Exhibit 10.1
KMC TELECOM HOLDINGS, INC.
$249,965,568 REPRESENTING 460,800 UNITS, EACH UNIT CONSISTING OF
ONE 121/2% SENIOR DISCOUNT NOTE DUE 2008 AND
ONE WARRANT TO PURCHASE COMMON STOCK OF THE COMPANY
PURCHASE AGREEMENT
January 26, 1998
KMC TELECOM HOLDINGS, INC.
PURCHASE AGREEMENT
January 26, 1998
Xxxxxx Xxxxxxx & Co. Incorporated
0000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Dear Sirs and Mesdames:
KMC Telecom Holdings, Inc., a Delaware corporation (the "Company"),
proposes to issue and sell to you (the "Initial Purchaser") 460,800 Units (the
"Units"). Each Unit will consist of (i) one 121/2% Senior Discount Note due
2008 of the Company (collectively, the "Notes") to be issued pursuant to the
provisions of an Indenture (the "Indenture") dated as of the Closing Date (as
defined in Section 4) between the Company and The Chase Manhattan Bank, as
trustee (in such capacity, the "Trustee"), and (ii) one Warrant (collectively,
the "Warrants"), entitling the holder thereof to purchase 0.21785 shares of
common stock, par value $0.01 per share ("Common Stock"), of the Company
(collectively, the "Warrant Shares") from the Company at an exercise price of
$0.01 per share, subject to adjustment as provided in the Warrant Agreement (as
defined below). The Warrants will be issued pursuant to the provisions of a
warrant agreement (the "Warrant Agreement") dated as of the Closing Date between
the Company and The Chase Manhattan Bank, as warrant agent (in such capacity,
the "Warrant Agent"), substantially in the form attached hereto as Exhibit A.
The Units will be offered without being registered under the
Securities Act of 1933, as amended (the "Securities Act") to qualified
institutional buyers in compliance with the exemption from registration provided
by Rule 144A under the Securities Act, in offshore transactions in reliance on
Regulation S under the Securities Act ("Regulation S") and to institutional
accredited investors (as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act) that deliver a letter in the form annexed to the Final
Memorandum.
The Initial Purchaser and its direct and indirect transferees will be
entitled to the benefits of a Registration Rights Agreement relating to the
Notes, to be dated the date hereof, and to be substantially in the form attached
hereto as Exhibit B (the "Registration Rights Agreement") and (ii) a Warrant
Registration Rights Agreement relating to the Warrants, dated the date hereof,
and to be substantially in the form attached hereto as Exhibit C (the "Warrant
Registration Rights Agreement").
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In connection with the sale of the Units, the Company has prepared a
preliminary private placement memorandum dated January 7, 1998 (the "Preliminary
Memorandum") and will prepare a final private placement memorandum (the "Final
Memorandum" and, with the Preliminary Memorandum, each a "Memorandum") setting
forth or including a description of the terms of the Units, the Notes, the
Warrants and the Warrant Shares, the terms of the offering and a description of
the Company and its business.
1. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to, and agrees with, you that as of the date hereof:
(a) The Preliminary Memorandum as of the date hereof does not
contain and the Final Memorandum, in the form used by the Initial Purchaser
to confirm sales and on the Closing Date, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in the light of the circumstances under which
they were made, not misleading, except that the representations and
warranties set forth in this paragraph do not apply to statements or
omissions in either Memorandum based upon information relating to the
Initial Purchaser furnished to the Company in writing by such Initial
Purchaser expressly for use therein.
(b) The Company has been duly incorporated, is validly existing as
a corporation in good standing under the laws of the State of Delaware, has
the corporate power and authority to own its property and to conduct its
business as described in each Memorandum and is duly qualified to transact
business and is in good standing in each jurisdiction in which the conduct
of its business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the Company
and its subsidiaries, taken as a whole.
(c) Each subsidiary of the Company is listed on Exhibit D hereto
(each a "Subsidiary" and, collectively, the "Subsidiaries") and has been
duly incorporated or otherwise organized, is validly existing as a
corporation or limited liability company, as the case may be, in good
standing under the laws of the jurisdiction of its incorporation or
organization, has the corporate and/or limited liability company power and
authority, as appropriate, to own its property and to conduct its business
as described in each Memorandum and is duly qualified to transact business
and is in good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so qualified or
be in good standing would not have a material adverse effect on the Company
and the Subsidiaries, taken as a whole; all of the issued shares of capital
stock or membership interests of each Subsidiary of the Company have been
duly and validly authorized and issued, are fully paid and non-assessable
and are
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owned, directly or indirectly, by the Company, free and clear of all liens,
encumbrances, equities or claims, other than those indicated in either
Memorandum.
(d) This Agreement has been duly authorized, executed and delivered
by the Company.
(e) The Notes have been duly authorized by the Company and, when
executed and authenticated in accordance with the Indenture, and delivered
to and paid for by the Initial Purchaser in accordance with the terms of
this Agreement, will (x) be valid and binding obligations of the Company
enforceable in accordance with their terms, except as (A) the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium
or similar laws affecting creditors' rights generally and (B) rights of
acceleration, if applicable, and the availability of equitable remedies may
be limited by equitable principles of general applicability and (y) be
entitled to the benefits of the Indenture pursuant to which such Notes are
to be issued and the Registration Rights Agreement.
(f) Each of the Indenture and the Registration Rights Agreement has
been duly authorized by the Company and, when executed and delivered by the
Company, will be a valid and binding agreement of, the Company, enforceable
in accordance with its terms except that (w) the enforceability thereof may
be limited by bankruptcy, insolvency, moratorium or similar laws affecting
creditors' rights generally, (x) rights of acceleration, if applicable, and
the availability of equitable remedies may be limited by equitable
principles of general applicability, (y) rights to indemnification and
contribution may be limited by public policy and (z) provisions of the
Indenture, if any, requiring any waiver of stay or extension laws, diligent
performance or other acts on the part of the Trustee may be unenforceable
under principles of public policy.
(g) The Warrants have been duly authorized by the Company and, when
executed, and countersigned by the Warrant Agent as provided in the Warrant
Agreement, and delivered to and paid for by the Initial Purchaser in
accordance with the terms of this Agreement, will (x) be valid and binding
obligations of the Company enforceable in accordance with their terms,
except as (A) the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium or similar laws relating to or affecting creditors'
rights generally and (B) rights of acceleration, if applicable, and the
availability of equitable remedies may be limited by equitable principles
and (y) be entitled to the benefits of the Warrant Agreement pursuant to
which such Warrants are to be issued and the Warrant Registration Rights
Agreement.
(h) Each of the Warrant Agreement and the Warrant Registration
Rights Agreement has been duly authorized by the Company and, when executed
and
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delivered by the Company, will be a valid and binding agreement of the
Company, enforceable in accordance with its terms except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium
or similar laws relating to or affecting creditors' rights generally,
(y) rights of acceleration, if applicable, and the availability of
equitable remedies may be limited by equitable principles and (z) rights to
indemnification and contribution may be limited by public policy.
