SC TO-I

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE TO

TENDER OFFER STATEMENT UNDER SECTION 14(d)(1) or 13(e)(1)

OF THE SECURITIES EXCHANGE ACT OF 1934

US LEC CORP.

(Name of Subject Company (Issuer) and Filing Person (Offeror))

Options to Purchase Class A Common Stock, Par Value $0.01 Per Share

Having an Exercise Price Per Share of $4.00 or More

(Title of Class of Securities)

90331S 109

(CUSIP Number of Class of Securities)

(Underlying Class A Common Stock)

Aaron D. Cowell, Jr.

President and Chief Executive Officer

US LEC Corp.

Morrocroft III

6801 Morrison Boulevard

Charlotte, North Carolina 28211

(704) 319-1000

(Name, address and telephone number of person authorized to receive notices and

communications on behalf of filing person)

Copy to:

Barney Stewart III

Thomas H. O’Donnell, Jr.

Moore & Van Allen PLLC

100 North Tryon Street, Suite 4700

Charlotte, North Carolina 28202-4003

(704) 331-1000

CALCULATION OF FILING FEE

Transaction valuation*	Amount of filing fee
$1,906,438	$400

* Calculated solely for purposes of determining the filing fee. This amount assumes that options to purchase 3,231,250 shares of Class A common stock of US LEC Corp. having an aggregate value of $1,906,438 as of December 18, 2002 will be exchanged pursuant to this offer. The aggregate value of such options was calculated based on the Black-Scholes option pricing model. The amount of the filing fee, calculated in accordance with Rule 0-11 of the Securities Exchange Act of 1934, as amended, equals 1/50th of one percent of the value of the transaction.

¨ Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

Amount Previously Paid:	Filing party:
Form or Registration No.:	Schedule TO Date filed:

¨ Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

Check the appropriate boxes below to designate any transactions to which the statement relates:

¨ third party tender offer subject to Rule 14d-l.

x issuer tender offer subject to Rule l3e-4.

¨ going-private transaction subject to Rule 13e-3.

¨ amendment to Schedule l3D under Rule l3d-2.

Check the following box if the filing is a final amendment reporting the results of the tender offer.  ¨

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Item 1.    Summary Term Sheet.

The information set forth under the heading “Summary Term Sheet” in the Offer to Exchange, dated December 20, 2002, (the “Offer to Exchange”), attached hereto as Exhibit (a)(1), is incorporated herein by reference.

Item 2.    Subject Company Information.

(a)    The name of the issuer is US LEC Corp., a Delaware corporation (the “Company”), the address of its principal executive offices is Morrocroft III, 6801 Morrison Boulevard, Charlotte, North Carolina 28211, the telephone number of its principal executive offices is (704) 319-1000. The information set forth in the Offer to Exchange under Section 10 (“Information Concerning US LEC Corp.”) is incorporated herein by reference.

(b)    As of December 18, 2002, there were options to purchase 3,907,550 shares of our Class A Common stock, par value $0.01 per share (the “Common Stock”) issued and outstanding, which were granted under the US LEC Corp. 1998 Omnibus Stock Plan (the “Option Plan”). Options to purchase 3,231,250 shares of our Common Stock had an exercise price per share of $4.00 or more. The information set forth in the Offer to Exchange under the heading “Introduction” is incorporated herein by reference.

(c)    The information set forth in the Offer to Exchange under Section 7 (“Price Range of Common Stock Underlying the Options”) is incorporated herein by reference.

Item 3.    Identity and Background of Filing Person.

(a)    The information set forth under Item 2(a) above is incorporated herein by reference.

Item 4.    Terms of the Transaction.

(a)    The information set forth in the Offer to Exchange under “Summary Term Sheet,” “Introduction,” Section 1 (“Number of Options; Exercise Price; Expiration Date”), Section 3 (“Procedures for Tendering Options”), Section 4 (“Withdrawal Rights; Change of Election”), Section 5 (“Acceptance of Options for Exchange and Issuance of New Options”), Section 6 (“Conditions of the Offer”), Section 8 (“Source and Amount of Consideration; Terms of New Options”), Section 10 (“Status of Eligible Options Acquired by Us in the Offer; Accounting Consequences of the Offer”), Section 11 (“Legal Matters; Regulatory Approvals”), Section 12 (“Material U.S. Federal Income Tax Consequences”) and Section 13 (“Extension of Offer; Termination; Amendment”) is incorporated herein by reference.

(b)    The information set forth in the Offer to Exchange under Section 9 (“Interests of Executive Officers and Directors; Transactions and Arrangements Concerning Options”) is incorporated herein by reference. The address of these persons is c/o the Company, Morrocroft III, 6801 Morrison Boulevard, Charlotte, North Carolina 28211 (telephone: (704) 319-1000).

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Item 5.    Past Contacts, Transactions, Negotiations and Arrangements.

(e)    The information set forth in the Offer to Exchange under Section 9 (“Interests of Executive Officers and Directors; Transactions and Arrangements Concerning Options”) is incorporated herein by reference.

Item 6.    Purposes of the Transaction and Plans or Proposals.

(a)    The information set forth in the Offer to Exchange under Section 2 (“Purpose of the Offer”) is incorporated herein by reference.

(b)    The information set forth in the Offer to Exchange under Section 5 (“Acceptance of Options for Exchange and Issuance of New Options”) and Section 10 (“Status of Eligible Options Acquired by Us in the Offer; Accounting Consequences of the Offer”) is incorporated herein by reference.

(c)    The information set forth in the Offer to Exchange under Section 2 (“Purpose of the Offer”) is incorporated herein by reference.

Item 7.    Source and Amount of Funds or Other Consideration.

(a)    The information set forth in the Offer to Exchange under Section 8 (“Source and Amount of Consideration; Terms of New Options”) and Section 14 (“Fees and Expenses”) is incorporated herein by reference.

(b)    The information set forth in the Offer to Exchange under Section 6 (“Conditions of the Offer”) is incorporated herein by reference.

(d)    Not applicable.

Item 8.    Interest in Securities of the Subject Company.

(a)    The information set forth in the Offer to Exchange under Section 9 (“Interests of Executive Officers and Directors; Transactions and Arrangements Concerning Options”) is incorporated herein by reference.

(b)    The information set forth in the Offer to Exchange under Section 9 (“Interests of Executive Officers and Directors; Transactions and Arrangements Concerning Options”) is incorporated herein by reference.

Item 9.    Person/Assets, Retained, Employed, Compensated or Used.

(a)    Not applicable.

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Item 10.    Financial Statements.

(a)    The information set forth in the Offer to Exchange under Section 15 (“Information concerning US LEC”) and Section 16 (“Additional Information”) and on pages 34 through 56 of the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2001, pages 3 through 13 of the Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended March 31, 2002, pages 3 through 14 of the Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended June 30, 2002 and pages 3 through 15 of the Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended September 30, 2002 is incorporated herein by reference.

Item 11.    Additional Information.

(a)    The information set forth in the Offer to Exchange under Section 9 (“Interests of Executive Officers and Directors; Transactions and Arrangements Concerning Options”) and Section 11 (“Legal Matters; Regulatory Approvals”) is incorporated herein by reference.

(b)    Not applicable.

Item 12.    Exhibits.

(a)    (1)    Offer to Exchange, dated December 20, 2002.

(2) Form of Letter of Transmittal.

(3) Form of Notice of Withdrawal.

(4) Press Release dated December 20, 2002.

(5) Email to Offerees from Mr. Aaron D. Cowell, Jr. dated December 20, 2002.

(6) The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.

(7) The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2002.

(8) The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2002.

(9) The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2002.

(b) Not applicable.

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(c) US LEC Corp. 1998 Stock Option Plan, as amended (the “Option Plan”) (incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 333-46341).

(d) Not applicable.

(e) Not applicable.

Item 13.    Information Required by Schedule 13E-3.

Not applicable.

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SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule TO is true, complete and correct.

US LEC CORP.

/s/    Michael K. Robinson    

Michael K. Robinson

Executive Vice President and Chief Financial Officer

Date:    December 20, 2002

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INDEX TO EXHIBITS

Exhibit Number	Description
(a)(1)	Offer to Exchange, dated December 20, 2002.
(a)(2)	Form of Letter of Transmittal.
(a)(3)	Form of Notice of Withdrawal.
(a)(4)	Press Release dated December 20, 2002.
(a)(5)	Email to Offerees from Mr. Aaron D. Cowell, Jr. dated December 20, 2002.
(a)(6)	The Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2001.
(a)(7)	The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2002.
(a)(8)	The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2002.
(a)(9)	The Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2002.
(d)	The Option Plan (incorporated by reference to the Company’s Registration Statement on Form S-1 (File No. 333-46341)).

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EX-99.A.1

US LEC Corp.

Offer To Exchange Certain Outstanding Options for New Options

The Offer And Withdrawal Rights Expire

At 5:00 P.M., North Carolina Time On January 24, 2003

Unless We Extend the Offer

December 20, 2002

We are offering our employees, including our executive officers, and two of our directors the opportunity to exchange their outstanding stock options with an exercise price per share of $4.00 or more (“eligible options”) for new options to purchase shares of our common stock (“new options”). You are not required to accept this offer. Any eligible options that you do not validly tender will remain outstanding in accordance with their terms.

The number of shares covered by the new options will be the same as the number of shares covered by your eligible options. There will be no change in the number of shares you can acquire upon exercise of your new options if you accept this offer.

The vesting schedule of your new option will match the vesting schedule of the eligible option grants you tendered just as though your tendered eligible option grant had remained outstanding through the new grant date except to the extent your eligible option grant has already vested or would have been vested on the new grant date. To the extent an eligible option grant has already vested or it would have been vested on the new grant date, the portion of your new option issued in exchange for that vested eligible option grant will be 50% vested on the new grant date and the remaining 50% will vest on the 12-month anniversary of the new grant date. However, if you are a non-exempt employee, none of your new options, whether vested or unvested, will become exercisable until the six month anniversary of the grant date subject to certain limited exceptions.

The new options will be granted on a business day that is at least six months and one day after the expiration of this offer. This offer will expire on January 24, 2003 unless we extend it. The exercise price of the new options will be the last reported sale price per share of our common stock on the Nasdaq SmallCap Market (or other automated securities quotation system or securities exchange where our common stock is then trading) on the trading day immediately before the date the new options are granted. Our common stock currently trades on the Nasdaq SmallCap Market under the symbol “CLEC.” The last reported sale price per share of our common stock was $1.96 on December 18, 2002. We cannot predict what the closing price will be on the date the new options are granted. We urge you to obtain current market quotations for our common stock before deciding whether to tender your eligible options. We cannot assure you that the new options will have a lower exercise price than the eligible options you tender for exchange.

You may only tender options on a grant-by-grant basis, that is, for each eligible option grant you hold, you may tender all or none (but not part) of an outstanding eligible option grant. Thus, if you decide to tender any options subject to a specific grant, you must tender all of the outstanding and unexercised options subject to that grant.

You will not be entitled to receive a new option unless you are employed with us or are a director on the date the new options are granted. If you cease to be employed by US LEC or one of its subsidiaries or to serve as a director of US LEC after US LEC accepts your tendered options for exchange and cancellation and prior to the grant date of the new options, you will not receive new options, or any other payment or consideration, in exchange for your tendered options. We expect to accept and cancel all validly tendered options promptly following the expiration date. We expect to grant the new options on or after July 28, 2003, but in no event later than August 1, 2003.

All of the outstanding options that are eligible to be exchanged pursuant to this offer were issued under our Omnibus Stock Plan. The new options will also be granted under our Omnibus Stock Plan, and will be evidenced by a new option agreement between you and us. Other than the exercise price and vesting schedule, the new options will have substantially the same terms as the eligible options you tender for exchange.

We are making this offer upon the terms and subject to the conditions described in this offer to exchange and in the related cover letter and letter of transmittal (which together, as they may be amended from time to time, constitute the “offer”). This offer is not conditioned upon a minimum number of eligible options being tendered. This offer is subject to conditions which we describe in Section 6 of this offer to exchange.

Although our board of directors has approved this offer, neither we nor our board of directors makes any recommendation as to whether you should accept or reject the offer. You must make your own decision whether to accept the offer by tendering one or more of your eligible options or reject the offer. Two of our directors, other than Aaron D. Cowell, Jr. who is eligible to participate as an employee of US LEC, hold options eligible to participate in this offer. We refer to these two directors as the “eligible directors.”

The threshold exercise price of $4.00 per share we have set to determine which options may be tendered in response to this offer does not, and is not meant to, reflect our view of what the trading price of our common stock will be in the short, medium or long term.

We have established an email address called “Stock Option Exchange Program” on our Intranet for any questions or requests for additional assistance. Any questions about this offer or requests for assistance in completing the related documentation or for additional copies of the offer to exchange or the letter of transmittal must be emailed to “Stock Option Exchange Program”, Attention: Option Exchange Offer Administrator. Questions or requests will only be responded to if submitted via email to “Stock Option Exchange Program” on our Intranet.

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Important

You must notify us whether you elect to accept this offer as to one or more of your eligible options or whether you elect to reject this offer as to one or more of your eligible options.

To make these elections, you must complete and sign the attached letter of transmittal in accordance with its instructions, and deliver, mail or fax it and any other required documents to us at US LEC Corp., Attention: Option Exchange Offer Administrator, Morrocroft III, 6801 Morrison Boulevard, Charlotte, North Carolina 28211 (facsimile: (704) 602-1155) before 5:00 p.m., North Carolina time, on January 24, 2003 (or a later expiration date if we extend the offer). Delivery of elections by e-mail will not be accepted. You do not need to return your option agreements to us. If you do not execute and deliver to us the letter of transmittal in accordance with the instructions provided therein, you will be deemed to have elected to reject the offer. In addition, if your letter of transmittal does not indicate an election with respect to any particular option grant, you will be deemed to have rejected the offer with respect to that option grant.

