KMC TELECOM HOLDINGS, INC.
CERTIFICATE OF THE POWERS,
DESIGNATIONS, PREFERENCES AND RIGHTS OF THE
SERIES G-1 VOTING CONVERTIBLE PREFERRED STOCK
AND SERIES G-2 NON-VOTING CONVERTIBLE PREFERRED STOCK
EACH PAR VALUE $.01 PER SHARE
Pursuant to Sections 141 and 151
of the General Corporation Law of the State of Delaware
As contemplated by Section 141 of the General Corporation Law of the
State of Delaware (the "DGCL"), the following resolution was duly adopted by the
Board of Directors of KMC Telecom Holdings, Inc., a Delaware corporation (the
"Corporation"), by unanimous written consent, dated July 5, 2000:
WHEREAS, the Board of Directors of the Corporation is authorized,
within the limitations and restrictions stated in the Amended and Restated
Certificate of Incorporation of the Corporation, to provide by resolution or
resolutions for the issuance of shares of preferred stock, par value $.01 per
share, of the Corporation, in one or more series with such voting powers, full
or limited, or without voting powers, and such designations, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations or restrictions as shall be stated and expressed in the resolution
or resolutions providing for the issuance thereof adopted by the Board of
Directors, and as are not stated and expressed in the Amended and Restated
Certificate of Incorporation, or any amendment thereto, including (but without
limiting the generality of the foregoing) such provisions as may be desired
concerning voting, redemption, dividends, dissolution or the distribution of
assets and such other subjects or matters as may be fixed by resolution or
resolutions of the Board of Directors under the DGCL;
WHEREAS, the Board of Directors of the Corporation, pursuant to its
authority under Section 151 of the DGCL, desires to authorize and fix the terms
of its Series G-1 Voting Convertible Preferred Stock and Series G-2 Non-Voting
Convertible Preferred Stock, each par value $.01 per Share;
NOW, THEREFORE, BE IT RESOLVED:
1. DESIGNATION AND NUMBER OF SHARES.
(a) There shall be hereby established a series of preferred stock, par
value $.01 per share, designated as "Series G-1 Voting Convertible Preferred
Stock" (such series being hereinafter referred to as the "Series G-1 Preferred
Stock"). The authorized number of shares of Series G-1 Preferred Stock shall be
1,250,000.
(b) There shall be hereby established a series of preferred stock, par
value $.01 per share, designated as "Series G-2 Non-Voting Convertible Preferred
Stock" (such series hereinafter referred to as the "Series G-2 Preferred Stock"
and, together with the Series G-1 Preferred Stock, the "Series G Preferred
Stock"). The authorized number of shares of Series G-2 Preferred Stock shall be
1,250,000.
(c) Except as otherwise expressly provided in Section 6 hereof, the
Series G-1 Preferred Stock and the Series G-2 Preferred Stock shall be identical
in all respects. The liquidation preference of the Series G Preferred Stock
shall be $337.9697 per share (as equitably adjusted for stock splits, stock
combinations and similar transactions, the "Liquidation Preference").
2. RANK. The Series G Preferred Stock shall, with respect to dividend
distributions and distributions upon the liquidation, winding-up and dissolution
of the Corporation, rank:
(i) senior to (A) all common stock, par value $.01 per share, of the
Corporation (the "Common Stock"), (B) each other class of Capital Stock or
series of Preferred Stock of the Corporation the terms of which expressly
provide that such class or series will rank junior to, and do not expressly
provide that it will rank senior to or on a parity with, the Series G Preferred
Stock as to dividend distributions and distributions upon the liquidation,
winding-up and dissolution of the Corporation, and (C) the Junior Preferred
Stock (all securities described in this clause (i) are collectively referred to
as "Junior Securities");
(ii) on a parity with (A) any class of Capital Stock or series of
Preferred Stock of the Corporation the terms of which expressly provide that
such class or series will rank on a parity with the Series G Preferred Stock as
to dividend distributions and distributions upon the liquidation, winding-up and
dissolution of the Corporation and (B) the Parity Preferred Stock (all
securities described in this clause (ii) are collectively referred to as "Parity
Securities"); and
(iii) junior to (A) each class of Capital Stock or series of Preferred
Stock of the Corporation the terms of which expressly provide that such class or
series will rank senior to the Series G Preferred Stock as to dividend
distributions and distributions upon liquidation, winding-up, and dissolution of
the Corporation and (B) the Senior Preferred Stock (all securities referred to
in this clause (iii) are collectively referred to as "Senior Securities").
The Series G Preferred Stock will be subject to the authorization and issuance
of additional classes and series of Senior Securities and Parity Securities;
PROVIDED that, except for (A) the issuance and sale of shares of Series G
Preferred Stock pursuant to the Purchase Agreement, (B) the issuance of shares
of Series F Preferred Stock to pay dividends on the Series F Preferred Stock and
(C) the issuance of shares of Series E Preferred Stock to pay dividends on the
Series E Preferred Stock or upon conversion of the Series F Preferred Stock, the
Corporation shall not authorize, create or issue, or increase the authorized
amount of, any class or series of Senior Securities or Parity Securities (or any
security convertible into any Senior Security or Parity Security) without the
approval of the holders of at least two-thirds of the shares of Series G
Preferred Stock then outstanding, voting or consenting, as the case may be,
separately as a single class. The Series G Preferred Stock (together with all
other Parity Securities) shall rank senior to all Junior Securities with respect
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to any redemption or repurchase by the Corporation of shares of its Capital
Stock. Notwithstanding the foregoing, without the approval of the holders of at
least two-thirds of the shares of Series G Preferred Stock then outstanding,
voting or consenting, as the case may be, separately as a single class the
Corporation shall not make any repurchases of Junior Securities by the
Corporation pursuant to the exercise of a right of first offer as provided in
Section 3 of the Shareholders Agreement. Notwithstanding the foregoing, the
Corporation may, at any time and from time to time, on or prior to February 4,
2001 redeem all or any portion of the shares of Series F Preferred Stock
outstanding pursuant to the provisions of Article VI(B) of the Certificate of
Designations of the Series F Preferred Stock.
3. DIVIDENDS.
(a) When, as and if declared by the Board of Directors of the
Corporation and solely out of funds available therefor, the Corporation shall
pay dividends in cash on each outstanding share of Series G Preferred Stock as
provided in this paragraph 3. From and after the Issue Date of each outstanding
share of Series G Preferred Stock, dividends shall accrue on such share on a
quarterly basis at a rate equal to 7.0% per annum of the Liquidation Preference.
