EXECUTION COPY
SECURITIES PURCHASE AGREEMENT
dated as of
June 30, 2000
among
KMC TELECOM HOLDINGS, INC.,
and
THE PURCHASERS REFERRED TO HEREIN
TABLE OF CONTENTS
ARTICLE I DEFINITIONS..........................................................1
SECTION 1.01. Definitions.................................................1
ARTICLE II PURCHASE AND SALE OF SECURITIES.....................................6
SECTION 2.01. Authorization of the Series G Preferred.....................6
SECTION 2.02. Commitment to Purchase......................................7
SECTION 2.03. The Closing.................................................7
SECTION 2.04. Subsequent Purchase and Sale of Preferred Shares............7
SECTION 2.05. The Subsequent Closings.....................................7
SECTION 2.06. Use of Proceeds.............................................7
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE ISSUER.......................8
SECTION 3.01. Organization, Standing, etc.................................8
SECTION 3.02. Capitalization..............................................8
SECTION 3.03. Authorization; Non-Contravention............................9
SECTION 3.04. Binding Effect.............................................10
SECTION 3.05. Governmental Regulation....................................10
SECTION 3.06. Solicitation...............................................11
SECTION 3.07. Authorization to Do Business...............................11
SECTION 3.08. Compliance with Laws.......................................11
SECTION 3.09. Litigation.................................................11
SECTION 3.10. Properties.................................................12
SECTION 3.11. Tax Matters................................................12
SECTION 3.12. Patents and Trademarks.....................................12
SECTION 3.13. Labor Matters..............................................12
SECTION 3.14. Environmental Matters......................................13
SECTION 3.15. Insurance..................................................13
SECTION 3.16. Financial Information......................................13
SECTION 3.17. Disclosure.................................................14
SECTION 3.18. Investment Company Act.....................................14
SECTION 3.19. Brokers....................................................14
SECTION 3.20. Affiliated Transactions....................................14
SECTION 3.21. Employee Benefit Plans.....................................14
SECTION 3.22. Material Contracts.........................................15
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...................15
SECTION 4.01. Organization...............................................15
SECTION 4.02. Authority; No Other Action.................................15
SECTION 4.03. No Conflict................................................15
SECTION 4.04. Binding Effect.............................................15
SECTION 4.05. No Defaults................................................16
SECTION 4.06. Private Placement..........................................16
ARTICLE V CONDITIONS PRECEDENT TO CLOSING.....................................17
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SECTION 5.01. Conditions to the Purchasers' Obligations..................17
SECTION 5.02. Conditions to Issuer's Obligations.........................18
SECTION 5.03. Subsequent Conditions of Each Purchaser's Obligations at a
Subsequent Closing..................................................19
ARTICLE VI COVENANTS..........................................................19
SECTION 6.01. Covenants of the Issuer....................................19
ARTICLE VII MISCELLANEOUS.....................................................25
SECTION 7.01. Notices....................................................25
SECTION 7.02. No Waivers.................................................26
SECTION 7.03. Successors and Assigns.....................................26
SECTION 7.04. Choice of Law..............................................26
SECTION 7.05. Counterparts; Effectiveness................................26
SECTION 7.06. Entire Agreement...........................................26
SECTION 7.07. Expenses...................................................26
SECTION 7.08. Announcements..............................................27
SECTION 7.09. Consents to Amendment......................................27
SECTION 7.10. Subsequent Sales...........................................27
EXHIBITS
Exhibit A - Charter Amendment
Exhibit B - Series G Certificate of Designations
Exhibit C - Year 2000 Budget
SCHEDULES
Schedule 3.01 - Organization; Capital Stock; Subsidiaries
Schedule 3.02 - Capitalization of Issuer
Schedule 3.08 - Compliance with Laws
Schedule 3.09 - Litigation
Schedule 3.10 - Liens on Property
Schedule 3.14 - Environmental Matters
Schedule 3.19 - Brokers
Schedule 3.20 - Affiliated Transactions
Schedule 3.22 - Material Contracts
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SECURITIES PURCHASE AGREEMENT
This SECURITIES PURCHASE AGREEMENT (this "Agreement") is dated as of June
30, 2000 among KMC Telecom Holdings, Inc., a Delaware corporation (the
"Issuer"), and the Persons named on the attached Schedule 2.02 (collectively,
the "Purchasers").
NOW, THEREFORE, in consideration of the mutual promises made herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. The following terms, as used herein, have
the following meanings:
"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.
"Benefit Plan" shall mean a defined benefit plan as defined in Section
3(35) of ERISA (other than a Multiemployer Plan) in respect of which the Issuer
or any ERISA Affiliate is, or within the immediately preceding six (6) year was,
an "employer" as defined in Section 3(5) of ERISA.
"Charter" means the Amended and Restated Certificate of Incorporation of
the Issuer, as amended as of the Closing Date.
"Charter Amendment' means the Certificate of Amendment of the Charter, in
the form of Exhibit A attached hereto.
"Closing" has the meaning set forth in Section 2.03.
"Closing Date" has the meaning set forth in Section 2.03.
"Common Stock" means the Common Stock, par value $.01 per share, of the
Issuer.
"E&F Warrant Agreement" means the Warrant Agreement dated February 4,
1999, as amended on April 29, 1999 and on June 1, 1999 among the Issuer, The
Chase Manhattan Bank, as warrant agent, Newcourt Commercial Finance Corporation,
Lucent Technologies Inc. and any additional purchasers and Xxxxxx X. Xxxxxx and
Nassau Capital Partners L.P., relating to the E&F
Warrants.
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"E & F Warrants" means the warrants to purchase shares of Common Stock
issued pursuant to the E & F Warrant Agreement; each such warrant entitling the
holder thereof to purchase 0.471756 shares of Common Stock.
"Environmental Laws" shall mean any applicable law concerning releases
into any part of the natural environment, or protection of natural resources,
the environment and public and employee health and safety including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act (42 U.S.C. ss. 9601 et seq.), the Hazardous Materials Transportation Act (49
U.S.C. ss. 1801 et seq.), the Resource Conservation and Recovery Act (42 U.S.C.
ss. 6901 et seq.), the Clean Water Act (33 U.S.C. ss. 1251 et seq.), the Clean
Air Act (33 U.S.C. ss. 7401 et seq.), the Toxic Substances Control Act (15
U.S.C. ss. 7401 et seq.), and the Occupational Safety and Health Act (29 U.S.C.
ss. 651 et seq.), as such laws have been and may be amended or supplemented
through the Closing Date, and the regulations promulgated pursuant thereto, and
any applicable state or local statutes, and the regulations promulgated pursuant
thereto.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"ERISA Affiliate" shall mean (i) any corporation which is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as the Issuer, (ii) any partnership or other trade or
business (whether or not incorporated) under common control (within the meaning
of Section 414(c) of the Internal Revenue Code) with the Issuer and (iii) any
member of the same affiliated service group (within the meaning of Section
414(m) of the Internal Revenue Code) as the Issuer, any corporation described in
clause (i) above or any partnership or trade or business described in clause
(ii) above.
"Event of Noncompliance" has the meaning set forth in the Series G
Certificate of Designations.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor statute.
"First Union Warrant Agreement" means the warrant agreement dated as of
April 30, 1999 among the Issuer, First Union Investors, Inc., Xxxxxx X.
Xxxxxx and Nassau Capital Partners L.P. and The Chase Manhattan Bank, as
warrant agent, relating to the First Union Warrants.
"First Union Warrants" means the warrants to purchase shares of Common
Stock issued pursuant to the First Union Warrant Agreement; each such warrant
entitling the holder thereof to purchase 0.471756 shares of Common Stock.
"GAAP" means generally accepted accounting principles in the United States
of America as in effect as of the Closing Date, including, without limitation,
those set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements
and pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession.
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"Governmental Authority" shall mean any federal, state, local or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the regulations promulgated thereunder.
"HY Warrant Agreement" means the warrant agreement dated as of January 29,
1998, between the Issuer and The Chase Manhattan Bank, as warrant agent,
relating to the HY Warrants.
"HY Warrants" means the warrants to purchase shares of Common Stock issued
pursuant to the HY Warrant Agreement; each such warrant entitling the holder
thereof to purchase 0.21785 shares of Common Stock.
"IRS" shall mean the Internal Revenue Service or any successor agency.
"Lien" means any lien, claim, charge, pledge, mortgage, security interest
or other encumbrance.
"Material Adverse Effect" means a material adverse effect, or any event,
occurrence, state of circumstances or facts or development involving a
prospective material adverse effect, on the business, operations, assets,
condition (financial or otherwise), results of operations, properties, assets or
value of the Issuer and its Subsidiaries taken as a whole.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA which is, or within the immediately preceding six
(6) years was, contributed to by the Issuer or any ERISA Affiliate.
"Person" means an individual, general partnership, limited partnership,
corporation, limited liability company, trust, joint stock company, association,
joint venture or any other entity or organization, whether or not a legal
entity, including a government or political subdivision or an agency or
instrumentality thereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation referred to and
defined in ERISA.
"Plan" shall mean any employee benefit plan as defined in Section 3(3) of
ERISA (other than a Multiemployer Plan) in respect of which the Issuer or any
ERISA Affiliate is, or within the immediately preceding six (6) years was, an
"employer" as defined in Section 3(5) of ERISA.
"Regulation D" means Regulation D under the Securities Act.
"Reportable Event" shall mean any reportable event as defined in Section
4043 of ERISA unless the reporting requirement with respect to such reportable
event has been waived by the PBGC or other appropriate Governmental Authority.
