Exhibit 4.7
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WARRANT AGREEMENT
between
KMC TELECOM HOLDINGS, INC.
and
THE CHASE MANHATTAN BANK,
as Warrant Agent
Dated as of January 29, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I
CERTAIN DEFINITIONS
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. FORM OF WARRANT CERTIFICATES. . . . . . . . . . . . . . . 6
Section 2.2. RESTRICTIVE LEGENDS . . . . . . . . . . . . . . . . . . . 7
Section 2.3. EXECUTION AND DELIVERY OF WARRANT CERTIFICATES. . . . . . 10
Section 2.4. CERTIFICATED WARRANTS . . . . . . . . . . . . . . . . . . 11
ARTICLE III
EXERCISE PRICE AND EXERCISE OF WARRANTS
Section 3.1. EXERCISE PRICE. . . . . . . . . . . . . . . . . . . . . . 11
Section 3.2. EXERCISE; RESTRICTIONS ON EXERCISE. . . . . . . . . . . . 11
Section 3.3. METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE . . . . . . 12
ARTICLE IV
ADJUSTMENTS
Section 4.1. ADJUSTMENTS . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.2. NOTICE OF ADJUSTMENT. . . . . . . . . . . . . . . . . . . 21
Section 4.3. STATEMENT ON WARRANTS . . . . . . . . . . . . . . . . . . 22
Section 4.4. NOTICE OF CONSOLIDATION, MERGER, ETC. . . . . . . . . . . 22
Section 4.5. FRACTIONAL INTERESTS. . . . . . . . . . . . . . . . . . . 22
ARTICLE V
DECREASE IN EXERCISE PRICE
ARTICLE VI
LOSS OR MUTILATION
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ARTICLE VII
RESERVATION AND AUTHORIZATION
OF COMMON SHARES
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. TRANSFER AND EXCHANGE . . . . . . . . . . . . . . . . . . 24
Section 8.2. BOOK-ENTRY PROVISIONS FOR THE GLOBAL WARRANTS . . . . . . 25
Section 8.3. SPECIAL TRANSFER PROVISIONS . . . . . . . . . . . . . . . 27
Section 8.4. SURRENDER OF WARRANT CERTIFICATES . . . . . . . . . . . . 31
ARTICLE IX
WARRANT HOLDERS
Section 9.1. WARRANT HOLDER DEEMED NOT A SHAREHOLDER . . . . . . . . . 31
Section 9.2. RIGHT OF ACTION . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE X
THE WARRANT AGENT
Section 10.1. DUTIES AND LIABILITIES . . . . . . . . . . . . . . . . . 32
Section 10.2. RIGHT TO CONSULT COUNSEL . . . . . . . . . . . . . . . . 33
Section 10.3. COMPENSATION; INDEMNIFICATION. . . . . . . . . . . . . . 33
Section 10.4. NO RESTRICTIONS ON ACTIONS . . . . . . . . . . . . . . . 34
Section 10.5. DISCHARGE OR REMOVAL; REPLACEMENT WARRANT AGENT. . . . . 34
Section 10.6. SUCCESSOR WARRANT AGENT. . . . . . . . . . . . . . . . . 35
ARTICLE XI
MISCELLANEOUS
Section 11.1. MONIES DEPOSITED WITH THE WARRANT AGENT. . . . . . . . . 35
Section 11.2. PAYMENT OF TAXES . . . . . . . . . . . . . . . . . . . . 36
Section 11.3. NO MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE COMPANY 36
Section 11.4. REPORTS TO HOLDERS . . . . . . . . . . . . . . . . . . . 36
Section 11.5. NOTICES; PAYMENT . . . . . . . . . . . . . . . . . . . . 36
Section 11.6. BINDING EFFECT . . . . . . . . . . . . . . . . . . . . . 37
Section 11.7. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . 38
iii
Section 11.8. AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . 38
Section 11.9. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 11.10. COMMON SHARES LEGEND. . . . . . . . . . . . . . . . . . 38
Section 11.11. THIRD PARTY BENEFICIARIES . . . . . . . . . . . . . . . 40
Section 11.12. TERMINATION . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 11.13. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . 40
EXHIBIT A FORM OF WARRANT CERTIFICATE
EXHIBIT B FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS PURSUANT TO REGULATION S
EXHIBIT C-1 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEROR IN CONNECTION
WITH TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
EXHIBIT C-2 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEREES IN
CONNECTION WITH TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
EXHIBIT D FORM OF CERTIFICATE
APPENDIX A LIST OF FINANCIAL EXPERTS
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of January 29, 1998 (this "AGREEMENT"),
between KMC TELECOM HOLDINGS, INC., a Delaware corporation (the "COMPANY"), and
The Chase Manhattan Bank, as warrant agent (the "WARRANT AGENT").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of a Purchase Agreement dated January
26, 1998 (the "PURCHASE AGREEMENT"), between the Company and Xxxxxx Xxxxxxx &
Co. Incorporated (the "INITIAL PURCHASER"), the Company has agreed to issue and
sell to the Initial Purchaser an aggregate of 460,800 warrants (each, a
"WARRANT" and collectively, the "WARRANTS"), each Warrant initially entitling
the holder thereof to purchase 0.21785 shares of Common Stock (as defined below)
of the Company at an exercise price of $.01 per Common Share (as defined below)
as part of 460,800 units (the "UNITS"), each Unit consisting of one 121/2%
Senior Discount Note due 2008 of the Company (each, a "NOTE" and collectively,
the "NOTES") to be issued pursuant to the provisions of an Indenture, dated as
of the date hereof, between the Company and The Chase Manhattan Bank, as trustee
(the "INDENTURE"), and one Warrant;
WHEREAS, the Notes and the Warrants included in each Unit will become
separately transferable at the close of business upon the earliest to occur of
(i) the date that is six months after the Closing Date (as defined below),
(ii) the commencement of an exchange offer with respect to the Notes undertaken
pursuant to the Notes Registration Rights Agreement (as defined below), (iii)
the effectiveness of a shelf registration statement with respect to resales of
the Notes, (iv) the commencement of an offer to purchase the Notes undertaken
pursuant to the Indenture or (v) the date which the Initial Purchaser, in its
sole discretion, determines; PROVIDED that, prior to such date, the Company
mails notice of such determination to the Warrant Agent and the Holders (as
defined below) of the Warrants (the "SEPARATION DATE"); and
WHEREAS, the Company desires to engage the Warrant Agent to act on the
Company's behalf, and the Warrant Agent desires to act on behalf of the Company,
in connection with the issuance of the Warrant Certificates (as defined below)
and the other matters as provided herein, including, without limitation, for the
purpose of defining the terms and provisions of the Warrants and the respective
rights and obligations thereunder of the Company and the record holders thereof
(together with the holders of shares of Common Stock (or other securities)
received upon exercise thereof, the "HOLDERS").
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NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements contained herein and in the Purchase Agreement, the Company and the
Warrant Agent hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent Members" has the meaning specified in Section 8.2 hereof.
"Auditors" means, at any time, the independent auditors of the Company
at such time.
"Board" means the board of directors of the Company from time to time.
"Business Day" means a day other than a Saturday or Sunday on which
the Depositary, Euroclear, Cedel Bank and commercial banks in The City of New
York are open for business.
"Cedel Bank" means Cedel Bank, societe anonyme.
"Certificated Warrants" has the meaning specified in Section 2.1
hereof.
"Certificate for Surrender" means the form on the reverse side of the
Warrant Certificate substantially in the form included in Exhibit A hereto.
"Closing Date" means the date hereof.
"Commission" means the United States Securities and Exchange
Commission.
"Common Shares" means the shares of the Common Stock of the Company.
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"Common Stock" means the common stock, par value $0.01 per share, of
the Company.
"Company" has the meaning specified in the preamble to this Agreement.
"Current Market Value" has the meaning specified in Section 4.1(f)
hereof.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Euroclear" means The Euroclear System.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Exercise Price" has the meaning specified in Section 3.1 hereof.
"Expiration Date" means January 31, 2008.
"Financial Expert" means one of the Persons listed in Appendix A
hereto.
"Global Warrants" has the meaning specified in Section 2.1 hereof.
"Holders" has the meaning specified in the recitals to this Agreement.
"IAI Certificated Warrants" has the meaning specified in Section 2.1
hereof.
"Indenture" has the meaning specified in the recitals to this
Agreement.
"Independent Financial Expert" means a Financial Expert that does not
(and whose directors, executive officers and 5% stockholders do not) have a
direct or indirect financial interest in the Company or any of its subsidiaries
or Affiliates, which has not been for at least five years and, at the time it is
called upon to give independent financial advice to the Company is not (and none
of its directors, executive officers or 5% stockholders is) a promoter,
director, or officer of the Company or any of its subsidiaries or Affiliates.
The Independent Financial Expert may be compensated and indemnified by the
Company for opinions or services it provides as an Independent Financial Expert.
"Initial Purchaser" has the meaning specified in the recitals to this
Agreement.
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"Institutional Accredited Investor" shall mean an institution that is
an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act.
"Non-U.S. Person" means a Person who is not a U.S. person as defined
in Rule 902 of Regulation S.
"Notes" has the meaning specified in the recitals to this Agreement.
"Notes Registration Rights Agreement" means the Registration Rights
Agreement with respect to the Notes dated January 26, 1998 between the Company
and the Initial Purchaser.
"Officer" means, with respect to the Company, (i) the Chairman of the
Board, the Vice Chairman of the Board, the President, the Chief Executive
Officer, the Chief Operating Officer, the Chief Financial Officer and (ii) the
Treasurer or any Assistant Treasurer, the Secretary or any Assistant Secretary
of the Company.
"Officers' Certificate" means a certificate signed by one Officer
listed in clause (i) of the definition thereof and one Officer listed in clause
(ii) of the definition thereof; PROVIDED, HOWEVER, that any such certificate may
be signed by any two of the Officers listed in clause (i) of the definition
thereof in lieu of being signed by one Officer listed in clause (i) of the
definition thereof and one Officer listed in clause (ii) of the definition
thereof.
"Offshore Certificated Warrants" has the meaning specified in Section
2.1 hereof.
"Opinion of Counsel" means a written opinion signed by legal counsel
who may be an employee of or counsel to the Company.
"Permanent Regulation S Global Warrant" has the meaning specified in
Section 2.1 hereof.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, trust, unincorporated organization or other entity
or any government or any agency or political subdivision thereof.
"Private Placement Legend" means the legend set forth on the Warrant
Certificates in the form set forth in Section 2.2(a) hereof.
5
"Purchase Agreement" has the meaning specified in the recitals to this
Agreement.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Warrant" has the meaning specified in Section 2.1
hereof.
"Restricted Certificated Warrants" has the meaning specified in
Section 2.1 hereof.
"Restricted Global Warrant" has the meaning specified in Section 2.1
hereof.
"Right" has the meaning specified in Section 4.1(c) hereof.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Separation Date" has the meaning specified in the recitals to this
Agreement.
"Spread" means, with respect to any Warrant, the last reported trade
price of the Common Shares subject to such Warrant at the close of business on
any Business Day on the exchange or quotation system on which the Company's
Common Shares are listed, less the Exercise Price of such Warrant, in each case
as adjusted as provided herein.
"Subscription Form" means the form on the reverse side of the Warrant
Certificate substantially in the form included in Exhibit A hereto.
"Temporary Regulation S Global Warrant" has the meaning specified in
Section 2.1 hereof.
"Underlying Securities" shall mean the Common Shares (or other
securities) issuable upon exercise of the Warrants.
"Units" has the meaning specified in the recitals to this Agreement.
"U.S. Certificated Warrants" has the meaning specified in Section 2.1
hereof.
6
"Value Report" has the meaning specified in Section 4.1(k) hereof.
"Warrant" has the meaning specified in the recitals to this Agreement.
"Warrant Agent" has the meaning specified in the preamble to this
Agreement.
"Warrant Certificates" has the meaning specified in Section 2.1
hereof.
"Warrant Registration Rights Agreement" means the Warrant Registration
Rights Agreement, dated January 26, 1998, between the Company and the Initial
Purchaser.
"Warrant Registration Statement" means a shelf registration statement
on the appropriate form which will be filed by the Company pursuant to the
Warrant Registration Rights Agreement.
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
SECTION 2.1. FORM OF WARRANT CERTIFICATES. Certificates representing
the Warrants (the "WARRANT CERTIFICATES") shall be substantially in the form
attached hereto as Exhibit A, shall be dated the date on which such Warrant
Certificates are countersigned by the Warrant Agent and shall have such
insertions as are appropriate or required or permitted by this Agreement and may
have such letters, numbers or other marks of identification and such legends and
endorsements stamped, printed, lithographed or engraved thereon as the Company
may deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any law or with any rule or
regulation pursuant thereto or with any rule or regulation of any securities
exchange on which the Warrants may be listed, or to conform to usage.
Warrants offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Warrant Certificates in
definitive, fully registered form, substantially in the form set forth in
Exhibit A (the "RESTRICTED GLOBAL WARRANT"), deposited with the Warrant Agent,
as custodian for, and registered in the name of the nominee for, the Depositary,
duly executed by the Company and countersigned by the Warrant Agent as
hereinafter provided. The aggregate number of Warrants represented by the
Restricted Global Warrant may from time to time be increased or decreased by
adjustments made on the records of the Warrant Agent, as custodian for the
Depositary, or its nominee, as provided in Section 2.4 and Section 8.3 hereof.