Commencing on the first Dividend Payment Date following the Issue Date of each
share of Series G Preferred Stock, dividends shall be payable quarterly in
arrears on the applicable Dividend Payment Date or the next succeeding Business
Day, if the applicable Dividend Payment Date is not a Business Day. All
dividends shall be cumulative, whether or not earned or declared, such that if
any dividend (or portion thereof) payable on any Dividend Payment Date is not
declared and paid in cash in full on such Dividend Payment Date, the amount of
such dividend payable that is not paid on such date shall increase at the rate
of 7.0% per annum (compounded quarterly on each subsequent Dividend Payment
Date) from such Dividend Payment Date until paid in full. In addition, the
holders of each outstanding share of Series G Preferred Stock shall be entitled
to participate in dividends (if any) paid in respect of Common Stock (whether
payable in cash, securities or other property) on an as-if-converted basis. All
dividends on the Series G Preferred Stock shall be payable to holders of record
as they appear on the stock books of the Corporation on the applicable record
dates, which shall be not less than ten (10) nor more than sixty (60) days
preceding the related Dividend Payment Date or other dividend record date, as
shall be fixed by the Board of Directors of the Corporation.
(b) All accumulated and unpaid dividends on the Series G Preferred
Stock shall be paid by the Corporation upon the occurrence of a Realization
Event, without reference to any regular Dividend Payment Date, to holders of
record on such date. The Corporation shall send by first class, postage prepaid
mail a notice of the Realization Event to all holders of outstanding shares of
Series G Preferred Stock. In the case of a Realization Event which is a
Qualified Public Offering, the Corporation may, in lieu of paying cash, pay all
accumulated and unpaid dividends by issuing to each holder of shares of Series G
Preferred Stock, upon the closing of such initial public offering, a number of
shares of Common Stock equal to the quotient obtained by dividing (x) the
aggregate accumulated and unpaid dividends on the shares of Series G Preferred
Stock held by such holder by (y) the price at which shares of Common Stock are
sold in such offering (before deduction of underwriting discounts and expenses
of sale).
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(c) All dividends paid with respect to shares of Series G Preferred
Stock pursuant to Section 3(a) shall be paid pro rata and in like manner to all
of the holders entitled thereto.
(d) No dividends or distributions shall be paid with respect to any
Junior Securities prior to the payment in full in cash by the Corporation of all
accumulated and unpaid dividends on shares of Series G Preferred Stock pursuant
to Section 3(a). No dividends or distributions shall be paid with respect to any
shares of Parity Securities unless like dividends or distributions are paid on
shares as Series G Preferred Stock, except that the Corporation may declare and
pay regularly scheduled dividends on the Series F Preferred Stock in additional
shares of Series F Preferred Stock without the payment of like dividends or
distributions on the Series G Preferred Stock.
(e) Except as otherwise provided in Section 3(b) above, nothing herein
contained shall in any way or under any circumstances be construed or deemed to
require the Board of Directors of the Corporation to declare, or the Corporation
to pay or set apart for payment, any dividends on shares of the Series G
Preferred Stock at any time, nor to permit the Board of Directors of the
Corporation to declare, or the Corporation to pay or set apart for payment, any
dividends on shares of the Series G Preferred Stock prior to the payment of any
dividends accrued on any Senior Securities.
(f) Whenever the provisions hereof require that the amount of
dividends with respect to the Series G Preferred Stock be determined for less
than a full quarterly period ending on a Dividend Payment Date (including but
not limited to the first Dividend Payment Date following the Issue Date of any
share of Series G Preferred Stock), the amount of dividends for such period
shall be equal to 7.0% of the Liquidation Preference thereon multiplied by a
fraction, the numerator or which is the number of days from (and including) the
most recent Dividend Payment Date to (but excluding) the last day of the period
in respect of which such determination is being made, and the denominator of
which is 365.
4. LIQUIDATION PREFERENCE.
(a) In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the affairs of the Corporation, the holders of
shares of Series G Preferred Stock and Parity Securities then outstanding shall
be entitled to be paid for each share held thereby, out of the assets of the
Corporation legally available for distribution to its stockholders, an amount in
cash equal to the Liquidation Preference thereof (as specified in the applicable
Certificate of Designations) plus an amount in cash equal to all accumulated and
unpaid dividends thereon (calculated pursuant to paragraph 3(a), in the case of
the Series G Preferred Stock) as accrued to the date fixed for liquidation,
dissolution or winding-up (including an amount equal to a prorated dividend for
the period from the most recent Dividend Payment Date through and including the
date fixed for liquidation, dissolution or winding-up), before any payment shall
be made or any assets distributed to the holders of any Junior Securities, but
after all liquidation payments have been made to the holders of all Senior
Securities. Except as provided in the preceding sentence and the last sentence
of this Section 4(a), holders of shares of Series G Preferred Stock and all
Parity Securities shall not be entitled to any distribution in the event of any
liquidation, dissolution or winding-up of the affairs of the Corporation. If the
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assets of the Corporation are not sufficient to pay in full the foregoing
liquidation payments payable to the holders of outstanding shares of Series G
Preferred Stock and all Parity Securities, then the holders of all shares of
Series G Preferred Stock and all Parity Securities shall share equally and
ratably in such distribution of assets of the Corporation in proportion to the
full liquidation preference and accumulated and accrued but unpaid dividends to
which each such holder is entitled. If all of the foregoing liquidation payments
with respect to any share of Series G Preferred Stock have been made, such share
may not be converted into Common Stock pursuant to Section 5. In addition, in
the event of any voluntary or involuntary liquidation, dissolution or winding-up
of the affairs of the Corporation (other than in connection with a Sale of the
Corporation which has been approved pursuant to Section 6(e) hereof or which
does not require any such approval), holders of Series G Preferred Stock will
participate on an as-if-converted basis, in distributions payable in respect of
Common Stock and other Junior Securities.
(b) For the purposes of this Section 4, the voluntary sale,
conveyance, exchange or transfer (for cash, securities or other property) of
voting control of the Corporation or of all or substantially all of the property
or assets of the Corporation or the consolidation or merger of the Corporation
with or into one or more other corporations in which the shareholders of the
Corporation immediately prior to such transaction do not own a majority of the
outstanding shares of Capital Stock of the surviving corporation shall not be
deemed to be a liquidation, dissolution or winding-up, voluntary or involuntary,
of the affairs of the Corporation (regardless of whether such sale, conveyance,
exchange or transfer is in connection with a liquidation, dissolution or
winding-up of the affairs of the Corporation).
