SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
SCHEDULE 13D
(RULE 13D-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO RULE 13D-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
RULE 13D-2(a)
CAIS Internet, Inc.
-------------------
(Name of Issuer)
Common Stock, $.01 par value
------------------------------
(Title of Class of Securities)
12476Q102
---------------
(CUSIP Number)
Robert S. Woodruff
Qwest Communications International Inc.
700 Qwest Tower
555 17th Street
Denver, Colorado 80202
(303) 992-1400
---------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
October 27, 1999
-------------------------------------------------------
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition that is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box [ ].
NOTE. Schedules filed in paper format shall include a signed
original and five copies of the schedule, including all exhibits. SEE
Rule 13d-7(b) for other parties to whom copies are to be sent.
(Continued on following pages)
(Page 1 of 73 Pages)
<PAGE>
- -------------------------- ------------------------
CUSIP NO. 12476Q102 13D Page 2 of 73
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
U.S. Telesource, Inc.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 1,677,415 shares of Common Stock
BENEFICIALLY -------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 0
REPORTING PERSON -------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
1,677,415 shares of Common Stock
-------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,677,415 shares of Common Stock
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.0%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
*SEE ITEM 4 OF TEXT BELOW
<PAGE>
- -------------------------- ------------------------
CUSIP NO. 12476Q102 13D Page 3 of 73
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
Qwest Communications Corporation
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 1,677,415 shares of Common Stock
BENEFICIALLY -------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 0
REPORTING PERSON -------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
1,677,415 shares of Common Stock
-------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,677,415 shares of Common Stock
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.0%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
*SEE ITEM 4 OF TEXT BELOW
<PAGE>
- -------------------------- ------------------------
CUSIP NO. 12476Q102 13D Page 4 of 73
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
Qwest Corporation
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Colorado
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 1,677,415 shares of Common Stock
BENEFICIALLY -------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 0
REPORTING PERSON -------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
1,677,415 shares of Common Stock
-------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,677,415 shares of Common Stock
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.0%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
*SEE ITEM 4 OF TEXT BELOW
<PAGE>
- -------------------------- ------------------------
CUSIP NO. 12476Q102 13D Page 5 of 73
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
Qwest Communications International Inc.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 1,677,415 shares of Common Stock
BENEFICIALLY -------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 0
REPORTING PERSON -------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
1,677,415 shares of Common Stock
-------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,677,415 shares of Common Stock
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.0%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
*SEE ITEM 4 OF TEXT BELOW
<PAGE>
- -------------------------- ------------------------
CUSIP NO. 12476Q102 13D Page 6 of 73
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
Anschutz Company
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 1,677,415 shares of Common Stock
BENEFICIALLY -------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 0
REPORTING PERSON -------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
1,677,415 shares of Common Stock
-------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,677,415 shares of Common Stock
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.0%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
- --------------------------------------------------------------------------------
*SEE ITEM 4 OF TEXT BELOW
<PAGE>
- -------------------------- ------------------------
CUSIP NO. 12476Q102 13D Page 7 of 73
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1 NAME OF REPORTING PERSON
I.R.S. IDENTIFICATION NO. OF ABOVE PERSON (ENTITIES ONLY)
Philip F. Anschutz
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [ ]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEM 2(d) OR 2(e) [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
U.S.
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 1,677,415 shares of Common Stock
BENEFICIALLY -------------------------------------------------
OWNED BY 8 SHARED VOTING POWER
EACH 0
REPORTING PERSON -------------------------------------------------
WITH 9 SOLE DISPOSITIVE POWER
1,677,415 shares of Common Stock
-------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,677,415 shares of Common Stock
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
7.0%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
IN
- --------------------------------------------------------------------------------
*SEE ITEM 4 OF TEXT BELOW
<PAGE>
Page 8 of 73
ITEM 1. SECURITY AND ISSUER
This statement on Schedule 13D relates to the common stock, $.01 par
value ("Common Stock") of CAIS Internet, Inc., a Delaware corporation (the
"Company"), which has its principal executive offices at 1255 22nd Street, NW,
4th Floor, Washington, D.C. 20037.
ITEM 2. IDENTITY AND BACKGROUND
This statement is filed by U.S. Telesource, Inc. ("USTI"), Qwest
Communications Corporation ("QCC"), Qwest Corporation ("QC"), Qwest
Communications International Inc. ("QCI"), Anschutz Company ("AC") and Philip F.
Anschutz ("Anschutz"), all of whom collectively are sometimes hereinafter
referred to as the "Reporting Persons."
USTI is a Delaware corporation and a direct wholly-owned subsidiary of
QCC. QCC is a Delaware corporation and a direct wholly-owned subsidiary of QC.
QC is a Colorado corporation and is a direct wholly-owned subsidiary of QCI. QCI
is a publicly-traded Delaware corporation. AC is a Delaware corporation and the
beneficial owner of approximately 39% of the outstanding shares of QCI. Anschutz
is the beneficial owner of 100% of the capital stock of AC. USTI's, QCC's, QC's,
QCI's, AC's and Anschutz's principal and business address is 555 17th Street,
Denver, Colorado 80202. The principal business of USTI is to acquire and hold
securities and other investment assets. The principal business of QCC and QCI is
providing voice, image and data communications. QC's principal business is
functioning as a holding company for QCC. The principal business of AC and
Anschutz is railroad transportation, communications, natural resources, real
estate and sports entertainment.
The name, residence or business address, present principal occupation
or employment, and the name, principal business and address of any corporation
or other organization in which such employment is conducted and the citizenship
of each of the persons enumerated in Instruction C with respect to the Reporting
Persons (collectively, the "Control Parties") that is a natural person is as set
forth on Exhibit A.
None of the Reporting Persons or the Control Parties has been, during
the last five years, (a) convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors), or (b) party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to federal
or state securities laws or finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
The aggregate amount of funds used in making the purchase of the Series
C Shares and the Warrant (as defined in Item 4 below) was approximately $15
million. USTI obtained such funds from one of its affiliates.
<PAGE>
Page 9 of 73
ITEM 4. PURPOSE OF TRANSACTION
On September 29, 1999, USTI purchased 125,000 shares of the Company's
Series C Preferred Stock, par value $.01 (the "Series C Shares") pursuant to
that certain Series C Preferred Stock Purchase Agreement, dated as of September
29, 1999 (the "Purchase Agreement") by and between the Company and USTI, a copy
of which is attached hereto as Exhibit B. At any time after the issuance of the
Series C Shares and from time to time, at the option of the holder thereof, each
Series C Share is convertible into ten shares of Common Stock, subject to
adjustment in accordance with the terms provided in the Company's Certificate of
Designation and subject to the limitation that, at no time, will the aggregate
of the number of shares of Common Stock issuable to the holder upon any
conversion of Series C Shares plus the number of shares of Common Stock
beneficially owned by such holder that were previously issued upon any
conversion of Series C Shares exceed 4.99% of the total issued and outstanding
shares of Common Stock.
On October 27, 1999, USTI also acquired a Common Stock Warrant (the
"Warrant") from the Company, which entitles USTI to purchase up to 500,000
shares of Common Stock at an exercise price of $12.00 per share subject to
adjustment for anti-dilution purposes. The Warrant may be exercised in whole or
in part at any time on or after the date of issuance of the Warrant and will
expire to the extent that the Warrant remains unexercised on October 28, 2002.
This statement on Schedule 13D relates to the acquisition of beneficial
ownership of the Common Stock into which the Series C Shares may be converted
and beneficial ownership of the Common Stock that USTI is entitled to purchase
upon exercise of the Warrant. The aggregate number of shares of Common Stock
beneficially owned directly or indirectly by each of the Reporting Persons by
virtue of their beneficial ownership of Series C Shares, on an as-converted
basis, and of the Warrant, on an as-exercised basis, is set forth in Item 5(a).
The purpose of the acquisition of the Series C Shares and the Warrant
by the Reporting Persons is to make an equity investment in the Company. In
addition, QCC and the Company have entered into certain commercial arrangements
pursuant to which the Company agreed to purchase certain services from QCC,
including a purchase from QCC of long-term network capacity and a revenue
commitment of $10 million to purchase certain other services from QCC over the
next 60 months, to co-locate equipment with QCC where desirable and to conduct
joint marketing and brand development with QCC where desirable.
Except as may be set forth in the Schedule 13D, USTI and its affiliates
have no present plans or proposals that relate to or would result in any actions
of the type described in items (a) through (j) of Item 4 of Schedule 13D.
The summary of the terms of the Purchase Agreement and the Warrant set
forth herein is not intended to be complete and is qualified in its entirety by
reference to the full texts of such agreements, copies of which are filed as
Exhibit B and Exhibit C hereto.
<PAGE>
Page 10 of 73
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
WITH RESPECT TO EACH REPORTING PERSON:
(a) AGGREGATE NUMBER AND PERCENTAGE OF CLASS OF COMMON STOCK:
USTI has direct beneficial ownership of 1,677,415 shares of Common
Stock, which represents 7.0% of the outstanding Common Stock.
QCC, QC, QCI, AC and Anschutz each have indirect beneficial ownership
of 1,677,415 shares of Common Stock, which represents 7.0% of the
outstanding Common Stock.
(b) NUMBER OF SHARES OF COMMON STOCK AS TO WHICH EACH REPORTING PERSON
HOLDS:
(i) Sole power to vote or to direct the vote: 1,677,415
(ii) Shared power to vote or to direct the vote: 0
(iii) Sole power to dispose or to direct the disposition: 1,677,415
(iv) Shared power to dispose or to direct the disposition: 0
(c) TRANSACTIONS IN THE PREVIOUS 60 DAYS:
To the extent that the acquisition of the Series C Shares and the
Warrant constitute transactions in Common Stock, the Reporting Persons
effected transactions in Common Stock when they acquired beneficial
ownership of Common Stock by virtue of their acquisition of the Series
C Shares at the closing of the transactions contemplated by the
Purchase Agreement and the acquisition of the Warrant on October 27,
1999. The Series C Shares were purchased directly from the issuer in a
private transaction for an aggregate consideration of $15 million. The
Warrant was purchased directly from the issuer for $1.00.
(d) ANY OTHER PERSON KNOWN TO HAVE THE RIGHT TO RECEIVE OR THE POWER TO
DIRECT DIVIDENDS:
Not applicable.
(e) DATE ON WHICH THE REPORTING PERSON CEASED TO BE A BENEFICIAL OWNER OF
MORE THAN FIVE PERCENT OF THE CLASS OF SECURITIES:
Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO SECURITIES OF THE ISSUER
See Item 4 for a description of the Purchase Agreement and Warrant,
which description is incorporated herein by this reference.
USTI and the Company have also entered into a Registration Rights and
Lock-Up Agreement, dated as of September 29, 1999, as amended by the First
Amendment to Registration Rights and Lock-Up Agreement, dated as of October 27,
1999 (collectively, the "Registration Rights Agreement") pursuant to which USTI
is entitled to certain demand registration rights and incidental registration
rights with respect to shares of the Common Stock of the Company that are
received upon the conversion of the Series C Shares or the exercise of the
<PAGE>
Page 11 of 73
Warrant (the "Registrable Shares"). In addition, the Registration Rights
Agreement restricts USTI from transferring, offering, pledging, selling or
contracting to sell, granting any options for the sale of or otherwise disposing
of, directly or indirectly, any of the Series C Shares, the Warrant or the
Registrable Shares through November 21, 1999 or, in connection with any public
offering by the Company, for a period of ninety days from the effective date of
the registration statement relating to such offering unless the Company and the
managing underwriters have given prior written consent. The summary of the terms
of the Registration Rights Agreement set forth herein is not intended to be
complete and is qualified in its entirety by reference to the full text of such
agreement, a copy of which is filed as Exhibit D hereto.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
EXHIBIT A: Name, residence or business address, present principal occupation or
employment and name, principal business and address of any
corporation or other organization in which such employment is
conducted of each of the Control Parties that is a natural person.