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"Qualified Public Offering" shall mean the sale in a firmly underwritten
public offering of Common Stock pursuant to an effective registration statement
filed by the Issuer under the Securities Act, in any single transaction or
series of related transactions, in which (i) the Corporation receives aggregate
gross proceeds (before deduction of underwriting discounts and expenses of sale)
of at least $80,000,000 and (ii) the price per share at which Common Stock is
offered to the public in such offering is not less than the lowest price per
share at which Series G Preferred Shares are sold pursuant to this Agreement (as
adjusted for any stock split, stock dividend, share combination, share exchange,
recapitalization, merger, conversion, consolidation, reorganization or other
similar transaction).
"Securities Act" means the Securities Act of 1933, as amended from time to
time, or any successor statute.
"Series A Preferred Stock" has the meaning set forth in Section 3.02.
"Series C Preferred Stock" has the meaning set forth in Section 3.02.
"Series D Preferred Stock" has the meaning set forth in Section 3.02.
"Series E Certificate of Designations" means the Certificate of Voting
Powers, Designations, Preferences and Relative Participating, Optional or Other
Special Rights and Qualifications, Limitations and Restrictions with respect to
the Series E Preferred Stock as previously filed with the Secretary of State of
Delaware on February 4, 1999 as amended by the Certificate of Correction dated
February 19, 1999 and filed with the Secretary of State of Delaware on March 3,
1999, as further amended by the Certificate of Amendment with respect to the
Series E Preferred Stock filed with the Secretary of the State of Delaware on
April 30, 1999.
"Series E Preferred Stock" has the meaning set forth in Section 3.02.
"Series F Certificate of Designations" means the Certificate of Voting
Powers, Designations, Preferences and Relative Participating, Optional or Other
Special Rights and Qualifications, Limitations and Restrictions with respect to
the Series F Preferred Stock as previously filed with the Secretary of State of
Delaware on February 4, 1999 as amended by the Certificate of Correction dated
February 19, 1999 and filed with the Secretary of State of Delaware on March 3,
1999, as further amended by the Certificate of Amendment with respect to the
Series F Preferred Stock filed with the Secretary of State of Delaware on April
30, 1999.
"Series F Preferred Stock" has the meaning set forth in Section 3.02.
"Series G Certificate of Designations" has the meaning set forth in
Section 2.01.
"Series G Preferred Shares" has the meaning set forth in Section 2.01.
"Springing Warrants" means the 227,273 warrants which may be issued
pursuant to Section 2.4 of the E&F Warrant Agreement.
"Stockholders Agreement" means the Amended and Restated Stockholders
Agreement among KMC Telecom Holdings, Inc., Nassau Capital Partners L.P., NAS
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Partners I L.L.C., Xxxxxx X. Xxxxxx, KMC Telecommunications L.P., AT&T Credit
Corporation, General Electric Capital Corporation, Corestates Bank, N.A. and
Corestates Holdings, Inc., dated as of October 31, 1997, as amended by Amendment
No. 1, dated as of January 7, 1998, to the Amended and Restated Stockholders
Agreement dated as of October 31, 1997, Amendment No. 2, dated as of January 26,
1998, to the Amended and Restated Stockholders Agreement, dated as of October
31, 1997, Amendment No. 3, dated as of February 25, 1998, to the Amended and
Restated Stockholders Agreement, dated as of October 31, 1997, Amendment No. 4,
dated as of February 4, 1999, to the Amended and Restated Stockholders Agreement
dated as of October 31, 1997, Amendment No. 5, dated as of April 30, 1999, to
the Amended and Restated Stockholders Agreement dated as of October 31, 1997,
Amendment No. 6 dated as of June 1, 1999 to be Amended and Restated Stockholders
Agreement dated October 31, 1997, Amendment No. 7 dated as of January 1, 2000 to
the Amended and Restated Stockholders Agreement dated October 3, 1997, Amendment
No. 8 dated as of April 1, 2000 to the Amended and Restated Stockholders
Agreement dated October 31, 1997 and Amendment No. 9 dated as of June 30, 2000
to the Amended and Restated Stockholders Agreement dated October 31, 1997.
"Subsequent Closing" has the meaning set forth in Section 2.05.
"Subsequent Closing Date" has the meaning set forth in Section 2.05.
"Subsequent Purchaser" has the meaning set forth in Section 2.04.
"Subsidiary" means, with respect to any Person, any corporation,
association or other business entity of which more than fifty percent (50%) of
the total voting power of shares of capital stock entitled (without regard to
the occurrence of any contingency) to vote in the election of directors,
managers or trustees thereof, or at least a majority of the ownership interests,
and the power to direct the policies, management and affairs thereof, is at the
time owned or controlled, directly or indirectly, by such Person or one or more
of the other Subsidiaries of such Person or a combination thereof.
"Taxes" shall mean all taxes, charges, fees, levies or other assessments,
including, without limitation, all net income, gross receipts, capital, sales,
use, ad valorem, value added, transfer, franchise, profits, inventory, capital
stock, license, withholding, payroll, employment, social security, unemployment,
excise, severance, stamp, occupation, property and estimated taxes, customs,
duties, fees, assessments and charges of any kind whatsoever, together with any
interest and any penalties, fines, additions to tax or additional amounts
imposed by any public or governmental taxing authority (domestic or foreign) and
shall include any transferee liability in respect of Taxes.
"Tax Returns" shall mean all returns, declarations, reports, estimates,
information returns and statements required to be filed in respect of any Taxes.
"Termination Event" shall mean (i) a Reportable Event with respect to a
Benefit Plan; (ii) the withdrawal of the Issuer or any ERISA Affiliate from a
Benefit Plan during a plan year in which the Issuer or such ERISA Affiliate was
a "substantial employer" as defined in Section 4001(a)(2) of ERISA; (iii) the
imposition of an obligation on the Issuer or any ERISA Affiliate under Section
4041 of ERISA to provide affected parties written notice of intent to terminate
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a Benefit Plan in a distress termination described in Section 4041(c) of ERISA;
(iv) the institution by the PBGC of proceedings to terminate a Benefit Plan; (v)
any event or condition which might constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to administer, any
Benefit Plan; or (vi) the partial or complete withdrawal of the Issuer or any
ERISA Affiliate from a Multiemployer Plan.
"Underlying Common Stock" means (i) the Common Stock issued or issuable
upon conversion of the Series G Preferred Shares and (ii) any Common Stock
issued or issuable with respect to the securities referred to in clause (i)
above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. For purposes of this Agreement, any Person who holds Series G
Preferred Shares shall be deemed to be the holder of the Underlying Common Stock
obtainable upon conversion of the Series G Preferred Shares in connection with
the transfer thereof or otherwise, regardless of any restriction or limitation
on the conversion of the Series G Preferred Shares, such Underlying Common Stock
shall be deemed to be in existence, and such Person shall be entitled to
exercise the rights of a holder of Underlying Common Stock hereunder. As to any
particular shares of Underlying Common Stock, such shares shall cease to be
Underlying Common Stock when they have been (a) effectively registered under the
Securities Act and disposed of in accordance with the registration statement
covering them, (b) distributed to the public through a broker, dealer or market
maker pursuant to Rule 144 under the Securities Act (or any similar provision
then in force) or (c) repurchased by the Issuer or any Subsidiary.
ARTICLE II
PURCHASE AND SALE OF SECURITIES
SECTION 2.01. Authorization of the Series G Preferred. The Issuer has
authorized the issuance and sale to the Purchasers of up to 1,250,000 shares in
the aggregate of (a) the Issuer's Series G-1 Voting Convertible Preferred Stock,
par value $.01 per share (the "Series G-1 Preferred Shares") and (b) the
Issuer's Series G-2 Non-Voting Convertible Preferred Stock, par value $.01 per
share (the "Series G-2 Preferred Shares" and, together with the Series G-1
Preferred Shares, the "Series G Preferred Shares"). The Series G Preferred
Shares have the rights and preferences set forth in the Series G Certificate of
Designations, in the form of Exhibit B attached hereto (the "Series G
Certificate of Designations").
SECTION 2.02. Commitment to Purchase. Subject to the terms and conditions
hereinafter stated, upon the basis of the representations and warranties of the
Purchasers herein contained, the Issuer agrees to issue and sell to each of the
Purchasers and, upon the basis of the representations and warranties of the
Issuer herein contained, each of the Purchasers agrees to purchase from the
Issuer the type and number of Series G Preferred Shares set forth opposite such
Purchaser's name on the attached Schedule 2.02, as such schedule may be amended,
modified or supplemented ("Schedule 2.02") under the headings "Series G
Sub-Class" and "Number of Shares," respectively, at a price per share of
$337.9697, for an aggregate purchase price equal to the amount set forth
opposite such Purchaser's name on the attached Schedule 2.02 under the heading
"Closing Amount."
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SECTION 2.03. The Closing. Subject to the fulfillment or waiver of the
conditions set forth in Article V hereof, the purchase and sale of the Series G
Preferred Shares, as set forth in Section 2.02 (the "Closing"), shall take place
at the offices of Xxxxxx Xxxx & Xxxxxx LLP, 000 Xxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000, at 10:00 a.m. on the date hereof or on such other date and at such other
location as the Issuer and the Purchasers shall agree. The date and time of the
Closing are referred to herein as the "Closing Date."
(a) At the Closing, each of the Purchasers shall deliver to the
Issuer, by wire transfer (of immediately available funds) to an account
designated by the Issuer in writing delivered to each Purchaser, the applicable
consideration set forth on Schedule 2.02.
(b) At the Closing, the Issuer shall deliver to each Purchaser,
against payment of the applicable consideration set forth on Schedule 2.02,
certificates evidencing the Series G Preferred Shares purchased by such
Purchaser registered in the name of such Purchaser.