We are not making this offer to, nor will we accept any tender of options from or on behalf of, holders of eligible options in any jurisdiction in which the offer or the acceptance of any tender of eligible options would not be in compliance with the laws of such jurisdiction. However, we may, in our discretion, take any actions necessary for us to make this offer to holders of eligible options in any jurisdiction.

We have not authorized any person to make any recommendation on our behalf as to whether or not you should tender your eligible options pursuant to the offer. You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to give you any information or to make any representation in connection with this offer other than the information and representations contained in this document or in the related letter of transmittal. If anyone makes any recommendation or representation to you or gives you any information, you must not rely upon that recommendation, representation or information as having been authorized by us.

This transaction has not been approved or disapproved by the Securities and Exchange Commission, nor has the Securities and Exchange Commission passed upon the fairness or merits of this transaction or upon the accuracy or adequacy of the information contained in this document. Any representation to the contrary is a criminal offense.

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TABLE OF CONTENTS

			Page
SUMMARY TERM SHEET			1
INTRODUCTION			9
THE OFFER			10
	1.	Number of Options; Exercise Price; Expiration Date.	10
	2.	Purpose of the Offer.	11
	3.	Procedures for Tendering Options.	12
	4.	Withdrawal Rights; Change of Election.	14
	5.	Acceptance of Options for Exchange and Issuance of New Options.	15
	6.	Conditions of the Offer.	16
	7.	Price Range of Common Stock Underlying the Eligible Options.	18
	8.	Source and Amount of Consideration; Terms of New Options.	19
	9.	Interests of Executive Officers and Directors; Transactions and Arrangements Concerning Options.	21
	10.	Status of Eligible Options Acquired by Us in the Offer; Accounting Consequences of the Offer.	22
	11.	Legal Matters; Regulatory Approvals.	23
	12.	Material U.S. Federal Income Tax Consequences.	23
	13.	Extension of Offer; Termination; Amendment.	24
	14.	Fees and Expenses.	25
	15.	Information Concerning US LEC	25
	16.	Additional Information.	27
	17.	Forward-Looking Statements.	27

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SUMMARY TERM SHEET

The following are answers to some of the questions that you may have about this offer. We urge you to read carefully the remainder of this offer to exchange and the accompanying letter of transmittal because the information in this summary is not complete, and additional important information is contained in the remainder of this offer to exchange and the letter of transmittal. We have included references to the relevant sections in this offer to exchange where you can find a more complete description of the topics in this summary.

1.    What is the offer?

We are offering our employees, including our executive officers, who hold options to purchase our common stock at an exercise price of $4.00 or more per share and the eligible directors the opportunity to exchange them for new options with an exercise price to be determined in the future and a vesting schedule that may be different than the vesting schedule of eligible options we have granted in the past.

2.    Why are we making the offer?

Many of our outstanding options have exercise prices that are significantly higher than the current market price of our common stock. Because the exercise prices of these options are higher than the current market price of our common stock, we believe our employees may not be able to recognize the intended benefits of these options since they are unlikely to be exercised in the foreseeable future. Consequently, we felt it appropriate to make this offer to exchange to provide our employees and the eligible directors with the benefit of holding options that over time may have greater potential to increase in value. We believe this will create better performance incentives for employees and eligible directors and thereby maximize stockholder value. We describe this more fully in Section 2.

3.    What are the important dates I need to know?

The following are important dates and what we expect to happen on each date.

Date	Event
January 24, 2003	This is the date this offer expires unless we extend it. We do not currently expect that the offer will be extended. You must submit your letter of transmittal to us by this date. If you decide to withdraw your tendered options or change the election you made when you first tendered any options, you must also effect your withdrawal or change of election by this date.
January 25, 2003	This is the date we expect to accept and cancel all validly tendered options.

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Date	Event
January 31, 2003	If you validly tender eligible options for exchange, this is the date we expect to notify you whether we accepted your tendered options and how many shares will be covered by your new option. If we extend the expiration date, this date will also be extended.
July 28, 2003	We expect to grant the new options on or after this date, but in no event later than August 1, 2003. If we extend the expiration date, this date will be extended as well. We will notify you if we decide to extend the offer.

4.    Which options may I tender for exchange?

You may tender for exchange any of the unexercised options to purchase our common stock that you currently hold that have an exercise price of $4.00 or more per share. We refer to these options as “eligible options.” No other outstanding stock options that we have granted may be tendered pursuant to this offer. This is described more fully in Section 1.

5.    Who can tender options for exchange?

If you are an employee of US LEC or any of its subsidiaries (or a director of US LEC) on January 24, 2003, you can tender any or all of your eligible options.

6.    How many shares will be covered by the new options?

The number of shares covered by the new options will be the same as the number of shares covered by your eligible option. Accepting the offer will not change the number of shares you will be able to acquire upon exercise of your new options.

7.    What will the exercise price of the new options be?

We can’t know at this point because the exercise price will be determined when the new options are granted. Our common stock currently trades on the Nasdaq SmallCap Market under the symbol “CLEC.” The exercise price of the new options will be the last reported sale price per share of our common stock on the Nasdaq SmallCap Market (or other automated securities quotation system or securities exchange where our common stock is then trading) on the trading day immediately before the date we grant the new options. The last reported sale price per share of our common stock on the Nasdaq SmallCap Market on December 18, 2002 was $1.96. We describe this more fully in Sections 1, 7 and 8.

Because we will not grant new options until on or after the first trading day that is at least six months and one day after the date we accept and cancel the eligible options you tender for exchange, the new options may have a higher exercise price than some or all of your tendered eligible options. In addition, after the grant of the new options, our common stock may trade at a price below the exercise price per share of the new options. We recommend that you obtain current market quotations for our common stock before deciding whether to tender your eligible options. At the same time, you should consider that the current market price of our common stock may provide little or no basis for predicting what the market price of our common stock will be on the new grant date or at any time in the future.

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8.    When will the new options vest?

The vesting schedule of the new options will not begin until the date they are granted. The vesting schedule of your new option will match the vesting schedule of the eligible option grants you tendered just as though your tendered eligible option grant had remained outstanding through the new grant date except to the extent your eligible option grant has already vested or would have been vested on the new grant date. To the extent an eligible option grant has already vested or would have been vested on the new grant date, the portion of your new option issued in exchange for that vested eligible option grant will be 50% vested on the new grant date and the remaining 50% will vest on the 12-month anniversary of the new grant date.

For example, assume you hold an eligible option for 1,000 shares that was granted on February 6, 2001 and vested in four equal annual installments beginning on February 6, 2002. Under this example, 25% of your eligible option vested on February 6, 2002, 25% of your eligible option would have vested on February 6, 2003, 25% of your eligible option would have vested on February 6, 2004 and 25% of your eligible option would have vested on February 6, 2005. Consequently, 25% of this eligible option would be vested at the time your tendered eligible option is accepted for exchange and another 25% would have vested prior to the new grant date. Under the terms of this offer, 25% of your new option will vest on the new grant date, 25% will vest on the 12-month anniversary of the new grant date, 25% will vest on February 6, 2004 and the remaining 25% will vest on February 6, 2005.

As another example, assume that you hold another eligible option for 1,000 shares granted on September 18, 1998 that vested in four equal annual installments. Since 100% of this eligible option has already vested and would therefore be vested on the new grant date, the new option you receive will be 50% vested on the new grant date and the remaining 50% will vest on the 12-month anniversary of the new grant date.

In addition, if you are a non-exempt employee under federal law, then none of your new options, whether vested or unvested, will become exercisable until six months after the grant date. Upon the expiration of that six month period, each of your new options will be vested and become exercisable in accordance with the terms of your new option agreement. If you are a non-exempt employee whose employment with us terminates before your new option becomes exercisable, then you will have until nine months after the grant date of your new option in which to exercise that new option for any shares for which it is vested at the time of your termination, based on the same vesting schedule that applies to the new option. We describe this more fully in Section 8.

9.    What is a non-exempt employee and why will new options granted to non-exempt employees not become exercisable until the six month anniversary of the new grant date?

A non-exempt employee is an hourly or salaried employee who is eligible to be paid overtime. Under the Fair Labor Standards Act, the value of a stock option must be included in the calculation of a non-exempt employee’s base pay if the value of the stock option is realized by the employee within six months of the date of grant. For this purpose, the value of a stock option is equal to the difference between the exercise price of the option and the fair market value of the underlying common stock on the date of exercise. Consequently, if a non-exempt employee exercised a new option within six months of the new grant date, the value of the new option would be considered base pay. US LEC has decided that it is in its best interest to prohibit exercises of new options by non-exempt employees until six months after the new grant date in order to avoid including this value in the base pay of the non-exempt employees and the related administrative issues that could arise as a result.

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10.    When will I receive my new option?

We will grant the new options on a business day that is at least six months and one day after the date that we cancel the eligible options that are tendered and accepted for exchange. We will cancel tendered options accepted for exchange promptly after the expiration date. We expect to grant the new options on or after July 28, 2003, but in no event later than August 1, 2003. We describe this more fully in Section 5.

11.    Can I choose to tender some but not all of my eligible options?

Yes. You may tender some eligible options but not others. However, you may not tender less than all of a particular eligible option grant. For example, if you hold an eligible option grant to purchase 100 shares of our common stock at an exercise price of $4.83 per share, you may either tender all or none of these eligible options. You may not tender only part of the eligible option and retain the remainder of the eligible option. On the other hand, if you have multiple option grants, you may choose to tender none, one or more, or all, of your grants of eligible options. For example, if you hold an eligible option grant with an exercise price of $4.83 per share and an eligible option grant with an exercise price of $10.00 per share, you could tender your eligible option grant with an exercise price of $10.00 per share, and keep your eligible option grant with an exercise price of $4.83 per share.

12.    Can I tender an eligible option that I have already partially exercised?

Yes. If you have already exercised only part of an eligible option granted on a particular date, you may accept the offer and tender the unexercised portion of the eligible option. For example, if you were granted an eligible option to purchase 100 shares of our common stock with an exercise price of $4.83 per share and you exercised a portion of that eligible option and bought 25 shares, you can accept the offer and elect to exchange the eligible option by tendering it for the remaining 75 shares. We describe this more fully in Section 1.

13.    What will the other terms of my new options be?

The new options will be granted under our Omnibus Stock Plan and the terms will be set forth in a new option agreement to be entered into between you and us, which will be substantially in the form as your existing option agreement(s). Except for the exercise price and vesting schedule, the other terms of your new options will be substantially the same as the eligible options you tender for exchange. We describe this more fully in  Section 8.

14.    If my eligible options are incentive stock options, will the new options be incentive stock options?

The new options will be designed to qualify as incentive stock options under the U.S. federal tax laws to the maximum extent permissible. Due to the statutory $100,000 limitation on the initial exercisability of incentive stock options per calendar year, some portion of the new options granted in exchange for your tendered eligible options that qualified as incentive stock options may be non-statutory or “non-qualified” options under U.S. federal tax laws.

We describe the federal tax consequences of incentive stock options and non-qualified options more fully in Section 12. You should discuss the tax consequences of accepting this offer with your own tax advisor before deciding whether to accept or reject the offer.

15.    What happens if I tender my eligible options and I leave US LEC or I am terminated as an employee or an eligible director before the expiration date?

If your employment with us terminates for any reason (or if your service as a director terminates) prior to the expiration date, your tendered eligible options will automatically be withdrawn, and you may exercise those

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eligible options in accordance with their terms to the extent they are vested. If your tendered options are automatically withdrawn, you will not receive any new options. We describe this more fully in Section 4.

16.    What if I tender my eligible options and I am not employed by US LEC when the new options are granted?

You will only be entitled to receive a new option in exchange for your tendered eligible options if you remain continuously employed by us or if you continuously serve as a director through and including the date the new options are granted. If you are not an employee of US LEC or its subsidiaries or a director of US LEC when the new options are granted, you will not be granted any new options and you will not receive any payment or other consideration in exchange for your tendered eligible options that were accepted for exchange and cancelled. We describe this more fully in Sections 1 and 5.

Once your tendered eligible options have been accepted and cancelled, you will have no rights with respect to those options and they will not be reissued or returned to you for any reason. This offer does not change the “at-will” nature of your employment with us and your employment may be terminated by us or by you at any time, including prior to or after the date the new options are granted. Similarly, this offer does not change the nature of a director’s service on our board of directors or the provisions governing removal of a director under our certificate of incorporation or bylaws or Delaware law.

17.    If I tender my eligible options, why do I have to be continuously employed by US LEC or continue to serve as a director of US LEC for approximately six months in order to receive a new option?

We have structured this offer to comply with accounting rules that we believe will not require us to record substantial compensation expense for financial reporting purposes. The accounting rules specify that we cannot grant new options to you until at least six months and one day after your tendered options have been accepted for exchange and cancelled. During this period, the accounting rules also require that you must bear the risk of not receiving a new option on the new grant date because, for example, you may not be employed with us on the date the new options are granted. Although we could have structured this offer so that it did not comply with these accounting rules, we decided that it was in the best interest of US LEC and our stockholders to structure it in a manner that would not result in a substantial compensation charge for financial reporting purposes.

18.    What happens to my eligible options that I choose not to tender or that are not accepted for exchange?

Nothing. Eligible options that you hold and choose not to tender for exchange or that we do not accept for exchange will remain outstanding and retain their current exercise price, current vesting schedule and other terms. We describe this more fully in Section 1.

19.    If I tender eligible options in the offer, will I be eligible to receive other option grants before I receive my new option?

No. We intend to continue to review option grants to employees from time to time as part of our normal compensation program. As a result of this review, we may decide to grant you additional options. If we accept and cancel the eligible options you tender in connection with the offer, however, the grant date, the pricing and other terms of any additional options that we may decide to grant to you will be deferred until after the grant date of the new options. We describe this more fully in Section 5.

