Document:

Form of Guarantee-Capital Securities-BAC Capital Trusts

 
 
EXHIBIT 4.14 
 
 
 
 
 
 
 
 
 
 
 
 
 
CAPITAL SECURITIES GUARANTEE AGREEMENT 
 
BAC Capital Trust [            ] [        ]% Capital Securities 
 
Dated as of
[                            ,
            ] 

 
TABLE OF
CONTENTS 
 

	 ARTICLE 1
	  	 
	
	 DEFINITIONS AND INTERPRETATION
	  	 
	
	 SECTION 1.1
	  	 Definitions and Interpretation
	  	 2

	
	 ARTICLE 2
	  	 
	
	 TRUST INDENTURE ACT
	  	 
	
	 SECTION 2.1
	  	 Trust Indenture Act; Application
	  	 5

	 SECTION 2.2
	  	 Lists of Holders of Securities
	  	 5

	 SECTION 2.3
	  	 Reports by the Capital Securities Guarantee Trustee
	  	 5

	 SECTION 2.4
	  	 Periodic Reports to Capital Securities Guarantee Trustee
	  	 6

	 SECTION 2.5
	  	 Evidence of Compliance with Conditions Precedent
	  	 6

	 SECTION 2.6
	  	 Events of Default; Waiver
	  	 6

	 SECTION 2.7
	  	 Event of Default; Notice
	  	 6

	 SECTION 2.8
	  	 Conflicting Interests
	  	 6

	
	 ARTICLE 3
	  	 
	
	 POWERS, DUTIES AND RIGHTS OF CAPITAL
SECURITIES GUARANTEE TRUSTEE
	  	 
	
	 SECTION 3.1
	  	 Powers and Duties of the Capital Securities Guarantee Trustee
	  	 7

	 SECTION 3.2
	  	 Certain Rights of Capital Securities Guarantee Trustee
	  	 8

	 SECTION 3.3
	  	 Not Responsible for Recitals or Issuance of Capital Securities Guarantee
	  	 10

	
	 ARTICLE 4
	  	 
	
	 CAPITAL SECURITIES GUARANTEE
TRUSTEE
	  	 
	
	 SECTION 4.1
	  	 Capital Securities Guarantee Trustee; Eligibility
	  	 10

	 SECTION 4.2
	  	 Appointment, Removal and Resignation of Capital Securities Guarantee Trustee
	  	 11

	
	 ARTICLE 5
	  	 
	
	 GUARANTEE
	  	 
	
	 SECTION 5.1
	  	 Guarantee
	  	 12

	 SECTION 5.2
	  	 Waiver of Notice and Demand
	  	 12

	 SECTION 5.3
	  	 Obligations Not Affected
	  	 12

	 SECTION 5.4
	  	 Rights of Holders
	  	 13

	 SECTION 5.5
	  	 Guarantee of Payment
	  	 13

	 SECTION 5.6
	  	 Subrogation
	  	 13

	 SECTION 5.7
	  	 Independent Obligations
	  	 14

	
	 ARTICLE 6
	  	 
	
	 LIMITATION OF TRANSACTIONS;
SUBORDINATION
	  	 
	
	 SECTION 6.1
	  	 Limitation of Transactions
	  	 14

	 SECTION 6.2
	  	 Ranking
	  	 14

 

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TABLE OF
CONTENTS 
 

	 ARTICLE 7
	  	 
	
	 TERMINATION
	  	 
	
	 SECTION 7.1
	  	 Termination
	  	 15

	
	 ARTICLE 8
	  	 
	
	 INDEMNIFICATION
	  	 
	
	 SECTION 8.1
	  	 Exculpation
	  	 15

	 SECTION 8.2
	  	 Indemnification
	  	 15

	
	 ARTICLE 9
	  	 
	
	 MISCELLANEOUS
	  	 
	
	 SECTION 9.1
	  	 Successors and Assigns
	  	 16

	 SECTION 9.2
	  	 Amendments
	  	 16

	 SECTION 9.3
	  	 Notices
	  	 16

	 SECTION 9.4
	  	 Benefit
	  	 17

	 SECTION 9.5
	  	 Governing Law
	  	 17

 

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CROSS-REFERENCE TABLE* 
 

	 Section of
Trust Indenture Act
of 1939, as amended

	  	 Section of
Declaration

	 310(a)
	  	 4.1(a)

	 310(c)
	  	 Inapplicable

	 311(c)
	  	 Inapplicable

	 312(a)
	  	 2.2(a)

	 312(b)
	  	 2.2(b)

	 313
	  	 2.3

	 314(a)
	  	 2.4

	 314(b)
	  	 Inapplicable

	 314(c)
	  	 2.5

	 314(d)
	  	 Inapplicable

	 314(f)
	  	 Inapplicable

	 315(a)
	  	 3.1(d)

	 315(c)
	  	 3.1(c)

	 315(d)
	  	 3.1(d)

*    This
Cross-Reference Table does not constitute part of the Capital Securities Guarantee and shall not affect the interpretation of any of its terms or provisions. 
 

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CAPITAL
SECURITIES GUARANTEE AGREEMENT 
 
This
GUARANTEE AGREEMENT (the “Capital Securities Guarantee”), dated as of [                ,         ], is
executed and delivered by BANK OF AMERICA CORPORATION, a Delaware corporation (the “Guarantor”), and THE BANK OF NEW YORK, a New York banking corporation, as trustee (the “Capital Securities Guarantee Trustee”), for the benefit
of the Holders (as defined herein) from time to time of the Capital Securities (as defined herein) of BAC Capital Trust [        ], a Delaware statutory trust (the “Issuer”). 
 
WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the “Declaration”), dated as of [                ,         ], among the trustees of the Issuer
named therein, the Guarantor, as sponsor, and the holders from time to time of undivided beneficial interests in the assets of the Issuer, the Issuer is issuing on the date hereof
[                    ] Capital Securities representing undivided preferred beneficial interests in the assets of the Issuer, designated the
BAC Capital Trust [        ] [        ]% Capital Securities (the “Capital Securities”), initially in the aggregate liquidation amount of
$[                    ]; 
 
[WHEREAS, pursuant to the terms of an Underwriting Agreement dated as of
[                ,         ], by and among the Guarantor, as sponsor, the Issuer and the Underwriters named therein
(the “Underwriting Agreement”), the Issuer has agreed to issue up to an additional [                    ] Capital Securities with an
aggregate liquidation amount of up to $[                    ] upon exercise of an option granted in the Underwriting Agreement to the
Underwriters (the “Option”);] 
 
WHEREAS,
as incentive for the Holders to purchase the Capital Securities, the Guarantor desires irrevocably and unconditionally to agree, to the extent set forth in this Capital Securities Guarantee, to pay to the Holders of the Capital Securities the
Guarantee Payments (as defined herein) and to make certain other payments on the terms and conditions set forth herein; and 
 
WHEREAS, the Guarantor also is executing and delivering a guarantee agreement (the “Common Securities Guarantee”) for the
benefit of the holders of the Common Securities (as defined herein); 
 
NOW, THEREFORE, in consideration of the purchase by each Holder of Capital Securities, which purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor executes and delivers this Capital Securities
Guarantee for the benefit of the Holders. 
 

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ARTICLE 1

 
DEFINITIONS AND INTERPRETATION 
 
SECTION 1.1 Definitions and
Interpretation. 
 
