REGISTRATION RIGHTS AGREEMENT
Dated May 19, 1999
between
KMC TELECOM HOLDINGS, INC.
and
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
FIRST UNION CAPITAL MARKETS CORP.
CIBC WORLD MARKETS CORP.
BANCBOSTON ROBERTSON STEPHENS INC.
WASSERSTEIN PERELLA SECURITIES, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into May 19, 1999 between KMC Telecom Holdings, Inc., a Delaware
corporation (the "Company"), and MORGAN STANLEY & CO. INCORPORATED, CREDIT
SUISSE FIRST BOSTON CORPORATION, FIRST UNION CAPITAL MARKETS CORP., CIBC WORLD
MARKETS CORP., BANCBOSTON ROBERTSON STEPHENS INC. and WASSERSTEIN PERELLA
SECURITIES, INC. (the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated the
date hereof, between the Company and the Initial Purchasers (the "Purchase
Agreement"), which provides for the sale by the Company to the Initial
Purchasers of an aggregate of $275,000,000 of 13 1/2% Senior Notes Due 2009 of
the Company (the "Notes"). In order to induce the Initial Purchasers to enter
into the Purchase Agreement, the Company has agreed to provide to the Initial
Purchasers and their direct and indirect transferees the registration rights set
forth in this Agreement. The execution of this Agreement is a condition to the
closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time
to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Closing Date" shall mean the Closing Date as defined in the Purchase
Agreement.
"Company" shall have the meaning set forth in the preamble to this
Agreement and shall also include the Company's successors.
"Exchange Offer" shall mean the exchange offer by the Company of
Exchange Notes for Registrable Notes pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the 1933
Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another appropriate
form) and all amendments and supplements to such registration statement, in each
case including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Exchange Notes" shall mean notes issued in the Exchange Offer
pursuant to Section 2(a) hereof.
"Holder" shall mean any of the Initial Purchasers, for so long as it
owns any Registrable Notes, and each of their respective successors, assigns and
direct and indirect transferees who become registered owners of Registrable
Notes under the Indenture; provided that for purposes of Sections 4 and 5 of
this Agreement, the term "Holder" shall include Participating Broker-Dealers (as
defined in Section 4(a) hereof).
"Indenture" shall mean the Indenture relating to the Notes to be dated
as of the Closing Date between the Company and The Chase Manhattan Bank, as
trustee, and as the same may be amended from time to time in accordance with the
terms thereof.
"Initial Purchasers" shall have the meaning set forth in the preamble
to this Agreement.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Notes; provided that
whenever the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the Company
or any of its affiliates (as such term is defined in Rule 405 under the 1933
Act) (other than the Initial Purchasers or subsequent holders of Registrable
Notes if such subsequent holders are deemed to be such affiliates solely by
reason of their holding of such Registrable Notes) shall not be counted in
determining whether such consent or approval was given by the Holders of such
required percentage or amount.
"Notes" shall have the meaning set forth in the Preamble to this
Agreement.
"Person" shall mean an individual, partnership, corporation, limited
liability company, trust or unincorporated organization or other entity, or a
government or agency or political subdivision thereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Notes covered by a Shelf Registration Statement, and by all other
amendments and supplements to such prospectus, and in each case including all
material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the preamble
to this Agreement.
"Registrable Notes" shall mean the Notes; provided, however, that the
Notes shall cease to be Registrable Notes (i) when a Registration Statement with
respect to such Notes shall have been declared effective under the 1933 Act and
such Notes shall have been disposed of pursuant to such Registration Statement,
(ii) when such Notes have been sold to the public pursuant to Rule 144 (or any
similar rule then in force, but not Rule 144A) under the 1933 Act or (iii) when
such Notes shall have ceased to be outstanding.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees, (ii) all fees and
expenses incurred in connection with compliance with state securities or blue
sky laws (including reasonable fees and disbursements of counsel for any
underwriters or Holders in connection with blue sky qualification of any of the
Exchange Notes or Registrable Notes), (iii) all expenses of any Persons in
preparing or assisting in preparing, word processing, printing and distributing
any Registration Statement, any Prospectus, any amendments or supplements
thereto, any underwriting agreements, securities sales agreements and other
documents relating to the performance of and compliance with this Agreement,
(iv) all rating agency fees, (v) all fees and disbursements relating to the
qualification of the Indenture under applicable securities laws, (vi) the fees
and disbursements of the Trustee and its counsel, (vii) the fees and
disbursements of counsel for the Company and, in the case of a Shelf
Registration Statement, the reasonable fees and disbursements of one counsel for
the Holders (which counsel shall be selected by the Majority Holders and which
counsel may also be counsel for the Initial Purchasers ) and (viii) the fees and
disbursements of the independent public accountants of the Company, including
the expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance, but excluding fees and expenses of
counsel to the underwriters (other than reasonable fees and expenses set forth
in clause (ii) above) or the Holders and underwriting discounts and commissions
and transfer taxes, if any, relating to the sale or disposition of Registrable
Notes by a Holder.