EXHIBIT B: Series C Preferred Stock Purchase Agreement
EXHIBIT C: Common Stock Warrant of CAIS Internet, Inc.
EXHIBIT D: Registration Rights and Lock-Up Agreement and First Amendment to
Registration Rights and Lock-Up Agreement
<PAGE>
Page 12 of 73
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
November 5, 1999
U.S. Telesource, Inc.
/s/ MARC B. WEISBERG
----------------------------------------------
By: Marc B. Weisberg
Title: President and Chief Executive Officer
<PAGE>
Page 13 of 73
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
November 5, 1999
Qwest Communications Corporation
/s/ MARC B. WEISBERG
----------------------------------------------
By: Marc B. Weisberg
Title: Senior Vice President
<PAGE>
Page 14 of 73
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
November 5, 1999
Qwest Corporation
/s/ DRAKE S. TEMPEST
------------------------------------------------
By: Drake S. Tempest
Title: Executive Vice President
and General Counsel
<PAGE>
Page 15 of 73
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
November 5, 1999
Qwest Communications International Inc.
/s/ DRAKE S. TEMPEST
-----------------------------------------------
By: Drake S. Tempest
Title: Executive Vice President
and General Counsel
<PAGE>
Page 16 of 73
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this statement is true,
complete and correct.
November 5, 1999
Anschutz Company
/s/ CRAIG D. SLATER
---------------------------------------------
By: Craig D. Slater
Title: Executive Vice President
<PAGE>
Page 17 of 73
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this statement is true, complete and
correct.
November 5, 1999
Philip F. Anschutz
/s/ PHILIP F. ANSCHUTZ
--------------------------------
<PAGE>
Page 18 of 73
<TABLE>
<CAPTION>
EXHIBIT A
USTI
- ----
OFFICERS AND DIRECTORS
<S> <C> <C>
Joseph P. Nacchio U.S. Director
555 17th Street U.S. Telesource, Inc.
Denver, CO 80202 555 17th Street
Denver, CO 80202
Robert S. Woodruff U.S. Director, Executive Vice President - Finance
555 17th Street and Chief Financial Officer
Denver, CO 80202 U.S. Telesource, Inc.
555 17th Street
Denver, CO 80202
Drake S. Tempest U.S. Executive Vice President, General
555 17th Street Counsel and Secretary
Denver, CO 80202 U.S. Telesource, Inc.
555 17th Street
Denver, CO 80202
Marc B. Weisberg U.S. Director, President and Chief Executive Officer
555 17th Street U.S. Telesource, Inc.
Denver, CO 80202 555 17th Street
Denver, CO 80202
Stephen H. Shoemaker U.S. Vice President and Treasurer
555 17th Street U.S. Telesource, Inc.
Denver, CO 80202 555 17th Street
Denver, CO 80202
Yash A. Rana Indian Assistant Secretary
555 17th Street U.S. Telesource, Inc.
Denver, CO 80202 555 17th Street
Denver, CO 80202
Kelly S. Carter U.S. Assistant Treasurer
555 17th Street U.S. Telesource, Inc.
Denver, CO 80202 555 17th Street
Denver, CO 80202
</TABLE>
<PAGE>
Page 19 of 73
<TABLE>
<CAPTION>
QCC
- ---
OFFICERS AND DIRECTORS
<S> <C> <C>
Joseph P. Nacchio U.S. Director and Chairman and Chief
555 17th Street Executive Officer
Denver, CO 80202 Qwest Communications Corporation
555 17th Street
Denver, CO 80202
Craig D. Slater U.S. Director
555 17th Street Qwest Communications Corporation
Denver, CO 80202 555 17th Street
Denver, CO 80202
Afshin Mohebbi U.S. President and Chief Operating
555 17th Street Officer
Denver, CO 80202 Qwest Communications Corporation
555 17th Street
Denver, CO 80202
Robert S. Woodruff U.S. Director, Executive Vice President -
555 17th Street Finance and Chief Financial Officer
Denver, CO 80202 Qwest Communications Corporation
555 17th Street
Denver, CO 80202
Drake S. Tempest U.S. Director, Executive Vice President, General
555 17th Street Counsel and Secretary
Denver, CO 80202 Qwest Communications Corporation
555 17th Street
Denver, CO 80202
Marc B. Weisberg U.S. Senior Vice President - Corporate
555 17th Street Development
Denver, CO 80202 Qwest Communications Corporation
555 17th Street
Denver, CO 80202
Stephen H. Shoemaker U.S. Vice President and Treasurer
555 17th Street Qwest Communications Corporation
Denver, CO 80202 555 17th Street
Denver, CO 80202
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page 20 of 73
<S> <C> <C>
Yash A. Rana Indian Assistant Secretary
555 17th Street Qwest Communications Corporation
Denver, CO 80202 555 17th Street
Denver, CO 80202
QC
- --
OFFICERS AND DIRECTORS
Joseph P. Nacchio U.S. Director and Chairman and
555 17th Street Chief Executive Officer
Denver, CO 80202 Qwest Corporation
555 17th Street
Denver, CO 80202
Craig D. Slater U.S. Director
555 17th Street Qwest Corporation
Denver, CO 80202 555 17th Street
Denver, CO 80202
Afshin Mohebbi U.S. President and Chief
555 17th Street Operating Officer
Denver, CO 80202 Qwest Corporation
555 17th Street
Denver, CO 80202
Robert S. Woodruff U.S. Director
555 17th Street Qwest Corporation
Denver, CO 80202 555 17th Street
Denver, CO 80202
Drake S. Tempest U.S. Director, Executive Vice President,
555 17th Street General Counsel and Secretary
Denver, CO 80202 Qwest Corporation
555 17th Street
Denver, CO 80202
Marc B. Weisberg U.S. Senior Vice President - Corporate
555 17th Street Development
Denver, CO 80202 Qwest Corporation
555 17th Street
Denver, CO 80202
Stephen H. Shoemaker U.S. Vice President and Treasurer
555 17th Street Qwest Corporation
Denver, CO 80202 555 17th Street
Denver, CO 80202
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page 21 of 73
<S> <C> <C>
Yash A. Rana Indian Assistant Secretary
555 17th Street Qwest Corporation
Denver, CO 80202 555 17th Street
Denver, CO 80202
Kelly S. Carter U.S. Assistant Treasurer
555 17th Street Qwest Corporation
Denver, CO 80202 555 17th Street
Denver, CO 80202
QCI
- ---
OFFICERS AND DIRECTORS
Philip F. Anschutz U.S. Director and Chairman of the Board
555 17th Street Qwest Communications International Inc.
Denver, CO 80202 Chairman, Anschutz Company and
The Anschutz Corporation
555 17th Street
Denver, CO 80202
Joseph P. Nacchio U.S. Director and Chairman and
555 17th Street Chief Executive Officer
Denver, CO 80202 Qwest Communications International Inc.
555 17th Street
Denver, CO 80202
Jerry Davis U.S. Director
555 17th Street Qwest Communications International Inc.
Denver, CO 80202 555 17th Street
Denver, CO 80202
Jordan L. Haines U.S. Director
555 17th Street Qwest Communications International Inc.
Denver, CO 80202 555 17th Street
Denver, CO 80202
Cannon Y. Harvey U.S. Director
555 17th Street Qwest Communications International Inc.
Denver, CO 80202 555 17th Street
Denver, CO 80202
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page 22 of 73
<S> <C> <C>
Douglas M. Karp U.S. Director
555 17th Street Qwest Communications International Inc.
Denver, CO 80202 555 17th Street
Denver, CO 80202
Vinod Khosla U.S. Director
555 17th Street Qwest Communications International Inc.
Denver, CO 80202 555 17th Street
Denver, CO 80202
Richard T. Liebhaber U.S. Director
555 17th Street Qwest Communications International Inc.
Denver, CO 80202 555 17th Street
Denver, CO 80202
Douglas L. Polson U.S. Director
555 17th Street Qwest Communications International Inc.
Denver, CO 80202 555 17th Street
Denver, CO 80202
Craig D. Slater U.S. Director
555 17th Street Qwest Communications International Inc.
Denver, CO 80202 555 17th Street
Denver, CO 80202
W. Thomas Stephens U.S. Director
555 17th Street Qwest Communications International Inc.
Denver, CO 80202 555 17th Street
Denver, CO 80202
Robert S. Woodruff U.S. Director, Executive Vice President - Finance
555 17th Street and Chief Financial Officer
Denver, CO 80202 Qwest Communications International Inc.
555 17th Street
Denver, CO 80202
Drake S. Tempest U.S. Executive Vice President,
555 17th Street General Counsel and Secretary
Denver, CO 80202 Qwest Communications International Inc.
555 17th Street
Denver, CO 80202
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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<S> <C> <C>
Stephen H. Shoemaker U.S. Vice President and Treasurer
555 17th Street Qwest Communications International Inc.
Denver, CO 80202 555 17th Street
Denver, CO 80202
Yash A. Rana Indian Assistant Secretary
555 17th Street Qwest Communications International Inc.
Denver, CO 80202 555 17th Street
Denver, CO 80202
AC
- --
OFFICERS AND DIRECTORS
Philip F. Anschutz U.S. Director, Chairman and Chief Executive Officer
555 17th Street Anschutz Company
Denver, CO 80202 555 17th Street
Denver, CO 80202
Cannon Y. Harvey U.S. Director, President and Chief Operating Officer
555 17th Street Anschutz Company
Denver, CO 80202 555 17th Street
Denver, CO 80202
Craig D. Slater U.S. Director and Executive Vice President
555 17th Street Anschutz Company
Denver, CO 80202 555 17th Street
Denver, CO 80202
Miles A. Williams U.S. Director and Executive Vice President
555 17th Street Anschutz Company
Denver, CO 80202 555 17th Street
Denver, CO 80202
Douglas L. Polson U.S. Director, Vice President - Finance
555 17th Street and Assistant Secretary
Denver, CO 80202 Anschutz Company
555 17th Street
Denver, CO 80202
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page 24 of 73
<S> <C> <C>
Richard M. Jones U.S. Vice President, General Counsel
555 17th Street and Assistant Secretary
Denver, CO 80202 Anschutz Company
555 17th Street
Denver, CO 80202
Lynn T. Wood U.S. Secretary
555 17th Street Anschutz Company
Denver, CO 80202 555 17th Street
Denver, CO 80202
Thomas G. Kundert U.S. Treasurer and Assistant Secretary
555 17th Street Anschutz Company
Denver, CO 80202 555 17th Street
Denver, CO 80202
</TABLE>
<PAGE>
Page 25 of 73
EXHIBIT B
CAIS INTERNET, INC.
SERIES C PREFERRED STOCK
PURCHASE AGREEMENT
This SERIES C PREFERRED STOCK PURCHASE AGREEMENT (this "AGREEMENT"),
dated as of September 29, 1999, by and between CAIS Internet, Inc., a Delaware
corporation (the "COMPANY"), and U.S. Telesource, Inc., a Delaware corporation
(the "PURCHASER").
SECTION 1
AUTHORIZATION AND SALE OF PREFERRED STOCK
1.1 AUTHORIZATION. The Company has authorized the sale and issuance of
125,000 shares of the Company's Series C Preferred Stock, par value $.01 per
share ("Shares").