SECTION 2.04. Subsequent Purchase and Sale of Preferred Shares. At any
time and from time to time after the Closing Date (but in no event later than
120 days after the Closing Date), the Issuer may sell additional Series G
Preferred Shares that have been authorized for sale pursuant to Section 2.01
hereof, but which have not been sold pursuant to Section 2.02 or this Section
2.04, to subsequent purchasers (the "Subsequent Purchasers"). As a condition to
the purchase and sale of such additional shares, any such Subsequent Purchasers
who are not already parties to this Agreement shall (i) execute a counterpart
signature page to this Agreement and for all purposes herein such Subsequent
Purchaser shall thereafter be deemed to be a Purchaser hereunder, and (ii)
execute a joinder to the Stockholders Agreement in the form attached thereto as
Exhibit A. Schedule 2.02 shall be amended to reflect the purchase of such
additional Series G Preferred Shares by such Subsequent Purchaser.
SECTION 2.05. The Subsequent Closings. The closing(s) of the purchase and
sale of any additional Series G Preferred Shares pursuant to Section 2.04 (each,
a "Subsequent Closing") shall take place at the offices of Xxxxxx Xxx & Xxxxxx
LLP, at 10:00 a.m. local time on the date(s) agreed to by the Issuer and
applicable Subsequent Purchaser(s) (the "Subsequent Closing Date"). At each
Subsequent Closing, the Issuer shall deliver to such Subsequent Purchaser a
stock certificate evidencing the Series G Preferred Shares to be purchased by
such Subsequent Purchaser at the Subsequent Closing, registered in such
Subsequent Purchaser's name, upon payment of the applicable purchase price
thereof by wire transfer of immediately available funds to the Issuer's account.
SECTION 2.06. Use of Proceeds. The proceeds from the issuance of the
Series G Preferred Shares will be used for (i) general working capital and
capital expenditures in the continued development of the Issuer's competitive
local exchange carrier, port wholesale and national footprint strategies, (ii)
notwithstanding any provision in the Series G Certificate of Designations, to
redeem 2,861.995 shares of Series F Preferred Stock pursuant to Section VI(B) of
the Series F Certificate of Designations, and (iii) to pay fees and expenses
relating to the transactions contemplated by this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE ISSUER
The Issuer represents and warrants to each of the Purchasers as follows as
of the Closing Date:
SECTION 3.01. Organization, Standing, etc. (a) The Issuer is a corporation
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority under such
laws to own or lease and operate its properties and to carry on its business as
now conducted. The Issuer is duly qualified or licensed to do business as a
foreign corporation in good standing in each jurisdiction in which the nature of
the business transacted by it or the character of the properties owned or leased
by it requires it to so qualify or be licensed, except where the failure to so
qualify or be licensed or be in good standing would not have a Material Adverse
Effect. The copies of the Issuer's Charter, bylaws and other organizational
documents and instruments (in each case, as amended and/or restated through the
Closing Date), heretofore made available to each of the Purchasers, are true,
complete and correct copies thereof.
(b) Each Subsidiary of the Issuer is duly organized and validly
existing under the laws of the jurisdiction of its formation, and has all
corporate or other power and authority to own its properties and conduct its
business as now conducted. All the outstanding shares of capital stock of each
corporate Subsidiary of the Issuer have been duly authorized and validly issued
and are fully paid and nonassessable and, except as disclosed on Schedule 3.01
hereto, are owned directly or indirectly by the Issuer free and clear of all
liens, security interests, charges and encumbrances. The Issuer does not own any
interest in any other Person or entity other than the Subsidiaries set forth on
Schedule 3.01. Except as set forth on Schedule 3.01 hereto, there are no
outstanding options, warrants, rights, agreements or commitments to any third
party to subscribe for or purchase any equity security of any Subsidiary or to
cause any Subsidiary to issue any such equity security.
SECTION 3.02. Capitalization. (a) The Issuer's authorized capital stock
consists of 4,250,000 shares of Common Stock and 3,700,000 shares of preferred
stock. Of the 3,700,000 authorized shares of preferred stock (i) 123,800 shares
have been designated as Series A Cumulative Convertible Preferred Stock (the
"Series A Preferred Stock") all of which are currently outstanding, (ii) 350,000
shares have been designated as Series C Cumulative Convertible Preferred Stock
(the "Series C Preferred Stock") of which 175,000 shares are currently
outstanding, (iii) 25,000 shares have been designated as Series D Cumulative
Convertible Preferred Stock (the "Series D Preferred Stock") of which none are
currently outstanding, (iv) 575,000 shares have been designated as the Series E
Senior Redeemable, Exchangeable, PIK Preferred Stock (the "Series E Preferred
Stock"), of which 67,380 shares are outstanding and 55,000 shares have been
reserved for issuance upon conversion of the Series F Preferred Stock, (v)
55,000 shares have been designated as Series F Senior Redeemable, Exchangeable,
PIK Preferred Stock (the "Series F Preferred Stock"), of which 45,792 shares are
currently outstanding, (vi) 1,250,000 shares have been designated as Series G-1
Preferred Shares of which 58,881.0180 shares will be outstanding upon the
consummation of the initial purchase of the Series G-1 Preferred Shares pursuant
to the Agreement and 481,108.2176 shares have been reserved for issuance upon
conversion of the shares of the Series G-2 Preferred Shares to be outstanding
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upon consummation of the initial purchases of Series G-2 Preferred Shares
pursuant to this Agreement, and (vii) 1,250,000 shares have been designated as
Series G-2 Preferred Shares of which 481,108.2176 shares will be outstanding
upon the consummation of the initial purchase of the Series G-2 Preferred Shares
pursuant to this Agreement. Of the 4,250,000 authorized shares of Common Stock:
(i) 853,775 shares are issued and outstanding, (ii) 600,000 shares have been
reserved for issuance upon conversion of the Series A Preferred Stock, (iii)
414,889 shares have been reserved for issuance upon conversion of the Series C
Preferred Stock, (iv) 1,250,000 shares have been reserved for issuance upon
conversion of the Series G Preferred Shares, (v) 10,000 shares have been
reserved for issuance upon exercise of a warrant held by General Electric
Capital Corporation, (vi) 99,285 shares have been reserved for issuance upon
exercise of Warrants issued in connection with the Issuer's offering of its 12
1/2% Senior Discount Notes, (vii) 192,229 shares have been reserved for issuance
upon exercise of the First Union Warrants, the E&F Warrants and the Springing
Warrants, (viii) 600,000 shares have been reserved for issuance pursuant to
options granted or to be granted under the 1998 Stock Purchase and Option Plan
for Key Employees of KMC Telecom Holdings, Inc. and Affiliates and (ix) no
shares are held in treasury. No other shares of capital stock have been issued
or reserved for issuance for any purpose. All of the outstanding shares of
capital stock of the Issuer have been duly authorized and validly issued, are
fully paid and nonassessable, free of preemptive rights and have been offered
and issued without violation of the Securities Act or any preemptive rights of
any person. Schedule 3.02 hereto accurately sets forth, as of the Closing Date,
the number of issued and outstanding shares of Common Stock held by each person
known by the Issuer to own beneficially or of record any shares of the Issuer's
capital stock.
(b) Except as disclosed on Schedule 3.02 hereto: (i) there are no
issued or outstanding securities that are convertible into or exchangeable for
shares of the Issuer's capital stock ("Convertible Securities"); (ii) there are
no issued or outstanding subscriptions, options, warrants or other rights to
purchase or acquire any shares of the capital stock of the Issuer or any
Convertible Securities ("Option Rights"); (iii) the Issuer is not a party to any
agreement or understanding pursuant to which it is obligated to purchase or
redeem any shares of its capital stock or any Convertible Securities or Option
Rights, other than pursuant to the redemption provisions in respect of the
Series E Preferred Stock and the Series F Preferred Stock set forth in the
Series E Certificate of Designations and the Series F Certificate of
Designations, respectively, and is not otherwise under any obligation to
repurchase, redeem or otherwise acquire any shares of its capital stock or any
Convertible Securities or Option Rights; (iv) the Issuer is not a party to any
agreement or understanding pursuant to which it is obligated to register any
shares of its capital stock or other securities under the Securities Act or any
state securities law; and (v) the Issuer is not, and to the best knowledge of
the Issuer, no securities holder of the Issuer is a party to any voting
agreement, voting trust, irrevocable proxy or other agreement affecting the
voting rights of any shares of the Issuer's capital stock or any agreement
providing for any call or put option, right of first refusal or offer or other
right to acquire or dispose of any shares of the Issuer's capital stock or any
Convertible Securities or Option Rights. Except as described in Section 3.02(a)
or Schedule 3.02, no shares of Common Stock are issuable upon the exercise of
any outstanding Convertible Securities or Option Rights of the Issuer.
SECTION 3.03. Authorization; Non-Contravention. The execution, delivery
and performance by the Issuer of this Agreement, the Stockholders Agreement, the
9
issuance, sale and delivery by the Issuer of the Series G Preferred Shares, and
the amendments to the Charter effected by the filing of the Charter Amendment
and the Series G Certificate of Designations (a) are within the Issuer's
corporate powers, (b) have been duly authorized by all necessary corporate
action, (c) require no action by or in respect of, or filing with, any
Governmental Authority, agency or official (other than the filing of the Charter
Amendment and the Series G Certificate of Designations with the Secretary of
State of Delaware), and (d) do not (i) contravene or constitute a default under
any provision of applicable law or regulation, judgment, injunction, order or
decree binding upon or applicable to the Issuer, (ii) contravene or constitute a
default under the Charter or bylaws, (iii) require any consent, approval or
other action by any other Person (other than the holders of the Series A
Preferred Stock, the Series C Preferred Stock, the outstanding Series E
Preferred Stock, the Series F Preferred Stock, and the other parties to the
Stockholders Agreement, which consents shall be obtained prior to the Closing
Date) or (iv) constitute a default under or contravene any material agreement,
judgment, injunction, order, decree or other instrument binding upon the Issuer
or any of its Subsidiaries.