5. CONVERSION.
(a) CONVERSION PRICE. Each share of Series G Preferred Stock to be
converted into shares of Common Stock under this Section 5 shall be converted
into a number of shares of Common Stock equal to the Liquidation Preference of
such share DIVIDED by the Conversion Price then in effect. The conversion price
for each share of Series G Preferred Stock shall initially be $337.9697 and
shall be subject to adjustment to the nearest fourth decimal place as provided
in this Section 5 (as adjusted from time to time in accordance with the terms
hereof, the "Conversion Price").
(b) AUTOMATIC CONVERSION. Upon the earlier to occur of (i) a Qualified
Public Offering or (ii) the election of holders of at least two-thirds of the
outstanding shares of Series G Preferred Stock (made by delivery of written
notice to the Corporation), each outstanding share of Series G Preferred Stock
shall automatically convert, without any further action on the part of the
holder thereof, into (x) the number of shares of Common Stock calculated
pursuant to Section 5(a) above, and (y) the right to receive an amount in cash
equal to the accumulated but unpaid dividends on such share of Series G
Preferred Stock to and including the date of the closing of a Qualified Public
Offering or the date for conversion specified in the holders' notice referred to
above (or, at the option of the Corporation, the right to receive additional
shares of Common Stock in lieu of cash dividends pursuant to Section 3(b) in the
case of a Qualified Public Offering); provided that, in the case of a conversion
pursuant to clause (ii) above, if the date on which such conversion is effected
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is prior to a Realization Event, the Corporation may, in lieu of making a
payment in cash equal to the amount of accumulated and unpaid dividends on
shares of Series G Preferred Stock, deliver a number of shares of Common Stock
equal to the amount of such accumulated but unpaid dividends divided by the Fair
Market Value of one share of Common Stock. Shares of Series G Preferred Stock
shall be deemed to have been converted pursuant to this Section 5(b) on the date
of a Qualified Public Offering, or in the case of a conversion pursuant to
clause (ii) above, on the date specified in the written election notice
delivered by holders of at least two-thirds of the outstanding shares of Series
G Preferred Stock, which date shall be not more than 60 days nor less than 10
days prior to the date on which such notice is delivered to the Corporation.
(c) CONVERSION AT THE OPTION OF THE HOLDER. At any time and from time
to time prior to a Qualified Public Offering, each holder of Series G Preferred
Stock shall have the right to convert such holder's shares of Series G Preferred
Stock, in whole or in part, into shares of Common Stock pursuant to Section 5(a)
above, plus the right to receive an amount in cash equal to the accumulated but
unpaid dividends on the shares of Series G Preferred Stock so converted to and
including the Conversion Date (as defined below); provided that, if such
Conversion Date is prior to a Realization Event, the Corporation may, in lieu of
making a payment in cash equal to the amount of such accumulated but unpaid
dividends, deliver a number of shares of Common Stock equal to the amount of
such accumulated but unpaid dividends divided by the Fair Market Value of one
share of Common Stock. Notwithstanding the foregoing, if the holder of the
Series G Preferred Stock is a bank holding company, it shall not have the right
to convert the Series G Preferred Stock, in whole or in part, into Common Stock
if as a result of such conversion, the holder would own more than five percent
of the Common Stock, unless such bank holding company has the authority pursuant
to Section 4(k)(H) of the Bank Holding Company Act of 1956, as amended, to hold
such shares in excess of five percent. In order to convert shares of Series G
Preferred Stock pursuant to this Section 5(c), the holder thereof shall
surrender at the office of the Corporation the certificate or certificates
therefor, duly endorsed to the Corporation in blank, and give written notice to
the Corporation that such holder elects to convert such shares and shall state
in writing therein the name or names (with addresses) in which such holder
wishes the certificate or certificates of Common Stock to be issued. Shares of
Series G Preferred Stock shall be deemed to have been converted on the date of
surrender of such certificate or certificates as provided above (the "Conversion
Date"), and the person or persons entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such Common Stock on such date. As soon as practicable on
or after the Conversion Date, the Corporation shall issue and deliver a
certificate or certificates for the number of shares of Common Stock issuable
upon conversion.
(d) FRACTIONAL SHARES: PARTIAL CONVERSION. No fractional shares shall
be issued upon conversion of shares of Series G Preferred Stock into Common
Stock. In case the number of shares of Series G Preferred Stock represented by
the certificate or certificates surrendered pursuant to this Section 5 exceeds
the number of shares converted, the Corporation shall, upon such conversion,
execute and deliver to the holder, at the expense of the Corporation, a new
certificate or certificates for the number of shares of Series G Preferred Stock
represented by the certificate or certificates surrendered which are not to be
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converted. If any fractional share of Common Stock would, except for the
provisions of the first sentence of this Section 5(d), be delivered upon such
conversion, the Corporation, in lieu of delivering such fractional share, shall
pay to the holder surrendering the Series G Preferred Stock for conversion an
amount in cash equal to the Fair Market Value of such fractional share.
(e) ADJUSTMENT OF CONVERSION PRICE UPON ISSUANCE OF COMMON STOCK.