(i) The Warrant Shares issuable upon exercise of the Warrants have
been duly authorized and reserved by the Company and, when issued and
delivered upon exercise of the Warrants in accordance with the terms of the
Warrants and the Warrant Agreement, will be validly issued, fully paid and
non-assessable and the issuance of such Warrant Shares will not be subject
to any preemptive rights.
(j) The shares of Common Stock outstanding prior to the issuance of
the Units have been duly authorized and are validly issued, fully paid and
non-assessable.
(k) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement, the
Indenture, the Registration Rights Agreement, the Warrant Agreement, the
Warrant Registration Rights Agreement, the Notes and the Warrants
(collectively, the "Transaction Documents") and the issuance, sale and
delivery of the Units, Notes and Warrants and the issuance of the Warrant
Shares upon exercise of the Warrants in accordance with the terms of the
Warrants and the Warrant Agreement by the Company will not contravene (i)
any provision of applicable law, (ii) the certificate of incorporation or
bylaws of the Company, (iii) any agreement or other instrument binding upon
the Company or any of its Subsidiaries, or (iv) any judgment, order or
decree of any governmental body, agency or court having jurisdiction over
the Company or any Subsidiary, except with respect to clauses (i) and (iii)
to the extent than any contravention would not have a material adverse
effect on the Company and its Subsidiaries taken as a whole.and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the Company
of its obligations under the Transaction Documents, except (x) such as may
be required by the securities or Blue Sky laws of the various states in
connection with the offer and sale of the Units, Notes and Warrants, (y)
such as may be required by Federal and state securities laws with respect
to the Company's obligations under the Registration Rights Agreement and
the Warrant Registration Rights Agreement and (z) for any consents,
approvals, authorizations, orders or qualifications, the failure to obtain
which would not have a material adverse effect on the ability of the
Company to perform its obligations under the Transaction Documents.
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(l) There has not occurred any material adverse change, or any
development involving a prospective material adverse change, in the
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its Subsidiaries, taken as a whole, from that
set forth in the Preliminary Memorandum. Furthermore, (1) the Company and
its Subsidiaries have not incurred any material liability or obligation,
direct or contingent, nor entered into any material transaction not in the
ordinary course of business; (2) the Company has not purchased (except for
the repurchase of shares of Common Stock from employees, officers,
directors, consultants or other persons providing services to the Company
or any of its Subsidiaries pursuant to agreements under which the Company
has the option to repurchase such shares of Common Stock at cost upon the
occurrence of certain events such as the termination of employment or other
service-providing relationship) any of its outstanding capital stock, nor
declared, paid or otherwise made any dividend or distribution of any kind
on its capital stock other than ordinary and customary dividends; and (3)
there has not been any material change in the capital stock, short-term
debt or long-term debt of the Company and its consolidated Subsidiaries
taken as a whole, except in each case as described in the Final Memorandum.
(m) There are no legal or governmental proceedings pending or, to
the knowledge of the Company, threatened to which the Company or any of its
Subsidiaries is a party or to which any of the properties of the Company or
any of its Subsidiaries is subject other than proceedings accurately
described in all material respects in each Memorandum and proceedings that
are not reasonably likely to have a material adverse effect on the Company
and its Subsidiaries, taken as a whole, or on the power or ability of the
Company to perform its obligations under any of the Transaction Documents
or to consummate the transactions contemplated by the Final Memorandum.
(n) Neither the Company nor any affiliate (as defined in
Rule 501(b) of Regulation D under the Securities Act, an "Affiliate") of
the Company has directly, or through any agent, (i) sold, offered for sale,
solicited offers to buy or otherwise negotiated in respect of, any security
(as defined in the Securities Act) which is or will be integrated with the
sale of the Units, the Notes or the Warrants in a manner that would require
the registration under the Securities Act of the Units, the Notes or the
Warrants or (ii) engaged in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Securities
Act) in connection with the offering of the Units, the Notes or the
Warrants or in any manner involving a public offering within the meaning of
Section 4(2) of the Securities Act.
(o) The Company is not, and after giving effect to the offering and
sale of the Units, the Notes and the Warrants and the application of the
proceeds thereof as
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described in the Final Memorandum, will not be an "investment company" as
such term is defined in the Investment Company Act of 1940, as amended.
(p) It is not necessary in connection with the offer, sale and
delivery of the Units, the Notes and the Warrants to the Initial Purchaser
in the manner contemplated by this Agreement to register the Units, the
Notes or the Warrants under the Securities Act or to qualify the Indenture
under the Trust Indenture Act of 1939, as amended.
(q) The Company and its Subsidiaries (i) are in compliance with any
and all applicable foreign, federal, state and local laws and regulations
relating to the protection of human health and safety, the environment or
hazardous or toxic substances or wastes, pollutants or contaminants
("Environmental Laws"), (ii) have received all permits, licenses or other
approvals required of them under applicable Environmental Laws to conduct
their respective businesses and (iii) are in compliance with all terms and
conditions of any such permit, license or approval, except where such
noncompliance with Environmental Laws, failure to receive required permits,
licenses or other approvals or failure to comply with the terms and
conditions of such permits, licenses or approvals would not, singly or in
the aggregate, have a material adverse effect on the Company and its
Subsidiaries, taken as a whole.
(r) There are no costs and liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance
with Environmental Laws or any permit, license or approval, any related
constraints on operating activities and any potential liabilities to third
parties) which would, singly or in the aggregate, have a material adverse
effect on the Company and its Subsidiaries, taken as a whole.
(s) The Units, the Notes and the Warrants satisfy the requirements
set
forth in Rule 144A(d)(3) under the Securities Act.
(t) None of the Company, its Affiliates or any person acting on its
or their behalf (other than the Initial Purchaser) has engaged in any
directed selling efforts (as that term is defined in Regulation S under the
Securities Act) with respect to the Units, the Notes or the Warrants and
the Company and its Affiliates and any person acting on its or their behalf
(other than the Initial Purchaser) have complied with the offering
restrictions requirement of Regulation S.
(u) Except as described in each Memorandum, the Company and its
Subsidiaries (i) have all necessary consents, authorizations, approvals,
orders, certificates and permits of and from, and have made all
declarations and filings with, all federal, state, local and other
governmental, administrative or regulatory
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authorities, all self-regulatory organizations and all courts and other
tribunals, to own, lease, license and use their properties and assets and
to conduct their business in the manner described in each Memorandum,
except to the extent that the failure to obtain such consents,
authorizations, approvals, orders, certificates or permits or make such
declarations or filings would not have a material adverse effect on the
Company and its Subsidiaries, taken as a whole; and (ii) has not received
any notice of proceedings relating to the violation, revocation or
modification of any such license, consent, authorization, approval, order,
certificate or permit which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would reasonably be expected to
result in a material adverse change in the condition, financial or
otherwise, in the earnings, business or operations of the Company and its
Subsidiaries, taken as a whole.