"Registration Statement" shall mean any registration statement of the
Company that covers any of the Exchange Notes or Registrable Notes pursuant to
the provisions of this Agreement and all amendments and supplements to any such
Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(b) of this
Agreement which covers all of the Registrable Notes (but no other securities
unless approved by the Holders whose Registrable Notes are covered by such Shelf
Registration Statement) on an appropriate form under Rule 415 under the 1933
Act, or any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all material incorporated by reference therein.
"Trustee" shall mean the trustee with respect to the Notes under the
Indenture.
"Underwritten Registration" or "Underwritten Offering" shall mean a
registration in which Registrable Notes are sold to an Underwriter (as
hereinafter defined) for reoffering to the public.
2. Registration Under the 1933 Act.
(a) To the extent not prohibited by any applicable law or applicable
interpretation of the staff of the SEC, the Company shall use its best efforts
to cause to be filed an Exchange Offer Registration Statement covering the offer
by the Company to the Holders to exchange all of the Registrable Notes for
Exchange Notes and to have such Registration Statement remain effective until
the closing of the Exchange Offer. The Company shall commence the Exchange Offer
promptly after the Exchange Offer Registration Statement has been declared
effective by the SEC and use its best efforts to have the Exchange Offer
consummated not later than 60 days after such effective date. The Company shall
commence the Exchange Offer by mailing the related exchange offer Prospectus and
accompanying documents to each Holder stating, in addition to such other
disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Registration Rights Agreement and that all Registrable Notes validly
tendered will be accepted for exchange;
(ii) the dates of acceptance for exchange (which shall be a
period of at least 20 business days from the date such notice is
mailed) (the "Exchange Dates");
(iii) that any Registrable Note not tendered will remain
outstanding and continue to accrue interest, but will not retain any
rights under this Registration Rights Agreement;
(iv) that Holders electing to have a Registrable Note exchanged
pursuant to the Exchange Offer will be required to surrender such
Registrable Note, together with the enclosed letters of transmittal,
to the institution and at the address (located in the Borough of
Manhattan, The City of New York) specified in the notice prior to the
close of business on the last Exchange Date; and
(v) that Holders will be entitled to withdraw their election, not
later than the close of business on the last Exchange Date, by sending
to the institution and at the address (located in the Borough of
Manhattan, The City of New York) specified in the notice a telegram,
telex, facsimile transmission or letter setting forth the name of such
Holder, the principal amount of Registrable Notes delivered for
exchange and a statement that such Holder is withdrawing his election
to have such Notes exchanged.
As soon as practicable after the last Exchange Date, the Company
shall:
(i) accept for exchange Registrable Notes or portions thereof
tendered and not validly withdrawn pursuant to the Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Notes or portions thereof so accepted for
exchange by the Company and issue, and cause the Trustee to promptly
authenticate and mail to each Holder, an Exchange Note equal in
principal amount to the principal amount of the Registrable Notes
surrendered by such Holder.
The Company shall use its best efforts to complete the Exchange Offer
as provided above and shall comply with the applicable requirements of the 1933
Act, the 1934 Act and other applicable laws and regulations in connection with
the Exchange Offer. The Exchange Offer shall not be subject to any conditions,
other than that the Exchange Offer does not violate applicable law or any
applicable interpretation of the staff of the SEC. The Company shall inform the
Initial Purchasers of the names and addresses of the Holders to whom the
Exchange Offer is made, and the Initial Purchasers shall have the right, subject
to applicable law, to contact such Holders and otherwise facilitate the tender
of Registrable Notes in the Exchange Offer.