7
Warrants offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of one or more temporary
global Warrant Certificates in definitive, fully registered form, substantially
in the form set forth in Exhibit A (the "TEMPORARY REGULATION S GLOBAL
WARRANT"), deposited with the Warrant Agent, as custodian for, and registered in
the name of, the Depositary or its nominee for the accounts of Euroclear and
Cedel Bank, duly executed by the Company and countersigned by the Warrant Agent
as hereinafter provided. Prior to January 29, 1999, beneficial interests in the
Temporary Regulation S Global Warrant may only be held through Euroclear and
Cedel Bank. At any time following January 29, 1999, upon receipt by the Warrant
Agent and the Company of a certificate substantially in the form of Exhibit D
hereto, one or more global Warrants in registered form substantially in the form
set forth in Exhibit A (the "PERMANENT REGULATION S GLOBAL WARRANT"; and
together with the Temporary Regulation S Global Warrant, the "REGULATION S
GLOBAL WARRANTS") shall be deposited with the Warrant Agent, as custodian for,
and registered in the name of the nominee for, the Depositary, duly executed by
the Company and countersigned by the Warrant Agent as hereinafter provided, and
the Warrant Agent shall reflect on its books and records the date and a decrease
in the Temporary Regulation S Global Warrant in an amount equal to the
beneficial interest in number of Warrants evidenced by the Temporary Regulation
S Global Warrant transferred. The aggregate number of Warrants represented by
the Regulation S Global Warrant may from time to time be increased or decreased
by adjustments made on the records of the Warrant Agent, as custodian for the
Depositary, or its nominee, as provided in Section 2.4 and Section 8.3 hereof.
Warrants offered and sold to Institutional Accredited Investors who
are not QIBs shall be issued initially in registered form substantially in the
form set forth in Exhibit A ("IAI CERTIFICATED WARRANTS").
Warrants issued pursuant to Section 2.4 and Section 8.2(b) in exchange
for interests in the Restricted Global Warrant shall be issued in the form of
permanent Warrant Certificates in registered form, substantially in the form set
forth in Exhibit A (the "RESTRICTED CERTIFICATED WARRANTS" and, together with
IAI Certificated Warrants, the "U.S. CERTIFICATED WARRANTS"). Warrants issued
pursuant to Section 2.4 and Section 8.2(b) in exchange for interests in the
Regulation S Global Warrants shall be issued in the form of permanent Warrant
Certificates in registered form, substantially in the form set forth in Exhibit
A (the "OFFSHORE CERTIFICATED WARRANTS"). The Offshore Certificated Warrants
and the U.S. Certificated Warrants are sometimes herein collectively referred to
as the "CERTIFICATED WARRANTS". The Restricted Global Warrant and the
Regulation S Global Warrant are sometimes herein collectively referred to as the
"GLOBAL WARRANTS."
The definitive Warrant Certificates shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other
8
manner permitted by the rules of any securities exchange on which the Warrants
may be listed, all as determined by the officers executing such Warrant
Certificates, as evidenced by their execution of such Warrant Certificates.
SECTION 2.2. RESTRICTIVE LEGENDS. (a) The Warrant Certificates,
other than the Permanent Regulation S Global Warrants, shall bear the following
legend on the face thereof:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
STATE SECURITIES LAWS, AND ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT
OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE.
BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS
DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A
U.S. PERSON AND IS ACQUIRING THIS WARRANT IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(k) (TAKING INTO
ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE SECURITIES ACT, IF
APPLICABLE) RESELL OR OTHERWISE TRANSFER THE WARRANTS REPRESENTED BY THIS
CERTIFICATE EXCEPT (A) TO KMC TELECOM HOLDINGS, INC. (THE "COMPANY") OR ANY
SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO THE WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THE WARRANTS
REPRESENTED BY THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE WARRANT AGENT), AND, IF SUCH TRANSFER IS SUBSEQUENT TO THE DATE ON
WHICH THE WARRANTS REPRESENTED HEREBY BECOME SEPARATELY TRANSFERABLE, AN
OPINION OF COUNSEL
9
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE
SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION
IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO
WHOM THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE WITHIN THE TIME
PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET
FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE WARRANT AGENT. IF THE PROPOSED TRANSFEREE
IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH
TRANSFER, FURNISH TO EACH OF THE WARRANT AGENT AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT. THE WARRANT AGREEMENT
CONTAINS A PROVISION REQUIRING THE WARRANT AGENT TO REFUSE TO REGISTER ANY
TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IN VIOLATION OF
THE FOREGOING RESTRICTIONS.
(b) Each Global Warrant shall also bear the following legend on the
face thereof:
UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO KMC TELECOM HOLDINGS,
INC. OR THE WARRANT AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
10
NAME OF CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN ARTICLE VIII OF THE WARRANT AGREEMENT.
(c) Each Warrant Certificate issued prior to the Separation Date
shall bear the following legend on the face thereof:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF
AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000 PRINCIPAL AMOUNT AT
MATURITY OF 121/2% SENIOR DISCOUNT NOTES DUE 2008 OF KMC TELECOM
HOLDINGS, INC. (THE "NOTES") AND ONE WARRANT INITIALLY ENTITLING THE HOLDER
THEREOF TO PURCHASE 0.21785 COMMON SHARES, PAR VALUE $0.01 PER SHARE, OF
KMC TELECOM HOLDINGS, INC. PRIOR TO THE CLOSE OF BUSINESS UPON THE
EARLIEST TO OCCUR OF (i) THE DATE THAT IS SIX MONTHS AFTER THE CLOSING
DATE, (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE NOTES,
(iii) THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT WITH RESPECT TO
THE NOTES, (iv) THE COMMENCEMENT OF AN OFFER TO REPURCHASE THE NOTES OR (v)
THE DATE WHICH THE INITIAL PURCHASER, IN ITS SOLE DISCRETION, DETERMINES,
PROVIDED THAT, PRIOR TO SUCH DATE, THE COMPANY MAILS NOTICE OF SUCH
DETERMINATION TO THE HOLDERS OF THE WARRANTS. THE WARRANTS EVIDENCED BY
THIS CERTIFICATE MAY NOT BE TRANSFERRED OR
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EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR EXCHANGED ONLY
TOGETHER WITH, THE NOTES.
SECTION 2.3. EXECUTION AND DELIVERY OF WARRANT CERTIFICATES. Warrant
Certificates evidencing 460,800 Warrants, each Warrant to purchase initially
0.21785 Common Shares, may be executed, on or after the date of this Agreement,
by the Company and delivered to the Warrant Agent for countersignature, and the
Warrant Agent shall thereupon countersign and deliver such Warrant Certificates
upon the order and at the written direction of the Company signed by its
Chairman of the Board, Vice Chairman of the Board, President, Chief Operating
Officer, Chief Financial Officer or Chief Executive Officer to the purchasers
thereof on the date of issuance. The Warrant Agent is hereby authorized to
countersign and deliver Warrant Certificates as required by this Section 2.3 or
by Section 3.3, Article VI or Article VIII hereof.
The Warrant Certificates shall be executed on behalf of the Company by
its Chairman of the Board, Vice Chairman of the Board, President, Chief
Operating Officer, Chief Financial Officer or Chief Executive Officer either
manually or by facsimile signature printed thereon. The Warrant Certificates
shall be countersigned by manual signature of the Warrant Agent and shall not be
valid for any purpose unless so countersigned. In case any officer or director
of the Company whose signature shall have been placed upon any of the Warrant
Certificates shall cease to be such officer or director of the Company before
countersignature by the Warrant Agent and the issuance and delivery thereof,
such Warrant Certificates may nevertheless be countersigned by the Warrant Agent
and issued and delivered with the same force and effect as though such person
had not ceased to be such officer or director of the Company.
SECTION 2.4. CERTIFICATED WARRANTS. Beneficial owners of interests
in a Global Warrant may receive Certificated Warrants (which, except as set
forth in Section 8.3(f) hereof, shall bear the Private Placement Legend) in
accordance with the procedures of the Warrant Agent and the Depositary;
PROVIDED, HOWEVER, that beneficial owners of interests in the Regulation S
Global Warrant may not receive Offshore Certificated Warrants in exchange for
such interests prior to the date one year from the Closing Date. In connection
with the execution and delivery of such Certificated Warrants, the Warrant Agent
shall reflect on its books, and record, a decrease in the number of Warrants
represented by the relevant Global Warrant equal to the number of Warrants
represented by such Certificated Warrants and the Company shall execute and the
Warrant Agent shall countersign and deliver to said beneficial owners one or
more Certificated Warrants in an equal aggregate number.
12
ARTICLE III
EXERCISE PRICE AND EXERCISE OF WARRANTS
SECTION 3.1. EXERCISE PRICE. Each Warrant Certificate shall, when
countersigned by the Warrant Agent, initially entitle the Holder thereof,
subject to the provisions of this Agreement, to purchase the number of Common
Shares indicated thereon at a purchase price (the "EXERCISE PRICE") of $.01 per
Common Share, subject to adjustment as provided in Section 4.1 and Article V
hereof.
SECTION 3.2. EXERCISE; RESTRICTIONS ON EXERCISE. At any time
beginning one year after the Closing Date and on or before the Expiration Date,
any outstanding Warrants may be exercised on any Business Day by the Holders
thereof; PROVIDED, that the Warrant Registration Statement is, at the time of
exercise, effective and available for the exercise of the Warrants or the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act. Any Warrants not exercised by 5:00 p.m., New York City time,
on the Expiration Date shall expire and all rights of the Holders of such
Warrants shall terminate. Additionally, pursuant to Section 4.1(j)(ii) hereof,
the Warrants shall expire and all rights of the Holders of such Warrants shall
terminate in the event the Company merges or consolidates with or sells all or
substantially all of its property and assets to a Person (other than an
Affiliate of the Company) if the consideration payable to holders of Common
Stock in exchange for their Common Stock in connection with such merger,
consolidation or sale consists solely of cash or in the event of the
dissolution, liquidation or winding up of the Company.
SECTION 3.3. METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE. (a) In
order to exercise all or any of the Warrants represented by a Warrant
Certificate, the Holder thereof must surrender for exercise the Warrant
Certificate to the Warrant Agent at its corporate trust office address set forth
in Section 11.5 hereof, with the Subscription Form set forth on the reverse of
the Warrant Certificate duly executed, together with payment in full of the
Exercise Price then in effect for each Common Share (or other securities)
issuable upon exercise of the Warrants as to which a Warrant is exercised; such
payment may be made by wire transfer, in cash or by certified or official bank
or bank cashier's check payable to the order of the Company and shall be made to
the Warrant Agent at its corporate trust office address set forth in Section
11.5 hereof prior to the close of business on the date the Warrant Certificate
is surrendered to the Warrant Agent for exercise. Notwithstanding the
foregoing, if the Common Shares (or other securities) issuable upon exercise of
the Warrants are registered under the Exchange Act, the Exercise Price may be
paid by surrendering additional Warrants to the Warrant Agent having an
aggregate Spread equal to the aggregate Exercise Price of the Warrants being
exercised. All payments received upon exercise of Warrants shall be delivered
13
to the Company by the Warrant Agent as instructed in writing by the Company. If
less than all the Warrants represented by a Warrant Certificate are exercised or
surrendered (in connection with a cashless exercise), such Warrant Certificate
shall be surrendered and a new Warrant Certificate of the same tenor and for the
number of Warrants which were not exercised or surrendered shall be executed by
the Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Warrant Certificate, registered in such name or names as may
be directed in writing by the Holder, and shall deliver the new Warrant
Certificate to the Person or Persons entitled to receive the same. Upon the
exercise of any Warrants following the surrender of a Warrant Certificate in
conformity with the foregoing provisions, the Warrant Agent shall instruct the
Company to transfer promptly to the Holder or, upon the written order of the
Holder of such Warrant Certificate, appropriate evidence of ownership of any
Common Shares or other security or property to which it is entitled, registered
or otherwise placed in such name or names as may be directed in writing by the
Holder, and to deliver such evidence of ownership to the Person or Persons
entitled to receive the same and fractional shares, if any, or an amount in
cash, in lieu of any fractional shares, as provided in Section 4.5 hereof;
PROVIDED that the Holder of such Warrant shall be responsible for the payment of
any transfer taxes required as the result of any change in ownership of such
Warrants or the issuance of such Common Shares other than to the Holder of such
Warrants and any such transfer shall comply with applicable law. Upon the
exercise of a Warrant or Warrants, the Warrant Agent is hereby authorized and
directed to requisition from any transfer agent of the Common Shares (and all
such transfer agents are hereby authorized to comply with all such requests)
certificates (bearing the legend set forth in Section 11.10 hereof, if
applicable, unless a registration statement relating to such Common Shares filed
with the Commission shall then be in effect or the Company and the Holder
exercising such Warrant or Warrants otherwise agree) for the necessary number of
Common Shares to which said Holder may be entitled. The Company shall enter, or
shall cause any transfer agent of the Common Shares to enter, the name of the
Person entitled to receive the Common Shares upon exercise of the Warrants into
the Company's register of shareholders within 14 days of such exercise. A
Warrant shall be deemed to have been exercised immediately prior to the close of
business on the date of the surrender for exercise, as provided above, of the
Warrant Certificate representing such Warrant together with payment in full of
the Exercise Price (or surrender of sufficient shares in connection with a
cashless exercise) and, for all purposes under this Agreement, the Person
entitled to receive any Common Shares deliverable upon such exercise shall, as
between such Person and the Company, be deemed to be the Holder of such Common
Shares of record as of the close of business on such date and shall be entitled
to receive, and the Warrant Agent shall deliver to such Person, any Common
Shares to which such Person would have been entitled had such Person been the
registered holder on such date.