(v) The Company and its Subsidiaries have good and marketable title
in fee simple to all real property and good and marketable title to all
personal property owned by them which is material to the business of the
Company and its Subsidiaries, taken as a whole, in each case free and clear
of all liens, encumbrances and defects except (i) such as are described in
each Memorandum, (ii) such as do not materially affect the value of such
property and do not interfere with the use made and proposed to be made of
such property by the Company and its Subsidiaries; or (iii) such as do not
have a material adverse effect on the Company and its Subsidiaries taken as
a whole; and any real property and buildings held under lease by the
Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
materially interfere with the use made and proposed to be made of such
property and buildings by the Company and its Subsidiaries, in each case
except as described in or contemplated by each Memorandum.
(w) The Company and its Subsidiaries own or possess, or can acquire
on reasonable terms, all material patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information,
systems or procedures), trademarks, service marks and trade names currently
employed by them in connection with the business now operated by them, and,
except as set forth in each Memorandum, neither the Company nor any of its
Subsidiaries has received any notice of infringement of or conflict with
asserted rights of others with respect to any of the foregoing which,
singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would be reasonably likely to result in any material
adverse change in the condition, financial or otherwise, or in the
earnings, business or operations of the Company and its Subsidiaries, taken
as a whole.
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(x) No material labor dispute with the employees of the Company or
any of its Subsidiaries exists, except as described in or contemplated by
each Memorandum, or, to the knowledge of the Company, is imminent; and the
Company is not aware of any existing, threatened or imminent labor
disturbance by the employees of any of its principal suppliers,
manufacturers or contractors that might reasonably be expected to result
in any material adverse change in the condition, financial or otherwise, or
in the earnings, business or operations of the Company and its
Subsidiaries, taken as a whole.
(y) The Company and its Subsidiaries are insured against such
losses and risks and in such amounts as the Company reasonably believes are
prudent and customary in the businesses in which they are engaged; neither
the Company nor any such Subsidiary has been refused any insurance coverage
sought or applied for; and neither the Company nor any such Subsidiary has
any reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business
at a cost that would not materially and adversely affect the condition,
financial or otherwise, or the earnings, business or operations of the
Company and its Subsidiaries, taken as a whole, except as described in or
contemplated by each Memorandum.
(z) The Company and its Subsidiaries maintain a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or
specific authorizations; (ii) transactions are recorded as necessary to
permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain asset accountability; (iii)
access to assets is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for assets
is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(aa) The terms of the Units, the Notes, the Warrants, the Common
Stock (including the Warrant Shares), the Indenture and the Warrant
Agreement conform in all material respects to the description thereof
contained in the Final Memorandum under the headings "Description of the
Units," "Description of the Notes," "Description of the Warrants" and
"Description of Capital Stock," respectively
2. AGREEMENTS TO SELL AND PURCHASE . The Company hereby agrees to
sell to the Initial Purchaser, and the Initial Purchaser, upon the basis of the
representations and warranties herein contained, but subject to the conditions
hereinafter stated, agrees to purchase from the Company the Units at a purchase
price of $520.76 per Unit (the "Purchase
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Price") plus accrued interest, if any, on the Notes from January 29, 1998 to the
Closing Date.
3. TERMS OF OFFERING. You have advised the Company that the
Initial Purchaser will make an offering of the Units purchased by the Initial
Purchaser hereunder on the terms set forth in the Final Memorandum, as soon as
practicable after this Agreement is entered into as in your judgment is
advisable.
4. PAYMENT AND DELIVERY. Payment for the Units shall be made to
the Company in Federal or other funds immediately available in New York City
against delivery of the Units at a closing (the "Closing") to be held at the
office of Shearman & Sterling, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, at
10:00 A.M., local time, on January 29, 1998, or at such other time on the same
or such other date, not later than February 12, 1998, as shall be designated in
writing by you. The time and date of such payment are herein referred to as
the "Closing Date."
Certificates for the Units, the Notes and the Warrants shall be in
definitive form or global form, as specified by you, and registered in such
names and in such denominations as you shall request in writing not later than
one full business day prior to the Closing Date. The certificates evidencing
the Notes shall be delivered to you on the Closing Date for the account of the
Initial Purchaser, with any transfer taxes payable in connection with the
transfer of the Units, the Notes or the Warrants to the Initial Purchaser duly
paid, against payment of the purchase price therefor.
5. CONDITIONS TO THE INITIAL PURCHASER'S OBLIGATIONS . The
obligation of the Initial Purchaser to purchase and pay for the Units on the
Closing Date is subject to the following conditions:
(a) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date,
(i) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating accorded
any of the Company's securities by any nationally recognized
statistical rating organization," as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change, in the condition,
financial or otherwise, or in the earnings, business or operations, of
the Company and its subsidiaries, taken as a whole, from that set
forth in the Final Memorandum (exclusive of
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any amendments or supplements thereto subsequent to the date of this
Agreement) that, in your judgment, is material and adverse and that
makes it, in your judgment, impracticable to market the Units on the
terms and in the manner contemplated in the Final Memorandum.
(b) The Initial Purchaser shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer of
the Company, to the effect that the representations and warranties of the
Company contained in this Agreement are true and correct as of the Closing
Date and that the Company has complied with all of the agreements contained
herein and satisfied all of the conditions contained herein on its part to
be performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Initial Purchaser shall have received on the Closing Date
an opinion of Xxxxxx Xxxx & Xxxxxx LLP, outside counsel to the Company,
dated the Closing Date, to the effect set forth in Exhibit E. Such
opinion shall be rendered to the Initial Purchaser at the request of the
Company and shall so state therein.
(d) The Initial Purchaser shall have received on the Closing Date
an opinion of Xxxxxxx Xxxxxxx & Xxxxxxxx, Special Note Counsel to the
Company, dated the Closing Date, to the effect set forth in Exhibit F.
Such opinion shall be rendered to the Initial Purchaser at the request of
the Company and shall so state therein.
(e) The Initial Purchaser shall have received on the Closing Date
an opinion of Xxxxxxx & Berlin, Chartered, regulatory counsel to the
Company, dated the Closing Date, to the effect set forth in Exhibit G.
Such opinion shall be rendered to the Initial Purchaser at the request of
the Company and shall so state therein.
(f) The Initial Purchaser shall have received on the Closing Date
an opinion of Shearman & Sterling, counsel to the Initial Purchaser, dated
the Closing Date, in form and substance satisfactory to you.
(g) The Initial Purchaser shall have received on each of the date
hereof and the Closing Date a letter, dated the date hereof or the Closing
Date, as the case may be, in form and substance satisfactory to the Initial
Purchaser, from Ernst & Young LLP, independent public accountants,
containing statements and information of the type ordinarily included in
accountants' "comfort letters" to underwriters with respect to the
financial statements and certain financial information contained in the
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Final Memorandum; PROVIDED that the letter delivered on the Closing Date
shall use a "cut-off date" not earlier than the date hereof.
(h) You shall have received such other documents and certificates
as are reasonably requested by you or your counsel.
6. COVENANTS OF THE COMPANY. In further consideration of the
agreements of the Initial Purchaser contained in this Agreement, the Company
covenants with the Initial Purchaser as follows:
(a) To use its reasonable best efforts to furnish to you in New
York City, without charge, prior to 10:00 a.m. New York City time on the
business day next succeeding the date of this Agreement and during the
period mentioned in Section 6(c), as many copies of the Final Memorandum
and any supplements and amendments thereto as you may reasonably request.