Except as provided in Section 5(f) or Section 5(g), if and whenever the
Corporation shall hereafter issue or sell, or is, in accordance with subsection
5(e)(1) through 5(e)(6), deemed to have issued or sold in one transaction or in
a series of related transactions, any shares of Common Stock for a consideration
per share less than the Conversion Price in effect immediately prior to the time
of such issuance or sale, then:
(i) if the Corporation receives aggregate gross proceeds of at least
$10,000,000 from the issuance or sale (or deemed issuance or sale) of any class
or series of securities of the Corporation (including the issuance of additional
shares of Series G Preferred Stock following the Closing Date (as defined in the
Purchase Agreement) (a "Significant Offering") then, immediately upon such
event, the Conversion Price shall be reduced to an amount equal to the lowest
price per share at which any share of Common Stock or securities convertible
into or exchangeable for shares of Common Stock has been issued or sold (or
deemed to be issued or sold) in such Significant Offering; PROVIDED that this
clause (i) shall not apply to any issuance or sale (or deemed issuance or sale)
of Common Stock or securities convertible into or exchangeable for shares of
Common Stock after the aggregate cash proceeds to the Corporation from sales of
additional Series G Preferred Stock pursuant to Section 2.04 of the Purchase
Agreement (the "Subsequent Offerings") exceeds $100,000,000; and PROVIDED
FURTHER, that if pursuant to this clause (i) the Conversion Price would be
adjusted below $165.2297 (as equitably adjusted for stock splits, stock
combinations and similar transactions), the Conversion Price shall be reduced to
(but not below) $165.2297 (as equitably adjusted for stock splits, stock
combinations and similar transactions) and shall remain subject to further
adjustment pursuant to clause (ii) below; or
(ii) if (w) the Corporation has not completed a Significant Offering,
(x) the Conversion Price has been reduced to $165.2297 (as equitably adjusted
for stock splits, stock combinations and similar transactions) pursuant to
clause (i) above, (y) the Corporation has issued shares of Series G Preferred
Stock in Subsequent Offerings having an aggregate purchase price of at least
$100,000,000 or (z) if clause (i) above does not otherwise apply then,
immediately upon any issuance or sale (or deemed issuance or sale) of any class
or series of securities (including the issuance of shares of Series G Preferred
Stock in any Subsequent Offerings after the total aggregate cash proceeds to the
Corporation from all such Subsequent Offerings exceeds $100,000,000), the
Conversion Price shall be reduced to the price determined by dividing (I) an
amount equal to the sum of (a) the number of shares of Common Stock outstanding
immediately prior to such issuance or sale (or deemed issuance or sale) as
determined on a Fully Diluted basis, multiplied by the Conversion Price then in
effect for the Series G Preferred Stock, plus (b) the aggregate consideration,
if any, received by the Corporation upon such issuance or sale (or deemed
issuance or sale), by (II) the total number of shares of Common Stock
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outstanding immediately after such issuance or sale (or deemed issuance or sale)
determined on a Fully Diluted basis.
For purposes of this Section 5(e), the following subsections 5(e)(1)
to 5(e)(6) shall also be applicable:
(5)(e)(1) ISSUANCE OF RIGHTS OR OPTIONS.In case at any time hereafter
the Corporation shall in any manner grant (whether directly or by assumption in
a merger or otherwise) any Options to purchase Common Stock or any Convertible
Securities, whether or not such Options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and the price per share
for which Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities (determined by dividing
(i) the total amount, if any, received or receivable by the Corporation as
consideration for the granting of such Options, plus the minimum aggregate
amount of additional consideration payable to the Corporation upon the exercise
of all such Options, plus, in the case of such Options which relate to
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the Conversion
Price in effect immediately prior to the time of the granting of such Options,
then the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such Options
shall be deemed to have been issued for such price per share as of the date of
granting of such Options or the issuance of such Convertible Securities and
thereafter shall be deemed to be outstanding. Except as otherwise provided in
subsection 5(e)(3), no adjustment of the Conversion Price shall be made upon the
actual issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
5(e)(2). ISSUANCE OF CONVERTIBLE SECURITIES. In case the Corporation
shall hereafter in any manner issue (whether directly or by assumption in a
merger or otherwise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the total amount
received or receivable by the Corporation as consideration for the issue or sale
of such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Corporation upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the conversion or exchange of all such Convertible Securities)
shall be less than the Conversion Price in effect immediately prior to the time
of such issue or sale, then the total maximum number of shares of Common Stock
issuable upon conversion or exchange of all such Convertible Securities shall be
deemed to have been issued for such price per share as of the date of the issue
or sale of such Convertible Securities and thereafter shall be deemed to be
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outstanding, provided that (a) except as otherwise provided in subparagraph
5(e)(3), no adjustment of the Conversion Price shall be made upon the actual
issue of such Common Stock upon conversion or exchange of such Convertible
Securities and (b) if any such issue or sale of such Convertible Securities is
made upon exercise of any Options to purchase any such Convertible Securities
for which adjustments of the Conversion Price have been or are to be made
pursuant to other provisions of this Section 5(e), no further adjustment of the
Conversion Price shall be made by reason of such issue or sale.
5(e)(3). CHANGE IN OPTION PRICE OR CONVERSION RATE. Upon the happening
of any of the following events, namely, if the purchase price provided for in
any Option referred to in subsection 5(e)(1), the additional consideration, if
any, payable upon the conversion or exchange of any Convertible Securities
referred to in subsection 5(e)(1) or 5(e)(2) or the rate at which Convertible
Securities referred to in subsection 5(e)(1) or 5(e)(2) are convertible into or
exchangeable for Common Stock shall change at any time (including, but not
limited to, changes under or by reason of provisions designed to protect against
dilution), the Conversion Price in effect at the time of such event shall
forthwith be readjusted to the Conversion Price which would have been in effect
at such time had such Options or Convertible Securities still outstanding
provided for such changed purchase price, additional consideration or conversion
rate, as the case may be, at the time initially granted, issued or sold, but
only if as a result of such adjustment the Conversion Price then in effect
hereunder is thereby reduced; and on the termination of any such Option or any
such right to convert or exchange such Convertible Securities, the Conversion
Price then in effect hereunder shall forthwith be increased to the Conversion
Price which would have been in effect at the time of such termination had such
Option or Convertible Securities, to the extent outstanding immediately prior to
such termination, never been issued.
5(e)(4). CONSIDERATION FOR STOCK. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Corporation therefor, without deduction therefrom of any expenses incurred or
any underwriting commissions or concessions paid or allowed by the Corporation
in connection therewith. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Corporation shall be deemed to be the fair value of such consideration as
determined in good faith by the Board of Directors, without deduction of any
expenses incurred or any underwriting commissions or concessions paid or allowed
by the Corporation in connection therewith. In case any Options shall be issued
in connection with the issue and sale of other securities of the Corporation,
together comprising one integral transaction in which no specific consideration
is allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued for such consideration as determined in good faith by
the Board of Directors of the Corporation.
5(e)(5). RECORD DATE. In case the Corporation shall take a record of
the holders of its Common Stock for the purpose of entitling them (i) to receive
a dividend or other distribution payable in Common Stock, Options or Convertible
Securities or (ii) to subscribe for or purchase Common Stock, options or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
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sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
5(e)(6). TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Corporation, and the disposition of any such shares shall be
considered an issue or sale of Common Stock for the purpose of this Section
5(e).