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(b) In addition to the requirements of paragraph (a) above, in
connection with any exercise of Warrants represented by Offshore Certificated
Warrants or the Regulation S Global Warrants, the Holder thereof shall be
required to provide to the Warrant Agent (i) (x) written certification
substantially in the form of Exhibit B hereto that it is a Non-U.S. Person and
the Warrant is not being exercised on behalf of a U.S. person within the meaning
of Rule 902 of Regulation S or (y) a written opinion of counsel reasonably
satisfactory to the Company and its counsel to the effect that the Warrant and
the Warrant Shares issued upon exercise of the Warrants have been registered
under the Securities Act or are exempt from registration thereunder and (ii) if
an opinion is not being furnished, written certification that the Holder
exercising the Warrant is located outside the United States at the time of the
exercise thereof.
ARTICLE IV
ADJUSTMENTS
SECTION 4.1. ADJUSTMENTS. The Exercise Price and the number of
Common Shares issuable upon exercise of each Warrant shall be subject to
adjustment from time to time as follows:
(a) DIVISIONS; CONSOLIDATIONS; RECLASSIFICATIONS. In case the
Company shall, on or before the Expiration Date, (i) issue any Common Shares in
payment of a dividend or other distribution with respect to its Common Stock,
(ii) subdivide its issued and outstanding Common Shares, (iii) consolidate its
issued and outstanding Common Shares into a smaller number of shares, or
(iv) reclassify or convert the Common Shares (other than a reclassification in
connection with a merger, consolidation or other business combination which will
be governed by Section 4.1(j)), then the number of Common Shares purchasable
upon exercise of each Warrant immediately prior to the record date for such
issue or distribution or the effective date of such subdivision, consolidation,
reclassification or conversion shall be adjusted so that the Holder of each
Warrant shall thereafter be entitled to receive the kind and number of Common
Shares which such Holder would have been entitled to receive after the happening
of any of the events described above had such Warrant been exercised immediately
prior to the happening of such event or any record date with respect thereto.
An adjustment made pursuant to this Section 4.1(a) shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
(b) RIGHTS; OPTIONS; WARRANTS. In case the Company shall issue
rights, options, warrants or convertible or exchangeable securities (other than
convertible or exchangeable securities subject to Section 4.1(a)) to all holders
of its Common Shares,
15
entitling them to subscribe for or purchase Common Shares at a price per share
which is lower (at the record date for such issuance) than the then Current
Market Value per Common Share, then the Company shall ensure that at the time of
such issuance, the same or a like offer or invitation is made to the Holders of
the Warrants as if their Warrants had been exercised on the day immediately
preceding the record date of such offer or invitation on the terms (subject to
any adjustment pursuant to Section 4.1(a) for a prior event) on which such
Warrants could have been exercised on such date; PROVIDED that if the Board so
resolves, the Company shall not be required to ensure that the same offer or
invitation is made to the Holders of the Warrants, but the number of Common
Shares thereafter purchasable upon the exercise of each Warrant shall instead be
adjusted and shall be determined by multiplying the number of Common Shares
theretofore purchasable upon exercise of each Warrant by a fraction, the
numerator of which shall be the sum of (i) the number of Common Shares
outstanding immediately prior to the issuance of such rights, options, warrants
or convertible or exchangeable securities plus (ii) the number of additional
Common Shares which may be purchased or subscribed for upon exercise, exchange
or conversion of such rights, options, warrants or convertible or exchangeable
securities and the denominator of which shall be the sum of (x) the number of
Common Shares outstanding immediately prior to the issuance of such rights,
options, warrants or convertible or exchangeable securities plus (y) the number
of shares which the total consideration received by the Company for such rights,
options, warrants or convertible or exchangeable securities so offered would
purchase at the then Current Market Value per Common Share. Except as otherwise
provided above, such adjustment shall be made whenever such rights, options,
warrants or convertible or exchangeable securities are issued, and shall become
effective retroactively immediately after the record date for the determination
of shareholders entitled to receive such rights, options, warrants or
convertible or exchangeable securities.
(c) ISSUANCE OF COMMON SHARES AT LOWER VALUES. In case the Company
shall sell and issue any Common Share or Right (as defined below) (excluding
(i) any Right issued in any of the transactions described in Section 4.1(a) or
(b) above, (ii) Common Shares issued pursuant to (x) any Rights outstanding on
the date of this Agreement or any Rights issued in any transaction described in
Section 4.1(a) or (b) above and (y) a Right, if on the date such Right was
issued, the exercise, conversion or exchange price per Common Share with respect
thereto was at least equal to the then Current Market Value per Common Share,
(iii) any Common Shares or Rights issued (A) as consideration when any
corporation or business is acquired, merged into or becomes part of the Company
or a subsidiary of the Company or (B) in good faith in connection with any other
acquisition of assets, in each case in an arm's-length transaction between the
Company and a Person other than an Affiliate of the Company, (iv) grants or
exercises of Rights granted to or exercised by employees, directors, consultants
or advisors of the Company or any of its subsidiaries for issuances of shares of
Common Stock to such Persons and (v) exercises of Rights by former employees,
16
former directors, former consultants or former advisors of the Company or any of
its subsidiaries for issuances of shares of Common Stock to such Persons) at a
price per Common Share (determined in the case of any such Right, by dividing
(x) the total consideration receivable by the Company in consideration of the
sale and issuance of such Right, plus the total consideration payable to the
Company upon exercise, conversion or exchange thereof, by (y) the total number
of Common Shares covered by such Right) that is lower than the Current Market
Value per Common Share in effect immediately prior to such sale or issuance,
then the number of Common Shares thereafter purchasable upon the exercise of
each Warrant shall be determined by multiplying the number of Common Shares
theretofore purchasable upon exercise of such Warrant by a fraction, the
numerator of which shall be the number of Common Shares outstanding immediately
after such sale or issuance and the denominator of which shall be the number of
Common Shares outstanding immediately prior to such sale or issuance plus the
number of Common Shares which the aggregate consideration received (determined
as provided below) for such sale or issuance would purchase at such Current
Market Value per Common Share. For purposes of this Section 4.1(c), the Common
Shares which the holder of any such Right shall be entitled to subscribe for or
purchase shall be deemed to be issued and outstanding as of the date of such
sale and issuance and the consideration received by the Company therefor shall
be deemed to be the consideration received by the Company for such Right, plus
the consideration or premiums stated in such Right to be paid for the Common
Shares covered thereby. In case the Company shall sell and issue any Right
together with one or more other securities as part of a unit at a price per
unit, then in determining the "price per Common Share" and the "consideration
received by the Company" for purposes of the first sentence of this
Section 4.1(c), the Board shall determine, in good faith, the fair value of the
Right then being sold as part of such unit. For purposes of this paragraph, a
"RIGHT" shall mean any right, option, warrant or convertible or exchangeable
security containing the Right to subscribe for or acquire one or more Common
Shares, excluding the Warrants. This Section 4.1(c) shall not apply to: (i) the
exercise of Warrants, or the conversion or exchange of other securities
convertible or exchangeable for Common Shares; or (ii) Common Shares issued upon
the exercise of Rights or warrants issued to all holders of Common Shares.
(d) DISTRIBUTIONS OF DEBT, ASSETS, SUBSCRIPTION RIGHTS OR
CONVERTIBLE SECURITIES. In case the Company shall make a distribution to all
holders of its Common Shares of evidences of its indebtedness, or assets, or
other distributions (excluding distributions in connection with the dissolution,
liquidation or winding-up of the Company which shall be governed by
Section 4.1(j) and distributions of securities referred to in Section 4.1(a),
Section 4.1(b) or Section 4.1(c)), then, in each case, the number of Common
Shares purchasable after such record date upon the exercise of each Warrant
shall be determined by multiplying the number of Common Shares purchasable upon
the exercise of such Warrant immediately prior to such record date by a
fraction, the numerator of which shall be the
17
Current Market Value per Common Share immediately prior to the record date for
such distribution and the denominator of which shall be the Current Market Value
per Common Share immediately prior to the record date for such distribution less
the then fair value (as determined in good faith by the Board) of the evidences
of indebtedness, or assets or other distributions so distributed attributable to
one Common Share. Such adjustment shall be made whenever any such distribution
is made, and shall become effective on the date of distribution retroactive to
the record date for the determination of shareholders entitled to receive such
distribution.
(e) EXPIRATION OF RIGHTS, OPTIONS AND CONVERSION PRIVILEGES. Upon
the expiration of any rights, options, warrants or conversion or exchange
privileges (including, without limitation, any Rights) that have previously
resulted in an adjustment hereunder, if any thereof shall not have been
exercised, exchanged or converted, the Exercise Price and the number of Common
Shares issuable upon the exercise of each Warrant shall, upon such expiration,
be readjusted and shall thereafter, upon any future exercise, be such as they
would have been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (i) the only Common
Shares so issued were the Common Shares, if any, actually issued or sold upon
the exercise, exchange or conversion of such rights, options, warrants or
conversion or exchange rights (including, without limitation, any Rights) and
(ii) such Common Shares, if any, were issued or sold for the consideration
actually received by the Company upon such exercise, exchange or conversion plus
the consideration, if any, actually received by the Company for issuance, sale
or grant of all such rights, options, warrants or conversion or exchange rights
(including, without limitation, any Rights) whether or not exercised.
(f) CURRENT MARKET VALUE. For the purposes of any computation
under this Article IV, the "CURRENT MARKET VALUE" per Common Share or of any
other security (herein collectively referred to as a "security") at any date
herein specified shall be:
(i) if the security is not registered under the Exchange Act, the
value of the security (1) most recently determined as of a date within the
six months preceding such date by an Independent Financial Expert selected
by the Board in accordance with the criteria for such valuation set out in
Section 4.1(k), or (2) if no such determination shall have been made within
such six-month period or if the Company so chooses, determined as of such a
date by an Independent Financial Expert selected by the Board in accordance
with the criteria for such valuation set out in Section 4.1(k), or
(ii) if the security is registered under the Exchange Act, the
average of the daily market prices of the security for the 20 consecutive
trading days immediately preceding such date or, if the security has been
registered under the Exchange Act for
18
less than 20 consecutive trading days before such date, then the average of
the daily market prices for all of the trading days before such date for
which daily market prices are available. The market price for each such
trading day shall be: (A) in the case of a security listed or admitted to
trading on any national securities exchange, the closing sales price,
regular way, on such day, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day on the principal
national securities exchange on which such security is listed or admitted,
as determined by the Board, in good faith, (B) in the case of a security
not then listed or admitted to trading on any national securities exchange,
the last reported sale price on such day, or if no sale takes place on such
day, the average of the closing bid and asked prices on such day, as
reported by a reputable quotation source designated by the Company, (C) in
the case of a security not then listed or admitted to trading on any
national securities exchange and as to which no such reported sale price or
bid and asked prices are available, the average of the reported high bid
and low asked prices on such day, as reported by a reputable quotation
service, or a newspaper of general circulation in the Borough of Manhattan,
City and State of New York customarily published on each Business Day,
designated by the Company, or, if there shall be no bid and asked prices on
such day, the average of the high bid and low asked prices, as so reported,
on the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported and (D) if there are no
bid and asked prices reported during the 30 days prior to the date in
question, the Current Market Value of the security shall be determined as
if the security were not registered under the Exchange Act.
(g) CONSIDERATION RECEIVED. For purposes of any computation
respecting consideration received pursuant to this Section 4.1, the following
shall apply:
(i) in the case of the issuance of Common Shares for cash, the
consideration shall be the amount of such cash, PROVIDED that in no case
shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(ii) in the case of the issuance of Common Shares for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined
in good faith by the Board (irrespective of the accounting treatment
thereof), whose determination shall be conclusive and described in
reasonable detail in a board resolution which shall be provided as soon as
practicable thereafter to the Warrant Agent; and
(iii) in the case of the issuance of rights, options, warrants or
securities convertible into or exchangeable for Common Shares, (including,
without limitation,
19
any Rights), the aggregate consideration received therefor shall be deemed
to be the consideration received by the Company for the issuance of such
rights, options, warrants or securities convertible into or exchangeable
for Common Shares, plus the additional minimum consideration, if any, to be
received by the Company upon the exercise, conversion or exchange thereof
(the consideration in each case to be determined in the same manner as
provided in clauses (i) and (ii) of this Section 4.1(g)).
(h) DE MINIMIS ADJUSTMENTS. No adjustment in the number of Common
Shares purchasable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the number of
Common Shares purchasable upon the exercise of each Warrant; PROVIDED, HOWEVER,
that any adjustments which by reason of this Section 4.1(h) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest one-thousandth of a
share.
(i) ADJUSTMENT OF EXERCISE PRICE. Whenever the number of Common
Shares purchasable upon the exercise of each Warrant is adjusted, as herein
provided, the Exercise Price per Common Share payable upon exercise of such
Warrant shall be adjusted (calculated to the nearest $.01) so that it shall
equal the price determined by multiplying such Exercise Price immediately prior
to such adjustment by a fraction the numerator of which shall be the number of
Common Shares purchasable upon the exercise of each Warrant immediately prior to
such adjustment and the denominator of which shall be the number of Common
Shares so purchasable immediately thereafter. Following any adjustment to the
Exercise Price pursuant to this Article IV, the amount payable, when adjusted,
together with the amount paid in connection with the original issuance of the
Warrants, shall never be less than the par value per Common Share at the time of
such adjustment.