20.    If I elect to exchange any of my eligible options, will my election affect other components of my compensation?

No. Your election to accept or reject the offer will not affect your compensation in the future. Your acceptance or rejection of the offer will not affect your eligibility or the likelihood that you will receive stock option grants in the future. It will only affect your right to receive a new option.

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21.    Will I have to pay taxes if I exchange eligible options in the offer?

If you tender your eligible options for new options, we believe that you will not be required under current law to recognize income for U.S. federal income tax purposes at the time of the exchange or at the time we grant the new options. We believe that the exchange will be treated as a non-taxable exchange. However, you should consult with your own tax advisor to determine the tax consequences of this offer. We describe this more fully in Section 12.

22.    Why don’t you simply reprice the eligible options?

“Repricing” existing options could require us, for financial reporting purposes, to record additional compensation expense each quarter until the repriced options are exercised, cancelled or expire.

23.    Why won’t you grant the new options immediately after the expiration of the offer, instead of waiting more than six months to do so?

Granting any new options before six months and one day after the closing of the offer would expose us to the same adverse accounting treatment described above. We describe this more fully in Section 5.

24.    What happens if US LEC is no longer subject to the SEC’s reporting requirements on the date new options are expected to be granted?

If we are no longer subject to the SEC’s reporting requirements on the date we expect to grant the new options, you will not receive new options on that date. We describe this more fully in Section 5.

25.    What happens if US LEC merges into or is acquired by another company before this offer expires?

If we merge into or are acquired by another company prior to the expiration date of the offer, your tendered options will be automatically withdrawn and you will be entitled to all of the rights afforded to you to acquire our common stock under the terms of your existing option agreements.

26.    What happens if US LEC is merged into or acquired by another public company after this offer expires but before the new options are granted?

If we are merged into another company after your tendered options are accepted for exchange and cancelled but before the new options are granted, the surviving company would automatically assume US LEC’s obligations with respect to the offer. The new options would be options to purchase shares of the surviving company. The number of shares issuable upon the exercise the new options would be adjusted based upon the exchange ratio that was used in the merger transaction. The exercise price would be based on the market price of the acquiring company’s stock.

If we are acquired and become a subsidiary of the acquiring company after your tendered options are accepted for exchange and cancelled but before the new options are granted, the obligations of US LEC in connection with the offer would not be automatically assumed by the acquiring company. While we would seek to make provisions for the option holders whose eligible options were accepted for exchange and cancelled in the acquisition agreement, we cannot guarantee what, if any, provision would be made. As a result, we cannot guarantee that any new options would be granted in the event of such an acquisition. We describe this more fully in Section 5.

27.    Are there conditions to the offer?

The offer is not conditioned upon a minimum number of eligible options being tendered. However, the offer is subject to a number of other conditions with regard to events that could occur prior to the expiration of the

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offer. These events include, among other things, a change in accounting rules, a lawsuit challenging the offer, a third-party tender offer for our common stock or other acquisition proposal. These and various other conditions are more fully described in Section 6.

28.    Under what circumstances would my tendered options not be accepted for exchange?

We currently expect that we will accept promptly after the expiration date all eligible options that are properly tendered for exchange and have not been validly withdrawn. We may, however, reject any letters of transmittal or tendered options to the extent that we determine they were not properly executed or delivered, to the extent that we determine it is unlawful to accept the tendered options or to the extent certain conditions exist which in our reasonable judgment makes it inadvisable to proceed with the offer. We describe this more fully in Sections 3, 5 and 6.

29.    What do I need to do to tender my options?

To accept the offer and tender your eligible options, you must deliver, before 5:00 p.m., North Carolina time, on January 24, 2003, a properly completed and duly executed letter of transmittal to US LEC Corp., Attention: Option Exchange Offer Administrator, Morrocroft III, 6801 Morrison Boulevard, Charlotte, North Carolina 28211, (facsimile: (704) 602-1155). You do not need to return your option agreements to accept the offer. We will only accept a paper copy or a facsimile copy of your executed letter of transmittal. Delivery by e-mail will not be accepted. If you do not execute and deliver to us the letter of transmittal in accordance with the instructions provided therein, you will be deemed to have elected to reject the offer. In addition, if your letter of transmittal does not indicate an election with respect to any particular option grant, you will be deemed to have rejected the offer with respect to that option grant.

If the offer is extended by us beyond January 24, 2003, you must deliver these documents on or before the extended expiration date.

We reserve the right to reject any or all tenders of eligible options that we determine are not in appropriate form or that we determine are unlawful to accept. Otherwise, we expect to accept all validly tendered eligible options that are not validly withdrawn. Subject to our rights to extend, terminate and amend the offer, we currently expect that we will accept all such validly tendered options promptly after the expiration date. We describe this more fully in Section 3.

30.    During what period of time may I withdraw previously tendered options?

You may withdraw your tendered options at any time before 5:00 p.m., North Carolina time, on January 24, 2003. If we extend the offer beyond that time, you may withdraw your tendered options at any time until the extended expiration date. You may not withdraw your tendered options after the expiration date, unless we do not accept and cancel your tendered options by 5:00 p.m., North Carolina time, on February 20, 2003. To withdraw your tendered options, you must deliver to us (at the address listed above) a written notice of withdrawal, or a facsimile thereof:

• On or prior to the expiration date; or

• By February 20, 2003, if we have not accepted and cancelled your tendered options earlier. We currently expect to accept and cancel your tendered options promptly after the expiration date.

We will accept only a paper copy or a facsimile copy of your executed notice of withdrawal. Delivery by e-mail will not be accepted.

Once you have withdrawn tendered options, you may re-tender eligible options only by repeating the delivery procedures described above on or prior to the expiration date. We describe this more fully in Sections 3 and 4.

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31.    How do I withdraw my tendered options?

Prior to the expiration date, you may withdraw your tendered eligible options by completing and signing the attached notice of withdrawal in accordance with its instructions and deliver it, by mail or fax, to us at US LEC Corp., Attention: Option Exchange Offer Administrator, Morrocroft III, 6801 Morrison Boulevard, Charlotte, North Carolina 28211 (facsimile: (704) 602-1155). You may not withdraw only a portion of the eligible options previously tendered. We will not accept delivery of a notice of withdrawal by e-mail. We describe this more fully in Section 4.

32.    When can I change my previous election?

You may change your previous election at any time before 5:00 p.m., North Carolina time, on January 24, 2003. If we extend the offer beyond that time, you may change your previous election at any time until the extended expiration date.

33.    How do I change my previous election?

Prior to the expiration date, you must deliver a notice of withdrawal in accordance with the instructions above and submit a new letter of transmittal in accordance with the procedures described in Section 3. For example, you may hold three separate eligible option grants – one for 100 shares with an exercise price of $4.83 per share, a second for 100 shares with an exercise price of $10.00 per share and a third for 100 shares with an exercise price of $11.44 per share. If you tendered all three of these eligible options and wish to change your election and tender just your eligible option with a $11.44 exercise price, you must:

• Deliver a signed notice of withdrawal listing the 300 shares originally tendered; and then

• Deliver a new signed letter of transmittal and re-tender your eligible option for 100 shares with an exercise price of $11.44.

You must deliver a notice of withdrawal before re-tendering any eligible options. Submitting a second letter of transmittal without first delivering a notice of withdrawal will not effect a change in your original letter of transmittal. We describe this more fully in Section 4.

34.    Do you think that I should accept the offer?

The offer is intended to benefit employees and our eligible directors, but accepting the offer also involves risks. Therefore, neither we nor our board of directors is making any recommendation as to whether you should accept or reject the offer.

35.    What should I do if I have questions about the offer?

You may wish to consult with your financial advisor. In addition, we have established an email address called “Stock Option Exchange Program” on our Intranet which is the Intranet address for questions and requests for additional assistance. US LEC will only respond to inquiries emailed to “Stock Option Exchange Program” on the Intranet. For additional information or assistance regarding the offer materials and tender process, you should send an email with your question or request via our Intranet to “Stock Option Exchange Program”, Attention: Option Exchange Offer Administrator.

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INTRODUCTION

We are offering to exchange certain outstanding options to purchase shares of US LEC’s Class A common stock, par value $.01 per share (the “common stock”), for new options (the “new options”) to purchase shares of common stock to be granted under our Omnibus Stock Plan, upon the terms and subject to the conditions described in this offer to exchange and the related cover letter and letter of transmittal (the “Letter of Transmittal” and, together with the related cover letter and offer to exchange, as they may be amended from time to time, the “offer”). You are not required to accept this offer.

The options subject to this offer are all outstanding and unexercised options to purchase shares of common stock granted under our Omnibus Stock Plan to employees of US LEC and its subsidiaries (including our executive officers) and the eligible directors having an exercise price per share of $4.00 or more.

The number of shares of common stock covered by the new options to be granted to each option holder in exchange for eligible options will be the same as the number of shares of common stock covered by tendered eligible options that we accept and convert. Accepting this offer will not change the number of shares an option holder may acquire upon the exercise of new options.

We will grant the new options on a business day which is at least six months and one day following the date we cancel the eligible options that are validly tendered and accepted for exchange by us (the “new grant date”). If you tender eligible options for exchange, we will grant you a new option under our Omnibus Stock Plan and we will enter into a new option agreement with you.

Our common stock currently trades on the Nasdaq SmallCap Market under the symbol “CLEC.” On December 18, 2002, the last reported sale price per share of our common stock as reported on the Nasdaq SmallCap Market was $1.96. We urge you to obtain current market quotations for our common stock before deciding whether to tender your eligible options.

This offer is not conditioned upon a minimum number of eligible options being tendered. You may tender eligible options for all or none (but not part) of the shares of common stock subject to each eligible option grant you hold. In addition, this offer is subject to conditions that we describe in Section 6 of this offer to exchange.

With the exception of the exercise price and vesting schedule, all the new options granted in connection with this offer will have substantially the same terms and conditions as the eligible options previously granted to you under our Omnibus Stock Plan.

As of December 18, 2002, options to purchase 3,907,550 shares of our common stock were issued and outstanding under our Omnibus Stock Plan. Of these options, options to purchase 3,231,250 shares of our common stock had an exercise price of $4.00 or more per share and are held by persons eligible to participate in this offering.

All validly tendered options accepted by us pursuant to this offer will be canceled effective as of January 25, 2003, which is the day after the expiration date of the offer, unless we extend the offer.

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THE OFFER

1.     Number of Options; Exercise Price; Expiration Date.

Upon the terms and subject to the conditions of the offer, we are offering to exchange new options to purchase common stock for all eligible options outstanding under our Omnibus Stock Plan that are properly tendered and not validly withdrawn in accordance with Section 4 before the “expiration date,” as defined below. Eligible options are all outstanding and unexercised options held by our employees (including our executive officers) and the eligible directors having an exercise price of $4.00 or more per share.

We will not accept tenders of eligible options for any portion less than 100% of the shares subject to any individual option grant. Therefore, if you decide to tender any eligible options, you may only tender options for all the shares of common stock subject to a particular option grant. For example, if you were granted an option to purchase 100 shares of our common stock with an exercise price of $4.83 per share, you must tender the entire option to purchase 100 shares. You may not tender only a portion of that particular option. However, if you were granted an option to purchase 100 shares of our common stock at an exercise price of $4.83 per share and you exercised a portion of that option and bought 25 shares, you can accept the offer, but you must tender the eligible option for all the remaining 75 shares.

If you have multiple option grants, you can elect to exchange all of one option grant and keep all of another option grant. For example, you may hold two separate option grants – one for 100 shares with an exercise price of $4.83 per share and a second for 100 shares with an exercise of $10.00 per share. You could accept the offer and tender the eligible option to purchase 100 shares with an exercise price of $10.00 per share and elect not to tender the eligible option to purchase 100 shares with an exercise price of $4.83 per share.

If your eligible options are properly tendered and accepted for exchange, you will be entitled to receive a new option to purchase the same number of shares of our common stock. The number of shares covered by the new option will be subject to adjustment for any stock splits, stock dividends and similar events.

The exercise price of the new options will be equal to the last reported sale price per share of our common stock on the Nasdaq SmallCap Market (or other automated securities quotation system or securities exchange where our common stock is then trading) on the trading day immediately before the date we grant the new options. Because the exercise price of the new options will be determined in the future, we cannot predict what the exercise price will be.

Our stock price has been, and in the future may be, volatile and could continue to decline. Our stock price could also rise prior to the grant of the new options and thereafter fall. The trading price of our common stock has fluctuated in the past and is expected to continue to do so in the future, as a result of a number of factors, many of which are outside our control. In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market prices of many telecommunication companies that have often been unrelated and disproportionate to the operating performance of these companies. The threshold exercise price of $4.00 per share that we have set to determine which options may be tendered in response to this offer does not, and is not meant to, reflect our view of what the trading price of our common stock will be in the short, medium or long term.

All new options granted in exchange for tendered options will be granted under our Omnibus Stock Plan, and the terms and conditions of the new options will be set forth in new option agreements between us and you. With the exception of the exercise price and vesting schedule, all new options will have substantially the same terms and conditions as the eligible options you tender for exchange.

The vesting schedule of your new option will match the vesting schedule of the eligible option grants you tendered just as though your tendered eligible option grant had remained outstanding through the new grant date except to the extent your eligible option grant has already vested or would have been vested on the new grant date. To the extent an eligible option grant has already vested or would have been vested on the new grant date,

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the portion of your new option issued in exchange for that vested eligible option grant will be 50% vested on the new grant date and the remaining 50% will vest on the 12-month anniversary of the new grant date. However, if you are a non-exempt employee, none of your new options, whether vested or unvested, will become exercisable until the six month anniversary of the grant date subject to certain limited exceptions. If you do not tender eligible options pursuant to this offer or we do not accept your tender, you will retain your eligible options subject to all of their terms and conditions, including the vesting provisions and exercise price, at the time they were granted to you.