(f) EXCEPTIONS TO CONVERSION PRICE ADJUSTMENT. Notwithstanding the
foregoing, no adjustment to the Conversion Price shall be made pursuant to this
Section 5 in connection with the grant, issuance or sale of Common Stock,
Convertible Securities, warrants, options or other rights to subscribe for or
purchase Common Stock or Convertible Securities: (i) pursuant to employee stock
purchase or stock option ownership plans adopted by the Corporation for
employees, consultants and/or directors of the Corporation and its affiliates;
(ii) pursuant to the terms of any Convertible Securities, (iii) pursuant to
warrants, options or other rights to subscribe for or purchase granted, issued
or sold pursuant to clause (i) above; and (iv) pursuant to (A) warrants to
purchase shares of Common Stock issued to General Electric Capital Corporation
on October 31, 1997, (B) warrants to purchase shares of Common Stock issued
pursuant to the Warrant Agreement, dated as of January 29, 1998, between the
Corporation and The Chase Manhattan Bank, as Warrant Agent, (C) warrants to
purchase shares of Common Stock issued pursuant to the Warrant Agreement (other
than the warrants to purchase Common Stock which may be issued pursuant to
Section 2.4 of such agreement when and if such warrants are issued) dated
February 4, 1999, as amended on April 29, 1999, among the Corporation, The Chase
Manhattan Bank, as Warrant Agent, Newcourt Commercial Finance Corporation,
Lucent Technologies, Inc. and any Additional Purchasers thereunder, and (D)
warrants to purchase shares of Common Stock issued pursuant to the Warrant
Agreement, dated as of April 30, 1999 among the Corporation, The Chase Manhattan
Bank, as Warrant Agent, and First Union Investors, Inc.; provided that the
aggregate number of shares of Common Stock issued or issuable pursuant to
clauses (i) and (iii) above shall not exceed 20% of the Common Stock (on a Fully
Diluted basis) outstanding from time to time.
(g) ADJUSTMENT IN CONNECTION WITH INITIAL PUBLIC OFFERING.
Prior to the completion of a public offering of shares of Common Stock resulting
in aggregate offering proceeds to the Corporation of at least $80,000,000, the
Corporation shall file with the Securities and Exchange Commission and mail to
prospective purchasers a "red-herring" S-1 registration statement related to the
sale of such shares, which red-herring registration statement shall set forth a
range of prices per share in which the Corporation intends to sell shares of
Common Stock registered thereunder. If the midpoint of such range (the "Midrange
Price") is less than the Conversion Price (as adjusted to give effect to any
stock split, stock combination or similar transaction which has occurred prior
to, or is contemplated to occur in connection with, the Corporation's initial
public offering) then in effect for the Series G Preferred Stock, the Conversion
Price shall be reduced (immediately prior to, but subject to the completion of,
such public offering) to the greater of (i) the product of (x) the Midrange
Price multiplied by (y) the applicable Discount Factor (hereinafter defined), or
(ii) $234.7012 (as adjusted to give effect to any stock split, stock combination
or similar transaction which has occurred prior to, or is contemplated to occur
10
in connection with, the Corporation's initial public offering). For purposes
hereof, the "Discount Factor" shall equal (i) 80% if the Corporation's initial
public offering is completed at any time on or prior to September 30, 2000, (ii)
70% if the Corporation's initial public offering is completed at any time after
September 30, 2000 but on or prior to December 31, 2000, (iii) 60% if the
Corporation's initial public offering is completed at any time after December
31, 2000 but on or prior to March 31, 2001, and (iv) 50% if the Corporation's
initial public offering is completed at any time after March 31, 2001.
Notwithstanding the foregoing, the provisions of this Section 5(g) shall not
apply if the Corporation has issued and sold shares of Series G Preferred Stock
in the Subsequent Offerings resulting in total aggregate cash proceeds to the
Corporation of at least $100,000,000.
(h) SUBDIVISION OR COMBINATION OF COMMON STOCK. In case the
Corporation shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
(i) REORGANIZATION OR RECLASSIFICATION. If any capital reorganization
or reclassification of the capital stock of the Corporation shall be effected in
such a way that holders of Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for Common Stock, then, as a
condition of such reorganization or reclassification (but subject to Section 7),
lawful and adequate provisions shall be made whereby each holder of a share or
shares of Series G Preferred Stock shall thereupon have the right to receive,
upon the basis and upon the terms and conditions specified herein and in lieu of
the shares of Common Stock immediately theretofore receivable upon the
conversion of such share or shares of Series G Preferred Stock, such shares of
stock, securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding shares of such Common Stock equal to the
number of shares of such Common Stock immediately theretofore receivable upon
such conversion had such reorganization or reclassification not taken place, and
in any such case appropriate provisions shall be made with respect to the rights
and interests of such holder to the end that the provisions hereof (including,
without limitation, provisions for adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
conversion rights.
(j) CARRYOVER. Notwithstanding any other provisions of this Section 5,
the Corporation shall not be required to make any adjustment to the Conversion
Price unless such adjustment would require an increase or decrease of at least
one percent (1%) in the Conversion Price. Any lesser adjustment shall be carried
forward and shall be made no later than the time of, and together with, the next
subsequent adjustment which, together with any adjustment or adjustments so
carried forward, shall amount to an increase or decrease of at least one percent
(1%) in the Conversion Price.
(k) OTHER EVENTS. If the Corporation shall make any dividend
(excluding cash dividends payable out of accumulated earnings and profits) or
distribution on the Common Stock or issue any Common Stock, other capital stock
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or other security of the Corporation or any rights or warrants to purchase or
acquire any such security, which transaction does not result in an adjustment to
the Conversion Price pursuant to the foregoing provisions of this Section 5, the
Board of Directors may consider whether such action is of such a nature that an
adjustment to the Conversion Price should equitably be made in respect of such
transaction. If the Board of Directors of the Corporation determines that an
adjustment to the Conversion Price should be made, an adjustment shall be made
effective as of such date, as determined by the Board of Directors of the
Corporation. The determination of the Board of Directors of the Corporation as
to whether such an adjustment to the Conversion Price should be made, and, if
so, as to what adjustment should be made and when, shall be final and binding on
the Corporation and all stockholders of the Corporation. The Corporation shall
be entitled to make such additional adjustments in the Conversion Price, in
addition to those required by the foregoing provisions of this Section 5, as
shall be necessary in order that any dividend or distribution in shares of
capital stock of the Corporation, subdivision, reclassification or combination
of shares of stock of the Corporation or any recapitalization of the Corporation
shall not be taxable to the holders of the Common Stock.
