GUARANTY AND SURETYSHIP AGREEMENT
THIS GUARANTY AND SURETYSHIP AGREEMENT (the "Guaranty Agreement" or the
"Guaranty"), dated as of January 16, 1998, is made by each of the undersigned
(each a "Guarantor" and collectively the "Guarantors") to each of Xxxxxxx X.
Aab, a resident of Rochester, New York, Xxxxxxx X. Xxxxxxx, a resident of
Charlotte, North Carolina and Melrich Associates, L.P., a New York limited
partnership (each a "Lender" and collectively the "Lenders").
W I T N E S S E T H:
WHEREAS, US LEC Corp., a Delaware corporation (the "Borrower"), has
executed a separate Promissory Note in favor of each Lender, each dated January
16, 1998 (as from time to time amended, modified or supplemented, the "Notes")
pursuant to which the Lenders have loaned to the Borrower, collectively,
$8,289,150 (the "Loans"); and
WHEREAS, Borrower owns a 99% equity interest in each of the Guarantors; and
WHEREAS, the Borrower is required to cause each Guarantor to guarantee to
the Lenders payment of the Borrower's Liabilities (as hereinafter defined) in
accordance with the terms of this Agreement; and
WHEREAS, each Guarantor will materially benefit from the loans made under
the Notes, and each Guarantor is willing to enter into this Guaranty to provide
an inducement for the Lenders to make the loans under the Notes;
NOW, THEREFORE, in order to induce the Lenders to make loans to the
Borrower under the Notes, each Guarantor agrees as follows:
1. Definitions. All capitalized terms not otherwise defined herein shall
have the meanings ascribed to such terms in the Notes.
2. Guaranty. Each Guarantor hereby jointly and severally, unconditionally,
absolutely, continually and irrevocably guarantees to the Lenders the payment
and performance in full of the Borrower's Liabilities (as defined below);
provided, however, that the liability of each Guarantor with respect to the
Guarantors' Obligations (as defined below) shall not exceed at any time the
Maximum Amount (as defined below). For all purposes of this Guaranty Agreement,
"Borrower's Liabilities" means: (a) the Borrower's prompt payment in full, when
due or declared due and at all such times, of all obligations and all other
amounts pursuant to the terms of the Notes, now or at any time or times
hereafter owing, arising, due or payable from the Borrower to the Lenders,
including, but not limited to, principal, interest, premium or fee (including,
but not limited to, loan fees and attorneys' fees and expenses); and (b) the
Borrower's prompt, full and faithful performance, observance and discharge of
each and every agreement, undertaking, covenant and provision to be performed,
observed or discharged by the Borrower under the Notes. Each Guarantor's
obligations to the Lenders under this Guaranty Agreement
are hereinafter collectively referred to as the "Guarantors' Obligations". The
"Maximum Amount" means the greater of (X) the aggregate amount of all advances
to such Guarantor made directly or indirectly with the proceeds of Loans and not
theretofore repaid by such Guarantor or (Y) 95% of (i) the fair salable value of
the assets of such Guarantor as of the date hereof minus (ii) the total
liabilities of such Guarantor (including contingent liabilities, but excluding
liabilities of such Guarantor under this Guaranty and under the Security
Agreements dated as of the date hereof executed by such Guarantor in connection
with entering into this Guaranty (the "Security Agreements")) as of the date
hereof; provided further, however, that, if the calculation of the Maximum
Amount in the manner provided above as of the date payment is required of such
Guarantor pursuant to this Guaranty would result in a greater positive number,
then the Maximum Amount shall be deemed to be such greater positive number.
Each Guarantor agrees that it is jointly and severally, directly and
primarily liable for the Borrower's liabilities, subject to the limitations and
conditions set forth herein.
3. Payment. If the Borrower shall default in payment or performance of any
Borrower's Liabilities, whether principal, interest, premium, fee (including,
but not limited to, loan fees and attorneys' fees and expenses), or otherwise,
when and as the same shall become due, whether according to the terms of the
Notes, by acceleration, or otherwise, or upon the occurrence of any other Event
of Default under the Notes that has not been cured or waived, then each
Guarantor, upon demand thereof by the Lenders or their successors or assigns,
will AS OF THE DATE OF THE DEMAND fully pay to the Lenders, subject to any
restrictions and limitations set forth in Section 2 hereof, an amount equal to
all Guarantor's Obligations then due and owing.