If your employment with us is terminated for any reason or if you cease to be a director of US LEC after US LEC accepts your tendered options for exchange and cancellation and before the date we grant the new options, you will not be entitled to receive the options you tendered, any new options or any other payment or consideration in exchange for your tendered options that we have accepted for exchange. This means that if you resign or your employment is terminated for any reason (including termination by us) or your directorship is terminated or you die, prior to the date we grant the new options, you will not receive anything for the options that you tendered and we accepted and canceled.

The term “expiration date” means 5:00 p.m., North Carolina time, on January 24, 2003, unless and until we, in our discretion, have extended the period of time during which the offer will remain open. If we extend the offer, the term “expiration date” will mean the latest time and date at which the offer, as so extended, expires. See Section 13 for a description of our rights to extend, delay, terminate and amend the offer.

We will notify you if we decide to take any of the following actions:

• increase or decrease what you will receive in exchange for tendered eligible options;

• increase or decrease the number of options eligible to be exchanged in the offer;

• change the category of persons entitled to participate in the offer to exchange; or

• extend or terminate the offer.

If the offer is scheduled to expire within 10 business days from the date we notify you of any such increase or decrease or other material change in the terms of the offer, we intend to extend the offer for 10 business days after we notify you of any such increase, decrease or other material change.

2.     Purpose of the Offer.

We issued the options that are outstanding under our Omnibus Stock Plan for the following purposes:

• to provide our employees and our eligible directors who hold eligible options an opportunity to acquire or increase a proprietary interest in US LEC, thereby allowing us to attract and motivate our employees and the eligible directors and create a stronger incentive for our employees and the eligible directors to expend maximum effort for our growth and success; and

• to encourage our employees and the eligible directors to continue their employment or service with us.

Many of our outstanding options have exercise prices that are significantly higher than the current market price of our common stock. We believe our employees and the eligible directors may not recognize the intended benefits of these options in the foreseeable future. By making this offer to exchange outstanding options for new options that will have an exercise price equal to the last reported sale price per share of our common stock on the Nasdaq SmallCap Market (or other automated securities quotation system or securities exchange where our common stock is then trading) on the trading day immediately before the date the new options are granted, we intend to provide our employees and the eligible directors with the benefit of holding options that over time may have a greater potential to increase in value. We believe this will create better performance incentives for employees and the eligible directors and thereby maximize stockholder value.

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Except as described in Section 15 under the heading “Information Concerning US LEC – Liquidity Needs” below, we presently have no plans or proposals that relate to or would result in:

(a)    any material corporate transaction, such as a material merger, reorganization or liquidation, involving us or any of our subsidiaries;

(b)    any purchase, sale or transfer of a material amount of our assets or the assets of any of our subsidiaries;

(c)    any material change in our present dividend policy, or in our indebtedness or capitalization (other than seeking modifications to our senior credit facility which, among other things, will entail adjustments in the amortization of the principal payments currently required under that facility);

(d)    any change in our present board of directors or management, including a change in the number or term of directors, other than any plans we have to fill a current vacancy on our board of directors, or to change any executive officer’s material terms of employment;

(e)    any other material change in our corporate structure or business;

(f)    our common stock not being authorized for quotation in an automated quotation system operated by a national securities association;

(g)    our common stock becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934;

(h)    the suspension or termination of our obligation to file reports pursuant to Section 13 of the Securities Exchange Act of 1934;

(i)    the acquisition by any person of any material amount of our securities (other than dividends in kind payable on our outstanding shares of Series A Convertible Preferred Stock and the issuance of debt or equity securities to raise up to approximately $25 million of additional capital) or the disposition of any material amount of our securities; or

(j)    any change in our certificate of incorporation or bylaws, or any actions which may impede the acquisition of control of us by any person.

We continually are presented with and evaluate possible transactions, including various financing or other transactions, that could result in the happening of one or more of the items set forth above. We cannot assure you that we will not pursue one or more of such possible transactions during the period between the time that you tender eligible options for exchange and the date that new options are granted.

Neither we nor our board of directors makes any recommendation as to whether you should accept or reject the offer, nor have we authorized any person to make any such recommendation. Three of our directors are eligible to participate in this offer, including Aaron D. Cowell, Jr. who is eligible to participate as our President and Chief Executive Officer and Messrs. Flaum and Schoonover who are eligible to participate because they hold eligible options. The new options may have a higher exercise price than some or all of your current options. You are urged to evaluate carefully all of the information in this offer to exchange and to consult your own investment and tax advisors.

You must make your own decision whether to accept the offer by tendering one or more of your eligible options or reject the offer. You are not required to accept this offer.

3.     Procedures for Tendering Options.

Proper Tender of Options.

If you decide to accept this offer or if you decide to reject it, you must complete and sign the Letter of Transmittal, along with any other documents required by the Letter of Transmittal, and deliver them to Option

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Exchange Offer Administrator at US LEC before the expiration date. You do not need to return your option agreements to accept the offer. The Letter of Transmittal and other required documents may be hand delivered or sent via mail, courier or facsimile. We will only accept a properly executed paper copy or a facsimile copy of your Letter of Transmittal and any other required documents. We will not accept delivery by e-mail. We must receive all of the required documents at Morrocroft III, 6801 Morrison Boulevard, Charlotte, North Carolina 28211, Attention: Option Exchange Offer Administrator (facsimile: (704) 602-1155), before 5:00 p.m., North Carolina time, on January 24, 2003 (or a later expiration date if we extend the offer). Letters of transmittal and other required documents received via facsimile will be valid if received by the expiration date, but only if the originals are sent by mail, courier or hand delivery and are received by us by January 29, 2003. The method of delivery of all documents, including letters of transmittal and any other required documents, is at your election and risk. If delivery is by mail, we recommend that you use registered or certified mail with return receipt requested. In all cases, you should allow sufficient time to ensure timely delivery.

Your new options will be granted on a date at least six months and one day after the date that we cancel the tendered eligible options accepted for exchange. We expect to accept and cancel all validly tendered eligible options promptly following the expiration date. We expect to grant the new options on or after July 28, 2003, but in no event later than August 1, 2003.

We recommend that you retain a copy of all documents that you return to us for your records.

Determination of Validity; Rejection of Options; Waiver of Defects; No Obligation to Give Notice of Defects.

We will determine, in our sole discretion, all questions as to the number of shares underlying eligible options, the form of documents and the validity, form, eligibility, including time of receipt and acceptance of any tender of options. Our determination of these matters will be final and binding on you. We may reject any or all tenders of eligible options that we determine are not properly executed and delivered, not in appropriate form or that we determine are unlawful to accept. Otherwise, we expect to accept all properly and timely tendered eligible options that are not validly withdrawn.

We may also waive any of the conditions of the offer or any defect or irregularity in any tender with respect to any particular options or any particular option holder. No tender of eligible options will be deemed to have been properly made until all defects or irregularities have been cured by the tendering option holder or waived by us. If such defects or irregularities are not cured or waived, you will be deemed to have elected to reject the offer. Neither we nor any other person is obligated to give notice of any defects or irregularities in tenders, and no one will be liable for failing to give notice of any defects or irregularities. If you do not execute and deliver to us the Letter of Transmittal in accordance with the instructions provided therein, you will be deemed to have elected to reject the offer. In addition, if your Letter of Transmittal and related documents do not indicate an election with respect to any particular option grant, you will be deemed to have rejected the offer with respect to that option grant.

Our Acceptance Constitutes an Agreement.

Your tender of eligible options pursuant to the procedures described above constitutes your acceptance of the terms and conditions of the offer. Our acceptance for exchange of eligible options tendered by you pursuant to the offer will constitute a binding agreement between us and you upon the terms and subject to the conditions of the offer.

Subject to our rights to extend, terminate and amend the offer, we currently expect that, promptly after the expiration of the offer, we will accept and cancel all properly tendered eligible options that have not been validly withdrawn.

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4.     Withdrawal Rights; Change of Election.

You may only withdraw or change your election with respect to tendered eligible options in accordance with the provisions of this Section 4.

Automatic Withdrawal.

If your employment with us terminates for any reason or if you cease to be a director before the expiration date, your tendered eligible options will automatically be withdrawn. If your tendered options are automatically withdrawn, you may exercise them to the extent they are vested at the time your employment or service as a director terminates, but only during the limited period for which they remain exercisable following termination of employment or service. This limited exercise period and the procedures for exercising these options are set forth in your option agreement with us.

Voluntary Withdrawal or Change of Election.

You may only withdraw or change your election, but only if you do so before 5:00 p.m., North Carolina time, on January 24, 2003. If we extend the offer, you may withdraw or change your election at any time until the extended expiration of the offer. In addition, if we have not accepted your tendered options for exchange, you may withdraw them at any time after 5:00 p.m., North Carolina time on February 20, 2003.

To validly withdraw or change your election to tender options, you must deliver to us at Morrocroft III, 6801 Morrison Boulevard, Charlotte, North Carolina 28211, Attention: Option Exchange Offer Administrator (facsimile: (704) 602-1155) a written notice of withdrawal, or a facsimile thereof before your right to withdraw your tendered options expires. Your notice of withdrawal must state the name of the option holder who tendered the eligible options to be withdrawn exactly as the option holder’s name appears on the option agreement for the eligible options, the grant date, exercise price and total number of shares covered by all the options previously tendered. You may not withdraw only a portion of the eligible options you previously tendered. Except as described in the following sentence, the notice of withdrawal must be signed by the option holder who tendered the eligible options to be withdrawn exactly as the option holder’s name appears on the option agreement for the eligible options. If the signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or another person acting in a fiduciary or representative capacity, the signer’s full title and proper evidence of the authority of the person to act in that capacity must be indicated on notice of withdrawal. We will not accept delivery of a notice of withdrawal by e-mail.

If you wish to change your election regarding eligible options you previously tendered, you may only do so before the expiration date. To change your election, you must submit a notice of withdrawal in accordance with the instructions above and submit a new Letter of Transmittal in accordance with the procedures described in Section 3. For example, you may hold three separate option grants—one for 100 shares with an exercise price of $4.83 per share, a second for 100 shares with an exercise price of $10.00 per share and a third for 100 shares with an exercise price of $11.44 per share. If you tendered all three of these options and you decide you want to change your election and tender just the option with an $11.44 per share exercise price, you must first withdraw all three of them prior to the expiration date. Then, prior to the expiration date, you must deliver another Letter of Transmittal and re-tender the option with the $11.44 per share exercise price. Using the example above, if you want to change your election you would:

• Submit a notice of withdrawal listing the 300 shares originally tendered; and then

• Submit a new letter of transmittal and re-tender the option for 100 shares with an exercise price of $11.44 per share.

You must withdraw your entire tender of eligible options before changing your election and re-tendering any eligible options. Submitting a second letter of transmittal without withdrawing your previous tender of options will not effect a change in your previous election.

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You may not rescind any notice of withdrawal, and any options you withdraw pursuant to a notice of withdrawal will thereafter be deemed not properly tendered for purposes of the offer, unless you properly re-tender eligible options before the expiration of the offer by following the procedures described in Section 3.

Neither we nor any other person is obligated to give notice of any defects or irregularities in any change of election, nor will anyone incur any liability for failure to give any such notice. We will determine, in our discretion, all questions as to the form and validity, including time of receipt, of changes of election. Our determination of these matters will be final and binding.

5.     Acceptance of Options for Exchange and Issuance of New Options.

Upon the terms and subject to the conditions of this offer and as promptly as practicable following the expiration date, we expect to accept for exchange and cancel options properly tendered and not validly withdrawn before the expiration date. If we cancel options accepted for exchange on January 25, 2003, we expect to grant the new options on or after July 28, 2003, but in no event later than August 1, 2003. If the offer is extended, then the grant date of the new options will also be extended.

Please note, however, that if you are not an employee of US LEC or one of our subsidiaries (or you are not a director of US LEC) from the date you tender options through the date we grant the new options, you will not receive any new options in exchange for your tendered options that have been accepted for exchange. You also will not receive any other consideration in exchange for your tendered options if you are not so employed or continuously serving as a director from the date you tender eligible options through the date we grant the new options. Certain employee leaves of absence that are approved by us in advance will not be deemed to constitute non-employment.

We intend to continue to review the option grants of all employees and directors from time to time as part of our normal compensation programs. As a result of this review, we may decide to grant you additional options. If we accept and cancel the eligible options you tender in connection with the offer, however, the grant date and the pricing of any additional options that we may decide to grant to you will be deferred until a date that is at least six months and one day from the expiration of this offer. We have determined that it is necessary for us to defer the grant date and pricing of any such additional options to avoid incurring compensation expense against our earnings because of accounting rules that would apply to these interim option grants as a result of the offer.

In addition, you will not receive any new options in exchange for your tendered options that have been accepted for exchange if we are no longer subject to the reporting requirements of the Exchange Act.

Consequences of a Merger with or Acquisition of US LEC.

In acquisition transactions, the parties typically negotiate the treatment of outstanding options of the acquired company, including obligations of the acquired company to issue options in the future. If we are acquired before the new options are granted and the acquiring company assumes our outstanding options, we expect that the acquiring company would also assume our obligation to issue new options. If the acquiring company assumes our obligation to issue the new options, you would receive an option from the acquiring company provided you remain continuously employed with us and the acquiring company through the grant date of the new options. However, the number of shares covered by the new options you would receive would be adjusted based on the exchange ratio that was used in the acquisition transaction. The exercise price would be the closing price of the acquiring company’s stock on the grant date of the new options.

If we are acquired through a merger of our company into the acquiring company before the new options are granted, our obligation to issue new options would be automatically assumed by the surviving company, and the number of shares issuable upon the exercise of the new options would be adjusted and the exercise price would be determined as described above.

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If we are acquired in any other type of acquisition transaction before the new options are granted, we cannot assure you that the acquiring company would assume our obligation to issue new options. While we would seek to make provisions for tendering option holders in the acquisition agreement, we cannot guarantee what, if any, provision would be made. Accordingly, it is possible that you may not receive any options, securities of the acquiring company or any other consideration for your tendered options if such an acquisition occurs before the new options are granted.

