Exhibit 4.3
PLEDGE AND
SECURITY AGREEMENT
Dated as of September 22, 1997
From
BTI TELECOM CORP.,
as Pledgor
and
BUSINESS TELECOM, INC.,
as Guarantor
to
FIRST TRUST OF NEW YORK, NATIONAL ASSOCIATION,
as Trustee
T A B L E O F C O N T E N T S
PAGE
SECTION 1. Definitions; Appointment; Deposit and Investment................................................. 2
1.1. Definitions...................................................................................... 2
1.2. Appointment of the Trustee....................................................................... 4
1.3. Pledge and Grant of Security Interest............................................................ 4
1.4. Deposit of Funds................................................................................. 4
SECTION 2. Security for Obligations.................................................................... 4
SECTION 3. Delivery of Collateral...................................................................... 5
SECTION 4. Maintaining the Cash Collateral Account..................................................... 5
SECTION 5. Investing of Amounts in the Cash Collateral Account......................................... 5
SECTION 6. Delivery of Collateral Investments; Filing.................................................. 6
SECTION 7. Disbursements............................................................................... 7
SECTION 8. Representations and Warranties.............................................................. 11
SECTION 9. Further Assurances.......................................................................... 13
SECTION 10. Covenants................................................................................... 13
SECTION 11. Power of Attorney........................................................................... 14
SECTION 12. No Assumption of Duties; Reasonable Care.................................................... 14
SECTION 13. Indemnity................................................................................... 15
SECTION 14. Remedies upon Event of Default.............................................................. 15
SECTION 15. Expenses.................................................................................... 16
SECTION 16. Security Interest Absolute.................................................................. 16
A-ii
SECTION PAGE
SECTION 17. Miscellaneous Provisions.................................................................... 17
17.1. Notices..................................................................................... 17
17.2. No Adverse Interpretation of Other Agreements............................................... 17
17.3. Severability................................................................................ 17
17.4. Headings.................................................................................... 18
17.5. Counterpart Originals....................................................................... 18
17.6. Benefits of Pledge and Security Agreement................................................... 18
17.7. Amendments, Waivers and Consents............................................................ 18
17.8. Interpretation of Agreement................................................................. 18
17.9. Continuing Security Interest; Termination................................................... 19
17.10. Survival Provisions......................................................................... 19
17.11. Waivers..................................................................................... 19
17.12. Authority of the Trustee.................................................................... 20
17.13. Intentionally Omitted....................................................................... 20
17.14. Final Expression............................................................................ 20
17.15. Rights of Holders of the Notes.............................................................. 20
17.16. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER
OF JURY TRIAL; WAIVER OF DAMAGES............................................................ 20
PLEDGE AND SECURITY AGREEMENT
This PLEDGE AND SECURITY AGREEMENT (this "Pledge and Security
Agreement") is made and entered into as of September 22, 1997 by and among BTI
TELECOM CORP., a North Carolina corporation (the "Pledgor") and BUSINESS
TELECOM, INC., a North Carolina corporation ("BTI"), each having its principal
office at 4300 Six Forks Road, Raleigh, North Carolina 27609, MORGAN STANLEY &
CO. INCORPORATED and MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED, as the
Placement Agents (collectively, the "Placement Agents"), in favor of FIRST TRUST
OF NEW YORK, NATIONAL ASSOCIATION, a national banking association ("First
Trust") having an office at 100 Wall Street, 16th Floor, New York, New York
10005, as trustee (the "Trustee") for the holders (the "Holders") of the Notes
(as defined herein) issued by the Pledgor under the Indenture referred to below.
W I T N E S S E T H
WHEREAS, the Pledgor, BTI and the Placement Agents are parties
to a Placement Agreement dated September 17, 1997 (the "Placement Agreement"),
pursuant to which the Pledgor will issue and sell to the Placement Agents $250.0
million in aggregate principal amount of its 10 1/2% Senior Notes due 2007 (the
"Notes");
WHEREAS, the Pledgor, BTI and the Trustee have entered into
that certain indenture dated as of the date hereof (as amended, restated,
supplemented or otherwise modified from time to time, the "Indenture"), pursuant
to which the Pledgor is issuing the Notes on the date hereof;
WHEREAS, pursuant to the Placement Agreement and the
Indenture, the Pledgor is required to direct that on the Closing Date (as
defined in the Placement Agreement) $243,125,000.00, or in the event the
Reorganization (as defined in the Indenture) and the FiberSouth Acquisition (as
defined in the Indenture) close on the date hereof, $74,093,277.10, (the
"Funds") be deposited with the Trustee to be held by the Trustee for the benefit
of the Holders of the Notes to secure the Pledgor's obligation to (i) provide
for payment in full of the first six scheduled interest payments due on the
Notes, (ii) secure repayment of the principal, premium and interest on the Notes
in the event that the Notes become due and payable prior to such time as the
first six scheduled interest payments thereon shall have been paid in full,
(iii) redeem all of the Notes (a "Special Redemption") if, prior to December 31,
1997 (the "Termination Date"), the Reorganization has not been consummated and
the applicable Material Regulatory Approvals (as defined herein) with respect
thereto have not been received, and (iv) consummate an Offer to Purchase (as
defined in the Indenture) $35.0 million principal amount of Notes (a "Special
Repurchase Offer") if the FiberSouth Acquisition has not been consummated and
the applicable Material Regulatory
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Approvals with respect thereto have not been received prior to the Termination
Date (collectively, the "Obligations"); provided that in the event the
Reorganization and FiberSouth Acquisition close on the date hereof, the
provisions in this Pledge and Security Agreement with respect to the release of
funds upon the occurrence of such events shall be of no further force and
effect; and
WHEREAS, to secure the Obligations of the Pledgor, the Pledgor
has agreed to (i) pledge to the Trustee for its benefit and the ratable benefit
of the Holders of the Notes, a security interest in the Funds and other
Collateral (as hereinafter defined) and (ii) execute and deliver this Pledge and
Security Agreement in order to secure the payment and performance by the Pledgor
of all the Obligations.
AGREEMENT
NOW, THEREFORE, in consideration of the promises herein
contained, and in order to induce the Holders of the Notes to purchase the
Notes, the Pledgor, BTI, the Placement Agents and the Trustee hereby agree, for
the benefit of the Trustee and for the ratable benefit of the Holders of the
Notes, as follows:
SECTION 1. Definitions; Appointment; Deposit and Investment.
1.1. Definitions.
"Cash Collateral Account" means an account established and
maintained by the Trustee in the name "First Trust of New York as
Trustee", which account shall at all times be under the sole dominion
and control of the Trustee and subject to the terms and conditions of
this Pledge and Security Agreement.
"Cash Equivalents" means, to the extent owned free and clear
of all liens other than liens created hereunder, U.S. Government
Securities.
"FiberSouth Officer's Certificate" shall mean a certificate
signed by the President or any Vice President of the Pledgor stating
that (i) the Reorganization Officer's Certificate and the Opinion of
Counsel relating to the Reorganization have been delivered to the
Trustee; (ii) the FiberSouth Acquisition has been consummated (or will
be consummated promptly upon the release of the proceeds held hereby to
the Pledgor), (iii) all Material Regulatory Approvals with respect to
the FiberSouth Acquisition have been received; and (iv) consummation of
the FiberSouth Acquisition does not violate or conflict with or give
rise to a right to terminate any material agreement or instrument to
which the Pledgor, BTI or any of their direct or indirect subsidiaries
is a party.