SECTION 3.04. Binding Effect. This Agreement and the Stockholders
Agreement have been duly authorized, executed and delivered by the Issuer and
constitute valid and legally binding obligations of the Issuer, enforceable in
accordance with their respective terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium and similar
laws affecting the enforcement of creditors' rights generally and by general
principles of equity (whether enforcement is sought by proceedings in equity or
at law). The Issuer has duly authorized the issuance, sale and delivery of the
Series G Preferred Shares to each of the Purchasers set forth on Schedule 2.02
and, when issued and delivered by the Issuer pursuant to this Agreement against
payment of the applicable consideration set forth herein, Series G Preferred
Shares will be validly issued, fully paid and non-assessable free and clear of
all Liens and without violation of any preemptive rights. All of the shares of
Common Stock to be issued upon conversion of the Series G Preferred Shares have
been duly and validly authorized and reserved for issuance upon such conversion
and, when issued and delivered, upon such conversion, will be duly and validly
issued, fully paid and non-assessable free and clear of all Liens and without
violation of any preemptive rights.
SECTION 3.05. Governmental Regulation. Except for the Securities Act, the
Exchange Act and state securities laws, the Issuer is not subject to any federal
or state or foreign law or regulation limiting its ability to issue the Series G
Preferred Shares or to perform its obligations under the terms of this
Agreement, the Stockholders Agreement and the Series G Certificate of
Designations. Except as described in Section 3.03 or as may be required pursuant
to "blue sky laws" or as may be required under the Securities Act or the
Exchange Act in connection with the registration of the shares of Common Stock
issuable upon conversion of the Series G Preferred Shares pursuant to the
Stockholders Agreement, no notices, reports or other filings are required to be
made by the Issuer or any Subsidiary with, nor are any consents, registrations,
applications, approvals, permits, licenses or authorizations required to be
obtained by the Issuer or any Subsidiary from, any public or governmental
authority or other third party in connection with the execution and delivery of
this Agreement, the Stockholders Agreement and the Series G Certificate of
Designations, or the consummation by the Issuer of the transactions contemplated
hereby or thereby, or the exercise by each Purchaser of its rights hereunder,
except for (i) any of the foregoing, the failure of which to make or obtain
would not have a Material Adverse Effect or adversely affect any Purchasers'
10
rights hereunder, or (ii) the consent, with respect to the Series G Certificate
of Designations, of the holders of the Series A Preferred Stock, the Series C
Preferred Stock, the outstanding Series E Preferred Stock and the Series F
Preferred Stock, which consents shall be obtained prior to the Closing Date.
SECTION 3.06. Solicitation. Assuming the representations and warranties of
the Purchasers set forth in Section 4.06 hereof are true and correct in all
material respects, the offer and sale of the Series G Preferred Shares pursuant
to this Agreement and the issuance of the shares of Common Stock upon conversion
of such Series G Preferred Shares, will be exempt from the registration
requirements of the Securities Act. No form of general solicitation or general
advertising was used by the Issuer or, to the best of its knowledge, any other
Person acting on its behalf, in respect of the Series G Preferred Shares or in
connection with the offer and sale of the Series G Preferred Shares. Neither the
Issuer nor any Person acting on behalf of the Issuer has, either directly or
indirectly, sold or offered for sale to any Person any of the Series G Preferred
Shares or any other similar security of the Issuer except as contemplated by
this Agreement. Neither the Issuer nor any Person acting on its behalf has, in
connection with the offering of the Series G Preferred Shares, engaged in any
action that would require the registration under the Securities Act of the
offering and sale of the Series G Preferred Shares pursuant to this Agreement.
SECTION 3.07. Authorization to Do Business. The Issuer and its
Subsidiaries (i) possess all licenses, certificates, authorizations, approvals
and permits issued by the appropriate federal, state, local or foreign
regulatory authorities necessary to conduct their respective businesses, as
presently conducted, excepting any license, certificate, authorization, approval
or permit, the failure to possess which, singly or in the aggregate, could not
reasonably be expected to result in a Material Adverse Effect and (ii) have not
received any notice of proceedings relating to revocation or modification of any
such license, certificate, authorization, approval or permit, nor is the Issuer
or any of its Subsidiaries in violation of, or in default under, any such
license, authorization, approval or permit or any decree, order, judgment
applicable to the Issuer or its Subsidiaries the effect of which, singly or in
the aggregate, could reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.08. Compliance with Laws. Except as set forth on Schedule 3.08
hereto and except as would not have a Material Adverse Effect, the business of
the Issuer and each of the Subsidiaries has been and is presently being
conducted in compliance with all applicable federal, state, county and local
ordinances, statutes, rules, regulations and laws (collectively "Laws").
SECTION 3.09. Litigation. Except as set forth on Schedule 3.09 hereto,
there are no pending actions, suits, proceedings, arbitrations or investigations
against or affecting the Issuer or any of its Subsidiaries or any of their
respective properties, assets or operations, or with respect to which the Issuer
or any such Subsidiary is responsible by way of indemnity or otherwise (a
"Material Claim") that, if there is an adverse decision, could singly, or in the
aggregate, with all such other actions, suits, investigations or proceedings,
have a Material Adverse Effect, and, to the knowledge of the Issuer, no such
actions, suits, proceedings or investigations are threatened.
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SECTION 3.10. Properties. Except as described in Schedule 3.10 hereto, the
Issuer and its Subsidiaries have good and marketable title to all their material
property and assets, free and clear of all Liens except (a) materialmen's,
mechanics', carriers', workmen's, warehousemen's, repairmen's, or other like
Liens arising in the ordinary course of business with respect to moneys not yet
due and payable; (b) Liens for current Taxes not yet due and payable or which
are being contested in good faith and by proper procedures; or (c) Liens or
minor imperfections of title that do not materially interfere with the use or
materially detract from the value of such property.
SECTION 3.11. Tax Matters. The Issuer and its Subsidiaries have filed all
Tax Returns required to be filed and are not in default in the payment of any
Taxes which were payable pursuant to such returns or any assessments in respect
thereof, other than any which the Issuer or any such Subsidiary is contesting in
good faith by proper procedures.
SECTION 3.12. Patents and Trademarks. Each of the Issuer and its
Subsidiaries has sufficient right, title and ownership of all patents,
trademarks, service marks, trade names, copyrights, licenses with respect to the
foregoing, information, proprietary rights and processes, or shall be able to
obtain all such licenses and other authority necessary or useful for the lawful
conduct of its business as it is contemplated to be conducted, without any known
conflicts with the rights of others. No stockholder, officer, director or
employee of the Issuer or any Subsidiary owns any rights therein which are
competitive with those to be owned or used by the Issuer and any Subsidiaries.
Neither the Issuer nor any Subsidiary has been sued or charged with any
infringement of any patent, license or permit or has knowledge of any basis for
any such claim.
SECTION 3.13. Labor Matters.
(a) Neither the Issuer nor any Subsidiary is party to any labor or
collective bargaining agreement and there are no labor or collective bargaining
agreements which pertain to employees of the Issuer or any Subsidiary.
(b) No employees of the Issuer or any Subsidiary are represented by
any labor organization. No labor organization or group of employees of the
Issuer or any Subsidiary has made a demand for recognition or certification, and
there are no representation or certification proceedings or petitions seeking a
representation proceeding presently pending or, to the knowledge of the Issuer,
threatened to be brought or filed, with the NLRB or any other labor relations
tribunal or authority. To the knowledge of the Issuer, there are no organizing
activities involving the Issuer or any Subsidiary pending with, or threatened
by, any labor organization.
(c) There are no strikes, work stoppages, slowdowns, lockouts,
material arbitrations or material grievances or other material labor disputes
pending or, to the knowledge of the Issuer, threatened against or involving the
Issuer or any Subsidiary. Except as would not result in any Material Adverse
Effect, there are no unfair labor practice charges, grievances or complaints
pending or, to the knowledge of the Issuer, threatened by or on behalf of any
employee or group of employees of the Issuer or any Subsidiary.
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SECTION 3.14. Environmental Matters.
(a) Except as set forth in Schedule 3.14, (i) each of the Issuer and
the Subsidiaries is in material compliance with all Environmental Laws and (ii)
neither the Issuer nor any Subsidiary has received any written communication
from a governmental authority with respect to such compliance or the failure
thereof.
(b) Except as set forth in Schedule 3.14, (i) there is no civil,
criminal or administrative action, claim, demand, investigation or notice
relating to a violation of an Environmental Law (an "Environmental Claim")
pending or, to the knowledge of the Issuer, threatened and (ii) to the knowledge
of the Issuer, there are no past or present actions, activities, circumstances,
conditions, events or incidents, including, without limitation, the release,
emission, discharge or disposal of any chemical, pollutant, contaminant, waste,
toxic substance, petroleum or petroleum product, that would form the basis of
any Environmental Claim, in either case (A) against the Issuer or any
Subsidiary, (B) against any person or entity whose liability for any
Environmental Claim the Issuer or any Subsidiary has or may have retained or
assumed either contractually or by operation of law, or (C) involving any real
or personal property which the Issuer or any Subsidiary owns, leases or manages
except, in each case, as would not have a Material Adverse Effect.
SECTION 3.15. Insurance. The Issuer and its Subsidiaries, in the
reasonable determination of the Issuer's management, maintain with financially
sound and reputable insurers insurance against loss or damage of the kinds
customarily insured against by corporations of established reputation engaged in
the same or a similar business and similarly situated, and of such types and in
such amounts as is customarily carried under similar circumstances by such other
corporations.