(l) NOTICE OF ADJUSTMENT. Upon any adjustment of the Conversion Price,
then and in each such case the Corporation shall give written notice thereof, by
delivery in person, certified or registered mail, return receipt requested, or
facsimile addressed to each holder of shares of Series G Preferred Stock
affected by such adjustment at the address of such holder as shown on the books
of the Corporation, which notice shall state the Conversion Price resulting from
such adjustment, setting forth in reasonable detail the method upon which such
calculation is based.
6. VOTING RIGHTS.
(a) The holders of Series G-2 Preferred Stock, except as otherwise
required under Delaware law or as set forth below in this Section 6, shall not
be entitled or permitted to vote on any matter required or permitted to be voted
upon by the stockholders of the Corporation.
(b) So long as the Series G-1 Preferred Stock is outstanding, each
share of Series G-1 Preferred Stock shall entitle the holder thereof to vote, in
person or by proxy, at a special or annual meeting of stockholders or by written
consent, on all matters voted on by holders of Common Stock voting together as a
single class with other shares entitled to vote thereon. With respect to any
such vote, each share of Series G-1 Preferred Stock shall entitle the holder
thereof to cast a number of votes equal to the number of votes entitled to be
cast by such holder had such holder converted such share of Series G-1 Preferred
Stock into Common Stock prior to such vote (or, if earlier, the record date with
respect to such vote).
(c) Without the prior consent of the holders of at least two-thirds of
the shares of the Series G Preferred Stock then outstanding, voting as a
separate class, the Corporation shall not:
(i) increase the authorized number of shares of Series G Preferred
Stock; or
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(ii) issue, or authorize the issuance for sale of, any Equity
Securities (other than the sale of shares of Series G Preferred Stock
pursuant to the Purchase Agreement) that are senior to or pari passu with
the Series G Preferred Stock upon liquidation or redemption or as to
dividends; except that without such consent the Corporation may (A) issue
additional shares of Series F Preferred Stock to pay dividends on the
Series F Preferred Stock and (B) issue additional shares of Series E
Preferred Stock to pay dividends on the Series E Preferred Stock and upon
conversion of shares of Series F Preferred Stock to Series E Preferred
Stock.
(d) Without the prior consent of the holders of at least two-thirds of
the shares of the Series G-1 Preferred Stock then outstanding, voting as a
separate class, the Corporation shall not, and the Corporation shall cause its
Subsidiaries not to, establish any material new business or materially change
its primary business.
(e) Without the prior consent of the Requisite Holders, voting as a
separate class, the Corporation shall not:
(i) effect a Sale of the Corporation unless the aggregate Fair
Market Value of the consideration received in respect of each share of
Series G Preferred Stock is at least (A) 125% of the Deemed Issuance Price
or (B) if greater, the sum of the Liquidation Preference plus all
accumulated but unpaid dividends thereon; or
(ii) amend, modify or repeal the powers, preferences or rights of
or the restrictions provided for the benefit of holders of the Series G
Preferred Stock, or amend the Corporation's Certificate of Incorporation or
By-laws, if such action would affect the Series G Preferred Stock
adversely.
(f) Notwithstanding the foregoing, without the consent of each holder
of Series G Preferred Stock affected thereby, the Corporation shall not reduce
the Liquidation Preference of the Series G Preferred Stock or the rate at which
dividends accumulate thereon, or modify the dividend cumulation provisions of
the Series G Preferred Stock or the times and prices at which the Series G
Preferred Stock may be redeemed in a manner that would be adverse to the holders
of Series G Preferred Stock.
7. OPTIONAL REDEMPTION.
(a) At any time (i) on or prior to the 30th day after the occurrence
of a Change of Control or Sale of the Corporation in which all shares of Series
G Preferred Stock are not being exchanged for cash or freely marketable
securities of another corporation (or, if earlier, the 30th day after receiving
notice that a Change of Control or Sale of the Corporation is proposed, together
with a description in reasonable detail of the material terms and conditions of
such Change of Control or Sale of the Corporation), or (ii) on or after August
15, 2009 (unless a Qualified Public Offering has occurred prior to such time),
the Corporation shall, at the request (by written notice given to the
Corporation) of the holders of at least two-thirds of the Series G Preferred
Stock redeem all outstanding shares of Series G Preferred Stock at a price per
share equal to the Redemption Price (as defined below) thereof; PROVIDED that,
in the case of such a request after notice of a proposed Change of Control or
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Sale of the Corporation described in clause (i) above, the requirement to make
such redemption shall not arise unless such Change of Control or Sale of the
Corporation actually occurs. Such redemption shall take place on a date fixed by
the Corporation. Prior to commencing any redemption of the Series G Preferred
Stock pursuant to clause (i) above, the Corporation shall first consummate any
change of control offer required to be made to any holder of Series E Preferred
Stock, Series F Preferred Stock and any Indebtedness (as defined in the
certificate of designation of the Series E Preferred Stock) of the Corporation.
(b) For each share of Series G Preferred Stock redeemed pursuant to
this Section 7, the Corporation shall be obligated on the date fixed for such
redemption (the "Redemption Date"), to pay to the holder thereof (upon surrender
by such holder at the Corporation's principal office of the certificate
representing such share duly endorsed in blank or accompanied by an appropriate
form of assignment) an amount (the "Redemption Price") equal to the greater of
(i) the Liquidation Preference of such share of Series G Preferred Stock plus
all accumulated but unpaid dividends thereon (whether or not declared) and (ii)
the Fair Market Value of the shares of Common Stock issuable upon conversion of
such share of Series G Preferred Stock.
(c) If the Corporation holds and sets aside money sufficient to pay
the Redemption Price of the Series G Preferred Stock on the Redemption Date,
then on and after the Redemption Date: (i) the shares of Series G Preferred
Stock shall no longer be convertible into shares of Common Stock; (ii) the
shares of Series G Preferred Stock will cease to be outstanding and dividends on
the Series G Preferred Stock will cease to be declared and paid, whether or not
certificates representing the Series G Preferred Stock have been delivered to
the Corporation; and (iii) all other rights of the holder in respect thereof
shall terminate (other than the right to receive the Redemption Price upon
delivery of such Series G Preferred Stock).