(b) In the event that (i) the Company determines that the Exchange
Offer Registration provided for in Section 2(a) above is not available or may
not be consummated as soon as practicable after the last Exchange Date because
it would violate applicable law or the applicable interpretations of the staff
of the SEC, (ii) the Exchange Offer is not for any other reason consummated by
the date that is six months after the Closing Date or (iii) the Exchange Offer
has been completed and in the opinion of counsel for the Initial Purchasers a
Registration Statement must be filed and a Prospectus must be delivered by the
Initial Purchasers in connection with any offering or sale of Registrable Notes
by the Initial Purchasers, of Registrable Notes that were acquired by the
Initial Purchasers from the Company, the Company shall use its best efforts to
cause to be filed as soon as practicable after such determination, date or
notice of such opinion of counsel is given to the Company, as the case may be, a
Shelf Registration Statement providing for the sale by the Holders of all of the
Registrable Notes and to have such Shelf Registration Statement declared
effective by the SEC. The Company agrees to use its best efforts to keep the
Shelf Registration Statement continuously effective until the expiration of the
period referred to in Rule 144(k) under the 1933 Act with respect to all
Registrable Notes covered by the Shelf Registration Statement, or such shorter
period that will terminate when all of the Registrable Notes covered by the
Shelf Registration Statement have been sold pursuant to the Shelf Registration
Statement. The Company further agrees to supplement or amend the Shelf
Registration Statement if required by the rules, regulations or instructions
applicable to the registration form used by the Company for such Shelf
Registration Statement or by the 1933 Act or by any other rules and regulations
thereunder for shelf registration or if reasonably requested by a Holder with
respect to information relating to such Holder, and to use its best efforts to
cause any such amendment to become effective and such Shelf Registration
Statement to become usable as soon as thereafter practicable. The Company agrees
to furnish to the Holders of Registrable Notes copies of any such supplement or
amendment promptly after its being used or filed with the SEC.
(c) The Company shall pay all Registration Expenses in connection with
the registration pursuant to Section 2(a) or Section 2(b). Each Holder shall pay
all underwriting discounts and commissions and transfer taxes, if any, relating
to the sale or disposition of such Holder's Registrable Notes pursuant to the
Shelf Registration Statement.
(d) An Exchange Offer Registration Statement pursuant to Section 2(a)
hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will
not be deemed to have become effective unless it has been declared effective by
the SEC; provided, however, that, if, after it has been declared effective, the
offering of Registrable Notes pursuant to a Shelf Registration Statement is
interfered with by any stop order, injunction or other order or requirement of
the SEC or any other governmental agency or court, such Registration Statement
will be deemed not to have become effective during the period of such
interference until the offering of Registrable Notes pursuant to such
Registration Statement may legally resume. As provided for in the Indenture, in
the event that the Exchange Offer is not consummated and, if a Shelf
Registration Statement is required hereby, the Shelf Registration Statement is
not declared effective on or prior to the date that is six months after the
Closing Date, the interest rate on the Notes (and on the Exchange Notes) will
increase by 0.5% per annum until the date the Exchange Offer is consummated or a
Shelf Registration Statement is declared effective.
(e) Without limiting the remedies available to the Initial Purchasers
and the Holders, the Company acknowledges that any failure by the Company to
comply with its obligations under Section 2(a) and Section 2(b) hereof may
result in material irreparable injury to the Initial Purchasers or the Holders
for which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Section 2(a)
and Section 2(b) hereof.