1.2 SALE AND ISSUANCE OF SHARES. Subject to the terms and conditions of
this Agreement, Purchaser agrees to purchase from the Company, and the Company
agrees to sell and issue to Purchaser, the Shares at a purchase price of One
Hundred and Twenty Dollars ($120.00) per Share.
SECTION 2
CLOSING DATES; DELIVERY
2.1 CLOSING. The purchase and sale of the Shares hereunder shall take
place at a closing (the "CLOSING") on September 29, 1999 (the "CLOSING DATE").
The Closing shall be held at the offices of the Company at 1255 22nd Street,
N.W., Washington, D.C., at 10:00 a.m. local time, on the Closing Date, or at
such other time and place upon which the Company and Purchaser shall agree.
2.2 DELIVERY. At the Closing, the Company will deliver to Purchaser a
certificate registered in Purchaser's name representing the Shares to be
purchased against payment of the purchase price therefor. At the Closing,
Purchaser will pay to the Company by wire transfer of immediately available
federal funds per the Company's instructions cash in the amount of Fifteen
Million Dollars ($15,000,000.00).
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company (including for purposes of this Section 3 all subsidiaries
of the Company) represents and warrants to Purchaser as of the date of this
Agreement as follows:
3.1 ORGANIZATION; GOOD STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, is qualified to conduct business and is in good standing under the
laws of each jurisdiction in which the nature of its business or the ownership
or leasing of its properties requires such qualification.
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Page 26 of 73
The Company has the requisite corporate power and authority to own and
operate its properties and assets and to carry on its business as currently
conducted. A true and correct copy of the Company's Amended and Restated
Certificate of Incorporation (the "RESTATED CERTIFICATE") is attached hereto as
EXHIBIT A, and a true and correct copy of the Company's By-Laws (the "BY-LAWS")
is attached hereto as EXHIBIT B, which in each case shall be in full force and
effect as of the Closing Date (as the Restated Certificate shall be amended
pursuant to the Certificate of Designation (as defined below)).
3.2 COMPANY SHARES. The Shares to be issued to Purchaser hereunder will
be duly authorized, validly issued, fully paid and nonassessable, and will have
the rights, preferences and privileges described in the Restated Certificate and
the Certificate of Series and Determination of Rights and Preferences of Series
C Convertible Preferred Stocks (the "CERTIFICATE OF DESIGNATION"), a true and
correct copy of which is attached hereto as EXHIBIT C, which shall be in full
force and effect as the Closing Date. Such copy contains all amendments through
the Closing Date. The Company will not amend the Certificate of Designation or
otherwise take any action or fail to take any action that would cause or permit
the Certificate of Designation to be amended or adversely affect the rights,
preferences and privileges of the Shares without Purchaser's prior written
consent.
3.3 AUTHORITY; BINDING NATURE OF AGREEMENTS.
(a) The execution, delivery and performance of this Agreement and all
other agreements and instruments contemplated to be executed and delivered by
the Company in connection herewith have been duly authorized by all necessary
corporate action on the part of the Company and its board of directors (the
"Board"). The Company has all requisite legal and corporate power and authority
to sell and issue the Shares hereunder and to issue the shares of common stock
of the Company, par value $0.01 per share, issuable upon conversion of the
Shares (the "CONVERSION STOCK") and to carry out and perform its obligations
under the terms of this Agreement.
(b) The Conversion Stock has been duly and validly reserved and, when
issued in compliance with the terms of this Agreement and the Restated
Certificate, will be validly issued, fully paid and nonassessable, and will have
the rights, preferences and privileges described in the Restated Certificate and
the Certificate of Designation. The Shares will be delivered to Purchaser free
of any liens or encumbrances, other than any liens or encumbrances created by or
imposed upon or by virtue of Purchaser; PROVIDED, HOWEVER, that the Shares and
the Conversion Stock are subject to restrictions on transfer under state and/or
federal securities laws as set forth herein and in the Registration Rights and
Lock-Up Agreement between the Company and Purchaser dated the date hereof (the
"REGISTRATION RIGHTS AGREEMENT"). Except as set forth in the Restated
Certificate and the Certificate of Designation, the Shares and the Conversion
Stock are not subject to any preemptive rights or rights of first refusal.
(c) This Agreement and all other agreements and instruments
contemplated to be executed and delivered by the Company in connection herewith
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, except to the extent that
enforceability may be limited by applicable bankruptcy, merger, insolvency,
moratorium, fraudulent conveyance or other laws affecting the enforcement of
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Page 27 of 73
creditors' rights generally and by general principles of equity regardless of
whether such enforceability is considered in a proceeding in law or equity, and
by limitations on indemnification due to public policy considerations.
3.4 NO VIOLATION OR DEFAULT.
(a) The execution, delivery and performance of this Agreement and the
other agreements and instruments contemplated to be executed and delivered by
the Company in connection herewith will not, directly or indirectly (with or
without notice or lapse of time):
(i) contravene, conflict with or result in a material
violation of (i) the Company's Restated Certificate or Bylaws, or (ii) any
resolution adopted by the Company's Board or any committee thereof or the
stockholders of the Company;
(ii) contravene, conflict with or result in a violation of, or
give any governmental body the right to challenge the issuance of the Shares or
to exercise any remedy or obtain any relief under, any legal requirement or any
order to which the Company or any material assets owned or used by it are
subject;
(iii) to the knowledge of the Company, cause any material
assets owned or used by the Company to be reassessed or revalued by any taxing
authority or other governmental body;
(iv) contravene, conflict with or result in a violation of any
of the terms or requirements of, or give any governmental body the right to
revoke, withdraw, suspend, cancel, terminate or modify, any governmental
authorization that is held by the Company;
(v) contravene, conflict with or result in a violation or
breach of, or default under, any material contract to which the Company is a
party; or
(vi) result in the imposition or creation of any mortgage,
pledge, lien, charge or encumbrance upon or with respect to any material
properties or assets owned or used by the Company.
(b) The Company is not in violation of or in default under its Restated
Certificate or By-Laws or, to the best of the Company's knowledge, (i) any
judgment, order, writ, decree, statute, rule or regulation applicable to it, or
(ii) any mortgage or indenture, or any other material agreement, instrument or
contract to which it is a party or by which it is bound.
3.5 FINDERS AND BROKERS.
The Company has not engaged any broker, finder or agent, and the
Purchaser has not, and will not, incur, directly or indirectly, as a result of
any action taken by the Company, any liability for brokerage or finders' fees or
agents' commissions or any similar charges in connection with the Transaction
Documents. In the event that the preceding sentence is in any way inaccurate,
the Company agrees to indemnify and hold harmless Purchaser from any liability
for any commission or compensation in the nature of a finder's fee (and the
costs and expenses of
<PAGE>
Page 28 of 73
defending against such liability) for which Purchaser, or any of its officers,
directors, employees or representatives, is responsible.
3.6 REPORTS AND FINANCIAL STATEMENTS; ABSENCE OF CERTAIN CHANGES.
(a) The Company has filed all reports required to be filed with the
U.S. Securities and Exchange Commission ("SEC") pursuant to the Securities Act
of 1933, as amended (the "SECURITIES ACT"), and the Securities Exchange Act of
1934 as amended (the "EXCHANGE ACT"), since its initial public offering on May
20, 1999 (all such reports, including those to be filed prior to the Closing
Date and all registration statements and prospectuses filed by the Company with
the SEC in connection with the Company's initial public offering, are
collectively referred to as the "COMPANY SEC REPORTS"), and has previously
furnished or made available to Purchaser true and complete copies of all the
Company SEC Reports filed, if any, with respect to periods ending after May 20,
1999 (including any exhibits thereto) and will promptly deliver to Purchaser any
Company SEC Reports filed between the date hereof and the Closing Date. All of
such Company SEC Reports complied at the time they were filed and declared
effective, if applicable, in all material respects with applicable requirements
of the Securities Act and the Exchange Act and the rules and regulations
thereunder. None of such Company SEC Reports, as of their respective dates (as
amended through the date hereof), contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited financial statements of the
Company included in the Company SEC Reports comply in all material respects with
the published rules and regulations of the SEC with respect thereto, and such
audited financial statements (i) were prepared from the books and records of the
Company, (ii) were prepared in accordance with United States generally accepted
accounting principles ("GAAP") applied on a consistent basis (except as may be
indicated therein or in the notes or schedules thereto) and (iii) present fairly
the financial position of the Company as of the dates thereof and the results of
operations and cash flows for the periods then ended. The unaudited financial
statements included in the Company SEC Reports comply in all material respects
with the published rules and regulations of the SEC with respect thereto; and
such unaudited financial statements (i) were prepared from the books and records
of the Company, (ii) were prepared in accordance with GAAP, except as otherwise
permitted under the Exchange Act and the rules and regulations thereunder, on a
consistent basis (except as may be indicated therein or in the notes or
schedules thereto) and (iii) present fairly the financial position of the
Company as of the dates thereof and the results of operations and cash flows (or
changes in financial condition) for the periods then ended, subject to normal
year-end adjustments and any other adjustments described therein or in the notes
or schedules thereto. The foregoing representations and warranties shall also be
deemed to be made with respect to all filings made with the SEC on or before the
Closing Date.
(b) Except as specifically contemplated by this Agreement or reflected
in the Company SEC Reports, since May 20, 1999, there has not been (i) any
material adverse change in the Company's business, assets, liabilities, or
operations, and, to the knowledge of the Company, no event has occurred that is
likely to have a material adverse effect on the Company's business, assets,
liabilities or operations; or (ii) any material change in the Company's
accounting principles, procedures or methods.
<PAGE>
Page 29 of 73
3.7 COMPLIANCE WITH APPLICABLE LAW. Except as disclosed in the Company
SEC Reports filed prior to the date of this Agreement or in the Company's
Registration State on Form S-1, SEC file number 333-72769, the Company holds all
governmental authorizations necessary for the lawful conduct of its business
under and pursuant to, and the business of the Company is not being conducted in
violation of, any governmental authorization applicable to the Company, except
to the extent that the failure or violation would not in the aggregate have a
material adverse effect on the business, results of operations or financial
condition of the Company.
3.8 CONSENTS. No consent, approval or authorization of or designation,
declaration or filing with any governmental authority or other third party on
the part of the Company is required in connection with the valid execution and
delivery of this Agreement nor any other agreement or instrument contemplated to
be executed and delivered by the Company in connection with this Agreement, or
the offer, sale or issuance of the Shares and the Conversion Stock, or the
consummation of any other transaction contemplated hereby or thereby, except for
qualification (or taking such action as may be necessary to secure an exemption
from qualification, if available) of the offer and sale of the Shares and the
Conversion Stock under applicable blue sky laws, which qualifications, if
required, will be accomplished in a timely manner.
3.9 CAPITALIZATION. The authorized capital stock of the Company
consists of 100,000,000 shares of Common Stock, of which 22,418,082 shares are
issued and outstanding as of the date of this Agreement, and 25,000,000 shares
of preferred stock, par value $.01 per share, of which 2,827,168 shares are
designated as Series A Preferred Stock (the "SERIES A SHARES"), none of which
are issued and outstanding, 1,119,679 shares are designated as Series B
Preferred Stock, none of which are issued and outstanding, and 125,000 shares
are designated as Series C Preferred Stock, none of which are issued and
outstanding as of the date of this Agreement. The outstanding shares of Common
Stock have been duly authorized and validly issued in compliance with applicable
laws, and are fully paid and non assessable. The Company has reserved (a)
1,500,000 shares of Common Stock for issuance upon conversion of the Shares to
be issued hereunder, (b) 5,000,000 shares of Common Stock for issuance pursuant
to the Company's Amended and Restated 1998 Equity Incentive Plan, (c) 3,778,423
shares of Common Stock for issuance pursuant to other outstanding options and
warrants, (d) 2,654,826 shares of Common Stock for issuance in connection with
the Company's acquisition of Atcom, Inc., and (e) 288,371 shares of Common Stock
for issuance in connection with the Company's acquisition of Business Anywhere
USA, Inc.