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"Government Book-Entry Security" means U.S. Government
Securities maintained in book-entry form through the United States
Federal Reserve Banks pursuant to (A) the United States Treasury
Department regulations codified at 31 C.F.R. Part 357, as modified by
the amendments promulgated at 61 Fed. Reg. 43, 626-43, 638 (Aug. 23,
1996), or (B) substantially identical regulations promulgated by any
other agency or instrumentality of the United States whose securities
qualify as "U.S. Government Securities" hereunder.
"Material Regulatory Approvals" shall mean with respect to the
Reorganization or the FiberSouth Acquisition (i) all consents and
approvals required by the Federal Communications Commission and any
other federal governmental authority or agency and (ii) all consents
and approvals required by the state public utilities commissions of
North Carolina and any other state governmental authority or agency in
such state, in each case with respect to consummation of the
Reorganization and the FiberSouth Acquisition, as applicable.
"Reorganization Officer's Certificate" shall mean a
certificate signed by the President or any Vice President of the
Pledgor stating that (i) the Reorganization has been consummated; (ii)
all Material Regulatory Approvals with respect to the Reorganization
have been received; and (iii) consummation of the Reorganization does
not violate or conflict with or give rise to a right to terminate any
material agreement or instrument to which the Pledgor, BTI or any of
their direct or indirect subsidiaries is a party.
"Opinion of Counsel" shall mean, collectively, (i) an opinion
of Wyrick, Robbins, Yates & Ponton substantially in the form attached
hereto as Exhibit A and (ii) an opinion of Swidler & Berlin
substantially in the form attached hereto as Exhibit B.
"Trustee" shall mean the Person named as the "Trustee" in the
first paragraph of this Agreement until a successor Trustee shall have
become such, and thereafter "Trustee" shall mean the Person who is then
the Trustee hereunder.
"U.S. Government Securities" means securities that are (i)
direct obligations of the United States of America for the payment of
which its full faith and credit is pledged or (ii) obligations of a
Person controlled or supervised by and acting as an agency or
instrumentality of the United States of America (x) the payment of
which is unconditionally guaranteed as a full faith and credit
obligation by the United States of America or (y) that are rated at
least "Aaa" (or the then equivalent grade) by Moody's Investors
Service, Inc. or "AAA" (or the equivalent grade) by Standard & Poor's
Ratings Services.
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All capitalized terms used herein without definition shall
have the respective meanings ascribed to them in the Indenture. Unless otherwise
defined herein or in the Indenture, (i) terms used in Articles 8 or 9 of the
Uniform Commercial Code as in effect in the State of New York (the "U.C.C.") are
used herein as therein defined and (ii) terms used in "Revised Article 8," as
such term is defined in 31 C.F.R. ss. 357.2, as modified by the amendments
promulgated at 61 Fed. Reg. 43, 628 (Aug. 23, 1996), are used herein as therein
defined.
1.2. Appointment of the Trustee. The Pledgor, BTI and the
Placement Agents hereby appoint First Trust as Trustee in accordance with the
terms and conditions set forth herein and the Trustee hereby accepts such
appointment.
1.3. Pledge and Grant of Security Interest. The Pledgor hereby
pledges to the Trustee for its benefit and for the ratable benefit of the
Holders of the Notes, and grants to the Trustee for its benefit and for the
ratable benefit of the Holders of the Notes, a continuing first priority
security interest in and to all of the Pledgor's right, title and interest in,
to and under the following (hereinafter collectively referred to as the
"Collateral"), whether characterized as certificated securities, uncertificated
securities, investment property, general intangibles or otherwise: (a) the Cash
Collateral Account, all funds held therein and all certificates and instruments,
if any, from time to time representing or evidencing the Cash Collateral
Account, (b) the Collateral Investments Account and all Collateral Investments
(as hereinafter defined) and all certificates and instruments, if any,
representing or evidencing the Collateral Investments, and any and all security
entitlements to the Collateral Investments, and any and all related securities
accounts in which security entitlements to the Collateral Investments are
carried, (c) all cash, notes, certificates of deposit, deposit accounts, checks
and other instruments from time to time hereafter delivered to or otherwise
possessed by the Trustee for or on behalf of the Pledgor in substitution for or
in addition to any or all of the then existing Collateral, and (d) all proceeds
of and other distributions on or with respect to any of the foregoing (and any
other proceeds or distributions), including, without limitation, all dividends,
interest, principal payments, cash, options, warrants, rights, instruments,
subscriptions and other property or proceeds from time to time received,
receivable or otherwise distributed or distributable in respect of or in
exchange for any of the foregoing or any security entitlement thereto.
1.4. Deposit of Funds. On the Closing Date, Pledgor shall
direct that all Funds be deposited into the Cash Collateral Account.
SECTION 2. Security for Obligations. This Pledge and Security
Agreement secures the prompt and complete payment and performance when due
(whether at stated maturity, by acceleration or otherwise) of all the
Obligations.
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Notwithstanding anything to the contrary contained in or
implied by this Pledge and Security Agreement, (i) following consummation of the
Reorganization, BTI shall have no liability or obligation whatsoever, to any
person or entity, under or pursuant to this Pledge and Security Agreement, and
(ii) in the event the Reorganization is consummated on the Closing Date, neither
the Trustee nor any other person or entity shall have any claim or cause of
action of any nature whatsoever against BTI under or pursuant to this Pledge and
Security Agreement, including without limitation any such claim or cause of
action arising prior to consummation of the Reorganization.
SECTION 3. Delivery of Collateral. All certificates or
instruments representing or evidencing the Collateral, including, without
limitation, amounts invested as provided in Section 5, shall be delivered to and
held by or on behalf of the Trustee pursuant hereto and shall be in suitable
form for transfer by delivery, or shall be accompanied by duly executed
instruments of transfer or assignment in blank, all in form and substance
sufficient to establish and maintain in favor of the Trustee a valid security
interest in such Collateral, and shall be credited to a securities account (the
"Collateral Investments Account") designated by the Trustee.
SECTION 4. Maintaining the Cash Collateral Account. (a) So
long as any Obligation shall remain unpaid, the Cash Collateral Account shall be
maintained with the Trustee.
(b) It shall be a term and condition of the Cash Collateral
Account, notwithstanding any term or condition to the contrary in any other
agreement relating to the Cash Collateral Account, and except as otherwise
provided by the provisions of Section 7 and Section 14 hereof, that no amount
(including interest on Collateral Investments) shall be paid or released to or
for the account of, or withdrawn by or for the account of, the Pledgor or any
other Person from the Cash Collateral Account.
The Cash Collateral Account shall be subject to such
applicable laws, and such applicable regulations of the Board of Governors of
the Federal Reserve System and of any other appropriate banking or governmental
authority, as may now or hereafter be in effect.