(b) Before amending or supplementing either Memorandum, to furnish
to you a copy of each such proposed amendment or supplement and not to use any
such proposed amendment or supplement to which you reasonably object
without unreasonable delay.
(c) If, during such period after the date hereof and prior to the
date on which all of the Units shall have been sold by the Initial
Purchaser, any event shall occur or condition exist as a result of which it
is necessary to amend or supplement the Final Memorandum in order to make
the statements therein, in the light of the circumstances when the Final
Memorandum is delivered to a purchaser, not misleading, or if, in the
opinion of counsel to the Initial Purchaser it is necessary to amend or
supplement the Final Memorandum to comply with applicable law, forthwith to
prepare and furnish, at its own expense, to the Initial Purchaser, either
amendments or supplements to the Final Memorandum so that the statements in
the Final Memorandum as so amended or supplemented will not, in the light
of the circumstances when the Final Memorandum is delivered to a purchaser,
be misleading or so that the Final Memorandum, as so amended or
supplemented, will comply in all material respects with applicable law.
(d) To endeavor to qualify the Units, the Notes, the Warrants and
the Warrant Shares for offer and sale under the securities or Blue Sky laws
of such jurisdictions as you shall reasonably request; provided that in no
event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which
would subject it to taxation in any jurisdiction where it is not now so
subject or to service or process in suits, other than those
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arising out of the offering or sale of the Units, the Notes, the Warrants
or the Warrant Shares in any jurisdiction where it is not now so subject.
(e) Whether or not the transactions contemplated in this Agreement
are consummated or this Agreement is terminated, to pay or cause to be paid
all expenses incident to the performance of its obligations under this
Agreement, including: (i) the preparation of each Memorandum and all
amendments and supplements thereto, (ii) the preparation, issuance and
delivery of the Units, the Notes and the Warrants, (iii) the fees and
disbursements of the Company's counsel and accountants and the Trustee and
its counsel, (iv) the qualification of such Units, Notes and Warrants under
securities or Blue Sky laws in accordance with the provisions of
Section 6(d), including filing fees and the fees and disbursements of
counsel for the Initial Purchaser in connection therewith and in connection
with the preparation of any Blue Sky or legal investment memoranda, (v) the
printing and delivery to the Initial Purchaser in quantities as hereinabove
stated of copies of the Memorandum and any amendments or supplements
thereto, (vi) any fees charged by rating agencies, (vii) all document
production charges and expenses of counsel to the Initial Purchaser (but
not including their fees for professional services) in connection with the
preparation of this Agreement, (viii) the fees and expenses, if any,
incurred in connection with the admission of such Units, Notes or Warrants
for trading in PORTAL or any other appropriate market system, (ix) the
costs and expenses of the Company relating to investor presentations on any
"road show" undertaken in connection with the marketing of the Offering,
including, without limitation, expenses associated with the production of
road show slides and graphics, fees and expenses of any consultants engaged
in connection with the road show presentations with the prior approval of
the Company, travel and lodging expense of the representatives and officers
of the Company and any such consultants, and the cost of any aircraft
chartered in connection with the road show with the prior approval of the
Company, and (x) all other costs and expenses incident to the performance
of the obligations of the Company hereunder for which provision is not
otherwise made in this Section. It is understood, however, that except as
provided in this Section, Section 8 and Section 11, the Initial Purchaser
will pay all of its costs and expenses, including fees and disbursements of
its counsel, transfer taxes payable on resale of any of the Units, the
Notes or the Warrants by them and any advertising expenses connected with
any offers they may make.
(f) Neither the Company nor any Affiliate will sell, offer for sale
or solicit offers to buy or otherwise negotiate in respect of any security
(as defined in the Securities Act) which could be integrated with the sale
of the Units, the Notes or the Warrants in a manner which would require the
registration under the Securities Act of such Units, Notes or Warrants.
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(g) Not to solicit any offer to buy or offer or sell the Units, the
Notes or the Warrants by means of any form of general solicitation or
general advertising (as those terms are used in Regulation D under the
Securities Act) or in any manner involving a public offering within the
meaning of Section 4(2) of the Securities Act, except as may be
contemplated by the Registration Rights Agreement and the Warrant
Registration Rights Agreement.
(h) While any of the Units, the Notes or the Warrants remain
"restricted securities" within the meaning of the Securities Act, to make
available, upon request, to any seller of such Units, Notes or Warrants the
information specified in Rule 144A(d)(4) under the Securities Act, unless
the Company is then subject to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (the "Exchange Act").
(i) Except as may be contemplated by the Registration Rights
Agreement and the Warrant Registration Rights Agreement, none of the
Company, its Affiliates or any person acting on its or their behalf (other
than the Initial Purchaser) will engage in any directed selling efforts (as
that term is defined in Regulation S) with respect to the Units, the Notes
or the Warrants, and the Company and its Affiliates and each person acting
on its or their behalf (other than the Initial Purchaser) will comply with
the offering restrictions of Regulation S.
(j) To refuse, and to cause the Warrant Agent with respect to the
Warrants and the registrar for the Warrant Shares to refuse, to register
any transfer of Warrants or Warrant Shares sold pursuant to Regulation S if
such transfer is not made in accordance with the provisions of Regulation S.
(k) To refuse, and to cause the Trustee to refuse, to register any
transfer of the Notes sold pursuant to Regulation S if such transfer is not
made in accordance with the provisions of Regulation S and the Indenture.
(l) To use its reasonable best efforts to permit the Units, the
Notes and the Warrants to be designated PORTAL securities in accordance
with the rules and regulations adopted by the National Association of
Securities Dealers, Inc. relating to trading in the PORTAL Market.
(m) To use its reasonable best efforts to cause all Warrant Shares
sold under a resale shelf to be listed on any securities exchange or any
automated quotation system on which securities of the same class issued by
the Company are then listed if requested by the holders of Warrant Shares
representing a majority of the Warrants originally issued, to the extent
such Warrant Shares satisfy applicable listing requirements.
14
(n) The Company shall not, and shall use its best efforts to cause
its affiliates (as defined in Rule 405 under the Securities Act) not to,
purchase and then resell or otherwise transfer any Units, Notes or
Warrants.
7. OFFERING OF UNITS, NOTES AND WARRANTS; RESTRICTIONS ON
TRANSFER. (a) The Initial Purchaser represents and warrants that such Initial
Purchaser is a qualified institutional buyer as defined in Rule 144A under the
Securities Act (a "QIB"). The Initial Purchaser agrees with the Company that
(i) it will not solicit offers for, or offer or sell, Units, Notes or Warrants
by any form of general solicitation or general advertising (as those terms are
used in Regulation D under the Securities Act) or in any manner involving a
public offering within the meaning of Section 4(2) of the Securities Act and
(ii) it will solicit offers for Units, Notes, or Warrants only from, and will
offer such Units, Notes or Warrants only to, persons that it reasonably believes
to be (A) in the case of offers inside the United States, (x) QIBs or (y) other
institutional accredited investors (as defined in Rule 501(a) (1), (2), (3) or
(7) under the Securities Act) ("institutional accredited investors") that, prior
to their purchase of Units, deliver to such Initial Purchaser a letter
containing the representations and agreements set forth in Appendix A to the
Final Memorandum and (B) in the case of offers outside the United States, to
persons other than U.S. persons ("foreign purchasers", which term shall include
dealers or other professional fiduciaries in the United States acting on a
discretionary basis for foreign beneficial owners (other than an estate or
trust)) in reliance upon Regulation S under the Securities Act that, in each
case, in purchasing such Units, Notes or Warrants are deemed to have represented
and agreed as provided in the Final Memorandum under the caption "Transfer
Restrictions."
