Exhibit 10.7

 

Execution Copy

 

THIRD AMENDMENT

 

THIRD AMENDMENT (the “Amendment”), dated as of December 4, 2003, with respect to
that certain Third Amended and Restated Loan and Security Agreement, dated as of
December 31, 2002 (as amended prior to the date hereof, the “Credit Agreement”),
among the entities party to the Credit Agreement as Borrowers thereunder (each
individually a “Borrower” and collectively, “Borrowers”), US LEC Corp., a
Delaware corporation (“Holdings”), as Guarantor and Borrower Representative,
each financial institution or entity listed on the signature pages thereof as a
“Lender” and the other financial institutions or entities which become parties
thereto as successors or assigns (each a “Lender” and collectively, “Lenders”),
and General Electric Capital Corporation (in its individual capacity, “GE
Capital”), as administrative agent for Lenders (in such capacity,
“Administrative Agent”).

 

W I T N E S S E T H:

 

WHEREAS, Borrowers, Holdings, Lenders and Administrative Agent are parties to
the Credit Agreement;

 

WHEREAS, Borrowers have requested that Lenders agree to amend the Credit
Agreement to permit Borrowers to acquire substantially all of the assets of
FASTNET (hereinafter defined) in accordance with the terms of that certain
letter agreement (the “Letter Agreement”), dated October 16, 2003, among
Holdings, Borrowers, Administrative Agent and the Requisite Lenders;

 

WHEREAS, in accordance with the terms and conditions of the Letter Agreement,
Holdings has received cash proceeds for the issuance of common stock, which does
not constitute Disqualified Stock, in an amount not less than $10,000,000 from
one or more investors reasonably acceptable to Administrative Agent and the
Requisite Lenders;

 

WHEREAS, the Requisite Lenders are willing to agree to the requested amendments
on the terms and conditions contained herein;

 

NOW THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:

 

1. Definitions. Unless otherwise defined herein, terms defined in the Credit
Agreement shall have their defined meanings when used herein.

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2. Amendment to Credit Agreement.

 

(a) Section 1.1 of the Credit Agreement shall be amended by adding thereto the
following new definitions in their proper alphabetical order:

 

“‘FASTNET’: collectively, FASTNET Corporation, a Pennsylvania corporation,
Netaxs Corp., a Pennsylvania corporation, SuperNet, Inc., a New Jersey
corporation, NetReach, Inc., a Pennsylvania corporation, Fastnet Acquisition,
Inc., a Delaware corporation, and Fastnet Acquisition Corp., a Pennsylvania
corporation.”

 

“‘FASTNET Acquisition’: The acquisition of all or substantially all of the
assets of FASTNET pursuant to the terms of the FASTNET Acquisition Agreement for
an aggregate cash purchase price not to exceed $8,500,000.”

 

“‘FASTNET Acquisition Agreement’: that certain Amended and Restated Asset
Purchase Agreement made as of December 3, 2003, by and among FASTNET and
Holdings.”

 

“‘Third Amendment Effective Date’: December [    ], 2003.”

 

(b) The definition of “Permitted Debt” set forth in Section 1.1 of the Credit
Agreement shall be amended by (i) deleting the “and” immediately preceding
clause (g) thereof and substituting therefor a comma and (ii) adding the
following new clause (h) at the end of such definition.

 

“, and (h) Indebtedness in an amount not to exceed $1,500,000 evidenced by a
promissory note issued by Holdings to FASTNET in respect of the purchase of
FASTNET’s accounts receivable and certain other assets.”

 

(c) Section 8.26 of the Credit Agreement shall be amended by adding the
following new clauses (d) and (e) at the end of such Section:

 

“(d) Within sixty (60) days of the Third Amendment Effective Date, Loan Parties
shall use reasonable best efforts to execute and deliver, or cause to be
executed and delivered, to Administrative Agent Landlord Consents for any real
property location where any of the Collateral acquired in connection with the
FASTNET Acquisition is located.

 

(e) Within sixty (60) days of the Third Amendment Effective Date, Loan Parties
shall obtain control agreements (in form and substance reasonably acceptable to
Administrative Agent) with respect to Deposit Accounts and Investment Property
not in certificated form, in each case, acquired in connection with the FASTNET
Acquisition.”