4. Unconditional Obligations. This is a guaranty of payment and not of
collection. The Guarantors' Obligations under this Guaranty Agreement shall be
joint and several, absolute and unconditional irrespective of the validity,
legality or enforceability of the Notes or the Security Agreements or any other
guaranty of the Borrower's Liabilities, and shall not be affected by any action
taken under the Notes or any other guaranty of the Borrower's Liabilities, or
any other agreement between the Lenders and the Borrower or any other Person, in
the exercise of any right or power therein conferred, or by any failure or
omission to enforce any right conferred thereby, or by any waiver of any
covenant or condition therein provided, or by any acceleration of the maturity
of any of the Borrower's Liabilities, or by the release or other disposal of any
security for or guarantee of any of the Borrower's Liabilities, or by the
dissolution of the Borrower or the combination or consolidation of the Borrower
into or with another entity or any transfer or disposition of any assets of the
Borrower or by any extension or renewal of any of the Notes or the Security
Agreements, in whole or in part, or by any modification, alteration, amendment
or addition of or to any of the Notes or any of the Security Agreements, any
other guaranty of the Borrower's Liabilities, or any other agreement between the
Lenders and the Borrower or any other Person, or by any other circumstance
whatsoever (with or without notice to or knowledge of any Guarantor) which may
or might in any manner or to any extent vary the risks of any Guarantor, or
might otherwise constitute a legal or equitable discharge of a surety or
guarantor; it being the purpose and intent of the parties hereto that this
2
Guaranty Agreement and the Guarantors' Obligations hereunder shall be absolute
and unconditional under any and all circumstances and shall not be discharged
except by payment as herein provided or as provided in the Notes or Security
Agreements.
5. Currency and Funds of Payment. Each Guarantor hereby guarantees that the
Guarantors' Obligations will be paid in lawful currency of the United States of
America and in immediately available funds, regardless of any law, regulation or
decree now or hereafter in effect that might in any manner affect the Borrower's
Liabilities, or the rights of any Lender with respect thereto as against the
Borrower, or cause or permit to be invoked any alteration in the time, amount or
manner of payment by the Borrower of any or all of the Borrower's Liabilities.
6. Events of Default. In the event that (a) there shall occur an Event of
Default under the Notes (b) there shall occur an Event of Default under the
Security Agreements; (c) any default shall occur in the payment of amounts due
hereunder; or (d) any other default shall occur hereunder which remains uncured
or unwaived for a period of thirty (30) days (each of the foregoing an "Event of
Default" hereunder); then notwithstanding any collateral available to the
Lenders from the Borrower or any Guarantor or any other guarantor of the
Borrower's Liabilities, or any other party, at the election of the Lenders and
without notice thereof or demand therefor, so long as such Event of Default
shall not have been waived, the Guarantors' Obligations shall become immediately
due and payable.
7. Suits. Each Guarantor from time to time shall pay to the Lenders, on
demand, at the Lenders' principal office or such other address as the Lenders
shall give notice of to the Guarantor, the Guarantors' Obligations as they
become or are declared due, and in the event such payment is not made forthwith,
the Lenders or any of them may proceed to suit against any one or more or all of
the Guarantors. At the election of the Lenders, one or more and successive or
concurrent suits may be brought hereon by the Lenders against any one or more or
all of the Guarantors, whether or not suit has been commenced against the
Borrower, any other guarantor of the Borrower's Liabilities, or any other Person
and whether or not any Lender has taken or failed to take any other action to
collect all or any portion of the Borrower's Liabilities.
8. Set-Off and Waiver. Each Guarantor waives any right to assert against
the Lenders as a defense, counterclaim, set-off or cross claim any claim (legal
or equitable) which such Guarantor may now or at any time hereafter have against
the Borrower without waiving any additional defenses, set-offs, counterclaims or
other claims otherwise available to such Guarantor. If at any time hereafter any
Lender employs counsel for advice or other representation to enforce the
Guarantors' Obligations that arise out of an Event of Default, then, in any of
the foregoing events, all of the reasonable attorneys' fees arising from such
services and all reasonable expenses, costs and charges in any way or respect
arising in connection therewith or relating thereto shall be jointly and
severally paid by the Guarantors to the Lenders, on demand.