SECTION 3.16. Financial Information.
(a) The Issuer has furnished to the Purchaser the audited
consolidated financial statements of the Issuer dated as of December 31, 1999
and for the year then ended, and the unaudited consolidated financial statements
for the fiscal quarter ended March 31, 2000 (collectively, the "Financials").
The Financials have been prepared in accordance with GAAP applied on a basis
consistent with that of preceding periods and are complete and correct in all
material respects. The Financials fairly represent the Issuer's consolidated
financial position as of the dates of the balance sheets included in the
Financials and its consolidated results of operations for the periods indicated
therein. There are no omissions from the Financials or any other facts or
circumstances not reflected in the Financials which are or may be material
according to GAAP.
(b) Except as and to the extent expressly set forth in the
Financials, or the notes, schedules or exhibits thereto, or as disclosed in the
documents filed by the Issuer with the Securities and Exchange Commission, (i)
as of March 31, 2000 (the "Balance Sheet Date"), neither the Issuer nor its
Subsidiaries had any material liabilities or obligations (whether absolute,
contingent, accrued or otherwise) that would be required to be included on a
balance sheet or in the notes, schedules or exhibits thereto prepared in
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accordance with GAAP, (ii) since the Balance Sheet Date, the Issuer and its
Subsidiaries have not incurred any such material liabilities or obligations
other than in the normal course of business and (iii) since December 31, 1999,
no event has occurred that has resulted in or is reasonably likely to result in
a Material Adverse Effect.
SECTION 3.17. Disclosure. The Issuer has provided the Purchaser with
disclosure about its and its Subsidiaries' business that in the aggregate did
not contain an untrue statement of a material fact or omit to state a material
fact necessary to make the statements in such disclosure not misleading.
SECTION 3.18. Investment Company Act. The Issuer is not, and after giving
effect to the offering and sale of the Series G Preferred Shares and the
application of the proceeds thereof will not be, an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended.
SECTION 3.19. Brokers. Except for fees, commissions and expenses as set
forth on Schedule 3.19 all of which will be paid by the Issuer on the Closing
Date, no brokerage or finder's commissions or fees are payable in connection
with the transactions contemplated by this Agreement, and the Issuer shall
defend, indemnify and hold the Purchaser harmless from and against any
liability, loss or expense (including, without limitation, reasonable attorneys
fees) arising in connection with any claim for any such commissions.
SECTION 3.20. Affiliated Transactions. Set forth on Schedule 3.20 is a
list of all arrangements, agreements and contracts entered into by the Issuer or
any of its Subsidiaries with any Person who is an officer, director or Affiliate
of the Issuer or any of its Subsidiaries, or, to the Issuer's knowledge, with
any immediate family member or with any relative of such officer, director or
Affiliate or with any entity of which any of the foregoing is an Affiliate.
SECTION 3.21. Employee Benefit Plans. Neither the Issuer nor any ERISA
Affiliates of the Issuer maintains or contributes to any Plan other than a Plan
listed on Schedule 3.21 hereto. Each Plan which is intended to be qualified
under Section 401(a) of the Internal Revenue Code has been determined by the IRS
to be so qualified, and each trust related to any such Plan has been determined
to be exempt from federal income tax under Section 501(a) of the Internal
Revenue Code. Except as disclosed on Schedule 3.21, neither the Issuer nor any
ERISA Affiliate maintains or contributes to any employee welfare benefit plan
within the meaning of Section 3(l) of ERISA which provides benefits to employees
after termination of employment other than as required by Section 601 of ERISA.
Neither the Issuer nor any ERISA Affiliate has breached any of the
responsibilities, obligations or duties imposed on it by ERISA or regulations
promulgated thereunder with respect to any Plan which breach could result in a
Material Adverse Effect. No Plan has incurred any accumulated funding deficiency
(as defined in Section 302(a)(2) of ERISA and Section 412(a) of the Internal
Revenue Code), whether waived or not waived. Neither the Issuer nor any ERISA
Affiliate nor any fiduciary of any Plan which is not a Multiemployer Plan (i)
has engaged in a nonexempt "prohibited transaction" described in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code or (ii) has taken or failed
to take any action which would constitute or result in a Termination Event.
Neither the Issuer nor any ERISA Affiliate has incurred any liability to the
PBGC which remains outstanding and which could result in a Material Adverse
Effect, other than the payment of premiums, and there are no premium payments
which have become due which are unpaid. Schedule B to the most recent annual
14
report filed with the IRS with respect to each Plan is complete and accurate.
Since the date of each such Schedule B, there has been no adverse change in the
funding status or financial condition of the Plan relating to such Schedule B.
Neither the Issuer nor any ERISA Affiliate has (i) failed to make a required
contribution or payment to a Multiemployer Plan or (ii) made a complete or
partial withdrawal under Sections 4203 or 4205 of ERISA from a Multiemployer
Plan. Neither the Issuer nor any ERISA Affiliate has failed to make a required
installment or any other required payment under Section 412 of the Internal
Revenue Code on or before the due date for such installment or other payment.
Neither the Issuer nor any ERISA Affiliate is required to provide security to a
Plan under Section 401 (a) (29) of the Internal Revenue Code due to a Plan
amendment that results in an increase in current liability for the plan year.
SECTION 3.22. Material Contracts. The agreements, set forth on Schedule
3.22 hereto are all of the agreements that are material to the financial
condition, business or results of operations of the Issuer and its Subsidiaries,
taken as a whole. All the foregoing agreements are valid, subsisting and in full
force and effect and neither the Issuer, nor, to the best of the Issuer's
knowledge and belief, any other parties, are in material default thereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser represents and warrants to the Issuer as follows:
SECTION 4.01. Organization. It is duly organized and existing under the
laws of its jurisdiction of organization.
SECTION 4.02. Authority; No Other Action. (a) The execution, delivery
and performance of this Agreement and the Stockholders Agreement are within
its powers and have been duly authorized on its part by all requisite
corporate, partnership or company action.
(b) No action by or in respect of, or filing with, any governmental
authority, agency or official is required for the execution, delivery and
performance by such Purchaser of this Agreement and the Stockholders Agreement.
SECTION 4.03. No Conflict. The execution, delivery and performance by such
Purchaser of this Agreement and the Stockholders Agreement and the consummation
of the transactions contemplated hereby and thereby do not and will not (i)
violate its charter, bylaws or similar organizational documents or (ii) violate
any applicable law, rule, regulation, judgment, injunction, order or decree,
which violation would (a) affect the validity of this Agreement or the
Stockholders Agreement or (b) individually or in the aggregate impair the
ability of such Purchaser to perform in any material respect the obligations
which it has under this Agreement or the Stockholders Agreement.
SECTION 4.04. Binding Effect. This Agreement and the Stockholders
Agreement have been duly authorized, executed and delivered by it and, except as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally and by
general principles of equity (whether enforcement is sought by proceedings in
15
equity or at law), constitute valid and binding agreements of such Purchaser
enforceable in accordance with their respective terms.
SECTION 4.05. No Defaults. Such Purchaser is not in violation of its
charter, bylaws or similar organizational documents or in default under any
provision of applicable law or regulation or of any agreement, judgment,
injunction, order, decree or other instrument binding upon it, which violation
or default (i) would affect the validity of this Agreement or the Stockholders
Agreement or (ii) would (individually or in the aggregate) impair the ability of
such Purchaser to perform in any material respect the obligations which it has
under this Agreement or the Stockholders Agreement.
SECTION 4.06. Private Placement. (a) Such Purchaser understands that (i)
the offering and sale of the Series G Preferred Shares is intended to be exempt
from registration under the Securities Act pursuant to Section 4(2) of the
Securities Act and (ii) there is no existing public or other market for any of
the Series G Preferred Shares or the shares of Common Stock issuable upon
conversion thereof and there can be no assurance that it will be able to sell or
dispose of such Series G Preferred Shares purchased by it pursuant to this
Agreement or any shares of Common Stock issuable upon conversion thereof.
(b) It is an "Accredited Investor" as such term is defined in
Regulation D.
(c) It has sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of its
investment in the Securities and it is capable of bearing the economic risks of
such investment, including a complete loss of its investment in the Series G
Preferred Shares.
(d) It has had access to the management and records of the Issuer
and has been furnished with all the information that it has requested from the
Issuer for determining whether to purchase the Series G Preferred Shares and has
been given the opportunity to ask questions of, and receive answers from,
management of the Issuer regarding its business and affairs and concerning the
terms and conditions of the Series G Preferred Shares and other related matters.
(e) It understands that the Series G Preferred Shares and the shares
of Common Stock issuable upon conversion of the Series G Preferred Shares are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired from the Issuer in a transaction not
involving a public offering and that under such laws and applicable regulations
such securities may be resold without registration under the Securities Act only
in certain limited circumstances. In this connection, it represents that it is
familiar with SEC Rules 144 and 144A, as presently in effect, and understands
the resale limitations imposed thereby and by the Securities Act.
(f) Such Purchaser understands that any certificates representing
Series G Preferred Shares which it may purchase pursuant to this Agreement and
any shares of Common Stock which may be issued upon conversion thereof will bear
a legend in substantially the following form:
16
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS OR
PURSUANT TO A WRITTEN OPINION OF COUNSEL FOR THE COMPANY THAT REGISTRATION
IS NOT REQUIRED.