8. EVENTS OF NONCOMPLIANCE.
(a) DEFINITION. An Event of Noncompliance shall have occurred if (i)
the Corporation has become required to, but has not, redeemed all of the Series
G Preferred Stock pursuant to Section 7, (ii) the Corporation has become
required to, but has not, paid all accrued dividends on shares of Series G
Preferred Stock, (iii) the Corporation has taken any action which it is
prohibited from taking under the terms of Section 6(c), (iv) the Corporation has
failed to pay when due any amounts owing in respect of indebtedness for borrowed
money, and such failure has continued for a period of 90 days without cure; or
(v) the Corporation knowingly and materially breaches any representation or
warranty contained in Section 3.17 of the Purchase Agreement.
(b) CONSEQUENCES OF NONCOMPLIANCE.
(i) If any Event of Noncompliance of the type described in clause
(i), (ii), (iii) or (iv) of Section 8(a) has occurred and is continuing,
the per annum rate of accrual of dividends pursuant to Section 3(a) on the
Series G Preferred Stock shall increase immediately by an increment of 100
basis points. Thereafter, until such time as no Event of Noncompliance
exists, the per annum rate of accrual of dividends pursuant to Section 3(a)
shall increase automatically at the end of each succeeding 90-day period by
an additional increment of 100 basis points (but in no event shall the per
14
annum rate of accrual of dividends pursuant to Section 3(a) exceed 15%).
Upon the cure of any such Event of Noncompliance, the per annum rate of
accrual of dividends pursuant to Section 3(a) shall immediately be reduced
to the rate set forth in Section 3(a), subject to further increase under
this clause (i) upon the occurrence of any subsequent Event of
Noncompliance of the type described in clause (i), (ii), (iii) or (iv) of
Section 8(a).
(ii) If any Event of Noncompliance of the type described in clause
(v) of Section 8(a) has occurred and is continuing, the per annum rate of
accrual of dividends pursuant to Section 3(a) on the Series G Preferred
Stock shall increase immediately by an increment of 100 basis points. Upon
the cure of any such Event of Noncompliance, the per annum rate of accrual
of dividends pursuant to Section 3(a) shall immediately be reduced to the
rate set forth in Section 3(a), subject to further increase under this
clause (ii) upon the occurrence of any subsequent Event of Noncompliance of
the type described in clause (v) of Section 8(a).
(iii) If an Event of Noncompliance of the type described in clause
(iv) of Section 8(a) has occurred and is continuing, the number of persons
on the Corporation's Board of Directors shall be increased by two directors
who shall be designated by holders of a majority of the outstanding shares
of Series G-1 Preferred Stock. Immediately upon the cure of such Event of
Noncompliance, the number of directors constituting the Corporation's Board
of Directors shall be reduced by two directors and the two persons
designated by the holders of a majority of the outstanding shares of Series
G-1 Preferred Stock shall automatically be removed from the Board of
Directors.
9. OPTIONAL CONVERSION OF SHARES OF SERIES G-2 PREFERRED STOCK INTO
SHARES OF SERIES G-1 PREFERRED STOCK. The holders of shares of Series G-2
Preferred Stock may convert all or any portion of their shares of Series G-2
Preferred Stock into shares of Series G-1 Preferred Stock at any time or from
time by surrendering certificates representing such shares to the Corporation
and the Corporation shall promptly issue certificates representing a like number
of shares of Series G-1 Preferred Stock in exchange therefor, provided that no
such holder may convert shares of Series G-2 Preferred Stock into shares of
Series G-1 Preferred Stock to the extent such conversion would be prohibited by
any law, judgment, decree, agreement or organizational document binding upon
such shares of Series G-2 Preferred Stock or the holder thereof.
10. REISSUANCE OF SERIES G PREFERRED STOCK. Shares of Series G
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged or converted, shall (upon compliance
with any applicable provisions of the laws of Delaware) have the status of
authorized and unissued shares of preferred stock undesignated as to series and
may be redesignated and reissued as part of any series of preferred stock (other
than Series G Preferred Stock).
11 BUSINESS DAY. If any payment or conversion shall be required by the
terms hereof to be made on a day that is not a Business Day, such payment or
conversion shall be made on the immediately succeeding Business Day.
15
12 DEFINITIONS. As used in this Certificate of Designation, the
following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:
"Board of Directors" shall mean the Board of Directors of the
Corporation.
"Business Day" means any day except a Saturday, a Sunday, or other day
on which commercial banks in the State of New York or New Jersey are authorized
or required by law or executive order to close.
"Capital Stock" means, with respect to any Person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting or non-voting) of, such Person's capital stock (but excluding
any debt security that is exchangeable for or convertible into such capital
stock).
"Change of Control" means such time as (i) a "person or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Securities and
Exchange Act of 1934, as amended) becomes the ultimate "beneficial owner" (as
defined in Rule 13d-3 under the Securities and Exchange Act of 1934, as amended)
of more than 50% of the total voting power of the voting stock of the
Corporation on a fully diluted basis.
"Common Stock" shall have the meaning ascribed to it in Section 2
hereof.
"Convertible Securities" shall mean any evidences of indebtedness,
shares or securities convertible into or exchangeable for Common Stock.
"Corporation" shall mean KMC Telecom Holdings, Inc., a Delaware
corporation.
"Deemed Issuance Price" shall be the lowest price per share at which
shares of Series G Preferred Stock are issued pursuant to the Purchase
Agreement.
"Dividend Payment Date" means March 31, June 30, September 30 and
December 31 of each year.
"Dividend Period" means the Initial Dividend Period and, thereafter,
each Quarterly Dividend Period.
"Event of Noncompliance" shall have the meaning set forth in Section
8.
"Equity Securities" means (i) any capital stock or other ownership or
equity interest, participation or securities (whether voting or non-voting,
whether preferred, common or otherwise, and including any stock appreciation,
contingent interest or similar right) and (ii) any option, warrant, security or
other right directly or indirectly convertible into or exercisable or
exchangeable for, or otherwise to acquire directly or indirectly, any stock,
interest, participation or security described in clause (i) above.