3. Registration Procedures.
In connection with the obligations of the Company with respect to the
Registration Statements pursuant to Section 2(a) and Section 2(b) hereof, the
Company shall as expeditiously as possible:
(a) prepare and file with the SEC a Registration Statement on the
appropriate form under the 1933 Act, which form (x) shall be selected by the
Company and (y) shall, in the case of a Shelf Registration, be available for the
sale of the Registrable Notes by the selling Holders thereof and (z) shall
comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the SEC to be
filed therewith, and use its best efforts to cause such Registration Statement
to become effective and remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period and cause each
Prospectus to be supplemented by any required prospectus supplement and, as so
supplemented, to be filed pursuant to Rule 424 under the 1933 Act; to keep each
Prospectus current during the period described under Section 4(3) and Rule 174
under the 1933 Act that is applicable to transactions by brokers or dealers with
respect to the Registrable Notes or Exchange Notes;
(c) in the case of a Shelf Registration, furnish to each Holder of
Registrable Notes, to counsel for the Initial Purchasers, to counsel for the
Holders and to each Underwriter of an Underwritten Offering of Registrable
Notes, if any, without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and such other
documents as such Holder or Underwriter may reasonably request, in order to
facilitate the public sale or other disposition of the Registrable Notes; and
the Company consents to the use of such Prospectus and any amendment or
supplement thereto in accordance with applicable law by each of the selling
holders of Registrable Notes and any such Underwriters in connection with the
offering and sale of the Registrable Notes covered by and in the manner
described in such Prospectus or any amendment or supplement thereto in
accordance with applicable law;
(d) use its reasonable best efforts to register or qualify the
Registrable Notes under all applicable state securities or "blue sky" laws of
such jurisdictions as any Holder of Registrable Notes covered by a Registration
Statement shall reasonably request in writing by the time the applicable
Registration Statement is declared effective by the SEC, to cooperate with such
Holders in connection with any filings required to be made with the National
Association of Securities Dealers, Inc. and do any and all other acts and things
which may be reasonably necessary or advisable to enable such Holder to
consummate the disposition in each such jurisdiction of such Registrable Notes
owned by such Holder; provided, however, that the Company shall not be required
to (i) qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(d), (ii) file any general consent to service of process or (iii)
subject itself to taxation in any such jurisdiction if it is not so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Notes, counsel for the Holders and counsel for the Initial
Purchasers promptly and, if requested by any such Holder or counsel, confirm
such advice in writing (i) when a Registration Statement has become effective
and when any post-effective amendment thereto has been filed and becomes
effective, (ii) of any request by the SEC or any state securities authority for
amendments and supplements to a Registration Statement and Prospectus or for
additional information after the Registration Statement has become effective,
(iii) of the issuance by the SEC or any state securities authority of any stop
order suspending the effectiveness of a Registration Statement or the initiation
of any proceedings for that purpose, (iv) if, between the effective date of a
Registration Statement and the closing of any sale of Registrable Notes covered
thereby, the representations and warranties of the Company contained in any
underwriting agreement, securities sales agreement or other similar agreement,
if any, relating to the offering cease to be true and correct in all material
respects or if the Company receives any notification with respect to the
suspension of the qualification of the Registrable Notes for sale in any
jurisdiction or the initiation of any proceeding for such purpose, (v) of the
happening of any event during the period a Shelf Registration Statement is
effective which makes any statement made in such Registration Statement or the
related Prospectus untrue in any material respect or which requires the making
of any changes in such Registration Statement or Prospectus in order to make the
statements therein not misleading in any material respect and (vi) of any
determination by the Company that a post-effective amendment to a Registration
Statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment and provide prompt notice to each Holder of the withdrawal of
any such order;
(g) in the case of a Shelf Registration, furnish to each Holder of
Registrable Notes, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);
(h) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Notes to facilitate the timely preparation and delivery
of certificates representing Registrable Notes to be sold and not bearing any
restrictive legends and enable such Registrable Notes to be in such
denominations (consistent with the provisions of the Indenture) and registered
in such names as the selling Holders may reasonably request at least two
business days prior to the closing of any sale of Registrable Notes;
(i) in the case of a Shelf Registration, upon the occurrence of any
event contemplated by Section 3(e)(v) hereof, use its best efforts to prepare
and file with the SEC a supplement or post-effective amendment to a Registration
Statement or the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter delivered
to the purchasers of the Registrable Notes, such Prospectus will not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading. The Company agrees to notify the Holders to suspend