In this Capital Securities
Guarantee, unless the context otherwise requires: 
 

	 	(a)	 	Capitalized terms used in this Capital Securities Guarantee but not defined in the preamble above have the respective meanings assigned to them in this Section 1.1;

 

	 	(b)	 	terms defined in the Declaration as at the date of execution of this Capital Securities Guarantee have the same meaning when used in this Capital Securities
Guarantee; 

 

	 	(c)	 	a term defined anywhere in this Capital Securities Guarantee has the same meaning throughout; 

 

	 	(d)	 	all references to “the Capital Securities Guarantee” or “this Capital Securities Guarantee” are to this Capital Securities Guarantee as modified,
supplemented or amended from time to time; 

 

	 	(e)	 	all references in this Capital Securities Guarantee to Articles and Sections are to Articles and Sections of this Capital Securities Guarantee, unless otherwise
specified; 

 

	 	(f)	 	a term defined in the Trust Indenture Act has the same meaning when used in this Capital Securities Guarantee, unless otherwise defined in this Capital Securities
Guarantee or unless the context otherwise requires; and 

 

	 	(g)	 	a reference to the singular includes the plural and vice versa. 

 
“Affiliate” has the same meaning as given to that term in Rule 405 of the Securities Act of
1933, as amended, or any successor rule thereunder. 
 
“Authorized Officer” means the Chief Executive Officer, President, Chief Financial Officer, any Vice President, Treasurer, Assistant Treasurer, Associate General Counsel or other person authorized to bind a person.

 
“Business Day” means any day
other than a day on which federal or state banking institutions in New York, New York or Charlotte, North Carolina are authorized or obligated by law, executive order or regulation to close. 
 
“Capital Securities Guarantee Trustee” means
The Bank of New York, a New York banking corporation, until a Successor Capital Securities Guarantee Trustee has been appointed and has accepted such appointment pursuant to the terms of this Capital Securities Guarantee and thereafter means each
such Successor Capital Securities Guarantee Trustee. 
 

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“Capital Securities” means the total number of BAC Capital Trust
[        ] [        ]% Capital Securities (liquidation amount $[        ] per Capital Security) issued
pursuant to the Declaration representing undivided preferred beneficial interests in the assets of the Issuer, [including any Capital Securities issued upon exercise of the Option.] 
 
“Common Securities” means the securities representing undivided common beneficial interests
in the assets of the Issuer[, including any additional Common Securities issued in connection with the exercise of the Option]. 
 
“Corporate Trust Office” means the office of the Capital Securities Guarantee Trustee at which the corporate trust
business of the Capital Securities Guarantee Trustee shall, at any particular time, be principally administered, which office at the date of execution of this Agreement is located at 101 Barclay Street, 8 West, New York, New York 10286.

 
“Covered Person” means any
Holder or beneficial owner of Capital Securities. 
 
“Event of Default” means a default by the Guarantor on any of its payments or other obligations under this Capital Securities Guarantee. 
 
“Guarantee Payments” means the following payments or distributions, without duplication,
with respect to the Capital Securities, to the extent not paid or made by the Issuer: (i) any accrued and unpaid Distributions that are required to be paid on such Capital Securities to the extent the Issuer shall have funds available therefor, (ii)
the applicable Redemption Price to the extent the Issuer has funds available therefor, with respect to any Capital Securities called for redemption by the Issuer, and (iii) upon a voluntary or involuntary dissolution, winding-up or termination of
the Issuer (other than in connection with the distribution of Notes to the Holders in exchange for Capital Securities as provided in the Declaration), the lesser of (a) the aggregate of the liquidation amount and all accrued and unpaid Distributions
on the Capital Securities to the date of payment, to the extent the Issuer shall have funds available therefor, and (b) the amount of assets of the Issuer remaining available for distribution to Holders in liquidation of the Issuer (in either case,
the “Liquidation Distribution”). If an Event of Default under, and as defined in, the Indenture has occurred and is continuing, the rights of holders of the Common Securities to receive payments under the Common Securities Guarantee are
subordinated to the rights of Holders of Capital Securities to receive Guarantee Payments under the Capital Securities Guarantee. 
 
“Holder” shall mean any holder, as registered on the books and records of the Issuer, of any Capital Securities;
provided, however, that in determining whether the holders of the requisite percentage of Capital Securities have given any request, notice, consent or waiver hereunder, “Holder” shall not include the Guarantor or any
Affiliate of the Guarantor. 
 
“Indemnified
Person” means the Capital Securities Guarantee Trustee, any Affiliate of the Capital Securities Guarantee Trustee, or any officers, directors, shareholders, members, partners, employees, representatives, nominees, custodians or agents of
the Capital Securities Guarantee Trustee. 
 
“Indenture” means the Restated Indenture dated as of November 1, 2001 between the Guarantor (the “Note Issuer”) and The Bank of New York, as trustee, together with any 
 

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Board Resolution (as defined in the Indenture) or any indenture supplemental thereto, pursuant to which
certain subordinated debt securities of the Note Issuer are to be issued to the Property Trustee (as defined in the Declaration) of the Issuer. 
 
“Majority in liquidation amount of the Securities” means, except as provided by the Trust Indenture Act, a vote by
Holder(s) of Capital Securities, voting separately as a class, of more than 50% of the liquidation amount (including the stated amount that would be paid on redemption, liquidation, dissolution or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all Capital Securities. 
 
“Notes” means the series of junior subordinated debt securities of the Guarantor designated the
[                ]% Junior Subordinated Notes, due [        ] held by the Property Trustee of the Issuer on behalf
of the Trust. 
 
“Officers’
Certificate” means, with respect to any Person, a certificate signed by an Authorized Officer of such Person. Any Officers’ Certificate delivered with respect to compliance with a condition or covenant provided for in this Capital
Securities Guarantee shall include: 
 
(a) a statement that each officer signing the Officers’ Certificate has read the covenant or condition and the definition relating thereto; 
 
(b) a brief statement of the nature and scope of the examination or investigation undertaken
by each officer in rendering the Officers’ Certificate; 
 
(c) a statement that each such officer has made such examination or investigation as, in such officer’s opinion, is necessary to enable such officer to express an informed opinion as to whether or
not such covenant or condition has been complied with; and 
 
(d) a statement as to whether, in the opinion of each such officer, such condition or covenant has been complied with. 
 
“Person” means a legal person, including any individual, corporation, estate, partnership,
joint venture, association, joint stock company, limited liability company, trust, unincorporated association, or government or any agency or political subdivision thereof, or any other entity of whatever nature. 
 
“Responsible Officer” means, with respect to
the Capital Securities Guarantee Trustee, any officer within the Corporate Trust Office of the Capital Securities Guarantee Trustee, including any vice president, any assistant vice president, any assistant treasurer or other officer of the
Corporate Trust Office of the Capital Securities Guarantee Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of that officer’s knowledge of and familiarity with the particular subject. 
 

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“Successor Capital Securities Guarantee Trustee” means a successor Capital Securities Guarantee Trustee possessing the qualifications to act as Capital Securities Guarantee Trustee under Section 4.1. 
 
“Trust Indenture Act” means the Trust
Indenture Act of 1939, as amended. 
 
“Trust Securities” means the Common Securities and the Capital Securities. 
 
ARTICLE 2  
 
TRUST INDENTURE ACT 
 
SECTION 2.1 Trust Indenture Act; Application. 
 
(a) This Capital Securities Guarantee is subject to the provisions of the Trust Indenture Act that are required to be part of this Capital
Securities Guarantee and shall, to the extent applicable, be governed by such provisions; and 
 
(b) If and to the extent that any provision of this Capital Securities Guarantee limits, qualifies or conflicts with the duties imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act,
such imposed duties shall control. 
 
SECTION 2.2 Lists of Holders of Securities. 
 
(a) The Guarantor shall provide the Capital Securities Guarantee Trustee with a list, in such form as the Capital Securities Guarantee Trustee may reasonably require, of the names and addresses of the Holders of the Capital
Securities (“List of Holders”) as of such date, (i) within 10 days after each record date, and (ii) at any other time within 30 days of receipt by the Guarantor of a written request for a List of Holders as of a date no more than 10 days
before such List of Holders is given to the Capital Securities Guarantee Trustee; provided, that the Guarantor shall not be obligated to provide such List of Holders at any time the List of Holders does not differ from the most recent List of
Holders given to the Capital Securities Guarantee Trustee by the Guarantor. The Capital Securities Guarantee Trustee may destroy any List of Holders previously given to it on receipt of a new List of Holders. 
 