"Fair Market Value" of any property as of a particular date (the
"Determination Date") shall mean: (i) if the property is a security, the average
of the last 30 "daily sales prices" of such security on the principal national
securities exchange on which such security is listed or admitted for trading on
the last 30 Business Days prior to the Determination Date, or if not listed or
16
traded on any such exchange, then the Fair Market Value shall be the average of
the last 30 "daily sales prices" of such security on the Nasdaq National Market
on the last 30 Business Days prior to the Determination Date (the "daily sales
price" shall be the closing price for bona fide transactions of such security at
the end of each day); or (ii) if such security is not so listed or admitted to
unlisted trading privileges or if no such sale is made on at least 25 of such
days, then the Fair Market Value shall be the price (determined on a per share
basis, if applicable) that would be paid for the entire common equity of the
Corporation in an orderly sale transaction between a willing buyer and a willing
seller, without taking into account the lack of liquidity of the Corporation's
securities, using customary valuation techniques and assuming full disclosure of
all relevant information, as reasonably determined by an investment banking firm
of recognized national standing selected in good faith by the Board of Directors
or a duly appointed committee of the Board of Directors (which determination
shall be reasonably described in the written notice delivered to the holders of
the Series G Preferred Stock) or (iii) if the property in question is not a
security, then the Fair Market Value of the property in question shall be the
fair value thereof determined jointly by the Corporation and the Requisite
Holders. If such parties are unable to reach agreement within a reasonable
period of time, such fair value shall be determined by an independent appraiser
experienced in valuing the type of property in question selected by the
Corporation and approved by the Requisite Holders (which approval shall not be
unreasonably withheld or delayed). The Company shall pay the fees and expenses
of any investment banking firm and/or appraiser retained to determine Fair
Market Value hereunder. The determination of such appraiser and/or investment
banking firm shall be final and binding on all Persons.
"Fully Diluted" shall mean at any date as of which the number of
shares of Common Stock is to be determined, all shares of Common Stock
outstanding at such date and the maximum number of shares of Common Stock
issuable in respect of Convertible Securities and warrants, options and other
rights to purchase (directly or indirectly) shares of Common Stock or
Convertible Securities (giving effect to the then current respective conversion
prices) outstanding on such date (to the extent the rights to convert, exchange
or exercise thereunder are presently exercisable).
"Initial Dividend Period" means the dividend period commencing on, and
including, the Series G Preferred Stock Issue Date and ending on, and excluding,
the first Dividend Payment Date to occur thereafter.
"Issue Date" for any share of Series G Preferred Stock means the first
date on which such share of Series G Preferred Stock is issued by the
Corporation regardless of the number of times transfer of such share is made on
the records maintained by or for the Corporation and regardless of the number of
certificates which may be issued to evidence such share.
"Junior Preferred Stock" means, collectively, the Series A Preferred
Stock, the Corporation's Series B Cumulative Convertible Preferred Stock, par
value $.01 per share, the Series C Preferred Stock, and the Series D Preferred
Stock.
"Junior Securities" shall have the meaning ascribed to it in Section 2
hereof.
"Liquidation Preference" shall have the meaning ascribed to it in
Section 1 hereof.
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"Option" shall mean rights, options, or warrants to subscribe for
purchase or otherwise acquire Convertible Securities or Common Stock.
"Parity Preferred Stock" means the Series F Preferred Stock.
"Parity Securities" shall have the meaning ascribed to it in Section 2
hereof.
"Person" means any individual, firm, corporation, partnership, limited
liability company, trust, incorporated or unincorporated association, joint
venture, joint stock company, governmental body or other entity of any kind.
"Purchase Agreement" means the Securities Purchase Agreement dated as
of June 30, 2000 among the Corporation, Nassau Capital Partners L.P., Dresdner
Kleinwort Benson Private Equity Partners L.P., Lucent Technologies, Inc. and the
other purchasers named therein.
"Qualified Public Offering" shall mean the sale in a firm commitment
underwritten public offering of Common Stock pursuant to an effective
registration statement filed by the Corporation under the Securities Act of
1933, as amended, 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 Liquidation Preference (as adjusted for any stock
split, stock dividend, share combination, share exchange, recapitalization,
merger, conversion, consolidation, reorganization or other similar transaction).
"Quarterly Dividend Period" shall mean the quarterly periods
commencing on, and including, each Dividend Payment Date and ending on, and
excluding, each next Dividend Payment Date occurring immediately thereafter,
respectively.
"Realization Event" shall mean a Sale of the Corporation or a
Qualified Public Offering.
"Requisite Holders" means (i) the holders of at least a majority of
the outstanding shares of Series G Preferred Stock if the Corporation has
received aggregate gross cash proceeds of at least $250,000,000 from the
issuance of Series G Preferred Stock pursuant to the Purchase Agreement or (ii)
the holders of at least two-thirds of the outstanding shares of Series G
Preferred Stock if the Corporation has not received aggregate gross cash
proceeds of at least $250,000,000 from the issuance of Series G Preferred Stock
pursuant to the Purchase Agreement.
"Sale of the Corporation" means the sale of all or substantially all
of the Common Stock or assets of the Corporation to an independent third party
or the consolidation or merger of the Corporation with one or more other
corporations, in any single transaction or series of related transactions.
"Senior Preferred Stock" means the Series E Preferred Stock.
"Senior Securities" shall have the meaning ascribed to it in Section 2
hereof.
"Series A Preferred Stock" means the Corporation's Series A Cumulative
Convertible Preferred Stock, par value, $.0l per share.
18
"Series C Preferred Stock" means the Corporation's Series C Cumulative
Convertible Preferred Stock, par value $.01 per share.
"Series D Preferred Stock" means the Corporation's Series D Cumulative
Convertible Preferred Stock, par value, $.01 per share.
"Series E Preferred Stock" means the Corporation's Series E Senior
Redeemable, Exchangeable, PIK Preferred Stock.
"Series F Preferred Stock" means the Corporation's Series F Senior
Redeemable, Exchangeable, PIK Preferred Stock.
"Series G Preferred Stock" shall have the meaning ascribed to it in
Section 1 hereof.
"Series G-1 Preferred Stock" shall have the meaning ascribed to it in
Section 1 hereof.
"Series G-2 Preferred Stock" shall have the meaning ascribed to it in
Section 1 hereof.
"Shareholders Agreement" means the Amended and Restated Stockholders
Agreement among KMC Telecom Holdings, Inc., Nassau Capital Partners L.P., NAS
Partners I L.L.C., Harold N. Kamine, 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, and
Amendment No. 8 dated 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.
* * * * *
19
IN WITNESS WHEREOF, KMC TELECOM HOLDINGS, INC. has caused this
certificate to be duly executed by its Executive Vice President and Chief
Financial Officer this 7th day of July, 2000.
KMC TELECOM HOLDINGS. INC.
By: /s/ William Stewart
----------------------------------------
Name: William Stewart
Title: Executive Vice President and CFO