3.10 ENVIRONMENTAL MATTERS. The properties, assets and operations of
the Company are in material compliance with all applicable federal, state, local
or foreign laws, rules, regulations, permits, licenses and decrees relating to
environmental matters or the discharge, release, storage, treatment or clean-up
of any materials or substances. No environmental or similar claim has been
asserted (or to the best knowledge of the Company threatened) against the
Company.
3.11 LITIGATION. There are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court or
governmental agency which could
<PAGE>
Page 30 of 73
reasonably be expected to have a material adverse effect on the business,
results of operations or financial condition of the Company (nor, to the best of
the Company's knowledge, is there any threat thereof). The Company is not a
party or subject to the provision of any order, writ, injunction or decree of
any court or governmental agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or that the Company
intends to initiate.
3.12 TITLE TO PROPERTIES AND ASSETS; LIENS. The Company has good and
marketable title to its properties and assets, and has good title to all its
leasehold interests, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (i) the lien of current taxes not yet due and
payable, (ii) possible minor liens and encumbrances which do not in any case
materially detract from the value of the property subject thereto or materially
impair the operations of the Company, and which have not arisen otherwise than
in the ordinary course of business and (iii) liens to secure vendor financing or
installation purchases.
3.13 INTELLECTUAL PROPERTY; TRADEMARKS.
(a) The Company has the right to use, free and clear of all liens,
charges, claims and restrictions, all patents, trademarks, service marks, trade
names, copyrights, licenses and other intellectual property rights necessary to
the business of the Company as presently conducted. To the best of the Company's
knowledge, the Company is not infringing upon or otherwise acting adversely to
the right or claimed right of any other person under or with respect to the
foregoing.
(b) The Company is at least a 50 percent owner of the entire right,
title and interest in and to the subject U.S. and foreign (excluding Israel)
patents and patent applications included in SCHEDULE 3.13 (the "PROPERTIES"),
and, in particular, is a 100 percent owner of the entire right, title and
interest in and to U.S. Application No. 08/893,403 and corresponding PCT
Application No. PCT/US971/12045.
(c) To the best knowledge of the Company, the Properties encompass all
patents and patent applications relating to communication systems that are
wholly or partially owned by Inline Connection Corporation.
(d) The Company has undertaken a reasonable investigation and has
determined that there are no claims, actions or proceedings, pending or to the
best knowledge of the Company threatened, or other information that challenges
the validity and/or the enforceability of any of the claims in the patents or of
any of the claims of the patent applications that may issue with respect to the
Properties.
(e) The Company will use commercially reasonable efforts to prosecute
(to the extent that the Company has a legal right to do so) all of the pending
patent applications listed in Schedule 3.13, with a view to obtaining broad
patent protection covering technology (known as "OVERVOICE") relating to the
simultaneous transmission of voice and data over a single traditional copper
telephone line at speeds of up to 300 times those of conventional 28.8k dial-up
modems and to enable a user to have both designated high-speed Internet access
and complete use of his telephone simultaneously over one traditional telephone
line.
<PAGE>
Page 31 of 73
(f) There are no encumbrances, third party or otherwise, against any of
the Properties.
3.14 TAX MATTERS. The Company, any predecessor of the Company and all
current and former members for income tax purposes of any affiliated group of
corporations of which the Company or any such predecessor is or has been a
member, Cleartel, Inc. and Cleartel, L.P. (collectively, the "TAXPAYERS") have
duly filed all tax reports and returns required to be filed by them or have
requested and obtained appropriate extensions, including all federal, state,
local and foreign tax returns and reports. The Taxpayers have paid in full all
taxes required to be paid by such Taxpayers before such payment became
delinquent or have otherwise paid any required interest and penalties relating
thereto or have made adequate provision, in conformity with U.S. GAAP
consistently applied, for the payment of such taxes as well as taxes which may
subsequently become due. There are no audits known by the Company to be pending
of the tax returns of the Company or any other Taxpayer, and there are no claims
known by the Company or any Taxpayer which have been or maybe asserted relating
to any tax returns filed for any year which if determined adversely would result
in the assertion by any governmental agency of any material deficiency.
3.15 INVESTMENT COMPANY. Immediately following the Closing, after
giving effect to the transactions contemplated hereby, neither the Company nor
any person, firm or entity controlling, controlled by or under common control
with the Company will be an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
3.16 EMPLOYER MATTERS. Except as disclosed in the Registration
Statement, or as set forth in SCHEDULE 3.16, the Company does not have any
employment contracts with any of its employees that are not terminable at will
and does not have any collective bargaining agreement covering any of its
employees. The Company is not aware of any labor organization activity involving
its employees. The Company is in compliance in all material respects with the
requirements of (i) the Employee Retirement Income Security Act of 1974,as
amended, and (ii) the Internal Revenue Code of 1986, as amended, in each case
relating to employee benefit plans, programs and agreements.
3.17 CONDITION OF SYSTEM. All material properties, equipment and
systems of the Company are in good repair, working order and condition and are
in material compliance with all standards and rules imposed (i) by any
governmental agency or authority in which such properties, equipment and/or
systems are located or operated and (ii) under any agreements with customers.
3.18 FEES; LICENSE COMPLIANCE. The Company has paid all material
franchise, license or other fees and charges which have become due in respect of
its business and has made appropriate provisions as is required by GAAP for any
such fees and charges which have accrued. The Company has duly secured all
necessary and material permits, licenses, consents and authorizations from and
have filed all required and material registrations, applications, reports and
other documents with, the appropriate governmental agencies, authorities and
commissions and other entities exercising jurisdiction over the business of the
Company. All of
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Page 32 of 73
the Company's licenses, including licenses held through or by affiliated
entities, are valid and in full force and effect without conditions except such
conditions as are generally applicable to holders of licenses. To the best of
the Company's knowledge, no event has occurred and is continuing which could
result in the termination, revocation or adverse modification of any license.
The Company does not have any reason to believe that its licenses, including
licenses held through or by its affiliated entities, will not be renewed in the
ordinary course.
3.19 NO CONFLICT OF INTEREST. Except as disclosed in the Registration
Statement or as set forth in the SCHEDULE 3.19, the Company is not indebted,
directly or indirectly, to any of its officers, directors or stockholders or to
their respective spouses or children, in any amount whatsoever, other than for
normal travel advances or reimbursement for normal business expenses; and none
of such officers, directors or stockholders, or any members of their immediate
families is indebted to the Company. SCHEDULE 3.19 sets forth a description of
all transactions since January 1, 1996, between the Company and any of its
officers, directors and stockholders, and their respective spouses and children
in which such persons had a direct or indirect material interest which are not
disclosed in the Registration Statement.
3.20 AGREEMENTS; ACTION.
(a) There are no agreements, understandings, instruments, contracts,
proposed transactions, judgments, orders, writs or decrees to which the Company
is a party or by which it is bound that may involve (i) obligations (contingent
or otherwise) of, or payments to, the Company in exercise of $50,000, (ii) the
license of any patent, copyright, trade secret or other proprietary rights to or
from the Company, (iii) provisions restricting or affecting the development,
manufacture or distribution of the Company's products or services or (iv)
indemnification by the Company with respect to infringements of proprietary
rights.
(b) The Company is not a party to and is not bound by any contract,
agreement or instrument, and is not subject to any restriction under its
Restated Certificate or its By-Laws, that materially adversely affects its
business as now conducted or as proposed to be conducted, or its properties or
financial condition.
(c) The Company has not engaged in the past three months in any
discussion (i) with any representative of any corporation or corporations
regarding the consolidation or merger of the Company with or into any such
corporation or corporations, (ii) with any corporation or corporations,
partnership, association or other business entity or any individual regarding
the sale, conveyance or disposition of all or substantially all of the assets of
the Company or a transaction or series of related transactions in which more
than 50 percent of the voting power of the Company is disposed of, or (iii)
regarding any other form of sale, liquidation, dissolution or winding up of the
Company.
(d) Except as disclosed in the Registration Statement or as provided in
SCHEDULE 3.20, the Company has not granted or agreed to grant any registration
rights, including piggy back rights, to any person or entity.
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Page 33 of 73
3.21 COMPLETE COPIES OF REQUESTED DOCUMENTS. The Company has delivered
or made available true and complete copies of each document that has been
reasonably requested by Purchaser.
3.22 FULL DISCLOSURE. Neither this Agreement (including all Exhibits
hereto) nor any of the other agreements or instruments contemplated to be
executed and delivered by the Company in connection with this Agreement contain
any untrue statement of material fact; and none of such documents omits to state
any material fact necessary to make any of the representations, warranties or
other statements or information contained therein not misleading.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to the Company with respect to
the purchase of the Shares by Purchaser, as follows:
4.1 EXPERIENCE; SPECULATIVE NATURE OF INVESTMENT. Purchaser has
substantial experience in evaluating and investing in private placement
transactions of securities in companies similar to the Company so that it is
capable of evaluating the merits and risks of its investment in the Company and
has the capacity to protect its own interests. Purchaser acknowledges that its
investment in the Company is highly speculative and entails a substantial degree
of risk and Purchaser is in a position to lose the entire amount of such
investment.
4.2 INVESTMENT. Purchaser is acquiring the Shares and the underlying
Conversion Stock for investment for its own account, not as a nominee or agent,
and not with the view to, or for resale in connection with, any distribution
thereof. Purchaser is an "accredited investor" within the meaning of Regulation
D, Rule 501(a), promulgated by the SEC.
4.3 RESTRICTED SECURITIES. Purchaser acknowledges that the Shares and
the underlying Conversion Stock must be held indefinitely unless subsequently
registered under the Securities Act or unless an exemption from the registration
requirements of the Securities Act is available.
4.4 ACCESS TO DATA. Purchaser has had an opportunity to discuss the
Company's business, management and financial affairs with the Company's
management. Purchaser has had an opportunity to ask questions of officers of the
Company, which questions were answered to its satisfaction. Purchaser
understands that such discussions, as well as any other written information
issued by the Company, were intended to describe certain aspects of the
Company's business and operations, but were not an exhaustive description.
4.5 AUTHORITY; BINDING NATURE OF AGREEMENTS.
(a) The execution, delivery and performance of this Agreement and all
other agreements and instruments contemplated to be executed and delivered by
Purchaser in connection herewith have been duly authorized by all necessary
corporate action on the part of
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Page 34 of 73
Purchaser and its board of directors. Purchaser has all requisite legal and
corporate power and authority to purchase the Shares hereunder.
(b) This Agreement and all other agreements and instruments
contemplated to be executed and delivered by Purchaser in connection herewith
constitute the legal, valid and binding obligations of Purchaser, enforceable
against Purchaser in accordance with their terms, except to the extent that
enforceability may be limited by applicable bankruptcy, merger, insolvency,
moratorium, fraudulent conveyance or other laws affecting the enforcement of
creditors' rights generally and by general principles of equity regardless of
whether such enforceability is considered in a proceeding in law or equity, and
by limitations on indemnification due to public policy considerations.