(b) The Initial Purchaser represents, warrants, and agrees with
respect to offers and sales outside the United States that:
(i) it understands that no action has been or will be taken
in any jurisdiction by the Company that would permit a public offering
of the Units, the Notes or the Warrants, or possession or distribution
of either Memorandum or any other offering or publicity material
relating to the Units, the Notes or the Warrants, in any country or
jurisdiction where action for that purpose is required;
(ii) such Initial Purchaser will comply with all
applicable laws and regulations in each jurisdiction in which it
acquires, offers, sells or delivers Units, Notes or Warrants or
has in its possession or distributes either Memorandum or any
such other material, in all cases at its own expense;
15
(iii) the Units, the Notes and the Warrants have not
been and will not be registered under the Securities Act and may
not be offered or sold within the United States or to, or for the
account or benefit of, U.S. persons except in accordance with
Rule 144A or Regulation S under the Securities Act or pursuant to
another exemption from the registration requirements of the
Securities Act;
(iv) such Initial Purchaser has offered the Units, the
Notes or the Warrants and will offer and sell the Units, the
Notes or the Warrants (A) as part of their distribution at any
time and (B) otherwise until 40 days after the Closing Date, with
respect to the Notes, and one year after the Closing Date with
respect to the Units and the Warrants, only in accordance with
Rule 903 of Regulation S or as otherwise permitted in Section
7(a); accordingly, neither such Initial Purchaser, its Affiliates
nor any persons acting on its or their behalf have engaged or
will engage in any directed selling efforts (within the meaning
of Regulation S) with respect to the Units, the Notes or the
Warrants, and any such Initial Purchaser, its Affiliates and any
such persons have complied and will comply with the offering
restrictions requirement of Regulation S;
(v) such Initial Purchaser has (A) not offered or sold
and, prior to the date six months after the Closing Date, will
not offer or sell any Units, Notes or Warrants to persons in the
United Kingdom except to persons whose ordinary activities
involve them in acquiring, holding, managing or disposing of
investments (as principal or agent) for the purposes of their
businesses or otherwise in circumstances which have not resulted
and will not result in an offer to the public in the United
Kingdom within the meaning of the Public Offers of Securities
Regulations 1995; (B) complied and will comply with all
applicable provisions of the Financial Services Xxx 0000 with
respect to anything done by it in relation to the Units, the
Notes or the Warrants in, from or otherwise involving the United
Kingdom; and (C) only issued or passed on and will only issue or
pass on in the United Kingdom any document received by it in
connection with the issue of the Units, the Notes or the Warrants
to a person who is of a kind described in Article 11(3) of the
Financial Services Xxx 0000 (Investment Advertisements)
(Exemptions) Order 1996 or is a person to whom such document may
otherwise lawfully be issued or passed on;
(vi) such Initial Purchaser understands that the Units,
the Notes and the Warrants have not been and will not be
registered under
16
the Securities and Exchange Law of Japan, and represents that it has
not offered or sold, and agrees that it will not offer or sell, any
Units, Notes or Warrants, directly or indirectly in Japan or for the
account of any resident thereof except pursuant to any exemption from
the registration requirements of the Securities and Exchange Law of
Japan and otherwise in compliance with applicable provisions of
Japanese law; and
(vii) such Initial Purchaser agrees that, at or prior to
confirmation of sales of the Units, it will have sent to each
distributor, dealer or person receiving a selling concession, fee
or other remuneration that purchases Units from it during the
restricted period a confirmation or notice to substantially the following
effect:
"The Units, the Notes and the Warrants covered
hereby have not been registered under the U.S.
Securities Act of 1933 (the "Securities Act") and
may not be offered and sold within the United
States or to, or for the account or benefit of,
U.S. persons (i) as part of their distribution at
any time or (ii) otherwise until 40 days after the
closing date, with respect to the Notes, and one
year after the closing date with respect to the
Units and the Warrants, except in either case in
accordance with Regulation S (or Rule 144A if
available) under the Securities Act. Terms used
above have the meaning given to them by Regulation
S."
Terms used in this Section 7(b) have the meanings given to them by
Regulation S.
8. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless the Initial Purchaser, and each person, if any, who
controls such Initial Purchaser within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred in connection with defending or
investigating any such action or claim) caused by any untrue statement or
alleged untrue statement of a material fact contained in either Memorandum (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein in the light of
the circumstances under which they were made not misleading, except insofar as
such losses, claims, damages or
17
liabilities are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information relating to the Initial
Purchaser furnished to the Company in writing by the Initial Purchaser expressly
for use therein.
(b) The Initial Purchaser agrees to indemnify and hold harmless the
Company, its directors, its officers and each person, if any, who controls
the Company within the meaning of either Section 15 of the Securities Act
or Section 20 of the Exchange Act to the same extent as the foregoing
indemnity from the Company to such Initial Purchaser, but only with
reference to information relating to such Initial Purchaser furnished to
the Company in writing by the Initial Purchaser expressly for use in either
Memorandum or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental
investigation) shall be instituted involving any person in respect of which
indemnity may be sought pursuant to either Section 8(a) or 8(b), such
person (the "indemnified party") shall promptly notify the person against
whom such indemnity may be sought (the "indemnifying party") in writing and
the indemnifying party, upon request of the indemnified party, shall retain
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party and any others the indemnifying party may designate in
such proceeding and shall pay the fees and disbursements of such counsel
related to such proceeding. In any such proceeding, any indemnified party
shall have the right to retain its own counsel, but the fees and expenses
of such counsel shall be at the expense of such indemnified party unless
(i) the indemnifying party and the indemnified party shall have mutually
agreed to the retention of such counsel or (ii) the named parties to any
such proceeding (including any impleaded parties) include both the
indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or
potential differing interests between them. It is understood that the
indemnifying party shall not, in respect of the legal expenses of any
indemnified party in connection with any proceeding or related proceedings
in the same jurisdiction, be liable for the fees and expenses of more than
one separate firm (in addition to any local counsel) for all such
indemnified parties and that all such fees and expenses shall be reimbursed
as they are incurred. Such firm shall be designated in writing by Xxxxxx
Xxxxxxx & Co. Incorporated in the case of parties indemnified pursuant to
Section 8(a) and by the Company in the case of parties indemnified pursuant
to Section 8(b). The indemnifying party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent or if there be a final judgment for the
plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or
judgment. Notwithstanding the foregoing sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse
the indemnified party for fees and expenses of counsel as contemplated by
the second and third sentences of this
18
paragraph, the indemnifying party agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if
(i) such settlement is entered into more than 60 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying
party shall not have reimbursed the indemnified party in accordance with
such request prior to the date of such settlement. No indemnifying party
shall, without the prior written consent of the indemnified party, effect
any settlement of any pending or threatened proceeding in respect of which
any indemnified party is or could have been a party and indemnity could
have been sought hereunder by such indemnified party, unless such
settlement includes an unconditional release of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in Section 8(a)
or 8(b) is unavailable to an indemnified party or insufficient in respect
of any losses, claims, damages or liabilities referred to therein, then
each indemnifying party under such section, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company, on the one hand, and the
Initial Purchaser, on the other hand, from the offering of such Units or
(ii) if the allocation provided by clause 8(d)(i) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only
the relative benefits referred to in clause 8(d)(i) above but also the
relative fault of the Company on the one hand and the Initial Purchaser on
the other hand in connection with the statements or omissions that resulted
in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received by the
Company on the one hand and the Initial Purchaser on the other hand in
connection with the offering of such Units shall be deemed to be in the
same respective proportions as the net proceeds from the offering of such
Units (before deducting expenses) received by the Company and the total
discounts and commissions received by the Initial Purchaser in respect
thereof bear to the aggregate offering price of such Units. The relative
fault of the Company on the one hand and of the Initial Purchaser on the
other hand shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission
or alleged omission to state a material fact relates to information
supplied by the Company or by the Initial Purchaser and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission.