(b) The Capital Securities Guarantee Trustee shall comply with
its obligations under Sections 311(a), 311(b) and Section 312(b) of the Trust Indenture Act. 
 
SECTION 2.3 Reports by the Capital Securities Guarantee Trustee. 
 
Within 60 days after March 31 of each year, the Capital
Securities Guarantee Trustee shall provide to the Holders of the Capital Securities such reports as are required by Section 313 of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313 of the Trust Indenture Act. The
Capital Securities Guarantee Trustee also shall comply with the requirements of Section 313(d) of the Trust Indenture Act. 
 

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SECTION 2.4 Periodic Reports to Capital Securities Guarantee Trustee. 
 
The Guarantor shall provide to the Capital Securities Guarantee Trustee such documents, reports and information, if any, as required by Section 314 and the compliance certificate required by Section
314 of the Trust Indenture Act in the form, in the manner and at the times required by Section 314 of the Trust Indenture Act. 
 
SECTION 2.5 Evidence of Compliance with Conditions Precedent. 
 
The Guarantor shall provide to the Capital Securities
Guarantee Trustee such evidence of compliance with any conditions precedent, if any, provided for in this Capital Securities Guarantee that relate to any of the matters set forth in Section 314(c) of the Trust Indenture Act. Any certificate or
opinion required to be given by an officer pursuant to Section 314(c)(1) may be given in the form of an Officers’ Certificate. 
 
SECTION 2.6 Events of Default; Waiver. 
 
The Holders of a Majority in liquidation amount of the Securities may, by vote, on behalf of the Holders of
all of the Capital Securities, waive any past Event of Default and its consequences. Upon such waiver, any such Event of Default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose
of this Capital Securities Guarantee, but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. 
 
SECTION 2.7 Event of Default; Notice. 
 
(a) The Capital Securities Guarantee Trustee shall, within 90
days after the occurrence of an Event of Default, transmit by mail, first class postage prepaid, to the Holders of the Capital Securities, notices of all Events of Default actually known to a Responsible Officer of the Capital Securities Guarantee
Trustee, unless such defaults have been cured before the giving of such notice, provided, that, the Capital Securities Guarantee Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Capital Securities
Guarantee Trustee in good faith determines that the withholding of such notice is in the interests of the Holders. 
 
(b) The Capital Securities Guarantee Trustee shall not be deemed to have knowledge of any Event of Default unless a Responsible Officer of
the Capital Securities Guarantee Trustee shall have received written notice thereof, or unless a Responsible Officer of the Capital Securities Guarantee Trustee charged with the administration of the Declaration shall have obtained actual knowledge
thereof. 
 
SECTION 2.8
Conflicting Interests. 
 
The Declaration
shall be deemed to be specifically described in this Capital Securities Guarantee for the purposes of clause (i) of the first proviso contained in Section 310(b) of the Trust Indenture Act. 
 

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ARTICLE 3

 
POWERS, DUTIES AND RIGHTS OF 
CAPITAL SECURITIES GUARANTEE TRUSTEE 
 
SECTION 3.1 Powers and Duties of the Capital Securities Guarantee Trustee. 
 
(a) This Capital Securities Guarantee shall be held by the
Capital Securities Guarantee Trustee for the benefit of the Holders, and the Capital Securities Guarantee Trustee shall not transfer this Capital Securities Guarantee to any Person except a Holder of Capital Securities exercising his or her rights
pursuant to Section 5.4(b) or to a Successor Capital Securities Guarantee Trustee on acceptance by such Successor Capital Securities Guarantee Trustee of its appointment to act as Successor Capital Securities Guarantee Trustee. The right, title and
interest of the Capital Securities Guarantee Trustee shall automatically vest in any Successor Capital Securities Guarantee Trustee, and such vesting and cessation of title shall be effective whether or not conveyancing documents have been executed
and delivered pursuant to the appointment of such Successor Capital Securities Guarantee Trustee. 
 
(b) If an Event of Default actually known to a Responsible Officer of the Capital Securities Guarantee Trustee has occurred and is
continuing, the Capital Securities Guarantee Trustee shall enforce this Capital Securities Guarantee for the benefit of the Holders. 
 
(c) The Capital Securities Guarantee Trustee, before the occurrence of any Event of Default and after the curing of all Events of Default
that may have occurred, shall undertake to perform only such duties as are specifically set forth in this Capital Securities Guarantee, and no implied covenants shall be read into this Capital Securities Guarantee against the Capital Securities
Guarantee Trustee. In case an Event of Default has occurred (that has not been cured or waived pursuant to Section 2.6) and is actually known to a Responsible Officer of the Capital Securities Guarantee Trustee, the Capital Securities Guarantee
Trustee shall exercise such of the rights and powers vested in it by this Capital Securities Guarantee, and use the same degree of care and skill in its exercise thereof, as a prudent person would exercise or use under the circumstances in the
conduct of his or her own affairs. 
 
(d) No
provision of this Capital Securities Guarantee shall be construed to relieve the Capital Securities Guarantee Trustee from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

 
(i) prior to the occurrence of
any Event of Default and after the curing or waiving of all such Events of Default that may have occurred: 
 
(A) the duties and obligations of the Capital Securities Guarantee Trustee shall be determined solely by the express
provisions of this Capital Securities Guarantee, and the Capital Securities Guarantee Trustee shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Capital Securities Guarantee, and no
implied covenants or obligations shall be read into this Capital Securities Guarantee against the Capital Securities Guarantee Trustee; and 
 

7 

 
(B) in the absence of bad faith on the part of the Capital Securities Guarantee Trustee, the Capital Securities Guarantee Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Capital Securities Guarantee Trustee and conforming to the requirements of this Capital Securities Guarantee; but in the case of any such certificates or opinions that by any provision
hereof are specifically required to be furnished to the Capital Securities Guarantee Trustee, the Capital Securities Guarantee Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this
Capital Securities Guarantee; 
 
(ii) the Capital Securities Guarantee Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer of the Capital Securities Guarantee Trustee, unless it shall be proved that the Capital
Securities Guarantee Trustee was negligent in ascertaining the pertinent facts upon which such judgment was made; 
 
(iii) the Capital Securities Guarantee Trustee shall not be liable with respect to any action taken or omitted to be taken
by it in good faith in accordance with the direction of the Holders of not less than a Majority in liquidation amount of the Securities relating to the time, method and place of conducting any proceeding for any remedy available to the Capital
Securities Guarantee Trustee, or exercising any trust or power conferred upon the Capital Securities Guarantee Trustee under this Capital Securities Guarantee; and 
 
(iv) no provision of this Capital Securities Guarantee shall require the Capital Securities
Guarantee Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers, if the Capital Securities Guarantee Trustee shall have
reasonable grounds for believing that the repayment of such funds or liability is not reasonably assured to it under the terms of this Capital Securities Guarantee or indemnity, reasonably satisfactory to the Capital Securities Guarantee Trustee,
against such risk or liability is not reasonably assured to it. 
 
SECTION 3.2 Certain Rights of Capital Securities Guarantee Trustee. 
 
(a) Subject to the provisions of Section 3.1: 
 
(i) The Capital Securities Guarantee Trustee may rely conclusively, and shall be fully protected in acting or refraining
from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to
have been signed, sent or presented by the proper party or parties. 
 
(ii) Any direction or act of the Guarantor contemplated by this Capital Securities Guarantee shall be sufficiently evidenced by an Officers’ Certificate. 
 
(iii) Whenever, in the administration of this
Capital Securities Guarantee, the Capital Securities Guarantee Trustee shall deem it desirable that a matter be proved or 
 

8 

 
established
before taking, suffering or omitting any action hereunder, the Capital Securities Guarantee Trustee (unless other evidence is herein specifically prescribed) may, in the absence of bad faith on its part, request and conclusively rely upon an
Officers’ Certificate which, upon receipt of such request, shall be promptly delivered by the Guarantor. 
 