use of the Prospectus as promptly as practicable after the occurrence of such an
event, and the Holders hereby agree to suspend use of the Prospectus until the
Company has amended or supplemented the Prospectus to correct such misstatement
or omission;
(j) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus or any document which is to be
incorporated by reference into a Registration Statement or a Prospectus after
initial filing of a Registration Statement, provide copies of such document to
the Initial Purchasers and their counsel (and, in the case of a Shelf
Registration Statement, the Holders and their counsel) and make such of the
representatives of the Company as shall be reasonably requested by the Initial
Purchasers or their counsel (and, in the case of a Shelf Registration Statement,
the Holders or their counsel) available for discussion of such document, and
shall not at any time file or make any amendment to the Registration Statement,
any Prospectus or any amendment of or supplement to a Registration Statement or
a Prospectus or any document which is to be incorporated by reference into a
Registration Statement or a Prospectus, of which the Initial Purchasers and
their counsel (and, in the case of a Shelf Registration Statement, the Holders
and their counsel) shall not have previously been advised and furnished a copy
or to which the Initial Purchasers or their counsel (and, in the case of a Shelf
Registration Statement, the Holders or their counsel) shall reasonably object;
(k) obtain a CUSIP number for all Exchange Notes or Registrable Notes,
as the case may be, not later than the effective date of a Registration
Statement;
(l) cause the Indenture to be qualified under the Trust Indenture Act
of 1939, as amended (the "TIA"), in connection with the registration of the
Exchange Notes or Registrable Notes, as the case may be, cooperate with the
Trustee and the Holders to effect such changes to the Indenture as may be
required for the Indenture to be so qualified in accordance with the terms of
the TIA and execute, and use its reasonable best efforts to cause the Trustee to
execute, all documents as may be required to effect such changes and all other
forms and documents required to be filed with the SEC to enable the Indenture to
be so qualified in a timely manner;
(m) in the case of a Shelf Registration, upon execution of customary
confidentiality agreements reasonably satisfactory to the Company and its
counsel, make available for inspection by a representative of the Holders of the
Registrable Notes, any Underwriter participating in any disposition pursuant to
such Shelf Registration Statement, and attorneys and accountants designated by
the Holders, at reasonable times and in a reasonable manner, all financial and
other records, pertinent documents and properties of the Company, and cause the
respective officers, directors and employees of the Company to supply all
information reasonably requested by any such representative, Underwriter,
attorney or accountant in connection with a Shelf Registration Statement;
(n) if reasonably requested by any Holder of Registrable Notes covered
by a Registration Statement, (i) promptly incorporate in a Prospectus supplement
or post-effective amendment such information with respect to such Holder as such
Holder reasonably requests to be included therein and (ii) make all required
filings of such Prospectus supplement or such post-effective amendment as soon
as the Company has received notification of the matters to be incorporated in
such filing; and
(o) in the case of a Shelf Registration, use its reasonable best
efforts to enter into such customary agreements and take all such other actions
in connection therewith (including those requested by the Holders of a majority
in principal amount of the Registrable Notes being sold) in order to expedite or
facilitate the disposition of such Registrable Notes including, but not limited
to, an Underwritten Offering and in such connection, (i) to the extent possible,
make such representations and warranties to the Holders and any Underwriters of
such Registrable Notes with respect to the business of the Company and its
subsidiaries, the Registration Statement, Prospectus and documents incorporated
by reference therein or deemed incorporated by reference therein, if any, in
each case, in form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings and confirm the same if and when
requested, (ii) use its reasonable best efforts to obtain opinions of counsel to
the Company (which counsel and opinions, in form, scope and substance, shall be
reasonably satisfactory to the Holders and such Underwriters and their
respective counsel) addressed to each selling Holder and Underwriter of
Registrable Notes, covering the matters customarily covered in opinions
requested in underwritten offerings, (iii) use its reasonable best efforts to
obtain "cold comfort" letters from the independent certified public accountants
of the Company (and, if necessary, any other certified public accountant of any
subsidiary of the Company, or of any business acquired by the Company for which
financial statements and financial data are or are required to be included in
the Registration Statement) addressed to each selling Holder and Underwriter of
Registrable Notes, such letters to be in customary form and covering matters of
the type customarily covered in "cold comfort" letters in connection with
underwritten offerings, and (iv) deliver such documents and certificates as may
be reasonably requested by the Holders of a majority in principal amount of the
Registrable Notes being sold or the Underwriters, and which are customarily
delivered in underwritten offerings, to evidence the continued validity of the
representations and warranties of the Company made pursuant to clause (i) above
and to evidence compliance with any customary conditions contained in an
underwriting agreement.