In addition, the announcement of a merger or acquisition involving us before the new options are granted could have a substantial effect on our stock price. An increase in our stock price could reduce or eliminate the potential benefits to you of participating in this exchange offer.

Although we do not anticipate that an acquiring company would seek to purchase our assets, such a transaction could occur before the new options are granted. In that event, the acquiring company would not be obligated to assume our obligation to issue the new options and you would not necessarily receive options to purchase securities of the acquiring company or any other consideration in exchange for your cancelled options.

Acceptance of Properly Tendered Eligible Options.

For purposes of the offer, we will be deemed to have accepted for exchange eligible options that are validly tendered and not properly withdrawn, if and when we give written notice to the option holders of our acceptance for exchange of these options, which may be by press release. Subject to our rights to extend, terminate and amend the offer, we currently expect that we will accept promptly after the expiration of the offer all properly tendered options that are not validly withdrawn. Promptly after we accept tendered options for exchange, we will send each tendering option holder a letter indicating the number of shares subject to the eligible options that we have accepted for exchange, the corresponding number of shares that will be subject to the new options and the expected grant date of the new options. If we do not extend the offer, we expect to send this letter on January 31, 2003. We, however, will not be able to provide tendering option holders with the exercise price of the new options, because the exercise price will be equal to the last reported sale price per share of our common stock on the Nasdaq SmallCap Market (or other automated securities quotation system or securities exchange where our common stock is then trading) on the trading day immediately before the date we grant the new options.

6.     Conditions of the Offer.

We will not be required to accept any eligible options tendered for exchange, and we may terminate or amend the offer, or postpone our acceptance and cancellation of any eligible options tendered for exchange, in each case, subject to Rule 13e-4(f)(5) under the Exchange Act, which requires that we must pay the consideration offered or return the tendered options promptly after termination or withdrawal of a tender offer, if at any time on or after December 20, 2002 and before the expiration date, we determine that any of the following events has occurred and, in our reasonable judgment the occurrence of the event makes it inadvisable for us to proceed with the offer or to accept and cancel options tendered for exchange:

(a)    any threatened, instituted or pending action or proceeding by any government or governmental, regulatory or administrative agency, authority or tribunal or any other person, domestic or foreign, before any court, authority, agency or tribunal that directly or indirectly challenges the making of the offer, the acquisition of some or all of the tendered options pursuant to the offer, the issuance of new options, or otherwise relates in any manner to the offer or that, in our reasonable judgment, could materially and adversely affect the business, condition (financial or other), income, operations or prospects of US LEC or our subsidiaries, or otherwise materially impair in any way the contemplated future conduct of our business or the business of any of our subsidiaries or materially impair the benefits that we believe we will receive from the offer;

(b)    any action is threatened, pending or taken, or any approval is withheld, or any statute, rule, regulation, judgment, order or injunction is threatened, proposed, sought, promulgated, enacted, entered,

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amended, enforced or deemed to be applicable to the offer or us or any of our subsidiaries, by any court or any authority, agency or tribunal that, in our reasonable judgment, would or might directly or indirectly:

(1)    make the acceptance for exchange of, or issuance of new options for, some or all of the tendered options illegal or otherwise restrict or prohibit consummation of the offer or otherwise relates in any manner to the offer;

(2)    delay or restrict our ability, or render us unable, to accept for exchange, or issue new options for, some or all of the tendered options;

(3)    materially impair the benefits that we believe we will receive from the offer; or

(4)    materially and adversely affect the business, condition (financial or other), income, operations or prospects of our subsidiaries, or otherwise materially impair in any way the contemplated future conduct of our business or the business of any of our subsidiaries;

(c)    any change in generally accepted accounting standards or application or interpretation thereof which could or would require us for financial reporting purposes to record compensation expense against our earnings in connection with the offer;

(d)    any general suspension of trading in, or limitations on prices for, securities listed on any national securities exchange or quotation market or in the over-the-counter market;

(e)    the declaration of a banking moratorium or any suspension of payments in respect of banks in the United States, whether or not mandatory;

(f)    the commencement of a war, armed hostilities or other international or national crisis directly or indirectly involving the United States;

(g)    any limitation, whether or not mandatory, by any governmental, regulatory or administrative agency or authority on, or any event that in our reasonable judgment might affect, the extension of credit by banks or other lending institutions in the United States;

(h)    any change in the general political, market, economic or financial conditions in the United States or abroad that could, in our reasonable judgment, have a material adverse effect on the business, condition (financial or other), operations or prospects of US LEC or our subsidiaries or on the trading in our common stock;

(i)    any change in the general political, market, economic or financial conditions in the United States or abroad that could have a material adverse effect on our business, condition (financial or other), operations or prospects or that of our subsidiaries or that, in our reasonable judgment, makes it inadvisable to proceed with the offer;

(j)    in the case of any of the foregoing existing at the time of the commencement of the offer, a material acceleration or worsening thereof; or

(k)    a tender or exchange offer with respect to some or all of our common stock, or a merger or acquisition proposal for us, shall have been proposed, announced or made by another person or entity or shall have been publicly disclosed, or we shall have learned that:

(1)    any person, entity or “group,” within the meaning of Section 13(d)(3) of the Securities Exchange Act, shall have acquired or proposed to acquire beneficial ownership of more than 5% of the outstanding shares of our common stock, or any new group shall have been formed that beneficially owns more than 5% of the outstanding shares of our common stock, other than any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the SEC before December 20, 2002;

(2)    any such person, entity or group that has filed a Schedule 13D or Schedule 13G with the SEC before December 20, 2002 shall have acquired or proposed to acquire beneficial ownership of an

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additional 2% or more of the outstanding shares of our common stock (other than acquisitions of beneficial ownership of our outstanding common stock by the holders of our shares of Series A Convertible Preferred Stock as a result of dividends in kind paid on these shares and acquisitions of beneficial ownership of our common stock approved by our board of directors); or

(3)    any person, entity or group shall have filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 or made a public announcement reflecting an intent to acquire us or any of our subsidiaries or any of the assets or securities of us or any of our subsidiaries; or

(l)    any change or changes occurs in our business, condition (financial or other), assets, income, operations, prospects or stock ownership or in that of our subsidiaries that, in our reasonable judgment, is or may be material to us or our subsidiaries or materially impairs or may materially impair the benefits that we believe we will receive from the offer.

The conditions to the offer are for our benefit. We may assert them in our discretion regardless of the circumstances giving rise to them prior to the expiration date. We may waive them, in whole or in part, at any time and from time to time prior to the expiration date, in our discretion, whether or not we waive any other condition to the offer. Our failure at any time to exercise any of these rights will not be deemed a waiver of any such rights. The waiver of any of these rights with respect to particular facts and circumstances is not a waiver with respect to any other facts and circumstances. Any determination we make concerning the events described in this Section 6 will be final and binding upon everyone.

7.     Price Range of Common Stock Underlying the Eligible Options.

Our common stock is currently quoted on the Nasdaq SmallCap Market under the symbol “CLEC.” The following table shows, for the periods indicated, the high and low sale prices per share of our common stock as reported by the Nasdaq Market.

	High		Low
Fiscal year ending December 31, 2002
Fourth Quarter (through December 18, 2002)	$	2.99	$	1.49
Third Quarter		3.90		1.50
Second Quarter		3.65		2.00
First Quarter		6.10		2.96
Fiscal year ending December 31, 2001
Fourth Quarter	$	6.90	$	2.70
Third Quarter		4.35		2.28
Second Quarter		7.09		2.16
First Quarter		9.38		4.50
Fiscal year ended December 31, 2000
Fourth Quarter		11.22		3.25
Third Quarter		17.63		7.50
Second Quarter		37.50		14.00
First Quarter		48.00		28.38

As of December 18, 2002, the last reported sale price of our common stock, as reported by the Nasdaq SmallCap Market, was $1.96 per share. We recommend that you obtain current market quotations for our common stock before deciding whether to tender your eligible options.

The new options will not be granted until a business day that is at least six months and one day after your tendered eligible options are accepted and cancelled. Therefore, there will be more than six months of market risk between the date you submit the documents necessary to exchange your eligible options and the grant date of

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the new options, when the exercise price of the new options will be determined. We cannot assure you that the new options will have a lower exercise price than the options you tender for exchange.

Our stock price has been, and in the future may be, volatile and could continue to decline. Our stock price could also rise prior to the grant of the new options and thereafter fall. The trading price of our common stock has fluctuated in the past and is expected to continue to do so in the future, as a result of a number of factors, many of which are outside our control. In addition, the stock market has experienced extreme price and volume fluctuations that have affected the market prices of many telecommunication companies that have often been unrelated and disproportionate to the operating performance of these companies.

The threshold exercise price of $4.00 per share that we have set to determine which options may be tendered in response to this offer does not, and is not meant to, reflect our view of what the trading price of our common stock will be in the short, medium or long term.

8.     Source and Amount of Consideration; Terms of New Options.

Consideration.

We will issue new options to purchase common stock in exchange for outstanding eligible options properly tendered and accepted for exchange by us. Only options with an exercise price of $4.00 or more per share are eligible for exchange. The number of shares of common stock covered by new options to be granted to each employee will be the same as the number of shares covered by the eligible options validly tendered and accepted for exchange. In each case, the number of shares covered by new options will be subject to adjustments for any stock splits, stock dividends or similar events.

Terms of New Options.

The new options will be issued under our Omnibus Stock Plan and a new option agreement between us and each employee who has validly tendered options for exchange. With the exception of the exercise price and vesting schedule, all new options will have substantially the same terms and conditions as the eligible options validly tendered and accepted pursuant to the terms of this offer. The new option agreements will be substantially the same as the form of your existing option agreement(s).

The issuance of new options under this offer will not create any contractual or other right of the recipients to receive any future grants of stock options or benefits in lieu of stock options or any right of continued employment.

The following description of our Omnibus Stock Plan and the new option agreements is only a summary, and may not be complete. For complete information, please refer to the copies of our Omnibus Stock Plan that has been filed with the SEC as an exhibit to the Tender Offer Statement on Schedule TO. You may request copies of our Omnibus Stock Plan or the form of the new option agreement via email on the Company Intranet at “Stock Option Exchange Program”. Copies of our Omnibus Stock Plan or form of new option agreement will be provided to you at our expense.

The following description summarizes the material terms of our Omnibus Stock Plan and the new options to be granted thereunder.

General.

The Omnibus Stock Plan provides for the issuance of up to 5,000,000 shares of our common stock. As of December 18, 2002, options to purchase 3,907,550 shares of our common stock were outstanding under the Omnibus Stock Plan, of which options to purchase 3,231,250 shares qualify as eligible options. Awards under the Omnibus Stock Plan may include, but are not limited to, stock options, stock appreciation rights, restricted stock,

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performance awards, or other stock-based awards, such as stock units, securities convertible into stock, phantom securities and dividend equivalents. Each new option issued in exchange for an eligible option that was intended to qualify as an incentive stock option at the time the option was granted will be designed to qualify as an incentive stock option to the maximum extent permissible under U.S. federal tax laws.

Administration.

The Omnibus Stock Plan is administered by the board of directors or the compensation committee of the board of directors (such committee or the board of directors itself, as applicable, is referred to as the “Committee”). The Committee has sole authority and discretion to (i) designate eligible participants and (ii) determine the types of awards to be granted and the conditions and limitations applicable to such awards, if any, including the acceleration of vesting or exercise rights upon a Change in Control (as defined in the Omnibus Stock Plan). The awards may be granted singly or together with other awards, or as replacement of, in combination with, or as alternatives to, grants or rights under the Omnibus Stock Plan or our other employee benefit plans. Awards under the Omnibus Stock Plan may be issued based on past performance, as an incentive for future efforts or contingent upon our future performance.

Term.

Options granted under the Omnibus Stock Plan must be exercised within the period fixed by the Committee, which may not exceed 10 years from the date of the option grant, or in the case of incentive stock options granted to any 10% stockholder, five years from the date of the option grant. The new options will have a term of 10 years from the date of grant.

Vesting.

The vesting schedule of your new option will match the vesting schedule of the eligible option grants you tendered just as though your tendered eligible option grant had remained outstanding through the new grant date except to the extent your eligible option grant has already vested or would have been vested on the new grant date. To the extent an eligible option grant has already vested or would have been vested on the new grant date, the portion of your new option issued in exchange for that vested eligible option grant will be 50% vested on the new grant date and the remaining 50% will vest on the 12-month anniversary of the new grant date.

However, if you are a non-exempt employee, your new options will not become exercisable for any shares, whether vested or unvested, until six months after the grant date. Should your employment with us terminate before your new options become exercisable, you will have nine months after the grant date of your new options in which to exercise those options for any shares for which they are vested at the time of your termination.

Exercise Price.

The per share exercise price of the new options will equal the last reported sale price per share of our common stock on the Nasdaq SmallCap Market (or other automated securities quotation system or securities exchange where our common stock is then trading) on the trading day immediately before the date we grant the new options.

Exercise and Termination of Options.

The terms and conditions applicable to the exercise of options, including the procedures for paying the exercise price, and the events or occurrences that may trigger acceleration, termination or forfeiture of the new options, and adjustments as a result of stock splits, stock dividends and the like, will be identical to those applicable to the eligible options you tender for exchange.

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Transferability.

Except as authorized by the Committee, outstanding options are not, and new options will not be, transferable other than by will or the laws of descent and distribution and, during the lifetime of an optionee, may be exercised only by the optionee.

Registration of Option Shares.

All of the shares of common stock issuable upon exercise of options issued under the Omnibus Stock Plan, including the shares issuable upon exercise of the new options, have been registered under the Securities Act of 1933, as amended, on a registration statement on Form S-8 filed with the SEC. Unless you are one of our affiliates, you will be able to sell the shares underlying your new options free of transfer restrictions under applicable securities laws.

Tax Consequences.

You should refer to Section 12 for a discussion of the U.S. federal income tax consequences of accepting the offer.