SECTION 5. Investing of Amounts in the Cash Collateral
Account. If directed by the Pledgor in writing, the Trustee will, subject to the
provisions of Section 7 and Section 14 hereof, from time to time (a) invest
amounts on deposit in the Cash Collateral Account in such Cash Equivalents, each
in the name of or for the account of the Trustee, as the Pledgor may select and
(b) invest interest paid on the Cash Equivalents referred to in clause (a)
above, and reinvest other proceeds of any such Cash Equivalents that may mature
or be sold, in each case in such Cash Equivalents, each in the name of or for
the account of the Trustee, as the Pledgor may select (the Cash Equivalents
referred to in clauses (a) and (b) above being collectively "Collateral
Investments"); provided, however, that following
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disbursement of proceeds by the Trustee in accordance with both Section 7(c) and
Section 7(e), the amount on deposit in the Collateral Investments Account must
include U.S. Government Securities sufficient, in the opinion of a nationally
recognized firm of independent public accountants selected by the Pledgor, to
provide for the payment in full of the first six scheduled interest payments on
all of the Notes then outstanding (including any interest that may be due in the
event the Exchange Offer is not consummated or the Shelf Registration Statement
is not declared effective as required by the Registration Rights Agreement).
Interest and proceeds that are not invested or reinvested in Collateral
Investments as provided above shall be deposited and held in the Cash Collateral
Account. The Trustee shall in no event be liable for any loss in the investment
or reinvestment of amounts held in the Cash Collateral Account.
SECTION 6. Delivery of Collateral Investments; Filing. (a) The
Trustee shall become the holder of the Collateral Investments (or applicable
security entitlements thereto) through the following delivery procedures: (i) in
the case of Collateral Investments which are certificated securities in
registered form, delivery of the applicable certificate(s), specially endorsed
to the Trustee or registered in the name of the Trustee, to the possession of
(A) the Trustee, (B) a securities intermediary or financial intermediary acting
on behalf of the Trustee, or (C) another person, other than a securities
intermediary or financial intermediary, which person acknowledges that it holds
for the Trustee; (ii) in the case of Collateral Investments which are
uncertificated securities, registration of one of the following as owner of such
uncertificated securities: the Trustee or a person designated by the Trustee, or
person other than a securities intermediary or financial intermediary, that
becomes the registered owner of such uncertificated securities and acknowledges
that it holds the same for the Trustee; and (iii) in the case of Collateral
Investments in the form of Government Book-Entry Securities, the making by a
financial intermediary or securities intermediary (other than a clearing
corporation) to whose account such Government Book-Entry Securities have been
credited on the books of a Federal Reserve Bank (or on the books of another such
financial intermediary or securities intermediary (other than a clearing
corporation)), of book entries indicating that such Government Book-Entry
Securities have been credited to an account of the Trustee, and the sending by
such financial intermediary or securities intermediary to the Trustee of
confirmation of such transfer to the Trustee's account.
(b) Prior to receiving any Collateral Investments (or any
security entitlements thereto), as provided in subsection (a) of this Section 6,
the Trustee shall establish the Collateral Investments Account on its books as
an account segregated from all other custodial or collateral accounts at its
office at 100 Wall Street, New York, New York, 10005. Upon delivery of any
Collateral Investments to the Trustee (or the Trustee's acquisition of a
security entitlement thereto), the Trustee shall make appropriate book entries
indicating that such Collateral Investment and/or such security entitlement has
been credited to and is held in the Collateral Investments Account. Subject to
the terms and conditions of this Pledge and Security Agreement, all Collateral
Investments held by the Trustee pursuant
7
to this Pledge and Security Agreement shall be held in the Collateral
Investments Account under exclusive dominion and control of the Trustee and for
the benefit of the Trustee and the ratable benefit of the Holders of the Notes
and segregated from all other funds or other property otherwise held by the
Trustee.
(c) All Collateral shall be retained in the Cash Collateral
Account and the Collateral Investments Account pending disbursement pursuant to
the terms hereof.
(d) Concurrently with the execution and delivery of this
Pledge and Security Agreement, the Pledgor is delivering to the Trustee
acknowledgement copies or stamped receipt copies of proper financing statements,
duly filed on or before the Closing Date in accordance with the Uniform
Commercial Code as in effect in the State of New York and the State of North
Carolina, covering the categories of Collateral described in this Pledge and
Security Agreement.
SECTION 7. Disbursements. The Trustee shall hold the assets in
the Cash Collateral Account and the Collateral Investments Account and release
the same, or a portion thereof, only as follows:
(a) At least five Business Days prior to the due date of any
of the first six scheduled interest payments on the Notes, the Pledgor
may, pursuant to written instructions executed by the Pledgor (an
"Issuer Order"), direct the Trustee to release from the Cash Collateral
Account, and if necessary liquidate Collateral Investments in the
Collateral Investments Account indicated in the Issuer Order, and pay
to the Holders of the Notes funds sufficient to provide for payment in
full of such interest then due on the Notes. Upon receipt of an Issuer
Order, the Trustee will take any action necessary to provide for the
payment of the interest on the Notes in accordance with the payment
provisions of the Indenture to the Holders of the Notes from (and to
the extent of) funds available in the Cash Collateral Account and/or
the Collateral Investments Account. Nothing in this Section 7 shall
affect the Trustee's rights to apply the Collateral to the payments of
amounts due on the Notes upon acceleration thereof.
(b) If the Pledgor makes any interest payment or portion of an
interest payment for which the Collateral is security from a source of
funds other than the Cash Collateral Account and/or the Collateral
Investments Account ("Pledgor Funds"), the Pledgor may, after payment
in full of such interest payment or portion thereof from proceeds of
the Collateral or such Pledgor Funds or both, direct the Trustee to
release to the Pledgor or to another party at the direction of the
Pledgor (a "Pledgor Designee") funds from the Cash Collateral Account,
and if necessary liquidate Collateral Investments in the Collateral
Investments Account indicated in the Issuer Order, in an amount less
than or equal to the amount of Pledgor Funds applied
8
to such interest payment. Upon receipt of an Issuer Order by the
Trustee, the Trustee shall pay over to the Pledgor or the Pledgor's
Designee, as the case may be, the requested amount from funds in the
Cash Collateral Account and/or the Collateral Investments Account.
Concurrently with any release of funds to the Pledgor pursuant to this
Section 7(b), the Pledgor shall deliver to the Trustee a certificate
signed by an officer of the Pledgor stating that such release has been
duly authorized by the Pledgor and will not contravene any provision of
applicable law or the Certificate of Incorporation of the Pledgor or
any material agreement or other material instrument binding upon the
Pledgor or any of its subsidiaries or any judgment, order or decree of
any governmental body, agency or court having jurisdiction over the
Pledgor or any of its subsidiaries or result in the creation or
imposition of any Lien on any assets of the Pledgor, except for the
security interest granted under the Pledge and Security Agreement.
(c) If the Trustee receives, prior to 5:00 P.M. New York City
time on the Termination Date, the Reorganization Officers' Certificate
and the Opinion of Counsel with respect to the Reorganization, the
Trustee shall immediately disburse funds and/or Cash Equivalents from
the Cash Collateral Account and/or the Collateral Investments Account
to the Pledgor, or at the written direction of the Pledgor, to a
Pledgor Designee, by the close of business on such date such that the
amount remaining in the Cash Collateral Account and the Collateral
Investments Account equals (i) an amount sufficient to purchase U.S.
Government Securities in such amount as will be sufficient upon receipt
of scheduled interest and principal payments on such securities, in the
opinion of a nationally recognized firm of independent public
accountants selected by the Pledgor (which opinion shall be delivered
to the Trustee), to provide for payment in full of the first six
scheduled interest payments due on the Notes (including any interest
that may be due in the event the Exchange Offer is not consummated or
the Shelf Registration Statement is not declared effective as required
by the Registration Rights Agreement) plus (ii) an amount sufficient to
consummate a Special Repurchase Offer at a purchase price equal to 101%
of the principal amount plus accrued interest to the repurchase date
(assuming the Special Repurchase Offer remains open for the longest
time permitted), in the event the FiberSouth Acquisition is not
consummated by December 31, 1997; provided, however, that if the
Reorganization Officer's Certificate and the Opinion of Counsel with
respect to the Reorganization are received by the Trustee (i) on a day
other than a Business Day or (ii) after 9:00 A.M. New York City time on
any date, then, in either instance, the Trustee may disburse the
proceeds by the close of business on the next Business Day.