(c) There is no pending proceeding, and, to Purchaser's knowledge, no
person has threatened to commence any proceeding that challenges, or that may
have the effect of preventing, delaying, making illegal or otherwise interfering
with Purchaser's ability to comply with or perform its obligations and covenants
under this Agreement and under all other agreements and instruments contemplated
to be executed and delivered by Purchaser in connection herewith, and, to the
knowledge of Purchaser, no event has occurred, and no claim, dispute or other
condition or circumstance exists, that might directly or indirectly give rise to
or serve as a basis for the commencement of any such proceeding.
4.6 BROKERS OR FINDERS. Purchaser has not engaged any broker, finder or
agent, and the Company has not, and will not, incur, directly or indirectly, as
a result of any action taken by Purchaser, any liability for brokerage or
finders' fees or agents' commissions or any similar charges in connection with
the purchase of the Shares. In the event that the preceding sentence is in any
way inaccurate, the Purchaser agrees to indemnify and hold harmless the Company
from any liability for any commission or compensation in the nature of any such
fee (and the costs and expenses of defending against such liability) for which
the Company or any of its officers, directors, employees or representatives, is
held responsible.
4.7 TAX LIABILITY. Purchaser has reviewed with its own tax advisors the
federal, state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. With respect to such matters,
Purchaser has relied solely on such advisors and not on any statements or
representations of the Company or any of its representatives other than the
representations and warranties set forth herein. Purchaser understands that it
(and not the Company) shall be responsible for its own tax liability that may
arise as a result of this investment or the transactions contemplated by this
Agreement.
SECTION 5
CONDITIONS TO PURCHASER'S OBLIGATIONS TO CLOSE
Purchaser's obligations to purchase the Shares at the Closing are,
unless waived by Purchaser, subject to the fulfillment of the following
conditions:
5.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by the Company in Section 3 hereof shall be true and correct in
all material respects as of the Closing Date.
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5.2 COVENANTS. All covenants and agreements contained in this Agreement
and the other agreements and instruments contemplated herewith to be performed
by the Company on or prior to the Closing shall have been performed or complied
with in all materials respects.
5.3 BLUE SKY. The Company shall have obtained all necessary Blue Sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares.
5.4 REGISTRATION RIGHTS AGREEMENT. The Company shall have executed and
delivered the Registration Rights Agreement as of the Closing Date.
5.5 OPINION OF COMPANY'S COUNSEL. The Purchaser shall have received
from Swidler Berlin Shereff Friedman, LLP, counsel to the Company, an opinion
addressed to it, dated the Closing Date, is substantially the form of EXHIBIT D.
SECTION 6
CONDITIONS TO COMPANY'S OBLIGATIONS TO CLOSE
The Company's obligation to sell and issue the Shares at the Closing
is, unless waived by the Company, subject to the fulfillment of the following
conditions:
6.1 REPRESENTATIONS AND WARRANTIES CORRECT. The representations and
warranties made by Purchaser in Section 4 hereof shall be true and correct in
all material respects as of the Closing Date.
6.2 COVENANTS. All covenants and agreements contained in this Agreement
and all other agreements and instruments contemplated herewith to be performed
by Purchaser on or prior to the Closing shall have been performed or complied
with in all material respects.
6.3 BLUE SKY. The Company shall have obtained all necessary blue sky
law permits and qualifications, or have the availability of exemptions
therefrom, required by any state for the offer and sale of the Shares.
6.4 REGISTRATION RIGHTS AGREEMENT. Purchaser shall have executed and
delivered the Registration Rights Agreement as of the Closing Date.
SECTION 7
CONFIDENTIAL INFORMATION
7.1 CONFIDENTIAL COMPANY INFORMATION. Purchaser covenants and agrees
that it shall maintain the confidentiality of all nonpublic information related
to the Company made available to it and/or any of its representatives by or on
behalf of the Company ("CONFIDENTIAL COMPANY INFORMATION"). Purchaser further
covenants and agrees that it shall not disclose any Confidential Company
Information to any person or entity, other than its officers, directors,
employees, attorneys, accountants and other agents with a legitimate need for
such information (which individuals and entities Purchaser shall cause to comply
with this Section 7.1), except as required by law, without the prior written
consent of the Company. Purchaser agrees that violation of this Section 7.1
would cause immediate and irreparable damage to the business of
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the Company, and consents to the entry of immediate and permanent injunctive
relief for any violation hereof.
7.2 CONFIDENTIAL PURCHASER INFORMATION. The Company covenants and
agrees that it shall maintain the confidentiality of all nonpublic information
related to Purchaser made available to it and/or any of its representatives by
or on behalf of Purchaser ("CONFIDENTIAL PURCHASER INFORMATION"). The Company
further covenants and agrees that it shall not disclose any Confidential
Purchaser Information to any person or entity, other than its officers,
directors, employees, attorneys, accountants and other agents with a legitimate
need for such information (which individuals and entities the Company shall
cause to comply with this Section 7.2), except as required by law, without the
prior written consent of Purchaser. The Company agrees that violation of this
Section 7.2 would cause immediate and irreparable damage to the business of
Purchaser, and consents to the entry of immediate and permanent injunctive
relief for any violation hereof.
SECTION 8
MISCELLANEOUS
8.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the internal laws of the State of New York, without regard to the conflicts of
laws provisions thereof.
8.2 JURISDICTION; JURY TRIAL WAIVER. The parties hereto hereby
irrevocably submit to the exclusive jurisdiction of the state and federal courts
located in the State of New York with respect to any action or proceeding
arising out of this Agreement or in any way arising here from or relating
hereto. THE PARTIES HEREBY WAIVE ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING INSTITUTED BY ANY PARTY AGAINST ANY OTHER PARTY ARISING ON, OUT OF OR
BY REASON OF THIS AGREEMENT, ANY ALLEGED TORTIOUS CONDUCT BY ANY PARTY OR IN ANY
WAY, DIRECTLY OR INDIRECTLY, ARISING OUT OF OR RELATED TO THE RELATIONSHIP
BETWEEN THE PARTIES.
8.3 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by Purchaser and the closing of
the transactions contemplated hereby.
8.4 SUCCESSORS AND ASSIGNS. Except as otherwise provided herein, the
provisions hereof shall inure to the benefit of, and be binding upon, the
successors, permitted assigns, heirs, executors and administrators of the
parties hereto; PROVIDED, HOWEVER, that the rights of Purchaser to purchase the
Shares shall not be assignable without the prior written consent of the Company.
8.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
delivered pursuant hereto at the Closing constitute the full and entire
understanding and agreement between the parties with regard to the subject
matter hereof and thereof, and no party shall be liable or bound to any other
party in any manner by any warranties, representations or covenants except as
specifically set forth herein or therein. Except as expressly provided herein,
neither this Agreement nor any term hereof may be amended, waived, discharged or
terminated
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other than by a written instrument signed by the party against whom enforcement
of any such amendment, waiver, discharge or termination is sought; PROVIDED,
HOWEVER, that Purchaser may, with the Company's prior written consent, waive,
modify or amend any provision hereof governing the rights and obligations of
Purchaser.
8.6 NOTICE, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, or otherwise delivered by hand or by messenger,
addressed (a) if to Purchaser, at Purchaser's address, 700 Qwest Tower, 555
Seventeenth Street, Denver, Colorado 80202, or at such other address as
Purchaser shall have furnished to the Company in writing, or (b) if to the
Company, at the Company's address: 1255 22nd Street, N.W., Washington, D.C.
20037, or at such other address as the Company shall have furnished to
Purchaser, and addressed to the attention of the Chief Executive Officer. Each
such notice or other communication shall for all purposes of this Agreement be
treated as effective or having been given when delivered if delivered
personally, or, if sent by mail, at the earlier of its receipt or seventy-two
(72) hours after the same has been deposited in a regularly maintained
receptacle for the deposit of the United States mail, addressed and mailed as
aforesaid.
8.7 DELAYS OR OMISSIONS. Except as expressly provided herein, no delay
or omission to exercise any right, power or remedy accruing to either party to
this Agreement upon any breach or default of the other party under this
Agreement, shall impair any such right, power or remedy of such nondefaulting
party nor shall it be construed to be a waiver of any such breach or default, or
an acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of
either party of any breach or default under this Agreement, or any waiver on the
part of either party of any provisions or conditions of this Agreement, must be
in writing and shall be effective only to the extent specifically set forth in
such writing. All remedies, either under this Agreement or by law or otherwise
afforded to either party to this Agreement, shall be cumulative and not
alternative.
8.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be enforceable against the party actually
executing such counterparts, and all of which together shall constitute one
instrument.
8.9 SEVERABILITY. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided, however, that no such severability shall be
effective if it materially changes the economic benefit of this Agreement to
either party.
8.10 TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not considered in construing or
interpreting this Agreement.
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8.11 EXPENSES. The Company and Purchaser shall bear their own expenses
with respect to this Agreement and the transactions contemplated hereby.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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The foregoing Series C Preferred Stock Purchase Agreement is hereby
executed as of the date first above written.
"COMPANY"
CAIS INTERNET, INC.
By: /s/ ULYSSES G. AUGER, II
----------------------------------------
Chief Executive Officer
"PURCHASER"
U.S. TELESOURCE, INC.
By: /s/ MARC B. WEISBERG
----------------------------------------
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EXHIBIT C
Neither the security evidenced by this Warrant nor the securities issuable upon
exercise of this Warrant have been registered under the Securities Act of 1933,
as amended. Such securities may not be sold or transferred in the absence of
such registration unless the Company receives an opinion of legal counsel for
the holder of said securities that is reasonably acceptable to the Company,
stating that such sale or transfer is exempt from the registration requirements
of the said Act or the Company otherwise satisfies itself that such transaction
is exempt from registration.
COMMON STOCK WARRANT
OF
CAIS INTERNET, INC.
THIS CERTIFIES THAT, subject to the terms and conditions of this
Warrant, for the consideration of $1.00, the receipt of which is hereby
acknowledged, U.S. Telesource, Inc., a Delaware corporation, or its successors
and assigns (the "HOLDER"), is entitled to purchase, at any time and from time
to time on or after the date hereof, shares of Common Stock, par value $.01 per
share (the "COMMON STOCK"), of CAIS Internet, Inc., a Delaware corporation (the
"COMPANY"), from the Company in such number and at such price as determined in
accordance with this Warrant.
Upon delivery of this Warrant (with the Notice of Exercise in the form
attached hereto as Exhibit A), together with payment of the Warrant Price (as
defined below) for the shares of Common Stock to be issued, which payment may be
made by converting this Warrant, or any portion thereof, pursuant to Section 5
below ("WARRANT CONVERSION"), at the principal office of the Company or at such
other office or agency as the Company may designate by notice in writing to the
Holder hereof, the Holder shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. All shares of Common
Stock that may be issued upon the exercise of this Warrant will, upon issuance,
be fully paid and nonassessable and free from all taxes, liens and charges with
respect thereto.
This Warrant is subject to the following terms and conditions:
1. TERM OF WARRANT. This Warrant may be exercised in whole or in part,
at any time and from time to time on or after the date hereof; PROVIDED,
HOWEVER, that this Warrant shall expire to the extent then unexercised as of
5:00 p.m., eastern time on October 28, 2002.
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2. NUMBER OF WARRANT SHARES. Subject to adjustment from time to time
pursuant to Section 4 hereof, the Holder may exercise this Warrant with
respect to 500,000 shares of Common Stock (or other securities issuable in the
event of a reclassification, change, merger or consolidation as set forth in
Section 4(a) hereof) (the "SHARES")
3. WARRANT PRICE. The exercise price of this Warrant (the "WARRANT
PRICE") shall equal $12.00 per share, subject to adjustment from time to time
pursuant to Section 4 hereof.