9. Waiver; Subrogation; Subordination.
3
(a) Each Guarantor hereby waives notice of the following events or
occurrences: (i) the Lenders' acceptance of this Guaranty Agreement; (ii) the
Lenders' heretofore, now or from time to time hereafter loaning monies or giving
or extending credit to or for the benefit of the Borrower, whether pursuant to
the Notes, or any amendments, modifications, or supplements thereto, or
replacements or extensions thereof; (iii) the Lenders or the Borrower
heretofore, now or at any time hereafter, obtaining, amending, substituting for,
releasing, waiving or modifying the Notes; (iv) presentment, demand, notices of
default, non-payment, partial payment and protest; (v) the Lenders heretofore,
now or at any time hereafter granting to the Borrower (or any other party liable
to the Lenders on account of the Borrower's Liabilities) any indulgence or
extensions of time of payment of or in respect of the Borrower's Liabilities;
and (vi) the Lenders heretofore, now or at any time hereafter accepting from the
Borrower or any other person, any partial payment or payments on account of the
Borrower's Liabilities or any collateral securing the payment thereof or the
Lenders settling, subordinating, compromising, discharging or releasing the same
in whole or in part. Each Guarantor agrees that each Lender may heretofore, now
or at any time hereafter do any or all of the foregoing in such manner, upon
such terms and at such times as each Lender, in its sole and absolute
discretion, deems advisable, without in any way or respect impairing, affecting,
reducing or releasing such Guarantor from the Guarantors' Obligations, (b) each
Guarantor hereby consents to each and all of the foregoing events or occurrences
and (c) each Guarantor waives, to the extend permitted by law, (1) any right of
a surety or guarantor to any defense, discharge, release or diminution of its
liabilities hereunder as a result of any of the foregoing events or occurrences,
and (2) any right under N.C.G.S. Section 26-7 through 26-9 inclusive or
otherwise or require that resort be had to the Borrower or any other guarantor
of, or any property securing, all or any part of the Borrower's Liabilities.
(b) Each Guarantor hereby agrees that payment or performance by such
Guarantor of the Guarantors' Obligations under this Guaranty Agreement may be
enforced by the Lenders upon demand by the Lenders to such Guarantor without the
Lenders being required, each Guarantor expressly waiving any right it may have
to require the Lenders, to (i) prosecute collection or seek to enforce or resort
to any remedies against the Borrower or any other Guarantor or any other
guarantor of the Borrower's Liabilities, IT BEING EXPRESSLY UNDERSTOOD,
ACKNOWLEDGED AND AGREED TO BY EACH GUARANTOR THAT DEMAND UNDER THIS GUARANTY
AGREEMENT MAY BE MADE BY THE LENDERS, AND THE PROVISIONS HEREOF ENFORCED BY THE
LENDERS, EFFECTIVE AS OF THE FIRST DATE ANY EVENT OF DEFAULT (AS DEFINED IN THE
NOTES) OCCURS AND IS CONTINUING UNDER ANY OF THE NOTES, or (ii) seek to enforce
or resort to any remedies with respect to any security interests, liens or
encumbrances granted to the Lenders by the Borrower or any other Person on
account of the Borrower's Liabilities or any guaranty thereof. No Lender shall
have any obligation to protect, secure or insure any of the foregoing security
interests, liens or encumbrances on the properties or interests in properties
subject thereto. The Guarantors' Obligations shall in no way be impaired,
affected, reduced, or released by reason of any Lender's failure or delay to do
or take any of the acts, actions or things described in this Guaranty Agreement
including, without limiting the generality of the foregoing, those acts, actions
and things described in this Section 9.
4
(c) Each Guarantor further agrees with respect to this Guaranty Agreement
that such Guarantor shall have no right of subrogation, contribution,
reimbursement or indemnity, nor any right of recourse to security for the
Borrower's Liabilities until the Borrower's Obligations under the Notes have
been fully, finally and irrevocably paid and satisfied.
(d) Until the Borrower's Obligations under the Notes have been fully,
finally and irrevocably paid and satisfied, each Guarantor hereby
unconditionally subordinates all present and future debts, liabilities or
obligations of the Borrower to such Guarantor to the Borrower's Liabilities, and
all amounts due under such debts, liabilities, or obligations shall, upon the
occurrence and during the continuance of an Event of Default, be collected and
paid over forthwith to the Lenders on account of the Borrower's Liabilities and,
pending such payment, shall be held by such Guarantor as agent and bailee of the
Lenders separate and apart from all other funds, property and accounts of such
Guarantor. Guarantor, at the request of the Lenders, shall execute such further
documents in favor of the Lenders to further evidence and support the purpose of
this Section 9(d).