(iv) The Capital Securities Guarantee Trustee shall have no duty to see to any recording, filing or registration of any
instrument (or any rerecording, refiling or registration thereof). 
 
(v) The Capital Securities Guarantee Trustee may consult with counsel of its selection, and the advice or opinion of such counsel with respect to legal matters shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or opinion. Such counsel may be counsel to the Guarantor or any of its Affiliates and may include any of its
employees. The Capital Securities Guarantee Trustee shall have the right at any time to seek instructions concerning the administration of this Capital Securities Guarantee from any court of competent jurisdiction. 
 
(vi) The Capital Securities Guarantee Trustee
shall be under no obligation to exercise any of the rights or powers vested in it by this Capital Securities Guarantee at the request or direction of any Holder, unless such Holder shall have provided to the Capital Securities Guarantee Trustee such
security and indemnity, reasonably satisfactory to the Capital Securities Guarantee Trustee, against the costs, expenses (including attorneys’ fees and expenses and the expenses of the Capital Securities Guarantee Trustee’s agents,
nominees or custodians) and liabilities that might be incurred by it in complying with such request or direction, including such reasonable advances as may be requested by the Capital Securities Guarantee Trustee; provided that, nothing contained in
this Section 3.2(a)(vi) shall be taken to relieve the Capital Securities Guarantee Trustee, upon the occurrence of an Event of Default, of its obligation to exercise the rights and powers vested in it by this Capital Securities Guarantee.

 
(vii) The Capital Securities
Guarantee Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence
of indebtedness or other paper or document, but the Capital Securities Guarantee Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit. 
 
(viii) The Capital Securities Guarantee
Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents, nominees, custodians or attorneys, and the Capital Securities Guarantee Trustee shall not be responsible for any
misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder. 
 
(ix) Any action taken by the Capital Securities Guarantee Trustee or its agents hereunder shall bind the Holders of the
Capital Securities, and the signature of the Capital 
 

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Securities
Guarantee Trustee or its agents alone shall be sufficient and effective to perform any such action. No third party shall be required to inquire as to the authority of the Capital Securities Guarantee Trustee to so act or as to its compliance with
any of the terms and provisions of this Capital Securities Guarantee, both of which shall be conclusively evidenced by the Capital Securities Guarantee Trustee’s or its agent’s taking such action. 
 
(x) Whenever in the administration of this
Capital Securities Guarantee the Capital Securities Guarantee Trustee shall deem it desirable to receive instructions with respect to enforcing any remedy or right or taking any other action hereunder, the Capital Securities Guarantee Trustee (i)
may request instructions from the Holders of a Majority in liquidation amount of the Securities, (ii) may refrain from enforcing such remedy or right or taking such other action until such instructions are received, and (iii) shall be protected in
conclusively relying on or acting in accordance with such instructions. 
 
(xi) The Capital Securities Guarantee Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Capital Securities Guarantee. 
 
(b) No provision of this Capital Securities Guarantee shall be deemed to impose any duty or obligation on the Capital Securities Guarantee Trustee to perform any act or acts or exercise any right,
power, duty or obligation conferred or imposed on it in any jurisdiction in which it shall be illegal, or in which the Capital Securities Guarantee Trustee shall be unqualified or incompetent in accordance with applicable law, to perform any such
act or acts or to exercise any such right, power, duty or obligation. No permissive power or authority available to the Capital Securities Guarantee Trustee shall be construed to be a duty. 
 
SECTION 3.3 Not Responsible for Recitals
or Issuance of Capital Securities Guarantee. 
 
The recitals contained in this Capital Securities Guarantee shall be taken as the statements of the Guarantor, and the Capital Securities Guarantee Trustee does not assume any responsibility for their correctness. The Capital
Securities Guarantee Trustee makes no representation as to the validity or sufficiency of this Capital Securities Guarantee. 
 
ARTICLE 4 
 
CAPITAL SECURITIES GUARANTEE TRUSTEE 
 
SECTION 4.1 Capital Securities Guarantee Trustee; Eligibility. 
 
(a) There shall at all times be a Capital Securities Guarantee
Trustee which shall: 
 
(i) not be
an Affiliate of the Guarantor; and 
 
(ii) be a corporation organized and doing business under the laws of the United States of America or any State or Territory thereof or of the District of Columbia, or a corporation or Person permitted by the Securities and Exchange
Commission to act 
 

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as a trustee
under the Trust Indenture Act, authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least $50,000,000, and subject to supervision or examination by Federal, State, Territorial or District of
Columbia authority. If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the supervising or examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii), the
combined capital and surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. 
 
(b) If at any time the Capital Securities Guarantee Trustee shall cease to be eligible to so act under
Section 4.1(a), the Capital Securities Guarantee Trustee shall immediately resign in the manner and with the effect set out in Section 4.2(c). 
 
(c) If the Capital Securities Guarantee Trustee has or shall acquire any “conflicting interest” within the meaning of Section
310(b) of the Trust Indenture Act, the Capital Securities Guarantee Trustee and Guarantor shall in all respects comply with the provisions of Section 310(b) of the Trust Indenture Act. 
 
SECTION 4.2 Appointment, Removal and Resignation of Capital Securities Guarantee
Trustee. 
 
(a) Subject to Section 4.2(b), the
Capital Securities Guarantee Trustee may be appointed or removed without cause at any time by the Guarantor except during an Event of Default. 
 
(b) The Capital Securities Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until a Successor Capital Securities
Guarantee Trustee has been appointed and has accepted such appointment by written instrument executed by such Successor Capital Securities Guarantee Trustee and delivered to the Guarantor. 
 
(c) The Capital Securities Guarantee Trustee may resign from office (without need for prior or subsequent
accounting) by an instrument in writing executed by the Capital Securities Guarantee Trustee and delivered to the Guarantor, which resignation shall not take effect until a Successor Capital Securities Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor Capital Securities Guarantee Trustee and delivered to the Guarantor and the resigning Capital Securities Guarantee Trustee. 
 
(d) If no Successor Capital Securities Guarantee Trustee shall
have been appointed and accepted appointment as provided in this Section 4.2 within 60 days after delivery of an instrument of removal or resignation, the Capital Securities Guarantee Trustee resigning or being removed may petition any court of
competent jurisdiction for appointment of a Successor Capital Securities Guarantee Trustee. Such court may thereupon, after prescribing such notice, if any, as it may deem proper, appoint a Successor Capital Securities Guarantee Trustee.

 
(e) No Capital Securities Guarantee Trustee
shall be liable for the acts or omissions to act of any Successor Capital Securities Guarantee Trustee. 
 

11 

 
(f) Upon
termination of this Capital Securities Guarantee or removal or resignation of the Capital Securities Guarantee Trustee pursuant to this Section 4.2, the Guarantor shall pay to the Capital Securities Guarantee Trustee all amounts accrued to the date
of such termination, removal or resignation. 
 
ARTICLE 5 
 
GUARANTEE

 
SECTION 5.1 Guarantee.

 
The Guarantor irrevocably and unconditionally
agrees to pay in full to the Holders the Guarantee Payments (without duplication of amounts theretofore paid by the Issuer), as and when due, regardless of any defense, right of set-off or counterclaim that the Issuer may have or assert. The
Guarantor’s obligation to make a Guarantee Payment may be satisfied by direct payment of the required amounts by the Guarantor to the Holders or by causing the Issuer to pay such amounts to the Holders. 
 
SECTION 5.2 Waiver of Notice and
Demand. 
 
The Guarantor hereby waives notice
of acceptance of this Capital Securities Guarantee and of any liability to which it applies or may apply, presentment, demand for payment, any right to require a proceeding first against the Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of redemption and all other notices and demands. 
 
SECTION 5.3 Obligations Not Affected. 
 