9.     Interests of Executive Officers and Directors; Transactions and Arrangements Concerning Options.

Our executive officers and directors are:

Richard T. Aab	Chairman of the Board of Directors
Aaron D. Cowell, Jr.	President and Chief Executive Officer and Director
Michael K. Robinson	Executive Vice President—Finance and Chief Financial Officer
Tansukh V. Ganatra	Director
David M. Flaum	Director
Steven L. Schoonover	Director
Anthony J. DiNovi	Director
Michael A. Krupka	Director

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Messrs. Cowell and Robinson are eligible to participate in this offer because they are executive officers of US LEC. Messrs. Flaum and Schnoonover are our only eligible directors. As of December 18, 2002, our directors and executive officers as a group (eight persons) held eligible options to purchase 800,000 shares of our common stock, 787,500 of which will be vested on the new grant date. Options to purchase 3,231,250 shares of our common stock were eligible for exchange in this offer as of December 18, 2002. Information about the eligible options held by each of these executive officers and directors is set forth below:

Name	Number of Eligible Options	Exercise Price
Aaron D. Cowell, Jr.	360,000		7.31
	25,000		26.13
Total	385,000
Michael K. Robinson	200,000		7.31
	25,000		26.13
Total	225,000
Steven L. Schnoonover	5,000		7.31
	5,000		15.38
	10,000		7.69
	125,000		4.83
Total	145,000
David M. Flaum	5,000	$	7.31
	5,000		15.38
	10,000		7.69
	25,000		4.83
Total	45,000

None of our officers or directors have been granted or have exercised options to purchase shares of our common stock during the past 60 days. Other than ordinary course purchases in the open market or under our employee stock purchase plan, and ordinary course grants of stock options to employees who are not executive officers, there have been no transactions in options to purchase our common stock or in our common stock which were effected during the past 60 days by us or, to our knowledge, by any executive officer, director, affiliate or subsidiary of ours.

10.     Status of Eligible Options Acquired by Us in the Offer; Accounting Consequences of the Offer.

Eligible options we acquire pursuant to the offer will be canceled and the shares of common stock subject to those options will be returned to the pool of shares available for grants of new options under the Omnibus Stock Plan and for issuance upon the exercise of the new options. To the extent such shares are not fully issued upon exercise of the new options to be granted in connection with the offer, the shares will be available for future awards to employees, directors and other eligible participants without further stockholder action, except as required by applicable law or the rules of the Nasdaq SmallCap Market or any other securities quotation system or any stock exchange on which our common stock is then quoted or listed.

For new options granted pursuant to this offer, we will not incur compensation expense as a result of the transactions contemplated by the offer because:

• the exercise price of all new options will be equal to the market value of our common stock on the date we grant the new options; and

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• we will not grant any new options until a date that is on or after the first trading day that is at least six months and one day after the date we accept and cancel options validly tendered and accepted for exchange.

We will not grant any additional options to a tendering option holder during the period between acceptance and cancellation of the tendered options and prior to the grant date of the new options.

11.     Legal Matters; Regulatory Approvals.

We are not aware of any license or regulatory permit that is to be material to our business that would be adversely affected by our exchange of options and issuance of new options as contemplated by the offer, or of any approval or other action by any government or governmental, administrative or regulatory authority or agency that would be required for the acquisition or ownership of our options as described in this offer. If any such approval or other action should be required, we presently intend to seek the approval or take the other action. We cannot predict whether we may determine that we are required to delay the acceptance of eligible options for exchange pending the outcome of any such matter. We cannot assure you that any approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that the failure to obtain any approval or other action might not result in adverse consequences to our business. Our obligation under the offer to accept tendered eligible options for exchange and to issue new options for tendered eligible options is subject to conditions, including the conditions described in Section 6 of this offer to exchange.

12.     Material U.S. Federal Income Tax Consequences.

The following is a general summary of the material U.S. federal income tax consequences of the exchange of options pursuant to the offer. This discussion is based on the Internal Revenue Code, its legislative history, Treasury Regulations and administrative and judicial interpretations as of the date of the offer, all of which may change, possibly on a retroactive basis. This summary does not discuss all of the tax consequences that may be relevant to you in light of your particular circumstances, and it is not intended to be applicable in all respects to all categories of option holders.

If you exchange outstanding incentive or nonqualified stock options for new options, you will not be required to recognize income for U.S. federal income tax purposes at the time of the exchange. We believe that the exchange will be treated as a non-taxable exchange. In addition, you will not be required to recognize additional income for U.S. federal income tax purposes on the date new options are granted because no taxable income is recognized at the time resulting from an option grant, regardless of whether it is an incentive or non-qualified stock option. We recommend that you consult your own tax advisor with respect to federal, state and local tax consequences of participating in the offer.

Incentive Stock Options.

If you exchange incentive stock options and those options are accepted by us, your new options will be incentive stock options to the maximum extent permissible under U.S. federal tax laws. We cannot assure you, however, that all of the new options issued in exchange for your tendered options that qualified as incentive stock options will be entitled to the favorable tax treatment applicable to incentive stock options.

No taxable income is generally recognized at the time an incentive stock option is exercised. However, the spread on the shares purchased under an incentive stock option (the excess of the fair market value of the purchased shares at the time of exercise over the aggregate exercise price paid for those shares) is normally included in the optionee’s alternative minimum taxable income at the time of exercise.

The optionee will recognize taxable income in the year in which the shares purchased upon exercise of the incentive stock option are sold or otherwise made the subject of a taxable disposition. For U.S. federal tax

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purposes, dispositions are divided into two categories: (i) qualifying and (ii) disqualifying. A qualifying disposition occurs if the sale or other disposition is made more than two (2) years after the date the option for the shares involved in such sale or disposition is granted and more than one (1) year after the date the option is exercised for those shares. If the sale or disposition occurs before these two periods are satisfied, then a disqualifying disposition will result.

Upon a qualifying disposition, the optionee will recognize long-term capital gain in an amount equal to the excess of (i) the amount realized upon the sale or other disposition of the purchased shares over (ii) the exercise price paid for the shares. If there is a disqualifying disposition of the shares, then the excess of (i) the fair market value of those shares on the exercise date over (ii) the exercise price paid for the shares will be taxable as ordinary income to the optionee. If the disqualifying disposition is effected by means of an arm’s length sale or exchange with an unrelated party, the ordinary income will be limited to the amount by which (A) the amount realized upon the disposition of the shares or (B) their fair market value on the exercise date, whichever is less, exceeds the exercise price paid for the shares. Any additional gain or loss recognized upon the disposition will be recognized as a capital gain or loss by the optionee.

If the optionee makes a disqualifying disposition of the purchased shares, then we will be entitled to an income tax deduction, for the taxable year in which such disposition occurs, equal to the excess of (i) the fair market value of such shares on the option exercise date over (ii) the exercise price paid for the shares. Optionees are required to notify us of any disqualifying disposition. If the optionee makes a qualifying disposition, then we will not be entitled to any income tax deduction.

Non-Qualified Stock Options.

Although no taxable income is recognized at the time a non-qualified stock option is granted, under current law, when you exercise a non-qualified stock option, the difference between the exercise price of the option and the fair market value of the shares subject to the non-qualified stock option on the date of exercise will be treated as taxable compensation income to you, and you will be subject to withholding of income and employment taxes at that time. We will generally be entitled to a deduction equal to the amount of compensation income taxable to you.

The subsequent sale of the shares acquired pursuant to the exercise of a non-qualified option generally will give rise to capital gain or loss equal to the difference between the sale price and the sum of the exercise price paid for the shares plus the ordinary income recognized with respect to the shares, and these capital gains or losses will be treated as long-term capital gains or losses if you held the shares for more than one year following exercise of the option.

13.     Extension of Offer; Termination; Amendment.

We may at any time, and from time to time, extend the period of time during which the offer is open and delay accepting any eligible options tendered to us by publicly announcing the extension and giving written notice of the extension to the holders of eligible options and making a public announcement thereof. If the offer is extended, then the grant date for the new options will also be extended.

We also expressly reserve the right, in our reasonable judgment, prior to the expiration date to terminate or amend the offer and to postpone our acceptance and cancellation of any eligible options tendered for exchange upon the occurrence of any of the conditions specified in Section 6, by giving oral or written notice of such termination or postponement to the holders of eligible options and making a public announcement. Our right to delay our acceptance and cancellation of eligible options tendered for exchange is limited by Rule l3e-4(f)(5) promulgated under the Exchange Act, which requires that we must pay the consideration offered or return the options tendered promptly after we terminate or withdraw the offer.

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As long as we comply with applicable law, we may amend the offer in any way, including decreasing or increasing the consideration offered in exchange for eligible options or by decreasing or increasing the number of eligible options to be exchanged. We may amend the offer regardless of whether any event described in Section 6 has occurred.

We may amend the offer at any time, and from time to time, and will publicly announce the amendment. In the case of an extension, the announcement will be issued no later than 9:00 a.m., North Carolina time, on the next business day after the last previously scheduled or announced expiration date. Any public announcement made pursuant to the offer will be disseminated promptly to holders of eligible options in a manner reasonably designed to inform holders of eligible options of the change. Without limiting the manner in which we may choose to make a public announcement, except as required by applicable law, we have no obligation to publish, advertise or otherwise communicate any such public announcement other than by making a press release.

If we materially change the terms of the offer or the information concerning the offer, or if we waive a material condition of the offer, we will extend the offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(3) under the Exchange Act. These rules require that the minimum period during which an offer must remain open following material changes in the terms of the offer or information concerning the offer, other than a change in price or a change in percentage of securities sought, will depend on the facts and circumstances, including the relative materiality of such terms or information. However, if the offer is scheduled to expire within 10 business days from the date we announce an increase or decrease in the consideration offered or the number of eligible options to be exchanged, we intend to extend the offer until 10 business days after the announcement is made.

14.     Fees and Expenses.

We will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of eligible options pursuant to this offer to exchange or to any financial or other advisor engaged by a holder of eligible options.

15.     Information Concerning US LEC

Based in Charlotte, NC, US LEC is an integrated telecommunications carrier providing voice, data and Internet services to over 10,000 mid-to-large-sized business customers throughout the southeastern and mid-Atlantic United States.

US LEC is committed to providing the best communications experience for business customers. The company achieves this by offering reliable products and competitive rate plans that are specifically designed to meet customers’ need. And with an unparalleled commitment to customers—reflected in US LEC’s high customer retention rate—the company offers uncompromising customer dedication with a lifetime guarantee for service.

US LEC has a dynamic and growing customer base that includes a wide range of customers from various industries, including automotive, construction, education, financial, government, healthcare, hospitality, manufacturing, professional & business services, real estate and transportation sectors.

The US LEC local service area includes Alabama, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia and the District of Columbia. In addition to the states listed above, US LEC also offers selected voice and data services in Connecticut, Indiana, Massachusetts, New York, Ohio and Texas. US LEC provides services to these areas with a network of 26 digital switching centers consisting of Lucent 5ESS^® AnyMedia^™ digital switches, Lucent CBX500 ATM data switches, Juniper M20^™ Internet Gateway routers and an Alcatel MegaHub^® 600ES.

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US LEC is a premier competitive carrier, but the success of US LEC is highly dependent on the strength of its people. With have an experienced team of over 900 dedicated professionals, the people of US LEC are committed to success and hold themselves accountable to US LEC’s customers and to the company’s performance.

As a result, US LEC continues to excel as the leading competitive business carrier in the southeast and mid-Atlantic United States.

US LEC was formed under Delaware law in June 1996. Our principal executive office is located at Morrocroft III, 6801 Morrison Boulevard, Charlotte, North Carolina 28211. Our telephone number is (704) 319-1000. Our Internet address on the worldwide web is www.uslec.com. The information contained on our website does not constitute a part of this offer or this offer to exchange.

Financial Information.

Selected Financial Data

(In Thousands, Except Per Share Data)

Selected Balance Sheet Data
	AS OF SEPTEMBER 30, 2002 (unaudited)			AS OF DECEMBER 31,
				2001			2000
Current Assets	$	102,468		$	135,644		$	160,782
Property & Equipment, Net		181,844			188,436			188,052
Total Assets		293,413			333,313			373,159
Current Liabilities		88,307			75,672			48,380
Long-Term Debt (including current portion)		140,626			150,000			130,000
Series A Redeemable Convertible Preferred Stock		226,663			216,155			202,854
Total Stockholders’ Deficiency		(148,338	)		(97,325	)		(22,250	)
Total Liabilities and Stockholders’ Deficiency		293,413			333,313			373,159

Selected Statement of Operations Data

	NINE MONTHS ENDED September 30, (unaudited)						YEAR ENDED December 31,
	2002			2001			2001			2000
Revenue, Net	$	176,630		$	127,089		$	178,602		$	114,964
Cost of Services		86,537			64,358			90,298			52,684
Loss from Operations		(35,681	)		(43,080	)		(54,655	)		(138,114	)
Net Loss		(41,471	)		(49,579	)		(63,354	)		(117,392	)
Net Loss Per Share-Basic and Diluted	$	(1.96	)	$	(2.17	)	$	(2.83	)	$	(4.58	)
Weighted Average Shares Outstanding-Basic and Diluted		26,494			27,458			27,108			27,618

26

Liquidity Needs

Although we have experienced recent operating losses, quarterly losses have been decreasing and earnings from operations before depreciation and amortization were positive in the third quarter of 2002. Recent quarterly results have also evidenced increasing revenue, particularly in end-customer revenue, growth in the number of customers and in other operating metrics. Management has focused our operating strategy on continuing to grow end-customers, improving the efficiency of our network operations and in controlling administrative costs and capital expenditures. As of September 30, 2002, we had $32 million in cash. Management believes this will fund our operating, investing and financing activities into the third quarter of 2003. We are aggressively pursuing several options to obtain additional financing and improve liquidity to fund our cash requirements beyond the third quarter of 2003. These options include, but are not limited to, issuing additional equity or debt securities, restructuring the existing amortization of our current credit facility, obtaining vendor financing and working capital management. Management is forecasting that with the achievement of both our operating and financing strategies we would expect to generate sufficient cash from operations to meet cash obligations as they come due. Although management believes it will be successful in achieving this goal, there can be no assurances. Failure to achieve our operating and financing strategies would have a material adverse effect on us.