 

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(d) Section 9.4(a) of the Credit Agreement shall be amended by deleting the same
in its entirety and substituting therefor the following:

 

“(a) Enter into, or become the subject of, any transaction of merger,
acquisition or consolidation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or convey, sell, lease, transfer or
otherwise dispose of, in one transaction or a series of transactions, all or any
substantial part of such Loan Party’s business or assets, whether now owned or
hereafter acquired, without Requisite Lenders’ prior written consent; provided,
that (i) Holdings may consummate the FASTNET Acquisition, (ii) Holdings and its
Subsidiaries may consummate the Eagle Acquisition and (iii) upon the repayment
in full of the Deferred Amortization, Holdings and its Subsidiaries may enter
into Permitted Acquisitions.”

 

(e) Section 9.4(f) of the Credit Agreement shall be amended by deleting the same
in its entirety and substituting therefor the following:

 

“(f) Acquire or purchase substantially all of the stock or ownership interests
in, or substantially all of the business, assets, customers or operations of,
any other entity; provided, that (i) Holdings may consummate the FASTNET
Acquisition, (ii) Holdings and its Subsidiaries may consummate the Eagle
Acquisition and (iii) upon the repayment in full of the Deferred Amortization,
Holdings and its Subsidiaries may enter into Permitted Acquisitions.

 

(f) Section 9.6 of the Credit Agreement shall be amended by deleting the same in
its entirety and substituting therefor the following:

 

“9.6 Prohibition on Sale or Issuance of Stock. Issue any stock, stock option,
warrant, or any other securities other than non-convertible debt securities, or
the right to receive any such security (“equity securities”) of each Loan Party
other than (a) issuances of equity securities by Holdings, the net cash proceeds
of which shall be applied in accordance with Section 2.l0(b)(ii) or (b) the
issuance of equity securities by Holdings in connection with the FASTNET
Acquisition.

 

(g) As of the Third Amendment Effective Date, all references to “Schedule” or
“Schedules” in the Credit Agreement or any other Loan Document shall be deemed
to be references to the Schedules attached hereto; provided that references to
“Schedule” or “Schedules” in representations and warranties made prior to the
date hereof shall be references to the Schedules attached to the Credit
Agreement prior to the effectiveness of this Amendment.

 

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3. Representations and Warranties. In order to induce Administrative Agent and
Lenders to enter into this Amendment, the Loan Parties hereby represent and
warrant to Administrative Agent and Lenders that the representations and
warranties of the Loan Parties contained in the Credit Agreement and the other
Loan Documents are true and correct in all material respects on and as of the
date hereof (after giving effect hereto), except where such representations and
warranties expressly relate to an earlier date in which case such
representations and warranties were true and correct in all material respects as
of such earlier date.

 

4. Conditions to Effectiveness. This Amendment shall be effective on the date
when the following conditions shall have occurred (the “Third Amendment
Effective Date”):

 

(a) Administrative Agent shall have executed this Amendment and shall have
received counterparts hereof, duly executed and delivered by Borrowers, Holdings
and the Requisite Lenders;

 

(b) Holdings shall have executed and delivered the Acknowledgement and Consent
attached as Exhibit A to this Amendment;

 

(c) Administrative Agent shall have received updated Schedules to the Credit
Agreement, which Schedules shall give effect to the transactions contemplated
hereby;

 

(d) Administrative Agent and Lenders shall have received a copy of the FASTNET
Acquisition Agreement, including all amendments, modifications or supplements
thereto;

 

(e) Administrative Agent and Lenders shall have received all information related
to the FASTNET Acquisition reasonably requested thereby;

 

(f) Administrative Agent’s counsel, Weil, Gotshal & Manges LLP, shall have
received all fees and expenses owing to date; and

 

(g) Holdings shall have consummated the FASTNET Acquisition, in accordance with
the terms of the FASTNET Acquisition Agreement, on or before December 31, 2003.

 

5. Reference to Credit Agreement. Upon the effectiveness of this Amendment, each
reference in the Credit Agreement to “this Agreement,” “hereunder,” or words of
like or similar import shall mean and be a reference to the Credit Agreement, as
modified and amended by this Amendment.

 

6. Governing Law and Jurisdiction. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES HERETO SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.

 

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7. Expenses. Borrowers agree to pay and reimburse Administrative Agent for all
its reasonable costs and expenses incurred in connection with the preparation
and delivery of this Amendment, including, without limitation, the reasonable
fees and disbursements of counsel to Administrative Agent.