(e) The Company and the Initial Purchaser agree that it would not
be just or equitable if contribution pursuant to this Section 8 were
determined by PRO RATA allocation or by any other method of allocation
that does not take account of the equitable considerations referred to in
Section 8(d). The amount paid or payable by
19
an indemnified party as a result of the losses, claims, damages and
liabilities referred to in Section 8(d) above shall be deemed to include,
subject to the limitations set forth above, any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 8, the Initial Purchaser shall not be required
to contribute any amount in excess of the amount by which the total price
at which the Units resold by it in the initial placement of such Units were
offered to investors exceeds the amount of any damages that such Initial
Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The remedies provided for
in this Section 8 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law
or in equity.
(f) The indemnity and contribution provisions contained in this
Section 8 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full
force and effect regardless of (i) any termination of this Agreement,
(ii) any investigation made by or on behalf of the Initial Purchaser or any
person controlling the Initial Purchaser or by or on behalf of the Company,
its officers or directors or any person controlling the Company and
(iii) acceptance of and payment for any of the Units.
9. TERMINATION. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, is material and adverse and (b) in the case of any of
the events specified in clauses 9(a)(i) through 9(a)(iv), such event singly or
together with any other such event makes it, in your judgment, impracticable to
market the Units on the terms and in the manner contemplated in the Final
Memorandum.
10. EFFECTIVENESS. This Agreement shall become effective upon the
execution and delivery hereof by the parties hereto.
20
11. MISCELLANEOUS. If this Agreement shall be terminated by the
Initial Purchaser because of any failure or refusal on the part of the Company
to comply with the terms or to fulfill any of the conditions of this Agreement,
or if for any reason the Company shall be unable to perform its obligations
under this Agreement (other than by reason of a breach of this Agreement by the
Initial Purchaser), the Company will reimburse the Initial Purchaser for all
out-of-pocket expenses (including the fees and disbursements of its counsel)
reasonably incurred by such Initial Purchaser in connection with this Agreement
or the offering contemplated hereunder.
12. COUNTERPARTS. This Agreement may be signed 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.
13. APPLICABLE LAW. This Agreement shall be governed by and
construed in accordance with the internal laws of the State of New York.
14. HEADINGS. The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed a part
of this Agreement.
Please confirm your agreement to the foregoing by signing in the space
provided below for that purpose and returning to us a copy hereof, whereupon
this Agreement shall constitute a binding agreement between us.
Very truly yours,
KMC Telecom Holdings, Inc.
By /s/ Xxxxxxx Xxxxxxxxx
---------------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: Chief Executive Officer
Agreed, January 29, 1998
Xxxxxx Xxxxxxx & Co.
Incorporated
By /s/ Xxxxxxx Xxxxxxx
---------------------------------
Name: Xxxxxxx Xxxxxxx
Title: Principal
EXHIBIT A
Form of Warrant Agreement
EXHIBIT B
Form of Registration Rights Agreement
EXHIBIT C
Form of Warrant Registration Rights Agreement
EXHIBIT D
Subsidiaries of the Company
Jurisdiction of
Incorporation or
Name Organization
---- ----------------
KMC Telecom Inc. Delaware
KMC Telecom II, Inc. Delaware
KMC Telecom Leasing I LLC Delaware
KMC Telecom Leasing II LLC Delaware
KMC Telecom of Virginia, Inc. Virginia
EXHIBIT E
Form of Opinion of
Xxxxxx Xxxx & Xxxxxx LLP
Pursuant to Section 5(c) of the Purchase Agreement, Xxxxxx Xxxx &
Xxxxxx shall deliver an opinion to the effect that:
(A) the Company has been duly incorporated, is validly existing as
a corporation in good standing under the laws of the State of Delaware,has
the corporate power and authority to own its property and to conduct its
business as described in the Final Memorandum (references herein to the
Final Memorandum being taken to mean the same, as amended or supplemented),
and is duly qualified to transact business and is in good standing in New
Jersey;
(B) each subsidiary of the Company listed in Exhibit D to the
Purchase Agreement has been duly organized, is validly existing as a
corporation or limited liability company, as the case may be, in good
standing under the laws of the jurisdiction of its organization, has the
corporate and/or limited liability company power and authority, as
appropriate, to own its property and to conduct its business as described
in the Final Memorandum and is duly qualified to transact business and is
in good standing in each jurisdiction listed opposite its name on Annex I
hereto;
(C) the Purchase Agreement has been duly authorized, executed and
delivered by the Company;
(D) the Notes have been duly authorized and, when executed,
authenticated and delivered to and paid for in accordance with the terms of
the Purchase Agreement, will (x) be valid and binding obligations of the
Company enforceable in accordance with their terms, except as (A) the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium
or similar laws affecting creditors' rights generally, and (B) rights of
acceleration, if applicable, and the availability of equitable remedies may
be limited by equitable principles of general applicability and (y) be
entitled to the benefits of the Indenture and the Registration Rights
Agreement;
(E) each of the Indenture and the Registration Rights Agreement
has been duly authorized, executed and delivered by, and is a valid and
binding agreement of, the Company, enforceable in accordance with its terms
except as (w) the enforceability thereof may be limited by bankruptcy,
insolvency, moratorium or similar laws affecting creditors' rights
generally, (x) rights of acceleration, if applicable, and the availability
of equitable remedies may be limited by equitable principles of general
applicability, (y) rights to indemnification and contribution may be
limited by public policy and (z) provisions of the Indenture, if any,
requiring any
E-2
waiver of stay or extension laws, diligent performance or other acts on the
part of the Trustee may be unenforceable under principles of public policy;
(F) the Warrants have been duly authorized by the Company and, when
executed, and countersigned by the Warrant Agent as provided in the Warrant
Agreement, and delivered to and paid for by the Initial Purchaser in
accordance with the terms of the Purchase Agreement, will (x) be valid and
binding obligations of the Company enforceable in accordance with their
terms, except as (A) the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium or similar laws relating to or affecting
creditors' rights generally and (B) rights of acceleration, if applicable,
and the availability of equitable remedies may be limited by equitable
principles and (y) be entitled to the benefits of the Warrant Agreement and