(d) (i) On the Termination Date (or, in the event the Trustee
receives a certificate signed by the President or any Vice President of
the Pledgor stating that a Reorganization Officer's Certificate and
Opinion of Counsel with respect to the
9
Reorganization will not be delivered to the Trustee by the Termination
Date, on the date five Business Days after the Trustee receives such
certificate), if the conditions required for release of funds and/or
Cash Equivalents as provided in clause (c) above have not been
satisfied, the Trustee shall mail a notice by first class mail to each
Holder's last address as it appears on the Security Register (as
determined in the Indenture) stating that all of the outstanding Notes
shall be redeemed within 10 days after the date of such notice (the
"Special Redemption Date"), at 101% of the principal amount thereof
plus accrued interest thereon to the Special Redemption Date (the
"Special Redemption Price"), and shall state that the Notes must be
surrendered to the Trustee in order to collect the Special Redemption
Price.
(ii) On the Business Day prior to the Special Redemption Date,
the Trustee shall release all Collateral to the Paying Agent. The Notes
shall be redeemed as specified in the Indenture.
(e) If the Trustee receives, prior to 5:00 P.M. New York City
time on the Termination Date, the FiberSouth Officers' Certificate and
the Opinion of Counsel with respect to the FiberSouth Acquisition, the
Trustee shall disburse from the Cash Collateral Account and/or the
Collateral Investments Account to the Pledgor or, at the written
direction of the Pledgor, to a Pledgor Designee, by the close of
business on such date funds and/or proceeds from the sale of the Cash
Equivalents held in the Collateral Investment Account other than the
U.S. Government Securities referred to in clause (c)(i) above;
provided, however, that if the FiberSouth Officer's Certificate and the
Opinion of Counsel with respect thereto are received by the Trustee (i)
on a day other than a Business Day or (ii) after 9:00 A.M. New York
City time on such date, then, in either instance, the Trustee may
disburse the proceeds by the close of business on the next Business
Day. The Pledgor agrees to use, or to cause to be used, to the extent
necessary, the disbursed proceeds to consummate the FiberSouth
Acquisition on the date of such release.
(f) (i) On the Termination Date (or, in the event the Trustee
receives a certificate signed by the President or any Vice President of
the Pledgor stating that a FiberSouth Officer's Certificate and Opinion
of Counsel with respect thereto will not be delivered to the Trustee by
the Termination Date, on the date five Business Days after the Trustee
receives such certificate), if the conditions required for release of
funds and/or Cash Equivalents as provided in clause (e) above have not
been satisfied, the Trustee shall mail a notice by first class mail to
each Holder's last address as it appears in the Security Register (as
defined in the Indenture) commencing the Special Repurchase Offer (and
stating the date of purchase (the "Special Repurchase Offer Payment
Date"), which shall be not less than 30 nor more than 60 days from the
date such notice is mailed), at a purchase price of 101% of the
principal amount thereof plus accrued interest thereon to the Special
Repurchase Offer Payment Date (the
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"Special Repurchase Offer Price"), and shall state that the Notes must
be surrendered to the Trustee in order to collect the Special
Repurchase Offer Price.
(ii) On the Business Day prior to the Special Repurchase Offer
Payment Date, the Trustee shall release to the Paying Agent Collateral
sufficient, to pay the Special Repurchase Offer Price for all Notes
validly tendered and not withdrawn. The Notes shall be purchased as
specified in the Indenture.
(g) If the Pledgor is required to effect a Special Redemption
contemplated by clause (d) or a Special Repurchase Offer contemplated
by clause (f) above and for any reason the amount of Collateral to be
released is insufficient to pay the aggregate Special Redemption Price
and/or Special Repurchase Offer Price, as the case may be, the Pledgor
and BTI jointly and severally agree to pay to the Paying Agent, on or
prior to the Special Redemption Date or the Special Repurchase Offer
Payment Date, as the case may be, the amount of funds necessary to
permit the payment of the aggregate Special Redemption Price and/or
Special Repurchase Offer Price, as the case may be.
(h) If at any time following disbursement by the Trustee in
accordance with clauses (c) and (e) above, the principal of and
earnings on the Collateral exceed 100% of the amount sufficient, in the
written opinion of a nationally recognized firm of independent
accountants selected by the Pledgor and delivered to the Trustee, to
provide for payment in full of the first six scheduled interest
payments due on the Notes (including any interest that may be due in
the event the Exchange Offer is not consummated or the Shelf
Registration Statement is not declared effective as required by the
Registration Rights Agreement), the Pledgor may direct the Trustee to
release any such overfunded amount to the Pledgor or to such other
party as the Pledgor may direct in writing. Upon receipt of an Issuer
Order, the Trustee shall pay over to the Pledgor or a Pledgor Designee,
as the case may be, any such overfunded amount.
(i) Upon payment in full of the first six scheduled interest
payments on the Notes in a timely manner, the security interest in the
Collateral evidenced by this Pledge and Security Agreement will
automatically terminate and be of no further force and effect and the
Collateral shall promptly be paid over and transferred to the Pledgor.
Furthermore, upon the release of any Collateral from the Cash
Collateral Account and/or the Collateral Investments Account in
accordance with the terms of this Pledge and Security Agreement,
whether upon release of Collateral to Holders as payment of interest or
otherwise, the security interest evidenced by this Pledge and Security
Agreement in such released Collateral will automatically terminate and
be of no further force and effect.
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(j) At least five Business Days prior to the due date of any
of the first six scheduled interest payments on the Notes, the Pledgor
covenants to give the Trustee (by Issuer Order) notice as to whether
payment of interest will be made pursuant to Section 7(a) or 7(b) and
as to the respective amounts of interest that will be paid pursuant to
Section 7(a) or 7(b). If no such notice is given, the Trustee will act
pursuant to Section 7(a) as if it had received an Issuer Order pursuant
thereto for the payment in full of the interest then due.
(k) The Trustee shall not be required to liquidate any
Collateral Investment in order to make any scheduled payment of
interest or any release hereunder unless instructed to do so by Issuer
Order or pursuant to Section 14 hereof.
(l) Nothing contained in Section 1, Section 5, Section 6, this
Section 7 or any other provision of this Pledge and Security Agreement
shall (i) afford the Pledgor any right to issue entitlement orders with
respect to any security entitlement to any of the Collateral
Investments or any securities account in which any such security
entitlement may be carried, or otherwise afford the Pledgor control of
any such security entitlement or (ii) otherwise give rise to any rights
of the Pledgor with respect to any of the Collateral Investments, any
security entitlement thereto or any securities account in which any
such security entitlement may be carried, other than the Pledgor's
beneficial interest under this Pledge and Security Agreement in
collateral pledged to and subject to the exclusive dominion and control
(consistent with this Pledge and Security Agreement) of the Trustee in
its capacity as such (and not as a securities intermediary). The
Pledgor acknowledges, confirms and agrees that the Trustee holds a
security entitlement to the Collateral Investments solely as trustee
for the Holders of the Notes and not as a securities intermediary or
financial intermediary.