THE SALE, ASSIGNMENT, HYPOTHECATION, PLEDGE, ENCUMBRANCE OR OTHER
DISPOSITION (EACH A `TRANSFER') AND VOTING OF ANY OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE ARE RESTRICTED BY THE TERMS OF THE AMENDED
AND RESTATED STOCKHOLDERS AGREEMENT, DATED AS OF OCTOBER 31, 1997 (THE
"STOCKHOLDERS AGREEMENT"), AMONG KMC TELECOM HOLDINGS, INC., NASSAU
CAPITAL PARTNERS L.P., NAS PARTNERS I L.L.C., XXXXXX X. XXXXXX, KMC
TELECOMMUNCATIONS L.P., GENERAL ELECTRIC CAPITAL CORPORATION, CORESTATES
HOLDINGS, INC. AND AT&T CREDIT CORPORATION, AS THE SAME HAS BEEN, OR
SUBSEQUENT TO THE DATE HEREOF MAY BE, AMENDED FROM TIME TO TIME, A COPY OF
WHICH MAY BE INSPECTED AT THE COMPANY'S PRINCIPAL OFFICE. THE COMPANY WILL
NOT REGISTER A TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
ON THE BOOKS OF THE COMPANY UNLESS AND UNTIL SUCH TRANSFER HAS BEEN MADE
IN COMPLIANCE WITH THE TERMS OF SUCH STOCKHOLDERS AGREEMENT.
ARTICLE V
CONDITIONS PRECEDENT TO CLOSING
SECTION 5.01. Conditions to the Purchasers' Obligations. The obligation of
each of the Purchasers to purchase the Series G Preferred Shares to be purchased
by it hereunder is subject to the satisfaction, on or prior to the Closing Date,
of the following conditions:
(a) each of the representations and warranties of the Issuer
contained herein shall be true and correct in all material respects on and as of
such Closing Date and the Purchasers shall have received a certificate attesting
thereto signed by the Chief Executive Officer, the President or a Vice President
of the Issuer;
(b) there shall not have occurred and there shall not otherwise
exist any condition, event or development having, or likely to have (in the
reasonable judgment of the Purchasers), a Material Adverse Effect;
(c) the Purchasers shall have received an opinion from Xxxxxx, Xxxx
& Xxxxxx LLP, counsel to the Issuer, dated the Closing Date, in form reasonably
satisfactory to the Purchasers;
17
(d) the Secretary or an Assistant Secretary of the Issuer shall have
delivered to the Purchasers at the Closing Date a Certificate dated as of the
Closing Date certifying: (i) that attached thereto is a true and complete copy
of the by-laws of the Issuer as in effect on the date of such certification;
(ii) that attached thereto is a true and complete copy of all resolutions
adopted by the Board of Directors of the Issuer authorizing the execution,
delivery and performance of this Agreement and the Stockholders Agreement, the
issuance, sale and delivery of the Series G Preferred Shares, and that all such
resolutions are in full force and effect and are all the resolutions adopted in
connection with the transactions contemplated by this Agreement and the
Stockholders Agreement, (iii) that attached thereto is a true and complete copy
of the Charter as in effect on the date of such certification; and (iv) to the
incumbency and specimen signature of certain officers of the Issuer;
(e) all corporate and other proceedings to be taken by the Issuer in
connection with the transactions contemplated by this Agreement and the
Stockholders Agreement, and all documents reflecting or evidencing such
proceedings shall be reasonably satisfactory in scope, form and substance to the
Purchasers and its legal counsel, and the Purchasers and its legal counsel shall
have received all such duly executed counterpart originals or certified or other
copies of such documents and instruments as they may reasonably request.
(f) each of the Purchasers shall have received duly executed and
authenticated certificates representing the Series G Preferred Shares being
purchased by it pursuant hereto;
(g) the Series G Certificate of Designations shall have been duly
filed with the Secretary of State of Delaware and shall be in full force and
effect;
(h) the Purchaser shall have received the Stockholders Agreement
duly executed by the Issuer;
(i) the Issuer shall have paid to the Purchasers all fees, expenses
and reimbursements required to be so paid on or prior to the Closing Date
pursuant to the terms of this Agreement; and
(j) the aggregate proceeds to be received by the Issuer at the
Closing from the sale of Series G Preferred Shares shall be at least $182.5
million.
SECTION 5.02. Conditions to Issuer's Obligations. The obligations of the
Issuer to issue and sell the Series G Preferred Shares to each of the Purchasers
pursuant to this Agreement are subject to the satisfaction, at or prior to the
Closing Date, of the following conditions:
(a) the representations and warranties of each of the Purchasers
contained herein shall be true and correct in all material respects on and as of
the Closing Date;
(b) the Issuer shall have received from each of the Purchasers by
wire transfer (of immediately available funds) to an account designated by the
Issuer in writing delivered to each Purchaser, the consideration referred to on
Schedule 2.02;
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(c) the Charter Amendment shall have been duly filed with the
Secretary of State of Delaware and shall be in full force and effect;
(d) the Series G Certificate of Designations shall have been duly
filed with the Secretary of State of Delaware and shall be in full force and
effect; and
(e) the aggregate proceeds to be received by the Issuer at the
Closing from the sale of Series G Preferred Shares shall be at least $182.5
million.
SECTION 5.03. Subsequent Conditions of Each Purchaser's Obligations at a
Subsequent Closing. The obligation of each Subsequent Purchaser to purchase and
pay for the Series G Preferred Shares to be purchased at any Subsequent Closing
is subject to the satisfaction as of the Subsequent Closing of the conditions
specified in Section 5.01 hereof and all references to "Closing" "Closing Date"
contained in Section 5.01 shall be replaced with references to "Subsequent
Closing" or "Subsequent Closing Date."
ARTICLE VI
COVENANTS
SECTION 6.01. Covenants of the Issuer.
(a) Securities. The Issuer hereby covenants that from and after the
Closing Date and so long as any Purchaser owns any Series G Preferred Shares,
the Issuer shall:
(i) Exchange of Certificates. Upon surrender by the holder of
any certificates representing Series G Preferred Shares (or securities
issued upon exchange, conversion or exercise thereof) for exchange or
reissuance at the office of the Issuer, cause to be issued in exchange
therefor new certificates in such denomination or denominations as may be
requested for the same aggregate number of Series G Preferred Shares (or
securities issued upon exchange, conversion or exercise thereof)
represented by the certificates so surrendered and registered as such
holder may request, subject to the provisions thereof.
(ii) Replacement of Certificates. Upon receipt by the Issuer
of evidence reasonably satisfactory to it of loss, theft, destruction or
mutilation of any certificate evidencing any of the Series G Preferred
Shares (or securities issued upon exchange, conversion or exercise
thereof), and (in case of loss, theft or destruction) of indemnity
reasonably satisfactory to the Issuer, and upon the surrender and
cancellation of such certificate, if mutilated, the Issuer shall make and
deliver in lieu of such certificate a new certificate for the number of
Series G Preferred Shares (or securities issued upon exchange, conversion
or exercise thereof), as the case may be, evidenced by such lost, stolen,
destroyed or mutilated certificate which remains outstanding. Such
Purchaser's (which term does not include any successors or assigns of such
Purchaser) agreement of indemnity shall constitute indemnity satisfactory
to the Issuer for the purposes of this Section 6.01(a) without the need of
any further surety or bond.
19
(iii) Government and Other Approvals. Promptly prepare, submit
and file with all public and governmental authorities, all applications,
notices, registrations, certificates, statements and such other
information, documents and instruments as may be required pursuant to any
federal, state or local law or rule or regulation of the National
Association of Securities Dealers, Inc. or any securities exchange, in
connection with the consummation of the transactions contemplated by this
Agreement, including the preparation and filing of all documents required
to be filed by the Issuer pursuant to the HSR Act in connection with the
purchase of Series G Preferred Shares hereunder by Dresdner, Kleinwort
Xxxxxx Private Equity Partners L.P. ("Dresdner"), the effect of any
dividends, exchange or conversion rights, anti-dilution provisions or
Board control contemplated by the terms of the Series G Preferred Shares
or other securities of the Issuer which may be acquired by any Purchaser
pursuant to this Agreement. The Issuer shall use its best efforts to
obtain any necessary consents or approvals from any authority in
connection with the consummation of the transactions contemplated by this
Agreement, including the effect of any dividends, exchange or conversion
rights, anti-dilution provisions or Board control contemplated by the
terms of the Series G Preferred Shares.
(b) Access and Confidentiality. Prior to the Closing Date, the
Issuer shall (and shall cause each of its Subsidiaries to) afford each Purchaser
and its representatives reasonable access during normal business hours to its
properties, books, contracts and records and personnel and advisors and the
Issuer shall (and shall cause each of the Subsidiaries to) furnish promptly to
each Purchaser all information concerning its business properties and personnel
as each Purchaser or its representatives may reasonably request, provided that
any review will be conducted in a way that will not interfere unreasonably with
the conduct of the Issuer's business.
(c) Reports to Holders. At all times, upon the request of any
Purchaser so long as such Purchaser (together with its, his or her Affiliates)
owns Shares of Underlying Common Stock having an initial purchase price of at
least $25 million, the Issuer shall supply to such Purchaser such financial and
other information as such Purchaser may reasonably determine to be necessary in
order to permit compliance with Rule 144A in connection with a resale or a
proposed resale of any of the Series G Preferred Shares.