The obligations, covenants, agreements and duties of the Guarantor under this Capital Securities Guarantee
shall in no way be affected or impaired by reason of the happening from time to time of any of the following: 
 
(a) the release or waiver, by operation of law or otherwise, of the performance or observance by the Issuer of any express or implied
agreement, covenant, term or condition relating to the Capital Securities to be performed or observed by the Issuer; 
 
(b) the extension of time for the payment by the Issuer of all or any portion of the Distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Capital Securities or the extension of time for the performance of any other obligation under, arising out of, or in connection with, the Capital Securities (other than an extension of
time for payment of Distributions, Redemption Price, Liquidation Distribution or other sum payable that results from the extension of any interest payment period on the Notes or any extension of the maturity date of the Notes permitted by the
Indenture); 
 
(c) any failure, omission, delay or
lack of diligence on the part of the Holders to enforce, assert or exercise any right, privilege, power or remedy conferred on the Holders pursuant to the terms of the Capital Securities, or any action on the part of the Issuer granting indulgence
or extension of any kind; 
 

12 

 
(d) the
voluntary or involuntary liquidation, dissolution, sale of any collateral, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of debt of, or other similar
proceedings affecting, the Issuer or any of the assets of the Issuer; 
 
(e) any invalidity of, or defect or deficiency in, the Capital Securities; 
 
(f) any failure or omission to receive any regulatory approval or consent required in connection with the Common Securities or Capital
Securities, including the failure to receive any approval of the Board of Governors of the Federal Reserve System required in connection with the Capital Securities; 
 
(g) the settlement or compromise of any obligation guaranteed hereby or hereby incurred; or 
 
(h) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being the intent of this Section 5.3 that the obligations of the Guarantor hereunder shall be absolute and unconditional under any and all circumstances. 
 
There shall be no obligation of the Holders to give notice to,
or obtain consent of, the Guarantor with respect to the happening of any of the foregoing. 
 
SECTION 5.4 Rights of Holders. 
 
(a) The Holders of a Majority in liquidation amount of the Securities have the right to direct the time,
method and place of conducting of any proceeding for any remedy available to the Capital Securities Guarantee Trustee in respect of this Capital Securities Guarantee or exercising any trust or power conferred upon the Capital Securities Guarantee
Trustee under this Capital Securities Guarantee. 
 
(b) If the Capital Securities Guarantee Trustee fails to enforce such Capital Securities Guarantee, any Holder of Capital Securities may institute a legal proceeding directly against the Guarantor to enforce the Capital Securities
Guarantee Trustee’s rights under this Capital Securities Guarantee, without first instituting a legal proceeding against the Issuer, the Capital Securities Guarantee Trustee or any other person or entity. The Guarantor waives any right or
remedy to require that any action be brought first against the Issuer or any other person or entity before proceeding directly against the Guarantor. 
 
SECTION 5.5 Guarantee of Payment. 
 
This Capital Securities Guarantee creates a guarantee of payment and not of collection. 
 
SECTION 5.6 Subrogation. 
 
The Guarantor shall be subrogated to all (if any) rights of
the Holders against the Issuer in respect of any amounts paid to such Holders by the Guarantor under this Capital 
 

13 

 
Securities Guarantee;
provided, however, that the Guarantor shall not (except to the extent required by mandatory provisions of law) be entitled to enforce or exercise any right that it may acquire by way of subrogation or any indemnity, reimbursement or other agreement,
in all cases as a result of payment under this Capital Securities Guarantee, if, at the time of any such payment, any amounts are due and unpaid under this Capital Securities Guarantee. If any amount shall be paid to the Guarantor in violation of
the preceding sentence, the Guarantor agrees to hold such amount in trust for the Holders and to pay over such amount to the Holders. 
 
SECTION 5.7 Independent Obligations. 
 
The Guarantor acknowledges that its obligations hereunder are independent of the obligations of the Issuer
with respect to the Capital Securities, and that the Guarantor shall be liable as principal and as debtor hereunder to make Guarantee Payments pursuant to the terms of this Capital Securities Guarantee notwithstanding the occurrence of any event
referred to in subsections (a) through (h), inclusive, of Section 5.3 hereof. 
 
ARTICLE 6 
 
LIMITATION OF TRANSACTIONS; SUBORDINATION 
 
SECTION 6.1 Limitation of Transactions. 
 
So long as any Capital Securities remain outstanding, if there shall have occurred and be continuing an Event of Default under this Capital Securities Guarantee, an Event of Default or a Nonpayment
under the Declaration or during an Extended Interest Payment Period (as defined in the Indenture), then (a) the Guarantor shall not declare or pay any dividend on, make any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock (other than (i) purchases or acquisitions of shares of its common stock in connection with the satisfaction by the Guarantor of its obligations under any employee benefit plans, (ii) as a
result of a reclassification of the Guarantor’s capital stock or the exchange or conversion of one class or series of the Guarantor’s capital stock for another class or series of the Guarantor’s capital stock, or (iii) the purchase of
fractional interests in shares of the Guarantor’s capital stock pursuant to an acquisition or the conversion or exchange provisions of such capital stock of the Guarantor or the security being converted or exchanged) or make any guarantee
payments with respect to the foregoing or (b) the Guarantor shall not make any payment of interest, principal or premium, if any, on or repay, repurchase or redeem any debt securities (including guarantees) issued by the Guarantor which rank pari
passu with or junior to the Notes. 
 
SECTION 6.2 Ranking. 
 
This Capital Securities Guarantee will constitute an unsecured obligation of the Guarantor and will rank (i) subordinate and junior in right of payment to all other liabilities, including contingent liabilities, of the Guarantor,
(ii) pari passu with the most senior preferred or preference stock now or hereafter issued by the Guarantor and with any guarantee now or hereafter entered into by the Guarantor in respect of any preferred securities (including trust preferred
securities) or preference stock of any Affiliate of the Guarantor, and (iii) senior to the Guarantor’s common stock. 
 

14 

 
ARTICLE 7

 
TERMINATION 
 
SECTION 7.1 Termination. 
 
This Capital Securities Guarantee shall terminate upon (i)
full payment of the Redemption Price of all Capital Securities, (ii) upon the distribution of the Notes to the Holders of all of the Capital Securities, or (iii) upon full payment of the amounts payable in accordance with the Declaration upon
liquidation or dissolution of the Issuer. Notwithstanding the foregoing, this Capital Securities Guarantee will continue to be effective or will be reinstated, as the case may be, if at any time any Holder must restore payment of any sums paid under
the Capital Securities or under this Capital Securities Guarantee. 
 
ARTICLE 8 
 
INDEMNIFICATION 
 
SECTION 8.1 Exculpation. 
 
(a) No Indemnified Person shall be liable, responsible or accountable in damages or otherwise to the Guarantor or any Covered Person for any loss, damage or claim incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith in accordance with this Capital Securities Guarantee and in a manner that such Indemnified Person reasonably believed to be within the scope of the authority conferred on such Indemnified Person by this Capital
Securities Guarantee or by law, except that an Indemnified Person shall be liable for any such loss, damage or claim incurred by reason of such Indemnified Person’s negligence or willful misconduct with respect to such acts or omissions.

 
(b) An Indemnified Person shall be fully
protected in relying in good faith upon the records of the Guarantor and upon such information, opinions, reports or statements presented to the Guarantor by any Person as to matters the Indemnified Person reasonably believes are within such other
Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Guarantor, including information, opinions, reports or statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from which Distributions to Holders of Capital Securities might properly be paid. 
 
SECTION 8.2 Indemnification. 
 
The Guarantor agrees to indemnify each Indemnified Person for, and to hold each Indemnified Person harmless
against, any and all loss, liability, damage, claim or expense incurred without negligence or bad faith on its part, arising out of or in connection with the acceptance or administration of the trust or trusts hereunder, including the costs and
expenses (including reasonable legal fees and expenses) of defending itself against, or investigating, any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder. The obligation to indemnify as set
forth in this Section 8.2 shall survive the termination of this Capital Securities Guarantee. 
 