16.     Additional Information.

We have filed a Tender Offer Statement on Schedule TO with the SEC, of which this offer to exchange is a part, with respect to the offer. This offer to exchange does not contain all of the information contained in the Schedule TO and the exhibits to the Schedule TO. We recommend that you review the Schedule TO, including its exhibits, and the following materials which we have filed with the SEC before making a decision on whether to tender your eligible options:

(a)    Our Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 000-24061);

(b)    Our Quarterly Report on Form l0-Q for the quarter ended March 31, 2002 (File No. 000-24061);

(c)    Our Quarterly Report on Form l0-Q for the quarter ended June 30, 2002 (File No. 000-24061);

(d)    Our Quarterly Report on Form 10-Q for the quarter ended September 30, 2002 (File No. 000-24061);

(e)    Our Proxy Statement on Schedule 14A, filed on April 15, 2002 (File No. 000-24061); and

(f)    The description of our common stock contained in our registration statement on Form 8-A filed on July 21, 1998, including all amendments updating this description (File No. 000-24061).

We file annual, quarterly and special reports, proxy statements and other information with the SEC. These reports and information relate to our business, financial condition and other matters. You may read and copy these reports, proxy statements and other information at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the SEC’s Public Reference Room in Washington, D.C. by calling the SEC at l-800-SEC-0330. Copies may be obtained from the SEC by paying the required fees. The SEC maintains an internet web site that contains reports, proxy and information statements and other information regarding us and other registrants that file electronically with the SEC. The SEC’s web site is http://www.sec.gov. Information that we file with the SEC may also be read and copied at the offices of the Nasdaq Operations at 1735 K Street, N.W., Washington, D.C. 20006.

We will provide upon request a free copy of any or all of the documents listed above (including exhibits to such documents that are specifically referred to in this offer to exchange) to any eligible option holder. Requests must be emailed via our Intranet to Stock Option Exchange Offer.

17.     Forward-Looking Statements.

This offer to exchange and our SEC reports referred to above include “forward looking statements,” as defined in the Private Securities Litigation Reform Act of 1995. These statements are identified by the use of

27

forward-looking words such as “believes,” “expects,” “may,” “will,” “should,” “estimates” or “anticipates” or the negative of these words or other variations of these words or comparable words, or by discussions of strategy that involve risks and uncertainties. These forward looking statements are based on a number of assumptions concerning future events, including the outcome of judicial and regulatory proceedings, the adoption of balanced and effective rules and regulations by the Federal Communication Commission and state public utility commissions in our service area, our ability to successfully execute our business strategy and improve our liquidity in the next several months. These forward looking statements are also subject to a number of uncertainties and risks, many of which are outside of our control, that could cause actual results to differ materially from such statements. These uncertainties and risks are described in our Annual Report on Form 10-K for the year ended December 31, 2001, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2002, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 and our Quarterly Report on Form 10-Q for the quarter ended September 30, 2002, which we encourage you to review.

28

US LEC Corp.

Offer To Exchange Outstanding Options For New Options

The Offer And Withdrawal Rights Expire

At 5:00 P.M., Charlotte, North Carolina Time on January 24, 2003,

Unless The Offer Is Extended By US LEC

Any questions or requests for assistance or additional copies of any documents referred to in the

offer to exchange must be emailed via US LEC Corp.’s Intranet to

“Stock Option Exchange Program”, Attention: Option Exchange Offer Administrator

December 20, 2002

EX-99.A.2

US LEC Corp.

Letter Of Transmittal

Pursuant To The Offer To Exchange Dated December 20, 2002

To Tender Options To Purchase Shares

Of Class A Common Stock Having

An Exercise Price Per

Share Of $4.00 Or More

For New Options

With An Exercise Price To Be Determined

The Offer And Withdrawal Rights Expire At

5:00 P.M., North Carolina Time, On January 24, 2003,

Unless The Offer Is Extended

To: US LEC Corp.

Morrocroft III

6801 Morrison Boulevard

Charlotte, North Carolina 28211

Attention: Option Exchange Offer Administrator

Telephone: (704) 319-1000

Facsimile: (704) 602-1155

Delivery of this letter of transmittal to an address

other than as set forth above or transmission via

facsimile to a number other than as set forth

above or transmission via e-mail will

not constitute a valid delivery.

You must return this Letter of Transmittal

and the attached Schedule A

whether or not you wish

to tender your options

Pursuant to the terms and subject to the conditions of the Offer to Exchange dated December 20, 2002 and this Letter of Transmittal, I hereby elect to tender the options to purchase shares of Class A common stock, par value $0.01 per share, as indicated on Schedule A to this Letter of Transmittal.

To: US LEC Corp.

Upon the terms and subject to the conditions set forth in the Offer to Exchange dated December 20, 2002 (the “Offer to Exchange”), my receipt of which I hereby acknowledge, and in this Letter of Transmittal (this “Letter” which, together with the cover letter and Offer to Exchange, as they may be amended from time to time, constitutes the “Offer”), I, the undersigned, hereby tender to US LEC Corp., a Delaware corporation (the “Company”), the options to purchase shares of Class A common stock, par value $0.01 per share, of the Company (the “common stock”) specified on Schedule A to this Letter (the “tendered options”) in exchange for a “new option,” which is the new option to purchase shares of common stock. All new options will be subject to the terms of the US LEC Corp. 1998 Omnibus Stock Plan (the “Option Plan”), and to a new option agreement between the Company and me.

Subject to, and effective upon, the Company’s acceptance for exchange of the tendered options in accordance with the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), I hereby sell, assign and transfer to the Company all right, title and interest in and to the tendered options.

I hereby represent and warrant that I have full authority to tender the tendered options and that, when and to the extent the tendered options are accepted for exchange by the Company, the tendered options will be free and clear of all security interests, liens, restrictions, charges, encumbrances, conditional sales agreements or other obligations relating to the sale or transfer thereof (other than pursuant to the applicable option agreement) and the tendered options will not be subject to any adverse claims. Upon request, I will execute and deliver any additional documents deemed by the Company to be necessary or desirable to complete the exchange of the tendered options pursuant to the Offer.

The name of the registered holder of the tendered options appears below exactly as it appears in the option agreement or agreements representing the tendered options. Schedule A to this Letter lists for each tendered option the total number of shares subject to the tendered option, the grant date of the tendered option and the exercise price.

I acknowledge that:

(1)    I may tender options outstanding having an exercise price per share of $4.00 or more (an “eligible option”) and that I am not required to tender any of such options in the Offer. If I tender an option, I must tender all of the shares subject to each individual grant.

(2)    If my eligible options are properly tendered and accepted for exchange, I will be entitled to receive a new option to purchase the same number of shares of our common stock covered by an eligible option.

(3)    All eligible options properly tendered prior to 5:00 p.m., North Carolina time, on January 24, 2003, unless the Company has extended the period of time the Offer will remain open (the “Expiration Date”), and not properly withdrawn will be exchanged for new options, upon the terms and subject to the conditions of the Offer, including the conditions described in Sections 6 of the Offer to Exchange.

2

(4)    Upon the Company’s acceptance of the tendered options for exchange, the option agreement or agreements to which the tendered options are subject will be terminated and the options thereunder will be canceled. All new options will be subject to the terms and conditions of the Option Plan and the terms of a new option agreement between the Company and me, a copy of which I will receive after the new options are granted.

(5)    The new options will not be granted until a business day that is at least six months and one day (184 days) after the date the Company accepts for exchange and cancels the tendered options.

(6)    The new options will have an exercise price equal to the last reported sale price per share of the common stock on the Nasdaq SmallCap Market (or other automated securities quotation system or securities exchange where the common stock is then trading) on the trading day immediately prior to the date my new option is granted.

(7)    Except as provided in subparagraph (8) below, the vesting schedule of my new option will match the vesting schedule of the eligible option I tendered just as though my tendered eligible option had remained outstanding through the new grant date.

(8)    If my eligible option grant has already vested or would have been vested on the new grant date, the portion of my new option issued in exchange for that vested eligible option grant will be 50% vested on the new grant date and the remaining 50% will vest on the 12-month anniversary of the new grant date.

(9)    If I am a non-exempt employee, none of my new options, whether vested or unvested, will be exercisable until six months after the new options are granted except in certain limited circumstances described in my new option agreement.

(10)    I must be an employee or director of the Company on the grant date of the new options in order to receive a new option, and, if for any reason I am not so employed or do not serve as a director on the grant date of the new options, I will not receive a new option or any other consideration for my tendered options.

(11)    In the event the Company is acquired from the date I tender my tendered options and before the date the new options are granted, I will not hold either my tendered options or my new options at that time, and therefore will not participate through them in any transaction affecting the common stock during this period. If the Company is no longer subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, on the date the new option is granted, I will not receive a new option or any other consideration for my tendered options.

(12)    By tendering options pursuant to the procedure described in Section 3 of the Offer to Exchange and in the instructions to this Letter, I accept the terms and conditions of the Offer. The Company’s acceptance for exchange of my tendered options will constitute a binding agreement between the Company and me upon the terms and subject to the conditions of the Offer.

3

(13)    Under certain circumstances set forth in the Offer to Exchange, the Company may terminate or amend the Offer and postpone its acceptance and cancellation of any tendered options, and in any such event, the options delivered herewith but not accepted for exchange will be returned to me at the address indicated below.

(14)    All eligible options that I choose not to tender for exchange or that are not accepted for exchange shall remain outstanding and retain their current exercise price and vesting schedule.

(15)    The Company has advised me to consult with my own advisors as to the consequences of accepting or rejecting the Offer.

(16)    I have received the Offer and agree to all of the terms and conditions of the Offer.

All authority herein conferred or agreed to be conferred shall not be affected by, and shall survive, my death or incapacity, and all of my obligations hereunder shall be binding upon my heirs, personal representatives, successors and assigns. Except as stated in the Offer, this tender is irrevocable.

The offer is not being made to (nor will tenders of options be accepted from or on behalf of) holders in any jurisdiction in which the making or acceptance of the Offer would not be in compliance with the laws of such jurisdiction.

You must complete and sign the following exactly as your name appears on the option agreement or agreements evidencing the options you are tendering. If the signature is by a trustee, executor, administrator, guardian, attorney-in-fact or another person acting in a fiduciary or representative capacity, please set forth the signer’s full title and include with this Letter proper evidence of the authority of such person to act in such capacity.

SIGNATURE OF OWNER

X

(Signature of Holder or Authorized Signatory – See Instructions 1 and 3)

Date:                             , 200  

Print Name:                                                        

Address:                                                               

Telephone No. (with area code):                     

Tax ID/Social Security No.:                             

4

INSTRUCTIONS

FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER

1.    Delivery of Letter of Transmittal and Other Required Documents. A properly completed and duly executed original of this Letter (or a facsimile thereof) including a completed and executed Schedule A, and any other documents required by this Letter, must be received by the Company at its address set forth on the front cover of this Letter on or before the Expiration Date. You must return these documents whether or not you have elected to tender any options. The failure to return the documents will be deemed to be an election NOT to tender options. In addition, if this Letter and related documents do not indicate an election with respect to any particular option grant, you will be deemed to have rejected the Offer with respect to that option grant.

The method by which you deliver any required documents is at your option, cost and risk, and the delivery will be deemed made only when actually received by the Company. If you elect to deliver your documents by mail, the Company recommends that you use registered or certified mail with return receipt requested. If delivery is by facsimile, we also recommend that you send a copy of this Letter and any required documents by registered or certified mail with return receipt requested. E-mail delivery will not be accepted. In all cases, you should allow sufficient time to ensure timely delivery. Retain a copy of this Letter and any required documents for your own records.

Elections with respect to tenders of options made pursuant to the Offer may be changed at any time prior to the Expiration Date by submitting a Notice of Withdrawal in the form provided to you. If the Offer is extended by the Company beyond that time, you may change your election with respect to the tender of your tendered options at any time until the extended expiration of the Offer. In addition, unless we have theretofore accepted your tendered options for exchange, you may withdraw at any time after 5:00 p.m., North Carolina time on February 20, 2003. To change your election with respect to the tender of tendered options you must deliver a completed Notice of Withdrawal and submit a new completed Letter in accordance with the instructions contained in this Letter. Withdrawals may not be rescinded and any eligible options withdrawn will thereafter be deemed not properly tendered for purposes of the Offer unless such withdrawn options are properly re-tendered prior to the Expiration Date by following the procedures described in this Letter.

The Company will not accept any alternative, conditional or contingent tenders. All tendering option holders, by execution of this Letter (or a facsimile of it), waive any right to receive any notice of the acceptance of their tender, except as provided for in the Offer to Exchange.

2.    Tenders. Whether or not you intend to tender options pursuant the Offer, you must complete and sign both this Letter and Schedule A to this Letter. You may tender options for all, but not part, of the shares of common stock subject to an individual grant.

3.    Signatures on this Letter of Transmittal and Schedule A. If this Letter and Schedule A are signed by the holder of the options, the signature must correspond with the name

5

as written on the face of the option agreement or agreements to which the options are subject without alteration or any change whatsoever.

If this Letter or Schedule A is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Company of the authority of such person so to act must be submitted with this Letter and Schedule A.

4.    Requests for Assistance or Additional Copies. The Company has established an email address on its Intranet called “Stock Option Exchange Program” which is the Intranet email address for any questions or requests for additional assistance. Any questions or requests for assistance, as well as requests for additional copies of the Offer to Exchange or this Letter must be emailed to Stock Option Exchange Program on the Company’s Intranet. Copies will be furnished at the Company’s expense.