If after an adjustment, a Holder of a Warrant upon exercise of it may
receive shares of two or more classes in the capital of the Company, the Company
shall determine the allocation of the adjusted Exercise Price between such
classes of shares in a manner that the Board deems fair and equitable to the
Holders. After such allocation, the exercise privilege and the Exercise Price
of each class of shares shall thereafter be subject to adjustment on terms
comparable to those applicable to Common Shares in this Article IV.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(j) CONSOLIDATION, MERGER, ETC. (i) Subject to the provisions of
Subsection
20
(ii) below of this Section 4.1(j), in case of the consolidation of the
Company with, or merger of the Company with or into, or of the sale of all
or substantially all of the properties and assets of the Company to, any
Person, and in connection therewith consideration is payable to holders of
Common Shares (or other securities or property purchasable upon exercise of
Warrants) in exchange therefor, the Warrants shall remain subject to the
terms and conditions set forth in this Agreement and each Warrant shall,
after such consolidation, merger or sale, entitle the Holder to receive
upon exercise the number of shares in the capital or other securities or
property (including cash) of or from the Person resulting from such
consolidation or surviving such merger or to which such sale shall be made
or of the parent of such Person, as the case may be, that would have been
distributable or payable on account of the Common Shares if such Holder's
Warrants had been exercised immediately prior to such merger, consolidation
or sale (or, if applicable, the record date therefor); and in any such case
the provisions of this Agreement with respect to the rights and interests
thereafter of the Holders of Warrants shall be appropriately adjusted by
the Board in good faith so as to be applicable, as nearly as may reasonably
be, to any shares, other securities or any property thereafter deliverable
on the exercise of the Warrants.
(ii) Notwithstanding the foregoing, (x) if the Company merges or
consolidates with, or sells all or substantially all of its property and
assets to, another Person (other than an Affiliate of the Company) and
consideration is payable to holders of Common Shares in exchange for their
Common Shares in connection with such merger, consolidation or sale which
consists solely of cash, or (y) in the event of the dissolution,
liquidation or winding up of the Company, then the Holders of Warrants
shall be entitled to receive distributions on the date of such event on an
equal basis with holders of Common Shares (or other securities issuable
upon exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event, less the Exercise Price. Upon receipt of
such payment, if any, the rights of a Holder shall terminate and cease and
such Holder's Warrants shall expire. In case of any such merger,
consolidation or sale of assets, the surviving or acquiring Person and, in
the event of any dissolution, liquidation or winding up of the Company, the
Company shall deposit promptly with the Warrant Agent the funds, if any,
necessary to pay the Holders of the Warrants. After receipt of such
deposit from such Person or the Company and after receipt of surrendered
Warrant Certificates, the Warrant Agent shall make payment by delivering a
check in such amount as is appropriate (or, in the case of consideration
other than cash, such other consideration as is appropriate) to such Person
or Persons as it may be directed in writing by the Holder surrendering such
Warrants.
(k) If required pursuant to Section 4.1(f)(i), the Current Market
Value shall be deemed to be equal to the value set forth in the Value Report (as
defined below) as
21
determined by an Independent Financial Expert, which shall be selected by the
Board in its sole discretion, and retained on customary terms and conditions,
using one or more valuation methods that the Independent Financial Expert, in
its best professional judgment, determines to be most appropriate. The Company
shall use its reasonable best efforts to cause the Independent Financial Expert
to deliver to the Company, with a copy to the Warrant Agent, within 45 days of
the appointment of the Independent Financial Expert, a value report (the "VALUE
REPORT") stating the value of the Common Shares and other securities or property
of the Company, if any, being valued as of the Valuation Date and containing a
brief statement as to the nature and scope of the examination or investigation
upon which the determination of value was made. The Warrant Agent shall have no
duty with respect to the Value Report of any Independent Financial Expert,
except to keep it on file and available for inspection by the Holders. The
determination as to Current Market Value in accordance with the provisions of
this Section 4.1(k) shall be conclusive on all Persons. The Independent
Financial Expert shall consult with management of the Company in order to allow
management to comment on the proposed value prior to delivery to the Company of
any Value Report.
(l) WHEN NO ADJUSTMENT REQUIRED. Without limiting any other
exception contained in this Section 4.1, and in addition thereto, no adjustment
need be made for:
(i) (A) grants to, exercises of Rights by, or issuances of equity
securities to employees, directors, consultants or advisors of
the Company or any of its subsidiaries and (B) exercises of
Rights by, or issuances of equity securities in connection with
Rights previously issued to former employees, former directors,
former consultants or former advisors of KMC Telecom, Inc. (to
the extent that all such securities do not have an aggregate
value in excess of 15% of the equity value of the Company on a
fully diluted basis, as determined in good faith by the Board);
(ii) grants of options, warrants or other agreements or rights to
purchase capital stock of the Company entered into prior to the
date of the issuance of the Warrants or any issuance of capital
stock pursuant thereto or in connection therewith;
(iii) rights to purchase Common Shares pursuant to a Company plan for
the reinvestment of dividends or interest;
(iv) future options, warrants or other rights with an exercise or
conversion price at least equal to the fair market value of the
related shares on the date of grant, as determined in good
faith by the Company's Board of Directors;
22
(v) a change in the par value of the Common Shares (including a
change from par value to no par value or vice versa);
(vi) future options granted to current holders of options in KMC
Telecom Common Stock in exchange for their options in KMC
Telecom with an exercise price determined in good faith by the
Company's Board of Directors to be fair; and
(vii) bona fide public offerings or private placements through
investment banks of national standing.
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
SECTION 4.2. NOTICE OF ADJUSTMENT. Whenever the number of Common
Shares purchasable upon the exercise of each Warrant or the Exercise Price is
adjusted, as herein provided, the Company shall cause, so far as it is able, the
Warrant Agent promptly to mail, at the expense of the Company, to each Holder
notice of such adjustment or adjustments and shall deliver to the Warrant Agent
a certificate of the Auditors setting forth the number of Common Shares
purchasable upon the exercise of each Warrant and the Exercise Price after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
Such certificate shall be conclusive evidence of the correctness of such
adjustment except in the case of manifest error. The Warrant Agent shall be
entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same,
from time to time, to any Holder desiring an inspection thereof during
reasonable business hours upon reasonable notice. The Warrant Agent shall not
at any time be under any duty or responsibility to any Holders to determine
whether any facts exist which may require any adjustment of the Exercise Price
or the number of Common Shares purchasable on exercise of the Warrants or any of
the other adjustments set forth in Section 4.1, or with respect to the nature or
extent of any such adjustment when made, or with respect to the method employed
in making such adjustment, or the validity or value (or the kind or amount) of
any Common Shares which may be purchasable on exercise of the Warrants. The
Warrant Agent shall not be responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver any Common Shares or share
certificates upon the exercise of any Warrant.
SECTION 4.3. STATEMENT ON WARRANTS. Irrespective of any adjustment
in the Exercise Price or the number or kind of shares purchasable upon the
exercise of the Warrants, Warrants theretofore or thereafter issued may continue
to express the same price and number and kind of shares as are stated in the
Warrants initially issuable pursuant to this Agreement.
23
SECTION 4.4. NOTICE OF CONSOLIDATION, MERGER, ETC. In case at any
time after the date hereof and prior to 5:00 p.m. (New York City time) on the
Expiration Date, there shall be any (i) consolidation or merger involving the
Company or sale, transfer or other disposition of all or substantially all of
the Company's property, assets or business (except (A) a merger or other
reorganization in which the Company shall be the surviving corporation and
holders of Common Shares receive no consideration in respect of their shares and
(B) a merger of the Company into a wholly owned subsidiary of the Company, the
principal purpose of which, in the good faith determination of the Board, is to
change the state of incorporation of the Company) or (ii) any other transaction
contemplated by Section 4.1(j)(ii) above then, in any one or more of such cases,
the Company shall cause to be mailed to the Warrant Agent and shall use its
reasonable best efforts to cause the Warrant Agent to mail, at Company's
expense, to each Holder of a Warrant, at the earliest practicable time (and, in
any event, not less than 20 days before any date set for definitive action),
notice of the date on which such reorganization, sale, consolidation, merger,
dissolution, liquidation or winding up shall take place, as the case may be.
Such notice shall also set forth such facts as shall indicate the effect of such
action (to the extent such effect may be known at the date of such notice) on
the Exercise Price and the kind and amount of the Common Shares and other
securities, money and other property deliverable upon exercise of the Warrants.
Such notice shall also specify the date as of which the holders of record of the
Common Shares or other securities or property issuable upon exercise of the
Warrants shall be entitled to exchange their shares for securities, money or
other property deliverable upon such reorganization, sale, consolidation,
merger, dissolution, liquidation or winding up, as the case may be.
SECTION 4.5. FRACTIONAL INTERESTS. If more than one Warrant shall be
presented for exercise in full at the same time by the same Holder, the number
of full Common Shares which shall be issuable upon such exercise thereof shall
be computed on the basis of the aggregate number of Common Shares purchasable on
exercise of the Warrants so presented. The Company shall not be required to
issue fractional Common Shares upon the exercise of Warrants. If any fraction
of a Common Share would, except for the provisions of this Section 4.5, be
issuable on the exercise of any Warrant (or specified portion thereof), the
Company may pay an amount in cash calculated by it to be equal to the then
Current Market Value per Common Share multiplied by such fraction computed to
the nearest whole cent.
SECTION 4.6. WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED. In any case
in which this Article IV shall require that an adjustment in the Exercise Price
be made effective as of a record date for a specified event, the Company may
elect to defer until the occurrence of such event (i) issuing to the Holder of
any Warrant exercised after such record date the Common Shares and other shares
in the capital of the Company, if any, issuable upon such exercise over and
above the Common Shares and other shares in the capital of the Company, if any,
issuable upon such exercise and (ii) paying such Holder any amount in cash in
lieu of a
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fractional share; PROVIDED, HOWEVER, that the Company shall deliver to such
Holder a due xxxx or other appropriate instrument evidencing such Holder's right
to receive such additional Common Shares, other shares and cash upon the
occurrence of the event requiring such adjustment.
SECTION 4.7. INITIAL PUBLIC OFFERING. Notwithstanding anything to
the contrary herein contained, if the Company conducts an initial public
offering of equity securities (other than nonconvertible preferred shares), the
Company will give the Holders the opportunity to convert such Warrants into
warrants to purchase such equity securities (other than nonconvertible preferred
shares) and such Common Shares or such other securities that have been received
by the Holders upon the exercise of Warrants into such equity securities (other
than nonconvertible preferred shares). Such conversion opportunity will be on
terms and conditions determined to be fair and reasonable by the Board.
ARTICLE V
DECREASE IN EXERCISE PRICE
The Board, in its sole discretion, shall have the right at any time,
or from time to time, to decrease the Exercise Price of the Warrants and/or
increase the number of shares issuable upon the exercise of the Warrants.
ARTICLE VI
LOSS OR MUTILATION
Upon receipt by the Company and the Warrant Agent of evidence
satisfactory to them of the ownership and the loss, theft, destruction or
mutilation of any Warrant Certificate and of indemnity or bond satisfactory to
them and (in the case of mutilation) upon surrender and cancellation thereof,
then, in the absence of notice to the Company or the Warrant Agent that the
Warrants represented thereby have been acquired by a bona fide purchaser, the
Company shall execute and the Warrant Agent shall countersign and deliver to the
registered Holder of the lost, stolen, destroyed or mutilated Warrant
Certificate, in exchange for or in lieu thereof, a new Warrant Certificate of
the same tenor and for a like aggregate number of Warrants. Upon the issuance
of any new Warrant Certificate under this Article VI, the Company may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and other expenses (including the fees
and expenses of the Warrant Agent) in connection therewith. Every new
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Warrant Certificate executed and delivered pursuant to this Article VI in lieu
of any lost, stolen or destroyed Warrant Certificate shall constitute a
contractual obligation of the Company whether or not the allegedly lost, stolen
or destroyed Warrant Certificates shall be at any time enforceable by anyone and
shall be entitled to the benefits of this Agreement equally and proportionately
with any and all other Warrant Certificates duly executed and delivered
hereunder. The provisions of this Article VI are exclusive and shall preclude
(to the extent lawful) all other rights or remedies with respect to the
replacement of mutilated, lost, stolen, or destroyed Warrant Certificates.
ARTICLE VII
RESERVATION AND AUTHORIZATION
OF COMMON SHARES
The Company shall at all times reserve and keep available such number
of its authorized but unissued Common Shares deliverable upon exercise of the
Warrants as will be sufficient to permit the exercise in full of all outstanding
Warrants and will cause appropriate evidence of ownership of such Common Shares
to be delivered to the Warrant Agent upon its request for delivery thereof upon
the exercise of Warrants. The Company covenants that all Common Shares of the
Company that may be issued upon the exercise of the Warrants will, upon
issuance, be duly authorized, validly issued, fully paid and not subject to any
calls for funds and free from pre-emptive rights and all taxes, liens, charges
and security interests with respect to the issue thereof.
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
SECTION 8.1. TRANSFER AND EXCHANGE. The Warrant Certificates shall
be issued in registered form only. The Warrant Agent shall keep at its office a
register for the registration of Warrant Certificates and transfers or exchanges
of Warrant Certificates as herein provided and other appropriate data as
determined by the Warrant Agent. The Company shall, upon reasonable notice to
the Warrant Agent, have access to such register during the Warrant Agent's
regular business hours. All Warrant Certificates issued upon any registration
of transfer or exchange of Warrant Certificates shall be the valid obligations
of the Company, evidencing the same obligations, and entitled to the same
benefits under this Agreement, as the Warrant Certificates surrendered for such
registration of transfer or exchange.