4. ADJUSTMENT OF NUMBER OF SHARES AND WARRANT PRICE. The number and
kind of Shares purchasable upon the exercise of the Warrant and the Warrant
Price shall be subject to adjustment from time to time in accordance with the
following provisions:
(a) SPECIAL DEFINITIONS. For purposes of this Section 4, the
following definitions shall apply:
(i) "OPTION" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire Common Stock or
Convertible Securities, excluding rights or options granted to
employees, vendors, officers, directors and executives of, and
consultants or shareholders to, the Company in an amount not exceeding
the number of Reserved Employee Shares.
(ii) "CONVERTIBLE SECURITIES" shall mean any
evidences of indebtedness, shares or other securities directly or
indirectly convertible into or exchangeable for Common Stock.
(iii) "ADDITIONAL SHARES OF COMMON STOCK" shall mean
all shares of Common Stock issued (or, pursuant to Section 4(c) below,
deemed to be issued) by the Company at any time while this Warrant
remains outstanding and unexpired, other than Reserved Employee Shares
and other than shares of Common Stock issued or issuable:
(i) upon the exercise of Options;
(ii) as a dividend or distribution on Series
C Preferred Stock, par value $.01 per share ("SERIES
C PREFERRED STOCK") or upon conversion of shares of
Series C Preferred Stock;
(iii) pursuant to this Warrant and warrants
issued by the Company pursuant to or in connection
with (a) the Warrant Agreement dated as of September
4, 1998 among the Company, Cleartel Communications,
Inc., CAIS, Inc. and ING (U.S.) Capital Corporation,
Inc. (the "ING Warrant Agreement"), (b) the Series A
Preferred Stock and Warrant Purchase Agreement dated
as of February 19, 1999 among the Company and the
several purchasers set forth therein; and (c) the
Warrant to Purchase Common Stock granted to Hilton
Hotels Corporation;
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(iv) to a corporation, partnership or other
entity with which the Company is seeking to establish
a partnership, joint venture or other business
relationship when the total number of shares of
Common Stock so issuable or issued does not exceed
1,000,000 shares (as appropriately adjusted for any
stock dividends, combinations, splits or the like
with respect to shares of Common Stock), provided the
Company receives at least 95% of Fair Market Value
for such shares;
(v) in connection with any high-yield debt
financing undertaken by the Company, not to exceed
2,000,000 shares of Common Stock in the aggregate;
(vi) pursuant to the Agreement and Plan of
Merger among the Company, Business Anywhere USA,
Inc., CIBA Merger Corp., Kim Kao, and Amy Hsiao dated
September 7, 1999, including without limitation, the
conversion of Business Anywhere options into options
to acquire Common Stock and the issuance of shares of
Common Stock upon the exercise thereof, not to exceed
288,371 shares of Common Stock in the aggregate;
(vii) in connection with the acquisition by
the Company of the securities or assets of another
corporation, partnership or other entity, provided
the Company receives at least 95% of Fair Market
Value for such shares; and
(viii) pursuant to the Agreement and Plan of
Merger among the Company, CIAM Corp. and Atcom, Inc.
dated August 4, 1999, including without limitation,
the conversion of Atcom options into options to
acquire Common Stock as described therein, the
issuance of shares of Common Stock upon the exercise
thereof and the issuance of Common Stock constituting
"Contingent Consideration" as defined therein, not to
exceed 2,654,826 shares of Common Stock in the
aggregate.
(iv) "RESERVED EMPLOYEE SHARES" shall mean shares of
Common Stock issued to employees, officers, directors, shareholders and
executives of, and consultants or vendors to, the Company of up to: (i)
5,000,000 shares (as appropriately adjusted for any stock dividends,
combinations, splits or the like with respect to shares of Common
Stock), plus such additional number of shares of Common Stock issued or
deemed issued for like purposes as shall be approved by the Holder;
plus (ii) shares reserved, as of the date hereof, for issuance upon the
exercise of outstanding Options to
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purchase up to 2,604,495 shares of Common Stock presently held by five
management employees of the Company. Such Reserved Employee Shares
shall be issued, at anytime, and from time to time, under such
arrangements, contracts or plans as are recommended by the Company's
management and approved by the Board.
(v) "RIGHTS TO ACQUIRE COMMON STOCK" (or "RIGHTS")
shall mean all rights issued by the Company to acquire Common Stock
whether by exercise of a warrant, option or similar call, or conversion
of any existing instruments, in either case for consideration fixed, in
amount or by formula, as of the date of issuance.
(vi) "FAIR MARKET VALUE" of any property shall mean
the fair market value thereof as determined in good faith by the Board
of Directors of the Company (the "BOARD"); PROVIDED, HOWEVER, that the
value of any securities will be determined as follows:
(i) Securities not subject to investment
letter or other similar restrictions on free
marketability covered by (ii) below:
(A) If traded on a securities
exchange or through the Nasdaq National Market, the
value shall be deemed to be the average of the
closing prices of the securities on such quotation
system over the thirty (30) day period ending three
(3) days prior to the closing;
(B) If actively traded
over-the-counter, the value shall be deemed to be the
average of the closing bid or sale prices (whichever
is applicable) over the thirty (30) day period ending
three (3) days prior to the closing; and
(C) If there is no active public
market, the value shall be the fair market value
thereof, as mutually determined by the Board and the
Holder.
(ii) The method of valuation of securities
subject to investment letter or other restrictions on
free marketability (other than restrictions arising
solely by virtue of a stockholder's status as an
affiliate or former affiliate) shall be to make an
appropriate discount from the market value determined
as above in (i)(A), (B) or (C) to reflect the
approximate fair market value thereof, as mutually
determined by the Board and the Holder.
(b) NO ADJUSTMENT OF WARRANT PRICE. The number of Shares
purchasable upon the exercise of the Warrant shall not be adjusted, by
adjustment in the Warrant Price thereof, unless the Fair Market Value of the
consideration per share (determined pursuant to Section 4(e) below) received by
the Company for an Additional Share of Common Stock issued or deemed to be
issued by the Company is less than the greater of 95% of the Fair Market Value
per share of the Common Stock or the applicable Warrant Price in effect on the
date of, and
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immediately prior to, the issue of such additional shares, or if prior to such
issuance, the Company receives written notice from the Holder, agreeing that no
such adjustment shall be made as the result of the issuance of Additional Shares
of Common Stock.
(c) ISSUE OF SECURITIES DEEMED ISSUE OF ADDITIONAL SHARES OF
COMMON STOCK. If the Company at any time or from time to time while this Warrant
remains outstanding and unexpired shall issue any Options or Convertible
Securities or Rights to Acquire Common Stock, then the maximum number of shares
of Common Stock (as set forth in the instrument relating thereto without regard
to any provision contained therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options, Rights to Acquire Common Stock or,
in the case of Convertible Securities, the conversion or exchange of such
Convertible Securities, shall be deemed to be Additional Shares of Common Stock
issued as of the time of such issue; provided, however, that Additional Shares
of Common Stock shall not be deemed to have been issued unless the Fair Market
Value of the consideration per share (determined pursuant to Section 4(e)
hereof) received by the Company for such Additional Shares of Common Stock would
be less than the greater of 95% of the Fair Market Value per share of Common
Stock or the applicable Warrant Price in effect on the date of and immediately
prior to such issue, or such record date, as the case may be, and provided,
further, that in any such case:
(i) No further adjustment in the Warrant Price shall
be made upon the subsequent issue of shares of Common Stock upon the
exercise of such Options, Rights or conversion or exchange of such
Convertible Securities;
(ii) Upon the expiration or termination of any
unexercised Option, Right or Convertible Security, the Warrant Price
shall be adjusted immediately to reflect the applicable Warrant Price
which would have been in effect had such Option, Right or Convertible
Security (to the extent outstanding immediately prior to such
expiration or termination) never been issued; and
(iii) In the event of any change in the number of
shares of Common Stock issuable upon the exercise, conversion or
exchange of any Option, Right or Convertible Security, including, but
not limited to, a change resulting from the anti-dilution provisions
thereof, the Warrant Price then in effect shall forthwith be readjusted
to such Warrant Price as would have been obtained had the Warrant Price
adjustment that was originally made upon the issuance of such Option,
Right or Convertible Security, which were not exercised or converted
prior to such change, been made upon the basis of such change, but no
further adjustment shall be made for the actual issuance of Common
Stock upon the exercise or conversion of any such Option, Right or
Convertible Security.
(d) ADJUSTMENT OF WARRANT PRICE UPON ISSUANCE OF ADDITIONAL
SHARES OF COMMON STOCK. If the Company shall at any time while this Warrant is
outstanding and unexpired issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to Section 4(c),
but excluding shares issued as a dividend or distribution as provided in Section
4(g) or upon a stock split or combination as provided in Section 4(f)), without
consideration, or for a consideration per share less than the greater of 95%
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of the Fair Market Value per share of Common Stock or the applicable Warrant
Price in effect on the date of and immediately prior to such issue, or without
the requisite notice contemplated by Section 4(b) hereof, then and in such
event, such Warrant Price shall be reduced, concurrently with such issue, to a
price (calculated to the nearest cent) determined by multiplying such Warrant
Price by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately prior to such issue plus the number of
shares of Common Stock which the aggregate consideration received by the Company
for the total number of Additional Shares of Common Stock so issued would
purchase at the greater of 95% of the Fair Market Value per share of Common
Stock or such Warrant Price; and the denominator of which shall be the number of
shares of Common Stock outstanding immediately prior to such issue plus the
number of such Additional Shares of Common Stock so issued.
Notwithstanding the foregoing, the applicable Warrant Price shall not be reduced
if the amount of such reduction would be an amount less than $.03, but any such
amount shall be carried forward and reduction with respect thereto made at the
time of and together with any subsequent reduction which, together with such
amount and any other amount or amounts so carried forward, shall aggregate $.03
or more.
(e) DETERMINATION OF CONSIDERATION. For purposes of this
Section 4, the Fair Market Value of the consideration received by the Company
for the issue of any Additional Shares of Common Stock shall be computed as
follows:
(i) CASH AND PROPERTY. Such consideration shall:
(i) insofar as it consists of cash, be
computed at the aggregate of cash received by the
Company, excluding amounts paid or payable for
accrued interest or accrued dividends;
(ii) insofar as it consists of property
other than cash, be computed at the Fair Market Value
thereof at the time of such issue, as determined in
good faith by the Board; and
(iii) in the event Additional Shares of
Common Stock are issued together with other shares or
securities or other assets of the Company for
consideration which covers both, be the proportion of
such consideration so received, computed as provided
in clauses (i) and (ii) above, as determined in good
faith by the Board.
(ii) OPTIONS, RIGHTS AND CONVERTIBLE SECURITIES. The
consideration per share received by the Company for Additional Shares
of Common Stock deemed to have been issued pursuant to Section 4(c),
relating to Options, Rights and Convertible Securities, shall be
determined by dividing
(i) the total amount, if any, received or
receivable by the Company as consideration for the
issue of such Options, Rights or Convertible
Securities, plus the minimum aggregate amount of
additional
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consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such
consideration) payable to the Company upon the
exercise of such Options, Rights or the conversion or
exchange of such Convertible Securities, by
(ii) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options, Rights or
the conversion or exchange of such Convertible
Securities.
(f) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If at any
time or from time to time while this Warrant remains outstanding and unexpired,
the Company shall effect a subdivision of the outstanding Common Stock, the
Warrant Price then in effect immediately before that subdivision shall be
proportionately decreased. If at any time or from time to time while this
Warrant remains outstanding and unexpired, the Company shall combine the
outstanding shares of Common Stock, the Warrant Price then in effect immediately
before the combination shall be proportionately increased. Any adjustment under
this paragraph shall become effective at the close of business on the date that
the subdivision or combination becomes effective.