 

8. Headings. Section headings in the Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.

 

9. Counterparts. This Amendment may be executed by the parties hereto in any
number of separate counterparts (including by facsimile transmission) and all of
such counterparts taken together shall be deemed to constitute one and the same
instrument.

 

10. Successors and Assigns. This Amendment shall be binding upon and inure to
the benefit of Borrowers and Holdings and their respective successors and
assigns, and upon Administrative Agent and Lenders and their respective
successors and assigns.

 

11. Continuing Effect. Except as expressly amended hereby, the Credit Agreement,
as amended by this Amendment, shall continue to be and shall remain in full
force and effect in accordance with its terms. This Amendment shall not
constitute an amendment or waiver of any provision of the Credit Agreement not
expressly referred to herein and shall not be construed as an amendment, waiver
or consent to any action on the part of Borrowers that would require an
amendment, waiver or consent of Administrative Agent or Lenders except as
expressly stated herein. Any reference to the “Credit Agreement” in the Loan
Documents or any related documents shall be deemed to be a reference to the
Credit Agreement as amended by this Amendment.

 

12. NO ORAL AGREEMENTS. THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT
THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE
OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE
ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES.

 

13. General Waiver and Release. IN ADDITION, TO INDUCE ADMINISTRATIVE AGENT AND
LENDERS TO AGREE TO THE TERMS OF THIS AMENDMENT, LOAN PARTIES (BY THEIR
EXECUTION BELOW) REPRESENT AND WARRANT THAT AS OF THE DATE OF THEIR EXECUTION OF
THIS AMENDMENT THERE ARE NO CLAIMS OR OFFSETS AGAINST OR DEFENSES OR
COUNTERCLAIMS TO THEIR RESPECTIVE OBLIGATIONS UNDER THE CREDIT AGREEMENT, THIS
AMENDMENT OR THE OTHER LOAN DOCUMENTS. NOTWITHSTANDING THE FOREGOING, IN THE
EVENT THERE EXIST ANY SUCH CLAIMS OR OFFSETS AGAINST OR DEFENSES OR
COUNTERCLAIMS, LOAN PARTIES (BY THEIR EXECUTION BELOW) HEREBY:

 

(A) FOREVER GENERALLY WAIVE ANY AND ALL CLAIMS, OFFSETS, DEFENSES AND/OR
COUNTERCLAIMS, WHETHER KNOWN OR UNKNOWN, ARISING ON OR PRIOR TO THE DATE OF
THEIR EXECUTION OF THIS AMENDMENT; AND

 

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(B) FOREVER RELEASE, ACQUIT AND DISCHARGE THE RELEASED PARTIES FROM ANY AND ALL
OBLIGATIONS, INDEBTEDNESS, LIABILITIES, CLAIMS, RIGHTS, CAUSES OF ACTION OR
DEMANDS WHATSOEVER, WHETHER KNOWN OR UNKNOWN, SUSPECTED OR UNSUSPECTED, IN LAW
OR EQUITY, WHICH ANY LOAN PARTY EVER HAD, NOW HAS, CLAIMS TO HAVE OR MAY HAVE
AGAINST ANY RELEASED PARTY ARISING ON OR PRIOR TO THE DATE HEREOF AND FROM OR IN
CONNECTION WITH THE CREDIT AGREEMENT, THIS AMENDMENT AND THE OTHER LOAN
DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY AND HEREIN.

 

The provisions of this Section 13, including without limitation the
representations and warranties contained herein, shall survive termination of
this Amendment indefinitely.

 

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

 

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IN WITNESS WHEREOF, the parties have caused this Amendment to be executed and
delivered by their respective duly authorized officers as of the day and year
first above written.

 

Borrower Representative and Guarantor:

US LEC CORP.

By:

 

/s/ Michael K. Robinson

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Name:

 

Michael K. Robinson

Title:

 

Executive Vice President and Chief

   

Financial Officer

Borrowers:

US LEC OF ALABAMA INC.

US LEC COMMUNICATIONS INC.

US LEC OF FLORIDA INC.

US LEC OF GEORGIA INC.

US LEC OF MARYLAND INC.

US LEC OF NORTH CAROLINA INC.

US LEC OF PENNSYLVANIA INC.

US LEC OP SOUTH CAROLINA NC.

US LEC OF TENNESSEE INC.

US LEC OF VIRGINIA L.L.C.