the Warrant Registration Rights Agreement;
(G) each of the Warrant Agreement and the Warrant Registration
Rights Agreement has been duly authorized by the Company and, when executed
and delivered by the Company, will be a valid and binding agreement of the
Company, enforceable in accordance with its terms except as (x) the
enforceability thereof may be limited by bankruptcy, insolvency, moratorium
or similar laws relating to or affecting creditors' rights generally,
(y) rights of acceleration, if applicable, and the availability of
equitable remedies may be limited by equitable principles and (z) rights to
indemnification and contribution may be limited by public policy;
(H) the Warrant Shares issuable upon exercise of the Warrants have
been duly authorized and reserved by the Company and, when issued and
delivered upon exercise of the Warrants in accordance with the terms of the
Warrants and the Warrant Agreement, will be validly issued, fully paid and
non-assessable and the issuance of such Warrant Shares will not be subject
to any preemptive rights;
(I) the execution and delivery by the Company of, and the
performance by the Company of its obligations under, the Purchase
Agreement, the Indenture, the Registration Rights Agreement, the Warrant
Agreement, the Warrant Registration Rights Agreement, the Notes and the
Warrants (collectively, the "Transaction Documents") and the issuance, sale
and delivery of the Notes and the Warrants and the issuance of the Warrant
Shares upon exercise of the Warrants in accordance with the terms of the
Warrants and the Warrant Agreement by the Company will not contravene (i)
any provision of applicable law, (ii) the certificate of incorporation or
by-laws of the Company, (iii) to such counsel's knowledge, any agreement or
other instrument binding upon the Company or any of its Subsidiaries that
is material to the Company and its Subsidiaries, taken as a whole, or (iv)
to such counsel's knowledge, any judgment, order or decree of any
governmental body, agency or court having jurisdiction over the Company or
any Subsidiary, except, in the case of clauses (i),
E-3
(iii) and (iv), for such contraventions which would not have a material
adverse on the Company and its Subsidiaries, taken as a whole and no
consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the Company
or its subsidiaries of their obligations under the Transaction Documents,
except such as may be required by the securities or Blue Sky laws of the
various states in connection with the offer and sale of the Units, the
Notes and the Warrants;
(J) after inquiry of the executive officers of the Company, to such
counsel's knowledge, there is not now pending or threatened any legal or
governmental proceedings to which the Company or any of its subsidiaries is
a party or to which any of the properties of the Company or any of its
subsidiaries is subject other than proceedings fairly summarized in all
material respects in the Final Memorandum and proceedings which such
counsel believes are not reasonably likely to have a material adverse
effect on the Company and its Subsidiaries, taken as a whole, or on the
power or ability of the Company to perform its obligations under the
Transaction Documents or to consummate the transactions contemplated by the
Final Memorandum;
(K) the Company is not, and after giving effect to the offering and
sale of the Units, the Notes and the Warrants and the application of the
proceeds thereof as described in the Final Memorandum, will not be an
"investment company" as such term is defined in the Investment Company Act
of 1940, as amended;
(L) the statements in the Final Memorandum under the captions
"Business - Legal and Administrative Proceedings", "Description of Certain
Indebtedness", "Description of the Units", "Description of the Warrants",
"Description of Capital Stock", "Private Placement" and "Transfer
Restrictions", in each case insofar as such statements constitute summaries
of the legal matters, documents or proceedings referred to therein, fairly
summarize the matters referred to therein in all material respects;
(M) the statements in the Final Memorandum, under the caption
"Certain United States Federal Income Tax Considerations" are accurate in
all material respects and fairly summarize the matters referred to therein;
(N) based upon the representations, warranties, and agreements of
the Company in the Purchase Agreement and of the Initial Purchaser in
Section 7 of the Purchase Agreement, it is not necessary in connection with
the offer, sale and delivery of the Units, Notes and Warrants to the
Initial Purchaser under the Purchase Agreement or in connection with the
initial resale of such Units, Notes and Warrants by the Initial Purchaser
in accordance with Section 7 of the Purchase Agreement to register the
Units, the Notes or the Warrants under the Securities Act of 1933, it being
understood that no opinion is expressed as to any subsequent resale of any
Unit, Note or Warrant;
E-4
ATTACHMENT A
TO
FORM OF XXXXXX, XXXX & XXXXXX OPINION
-------------------------------------
In the course of the preparation by the Company of the Final Memorandum, we
have participated in conferences with officers, directors and representatives of
the Company, its independent auditors, your representatives and representatives
of your counsel at which conferences the contents of the Final Memorandum and
related matters were discussed. Although we have not independently verified
the accuracy or completeness of, or otherwise verified the statements made in
the Final Memorandum (other than as expressly provided above), nothing has come
to our attention that has led us to believe that the Final Memorandum, as of its
date or the date hereof, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order the make the statements
therein in the light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, we are not expressing any opinion or
belief as to the financial statements and supporting notes and schedules and
other financial data contained in the Final Memorandum nor with respect to any
FCC data contained therein. Nor are we expressing any opinion or belief as to
any statements in the Final Memorandum under the captions "Risk Factors -
Government Regulation" and "Business - Regulation" insofar as such statements
constitute a summary of the legal matters, documents, or proceedings of the FCC
and any state authority overseeing telecommunication matters with respect to
telecommunications regulation referred to therein.
E-5
ANNEX I
TO
XXXXXX XXXX & XXXXXX OPINION
KMC TELECOM INC. Delaware
Alabama
Florida
Georgia
Louisiana
New Jersey
Texas
Wisconsin
KMC TELECOM II, INC. Delaware
Florida
Georgia
Kansas
Maryland
Michigan
Minnesota
New Jersey
North Carolina
KMC TELECOM LEASING I LLC Delaware
Alabama
Georgia
Louisiana
New Jersey
Texas
Wisconsin
KMC TELECOM LEASING II LLC Delaware
New Jersey
Georgia
KMC TELECOM OF VIRGINIA, INC. Virginia
EXHIBIT F
Form of Opinion of Xxxxxxx Xxxxxxx & Xxxxxxxx
(A) the statements in the Final Memorandum under the caption "Description
of the Notes", insofar as such statements constitute summaries of certain terms
of documents referred to therein, constitute accurate summaries of the terms
for such documents in all material respects.