(g) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. In the
event that, while this Warrant remains outstanding and unexpired, the Company at
any time or from time to time shall make or issue a dividend or other
distribution payable in Additional Shares of Common Stock, then and in each such
event the Warrant Price shall be decreased as of the time of such issuance, by
multiplying the Warrant Price by a fraction, the numerator of which shall be the
total number of shares of Common Stock issued and outstanding immediately prior
to the time of such issuance, and the denominator of which shall be the total
number of shares of Common Stock issued and outstanding immediately prior to the
time of such issuance plus the number of shares of Common Stock issuable in
payment of such dividend or distribution.
(h) ADJUSTMENTS FOR OTHER DIVIDENDS AND DISTRIBUTIONS. In the
event that, while this Warrant remains outstanding and unexpired, the Company at
any time, or from time to time shall make or issue, a dividend or other
distribution payable in securities of the Company other than shares of Common
Stock, then and in each such event provision shall be made so that the Holder
shall receive upon the exercise of the Warrant in addition to the number of
Shares receivable thereupon, the amount of securities of the Company that the
Holder would have received had the Warrant been exercised with respect to the
Shares on the date of such event and had thereafter, during the period from the
date of such event to and including the date on which the Warrant was exercised,
retained such securities receivable by the Holder as aforesaid during such
period given application to all adjustments called for during such period.
(i) RECLASSIFICATION, CONSOLIDATION OR MERGER. In case of any
capital reorganization, reclassification or change of outstanding securities of
the class issuable upon exercise of the Warrant (other than as a result of a
subdivision, split, combination or stock
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dividend), or in case of any consolidation or merger of the Company with or into
another entity, the Company, or such successor entity, as the case may be, shall
execute a new Warrant, with substantially the same terms as this Warrant, or
amend this Warrant, to provide that the Holder shall have the right to exercise
such new Warrant or amended Warrant and procure upon such exercise in lieu of
the Common Stock theretofore issuable upon exercise of this Warrant the kind and
amount of shares of stock, other securities, money and/or property receivable
upon such reorganization, reclassification, change, consolidation or merger by
the Holder as if this Warrant had been fully exercised immediately prior to such
event. Any such new Warrant shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 4. The provisions of this subsection (a) shall similarly apply to
successive reorganizations, reclassifications, changes, consolidations and
mergers.
(j) CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of the Warrant Price pursuant to this Section 4, the
Company at its expense shall promptly compute such adjustment or readjustment in
accordance with the terms hereof and furnish to the Holder a certificate setting
forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based and shall file a copy of such
certificate with its corporate records. The Company shall, upon the reasonable
written request of the Holder, furnish or cause to be furnished to the Holder a
similar certificate setting forth (i) such adjustments and readjustments, (ii)
the Warrant Price then in effect, and (iii) the number of Shares and the amount,
if any, of other property which then would be received upon the exercise of the
Warrant.
5. PAYMENT BY WARRANT CONVERSION. The Holder may exercise the purchase
right represented by this Warrant with respect to a particular number of
Shares subject to this Warrant ("CONVERTED WARRANT SHARES") and elect to pay
for a number of such Converted Warrant Shares through Warrant Conversion by
specifying such election in the Notice of Exercise attached hereto as Exhibit
A. In such event, the Company shall deliver to the Holder (without payment by
the Holder of any Warrant Price or any cash or other consideration) that
number of Shares equal to the quotient obtained by dividing (x) the value of
this Warrant (or the specified portion hereof) on the date of exercise, which
value shall be determined by subtracting (A) the aggregate Warrant Price of
the Converted Warrant Shares immediately prior to the exercise of the Warrant
from (B) the aggregate fair market value of the Converted Warrant Shares
issuable upon exercise of this Warrant (or the specified portion hereof) on
the date of exercise, by (y) the fair market value of one Share on the date of
exercise. For purposes of this Section 5, fair market value of a Share as of a
particular date shall be the closing price on the business day immediately
prior to the exercise of the applicable Warrant.
6. NOTICES. Upon any adjustment of the Warrant Price and any increase
or decrease in the number of Shares purchasable upon the exercise of this
Warrant, then, and in each such case, the Company, within 30 days thereafter,
shall give written notice thereof to the registered holder of this Warrant
(the "NOTICE"). The Notice shall be mailed to the address of such holder as
shown on the books of the Company; and shall state the Warrant Price as
adjusted and the increased or decreased number of shares purchasable upon the
exercise of this Warrant, setting forth in reasonable detail the method of
calculation of each.
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7. TRANSFER AND EXCHANGE OF THE WARRANT AND SHARES. When this `Warrant
or Shares are presented to the Company with a request:
(a) to register their transfer; or
(b) to exchange such Warrant for an equal number of warrants
of other authorized denominations,
the Company shall register the transfer or make the exchange as requested if the
following requirements are met:
(x) the Warrant shall be duly endorsed or accompanied by a
written instruction of transfer in form satisfactory to the Company, duly
executed by the Holder thereof or by his attorney-in-fact, duly authorized in
writing; and
(y) in the case of Shares, such request shall be accompanied
by the following additional information and documents (all of which may be
submitted by facsimile), as applicable:
(i) if such Shares are being transferred (1) to a
"qualified institutional buyer" (as defined in Rule 144A) in accordance
with Rule 144A or (2) pursuant to an exemption from registration in
accordance with Rule 144 (and based on an opinion of counsel if the
Company so requests) or (3) pursuant to an effective registration
statement under the Securities Act, a certification to that effect;
(ii) if such Shares are being transferred pursuant to
an exemption from registration in accordance with Rule 904 under the
Securities Act (and based on an opinion of counsel if the Company so
requests), a certification to that effect; or
(iii) if such Shares are being transferred in
reliance on another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so
requests), a certification to that effect.
8. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to the Holder as follows:
(a) ORGANIZATION AND POWERS. The Company (i) is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; and (ii) has all the requisite power and
authority to carry on its business and to execute, deliver and perform its
obligations under this Warrant.
(b) AUTHORIZATION; NO CONFLICT. The offer and sale of the
Warrant and the Common Stock underlying the Warrant, and the execution, delivery
and performance by the Company of the Warrant have been duly authorized by all
necessary corporate action of the Company and do not and will not (i) contravene
the Company's articles of incorporation or bylaws; (ii) result in a breach or
default under any material instrument, contract or other
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agreement to which the Company is a party; or (iii) violate any provision of any
law, rule, regulation, order, judgment, decree or the like binding on or
affecting the Company.
(c) BINDING OBLIGATIONS. The Warrant constitutes, or will
constitute, a legal, valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting creditors' rights generally and general principles of
equity, including, without limitation, concepts of materiality, reasonableness,
good faith and fair dealing and the possible unavailability of specific
performance or injunctive relief, regardless of whether considered in a
proceeding of equity or at law.
(d) SHARES DULY ISSUED, FULLY PAID AND NON-ASSESSABLE. The
Shares, when issued upon the exercise of this Warrant pursuant to the terms
hereof, shall be duly issued, fully paid and non-assessable.
(e) NO REGISTRATION. The offer and sale of the Warrant and the
underlying Shares of Common Stock are exempt from the registration and
prospectus delivery requirements of the Securities Act.
9. REGISTRATION RIGHTS. The Holder shall have such registration rights
with respect to the Shares as specified in that certain Registration Rights
and Lock-Up Agreement dated as of September 29, 1999, as amended by the First
Amendment to Registration Rights and Lock-Up Agreement dated as of even date
herewith.
10. PRESS RELEASES. The Holder shall consent to the form and content of
all press releases or public announcements that shall be made concerning this
Warrant and the transactions contemplated hereby, and the Company shall not
make any press release or public announcement without the Holder's prior
written consent, which consent shall not be unreasonably withheld.
11. MISCELLANEOUS.
(a) The terms of this Warrant shall be binding upon and shall
inure to the benefit of any successors or assigns of the Company and of the
holder or holders hereof and of the Common Stock issued or issuable upon the
exercise hereof.
(b) No Holder, as such, shall be entitled to vote or receive
dividends or be deemed to be a stockholder of the Company for any purpose, nor
shall anything contained in this Warrant be construed (i) to confer upon the
Holder, as such, any rights of a stockholder of the Company, or any right to
vote, give or withhold consent to any corporate action, receive notice of
meetings, receive dividends or subscription rights, or otherwise, or (ii) as
imposing any obligation on the Holder to purchase any securities or any
liability as a stockholder of the Company, whether such obligation or
liabilities are asserted by the Company or its creditors.
(c) Receipt of this Warrant by the Holder hereof shall
constitute acceptance of and agreement to the foregoing terms and conditions.
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(d) The Company will not, by amendment of its certificate of
incorporation or bylaws or through any other action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all actions as may be necessary or appropriate in order to protect the
rights of the Holder against impairment.
(e) Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of any such loss, theft or distribution, upon delivery of an indemnity
agreement reasonably satisfactory in form and amount to the Company or, in the
case of any such mutilation, upon surrender and cancellation of such Warrants,
the Company at its expense will execute and deliver, in lieu thereof, a new
Warrant of like date and tenor.
(f) Any provision of this Warrant may be amended, waived or
modified upon the written consent of the Company and the Holder.
(g) The Company hereby agrees that at all times there shall be
reserved for issuance and/or deliver upon exercise of this Warrant, free from
preemptive rights, such number of authorized but unissued shares of Common Stock
as from time to time shall be required for issuance or delivery upon exercise of
this Warrant. The Company further agrees that it will promptly to take all
action as may from time to time be required in order to permit the holder hereof
to exercise this Warrant and the Company duly and effectively to issue shares of
Common Stock hereunder.
(h) This Warrant shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
conflicts of laws provisions thereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.
Dated: October 27, 1999
CAIS INTERNET, INC.:
/s/ WILLIAM M. CALDWELL, IV
-------------------------------------
William M. Caldwell, IV
President
<PAGE>
EXECUTION COPY
Page 52 of 73
EXHIBIT D
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
This REGISTRATION RIGHTS AND LOCK-UP AGREEMENT (this "AGREEMENT"),
dated as of September 29, 1999, by and between CAIS Internet, Inc., a Delaware
corporation (the "COMPANY"), and U.S. Telesource, Inc., a Delaware corporation
(the "HOLDER").
W I T N E S S E T H:
WHEREAS, the Company and the Holder have entered into a certain Series
C Preferred Stock Purchase Agreement of even date herewith (the "PURCHASE
AGREEMENT"), pursuant to which the Company will sell to the Holder, and the
Holder will purchase from the Company, 125,000 shares of the Company's Series C
Preferred Stock, par value $.01 per share (the "SHARES"); and
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the consummation of the purchase of the Shares pursuant to the
Purchase Agreement (the "PURCHASE");
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following capitalized defined
terms shall have the following meanings:
"CAIS PROSPECTUS" shall have the meaning set forth in Section
7(d) hereof.
"CAIS SEC REPORTS" shall have the meaning set forth in Section
7(d) hereof.
"COMMON STOCK" shall mean the Common Stock, par value $.01 per
share, of the Company.
"COMPANY" shall have the meaning set forth in the preamble and
also shall include the Company's successors.
"DEMAND PERIOD" shall have the meaning set forth in Section 3.
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Page 53 of 73
"DEMAND REGISTRATION" shall have the meaning set forth in
Section 3.