US LEC ACQUISITION CO.

By:

 

/s/ Michael K. Robinson

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Name:

 

Michael K. Robinson

Title:

 

Executive Vice President and Chief

   

Financial Officer

 

[SIGNATURE PAGE TO THIRD AMENDMENT]

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GENERAL ELECTRIC CAPITAL

CORPORATION, as Administrative Agent

By:

 

/s/ E. Keith Min

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Name:

 

E. Keith Min

Title:

 

Senior Vice President

   

VFS Special Assets

 

[SIGNATURE PAGE TO THIRD AMENDMENT]

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QDRF MASTER LTD, as a Lender

By:

 

QDRA LLC

   

Its Advisor

By:

 

/s/ Michael A. Weinstock

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Name:

 

Michael A. Weinstock

Title:

 

Managing Principal

QUADRANGLE MASTER FUNDING

LTD, as a Lender

By:

 

QDRA LLC

   

Its Advisor

By:

 

/s/ Michael A. Weinstock

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Name:

 

Michael A. Weinstock

Title:

 

Managing Principal

 

[SIGNATURE PAGE TO THIRD AMENDMENT]

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QUADRANGLE CAPITAL PARTNERS

A LP, as a Lender

By:

 

Quadrangle GP Investors LP,

   

its General Partner

By:

 

Quadrangle GP Investors LLC, as

   

General Partner of the General Partner

By:

 

/s/ Joshua Steiner

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Name:

 

Joshua Steiner

Title:

 

Managing Principal

QUADRANGLE CAPITAL PARTNERS

LP, as a Lender

By:

 

Quadrangle GP Investors LP,

   

its General Partner

By:

 

Quadrangle GP Investors LLC,

   

as General Partner of the General Partner

By:

 

/s/ Joshua Steiner

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Name:

 

Joshua Steiner

Title:

 

Managing Principal

QUADRANGLE SELECT PARTNERS

LP, as a Lender

By:

 

Quadrangle GP Investors LP,

   

its General Partner

By:

 

Quadrangle GP Investors LLC,

   

as General Partner of the General Partner

By:

 

/s/ Joshua Steiner

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Name:

 

Joshua Steiner

Title:

 

Managing Principal

 

[SIGNATURE PAGE TO THIRD AMENDMENT]

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U.S. BANK NATIONAL ASSOCIATION,

as a Lender

By:

 

 

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Name:

   

Title:

   

 

[SIGNATURE PAGE TO THIRD AMENDMENT]

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DSC PARTNERS,

as a Lender

By:

 

/s/ [illegible]

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Name:

   

Title:

   

 

[SIGNATURE PAGE TO THIRD AMENDMENT]

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EXHIBIT A

 

ACKNOWLEDGEMENT AND CONSENT

 

The undersigned hereby:

 

(a) acknowledges and consents to the execution, delivery and performance of (i)
the Third Amendment dated December     , 2003, to the Third Amended and Restated
Loan and Security Agreement, dated as of December 31, 2002 (as the same may be
amended, amended and restated, supplemented or otherwise modified from time to
time, the “Credit Agreement”; terms defined in the Credit Agreement shall have
their defined meanings when used herein), among the entities party to the Credit
Agreement as Borrowers thereunder (each individually a “Borrower” and
collectively, “Borrowers”), US LEC Corp., a Delaware corporation (“Holdings”),
as Guarantor and Borrower Representative, each financial institution or entity
listed on the signature pages thereof as a “Lender” and the other financial
institutions or entities which become parties thereto as successors or assigns
(each a “Lender” and collectively, “Lenders”), and General Electric Capital
Corporation (in its individual capacity, “GE Capital”), as administrative agent
for Lenders (in such capacity, “Administrative Agent”); and

 

(b) ratifies and confirms that all guaranties, assurances, obligations and liens
under the Loan Documents are not released, diminished, impaired, reduced or
otherwise adversely affected and agrees that such execution, delivery and
performance shall not in any way affect such Persons obligations under any Loan
Document to which such Person is a party, which obligations on the date hereof
remain absolute and unconditional and are not subject to any defense, set-off or
counterclaim whatsoever.

 

Dated: December     , 2003

 

US LEC CORP.,

as a Guarantor

By:

 

/s/ Michael K. Robinson

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Name:

 

Michael K. Robinson

Title:

 

Executive Vice President and

   

Chief Financial Officer

 

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