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The Warrants shall initially be issued as part of the issuance of the
Units. Prior to the Separation Date, the Warrants may not be transferred or
exchanged separately from, but may be transferred or exchanged only together
with, the Notes issued as part of such Units.
A Holder may transfer its Warrants only by written application to the
Warrant Agent stating the name of the proposed transferee and otherwise
complying with the terms of this Agreement. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only upon,
final acceptance and registration of the transfer by the Warrant Agent in the
register. Prior to the registration of any transfer of Warrants by a Holder as
provided herein, the Company, the Warrant Agent, and any agent of the Company or
the Warrant Agent may treat the Person in whose name the Warrants are registered
as the owner thereof for all purposes and as the Person entitled to exercise the
rights represented thereby, any notice to the contrary notwithstanding.
Furthermore, any Holder of a Global Warrant shall, by acceptance of such Global
Warrant, agree that transfers of beneficial interests in such Global Warrant may
be effected only through a book-entry system maintained by the Holder of such
Global Warrant (or its agent), and that ownership of a beneficial interest in
the Warrants represented thereby shall be required to be reflected in a
book-entry. When Warrant Certificates are presented to the Warrant Agent with a
request to register the transfer or to exchange them for an equal amount of
Warrants of other authorized denominations, the Warrant Agent shall register
such transfer or make such exchange as requested if its requirements for such
transactions are met. To permit registrations of transfers and exchanges, the
Company shall execute Warrant Certificates at the Warrant Agent's request. No
service charge shall be made for any registration of transfer or exchange of
Warrants, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
registration of transfer of Warrants.
SECTION 8.2. BOOK-ENTRY PROVISIONS FOR THE GLOBAL WARRANTS. (a) The
Global Warrants initially shall (i) be registered in the name of the Depositary
for such Global Warrant or the nominee of such Depositary, (ii) be delivered to
the Warrant Agent as custodian for such Depositary and (iii) bear legends as set
forth in Section 2.2 hereof.
Members of, or participants in, the Depositary ("AGENT MEMBERS") shall
have no rights under this Agreement with respect to the Global Warrants held on
their behalf by the Depositary or the Warrant Agent as its custodian, and the
Depositary may be treated by the Company, the Warrant Agent and any agent of the
Company or the Warrant Agent as the absolute owner of such Global Warrant for
all purposes whatsoever. Nothing herein shall prevent the Company, the Warrant
Agent or any agent of the Company or the Warrant Agent, from giving effect to
any written certification, proxy or other authorization furnished by the
Depositary or impair, as between the Depositary and its Agent Members, the
operation of customary practices governing the exercise of the rights of a
Holder of any Warrants.
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(b) Transfers of a Global Warrant shall be limited to transfers of
such Global Warrant in whole, but not in part, to the Depositary, its successors
or their respective nominees. Interests of beneficial owners in the Global
Warrants may be transferred in accordance with the rules and procedures of the
Depositary and the provisions of Section 8.3 hereof. U.S. Certificated Warrants
and Offshore Certificated Warrants shall be transferred to beneficial owners in
exchange for their beneficial interests in the Restricted Global Warrant or the
Regulation S Global Warrant, as the case may be, (i) if the Depositary notifies
the Company that it is unwilling or unable to continue as Depositary for any
such Global Warrant and a successor depositary is not appointed by the Company
within 90 days of such notice, (ii) if there is a Default or (iii) upon the
request of the beneficial owner in accordance with the rules and procedures of
the Depositary and the provisions of Section 8.3 hereof; provided that Offshore
Certificated Warrants shall not be transferred in exchange for the Temporary
Regulation S Global Note prior to one year from the Closing Date.
(c) Any beneficial interest in one of the Global Warrants that is
transferred to a Person who takes delivery in the form of an interest in any
other Global Warrant will, upon transfer, cease to be an interest in the first
such Global Warrant and become an interest in such other Global Warrant and,
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Warrant for as long as it remains such an interest.
(d) In connection with the transfer of the entire Restricted Global
Warrant or Regulation S Global Warrant to beneficial owners pursuant to
paragraph (b) of this Section 8.2, the Restricted Global Warrant or the
Regulation S Global Warrant, as the case may be, shall be surrendered to the
Warrant Agent for cancellation, and the Company shall execute, and the Warrant
Agent shall countersign and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in the Restricted Global
Warrant or the Regulation S Global Warrant, as the case may be, U.S.
Certificated Warrants or Offshore Certificated Warrants, as the case may be, of
authorized denominations representing, in the aggregate, the number of Warrants
theretofore represented by the Restricted Global Warrant or the Regulation S
Global Warrant, as the case may be.
(e) In connection with the transfer of a portion of the beneficial
interests in the Restricted Global Warrant or the Permanent Regulation S Global
Warrant to beneficial owners pursuant to paragraph (b) of this Section 8.2, the
Warrant Agent shall reflect on its books and records the date and a decrease in
the amount of Warrants represented by the Restricted Global Warrant or Permanent
Regulation S Global Warrant in an amount equal to the amount of Warrants
represented by the beneficial interest in the Restricted Global Warrant or
Permanent Regulation S Global Warrant to be transferred, and the Company shall
execute, and the Warrant Agent shall countersign and deliver, to each beneficial
owner identified by the
28
Depositary in exchange for its beneficial interest in the Restricted Global
Warrant or the Permanent Regulation S Global Warrant, as the case may be, U.S.
Certificated Warrants or Offshore Certificated Warrants, as the case may be, of
like tenor and amount.
(f) Any Certificated Warrant delivered in exchange for an interest
in a Global Warrant pursuant to paragraph (b), of this Section shall, except as
otherwise provided by paragraph (d) of Section 8.3 hereof, bear the legend
regarding transfer restrictions set forth in Section 2.2 hereof.
(g) The registered holder of a Global Warrant may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Agreement or the Warrants.
SECTION 8.3. SPECIAL TRANSFER PROVISIONS. The following provisions
shall apply:
(a) TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of Warrants to a QIB
(excluding non-U.S. Persons):
(i) If the Warrants to be transferred are represented by
Certificated Warrants or by an interest in the Temporary Regulation S
Global Warrant, the Warrant Agent shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box
provided for on the form of Warrant Certificate stating, or has otherwise
advised the Company and the Warrant Agent in writing, that the sale has
been made in compliance with the provisions of Rule 144A to a transferee
who has signed the certification provided for on the form of Warrant
Certificate stating, or has otherwise advised the Company and the Warrant
Agent in writing, that it is purchasing the Warrants for its own account or
an account with respect to which it exercises sole investment discretion
and that it and any such account is a QIB within the meaning of Rule 144A,
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as
it has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon
its foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the Warrants
to be transferred are represented by Certificated Warrants or an interest
in the Temporary Regulation S Global Warrant, upon receipt by the Warrant
Agent of the documents referred to in clause (i) above and instructions
given in accordance with the Depositary's and the Warrant Agent's
procedures, the Warrant Agent shall reflect on
29
its books and records the date and an increase in the amount of Warrants
represented by the Restricted Global Warrant in an amount equal to the
amount of Warrants represented by the Certificated Warrants or the interest
in the Temporary Regulation S Global Warrant, as the case may be, to be
transferred, and the Warrant Agent shall cancel the Certificated Warrants
or decrease the amount of the Temporary Regulation S Global Warrant so
transferred.
(b) TRANSFERS TO NON-U.S. PERSONS AT ANY TIME. The following
provisions shall apply with respect to the registration of any proposed transfer
of Warrants (other than transfer of the Regulation S Global Warrant) to a
Non-U.S. Person:
(i) The Warrant Agent shall register any proposed transfer of
Warrants to a Non-U.S. Person only upon receipt of a certificate
substantially in the form of Exhibit B from the proposed transferor.
(ii) If the proposed transferee is an Agent Member and the Warrants
to be transferred are represented by Certificated Warrants or an interest
in the Restricted Global Warrant, upon receipt by the Warrant Agent of the
documents referred to in clause (i) above and instructions given in
accordance with the Depositary's and the Warrant Agent's procedures, the
Warrant Agent shall reflect on its books and records the date and an
increase in the number of Warrants represented by the Regulation S Global
Warrant in an amount equal to the number of Warrants represented by the
Certificated Warrants or the Restricted Global Warrant, as the case may be,
to be transferred, and the Warrant Agent shall cancel the Certificated
Warrant or decrease the amount of Warrants represented by the Restricted
Global Warrant so transferred.
(c) TRANSFERS TO ANY OTHER PERSON. The following provisions shall
apply with respect to the registration of any proposed transfer of Warrants
(other than transfers of the Regulation S Global Warrant) to any Person not
specified in paragraphs (a) and (b) above (including any Institutional
Accredited Investor which is not a QIB).
(i) The Warrant Agent shall register any proposed transfer of
Warrants to any such Person if (x) the transferor has delivered to the
Warrant Agent and the Company a certificate substantially in the form of
Exhibit C-1 hereto and, if required by paragraph (d) thereof, an Opinion of
Counsel to the effect set forth therein and (y) the proposed transferee has
delivered to the Warrant Agent and the Company a certificate substantially
in the form of Exhibit C-2 hereto if such transferee is an Institutional
Accredited Investor that is not a QIB.
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(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the Restricted Global Warrant, upon receipt by the
Warrant Agent and the Company of the documents referred to in clause (i)
above and instructions given in accordance with the Depositary's and the
Warrant Agent's procedures, the Company shall execute and the Warrant Agent
shall countersign Certificated Warrants in an amount equal to the number of
Warrants represented by the Restricted Global Warrant, to be transferred
and the Warrant Agent shall decrease the number of Warrants represented by
the Restricted Global Warrant or the Regulation S Global Warrant so
transferred.
(d) TRANSFERS OF INTERESTS IN THE TEMPORARY REGULATION S GLOBAL
WARRANT. The following provisions shall apply with respect to registration of
any proposed transfer of interests in the Temporary Regulation S Global Warrant:
(i) The Warrant Agent shall register the transfer of any Warrant
(x) if the proposed transferee is a Non-U.S. Person and the proposed
transferor has delivered to the Warrant Agent a certificate substantially
in the form of Exhibit B hereto or (y) if the proposed transferee is a QIB
and the proposed transferor has checked the box provided for on the form of
Warrant Certificate stating, or has otherwise advised the Company and the
Warrant Agent in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Warrant Certificate stating, or
has otherwise advised the Company and the Warrant Agent in writing, that it
is purchasing the Warrant for its own account or an account with respect to
which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information and
that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration provided
by Rule 144A.
(ii) If the proposed transferee is an Agent Member, upon receipt by
the Warrant Agent of the documents referred to in clause (i)(y) above and
instructions given in accordance with the Depositary's and the Warrant
Agent's procedures, the Warrant Agent shall reflect on its books and
records the date and an increase in the number of Warrants represented by
the Regulation S Global Warrant or the Restricted Global Warrant, as the
case may be, in an amount equal to the number of Warrants represented by
the Temporary Regulation S Global Warrant to be transferred, and the
Warrant Agent shall decrease the number of Warrants represented by the
Temporary Regulation S Global Warrant.
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(e) TRANSFERS OF INTERESTS IN THE PERMANENT REGULATION S GLOBAL
WARRANT OR OFFSHORE CERTIFICATED WARRANTS. The Warrant Agent shall register the
transfer of any Permanent Regulation S Global Warrant or permanent Offshore
Certificated Warrant without requiring any additional certification.
(f) PRIVATE PLACEMENT LEGEND. Upon the registration of transfer,
exchange or replacement of Warrant Certificates not bearing the Private
Placement Legend, the Warrant Agent shall deliver Warrant Certificates that do
not bear the Private Placement Legend. Upon the registration of transfer,
exchange or replacement of Warrant Certificates bearing the Private Placement
Legend, the Warrant Agent shall deliver only Warrant Certificates that bear the
Private Placement Legend unless either (i) the circumstances contemplated by the
third sentence of the third paragraph of Section 2.1 exist or (ii) there is
delivered to the Warrant Agent an opinion of counsel reasonably satisfactory to
the Company, its Counsel and the Warrant Agent to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(g) GENERAL. (i) By its acceptance of any Warrants represented by
a Warrant Certificate bearing the Private Placement Legend, each Holder of such
Warrants acknowledges the restrictions on transfer of such Warrants set forth in
this Agreement and in the Private Placement Legend and agrees that it will
transfer such Warrants only as provided in this Agreement. The Warrant Agent
shall not register a transfer of any Warrants unless such transfer complies with
the restrictions on transfer of such Warrants set forth in this Agreement. In
connection with any transfer of Warrants, each Holder agrees by its acceptance
of Warrants to furnish the Warrant Agent or the Company such certifications,
legal opinions or other information as either of them may reasonably require to
confirm that such transfer is being made pursuant to an exemption from, or a
transaction not subject to, the registration requirements of the Securities Act
or any applicable laws of any state or foreign jurisdiction; PROVIDED that the
Warrant Agent shall not be required to determine (but may rely on a
determination made by the Company with respect to) the sufficiency of any such
certifications, legal opinions or other information.
(ii) The Warrant Agent shall retain, in accordance with its
customary procedure, copies of all letters, notices and other written
communications received pursuant to Section 8.2 hereof or this Section 8.3.