10. Effectiveness; Enforceability. This Guaranty Agreement shall be
effective as of the date hereof, and shall continue in full force and effect
until all of the Borrower's Obligations (other than obligations in the nature of
continuing indemnities and liability for expenses which are not yet due and
payable, which shall survive as an obligation guarantied by the Guarantors
hereunder notwithstanding any termination hereof) are fully, finally and
irrevocably paid and satisfied. The Lenders shall give each Guarantor written
notice of such termination at each Guarantor's address set forth below such
Guarantor's execution hereof on the signature pages of this Guaranty or such
other address for the Guarantor as such Guarantor shall give notice to the
Lenders in the manner provided for the giving of notices under the Notes (the
"Guarantor's Address"). This Guaranty Agreement shall be binding upon and inure
to the benefit of each Guarantor, the Lenders and their respective successors
and assigns. Notwithstanding the foregoing, no Guarantor may, without the prior
written consent of the Lenders, assign any rights, powers, duties or obligations
hereunder. Any claim or claims that the Lenders may at any time hereafter have
against any Guarantor under this Guaranty Agreement may be asserted by any
Lender by written notice directed to any one or more or all of the Guarantors at
the applicable Guarantor's Address.
11. Representations and Warranties. Each Guarantor warrants and represents
to the Lenders that it is duly authorized to execute, deliver and perform this
Guaranty Agreement, that this Guaranty Agreement is legal, valid, binding and
enforceable against such Guarantor in accordance with its terms except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by general equitable principles; and that such Guarantor's
execution, delivery and performance of this Guaranty Agreement do not violate or
constitute a breach of any of its charter or governance documents or any
agreement to which such Guarantor is a party, or any law, order, rule,
regulation, decree or award of any applicable governmental authority or arbitral
body.
5
12. Expenses. Each Guarantor agrees to be liable for the payment of all
reasonable fees and expenses, including without limitation attorney's fees,
incurred by any Lender in connection with the enforcement of this Guaranty
Agreement, whether or not suit be brought.
13. Reinstatement. Each Guarantor agrees that this Guaranty Agreement shall
continue to be effective or be reinstated, as the case may be, at any time
payment received by the Lenders under the Notes or the Security Agreements or
this Guaranty Agreement is rescinded or must be restored for any reason.
14. Counterparts. This Guaranty Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall constitute one and
the same instrument.
15. Reliance. Each Guarantor represents and warrants to the Lenders, that:
(a) such Guarantor has adequate means to obtain from Borrower, on a continuing
basis, information concerning Borrower and Borrower's financial condition and
affairs and has full and complete access to Borrower's books and records; (b)
such Guarantor is not relying on any Lender, or its or their employees, agents
or other representatives, to provide such information, now or in the future; (c)
such Guarantor is executing this Guaranty Agreement freely and deliberately, and
understands the obligations and financial risks undertaken by providing this
Guaranty; (d) such Guarantor has relied solely on the Guarantor's own
independent investigation, appraisal and analysis of Borrower and Borrower's
financial condition and affairs in deciding to provide this Guaranty and is
fully aware of the same; and (e) such Guarantor has not depended or relied on
any Lender, or his or its employees, agents or representatives, for any
information whatsoever concerning Borrower or Borrower's financial condition and
affairs or other matters material to such Guarantor's decision to provide this
Guaranty or for any counseling, guidance, or special consideration or any
promise therefor with respect to such decision. Each Guarantor agrees that no
Lender has any duty or responsibility whatsoever, now or in the future, to
provide to any Guarantor any information concerning Borrower or Borrower's
financial condition and affairs, other than as expressly provided herein, and
that, if such Guarantor receives any such information from any Lender, its or
their employees, agents or other representatives, such Guarantor will
independently verify the information and will not rely on any Lender, or its or
their employees, agents or other representatives, with respect to such
information.
16. Governing Law.
(a) THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NORTH CAROLINA APPLICABLE TO CONTRACTS
EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.
