in seeking to protect, collect or enforce its
rights in the Collateral or otherwise hereunder. Any such amounts
paid or incurred by Pledgee shall constitute part of the
Obligations secured hereby and may be charged by Pledgee to any
loan account of Pledgor maintained by Pledgee, at its
option.
(l) Pledgee
may notify any Issuer or the appropriate transfer agent of the
Pledged Securities to register the security interest and pledge
granted herein and honor the rights of Pledgee with respect
thereto.
(m) Pledgor
authorizes Pledgee to:(i) perform any and all other acts which
Pledgee deems reasonable and/or necessary for the protection and
preservation of the Collateral or its value or Pledgee’s
security interest therein, and (ii) pay any charges or
expenses which Pledgee deems necessary for the foregoing purpose,
but without any obligation to do so (and any amounts so paid shall
constitute Obligations under the Loan Agreement).
(n) Pledgor
waives: (i) all rights to require Pledgee to proceed against
any other person, entity or collateral or to exercise any remedy,
(ii) the defense of the statute of limitations in any action
upon any of the Obligations, (iii) any right of subrogation or
interest in the Obligations or Collateral until all Obligations
have been paid in full in immediately available funds and the Loan
Agreement has been terminated, (iv) any rights to notice of
any kind or nature whatsoever, unless specifically required in this
Pledge Agreement or non-waivable under any applicable law, and
(v) to the extent permissible, its rights under
Section 9-207 of the Uniform Commercial Code. Pledgor agrees
that the Collateral, other collateral, or any other guarantor or
endorser may be released, substituted or added with respect to the
Obligations, in whole or in part, without releasing or otherwise
affecti
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