The Company shall have the right to inspect and make copies of all such
letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Warrant Agent.
32
SECTION 8.4. SURRENDER OF WARRANT CERTIFICATES. Any Warrant
Certificate surrendered for registration of transfer, exchange or exercise of
the Warrants represented thereby shall, if surrendered to the Company, be
delivered to the Warrant Agent, and all Warrant Certificates surrendered or so
delivered to the Warrant Agent shall be promptly cancelled by the Warrant Agent
and shall not be reissued by the Company and, except as provided in this Article
VIII in case of an exchange, Article III hereof in case of the exercise of less
than all the Warrants represented thereby or Article VI in case of a mutilated
Warrant Certificate, no Warrant Certificate shall be issued hereunder in lieu
thereof. The Warrant Agent shall deliver to the Company from time to time or
otherwise dispose of such cancelled Warrant Certificates as the Company may
direct in writing.
ARTICLE IX
WARRANT HOLDERS
SECTION 9.1. WARRANT HOLDER DEEMED NOT A SHAREHOLDER. The Company
and the Warrant Agent may deem and treat the registered Holder(s) of the Warrant
Certificates as the absolute owner(s) thereof (notwithstanding any notation of
ownership or other writing thereon made by anyone), for the purpose of any
exercise thereof and for all other purposes, and neither the Company nor the
Warrant Agent nor any agent thereof shall be affected by any notice to the
contrary. Accordingly, the Company and/or the Warrant Agent shall not, except
as ordered by a court of competent jurisdiction as required by law, be bound to
recognize any equitable or other claim to or interest in the Warrants on the
part of any Person other than such registered Holder, whether or not it shall
have express or other notice thereof. Prior to the valid exercise of the
Warrants, no Holder of a Warrant Certificate, as such, shall be entitled to any
rights of a shareholder of the Company, including, without limitation, the right
to vote or to consent to any action of the shareholders, to receive dividends or
other distributions, to exercise any preemptive right or to receive any notice
of meetings of shareholders and, except as otherwise provided in this Agreement,
shall not be entitled to receive any notice of any proceedings of the Company.
SECTION 9.2. RIGHT OF ACTION. All rights of action with respect to
this Agreement are vested in the Holders of the Warrants, and any Holder of any
Warrant, without the consent of the Warrant Agent or the Holders of any other
Warrant, may, on such Holder's own behalf and for such Holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company suitable to enforce, or otherwise in respect of, such Holder's right
to exercise such Warrants in the manner provided in the Warrant Certificate
representing such Warrants and in this Agreement.
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ARTICLE X
THE WARRANT AGENT
SECTION 10.1. DUTIES AND LIABILITIES. The Warrant Agent hereby
accepts the agency established by this Agreement and agrees to perform the same
upon the terms and conditions herein set forth, by all of which the Company and
the Holders of Warrants, by their acceptance thereof, shall be bound. The
Warrant Agent shall not, by countersigning Warrant Certificates or by any other
act hereunder, be deemed to make any representations as to the validity or
authorization of the Warrants or the Warrant Certificates (except as to its
countersignature thereon) or of any Common Shares issued upon exercise of any
Warrant, or as to the accuracy of the computation of the Exercise Price or the
number or kind or amount of Common Shares deliverable upon exercise of any
Warrant or the correctness of the representations of the Company made in the
certificates that the Warrant Agent receives. The Warrant Agent shall not be
accountable for the use or application by the Company of the proceeds of the
exercise of any Warrant. The Warrant Agent shall not have any duty to calculate
or determine any adjustments with respect to either the Exercise Price or the
kind and amount of Common Shares receivable by Holders upon the exercise of
Warrants required from time to time and the Warrant Agent shall have no duty or
responsibility in determining the accuracy or correctness of such calculation.
The Warrant Agent shall not be (a) liable for any recital or statement of fact
contained herein or in the Warrant Certificates or for any action taken,
suffered or omitted by it in good faith in the belief that any Warrant
Certificate or any other documents or any signatures are genuine or properly
authorized, (b) responsible for any failure on the part of the Company to comply
with any of its covenants and obligations contained in this Agreement or in the
Warrant Certificates or (c) liable for any act or omission in connection with
this Agreement except for its own gross negligence, bad faith or willful
misconduct. The Warrant Agent is hereby authorized to accept instructions with
respect to the performance of its duties hereunder from the Chairman of the
Board, the Vice Chairman of the Board, the President, Chief Executive Officer,
the Chief Operating Officer, the Chief Financial Officer, or any other executive
officer of the Company and to apply to any such officer for instructions (which
instructions will be promptly given in writing when requested) and the Warrant
Agent shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with the instructions of any such officer; PROVIDED,
HOWEVER, that, in its discretion, the Warrant Agent may, in lieu thereof, accept
other evidence of such or may require such further or additional evidence as it
may deem reasonable. The Warrant Agent shall not be liable for any action taken
with respect to any matter in the event it requests instructions from the
Company as to that matter and does not receive such instructions within a
reasonable period of time after the request therefor.
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The Warrant Agent may execute and exercise any of the rights and
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys, agents or employees, and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys, agents or employees; PROVIDED that reasonable care has been
exercised with respect to the retention of any such attorney, agent or employee.
The Warrant Agent shall not be under any obligation or duty to institute, appear
in or defend any action, suit or legal proceeding in respect hereof, unless
first indemnified to its reasonable satisfaction. The Warrant Agent shall
promptly notify the Company in writing of any claim made or action, suit or
proceeding instituted against it arising out of or in connection with this
Agreement.
The Company will perform, execute, acknowledge and deliver or cause to
be delivered all such further acts, instruments and assurances as are consistent
with this Agreement and as may reasonably be required by the Warrant Agent in
order to enable it to carry out or perform its duties under this Agreement.
The Warrant Agent shall act solely as agent of the Company hereunder.
The Warrant Agent shall not be liable except for the failure to perform such
duties as are specifically set forth herein, and no implied covenants or
obligations shall be read into this Agreement against the Warrant Agent, whose
duties and obligations shall be determined solely by the express provisions
hereof.
SECTION 10.2. RIGHT TO CONSULT COUNSEL. The Warrant Agent may at any
time consult with legal counsel (who may be legal counsel for the Company), and
the written opinion or advice of such counsel shall be full and complete
authorization and protection to the Warrant Agent and the Warrant Agent shall
incur no liability or responsibility to the Company or to any Holder for any
action taken, suffered or omitted by it in good faith in accordance with the
opinion or advice of such counsel.
SECTION 10.3. COMPENSATION; INDEMNIFICATION. The Company agrees
promptly to pay the Warrant Agent from time to time and in any case within 30
days of receipt of an invoice, compensation for its services hereunder as the
Company and the Warrant Agent may agree from time to time, and to reimburse it
upon its request (which shall be accompanied by reasonable supporting
documentation) for reasonable fees or expenses and reasonable counsel fees and
expenses incurred in connection with the execution and administration of this
Agreement, and further agrees to indemnify the Warrant Agent and save it
harmless against any losses, liabilities or reasonable expenses arising out of
or in connection with the acceptance and administration of this Agreement,
including, without limitation, the reasonable costs and expenses of
investigating or defending any claim of such liability, except that the Company
shall have no liability hereunder to the extent that any such loss, liability or
expense
35
results from the Warrant Agent's own gross negligence, bad faith or willful
misconduct. The obligations of the Company under this Section 10.3 shall
survive the exercise and the expiration of the Warrants, the termination of this
Agreement and the resignation or removal of the Warrant Agent in respect of
services or expenses incurred in connection with the Warrants or this Agreement.
SECTION 10.4. NO RESTRICTIONS ON ACTIONS. Nothing in this Agreement
shall be deemed to prevent the Warrant Agent and any shareholder, director,
officer or employee of the Warrant Agent from buying, selling or dealing in any
of the Warrants or other securities of the Company or becoming pecuniarily
interested in transactions in which the Company may be interested, or
contracting with or lending money to the Company or otherwise acting as fully
and freely as though it were not the Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
SECTION 10.5. DISCHARGE OR REMOVAL; REPLACEMENT WARRANT AGENT. The
Warrant Agent may resign from its position as such and be discharged from all
further duties and liabilities hereunder (except liability arising as a result
of the Warrant Agent's own gross negligence, bad faith or willful misconduct),
after giving one month's prior written notice to the Company. The Company may
at any time remove the Warrant Agent upon one month's written notice specifying
the date when such discharge shall take effect, and the Warrant Agent shall
thereupon in like manner be discharged from all further duties and liabilities
hereunder, except as aforesaid. The Warrant Agent shall mail to each Holder of
a Warrant, at the Company's expense, a copy of said notice of resignation or
notice of removal, as the case may be. Upon such resignation or removal the
Company shall appoint in writing a new warrant agent. If the Company shall fail
to make such appointment within a period of 30 days after it has been notified
in writing of such resignation by the resigning Warrant Agent or after such
removal, then the resigning or removed Warrant Agent or the Holder of any
Warrant may apply to any court of competent jurisdiction for the appointment of
a new warrant agent. After 30 days from receipt of, or giving, notice, as the
case may be, and pending appointment of a successor to the original Warrant
Agent, either by the Company or by such a court, the duties of the Warrant Agent
shall be carried out by the Company. Any new warrant agent, whether appointed
by the Company or by such a court, shall be a bank or trust company doing
business under the laws of the United States or any state thereof, in good
standing and having a combined capital and surplus of not less than $25,000,000.
The combined capital and surplus of any such new warrant agent shall be deemed
to be the combined capital and surplus as set forth in the most recent annual
report of its condition published by such warrant agent prior to its
appointment, PROVIDED that such reports are published at least annually pursuant
to law or to the requirements of a federal or state supervising or examining
authority. After acceptance in writing of such appointment by the new warrant
agent, it shall be vested with
36
the same powers, rights, duties and responsibilities as if it had been
originally named herein as the Warrant Agent, without any further assurance,
conveyance, act or deed; however, the original Warrant Agent shall in all events
deliver and transfer to the successor Warrant Agent all property (including,
without limitation, documents and recorded information), if any, at the time
held hereunder by the original Warrant Agent and if for any reason it shall be
necessary or expedient to execute and deliver any further assurance, conveyance,
act or deed, the same shall be done at the expense of the Company and shall be
legally and validly executed and delivered by the resigning or removed Warrant
Agent. Not later than the effective date of any such appointment, the Company
shall file notice thereof with the resigning or removed Warrant Agent and shall
use its reasonable best efforts to forthwith cause a copy of such notice to be
mailed by the successor Warrant Agent to each Holder of a Warrant. Failure to
give any notice provided for in this Section 10.5, however, or any defect
therein, shall not affect the legality or validity of the resignation of the
Warrant Agent or the appointment of a new warrant agent, as the case may be. No
Warrant Agent hereunder shall be liable for any acts or omissions of any
successor Warrant Agent.
SECTION 10.6. SUCCESSOR WARRANT AGENT. Any corporation into which
the Warrant Agent or any new warrant agent may be merged or converted, or any
corporation resulting from any consolidation to which the Warrant Agent or any
new warrant agent shall be a party or any corporation succeeding to all or
substantially all the corporate agency business of the Warrant Agent, shall be a
successor Warrant Agent under this Agreement without any further act, PROVIDED
that such corporation would be eligible for appointment as successor to the
Warrant Agent under the provisions of Section 10.5 hereof. Any such successor
Warrant Agent shall promptly cause notice of its succession as Warrant Agent to
be mailed to each Holder of a Warrant.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. MONIES DEPOSITED WITH THE WARRANT AGENT. The Warrant
Agent shall not be required to pay interest on any monies deposited pursuant to
the provisions of this Agreement except such as it shall agree in writing with
the Company to pay thereon. Any monies, securities or other property which at
any time shall be deposited by the Company or on its behalf with the Warrant
Agent pursuant to this Agreement shall be and are hereby assigned, transferred
and set over to the Warrant Agent in trust for the purpose for which such
monies, securities or other property shall have been deposited; but such monies,
securities or other property need not be segregated from other funds, securities
or other property except to the extent required by law. Any monies, securities
or other property deposited with the
37
Warrant Agent for payment or distribution to the Holders that remains unclaimed
for one year after the date the monies, securities or other property was
deposited with the Warrant Agent shall be delivered to the Company upon its
request therefor.
SECTION 11.2. PAYMENT OF TAXES. Subject to Article VI hereof, all
Common Shares issuable upon the exercise of Warrants shall be validly issued,
fully paid and not subject to any calls for funds, and the Company shall pay any
taxes and other governmental charges that may be imposed under the laws of the
United States of America or any political subdivision or taxing authority
thereof or therein in respect of the issue or delivery thereof upon exercise of
Warrants (other than income taxes imposed on the Holders). The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for Common Shares
(including other securities or property issuable upon the exercise of the
Warrants) or payment of cash to any Person other than the Holder of a Warrant
Certificate surrendered upon the exercise of a Warrant and in case of such
transfer or payment, the Warrant Agent and the Company shall not be required to
issue any share certificate or pay any cash until such tax or charge has been
paid or it has been established to the Warrant Agent's and the Company's
satisfaction that no such tax or charge is due.
SECTION 11.3. NO MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE
COMPANY. Except as otherwise provided herein, the Company will not merge into
or consolidate with any other Person, or sell or otherwise transfer its
property, assets and business substantially as an entirety to a successor of the
Company, unless the Person resulting from such merger or consolidation, or such
successor of the Company, shall expressly assume, by supplemental agreement
satisfactory in form to the Warrant Agent and executed and delivered to the
Warrant Agent, the due and punctual performance and observance of each and every
covenant and condition of this Agreement or contained in the Warrants to be
performed and observed by the Company.