5.    Irregularities. All questions as to the number of shares subject to a tendered option to be accepted for exchange, and the validity, form, eligibility (including time of receipt) and acceptance for exchange of any tendered options will be determined by the Company in its discretion, which determinations shall be final and binding on all parties. The Company reserves the right to reject any or all tenders of options the Company determines not to be in proper form or the acceptance of which may, in the opinion of the Company’s counsel, be unlawful. The Company also reserves the right to waive any of the conditions of the Offer and any defect or irregularity in the tender of any particular options, and the Company’s interpretation of the terms of the Offer (including these instructions) will be final and binding on all parties. No tender of options will be deemed to be properly made until all defects and irregularities have been cured or waived. Unless waived, any defects and irregularities in connection with tenders must be cured within such time as the Company shall determine. Neither the Company nor any other person is or will be obligated to give notice of any defects or irregularities in tenders, and no person will incur any liability for failure to give any such notice.

Important: Whether or not you wish to accept the Offer, this Letter (or a facsimile copy thereof) and a completed and signed copy of Schedule A must be received by the Company on or prior to the Expiration Date. You must deliver a properly executed paper copy or facsimile copy of the documents. E-mail delivery will not be accepted.

6.    Important Tax Information. You should refer to Section 12 of the Offer to Exchange, which contains important tax information.

6

Schedule A To Letter Of Transmittal

This Form Must Be Included With The Signed Letter Of Transmittal In Order For This To Be A Properly Executed Document.

This Schedule A lists all your stock option grants that are eligible to be tendered for exchange pursuant to the Offer. To tender options, you must complete this Schedule A by checking the appropriate box for each stock option grant indicating either that:

• you wish to tender the options; or

• you DO NOT wish to tender the options.

Check only one box for each stock option grant.

If you do not check a box for a particular option grant, you will be deemed to have rejected the Offer with respect to that option grant.

Whether or not you choose to tender any of your stock option grants, you must:

• sign and date this Schedule A; and

• return this completed Schedule A and the signed Letter of Transmittal using the enclosed envelope. The Letter of Transmittal and this Schedule A must be received by 5:00 p.m., North Carolina time, on January 24, 2003.

For more information, please read the enclosed cover letter and the Letter of Transmittal.

THIS FORM MUST BE INCLUDED WITH THE SIGNED LETTER OF TRANSMITTAL IN ORDER FOR THIS TO BE A PROPERLY EXECUTED DOCUMENT.

Please sign on the next page

Schedule A

Stock Option Grants Eligible for Tender

Grant No.	Grant Date of Option	Exercise Price of Option	Total No. of Shares Subject to Option	I Wish to Tender this Option	I DO NOT Wish to Tender this Option
				¨	¨
				¨	¨
				¨	¨

You should read the entire Offer to Exchange before executing and delivering this letter of transmittal. Section 1 and Section 8 of the Offer to Exchange describe the terms of the new options.

I understand and acknowledge that if I have not indicated an election on this Schedule A with respect to any particular option grant, I will be deemed to have rejected the Offer to tender that particular option grant.

SIGNATURE OF OWNER

X

(Signature of Holder or Authorized Signatory – See Instructions 1 and 3)

Date:                             , 200  

Print Name:                                                        

Address:                                                               

Telephone No. (with area code):                     

Tax ID/Social Security No.:                             

8

EX-99.A.3

US LEC Corp.

Notice of Withdrawal

Pursuant To The Offer To Exchange Dated December 20, 2002

To Tender Options To Purchase Shares

Of Class A Common Stock

Having An Exercise Price Share

Of $4.00 or More

For New Options

With An Exercise Price To Be Determined

The Offer And Withdrawal Rights Expire At

5:00 P.M., North Carolina Time, On January 24, 2003,

Unless The Offer Is Extended

To: US LEC Corp.

        Morrocroft III

        6801 Morrison Boulevard

        Charlotte, North Carolina 28211

        Attention: Option Exchange Offer Administrator

        Telephone: (704) 319-1000

        Facsimile: (704) 602-1155

Delivery of this notice of withdrawal to an address

other than as set forth above or transmission via

facsimile to a number other than as set forth

above or transmission via e-mail will

not constitute a valid delivery.

To: US LEC Corp.

I previously received the Offer to Exchange dated December 20, 2002 (the “Offer to Exchange”) and the Letter of Transmittal (the “Letter” which, together with the cover letter and Offer to Exchange, as they may be amended from time to time, constitutes the “Offer”). I signed and returned the Letter, in which I elected to accept US LEC Corp.’s (the “Company”) offer to exchange some or all of my options to purchase the Company’s Class A common stock.

I now wish to change that election and withdraw my participation in the option exchange and reject the Company’s offer to exchange my options. I acknowledge that by signing this Notice of Withdrawal and delivering it to the Company (i) this notice of withdrawal may not be rescinded, (ii) this notice of withdrawal applies to all of the options I previously tendered when I delivered my signed Letter, (iii) I have read and understand all of the terms and conditions of the Offer and (iv) I will not receive new options in exchange for my eligible options. I further acknowledge that I am rejecting the Offer and will not be able to participate in the Offer unless I complete, sign and deliver to the Company, a new Letter.

I hereby represent and warrant that I have full power and authority to withdraw my previously tendered options. Upon request, I will execute and deliver any additional documents deemed by the Company to be necessary or desirable to confirm my withdrawal from and rejection of the Offer.

The name of the registered holder of the previously tendered options appears below exactly as it appears in the option agreement or agreements representing the tendered options.

SIGNATURE OF OWNER

X

(Signature of Holder or Authorized Signatory—See Instructions 1 and 3)

Date:                                , 200    

Print Name:

Address:

Telephone No. (with area code):

Tax ID/Social Security No.:

2

INSTRUCTIONS

If you have previously elected to accept US LEC Corp.’s offer to exchange by submitting a signed Letter of Transmittal and you would like to withdraw your acceptance entirely or change your election with respect to some or all of your eligible options, you must:

1. Complete this form, sign it and send it to US LEC Corp. by hand delivery, mail or overnight courier to the address listed above and via facsimile to (704) 602-1155, Attention: Option Exchange Offer Administrator. Delivering this notice of withdrawal will effect all of the options you previously tendered. If you wish to retender all or some of your options you must submit a new completed, signed Letter in accordance with the instructions in the Letter.

2. Ensure that you receive confirmation of receipt from US LEC Corp.

The method of delivery of all required documents is at your election, cost and risk, and the delivery will be deemed made only when actually received by the Company. If delivery is by facsimile, you must send the originals by mail, courier or hand delivery. If you send any required documents by mail, the Company recommends that you send them by registered or certified mail with return receipt requested. E-mail delivery will not be accepted. In all cases, you should allow sufficient time to ensure timely delivery. Retain a copy of this notice of withdrawal and any required documents for your own records.

All questions as to the validity, form, eligibility (including time of receipt) of this notice of withdrawal will be determined by the Company in its discretion, which determinations shall be final and binding on all parties. The Company reserves the right to reject any or all tenders of options or withdrawals of options the Company determines not to be in proper form or the acceptance of which may, in the opinion of the Company’s counsel, be unlawful. The Company also reserves the right to waive any of the conditions of the Offer and any defect or irregularity in the withdrawal of any particular options, and the Company’s interpretation of the terms of the Offer (including these instructions) will be final and binding on all parties. No withdrawal of options will be deemed to be properly made until all defects and irregularities have been cured or waived. Unless waived, any defects and irregularities in connection with withdrawals must be cured within such time as the Company shall determine. Neither the Company nor any other person is or will be obligated to give notice of any defects or irregularities in tenders, and no person will incur any liability for failure to give any such notice.

3

EX-99.A.4

US LEC Corp. Announces Option Exchange Offer

FOR IMMEDIATE RELEASE

US LEC Corp. (Nasdaq: CLEC—News), a super-regional telecommunications carrier providing integrated voice, data and Internet telecommunications services to businesses, today announced that its Board of Directors has approved a voluntary stock option exchange offer for the holders of stock options with an exercise price of $4.00 or more.

Options to purchase approximately 4.1 million shares of US LEC Corp.’s common stock are outstanding. Options to purchase approximately 3.3 million shares will be eligible for exchange in the offer. The total number of outstanding options is not expected to change as a result of the offer.

The new options will be granted at least six months and one day after acceptance of the existing options for exchange. The exercise price of the new options will be determined on the date the new options are granted. The offer is scheduled to expire on January 24, 2003, and US LEC Corp. expects to grant the new options in late July 2003.

“The goal of our option plan is to motivate and retain employees as well as to continue to align our employees’ interests with those of our shareholders. By taking this step, our team will remain focused on continuing to deliver strong operating results and building shareholder value,” stated Aaron Cowell, US LEC’s chief executive officer and president.

US LEC Corp. will file a tender offer statement with the Securities and Exchange Commission that provides additional information about the terms of the offer.

About US LEC

Based in Charlotte, NC, US LEC is an integrated telecommunications carrier providing voice, data and Internet services to over 10,000 mid-to-large-sized business customers throughout the southeastern and mid-Atlantic United States. US LEC’s network of 26 digital switching centers consists of Lucent 5ESS^® AnyMedia(TM) digital switches, Lucent CBX500 ATM data switches, Juniper M20(TM) Internet Gateway routers and an Alcatel MegaHub^® 600ES. The US LEC local service area includes Alabama, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, New Jersey, North Carolina, Pennsylvania, South Carolina, Tennessee, Virginia and the District of Columbia. In addition to the states listed above, US LEC also offers selected voice and data services in Connecticut, Indiana, Massachusetts, New York, Ohio and Texas. For more information about US LEC, visit www.uslec.com.

CONTACT: media, Jennifer Sharpe, +1-704-319-1135, or jsharpe@uslec.com, or investors, James Stawski, +1-704-319-1189, or jstawski@uslec.com, both of US LEC Corp.

EX-99.A.5

Exhibit A5

Team:

I am very pleased to announce that the Board of Directors has approved an option exchange program that will provide you with an opportunity to exchange your outstanding stock options with an strike price of $4.00 or more for new options with a strike price to be determined in the future.

We are making this opportunity available in recognition of your hard work and success in delivering strong results in difficult times and of the contribution that the team has made to the bottom line in our cost cutting efforts. We also believe strongly that the only way we will succeed in continuing to deliver strong operating performance for our stockholders is to make sure our team is 100% committed to the cause. By making this opportunity available, we will also ensure that your interests will continue to be aligned with those of our stockholders by allowing you a more meaningful opportunity to share in the potential increase in our stock price.

Due to regulatory issues and accounting rules, the details of the plan are somewhat complex and cannot be described in this e-mail. However, within the next few days you will be receiving a complete information packet at your home regarding the option exchange program. Please take time to read all of these materials carefully. That said, I do want to highlight for you some of the key elements of the option exchange program.

· The option exchange is completely voluntary and, subject to certain limitations, you can participate with all of your options or only part of your options. If you do not like the terms of the option exchange, then you simply do not participate. Any options that you do not surrender to the company will not be affected in any way.

· The opportunity we are offering will allow you to exchange your current options for the same number of new options. Any options that you surrender for exchange will be cancelled. In order to avoid a potentially significant adverse financial impact to US LEC, however, new options would not be granted to you until after six months from the day your existing options are cancelled. The strike price of your new options will be determined based on the market price for our stock when the new options are granted.

· Under new accounting rules, in order to participate in the exchange, you must bear risk related to the new options. For example, you will bear the risk that the strike price of your new options may be higher than the strike price of your existing options. You will also bear the risk that, if you are not an employee of US LEC when the new options are granted, you will not be granted any new options or receive anything else for the existing option you surrendered. So, if you resign, are fired or die before the new options are granted, you will not receive anything in exchange for the options that you surrendered.

· If you participate in the option exchange, the vesting schedule of the new options that you receive will be different than the vesting schedule for your current options. To the extent your existing options are vested or would have vested by the date the new options are granted, then that portion of your new options will vest 50% on the date the new options are granted and 50% will vest one year from the date the new options are granted. To the

extent your existing options are not vested and would not have vested by the date the new options are granted, then that portion of your new options will vest in accordance with the vesting schedule of your existing options. In other words, you will re-vest all of your existing vested options in approximately 18 months after the day you surrender your existing options, and the vesting of your unvested options will not be affected.

· The option exchange is available to every employee holding options with a strike price of $4.00 or more per share. We are also allowing two of our directors—Steve Schoonover and David Flaum—to participate in the exchange in recognition of their long service and commitment to US LEC’s success.

In order to answer questions about the exchange offer, we have set up an email address called “Stock Option Exchange Program” on our Intranet to answer questions regarding the exchange materials and requests for additional assistance. Please wait to receive and review the exchange offer materials before sending us an email. If you believe you have option grants that are eligible to be exchanged, but you have not received a package by December 31, 2002, please email us at the Stock Option Exchange Program on our Intranet.

The decision to participate in the exchange is yours and has potentially significant financial implications. Accordingly, we encourage you to consult your own financial advisors as you make your decision. Participation in the exchange is completely voluntary and we are not making any recommendation as to whether you should participate.

The most valuable asset US LEC possesses is our people. We both appreciate all you are doing to make US LEC a success and we are sensitive to your concerns. This option exchange offer is one way of demonstrating our enthusiasm and appreciation for your contributions.

Aaron D. Cowell, Jr.

President and Chief Executive Officer

US LEC Corp. has not commenced the offer to exchange that is referred to in this e-mail. Upon commencement of the offer, US LEC Corp. will file a completed Schedule TO and related exhibits, including the offer to exchange, letter of transmittal and other related documents, with the Securities and Exchange Commission. If you are eligible to participate in the offer, you will be receiving the exchange offer materials at your home in the next few days. In addition, we strongly encourage you to read the Schedule TO and all of the exhibits when they become available because the Schedule TO and all of its exhibits will contain important information about the offer. The Schedule TO and related exhibits will be available without charge at the Securities and Exchange Commission’s website at www.sec.gov.

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