15 

 
ARTICLE 9

 
MISCELLANEOUS 
 
SECTION 9.1 Successors and Assigns.

 
All guarantees and agreements contained in this
Capital Securities Guarantee shall bind the successors, assigns, receivers, trustees and representatives of the Guarantor and shall inure to the benefit of the Holders of the Capital Securities then outstanding. 
 
SECTION 9.2 Amendments. 
 
Except with respect to any changes that do not adversely
affect the rights of Holders (in which case no consent of Holders will be required), this Capital Securities Guarantee may only be amended with the prior approval of the Holders of at least a Majority in liquidation amount (including the stated
amount that would be paid on redemption, liquidation or otherwise, plus accrued and unpaid Distributions to the date upon which the voting percentages are determined) of all the outstanding Capital Securities. The provisions of Section 12.2 of the
Declaration with respect to meetings of holders of the Securities apply to the giving of such approval. 
 
SECTION 9.3 Notices. 
 
All notices provided for in this Capital Securities Guarantee shall be in writing, duly signed by the party giving such notice, and shall
be delivered, telecopied or mailed by first class mail, as follows: 
 
(a) If given to the Capital Securities Guarantee Trustee, at the Capital Securities Guarantee Trustee’s mailing address set forth below (or such other address as the Capital Securities Guarantee Trustee may give notice
of to the Holders): 
 
The Bank of
New York 
101 Barclay Street, 8 West 
New York, New York 10286 
Attention: Corporate Trust Trustee Administration 
Telecopy:
(904) 645-1921 
 
(b) If given to the Guarantor, at
the Guarantor’s mailing address set forth below (or such other address as the Guarantor may give notice of to the Holders of the Capital Securities): 
 
Bank of America Corporation 
Bank of America Corporate Center 
100 North Tryon Street

NC1-007-23-01 
Charlotte, North Carolina 28255 
Attention: Corporate
Treasury 
Telecopy: (704) 386-0270 
 

16 

 
(c) If given
to any Holder of Capital Securities, at the address set forth on the books and records of the Issuer. 
 
All such notices shall be deemed to have been given when received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused delivery or cannot be delivered because of a changed address of which no notice was given, such notice or other document shall be deemed to have been delivered on the date of
such refusal or inability to deliver. 
 
SECTION 9.4 Benefit. 
 
This Capital Securities Guarantee is solely for the benefit of the Holders of the Capital Securities and, subject to Section 3.1(a), is not separately transferable from the Capital Securities. 
 
SECTION 9.5 Governing Law.

 
THIS CAPITAL SECURITIES GUARANTEE SHALL BE
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES THEREOF. 
 
[Signature page follows] 
 

17 

 
THIS CAPITAL
SECURITIES GUARANTEE is executed as of the day and year first above written. 
 

	 BANK OF AMERICA CORPORATION,
as
Guarantor

	
	 By:
	 	

	 Name:
	 	

	 Title:
	 	 Senior Vice President

 

	 THE BANK OF NEW YORK, as Capital Securities
Guarantee Trustee

	
	 By:
	 	

	 Name:
	 	

	 Title:
	 	 Agent

 

18<PAGE>

                                                                    Exhibit 10.5

STATE OF NORTH CAROLINA                 )                   SEPARATION AGREEMENT
                                        )                        AND RELEASE
COUNTY OF MECKLENBURG                   )

     THIS AGREEMENT is made this 17th day of October, 2002, by and between US
LEC Corp., a Delaware corporation ("Company"), with its principal office in
Charlotte, North Carolina, and Francis J. Jules, a resident of Glencoe, Illinois
(the "Executive").

     WHEREAS, Executive has been employed by Company as its Chief Executive
Officer and has tendered his resignation from his employment as Chief Executive
Officer and as a member of Company's Board of Directors, effective as of October
14, 2002; and

     WHEREAS, Company and Executive agree that in exchange for the Release and
other consideration provided by Executive, as documented herein, Company will
provide Executive with certain additional consideration which it was not
otherwise obligated to provide; and

     WHEREAS, Executive and Company desire to terminate their employment
relationship in an amicable and definitive manner, and to settle, compromise and
resolve any and all claims they may have against each other; and

     WHEREAS, Executive has been allowed at least 21 days within which to
consider this Agreement.

     NOW, THEREFORE, for good and valuable consideration, receipt and
sufficiency of which are hereby acknowledged, Executive and Company hereby agree
to the termination of their employment relationship in accordance with the terms
and conditions hereinafter set forth:

     1. Term. The term of this Agreement shall commence on October 14, 2002 and
shall end on the earlier of April 14, 2003 or the date when Executive commences
employment (whether as an employee, consultant, independent contractor or
otherwise) outside of Company (the "Term").

     2. Separation from Employment and Payment of Compensation. Company accepts
the Executive's resignation from his employment as Chief Executive Officer with,
and resignation as a member of the Board of Directors of, Company and any and
all of its affiliated and subsidiary entities, effective as of October 14, 2002
(the "Separation Date"). Except as otherwise provided in this Section 2 of this
Agreement, Executive acknowledges that Company has paid to Executive all salary
and other compensation (excluding all accrued and unused vacation, which will be
paid on the next regular payday after it becomes calculable) due and payable
during the term of employment through and including the Separation Date. Company
shall reimburse Executive for reasonable business expenses incurred by him
during his employment with Company under Company's policies on the next regular
payday following execution of this Agreement.

<PAGE>

     3. Consultation Services. Executive agrees that during the Term of this
Agreement, he shall serve as a consultant to the Company in the position of
Executive Advisor to the Chairman of the Board. Executive will make himself
available from time to time during the Term to assist the Chairman of the Board
of Directors with such matters and duties as may be reasonably requested by the
Chairman. The parties understand and agree that Executive will not communicate
with any employee or representative of Company or its affiliates or subsidiaries
other than the Chairman, David Thaeler and Executive's former assistant at
Company, Judy Boas. In addition, the parties understand and agree that Executive
will not work in any office of the Company or its affiliates or subsidiaries,
but instead shall maintain an office in his home during the Term for the purpose
of carrying out his responsibilities. Executive understands that he continues to
be bound by the terms of Paragraphs 13(a) (as modified below), 13(b) and 14 of
that certain Employment Agreement between Company and Executive dated December
18, 2001 (the "Employment Agreement"), and Executive agrees to comply with the
provisions set forth therein.

     4. Special Separation Benefits. In consideration of the promises of
Executive contained in this Agreement and the performance thereof, Company
agrees to provide Executive with the following special separation benefits.

          a. Continuation of Base Salary. During the Term, Company shall provide
     Executive with a continuation of his monthly base salary in effect
     immediately prior to the Separation Date (the "Base Salary"), less any
     standard deductions and withholdings. It is recognized and agreed that
     Executive's monthly gross base salary immediately prior to the Separation
     Date was $ 41,666,66. Such salary continuation shall be payable as follows:

               (i) Continuation During First Three Months of the Term. Within
          ten (10) days after Executive's proper execution of this Agreement,
          Company will pay to Executive a lump sum amount equal to three months
          of his Base Salary, less any standard deductions and withholdings, as
          salary continuation then due to Executive and as an advance against
          salary continuation for the remaining portions of the first three
          months of the Term.

               (ii) Continuation During Remaining Period of the Term. During the
          remaining period of the Term, Company shall provide Executive with a
          continuation of his Base Salary, less standard deductions and
          withholdings, payable monthly in equal installments on February 14,
          2003, March 14, 2003, and April 14, 2003..

          b. Benefits. In further consideration for Executive's promises
     contained in this Agreement and his performance thereof, Company shall
     provide Executive with the following benefits.