SECTION 11.4. REPORTS TO HOLDERS. At all times from and after the
earlier of (i) the Separation Date and (ii) the date that is six months after
the Closing Date, in either case, whether or not the Company is then required to
file reports with the Commission, the Company shall file with the Commission all
such reports and other information it would be required to file with the
Commission by Section 13(a) or 15(d) under the Exchange Act if it were subject
thereto. The Company shall supply the Warrant Agent and each Holder or shall
supply to the Warrant Agent for forwarding to each such Holder, without cost to
such Holder, copies of such reports and other information. In addition, at all
times, upon the request of any Holder or any prospective purchaser of the
Warrants designated by a Holder, the Company shall supply to such Holder or such
prospective purchaser the information required under Rule 144A under the
Securities Act.
38
SECTION 11.5. NOTICES; PAYMENT. (a) Except as otherwise provided in
Section 11.5(b) hereof, any notice, demand or delivery authorized by this
Agreement shall be sufficiently given or made when mailed, if sent by first
class mail, postage prepaid, addressed to any Holder of a Warrant at such
Holder's last known address appearing on the register of the Company maintained
by the Warrant Agent and to the Company or the Warrant Agent as follows:
To the Company:
KMC Telecom Holdings, Inc.
0000 Xxxxx 000, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Chief Financial Officer
To the Warrant Agent:
The Chase Manhattan Bank
000 Xxxx 00xx Xx., 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Global Trust Services
or such other address as shall have been furnished to the party giving or making
such notice, demand or delivery. Any notice that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given when mailed,
whether or not the Holder receives the notice.
(b) Payment of the Exercise Price should be made in accordance with
the provisions of this Agreement at the office of the Warrant Agent set forth
above.
(c) Any notice required to be given by the Company to the Holders
shall be made by mailing to the Holders at their last known addresses appearing
on the register maintained by the Warrant Agent. The Company hereby irrevocably
authorizes the Warrant Agent, in the name and at the expense of the Company, to
mail any such notice upon receipt thereof from the Company. Any notice that is
mailed in the manner herein provided shall be conclusively presumed to have been
duly given when mailed, whether or not the Holder receives the notice.
SECTION 11.6. BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the Company and the Warrant Agent and their
respective successors and assigns, and the Holders from time to time of the
Warrants. Nothing in this Agreement is
39
intended or shall be construed to confer upon any Person, other than the
Company, the Warrant Agent and the Holders of the Warrants, any right, remedy or
claim under or by reason of this Agreement or any part hereof.
SECTION 11.7. COUNTERPARTS. This Agreement may be executed manually
or by facsimile in any number of counterparts, each of which shall be deemed an
original, but all of which together constitute one and the same instrument.
SECTION 11.8. AMENDMENTS. The Warrant Agent may, without the consent
or concurrence of the Holders of the Warrants, by supplemental agreement or
otherwise, join with the Company in making any changes or corrections in this
Agreement that (a) are required to cure any ambiguity or to correct any
defective or inconsistent provision or clerical omission or mistake or manifest
error herein contained or (b) add to the covenants and agreements of the Company
in this Agreement further covenants and agreements of the Company thereafter to
be observed, or surrender any rights or power reserved to or conferred upon the
Company in this Agreement; PROVIDED that in either case such changes or
corrections do not and will not adversely affect, alter or change the rights,
privileges or immunities of the Holders of Warrants. Upon the Warrant Agent's
request, the Company shall promptly provide an Officer's Certificate and Opinion
of Counsel which provide that all conditions precedent to adoption of an
amendment have been satisfied.
SECTION 11.9. HEADINGS. The descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
SECTION 11.10. COMMON SHARES LEGEND. Unless and until the Common
Shares issuable upon the exercise of the Warrants are registered under the
Securities Act, or unless otherwise agreed by the Company and the Holder
thereof, such Common Shares will bear a legend to the following effect:
THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAWS, AND ACCORDINGLY, MAY
NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS
EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS AN
40
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL
ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE
COMMON SHARES REPRESENTED BY THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT IT
WILL NOT, WITHIN THE TIME PERIOD REFERRED TO IN RULE 144(k) (TAKING INTO
ACCOUNT THE PROVISIONS OF RULE 144(d) UNDER THE SECURITIES ACT, IF
APPLICABLE), AS IN EFFECT WITH RESPECT TO SUCH TRANSFER, RESELL OR
OTHERWISE TRANSFER THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE EXCEPT
(A) TO KMC TELECOM HOLDINGS, INC. (THE "COMPANY") OR ANY SUBSIDIARY
THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE
144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES
TO THE TRANSFER AGENT AND REGISTRAR A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF
THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRANSFER AGENT AND REGISTRAR) AND AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT,
(E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL
DELIVER TO EACH PERSON TO WHOM THE COMMON SHARES REPRESENTED BY THIS
CERTIFICATE ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS
LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE COMMON SHARES REPRESENTED
BY THIS CERTIFICATE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER
MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO
THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRANSFER
AGENT AND REGISTRAR. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED
41
INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO EACH OF THE
TRANSFER AGENT AND REGISTRAR AND THE COMPANY SUCH CERTIFICATIONS, LEGAL
OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO
CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR
IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT. THE WARRANT AGREEMENT CONTAINS A PROVISION
REQUIRING THE TRANSFER AGENT AND REGISTRAR TO REFUSE TO REGISTER ANY
TRANSFER OF THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE IN
VIOLATION OF THE FOREGOING RESTRICTIONS.
SECTION 11.11. THIRD PARTY BENEFICIARIES. The Holders shall be third
party beneficiaries to the agreements made hereunder between the Company, on the
one hand, and the Warrant Agent, on the other hand, and each Holder shall have
the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder. By acquiring Warrants, each Holder agrees to be bound by the
obligations of Holders generally as set forth herein and as such obligations may
be applicable to such Holder.
SECTION 11.12. TERMINATION. Except as otherwise specified herein,
this Agreement shall terminate at 5:00 p.m. (New York City time) on the
Expiration Date. Notwithstanding the foregoing, this Agreement shall terminate
on any earlier date as of which all Warrants have been exercised.
SECTION 11.13. GOVERNING LAW. This Agreement shall be governed by
the laws of the State of New York.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, as of the day and year first above written.
KMC TELECOM HOLDINGS, INC.
By:
-----------------------------------
Name:
Title:
THE CHASE MANHATTAN BANK, as Warrant Agent
By:
-----------------------------------
Name: Xxxxxxxx Xxxxx
Title:
EXHIBIT A
FORM OF WARRANT CERTIFICATE
KMC TELECOM HOLDINGS, INC.
[CUSIP] [CINS] [ISIN] No. _____
No. _____
WARRANTS TO PURCHASE COMMON SHARES
This certifies that ______________, or its registered assigns, is the
owner of ___________ Warrants, each of which represents the right to purchase,
after January 29, 1999, from KMC TELECOM HOLDINGS, INC., a Delaware corporation
(the "COMPANY"), 0.21785 shares of the Common Stock, par value $0.01 per share,
of the Company (the "COMMON SHARES") at an exercise price (the "EXERCISE PRICE")
of $0.01 per Common Share (subject to adjustment as provided in the Warrant
Agreement hereinafter referred to below), upon surrender hereof at the office of
The Chase Manhattan Bank, or to its successor, as the warrant agent under the
Warrant Agreement (any such warrant agent being herein called the "WARRANT
AGENT"), with the Subscription Form on the reverse hereof duly executed, with
signature guaranteed as therein specified and simultaneous payment in full by
wire transfer, in cash or by certified or official bank or bank cashier's check
payable to the order of the Company. Notwithstanding the foregoing, if the
Common Shares (or other securities) issuable upon exercise of the Warrants are
registered under the Exchange Act, the Exercise Price may be paid by
surrendering additional Warrants to the Warrant Agent having an aggregate Spread
equal to the aggregate Exercise Price of the Warrants being exercised. At any
time beginning one year after the Closing Date and on or before the Expiration
Date, any outstanding Warrants may be exercised on any Business Day; PROVIDED
that the Warrant Registration Statement is, at the time of exercise, effective
and available for the exercise of Warrants or the exercise of such Warrants is
exempt from the registration requirements of the Securities Act.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of January 29, 1998 (the "WARRANT AGREEMENT"),
between the Company and The Chase Manhattan Bank and a Warrant Registration
Rights Agreement dated as of January 26, 1998 (the "WARRANT REGISTRATION RIGHTS
AGREEMENT"), between the Company and Xxxxxx Xxxxxxx & Co. Incorporated, and is
subject to the Certificate of Incorporation and Bylaws of the Company and to the
terms and provisions contained therein, to all of which terms and provisions the
Holder of this Warrant Certificate consents by acceptance hereof. The terms of
the Warrant Agreement and the Warrant Registration Rights Agreement are hereby
incorporated herein by reference and made a part hereof. Reference is hereby
made to the Warrant Agreement and the Warrant Registration Rights Agreement for
a full description
A-2
of the rights, limitations of rights, obligations, duties and immunities
thereunder of the Company and the Holders of the Warrants. The summary of the
terms of the Warrant Agreement and the Warrant Registration Rights Agreement
contained in this Warrant Certificate is qualified in its entirety by express
reference to the Warrant Agreement and the Warrant Registration Rights
Agreement. All terms used in this Warrant Certificate that are defined in the
Warrant Agreement and the Warrant Registration Rights Agreement shall have the
meanings assigned to them in such agreements.
Copies of the Warrant Agreement and the Warrant Registration Rights
Agreement are on file at the office of the Warrant Agent and may be obtained by
writing to the Warrant Agent at the following address:
The Chase Manhattan Bank
000 Xxxx 00xx Xx., 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Global Trust Services
If the Company merges or consolidates with or into, or sells all or
substantially all of its property and assets to, another Person and the
consideration received by holders of Common Shares consists solely of cash, the
Holders of Warrants shall be entitled to receive distributions on the date of
such event on an equal basis with holders of Common Shares (or other securities
issuable upon exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event (less the Exercise Price). Upon receipt of such
payment, if any, the rights of a Holder shall terminate and cease and such
Holder's Warrants shall expire.
The number of Common Shares purchasable upon the exercise of each
Warrant and the price per share are subject to adjustment as provided in the
Warrant Agreement. Except as stated in the immediately preceding paragraph, in
the event the Company merges or consolidates with, or sells all or substantially
all of its assets to, another Person, each Warrant will, upon exercise, entitle
the Holder thereof to receive the number of shares of capital stock or other
securities or the amount of money and other property which the holder of a
Common Share (or other securities or property issuable upon exercise of a
Warrant) is entitled to receive upon completion of such merger, consolidation or
sale.
As to any final fraction of a share which the same Holder of one or
more Warrant Certificates would otherwise be entitled to purchase upon exercise
thereof in the same transaction, the Company may pay the cash value thereof
determined as provided in the Warrant Agreement.
A-3
Subject to Article VI of the Warrant Agreement, all Common Shares
issuable by the Company upon the exercise of Warrants shall be validly issued,
fully paid and not subject to any calls for funds, and the Company shall pay any
taxes and other governmental charges that may be imposed under the laws of the
United States of America or any political subdivision or taxing authority
thereof or therein in respect of the issue or delivery thereof upon exercise of
Warrants (other than income taxes imposed on the Holders). The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for Common Shares
(including other securities or property issuable upon the exercise of the
Warrants) or payment of cash to any Person other than the Holder of a Warrant
Certificate surrendered upon the exercise of a Warrant and in case of such
transfer or payment, the Warrant Agent and the Company shall not be required to
issue any share certificate or pay any cash until such tax or charge has been
paid or it has been established to the Warrant Agent's and the Company's
satisfaction that no such tax or charge is due.
Subject to the restrictions on and conditions to transfer set forth in
Articles II and VIII of the Warrant Agreement, this Warrant Certificate and all
rights hereunder are transferable by the registered Holder hereof, in whole or
in part, on the register of the Company maintained by the Warrant Agent for such
purpose at the Warrant Agent's office in New York, New York, upon surrender of
this Warrant Certificate duly endorsed, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Warrant Agent duly
executed, with signatures guaranteed as specified in the attached Form of
Assignment, by the registered Holder hereof or his attorney duly authorized in
writing and by such other documentation required pursuant to the Warrant
Agreement and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. Upon any partial transfer, the Company will
sign and issue and the Warrant Agent will countersign and deliver to such Holder
a new Warrant Certificate or Certificates with respect to any portion not so
transferred. Each taker and Holder of this Warrant Certificate, by taking and
holding the same, consents and agrees that prior to the registration of transfer
as provided in the Warrant Agreement, the Company and the Warrant Agent may
treat the Person in whose name the Warrants are registered as the absolute owner
hereof for any purpose and as the Person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding. Accordingly,
the Company and/or the Warrant Agent shall not, except as ordered by a court of
competent jurisdiction as required by law, be bound to recognize any equitable
or other claim to or interest in the Warrants on the part of any Person other
than such registered Holder, whether or not it shall have express or other
notice thereof.
This Warrant Certificate may be exchanged at the office of the Warrant
Agent maintained for such purpose in New York, New York for Warrant Certificates
representing
A-4
the same aggregate number of Warrants, each new Warrant Certificate to represent
such number of Warrants as the Holder hereof shall designate at the time of such
exchange.