In the case of a Shelf Registration Statement, the Company may require
each Holder of Registrable Notes to furnish to the Company such information
regarding the Holder and the proposed distribution by such Holder of such
Registrable Notes as the Company may from time to time reasonably request in
writing. No Holder of Registrable Notes may include its Registrable Notes in
such Shelf Registration Statement unless and until such Holder furnishes such
information to the Company. Each Holder including Registrable Notes in a Shelf
Registration shall agree to furnish promptly to the Company any information
regarding such Holder and the proposed distribution by such Holder of such
Registrable Notes required to make any information previously furnished to the
Company by such Holder not materially misleading.
In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of the happening of any event
of the kind described in Section 3(e)(v) hereof, such Holder will forthwith
discontinue disposition of Registrable Notes pursuant to a Registration
Statement until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(i) hereof, and, if so directed by
the Company, such Holder will deliver to the Company (at its expense) all copies
in its possession, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Registrable Notes current at the
time of receipt of such notice. If the Company shall give any such notice to
suspend the disposition of Registrable Notes pursuant to a Registration
Statement, the Company shall extend the period during which the Registration
Statement shall be maintained effective pursuant to this Agreement by the number
of days during the period from and including the date of the giving of such
notice to and including the date when the Holders shall have received copies of
the supplemented or amended Prospectus necessary to resume such dispositions.
There may not be more than two such suspensions during any 365 day period and
any such suspensions may not exceed 30 days for each suspension.
The Holders of Registrable Notes covered by a Shelf Registration
Statement who desire to do so may sell such Registrable Notes in an Underwritten
Offering; provided that the Company shall be required to use its reasonable best
efforts to effect an underwritten offering only upon the request of Holders of
at least 25% in aggregate principal amount of the Registrable Notes outstanding
at the time such request is delivered to the Company. In any such Underwritten
Offering, the investment banker or investment bankers and manager or managers
(the "Underwriters") that will administer the offering will be selected by the
Majority Holders of the Registrable Notes included in such offering, subject to
approval by the Company, which approval will not be unreasonably withheld.
4. Participation of Broker-Dealers in Exchange Offer.
(a) The staff of the SEC has taken the position that any broker-dealer
that receives Exchange Notes for its own account in the Exchange Offer in
exchange for Notes that were acquired by such broker-dealer as a result of
market-making or other trading activities (a "Participating Broker-Dealer"), may
be deemed to be an "underwriter" within the meaning of the 1933 Act and must
deliver a prospectus meeting the requirements of the 1933 Act in connection with
any resale of such Exchange Notes.
The Company understands that it is the staff's position that if the
Prospectus contained in the Exchange Offer Registration Statement includes a
plan of distribution containing a statement to the above effect and the means by
which Participating Broker-Dealers may resell the Exchange Notes, without naming
the Participating Broker-Dealers or specifying the amount of Exchange Notes
owned by them, such Prospectus may be delivered by Participating Broker-Dealers
to satisfy their prospectus delivery obligation under the 1933 Act in connection
with resales of Exchange Notes for their own accounts, so long as the Prospectus
otherwise meets the requirements of the 1933 Act.
(b) In light of the above, notwithstanding the other provisions of
this Agreement, the Company agrees that the provisions of this Agreement as they
relate to a Shelf Registration shall also apply to an Exchange Offer
Registration to the extent, and with such reasonable modifications thereto as
may be, reasonably requested by the Initial Purchasers or by one or more
Participating Broker-Dealers, in each case as provided in clause (ii) below, in
order to expedite or facilitate the disposition of any Exchange Notes by
Participating Broker-Dealers consistent with the positions of the staff of the
SEC recited in Section 4(a) above; provided that:
(i) the Company shall not be required to amend or supplement the
Prospectus contained in the Exchange Offer Registration Statement, as
would otherwise be contemplated by Section 3(i), for a period
exceeding 180 days after the last Exchange Date (as such period may be
extended pursuant to the penultimate paragraph of Section 3 of this
Agreement) and Participating Broker-Dealers shall not be authorized by
the Company to deliver and shall not deliver such Prospectus after
such period in connection with the resales contemplated by this
Section 4; and
(ii) the application of the Shelf Registration procedures set
forth in Section 3 of this Agreement to an Exchange Offer
Registration, to the extent not required by the positions of the staff
of the SEC or the 1933 Act and the rules and regulations thereunder,
will be in conformity with the reasonable request to the Company by
the Initial Purchasers or with the reasonable request in writing to
the Company by one or more broker-dealers who certify to the Initial
Purchasers and the Company in writing that they anticipate that they
will be Participating Broker-Dealers; and provided further that, in
connection with such application of the Shelf Registration procedures
set forth in Section 3 to an Exchange Offer Registration, the Company
shall be obligated (x) to deal only with one entity representing the
Participating Broker-Dealers, which shall be Morgan Stanley & Co.