SECTION 8. Representations and Warranties. The Pledgor and BTI
each hereby represents and warrants that:
(a) The execution and delivery by it of, and the performance
by it of its obligations under, this Pledge and Security Agreement will
not contravene any provision of applicable law or its Certificate of
Incorporation or any material agreement or other material instrument
binding upon it or any of its subsidiaries or any judgment, order or
decree of any governmental body, agency or court having jurisdiction
over its or any of its subsidiaries, or result in the creation or
imposition of any Lien on any of its assets, except for the security
interests granted under this Pledge and Security Agreement; no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required (i) for the performance by it
of its obligations under this Pledge and Security Agreement, (ii) for
the pledge by the Pledgor of the Collateral pursuant to this Pledge and
Security
12
Agreement or (iii) except for any such consents, approvals,
authorizations or orders required to be obtained by the Trustee (or the
Holders) for reasons other than the consummation of this transaction
(if any), for the exercise by the Trustee of the rights provided for in
this Pledge and Security Agreement or the remedies in respect of the
Collateral pursuant to this Pledge and Security Agreement.
(b) The Pledgor is the beneficial owner of the Collateral,
free and clear of any Lien or claims of any person or entity (except
for the security interests granted under this Pledge and Security
Agreement). No financing statement covering the Pledgor's interest in
the Collateral is on file in any public office other than the financing
statements, if any, filed pursuant to this Pledge and Security
Agreement.
(c) This Pledge and Security Agreement has been duly
authorized, validly executed and delivered by it and (assuming the due
authorization and valid execution and delivery of this Pledge and
Security Agreement by the Trustee and the Placement Agents and
enforceability of this Pledge and Security Agreement against the
Trustee and the Placement Agents in accordance with its terms)
constitutes a valid and binding agreement of it, enforceable against it
in accordance with its terms, except as (i) the enforceability hereof
may be limited by bankruptcy, insolvency, fraudulent conveyance,
preference, reorganization, moratorium or similar laws now or hereafter
in effect relating to or affecting creditors' rights or remedies
generally, (ii) the availability of equitable remedies may be limited
by equitable principles of general applicability and the discretion of
the court before which any proceeding therefor may be brought, (iii)
the exculpation provisions and rights to indemnification hereunder may
be limited by U.S. federal and state securities laws and public policy
considerations and (iv) the waivers of rights and defenses contained in
Section 14(b), Section 17.11 and Section 17.16 hereof may be limited by
applicable law.
(d) Upon the filing of financing statements, if any, required
by the U.C.C. in the appropriate offices in the State of New York and
the State of North Carolina, and the delivery to the Trustee of the
Collateral, in accordance with this Pledge and Security Agreement, the
pledge of and grant of a security interest in the Collateral securing
the payment of the Obligations for the benefit of the Trustee and the
Holders of the Notes will constitute a first priority perfected
security interest in such Collateral, enforceable as such against all
creditors of the Pledgor (and any persons purporting to purchase any of
the Collateral from the Pledgor), other than as permitted by the
Indenture.
(e) There are no legal or governmental proceedings pending or,
to the best of its knowledge, threatened to which it is a party or to
which any of its properties is subject that would materially adversely
affect the power or ability of it to perform its
13
obligations under this Pledge and Security Agreement or to consummate
the transactions contemplated hereby.
(f) The pledge of the Collateral pursuant to this Pledge and
Security Agreement is not prohibited by law or governmental regulation
(including, without limitation, Regulations G, T, U and X of the Board
of Governors of the Federal Reserve System) applicable to the Pledgor.
(g) No Event of Default exists.
SECTION 9. Further Assurances. The Pledgor and BTI will,
promptly upon request by the Trustee (which request the Trustee may submit at
the direction of the Holders of a majority in principal amount of the Notes then
outstanding), execute and deliver or cause to be executed and delivered, or use
its reasonable best efforts to procure, all assignments, instruments and other
documents, deliver any instruments to the Trustee and take any other actions
that are necessary or desirable to perfect, continue the perfection of, or
protect the first priority of the Trustee's security interest in and to the
Collateral, to protect the Collateral against the rights, claims or interests of
third persons (other than any such rights, claims or interests created by or
arising through the Trustee) or to effect the purposes of this Pledge and
Security Agreement. The Pledgor and BTI each also hereby authorizes the Trustee
to file any financing or continuation statements in the United States with
respect to the Collateral without the signature of the Pledgor (to the extent
permitted by applicable law). The Pledgor and BTI jointly and severally agree to
promptly pay all reasonable costs incurred in connection with any of the
foregoing within 45 days of receipt of an invoice therefor. The Pledgor and BTI
each also agrees, whether or not requested by the Trustee, to take all actions
that are necessary to perfect or continue the perfection of, or to protect the
first priority of, the Trustee's security interest in and to the Collateral,
including the filing of all necessary financing and continuation statements, and
to protect the Collateral against the rights, claims or interests of third
persons (other than any such rights, claims or interests created by or arising
through the Trustee).
SECTION 10. Covenants. The Pledgor and BTI each covenants and
agrees with the Trustee and the Holders of the Notes that from and after the
date of this Pledge and Security Agreement until the earlier of payment in full
in cash of (x) each of the first six scheduled interest payments due on the
Notes under the terms of the Indenture or (y) all obligations due and owing
under the Indenture and the Notes in the event such obligations become due and
payable prior to the payment of the first six scheduled interest payments on the
Notes:
(a) that (i) it will not (and will not purport to) sell or
otherwise dispose of, or grant any option or warrant with respect to,
any of the Collateral or its beneficial interest therein, and (ii) it
will not create or permit to exist any Lien upon or other
14
adverse interest in or with respect to its beneficial interest in any
of the Collateral (except for the security interests granted under this
Pledge and Security Agreement); and
(b) that it will not (i) enter into any agreement or
understanding that restricts or inhibits or purports to restrict or
inhibit the Trustee's rights or remedies hereunder, including, without
limitation, the Trustee's right to sell or otherwise dispose of the
Collateral or (ii) fail to pay or discharge any tax, assessment or levy
of any nature with respect to its beneficial interest in the Collateral
not later than five days prior to the date of any proposed sale under
any judgment, writ or warrant of attachment with respect to such
beneficial interest.
SECTION 11. Power of Attorney. In addition to all of the
powers granted to the Trustee pursuant to the Indenture, the Pledgor and BTI
each hereby appoints and constitutes the Trustee as its attorney-in-fact (with
full power of substitution) to exercise to the fullest extent permitted by law
all of the following powers upon and at any time after the occurrence and during
the continuance of an Event of Default: (a) collection of proceeds of any
Collateral; (b) conveyance of any item of Collateral to any purchaser thereof;
(c) giving of any notices or recording of any Liens under Section 6 hereof; and
(d) paying or discharging taxes or Liens levied or placed upon the Collateral,
the legality or validity thereof and the amounts necessary to discharge the same
to be determined by the Trustee in its sole reasonable discretion, and such
payments made by the Trustee to become part of the Obligations of the Pledgor to
the Trustee, due and payable immediately upon demand. The Trustee's authority
under this Section 11 shall include, without limitation, the authority to
endorse and negotiate any checks or other instruments representing proceeds of
Collateral, execute and give receipt for any certificate of ownership or any
document constituting Collateral, transfer title to any item of Collateral, sign
the Pledgor's name on all financing statements (to the extent permitted by
applicable law) or any other documents deemed necessary or appropriate by the
Trustee to preserve, protect or perfect the security interest in the Collateral
and to file the same, prepare, file and sign the Pledgor's name on any notice of
Lien, and to take any other actions arising from or incident to the powers
granted to the Trustee in this Pledge and Security Agreement. This power of
attorney is coupled with an interest and is irrevocable by the Pledgor.