(d) Inspection of Property. The Issuer shall permit any
representatives designated by a Purchaser that (together with its, his or her
Affiliates) continues to hold at least 5% of the authorized shares of Underlying
Common Stock, upon reasonable notice and during normal business hours, to (i)
visit and inspect any of the properties of the Issuer and its Subsidiaries, (ii)
examine the corporate and financial records of the Issuer and its Subsidiaries
and make copies thereof or extracts therefrom and (iii) discuss the affairs,
finances and accounts of any such corporations with the directors, officers and
independent accountants of the Issuer and its Subsidiaries. Any Person not then
subject to the terms of an effective confidentiality agreement with the Issuer
may be required to execute such an agreement with the Issuer as a condition of
being provided access to the properties, books and records of the Issuer and an
opportunity to discuss the Issuer's affairs with the officers, directors and
independent accountants of the Issuer. The presentation of an executed copy of
this Agreement by any Purchaser to the Issuer's independent accountants shall
constitute the Issuer's permission to its independent accountants to participate
in discussions with such Persons. Any Person entitled to exercise rights under
20
this Section 6(e) shall be entitled to exercise such rights not more than one
time per calendar quarter. The rights granted under this Section 6.01(d) shall
terminate upon the consummation of a Qualified Public Offering.
(e) Limited Rights of First Refusal
(i) Except for issuances of Common Stock (a) to the Issuer's
employees or other service providers pursuant to the 1998 Stock Purchase
and Option Plan for Key Employees of KMC Telecom Holdings, Inc. and
Affiliates, as amended, or any other board-approved equity issuance to the
employees or service providers, (b) upon the exercise or conversion of any
securities outstanding on the Closing Date, (c) for consideration other
than cash, (d) to lessors of the Issuer (e) to providers of debt
financing, or (f) pursuant to a public offering registered under the
Securities Act, and except for issuances of Series G Preferred Shares
pursuant to Section 2.04, if the Issuer authorizes the issuance or sale of
any shares of Common Stock or any securities containing options or rights
to acquire any shares of Common Stock (other than as a dividend on the
outstanding Common Stock), the Issuer shall first offer to sell to each
holder of Underlying Common Stock a portion of such stock or securities
equal to the quotient determined by dividing (1) the number of shares of
Underlying Common Stock held by such holder by (2) the sum of the total
number of shares of Underlying Common Stock and the number of shares of
Common Stock outstanding on a fully diluted basis which are not shares of
Underlying Common Stock. Each holder of Underlying Common Stock shall be
entitled to purchase such stock or securities at the most favorable price
and on the most favorable terms as such stock or securities are to be
offered to any other Persons; provided that, at the request of any holder
of Underlying Common Stock, the Issuer shall offer to such holder stock or
securities which have no voting rights (other than as required by
applicable law) and which are convertible into voting securities at the
option of the holder but which are otherwise identical to the stock or
securities being offered. The purchase price for all stock and securities
offered to the holders of the Underlying Common Stock shall be payable in
cash.
(ii) In order to exercise its purchase rights hereunder, a
holder of Underlying Common Stock must within 15 days after receipt of
written notice from the Issuer describing in reasonable detail the stock
or securities being offered, the purchase price thereof, the payment terms
and such holder's percentage allotment deliver a written notice to the
Issuer describing its election hereunder. If all of the stock and
securities offered to the holders of Underlying Common Stock is not fully
subscribed by such holders, the remaining stock and securities shall be
reoffered by the Issuer to the holders purchasing their full allotment
upon the terms set forth in this paragraph, except that such holders must
exercise their purchase rights within five days after receipt of such
reoffer.
(iii) Upon the expiration of the offering periods described
above, the Issuer shall be entitled to sell such stock or securities which
the holders of Underlying Common Stock have not elected to purchase during
the 90 days following such expiration on terms and conditions no more
favorable to the purchasers thereof than those offered to such holders.
Any stock or securities offered or sold by the Issuer after such 90-day
period must be reoffered to the holders of Underlying Common Stock
pursuant to the terms of this paragraph 6.01(f).
21
(iv) The rights of the holders of Underlying Common Stock
under this Section 6.01(e) not apply to, and shall terminate upon the
consummation of, a Qualified Public Offering.
(f) Directed Shares upon the Initial Public Offering.
(i) Notwithstanding the provisions of Section 6.01(e), the
Issuer hereby grants to each of the Purchasers, a right of first offer to
purchase shares of Common Stock in the Issuer's initial public offering
(the "IPO") of shares of its Common Stock registered under the Securities
Act (the "IPO Purchase Option") at a price equal to the public offering
price of such shares. In connection with its exercise of the IPO Purchase
Option, the Purchasers may, on a pro-rata basis, purchase up to a number
of shares equal to ten percent (10%) of all shares of Common Stock offered
by the Issuer in the IPO (the "Maximum Number"). The IPO Purchase Option
shall not extend, however, to any shares of Common Stock which may be
subject to any over-allotment option granted to the underwriters in
connection with such IPO.
(ii) The Issuer shall deliver notice of the IPO, within ten
(15) days following the filing of a registration statement relating to the
IPO. Within five (5) days following delivery of such notice, each of the
Purchasers may exercise the IPO Purchase Option (by delivery of notice to
such effect to the Issuer) for a number of shares up to its respective
Maximum Number. For purposes of this Section 6.01(f), the Purchasers
include any Permitted Transferees (as defined in the Stockholders
Agreement) of the Purchasers.
(iii) The exercise of the IPO Purchase Option by each
Purchaser shall be deemed an expression of interest in receiving an offer
by the Issuer to purchase the number of shares of Common Stock indicated
by such Purchaser pursuant to subsection (ii) above. The Issuer's offer to
sell such shares of Common Stock to such Purchaser shall be deemed to
occur automatically upon the completion of each of the earlier to occur of
(A) the Issuer's providing such Purchaser with a copy of the final
prospectus filed with the Securities and Exchange Commission with respect
to the shares of Common Stock and (B) two hours after the latest to occur
of (x) the effectiveness of the IPO registration statement and (y) the
Issuer's determination of the offering price for shares offered to the
public in the IPO (the completion of the last to occur of the foregoing,
the "Offer Commencement"). Each Purchaser shall have an unconditional
right to terminate its IPO Purchase Option and revoke its exercise thereof
by written notice to the Issuer on or before the Offer Commencement. Once
revoked by a Purchaser, the IPO Purchase Option shall become null and void
with respect to such Purchaser. Each Purchaser's exercise of the IPO
Purchase Option shall, unless so revoked by such Purchaser on or before
the Offer Commencement, automatically be deemed to be a binding commitment
to purchase the shares of Common Stock indicated by such Purchaser
pursuant to subsection (ii) above when each of the actions specified in
the immediately preceding sentence have occurred. The purchase of the
22
shares of Common Stock by any Purchaser shall occur simultaneously with
the closing of the purchase and sale of the other shares distributed in
the IPO. It is the intent of the parties that the shares of Common Stock
issued to the Purchasers shall be fully registered shares for sale in the
IPO.
(iv) The IPO Purchase Option set forth in this Section 6.01(f)
may not be assigned or transferred, except that such right is assignable
by a Purchaser to any of its Permitted Transferees (as defined in the
Stockholders Agreement) or any other Purchaser.
(g) Financial Statements and Other Information. The Issuer shall
deliver to each Purchaser who (together with its, his or her Affiliates)
continues to hold at least 5% of the authorized shares of Underlying Common
Stock:
(i) within 45 days after the end of each month (or equivalent
fiscal period of the Company), a copy of the unaudited consolidated
balance sheets of the Issuer as of the end of such month (or equivalent
fiscal period of the Issuer) and the related consolidated statements of
income and statements of cash flows and changes in stockholders equity for
such month (or equivalent fiscal period of the Issuer) and for the portion
of the fiscal year ending as of the end of such month (or equivalent
fiscal period of the Issuer), all in reasonable detail and prepared in
accordance with GAAP, consistently applied (subject to normal year-end
adjustments and the exclusion of such footnotes as may be required in
accordance with GAAP, consistently applied), accompanied by comparisons to
the Issuer's annual budget for such month and for year to date results and
to the corresponding periods in the preceding fiscal year (if any),
including a management discussion and analysis of such financial
statements and comparisons and an explanation of any material deviation
from the budget;
(ii) accompanying the financial statements referred to in
subparagraph (i), a certificate from the Issuer's chief financial officer
stating that there is no Event of Noncompliance in existence or, if any
Event of Noncompliance exists, specifying the nature thereof;
(iii) within 120 days after the close of each fiscal year, a
copy of the audited consolidated financial statements of the Issuer,
consisting of consolidated balance sheets as of the end of such fiscal
year and consolidated statements of income and statements of cash flows
and changes in stockholders' equity for such fiscal year, setting forth in
comparative form in each case the consolidated figures set forth in the
annual budget for such fiscal year and the consolidated figures for the
previous fiscal year-end, which financial statements shall be prepared in
accordance with GAAP, consistently applied, certified without
qualification by a "big-five" accounting firm selected by the Issuer,
accompanied by (a) a management discussion and analysis of such financial
statements and comparisons and an explanation of any material deviation
from the annual budget, (b) a certificate from such accounting firm,
addressed to the Board, stating that in the course of its examination
nothing came to its attention that caused it to believe that there was an
Event of Noncompliance in existence or that there was any other material
default by the Issuer or any Subsidiary in the fulfillment of or
compliance with any of the terms, covenants, provisions or conditions of
this Agreement and any other material agreement to which the Issuer or any
Subsidiary is a party or, if such accountants have reason to believe any
23
Event of Noncompliance or other default by the Issuer or any Subsidiary
exists, a certificate specifying the nature and period of existence
thereof, and (c) a copy of such firm's annual management letter to the
Board;
(iv) no later than 30 days prior to the close of each fiscal
year, a copy of the Issuer's annual budget for the next succeeding fiscal
year which shall have been duly adopted by the Board (the first proposed
budget is attached hereto as Exhibit C);
(v) promptly (but in any event within ten days) after the
discovery or receipt of notice of any Event of Noncompliance or any
condition or event which is reasonably likely to have a material adverse
effect on the Issuer's business prospects or financial condition or on the
Purchasers' investment in the Series G Preferred Shares or the Underlying
Common Stock, written notice specifying the nature and period of existence
thereof;
(vi) within ten days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general
written communications which the Issuer sends to its stockholders and
copies of all regular, special or periodic reports which it files, or any
of its officers or directors file with respect to the Issuer, with the
Securities and Exchange Commission or with any securities exchange on
which any of its securities are then listed, and copies of all press
releases and other statements made available generally by the Issuer to
the public concerning material developments in the Issuer's and its
Subsidiaries' businesses; and
(vii) notwithstanding the foregoing, at the request of any
holder of Underlying Common Stock, the Issuer shall cease providing to
such holder any or all such information that such holder is entitled to
pursuant to this Section 6.01(g) until such holder rescinds such request;
provided, that the obligations of the Issuer contained in this Section 6.01(g)
shall terminate upon a Qualified Public Offering.