               (i) Health Insurance Coverage. During the Term, Company shall
          reimburse Executive for any actual premium expenses (currently
          estimated to be $1000.13 per month), incurred during the period from
          the Qualifying Event for

                                       2

<PAGE>

          COBRA purposes to and including the expiration of the Term (provided
          that if Executive chooses to not elect COBRA continuation coverage,
          Company shall have no further obligation under this Subsection
          4.b(i)). The Qualifying Event for purposes of Executive's COBRA
          election shall be the Separation Date.

               (ii) Life Insurance. Company shall assist Executive in converting
          the $500,000 life insurance coverage provided to Executive by Company
          in effect immediately prior to the Separation Date to an individual
          policy and reimburse Executive for actual conversion fees, if any, and
          for the premiums under the individual policy during the Term.
          Executive understands and agrees that he shall be solely responsible
          for all costs and premiums for his voluntary supplemental life
          insurance coverage. Executive agrees to provide any assistance
          required by the insurer necessary to obtain the converted policy.

               (iii) Disability Coverage. Company shall purchase a replacement
          policy which provides coverage for the Executive during the Term
          equivalent to the short term and long term disability coverage
          provided to Executive under the plans in existence immediately prior
          to the Separation Date and Company shall pay the premiums for such
          policy during the Term. Decisions related to the replacement policy,
          including but not limited to the choice of insurer, shall be made in
          the sole discretion of Company. Executive agrees to provide any
          assistance required by the insurer necessary to obtain the replacement
          policy.

          All obligations of Company with respect to the replacement policy and
     the converted policy shall cease on the expiration of the Term.

               (iv) Indemnification. As further consideration for Executive's
          agreements and promises contained in this Agreement and the
          performance thereof, Company agrees that Executive shall be entitled
          to be indemnified in his capacity as an officer and director of the
          Company on the same basis as other officers and directors of the
          Company as of the Separation Date, and that Company will continue to
          include Executive in its directors and officers insurance coverage
          provided generally to other officers and directors of the Company as
          of the Separation Date for a period of six (6) years after the
          Separation Date.

               (v) Legal Fees. As further consideration for Executive's
          agreements and promises contained in this Agreement and the
          performance thereof, Company agrees to reimburse Executive for
          reasonable legal fees incurred in connection with the negotiation of
          this Agreement, up to a maximum of $2,500.

All other benefits to which Executive was entitled prior to the Separation Date
shall cease as of the Effective Date. Executive understands and agrees that he
shall not accrue vacation or other leave after the Separation Date.

          c. Administrative Assistance. During the Term, Executive shall be
     entitled to continue the reasonable use of the administrative support
     services of Judy Boas in

                                       3

<PAGE>

     carrying out the responsibilities referred to in Section 3 of this
     Agreement. Company shall also provide Executive with voicemail and e-mail
     services, and shall reimburse Executive for reasonable and necessary
     expenses incurred by him in the use of a cellular telephone and home
     computer in carrying out the responsibilities referred to in Section 3 of
     this Agreement. Executive's use of such services and items shall be subject
     to the terms and conditions of the Company's applicable policies.

          d. Stock Options. Company and Executive hereby agree to the
     modification of Paragraph 4 of that certain Stock Option Agreement between
     Executive and Company dated December 18, 2001 (the "Stock Option
     Agreement") by striking the entire paragraph and inserting in its place the
     following:

          "4. Option Termination Date. Nothwithstanding any other provision of
          this Stock Option Agreement, the Option may be exercised on or before
          April 14, 2004 (the "Option Termination Date"), but only to the extent
          of 100,000 shares. Upon the close of business on the Option
          Termination Date, the Option and all rights thereunder (other than the
          Executive's right to Shares theretofore purchased under the Option)
          shall terminate and become null and void."

     Furthermore, Company agrees to waive the terms of Paragraph 5 of the Stock
     Option Agreement. Executive understands and agrees that he will not be
     granted any further options by the Company and that any prior agreement to
     grant options to Executive after October 14, 2002 is hereby cancelled, null
     and void.

          e. Outplacement Services. Company shall provide Executive with
     professional executive outplacement services during the Term at the Center
     for Executive Option at Drake Beam Morin or other outplacement services
     acceptable to Executive. Executive agrees to use his best efforts to
     diligently seek and obtain employment during the Term. Executive agrees to
     notify Company of his acceptance of an offer of employment immediately
     after he communicates his acceptance to the prospective employer.

          f. Release from Restrictive Covenant. As further consideration for the
     promises and agreements of Executive contained in this Agreement and the
     performance thereof, Company releases Executive from the restrictions set
     forth in Paragraph 13(c) of the Employment Agreement after the Effective
     Date of this Agreement. As further consideration for Executive's promises
     and agreements, Company and Executive hereby agree to the modification of
     Paragraph 13(a) of the Employment Agreement by deleting the entire
     paragraph and inserting in its place the following:

          Employee will not for himself or on behalf of any other person, firm,
          entity, partnership or corporation, solicit, call upon or approach, or
          provide confidential information to any other person, to enable such
          person to solicit, call upon or approach, any Customer of US LEC for
          the purpose of (i) soliciting business from such Customer, (ii)
          providing to such Customer any products or services which are the same
          as or similar to those provided to Customers by US LEC, or (iii)

                                       4

<PAGE>

          encouraging such Customer to limit, reduce or cease doing business
          with US LEC. Further, Employee agrees that he will not be involved in
          identifying any Customers to be contacted or solicited by others and
          shall not direct others to contact or solicit such Customers. For
          purposes of this subparagraph (a) of this Paragraph 13, "Customer"
          shall include all existing customers of US LEC on the effective date
          of Employee's termination and all customers contacted or solicited by
          Employee or by US LEC with Employee's knowledge within twelve (12)
          months prior to the effective date of Employee's termination.

     The restrictions contained in Paragraphs 13(a) (as modified herein), 13(b)
     and 14 of the Employment Agreement remain in full force and effect.

     5. Pension and Profit-Sharing Benefits. Company will direct the trustee or
administrator to distribute the Executive's vested accrued benefits, if any, in
Company's pension and profit-sharing plans in accordance with the provisions of
said plans.

     6. Return of Property. Company will return to Executive all of his personal
effects and property which are in Company's possession or control. Executive
will return to Company all property of Company (including but not limited to,
all keys to Company's offices, all vehicles and keys thereto, all keys to the
apartment leased for Executive in Charlotte, North Carolina, and all documents,
records, and equipment) which are in Executive's possession or control,
including all copies and summaries of any of Company's confidential or
proprietary information, within ten (10) days after execution of this Agreement.

     7. Release by Executive. In consideration for the special separation
benefits described above in Subsections 4a, b, c, d, e and f and the Release set
forth in Section 8 of this Agreement, each of which provides separate and
independent sufficient consideration for this Release, Executive, for himself,
his heirs, executors, administrators, and assigns, hereby releases, waives, and
forever discharges Company, its owners, its health or welfare benefits plans,
affiliates, predecessors, successors, parent company, subsidiaries, and assigns,
and their respective officers, directors, trustees, employees, representatives
and agents, from any and all claims or liabilities of whatever kind or nature
which he has ever had or which he now has, at the time of or prior to his
execution of this Agreement, known or unknown, including, but not limited to,
contract claims; claims for bonuses, severance pay, employee or fringe benefits;
and claims based on any state or federal wage, employment, or common laws,
statutes, or amendments thereto, including, but not limited to: (i) any claim
under the Employee Retirement Income Security Act, 29 U.S.C. (S) 1001 et seq.,
the Family Medical and Leave Act, 29 U.S.C. (S) 2611, et seq., or COBRA, (ii)
age discrimination claims under the Age Discrimination in Employment Act (ADEA),
29 U.S.C. (S) 621 et seq., (iii) any race, color, religion, sex, or national
origin discrimination claims under Title VII of the 1964 Civil Rights Act, 42
U.S.C. (S) 2000(e) et seq., (iv) any claim under the Americans with Disabilities
Act (ADA), 42 U.S.C. (S) 12102 et seq., (v) any other claims related to or
arising out of his entering into this Agreement , his separation from Company
and its affiliates and subsidiaries, his status as a shareholder in Company,
and/or of his former employment relationship with Company, or (vi) any claims
for damages due to personal injury or for compensatory or punitive damages.
Executive further agrees not to file,

                                       5

<PAGE>

institute or pursue any lawsuit, claim or action against such entities and
individuals relating to those claims. (This release and waiver does not apply to
claims that may arise after the date this Agreement is executed, including but
not limited to claims for breach of this Agreement.) Failure of consideration by
Company shall render Executive's release contained in this Agreement null and
void.