SECTION 12. No Assumption of Duties; Reasonable Care. The
rights and powers granted to the Trustee hereunder are being granted in order to
establish, preserve and protect the security interest of the Trustee and the
Holders of the Notes in and to the Collateral granted hereby and shall not be
interpreted to and shall not impose any duties on the Trustee in connection
therewith other than those expressly provided herein or imposed under applicable
law. Except as expressly provided by applicable law or by the Indenture, the
Trustee shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is accorded
treatment
15
substantially equal to that which the Trustee accords similar property held by
the Trustee for its own account, it being understood that the Trustee in its
capacity as such shall not have any responsibility for (a) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities or other
matters relative to any Collateral, whether or not the Trustee has or is deemed
to have knowledge of such matters, (b) taking any necessary steps to preserve
rights against any parties with respect to any Collateral or (c) investing or
reinvesting any of the Collateral.
SECTION 13. Indemnity. The Pledgor shall indemnify, hold
harmless and defend the Trustee and its directors, officers, agents and
employees, from and against any and all claims, actions, obligations,
liabilities and expenses, including reasonable defense costs, reasonable
investigative fees and costs, and reasonable legal fees and damages arising from
the Trustee's performance as Trustee under this Pledge and Security Agreement,
except to the extent that such claim, action, obligation, liability or expense
is directly attributable to the bad faith, gross negligence or wilful misconduct
of such indemnified person.
SECTION 14. Remedies upon Event of Default. If any Event of
Default under the Indenture or default hereunder (any such Event of Default or
default being referred to in this Pledge and Security Agreement as an "Event of
Default") shall have occurred and be continuing:
(a) The Trustee and the Holders of the Notes shall have, in
addition to all other rights given by law or by this Pledge and
Security Agreement or the Indenture, all of the rights and remedies
with respect to the Collateral of a secured party under the U.C.C. in
effect in the State of New York at that time. In addition, with respect
to any Collateral that shall then be in or shall thereafter come into
the possession or custody of the Trustee, the Trustee may and, at the
direction of the Holders of a majority in principal amount of the Notes
then outstanding, shall, sell or cause the same to be sold at any
broker's board or at public or private sale, in one or more sales or
lots, at such price or prices as the Trustee may deem best, for cash or
on credit or for future delivery, without assumption of any credit
risk. The purchaser of any or all Collateral so sold shall thereafter
hold the same absolutely, free from any claim, encumbrance or right of
any kind whatsoever created by or through the Pledgor. Unless any of
the Collateral threatens, in the reasonable judgment of the Trustee, to
decline speedily in value or is or becomes of a type sold on a
recognized market, the Trustee will give the Pledgor reasonable notice
of the time and place of any public sale thereof, or of the time after
which any private sale or other intended disposition is to be made. Any
sale of the Collateral conducted in conformity with reasonable
commercial practices of banks, insurance companies, commercial finance
companies, or other financial institutions disposing of property
similar to the Collateral shall be deemed to be commercially
reasonable. Any requirements of reasonable notice shall be met if such
notice is mailed to the Pledgor as provided in
16
Section 17.1 hereof at least ten (10) days before the time of the sale
or disposition. The Trustee or any Holder of Notes may, in its own name
or in the name of a designee or nominee, buy any of the Collateral at
any public sale and, if permitted by applicable law, at any private
sale. All fees and expenses (including court costs and reasonable
attorneys' fees, expenses and disbursements) of, or incident to, the
enforcement of any of the provisions hereof shall be recoverable from
the proceeds of the sale or other disposition of the Collateral. In no
event shall the Trustee be liable for any loss or diminution in value
of the Collateral sold or offered for sale in accordance with this
Section 14.
(b) The Pledgor further agrees to use its reasonable best
efforts to do or cause to be done all such other acts as may be
necessary to make such sale or sales of all or any portion of the
Collateral pursuant to this Section 14 valid and binding and in
compliance with any and all other applicable requirements of law. The
Pledgor further agrees that a breach of any of the covenants contained
in this Section 14 will cause irreparable injury to the Trustee and the
Holders of the Notes, that the Trustee and the Holders of the Notes
have no adequate remedy at law in respect of such breach and, as a
consequence, that each and every covenant contained in this Section 14
shall be specifically enforceable against the Pledgor, and the Pledgor
hereby waives and agrees not to assert any defenses against an action
for specific performance of such covenants except for a defense that no
Event of Default has occurred.
SECTION 15. Expenses. The Pledgor will upon demand pay to the
Trustee the amount of any and all reasonable expenses, including, without
limitation, the reasonable fees, expenses and disbursements of its counsel,
experts and agents retained by the Trustee, that the Trustee may incur in
connection with (a) the review, negotiation and administration of this Pledge
and Security Agreement, (b) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (c) the
exercise or enforcement of any of the rights of the Trustee and the Holders of
the Notes hereunder or (d) the failure by the Pledgor to perform or observe any
of the provisions hereof.
SECTION 16. Security Interest Absolute. All rights of the
Trustee and the Holders of the Notes and security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture or
any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the
Indenture;
17
(c) any exchange, surrender, release or non-perfection of any
Liens on any other collateral for all or any of the Obligations; or
(d) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to,
or a discharge of, the Pledgor in respect of the Obligations or of this
Pledge and Security Agreement.
SECTION 17. Miscellaneous Provisions.
17.1. Notices. Any notice or communication shall be
sufficiently given if in writing and delivered in person or mailed by first
class mail, commercial courier service or telecopier communication, addressed as
follows:
if to the Pledgor:
BTI Telecom Corp.
4300 Six Forks Road
Raleigh, North Carolina 27609
Attention: Anthony Copeland
if to BTI:
Business Telecom, Inc.
4300 Six Forks Road
Raleigh, North Carolina 27609
Attention: Anthony Copeland
if to the Trustee:
First Trust of New York, National Association
100 Wall Street, 16th Floor
New York, New York 10005
Attention: Corporate Trust Administration
17.2. No Adverse Interpretation of Other Agreements. This
Pledge and Security Agreement may not be used to interpret another pledge,
security or debt agreement of the Pledgor or any subsidiary thereof. No such
pledge, security or debt agreement (other than the Indenture) may be used to
interpret this Pledge and Security Agreement.
17.3. Severability. The provisions of this Pledge and Security
Agreement are severable, and if any clause or provision shall be held invalid,
illegal or unenforceable in
18
whole or in part in any jurisdiction, then such invalidity or unenforceability
shall affect in that jurisdiction only such clause or provision, or part
thereof, and shall not in any manner affect such clause or provision in any
other jurisdiction or any other clause or provision of this Pledge and Security
Agreement in any jurisdiction.
17.4. Headings. The headings in this Pledge and Security
Agreement have been inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict any of the terms
or provisions hereof.
17.5. Counterpart Originals. This Pledge and Security
Agreement may be signed in two or more counterparts, each of which shall be
deemed an original, but all of which shall together constitute one and the same
agreement.