(h) Miscellaneous Covenants.
(i) the Issuer will maintain property, casualty, products
liability and other insurance covering such risks at such levels and with
such exclusions as is customarily maintained by Companies of similar size
engaged in similar lines of business;
(ii) the Issuer will maintain directors and officers liability
insurance for the benefit of all of its directors and officers as is
customary for companies of similar size engaged in similar lines of
business;
(iii) the Issuer shall perform and observe all of its material
obligations to each holder of the Series G Preferred Shares and all of its
obligations to each holder of the Underlying Common Stock set forth in the
Charter, the Series G Certificate of Designations and the Issuer's bylaws;
and
24
(iv) within 15 days following the Closing Date, the Issuer
shall prepare and file a report on Form D pursuant to Regulation D with
the Securities and Exchange Commission describing the purchase and sale of
the Series G Preferred Shares as contemplated herein.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Notices. All notices, requests and other communications to
any party hereunder shall be in writing (including telecopier or similar
writing) and shall be given to such party by certified first class mail at its
address with a return receipt requested, by Federal Express or similar overnight
mail service with signature required for receipt, or by telecopy at the
telecopier number set forth below or such other address or telecopier number as
such party may hereinafter specify in writing for the purpose to the party
giving such notice. Each such notice, request or other communication shall be
effective (i) if given by telecopy, when such telecopy is transmitted to the
telecopy number specified in this Section and the appropriate electronic
confirmation is received and a copy of such notice is sent by overnight mail
service or (ii) if given by mail or overnight courier, 72 hours after such
communication is deposited in the mails with first class postage prepaid or
given to overnight courier service, addressed as aforesaid.
Issuer:
KMC Telecom Holdings, Inc.
0000 Xxxxx 000, Xxxxx 000
Xxxxxxxxxx XX 00000
Attn: Chief Financial Officer
Fax: (000) 000-0000
With a copy (which shall not constitute notice) to:
Xxxxxx Xxxx & Xxxxxx LLP
000 Xxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx X. Xxxxxxx
Fax: (000) 000-0000
To any Purchaser:
To the address, and with the copy or copies, indicated on the
attached Schedule 2.02
25
SECTION 7.02. No Waivers. No failure or delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The rights and remedies herein provided shall be cumulative and not exclusive of
any rights or remedies provided by law.
SECTION 7.03. Successors and Assigns. Each Purchaser may assign its rights
hereunder without the consent of the Issuer to any transferee of any of the
Series G Preferred Shares. Otherwise, no party to this Agreement may assign any
of its rights or obligations hereunder to any person except with the prior
written consent of the other parties hereto (which consent may not be
unreasonably withheld). This Agreement shall be binding upon the Issuer and each
Purchaser and their respective successors and assigns.
SECTION 7.04. Choice of Law. All issues and questions concerning the
construction, validity, enforcement and interpretation of this Agreement and the
exhibits and schedules hereto shall be governed by, and construed in accordance
with, the laws of the State of New York, without giving effect to any choice of
law or conflict of law rules or provisions (whether of the State of New York or
any other jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York. In furtherance of the foregoing,
the internal law of the State of New York shall control the interpretation and
construction of this Agreement (and all schedules and exhibits hereto), even
though under that jurisdiction's choice of law or conflict of law analysis, the
substantive law of some other jurisdiction would ordinarily apply.
SECTION 7.05. Counterparts; Effectiveness. This Agreement may be executed
in any number of counterparts each of which shall be an original with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other parties hereto.
SECTION 7.06. Entire Agreement. This Agreement, the Stockholders Agreement
and the Series G Certificate of Designations constitute the entire agreement and
understanding of the parties hereto in respect of the subject matter contained
herein and therein, and there are no restrictions, promises, representations,
warranties, covenants, or undertakings with respect to the subject matter
hereof, other than those expressly set forth or referred to herein or therein.
This Agreement and the documents referred to in the preceding sentence supersede
all prior agreements and understandings between the parties hereto with respect
to the subject matter hereof.
SECTION 7.07. Expenses. Upon consummation of the transactions contemplated
by this Agreement, the Issuer shall pay the Purchasers' reasonable out-of-pocket
expenses on demand arising in connection with the execution and delivery of this
Agreement, the Stockholders Agreement and the Series G Certificate of
Designations (collectively, the "Transaction Documents") and the purchase of the
Series G Preferred Shares, including, without limitation: (i) the reasonable
fees and expenses of legal counsel to each of the Purchasers in connection with
the preparation and negotiation of the Transaction Documents and the
consummation of the transactions contemplated therein, and (ii) the reasonable
26
fees and expenses incurred in connection with the preparation and filing of all
documents required to be filed pursuant to the HSR Act in connection with the
purchase of the Series G Preferred Shares hereunder by Dresdner. In addition,
the Issuer shall pay the costs and expenses, including reasonable attorneys fees
and expenses and the fees and expenses of any other special or financial
advisors, incurred in connection with any bankruptcy or insolvency of the Issuer
or in connection with any workout or restructuring of any of the transactions
contemplated in the Transaction Documents. The obligations of the Issuer under
this Section 7.07 shall survive any transfer of any of the Series G Preferred
Shares by any Purchaser or any subsequent holder thereof.
SECTION 7.08. Announcements. No party or any Affiliate, officer or agent
of the parties hereto shall make any announcement concerning the transactions
contemplated hereby without the other parties' consent, which will not be
unreasonably withheld; provided, however, that any party or such Affiliate,
officer or agent may make any announcements required by applicable law so long
as the text of the announcement shall have been provided to the parties hereto
prior to the making of such announcement.
SECTION 7.09. Consents to Amendment. The provisions of this Agreement may
be amended, modified, or waived, and the Issuer may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Issuer has obtained the written consent of the holders of two thirds
of each of the Series G-1 Preferred Shares and the Series G-2 Preferred Shares,
respectively; provided that if any such amendment, modification or waiver would
adversely affect any holder of Series G-1 Preferred Shares or Series G-2
Preferred Shares, as the case may be, relative to the holders of Series G-1
Preferred Shares or Series G-2 Preferred Shares voting in favor of such
amendment, modification, or waiver, such amendment, modification or waiver shall
also require the written consent of the holders of two thirds of the Series G-1
Preferred Shares or Series G-2 Preferred Shares, as applicable, held by all
holders so adversely affected. No course of dealing between the Issuer and any
holder of Series G Preferred Shares or any delay by such holder in exercising
any rights hereunder shall operate as a waiver of any rights of such holder.
SECTION 7.10. Subsequent Sales. In the event that the Issuer sells any
Series G Preferred Shares after the Closing Date to any purchaser at a price
and/or with other terms, rights, preferences or privileges more favorable than
those offered to the Purchasers hereunder, then the Issuer will provide the
Purchasers with substantially similar price, terms, rights, preferences and/or
privileges. The parties hereto agree to amend this Agreement, the Stockholder
Agreement, the Series G Certificate of Designations and any other instruments or
agreements executed or delivered in connection herewith or therewith to the
extent necessary to implement the intent of this Section 7.10.
* * * * *
27
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: /s/ Xxxxxxx X. Xxxxxxx
----------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Executive Vice President and
CFO
NASSAU CAPITAL PARTNERS IV, L.P.
By: Nassau Capital LLC
Its: General Partner
By: /s/ Xxxx X. Xxxxxxx
-------------------
Name: Xxxx X. Xxxxxxx
Title: Member
NAS PARTNERS I L.L.C.
By: /s/ Xxxx X. Xxxxxxx
-------------------
Name: Xxxx X. Xxxxxxx
Title: Member
DRESDNER KLEINWORT XXXXXX PRIVATE EQUITY
PARTNERS LP
By: Dresdner Kleinwort Xxxxxx Private
Equity LLC
Its: General Partner
By: /s/ Xxxxxxxxx X. Xxxxxxx
------------------------
Name: Xxxxxxxxx X. Xxxxxxx
Title: Authorized Person
By: /s/ I. D. Leigh
---------------
Name: I. D. Leigh
Title: Authorized Person
00 XXXX XXXXXX ASSOCIATES, LLC
By: Kleinwort Xxxxxx (USA) Inc.
Its: Attorney-in-Fact
By: /s/ Xxxxxxxxx X. Xxxxxxx
------------------------
Name: Xxxxxxxxx X. Xxxxxxx
Title: Authorized Person
By: /s/ I. D. Leigh
---------------
Name: I. D. Leigh
Title: Authorized Person
CIT LENDING SERVICES CORPORATION
By: /s/ Xxxxx X. Xxxxx
------------------
Name: Xxxxx X. Xxxxx
Title:
LUCENT TECHNOLOGIES INC.
By: /s/ Xxxx Xxxx
-------------
Name: Xxxx Xxxx
Title: Director - NA Customer
Finance
XXXXXX X. XXXXXX,
in his individual capacity
/s/ Xxxxxx X. Xxxxxx
--------------------
Xxxxxx X. Xxxxxx