Incorporated unless it elects not to act as such representative, (y)
to pay the fees and expenses of only one counsel representing the
Participating Broker-Dealers, which shall be counsel to the Initial
Purchasers unless such counsel elects not to so act and (z) to cause
to be delivered only one, if any, "cold comfort" letter with respect
to the Prospectus in the form existing on the last Exchange Date and
with respect to each subsequent amendment or supplement, if any,
effected during the period specified in clause (i) above.
(c) The Initial Purchasers shall have no liability to the Company or
any Holder with respect to any request that they may make pursuant to Section
4(b) above.
5. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless the Initial
Purchasers, each Holder and each person, if any, who controls any Initial
Purchaser or any Holder within the meaning of either Section 15 of the 1933 Act
or Section 20 of the 1934 Act, or is under common control with, or is controlled
by, any Initial Purchaser or any Holder, from and against all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred by any Initial Purchaser, any Holder or any such
controlling or affiliated person 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 any Registration Statement (or any
amendment thereto) pursuant to which Exchange Notes or Registrable Notes were
registered under the 1933 Act, including all documents incorporated therein by
reference, or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or caused by any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (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 light of the
circumstances under which they were made not misleading, except insofar as such
losses, claims, damages or liabilities are caused by any such untrue statement
or omission or alleged untrue statement or omission based upon information
relating to any of the Initial Purchasers or any Holder furnished to the Company
in writing by any Initial Purchaser or any selling Holder expressly for use
therein; provided, that the foregoing indemnity agreement shall not inure to the
benefit of any Holder or any Person controlling such Holder, with respect to any
sale or disposition of Registrable Notes by such Holder in violation of the
penultimate paragraph of Section 3 of this Agreement. In connection with any
Underwritten Offering permitted by Section 3, the Company will also indemnify
the Underwriters, if any, selling brokers, dealers and similar securities
industry professionals participating in the distribution, their officers and
directors and each Person who controls such Persons (within the meaning of the
1933 Act and the 1934 Act) to the same extent as provided above with respect to
the indemnification of the Holders, if requested in connection with any
Registration Statement.
(b) Each Holder (including any Initial Purchaser if it is a Holder)
agrees, severally and not jointly, to indemnify and hold harmless the Company,
each Initial Purchaser and the other selling Holders, and each of their
respective directors, officers who sign the Registration Statement and each
Person, if any, who controls the Company, any Initial Purchaser and any other
selling Holder within the meaning of either Section 15 of the 1933 Act or
Section 20 of the 1934 Act to the same extent as the foregoing indemnity from
the Company to the Initial Purchasers and the Holders, but only with reference
to information relating to such Holder furnished to the Company in writing by
such Holder expressly for use in any Registration Statement (or any amendment
thereto) or any Prospectus (or any amendment or supplement 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 paragraph (a) or paragraph (b) above, 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 connection with any proceeding or related proceedings in the same
jurisdiction, be liable for (a) the reasonable fees and expenses of more than
one separate firm (in addition to any local counsel) for all Initial Purchasers
and all Persons, if any, who control the Initial Purchasers within the meaning
of either Section 15 of the 1933 Act or Section 20 of the 1934 Act, (b) the
reasonable fees and expenses of more than one separate firm (in addition to any
local counsel) for the Company, its directors, its officers who sign the
Registration Statement and each Person, if any, who controls the Company within
the meaning of either such Section and (c) the reasonable fees and expenses of
more than one separate firm (in addition to any local counsel) for all Holders
and all Persons, if any, who control any Holders within the meaning of either
such Section, and that all such fees and expenses shall be reimbursed as they
are incurred. In such case involving any Initial Purchaser and Persons who
control such Initial Purchaser, such firm shall be designated in writing by
Morgan Stanley & Co. Incorporated. In such case involving the Holders and such
Persons who control Holders, such firm shall be designated in writing by the
Majority Holders. In all other cases, such firm shall be designated by the
Company. 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 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 for such fees and expenses of counsel 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 such
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) If the indemnification provided for in paragraph (a) or paragraph
(b) of this Section 5 is unavailable to an indemnified party or insufficient in
respect of any losses, claims, damages or liabilities, then each indemnifying
party under such paragraph, 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 in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party or parties on the one hand and of the indemnified party or parties 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 fault of the Company and the Holders 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 Holders
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Holders'
respective obligations to contribute pursuant to this Section 5(d) are several
in proportion to the respective principal amount of Registrable Notes of such
Holder that were registered pursuant to a Registration Statement.