17.6. Benefits of Pledge and Security Agreement. Nothing in
this Pledge and Security Agreement, express or implied, shall give to any
person, other than the parties hereto and their successors hereunder, and the
Holders of the Notes, any benefit or any legal or equitable right, remedy or
claim under this Pledge and Security Agreement.
17.7. Amendments, Waivers and Consents. Any amendment or
waiver of any provision of this Pledge and Security Agreement and any consent to
any departure by the Pledgor from any provision of this Pledge and Security
Agreement shall be effective only if made or duly given in compliance with all
of the terms and provisions of the Indenture, and neither the Trustee nor any
Holder of Notes shall be deemed, by any act, delay, indulgence, omission or
otherwise, to have waived any right or remedy hereunder or to have acquiesced in
any Default or Event of Default or in any breach of any of the terms and
conditions hereof. Consistent with the foregoing, this Pledge and Security
Agreement may be amended, its provisions may be waived and departures from its
provisions may be consented to by action of the Pledgor and the Trustee and (if
applicable) the Holders of the Notes, all as provided in the Indenture, and no
such amendment, waiver or consent shall require any action or approval of the
Placement Agents. Failure of the Trustee or any Holder of Notes to exercise, or
delay in exercising, any right, power or privilege hereunder shall not preclude
any other or further exercise thereof or the exercise of any other right, power
or privilege. A waiver by the Trustee or any Holder of Notes of any right or
remedy hereunder on any one occasion shall not be construed as a bar to any
right or remedy that the Trustee or such Holder of Notes would otherwise have on
any future occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
17.8. Interpretation of Agreement. To the extent a term or
provision of this Pledge and Security Agreement conflicts with the Indenture,
the Indenture shall control with respect to the subject matter of such term or
provision. The Trustee shall be entitled to all its rights and privileges and
immunities under the Indenture in performing hereunder.
19
Acceptance of or acquiescence in a course of performance rendered under this
Pledge and Security Agreement shall not be relevant to determine the meaning of
this Pledge and Security Agreement even though the accepting or acquiescing
party had knowledge of the nature of the performance and opportunity for
objection.
17.9. Continuing Security Interest; Termination. (a) This
Pledge and Security Agreement shall create a continuing security interest in and
to the Collateral and shall, except as otherwise provided in the Indenture or in
this Pledge and Security Agreement, remain in full force and effect until the
payment in full in cash of the Obligations. This Pledge and Security Agreement
shall be binding upon the Pledgor, its transferees, successors and assigns, and
shall inure, together with the rights and remedies of the Trustee hereunder, to
the benefit of the Trustee, the Holders of the Notes and their respective
successors, transferees and assigns.
(b) This Pledge and Security Agreement shall terminate (except
as to surviving rights of indemnity) upon the payment in full in cash of the
Obligations. At such time, the Trustee shall, pursuant to an Issuer Order,
reassign and redeliver to the Pledgor all of the Collateral hereunder that has
not been sold, disposed of, retained or applied by the Trustee in accordance
with the terms of this Pledge and Security Agreement and the Indenture. Such
reassignment and redelivery shall be without warranty by or recourse to the
Trustee in its capacity as such, except as to the absence of any Liens on the
Collateral created by or arising through the Trustee, and shall be at the
reasonable expense of the Pledgor.
(c) Notwithstanding anything to the contrary contained in or
implied by this Pledge and Security Agreement, in the event the Reorganization
and FiberSouth Acquisition are consummated on the date hereof (i) BTI shall have
no liability or obligation whatsoever, to any person or entity, under or
pursuant to this Pledge and Security Agreement and (ii) neither the Trustee nor
any other person or entity shall have any claim or cause of action of any nature
whatsoever against BTI under or pursuant to this Pledge and Security Agreement.
17.10. Survival Provisions. All representations, warranties
and covenants of the Pledgor and BTI contained herein shall survive the
execution and delivery of this Pledge and Security Agreement, and shall
terminate only upon the termination of this Pledge and Security Agreement. The
obligations of the Pledgor under Sections 13 and 15 hereof shall survive the
termination of this Agreement.
17.11. Waivers. The Pledgor waives presentment and demand for
payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
20
17.12. Authority of the Trustee. (a) The Trustee shall have
and be entitled to exercise all powers hereunder that are specifically granted
to the Trustee by the terms hereof, together with such powers as are reasonably
incident thereto. The Trustee may perform any of its duties hereunder or in
connection with the Collateral by or through agents or employees and shall be
entitled to retain counsel and to act in reliance upon the advice of counsel
concerning all such matters. Except as otherwise expressly provided in this
Pledge and Security Agreement or the Indenture, neither the Trustee nor any
director, officer, employee, attorney or agent of the Trustee shall be liable to
the Pledgor for any action taken or omitted to be taken by the Trustee, in its
capacity as Trustee hereunder, except for its own bad faith, gross negligence or
willful misconduct, and the Trustee shall not be responsible for the validity,
effectiveness or sufficiency hereof or of any document or security furnished
pursuant hereto. The Trustee and its directors, officers, employees, attorneys
and agents shall be entitled to rely on any communication, instrument or
document reasonably believed by it or them to be genuine and correct and to have
been signed or sent by the proper person or persons. The Trustee shall have no
duty to cause any financing statement or continuation statement to be filed in
respect of the Collateral.
(b) The Pledgor acknowledges that the rights and
responsibilities of the Trustee under this Pledge and Security Agreement with
respect to any action taken by the Trustee or the exercise or non-exercise by
the Trustee of any option, right, request, judgment or other right or remedy
provided for herein or resulting or arising out of this Pledge and Security
Agreement shall, as between the Trustee and the Holders of the Notes, be
governed by the Indenture and by such other agreements with respect thereto as
may exist from time to time among them, but, as between the Trustee and the
Pledgor, the Trustee shall be conclusively presumed to be acting as agent for
the Holders of the Notes with full and valid authority so to act or refrain from
acting, and the Pledgor shall not be obligated or entitled to make any inquiry
respecting such authority.
17.13. Intentionally Omitted.
17.14. Final Expression. This Pledge and Security Agreement,
together with the Indenture and any other agreement executed in connection
herewith, is intended by the parties as a final expression of this Pledge and
Security Agreement and is intended as a complete and exclusive statement of the
terms and conditions thereof.
17.15. Rights of Holders of the Notes. No Holder of Notes
shall have any independent rights hereunder other than those rights granted to
individual Holders of the Notes pursuant to Section 6.07 of the Indenture;
provided that nothing in this subsection shall limit any rights granted to the
Trustee under the Notes or the Indenture.
17.16. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER
OF JURY TRIAL; WAIVER OF DAMAGES. (a) THIS PLEDGE AND SECURITY
21
AGREEMENT SHALL BE GOVERNED BY AND INTERPRETED UNDER THE LAWS OF THE STATE OF
NEW YORK, AND ANY DISPUTE ARISING OUT OF, CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE PLEDGOR, THE TRUSTEE AND
THE HOLDERS OF THE NOTES IN CONNECTION WITH THIS PLEDGE AND SECURITY AGREEMENT,
AND WHETHER ARISING IN CONTRACT, TORT, EQUITY OR OTHERWISE, SHALL BE RESOLVED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. NOTWITHSTANDING THE
FOREGOING: THE MATTERS IDENTIFIED IN 31 C.F.R. ss.ss. 357.10 AND 357.11 (AS IN
EFFECT ON THE DATE OF THIS AGREEMENT) SHALL BE GOVERNED SOLELY BY THE LAWS
SPECIFIED THEREIN.