EXHIBIT G
Form of Opinion of Xxxxxxx & Berlin, Chartered
Pursuant to Section 5(e) of the Purchase Agreement, Xxxxxxx & Berlin,
Chartered , regulatory counsel for the Company, shall furnish an opinion to the
effect that:
(A) (1) the execution and delivery of the Purchase Agreement by the
Company and the consummation of the transactions contemplated thereby do
not violate (i) the federal Communications Act of 1934, as amended, and the
Telecommunications Act of 1996, any rules or regulations of the Federal
Communications Commission ("FCC") applicable to the Company (collectively,
the "Communications Act"), (ii) any state telecommunications law, rules or
regulations ("State Law") applicable to the Company, and (iii) to the best
of such counsel's knowledge, any decree from any court, and (2) no consent,
approval, authorization or order of or filing with the FCC or any state
authority overseeing telecommunications matters ("State Authority"), is
necessary for the execution and delivery of the Purchase Agreement by the
Company and except to the extent that the failure to obtain such consents,
approvals, authorizations or orders or to make filings with, the FCC or any
State Authority would not, individually or in the aggregate, have a
material adverse effect on the prospects, condition (financial or
otherwise) or in the earnings, business or operations of the Company and
KMC Telecom Inc., KMC Telecom II, Inc., KMC Telecom Leasing I, LLC, KMC
Telecom Leasing II, LLC and KMC Telecom of Virginia, Inc. (the
"Subsidiaries") taken as a whole;
(B) except as indicated in this paragraph B, to the best of our
knowledge, based on our understanding of operations of the Company and its
Subsidiaries from the Certificate [see Attachment A] (1) the Company and
its Subsidiaries have made all reports and filings, and paid all fees,
required by the FCC and the State Authorities, and have all certificates,
orders, permits, licenses, authorizations, consents and approvals of and
from, and have made all filings and registrations, with the FCC and the
State Authorities necessary to own, lease, license and use its properties
and assets and to conduct its respective business in the manner described
in the Preliminary and Final Memorandum, except for those filings, fees,
and approvals the failure to obtain or file of which would not have
material adverse effect on the financial condition, or on the earnings,
business, or operations of the Company and its Subsidiaries, taken as a
whole; (2) has not received any notice of proceedings relating to the
violation, revocation or modification of any such certificates, orders,
permits, licenses,
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authorizations,consents or approvals, or the qualification or rejection of
any such filing or registration, the effect of which, singly or in the
aggregate, would have a material adverse effect on the prospects,
condition, financial or otherwise, or in the earnings, business or
operations of the Company, taken as a whole; and (3) neither the Company
nor its Subsidiaries is in violation of, or in default under the
Communications Act or State Law, the effect of which, singly or in the
aggregate, would have a material adverse effect on the prospects,
condition, financial or otherwise, or in the earnings, business or
operations of the Company and its Subsidiaries, taken as a whole;
Notwithstanding the foregoing, the Company has not obtained the
required authority in the related jurisdictions listed on SCHEDULE 1 hereof
for the 1997 reorganization of the Company into a holding company
structure, the execution of voting agreement by Xxxxxx Xxxxxx reducing Xx.
Xxxxxx'x voting rights, and related transactions. However, the Company is
in the process of seeking NUNC PRO TUNC or retroactive approval from State
Authorities through appropriate filings to be made in the states that
require approval or notice of such transactions. To the best of our
knowledge, none of the State Authorities in the jurisdictions listed on
SCHEDULE 1 has taken significant enforcement action in connection with
similar filings in the past and we do not expect the State Authorities to
initiate enforcement action with respect to the Company's filings that
would, if taken against the Company, have a material adverse effect on the
financial condition, or on the earnings, business, or operations of the
Company and its Subsidiaries taken as a whole.
(C) to the best of such counsel's knowledge after due inquiry (i)
no adverse judgment, decree or order of the FCC or any State Authority has
been issued against the Company or its Subsidiaries and (ii) no litigation,
proceeding, inquiry or investigation has been commenced or threatened
against the Company or its Subsidiaries before or by the FCC or any State
Authority which, if decided adversely to the interests of the Company or
its Subsidiaries would have a material adverse effect on the Company and
its Subsidiaries, taken as a whole; and
(D) the statements in the Final Memorandum under the captions "Risk
Factors - Competition," "Risk Factors - Government Regulation," "Business
- Industry Overview" and "Business - Regulation," insofar as such
statements constitute a summary of the legal matters, documents or
proceedings of the FCC and State Authorities with respect to
telecommunications regulation referred to therein, fairly summarize the
matters referred to therein.
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ATTACHMENT A TO OPINION OF XXXXXXX & BERLIN
CERTIFICATE OF OFFICER
Except as otherwise stated herein, all capitalized terms used herein
shall have the respective meanings ascribed to them in the Xxxxxxx & Berlin
Opinion Letter, dated January 29, 1998 or the documents referred to in the
Opinion Letter.
The undersigned is an officer of KMC Telecom Holdings, Inc., KMC
Telecom Inc., KMC Telecom II, Inc., KMC Telecom Leasing I, LLC, KMC Telecom
Leasing II, LLC and KMC Telecom of Virginia, Inc. (collectively, "KMC").
The undersigned, in the capacity as an officer of KMC and not in an
individual capacity, does hereby certify to Xxxxxxx & Berlin, Chartered, that:
1. KMC has all certificates, orders, permits, licenses,
authorizations, consents, and approvals of and from, and has made all
filings and registrations with, the FCC and the State Authorities necessary
to own, lease, license and use its properties and assets and to provide the
services authorized by the certifications listed in Exhibit A hereto. As
of the date of this Certificate, KMC Telecom Inc. is not providing any
services other than those authorized by the terms and conditions of the
certificates issued to KMC Telecom Inc. by the State Authorities listed in
Exhibit A thereto. As of the date of this Certificate, KMC Telecom of
Virginia, Inc. and KMC Telecom II, Inc. are not yet providing
telecommunications services. In addition, KMC Telecom Leasing I, LLC, and
KMC Telecom Leasing II, LLC do not hold out or provide telecommunications
services to the public. KMC Telecom Holdings, Inc. is a holding company
and does not hold out or provide telecommunications services to the public.
2. KMC has made all reports and periodic filings, and paid all
fees, required by the FCC and the State Authorities except as may be
required to authorize or to provide notification of the reorganization of
the Company and its subsidiaries into the current holding company structure
for Xxxxxx Xxxxxx to enter into a voting agreement reducing his voting
rights and related transactions.
3. KMC has not received notice of any litigation, complaint,
inquiry or investigation, formal or informal, pending or threatened by or
before the FCC or any State Authority based on any alleged violations by
the Company or its Subsidiaries of a character which, if adversely
determined, is likely to impair materially the FCC or
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any of the State Authority authorizations held by the Company or its
Subsidiaries. KMC has not received notice of any proceedings or threatened
proceedings relating to the revocation, restriction, or modification of any
of the licenses or certifications listed in Exhibit A hereto.
4. To the best of my knowledge, based on a review of the Offering
Memorandum, the description in the Offering Memorandum of the manner in
which the Company and its Subsidiaries conduct their respective businesses
and the factual representations made therein are complete and accurate.
This Certificate is given with the express understanding that it will
be relied upon by the law firm of Xxxxxxx & Berlin, Chartered, in rendering its
opinion pursuant to Section 5(e) of the Purchase Agreement.
IN WITNESS WHEREOF, the undersigned has set his/her hand this __ day
of January, 1998.
By:
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Name
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Title