(b) EACH PARTY HEREBY EXPRESSLY AND IRREVOCABLY AGREES AND CONSENTS
THAT ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT AND THE
6
TRANSACTIONS CONTEMPLATED HEREIN MAY BE INSTITUTED IN ANY STATE OR FEDERAL
COURT SITTING IN THE COUNTY OF MECKLENBURG, STATE OF NORTH CAROLINA, UNITED
STATES OF AMERICA AND, BY THE EXECUTION AND DELIVERY OF THIS AGREEMENT,
EXPRESSLY WAIVES ANY OBJECTION THAT IT MAY HAVE NOW OR HEREAFTER TO THE
LAYING OF THE VENUE OR TO THE JURISDICTION OF ANY SUCH SUIT, ACTION OR
PROCEEDING, AND IRREVOCABLY SUBMITS GENERALLY AND UNCONDITIONALLY TO THE
NONEXCLUSIVE JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR
PROCEEDING.
(c) EACH PARTY AGREES THAT SERVICE OF PROCESS MAY BE MADE BY PERSONAL
SERVICE OF A COPY OF THE SUMMONS AND COMPLAINT OR OTHER LEGAL PROCESS IN
ANY SUCH SUIT, ACTION OR PROCEEDING, OR BY REGISTERED OR CERTIFIED MAIL
(POSTAGE PREPAID) TO THE GUARANTOR'S ADDRESS (AS HEREIN DEFINED) FOR EACH
GUARANTOR AND AT THE ADDRESS OF SUCH OTHER PARTY PROVIDED IN THE NOTES OR
SECURITY AGREEMENTS OR BY ANY OTHER METHOD OF SERVICE PROVIDED FOR UNDER
THE APPLICABLE LAWS IN EFFECT IN THE STATE OF NORTH CAROLINA.
(d) NOTHING CONTAINED IN SUBSECTIONS (b) OR (c) HEREOF SHALL PRECLUDE
ANY PARTY FROM BRINGING ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE NOTES OR THE SECURITY AGREEMENTS IN THE
COURTS OF ANY PLACE WHERE ANY OTHER PARTY OR ANY OF SUCH PARTY'S PROPERTY
OR ASSETS MAY BE FOUND OR LOCATED. TO THE EXTENT PERMITTED BY THE
APPLICABLE LAWS OF ANY SUCH JURISDICTION, EACH PARTY HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY SUCH COURT AND EXPRESSLY WAIVES, IN
RESPECT OF ANY SUCH SUIT, ACTION OR PROCEEDING, THE JURISDICTION OF ANY
OTHER COURT OR COURTS WHICH NOW OR HEREAFTER, BY REASON OF ITS PRESENT OR
FUTURE DOMICILE, OR OTHERWISE, MAY BE AVAILABLE TO IT.
(e) IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS OR
REMEDIES UNDER OR RELATED TO THIS AGREEMENT OR ANY AMENDMENT, INSTRUMENT,
DOCUMENT OR AGREEMENT DELIVERED OR THAT MAY IN THE FUTURE BE DELIVERED IN
CONNECTION WITH THE FOREGOING, EACH PARTY HEREBY AGREES, TO THE EXTENT
PERMITTED BY APPLICABLE LAW, THAT ANY SUCH ACTION OR PROCEEDING SHALL BE
TRIED BEFORE A COURT AND NOT BEFORE A JURY AND EACH PARTY HEREBY WAIVES, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY
7
HAVE THAT EACH ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM.
8
IN WITNESS WHEREOF, the parties have duly executed this Guaranty Agreement
on the day and year first written above.
GUARANTORS:
US LEC of North Carolina L.L.C.
WITNESS: By: /s/ Xxxxx X. Xxxx
------------------------------------
Name: Xxxxx X. Xxxx
---------------------------------
______________________ Title: Executive Vice President, Finance
Chief Financial Officer
______________________ Address for Notices:
US LEC of North Carolina L.L.C.
000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telefacsimile: (000) 000-0000
US LEC of Georgia L.L.C.
By: /s/ Xxxxx X. Xxxx
------------------------------------
Name: Xxxxx X. Xxxx
---------------------------------
Title: Executive Vice President, Finance
WITNESS: Chief Financial Officer
______________________
______________________ Address for Notices:
US LEC of Georgia L.L.C.
000 X. Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
Telefacsimile: (000) 000-0000
LENDERS:
/s/ Xxxxxxx X. Aab
----------------------------------
Xxxxxxx X. Aab
/s/ Xxxxxxx X. Xxxxxxx
--------------------------------------
Xxxxxxx X. Xxxxxxx
Melrich Associates, L.P.
By: /s/ Xxxxxxx X. Aab
----------------------------------
Xxxxxxx X. Aab, General Partner