(b) THE PLEDGOR AGREES TO SUBMIT TO THE JURISDICTION OF ANY
FEDERAL OR STATE COURT LOCATED IN THE CITY OF NEW YORK.
(c) THE PLEDGOR AGREES THAT THE TRUSTEE SHALL, IN ITS CAPACITY
AS TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE THE RIGHT,
TO THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE PLEDGOR OR THE
COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH (AND
HAVING PERSONAL OR IN REM JURISDICTION OVER THE PLEDGOR OR THE COLLATERAL, AS
THE CASE MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH COLLATERAL, OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF THE TRUSTEE. THE
PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS
IN ANY PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE ON SUCH PROPERTY OR TO
ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE TRUSTEE, EXCEPT FOR SUCH
COUNTERCLAIMS, SETOFFS OR CROSSCLAIMS WHICH, IF NOT ASSERTED IN ANY SUCH
PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED. THE PLEDGOR WAIVES ANY
OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN THE CITY OF NEW YORK
ONCE THE TRUSTEE HAS COMMENCED A PROCEEDING DESCRIBED IN THIS PARAGRAPH
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS.
(d) THE PLEDGOR AGREES THAT NEITHER ANY HOLDER OF NOTES NOR
(EXCEPT AS OTHERWISE PROVIDED IN THIS PLEDGE AND SECURITY AGREEMENT OR THE
INDENTURE) THE TRUSTEE IN ITS CAPACITY AS TRUSTEE SHALL HAVE ANY LIABILITY TO
THE PLEDGOR (WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED
BY THE PLEDGOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED
22
TO, THE TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS
PLEDGE AND SECURITY AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN
CONNECTION THEREWITH, UNLESS IT IS DETERMINED BY A FINAL AND NONAPPEALABLE
JUDGMENT OF A COURT THAT IS BINDING ON THE TRUSTEE OR SUCH HOLDER OF NOTES, AS
THE CASE MAY BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE
PART OF THE TRUSTEE OR SUCH HOLDERS OF NOTES, AS THE CASE MAY BE, CONSTITUTING
BAD FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR
WAIVES THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER
OF NOTES IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY
JUDGMENT OR OTHER COURT ORDER PERTAINING TO THIS PLEDGE AND SECURITY AGREEMENT
OR ANY RELATED AGREEMENT OR DOCUMENT ENTERED IN FAVOR OF THE TRUSTEE OR ANY
HOLDER OF NOTES, OR TO ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING
ORDER OR PRELIMINARY OR PERMANENT INJUNCTION, THIS PLEDGE AND SECURITY AGREEMENT
OR ANY RELATED AGREEMENT OR DOCUMENT BETWEEN THE PLEDGOR ON THE ONE HAND AND THE
TRUSTEE AND/OR THE HOLDERS OF THE NOTES ON THE OTHER HAND.
23
IN WITNESS WHEREOF, the Pledgor, BTI, the Placement Agents and
the Trustee have each caused this Pledge and Security Agreement to be duly
executed and delivered as of the date first above written.
BTI Telecom Corp.
By /s/ Peter T. Loftin
______________________________________
Name: Peter T. Loftin
Title: Chief Executive Officer
Business Telecom, Inc.
By /s/ R. Michael Newkirk
______________________________________
Name: R. Michael Newkirk
Title: President
Morgan Stanley & Co. Incorporated
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
By: Morgan Stanley & Co. Incorporated
By: /s/ James B. Avery
______________________________________
Name: James B. Avery
Title: Vice President
First Trust of New York, National Association,
as Trustee
By: /s/ Glenn W. Andersen
_________________________________________
Name: Glenn W. Andersen
Title: Vice President
Exhibit A
Form of Opinion of Counsel
I. Form of opinion to be delivered in connection with the
Reorganization
(A) the Reorganization has been duly and validly authorized by
the Pledgor and BTI, and all corporate action on the part of the Pledgor and BTI
and the Pledgor's and BTI's shareholders necessary to approve the Reorganization
has been accomplished;
(B) no consent, approval, authorization or order of, or
qualification with, any United States or state governmental body, agency or
court having jurisdiction over the Pledgor or BTI or any of its subsidiaries is
required for the consummation of the Reorganization by the Pledgor or BTI
pursuant to the applicable transaction documents, except such as may be required
under the federal and state telecommunications laws; and
(C) the execution and delivery by the Pledgor and BTI of, and
the performance by the Pledgor and BTI of its obligations under the applicable
transaction documents and the consummation of the Reorganization by the Pledgor
and BTI, do not contravene (i) any provision of applicable law, (ii) the
articles of incorporation or by-laws of the Pledgor or BTI, (iii) to such
counsel's knowledge, any agreement or other instrument binding upon the Pledgor
or BTI or any of its subsidiaries that is material to the Pledgor and BTI, taken
as a whole, and (iv) to such counsel's knowledge, any judgment, order or decree
of any governmental body, agency or court having jurisdiction over the Pledgor
or BTI or any of its subsidiaries.
II. Form of opinion to be delivered in connection with the
FiberSouth Acquisition
(A) the FiberSouth Acquisition has been duly and validly
authorized by the Pledgor and by FiberSouth, and all corporate action on the
part of the Pledgor, the Pledgor's shareholders, FiberSouth and FiberSouth's
shareholders necessary to approve the FiberSouth Acquisition has been
accomplished;
(B) no consent, approval, authorization or order of, or
qualification with, any United States or state governmental body, agency or
court having jurisdiction over the Pledgor or any of its subsidiaries is
required for the consummation of the FiberSouth Acquisition by the Pledgor and
FiberSouth pursuant to the applicable transaction documents, except such as may
be required under the federal and state telecommunications laws; and the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, applicable to the FiberSouth Acquisition has expired; and
(C) the execution and delivery by each of the Pledgor and
FiberSouth of, and the performance by each of the Pledgor and FiberSouth of
their respective obligations
A-2
under the applicable transaction documents and the consummation of the
FiberSouth Acquisition by the Pledgor and FiberSouth, do not contravene (i) any
provision of applicable law, (ii) the articles of incorporation or by-laws of
the Pledgor or FiberSouth, (iii) to such counsel's knowledge, any agreement or
other instrument binding upon the Pledgor, FiberSouth or any of their
subsidiaries that is material to the Pledgor and BTI, taken as a whole, and (iv)
to such counsel's knowledge, any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Pledgor, FiberSouth or any of
their subsidiaries.
Exhibit B
Form of Opinion of Regulatory Counsel
I. Form of opinion to be delivered in connection with the
Reorganization
All authorizations of or filings with the FCC and any State Regulatory
Agency for the consummation of the Reorganization have been obtained or made,
except where failure to obtain such authorizations or make such filings would
not, individually or in the aggregate, have a material adverse effect on BTI
Telecom Corp. and Business Telecom, Inc., taken as a whole.
II. Form of opinion to be delivered in connection with the
FiberSouth Acquisition
All authorizations of or filings with the FCC and any State Regulatory
Agency for the consummation of the FiberSouth Acquisition have been obtained or
made, except where failure to obtain such authorizations or make such filings
would not, individually or in the aggregate, have a material adverse effect on
BTI Telecom Corp. and Business Telecom, Inc., taken as a whole.