NOTE: You have the right to consider this Agreement for at least twenty-one days
before accepting it. Before executing this Agreement and Release, you are
advised to consult with an attorney of your choice, at your expense.

     8. Release by Company. In consideration for Executive's entrance into and
promises contained in this Separation Agreement and the release set forth in
Section 7, Company, for itself, its administrators and assigns, hereby releases,
waives, and forever discharges Executive from any and all claims or liabilities
of whatever kind or nature which it has ever had or which it now has, known or
unknown, including, but not limited to, contract claims; tort claims; and claims
based on any state or federal common laws or statutes; provided however that
Company does not release, waive or discharge claims based on any violation by
Executive of the confidentiality provisions and restrictive covenants contained
in the Employment Agreement. (This release and waiver does not apply to claims
that may arise after the date this Agreement is executed, including but not
limited to claims for breach of this Agreement.) Failure of consideration by
Executive shall render Company's release contained in this Agreement null and
void.

     9. Nondisparagement and Confidentiality.

          (a) Executive. As further consideration of the special severance
     benefits described in Subsections 4a, b, c, d, e and f of this Agreement,
     each of which constitutes separate and independent sufficient
     consideration, Executive also agrees that he will, at all times hereafter,
     refrain from making any untrue, misleading, or defamatory statements or
     representations, either orally or in writing, regarding Company, its
     affiliates and subsidiaries, and their respective officers, directors,
     shareholders, employees, agents, predecessors and related entities, and
     will not disclose or communicate to any person, firm or entity any
     confidential or proprietary business information of Company, its affiliates
     and subsidiaries or information the disclosure of which is or is likely to
     be harmful or damaging to, or inimical to the best interests of, Company,
     its affiliates and subsidiaries, and/or their respective officers,
     directors, shareholders, employees, agents, predecessors and related
     entities, which he learned or which came to his attention during the course
     of his employment with Company.

          (b) Company. Company agrees to use reasonable efforts to prevent its
     directors, officers, and management employees from making any untrue,
     misleading, or defamatory statements or representations, either orally or
     in writing, regarding Executive.

          (c) Confidentiality of Agreement. The parties further agree to keep
     the content of the negotiations for, and the terms of, this Agreement in
     strict confidence, except as disclosure is required by law. Executive
     agrees not to disclose (except to the extent

                                       6

<PAGE>

     previously disclosed by the Company), this document its contents, or
     subject matter to any person other than his spouse, attorney, accountant,
     or income tax preparer, and to the extent Executive is permitted to
     disclose and does disclose such information, he agrees to require, and
     warrants, that the person receiving such information will maintain its
     confidentiality. This provision does not prevent Executive from informing
     any future employers of his obligations to Company under the terms of
     Paragraphs 13(a), 13(b), 13(d), 14, and 15 of the Employment Agreement.

     10. Scope of Agreement; Modification. Except as to the terms of Paragraphs
13(a), 13(b), 13(d), 14, and 15 of the Employment Agreement, the terms of
Paragraphs 17(e), 17(g) and 17(i) of the Employment Agreement as they relate to
Paragraphs 13(a), 13(b), 13(d), 14, and 15 of the Employment Agreement, and the
terms of the Stock Option Agreement (as modified by Section 4.d. of this
Agreement), the terms of which shall survive and be in addition to the terms of
this Agreement, this Agreement discharges and cancels all previous agreements
between the parties and contains the entire agreement between the parties on
this matter; no agreements, representations, or statements of either party not
contained herein shall be binding on such party, This Agreement shall not be
modified, amended, altered or waived except by separate written agreement signed
by Company and Executive.

     11. Binding Effect. This Agreement shall be binding upon, and inure to the
benefit of, Executive and Company and their respective heirs, successors,
assigns, and legal representatives.

     12. Severability. In the event any portion of this Agreement is determined
to be invalid under any applicable law by a court of competent jurisdiction,
such provision shall be deemed void and the remainder of this Agreement shall
continue in full force and effect.

     13. Notices. Any notice or other communication required or permitted under
this Agreement shall be in writing and shall be deemed to have been duly given
(i) upon hand delivery, (ii) on the third day following delivery to the U.S.
Postal Service as certified mail, return receipt requested and postage prepaid,
or (iii) on the first day following delivery to a nationally recognized United
States overnight courier service, fee prepaid, return receipt or other
confirmation of delivery requested. Any such notice or communication shall be
delivered or directed to a party at its address set forth below or at such other
address as may be designated by a party in a notice given to the other party in
accordance with the provisions of this Subsection.

          Notice to US LEC shall be sent to:

               US LEC Corp.
               6801 Morrison Boulevard
               Morrocroft III
               Charlotte, NC 28211
               Attn:  Secretary

               Notice to Employee shall be sent to:

                                       7

<PAGE>

               Francis J. Jules
               at his last address filed with US LEC

               With a copy to:

               Mayer, Brown, Rowe & Maw
               190 South LaSalle Street
               Chicago, IL 60603
               Attn. Herbert W. Krueger

     14. Governing Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of North Carolina pertaining to contracts
made and to be wholly performed within such state, without taking into account
conflicts of laws principles.

     15. Arbitration. In the event that any disagreement or dispute should arise
between the parties hereto with respect to this Agreement, then such
disagreement or dispute shall be submitted to arbitration in Charlotte, North
Carolina in accordance with the rules then pertaining to the American
Arbitration Association with respect to commercial disputes; provided, however,
that this provision will not affect or limit US LEC's right to seek and obtain
temporary, preliminary and permanent injunctive relief for Executive's violation
of Sections 13 (as modified by Section 4 of this Agreement) or 14 of the
Employment Agreement (or any part thereof) in a court of law. Judgment upon any
arbitration award may, after its rendering, be entered in any court of competent
jurisdiction by either party. After any demand for arbitration pursuant to this
Agreement and prior to any scheduled arbitration date, either party to such
arbitration proceedings shall be entitled to discovery according to the
provisions and within the time limits prescribed in Rule 34 and Rule 26(c)of the
North Carolina Rules of Civil Procedure with respect to all materials and
records in the possession of either party hereto, or in the possession of
others, which are relevant to the matter or matters to be arbitrated.

     16. Jurisdiction and Venue. In the event that any legal proceedings are
commenced in any court with respect to any matter arising under this Agreement,
the parties hereto specifically consent and agree that:

               (i) the courts of the State of North Carolina and/or the United
          States Federal Courts located in the State of North Carolina shall
          have exclusive jurisdiction over each of the parties hereto and over
          the subject matter of any such proceedings; and

               (ii) the venue of any such action shall be in Mecklenburg County,
          North Carolina and/or the United States District Court for the Western
          District of North Carolina, Charlotte, North Carolina.

     17. Effective Date. This Agreement shall not become effective and
enforceable until after seven (7) days following its execution by Executive and
may be revoked by Executive at any time within the seven day period.

                                       8

<PAGE>

     18. Headings. The headings contained in this Agreement are inserted for
convenience only and do not constitute a part of this Agreement.

     IN WITNESS WHEREOF, Company and Executive have executed this Agreement on
the day and year first written above.

                                        EXECUTIVE:

                                        /s/ Francis J. Jules              (SEAL)
                                        ----------------------------------
                                        Francis J. Jules

                                        US LEC CORP.

                                        By: /s/ David Thaeler
                                            ------------------------------
                                        Title: Vice President

                                       9

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