Prior to the valid exercise of the Warrants represented hereby, the
Holder of this Warrant Certificate, as such, shall not be entitled to any rights
of a shareholder of the Company, including, without limitation, the right to
vote or to consent to any action of the shareholders, to receive any
distributions, to exercise any pre-emptive right or to receive any notice of
meetings of shareholders, and shall not be entitled to receive any notice of any
proceedings of the Company except as provided in the Warrant Agreement.
This Warrant Certificate shall be void and all rights evidenced hereby
shall cease on January 31, 2008, unless sooner terminated by the liquidation,
dissolution or winding-up of the Company or as otherwise provided in the Warrant
Agreement upon the consolidation or merger of the Company with, or sale of the
Company to, another Person or unless such date is extended as provided in the
Warrant Agreement.
[Balance of page intentionally left blank.]
A-5
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
KMC TELECOM HOLDINGS, INC.
By:
------------------------------
Name:
Title:
Dated:
Countersigned:
THE CHASE MANHATTAN BANK,
as Warrant Agent
By:
------------------------------
Name:
Title:
A-6
FORM OF REVERSE OF WARRANT CERTIFICATE
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: The Chase Manhattan Bank
000 Xxxx 00xx Xx., 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Global Trust Services
The undersigned irrevocably exercises ________ of the Warrants
represented by this Warrant Certificate and herewith makes payment of $ _______
(such payment being by wire transfer, in cash or by certified or official bank
or bank cashier's check payable to the order or at the direction of KMC Telecom
Holdings, Inc. or, if the Common Shares (or other securities) issuable upon
exercise of the Warrants are registered under the Exchange Act, the exercise
price may be paid by surrendering additional Warrants to the Warrant Agent
having an aggregate Spread equal to the aggregate exercise price of the Warrants
being exercised) all at the exercise price and on the terms and conditions
specified in this Warrant Certificate and in the Warrant Agreement and the
Warrant Registration Rights Agreement referred to herein and surrenders this
Warrant Certificate and all right, title and interest therein to and directs
that the shares of Common Stock, par value $.01 per share, of KMC Telecom
Holdings, Inc. (the "COMMON SHARES") deliverable upon the exercise of such
Warrants be registered or placed in the name and at the address specified below
and delivered thereto.
CHECK ONE
/ / Payment made by wire transfer, in cash, or by certified or
official bank or bank cashier's check.
OR
/ / The Common Shares (or other securities) issuable upon exercise
of the Warrants are registered under the Exchange Act and
Payment is being made by surrendering Warrants having an
aggregate Spread equal to the aggregate Exercise Price of the
Warrants being exercised.
[THE FOLLOWING PROVISION TO BE INCLUDED ONLY
ON OFFSHORE CERTIFICATED WARRANTS]
The undersigned certifies that:
A-7
CHECK ONE
/ / (a) (i) it is not a U.S. person (as defined in Rule 902 of
Regulation S under the Securities Act) and the Warrants are not
being exercised on behalf of a U.S. person.
OR
/ / (ii) it is furnishing to the Warrant Agent a written opinion of
counsel to the effect that the Warrants and the Common Shares
issuable upon exercise of the Warrants have been registered
under the Securities Act or are exempt from registration
thereunder.
and (b) if an opinion is not being furnished, the undersigned is located outside
the United States at the time of the exercise hereof.
Dated: _______________________________
(Signature of Owner)
_______________________________
(Xxxxxx Xxxxxxx)
_______________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
_______________________________
Securities and/or check or other property to be issued or delivered to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
A-8
FORM OF ASSIGNMENT
In consideration of monies or other valuable consideration received
from the Assignee(s) named below, the undersigned registered Holder of this
Warrant Certificate hereby sells, assigns, and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Warrants constituting
a part of the Warrants evidenced by this Warrant Certificate not being assigned
hereby) all of the right of the undersigned under this Warrant Certificate, with
respect to the number of Warrants set forth below:
Name(s) of Assignee(s): _____________________________________
Address: ____________________________________________________
No. of Warrants: ____________________________________________
Please insert social security or other identifying number of assignee(s):
and does hereby irrevocably constitute and appoint ________________________ the
undersigned's attorney to make such transfer on the books of __________________
maintained for the purposes, with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES EXCEPT PERMANENT
REGULATION S GLOBAL WARRANTS AND OFFSHORE CERTIFICATED WARRANTS]
In connection with any transfer of Warrants, the undersigned confirms
that without utilizing any general solicitation or general advertising that:
[Check One]
/ / (a) these Warrants are being transferred in compliance with the exemption
from registration under the U.S. Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
OR
/ / (b) these Warrants are being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Warrant Certificate and the
Warrant Agreement.
OR
A-9
/ / (c) these Warrants are being transferred pursuant to an effective
registration statement under the U.S. Securities Act of 1933, as
amended.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Article VIII of the Warrant Agreement shall
have been satisfied.
Dated:
_______________________________
(Signature of Owner)
_______________________________
(Xxxxxx Xxxxxxx)
_______________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
_______________________________
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing the
Warrant(s) for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the U.S. Securities
Act of 1933, as amended, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding KMC Telecom Holdings, Inc. as the undersigned has requested pursuant
to Rule 144A or has determined not to request such information and that it is
aware that the transferor is relying upon the undersigned's foregoing
representations in order to claim the exemption from registration provided by
Rule 144A.
Dated:________________
________________________________________
[NOTE: To be executed by an executive officer]
EXHIBIT B
Form of Certificate to be Delivered
in Connection with
Transfers Pursuant to Regulation S
----------------------------------
[Date]
KMC Telecom Holdings, Inc.
0000 Xxxxx 000, Xxxxx 000
Xxxxxxxxxx, XX 00000
The Chase Manhattan Bank
000 Xxxx 00xx Xx., 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Global Trust Services
Re: KMC Telecom Holdings, Inc.
(the "COMPANY") Warrants to Purchase
Common Shares (the "WARRANTS")
Ladies and Gentlemen:
In connection with our proposed sale of _______________ Warrants, we
hereby certify that such sale has been effected pursuant to and in accordance
with Regulation S under the U.S. Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, we represent that:
(1) the offer of the Warrants was not made to a person in the
United States and not to a U.S. Person (as defined in Regulation S
under the Securities Act);
(2) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States;
(3) no directed selling efforts (as such term is defined in
Rule 902(b) of Regulations S under the Securities Act) have been made
by us, any of our affiliates
B-2
or any persons acting on our behalf in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S under the Securities Act, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
-------------------------
Authorized Signature
EXHIBIT C-1
Form of Certificate to be
Delivered by Transferor in Connection with
Transfers to Institutional Accredited Investors
-----------------------------------------------
[Date]
KMC Telecom Holdings, Inc.
0000 Xxxxx 000, Xxxxx 000
Xxxxxxxxxx, XX 00000
The Chase Manhattan Bank
000 Xxxx 00xx Xx., 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Global Trust Services
Re: Warrants (the "Warrants") to Purchase
Common Shares of KMC Telecom Holdings, Inc. (the "Company")
Ladies and Gentlemen:
We hereby certify that such transfer is being effected in compliance
with the transfer restrictions applicable to the Warrants or interests therein
transferred pursuant to and in accordance with the Securities Act, and
accordingly we hereby further certify that (check one):
(a) / / such transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) / / such transfer is being effected to the Company or a subsidiary
thereof;
or
(c) / / such transfer is being effected pursuant to an effective
registration statement under the Securities Act;
or
C1-2
(d) / / such transfer is being effected pursuant to an exemption from
the registration requirements of the Securities Act other than Rule 144A, Rule
144 or Rule 904, and we hereby further certify that such transfer complies with
the transfer restrictions applicable to the Warrants or interests therein
transferred to Institutional Accredited Investors and in accordance with the
requirements of the exemption claimed, which certification is supported by an
Opinion of Counsel provided by us or the transferee (a copy of which we have
attached to this certification), to the effect that such transfer is in
compliance with the Securities Act. Upon consummation of the proposed transfer
in accordance with the terms of the Warrant Agreement, the transferred Warrants
or interests therein will be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the IAI Certificated Warrant and in
the Warrant Agreement and the Securities Act.
Very truly yours,
[Name of Transferor]
By:
------------------------------
Authorized Signatory
EXHIBIT C-2
Form of Certificate to be
Delivered By Transferees in Connection with
Transfers to Institutional Accredited Investors
-----------------------------------------------
[Date]
KMC Telecom Holdings, Inc.
0000 Xxxxx 000, Xxxxx 000
Xxxxxxxxxx, XX 00000
The Chase Manhattan Bank
000 Xxxx 00xx Xx., 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Global Trust Services
Re: Warrants (the "WARRANTS") to Purchase
Common Shares of
KMC Telecom Holdings, Inc. (the "COMPANY")
Ladies and Gentlemen:
In connection with our proposed purchase of ___________ aggregate
number of Warrants, we confirm that:
1. We understand that any subsequent transfer of the Warrants, any
interest therein or the Common Shares issuable upon exercise of any Warrant
(the "WARRANT SHARES") is subject to certain restrictions and conditions
set forth in the Warrant Agreement dated as of January 29, 1998 relating to
the Warrants (the "WARRANT AGREEMENT") and the Warrant Registration Rights
Agreement dated January 26, 1998 relating to the Warrants (the "WARRANT
REGISTRATION RIGHTS AGREEMENT") and the undersigned agrees to be bound by,
and not to resell, pledge or otherwise transfer the Warrants or Warrant
Shares except in compliance with, such restrictions and conditions and the
U.S. Securities Act of 1933, as amended (the "SECURITIES ACT").
2. We understand that the Warrants represented by this Warrant
Certificate and, as of the date this Warrant Certificate was originally
issued, the Warrant Shares have not been registered under the Securities
Act, and accordingly may not be offered, sold, pledged or otherwise
transferred within the United States or to, or for the account
C2-2
or benefit of, U.S. Persons except as set forth in the following sentence.
We agree that we will not, within the time period referred to in Rule
144(k) of the Securities Act (taking into account the provisions of Rule
144(d) under the Securities Act, if applicable) under the Securities Act as
in effect on the date of the transfer of this Warrant, resell or otherwise
transfer the Warrants represented by this Warrant Certificate except (a) to
KMC Telecom Holdings, Inc. or any subsidiary thereof, (b) to a qualified
institutional buyer in compliance with Rule 144A under the Securities Act,
(c) outside the United States in an offshore transaction in compliance with
Rule 904 under the Securities Act, (d) pursuant to the exemption from
registration provided by Rule 144 under the Securities Act (if available),
(e) to an institutional accredited investor that, prior to such transfer,
furnishes to you, to the Company and, in the case of the Warrant Shares, to
the transfer agent and registrar therefor, a signed letter containing
certain representations and agreements relating to the restrictions on
transfer of the Warrants represented by this Warrant Certificate (the form
of which letter can be obtained from the Warrant Agent) and an opinion of
counsel acceptable to KMC Telecom Holdings, Inc. and its counsel that such
transfer is in compliance with the Securities Act or (f) pursuant to an
effective registration statement under the Securities Act and, in each
case, in accordance with applicable state securities laws.
3. We understand that, on any proposed resale of any Warrants, any
interest therein or Warrant Shares, we will be required to furnish to you
and the Company such certifications, legal opinions and other information
as you and the Company may reasonably require to confirm that the proposed
sale complies with the foregoing restrictions. We further understand that
the Warrants purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in
Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
and have such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of our investment in the
Warrants, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment for an indefinite period of
time.
5. We are acquiring the Warrants purchased by us for our own
account or for one or more accounts (each of which is an institutional
"accredited investor") as to each of which we exercise sole investment
discretion.
C2-3
You, the Company and, if applicable, the transfer agent and registrar
for the Warrant Shares are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
[Name of Transferee]
By:
------------------------------
Authorized Signature
EXHIBIT D
Form of Certificate
-------------------
________, __
The Chase Manhattan Bank
000 Xxxx 00xx Xx., 00xx Xxxxx
Xxx Xxxx, XX 00000-0000
Attention: Global Trust Services
KMC Telecom Holdings, Inc.
0000 Xxxxx 000, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: Chief Financial Officer
Re: Warrants to Purchase Common Shares of KMC Telecom Holdings, Inc. (the
"Company")
---------------------------------------------------------------------
Ladies and Gentlemen:
This letter relates to Warrants represented by a Warrant
Certificate (the "Temporary Warrants") which bears a legend outlining
restrictions upon transfer of such Temporary Warrants. Pursuant to Section 2.1
of the Warrant Agreement dated as of January 29, 1998 (the "Warrant Agreement")
relating to the Warrants, we hereby certify that we are (or we will hold such
securities on behalf of) a person outside the United States to whom the Warrants
could be transferred in accordance with Rule 904 of Regulation S promulgated
under the U.S. Securities Act of 1933. Accordingly, you are hereby requested to
exchange the temporary certificate for a permanent certificate representing an
identical number of Warrants, all in the manner provided for in the Warrant
Agreement.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
------------------------------
Authorized Signature
APPENDIX A
LIST OF FINANCIAL EXPERTS
-------------------------
Alex. Xxxxx & Sons
Bear, Xxxxxxx & Co., Inc.
Xxxxxx, Read & Co. Inc.
Xxxxxxxxx, Lufkin & Xxxxxxxx Securities Corporation
Xxxxxxx, Sachs & Co.
Lazard Freres & Co.
Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx Incorporated
Xxxxxx Xxxxxxx & Co. Incorporated
PaineWebber Incorporated
Prudential Securities Inc.
Salomon Brothers Inc
Xxxxxx Brothers