(e) The Company and each Holder agree that it would not be just or
equitable if contribution pursuant to this Section 5 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 paragraph (d) above. The amount paid
or payable by an indemnified party as a result of the losses, claims, damages
and liabilities referred to in paragraph (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 5, no Holder shall be required to indemnify or contribute any amount in
excess of the amount by which the total price at which Registrable Notes were
sold by such Holder exceeds the amount of any damages that such Holder 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 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 5 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.
The indemnity and contribution provisions contained in this Section 5
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
any Initial Purchaser, any Holder or any Person controlling any Initial
Purchaser or any Holder, or by or on behalf of the Company, its officers or
directors or any Person controlling the Company, (iii) acceptance of any of the
Exchange Notes and (iv) any sale of Registrable Notes pursuant to a Shelf
Registration Statement.
6. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not entered into, and
on or after the date of this Agreement will not enter into, any agreement which
is inconsistent with the rights granted to the Holders of Registrable Notes in
this Agreement or otherwise conflicts with the provisions hereof. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's other
issued and outstanding securities under any such agreements.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Notes affected by such amendment, modification, supplement, waiver
or consent; provided, however, that no amendment, modification, supplement,
waiver or consent to any departure from the provisions of Section 5 hereof shall
be effective as against any Holder of Registrable Notes unless consented to in
writing by such Holder.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 6(c), which address initially is, with respect to the Initial
Purchasers, the address set forth in the Purchase Agreement; and (ii) if to the
Company, initially at the Company's address set forth in the Purchase Agreement
and thereafter at such other address, notice of which is given in accordance
with the provisions of this Section 6(c).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Trustee, at the
address specified in the Indenture.
(d) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Notes in
violation of the terms of the Purchase Agreement. If any transferee of any
Holder shall acquire Registrable Notes, in any manner, whether by operation of
law or otherwise, such Registrable Notes shall be held subject to all of the
terms of this Agreement, and by taking and holding such Registrable Notes such
person shall be conclusively deemed to have agreed to be bound by and to perform
all of the terms and provisions of this Agreement and such person shall be
entitled to receive the benefits hereof. The Initial Purchasers (in their
capacity as Initial Purchasers) shall have no liability or obligation to the
Company with respect to any failure by a Holder to comply with, or any breach by
any Holder of, any of the obligations of such Holder under this Agreement.
(e) Purchases and Sales of Notes. The Company shall not, and shall use
its best efforts to cause its affiliates (as defined in Rule 405 under the 1933
Act) not to, purchase and then resell or otherwise transfer any Notes.
(f) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
KMC TELECOM HOLDINGS, INC.
By: /s/ James D. Grenfell
------------------------
Name: JAMES D. GRENFELL
Title: EXECUTIVE VICE PRESIDENT,
CHIEF FINANCIAL OFFICER
Confirmed and accepted as of the date first above written:
MORGAN STANLEY & CO. INCORPORATED
CREDIT SUISSE FIRST BOSTON CORPORATION
FIRST UNION CAPITAL MARKETS CORP.
CIBC WORLD MARKETS CORP.
BANCBOSTON ROBERTSON STEPHENS INC.
WASSERSTEIN PERELLA SECURITIES, INC.
By: MORGAN STANLEY & CO. INCORPORATED
In its individual capacity and as representative
of the other Initial Purchasers
By: /s/ Albert L. Lord
------------------------
Name: ALBERT L. LORD
Title: VICE PRESIDENT