"DEMAND REGISTRATION REQUEST" shall have the meaning set forth
in Section 3.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"FAIR MARKET VALUE" means, per share of Common Stock, (i) if
the Common Stock is traded on a national securities exchange or system, or is
actively traded over-the-counter, the average of the closing sales prices for
the Common Stock on such exchange or system or format for the two (2) trading
days preceding, but not including, the date of a Demand Registration Request, or
(ii) if the Common Stock is not so traded, the fair market value as determined
in the discretion of the Board of Directors of the Company.
"FORM S-1" means such form under the Securities Act as in
effect on the date hereof or any registration form under the Securities Act
subsequently adopted by the SEC which permits inclusion or incorporation of
substantial information by reference to other documents filed by the Company
with the SEC.
"HOLDER" shall have the meaning set forth in the preamble.
"PURCHASE" shall have the meaning set forth in the preamble.
"OFFERING" shall mean the sale of Registrable Securities in
connection with any public offering.
"OTHER HOLDER" shall have the meaning set forth in Section
5(c) hereof.
"PERSON" shall mean an individual, partnership, limited
liability company, corporation, trust, unincorporated organization or other
entity, or a government or agency or political subdivision thereof.
"PIGGYBACK NOTICE" shall have the meaning set forth in Section
5(a) hereof.
"PIGGYBACK REGISTRATION" shall have the meaning set forth in
Section 5(a) hereof.
"PROSPECTUS" shall mean the prospectus included in a
Registration Statement for the registration with the SEC of all or a portion of
the Registrable Securities, including any preliminary prospectus, and any such
prospectus as amended or supplemented by any prospectus supplement and by all
other amendments and supplements to such prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
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"REGISTRABLE SECURITIES" shall mean any shares of Common Stock
issued or issuable upon the conversion of the Holder's Shares in accordance with
the Company's Amended and Restated Certificate of Incorporation, as amended, and
the Certificate of Designation related to the Shares, excluding, (i) Registrable
Securities for which a Registration Statement relating to the sale thereof shall
have become effective under the Securities Act or (ii) Registrable Securities
which the holder thereof may sell in any one three month period pursuant to Rule
144 under the Securities Act (or such successor rule as may be adopted).
"REGISTRATION EXPENSES" shall mean any and all expenses
incident to performance of or compliance with the registration rights granted
under Section 3, Section 4 or Section 5 of this Agreement, including, without
limitation: (i) all SEC, stock exchange or National Association of Securities
Dealers, Inc. (the "NASD") 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 in connection
with blue sky qualification of any of the Registrable Securities and the
preparation of a blue sky memorandum) and compliance with the rules of the NASD,
(iii) all expenses of any Persons in preparing or assisting in preparing, word
processing, printing and distributing any Registration Statement, any
Prospectus, certificates and other documents relating to the performance of and
compliance with this Agreement, (iv) all fees and expenses incurred in
connection with the listing, if any, of any of the Registrable Securities on any
securities exchange or exchanges pursuant to Section 6(1) hereof, and (v) the
fees and disbursements of counsel for the Company and 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. Registration Expenses shall specifically exclude underwriting
discounts and commissions, the fees and disbursements of counsel representing
the Holder and transfer taxes, if any, relating to the sale or disposition of
Registrable Securities by the Holder, all of which shall be borne by the Holder
in all cases.
"REGISTRATION STATEMENT" shall mean a registration statement
of the Company and any other entity required to be a registrant with respect to
such registration statement pursuant to the requirements of the Securities Act
which covers some or all of the Registrable Securities, 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 materials incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended from time to time.
"SHARES" shall have the meaning set forth in the preamble.
"SHELF REGISTRATION" shall have the meaning set forth in
Section 4.
"SHELF REQUEST" shall have the meaning set forth in Section 4.
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Page 55 of 73
2. LOCK-UP AGREEMENT.
(a) Holder agrees that it shall not transfer, offer, pledge,
sell, contract to sell, grant any options for the sale of or otherwise dispose
of, directly or indirectly, any Shares or Registrable Securities held by the
Holder through November 21, 1999. If requested by an underwriter of Common
Stock, the Holder will reaffirm the agreement set forth in this Section 2 in a
separate writing in a form satisfactory to such underwriter. The Company may
impose stop-transfer instructions with respect to the Shares or Registrable
Securities, subject to the foregoing restriction until the end of said period.
(b) Notwithstanding anything in this Agreement to the
contrary, in connection with any Offering, the Holder agrees that, if requested
by the managing underwriter of the Offering, the Holder shall not, directly or
indirectly, sell, offer, contract to sell, grant any option to purchase,
transfer the economic risk of ownership in, make any short sale, pledge or
otherwise dispose of, any Shares or Registrable Securities, without the prior
written consent of the Company and the managing underwriters of the Offering for
a period of ninety (90) days from the effective date of the registration
statement under the Securities Act relating to such Offering. This restriction
shall be binding upon any transferee of the Shares or Registrable Securities and
the certificates for the Shares or Registrable Securities shall bear a legend to
such effect. In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Shares or Registrable Securities
until the end of such period.
3. DEMAND FOR REGISTRATION.
(a) DEMAND PERIOD. From November 21, 1999, until the date that
is the second anniversary of the date of this Agreement (the "DEMAND PERIOD"),
subject to the terms and conditions set forth herein, the Holder shall have two
(2) opportunities, in addition to other rights enumerated in this Agreement, to
have a registration effected under the Securities Act of all or part of its
Registrable Securities (a "DEMAND REGISTRATION").
(b) DEMAND PROCEDURE.
(i) Subject to paragraph (ii) below, during the
Demand Period the Holder may deliver to the Company a written request ("Demand
Registration Request") requesting that the Company register any or all of the
Holder's Registrable Securities; PROVIDED, HOWEVER, that the Company shall not
be required to comply with any Demand Registration Request unless the Holder
requests the registration of Registrable Securities having an aggregate Fair
Market Value in excess of (i) $5,000,000, with respect to the initial Demand
Registration, or (ii) $5,000,000, with respect to the second Demand
Registration.
(ii) No Demand Registration Request may be made
within six (6) months after any other Demand Registration is declared effective.
The Company shall only be required to file one Registration Statement (as
distinguished from supplements or pre-effective or post-effective amendments
thereto) in response to each Demand Registration Request.
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Page 56 of 73
(iii) A Demand Registration Request shall (i) set
forth the number of Registrable Securities intended to be sold pursuant to the
Demand Registration Request, (ii) disclose whether all or any portion of a
distribution pursuant to such registration will be sought by means of an
underwriting, and (iii) identify any underwriter or underwriters proposed for
the underwritten portion, if any, of such registration.
(iv) If the Company receives a Demand Registration
Request in compliance with the terms of this Agreement, then the Company shall,
subject to the limitations in paragraphs (v) and (vi) of this section, (i) use
its reasonable best efforts to prepare and file as soon as practicable with the
SEC a Registration Statement under the Securities Act with respect to all the
Registrable Securities that the Holder requested to be registered in the Demand
Registration Request, (ii) use its reasonable best efforts to cause such
Registration Statement to become effective, and (iii) keep such Registration
Statement effective until the earlier of (x) such time as the Holder shall have
sold or otherwise disposed of all of their Registrable Securities included in
the registration, or (y) sixty (60) days following the effective date of such
Registration Statement. A registration requested pursuant to this paragraph (iv)
shall not be deemed to have been effected (i) unless a Registration Statement
with respect thereto has become effective or (ii) if after it has become
effective, such registration is interfered with by any stop order, injunction or
other order or requirement of the SEC or other governmental agency or court for
any reason, unless (a) such order, injunction or requirement is implemented
after the period specified in clause (iii) of the immediately preceding sentence
or (b) such order, injunction or requirement is lifted or stayed within thirty
(30) days.
(v) It is anticipated that the registration
contemplated under this Section 3 will be accomplished by means of the filing of
a Form S-1 or such other appropriate registration form under the Securities Act
(i) as shall be selected by the Company and (ii) as shall permit the disposition
of the Registrable Securities being registered in accordance with the intended
method or methods of disposition. If the Holder desires to distribute all or
part of the Registrable Securities covered by its request by means of an
underwriting, they shall so advise the Company in writing in their initial
Demand Registration Request as described in paragraph (iii) of this Section. A
determination of whether all or part of the distribution will be by means of an
underwriting shall be made by the Holder, subject to approval by the Company's
Board of Directors. If all or part of the distribution is to be by means of an
underwriting, all subsequent decisions concerning the underwriting which are to
be made by the Holder pursuant to the terms of this Agreement, which shall
include the selection of the underwriter or underwriters to be engaged and the
representative, if any, of the underwriters so engaged, shall be made by the
Holder, subject to approval by the Company's Board of Directors.
(vi) If the parties agree to distribute all or part
of the Registrable Securities through an underwriting, the Holder shall enter
into an underwriting agreement consistent with the provisions of this Agreement
and otherwise in customary form with the underwriter or underwriters selected
for such underwriting.
(c) PRIORITY ON DEMAND REGISTRATION. If a Demand Registration
is an underwritten Offering and the managing underwriters advise the Company in
writing that in their opinion the number of Registrable Securities exceeds the
number of securities
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that can be sold in an orderly manner in such Offering within a price range
acceptable to the Holder, the Company will include in such registration the
number of shares of Registrable Securities requested to be included which, in
the opinion of such underwriters, can be sold in an orderly manner within such
acceptable price range.
4. SHELF REGISTRATION.
(a) SHELF REQUEST. If at any time after November 21, 1999, the
Company shall receive from a Holder a written request (a "SHELF REQUEST") that
the Company register pursuant to Rule 415 under the Securities Act (or any
successor rule with similar effect) a delayed offering of all (but not less than
all) Registrable Securities, then the Company shall, as promptly as practicable
(but in no event more than thirty (30) days after so required or requested
pursuant to this Section 4) prepare and file with the SEC, and thereafter shall
use its reasonable best efforts to cause to be declared effective, a
Registration Statement on an appropriate form under the Securities Act relating
to the offer and sale of Registrable Securities by the Holder thereof from time
to time in accordance with the methods of distribution set forth in the
Registration Statement and Rule 415 under the Securities Act (hereinafter, the
"SHELF REGISTRATION"). No Shelf Request may be made within six (6) months after
a Demand Registration is declared effective.
(b) EFFECTIVE TIME. If the Company receives a Shelf Request in
compliance with the terms of this Agreement, then the Company shall use its
reasonable best efforts to keep the Registration Statement filed pursuant to
this Section 4 continuously effective in order to permit the Prospectus to be
lawfully delivered by the Holder, for a period of two (2) years following the
latest date Shares were converted into Registrable Securities or such shorter
period that will terminate when all the Registrable Securities covered by the
Registration Statement (i) have been sold pursuant thereto, or (ii) are no
longer restricted securities (as defined in Rule 144 under the Securities Act,
or any successor rule thereof). The Company shall be deemed not to have used its
reasonable best efforts to keep the Registration Statement filed hereunder
effective during the requisite period if it voluntarily takes any action that
would result in the Holder not being able to offer and sell such Registrable
Securities during that period, unless such action is required by applicable law.
5. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. If the Company proposes to file any
registration statement under the Securities Act for purposes of an offering of
securities of the Company (including, but not limited to, registration
statements relating to secondary offerings of securities of the Company, but
excluding (i) Registration Statements filed pursuant to Section 3 or Section 4
of this Agreement or (ii) Registration Statements relating to employee benefit
plans or with respect to corporate reorganizations, or other transactions under
Rule 145 of the Securities Act) (a "PIGGYBACK REGISTRATION"), the Company will
give prompt written notice to the Holder of its intention to effect such a
registration (a "PIGGYBACK NOTICE') and, subject to the terms hereof, the
Company will include in such registration all Registrable Securities with
respect to which the Company
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has received a written request for inclusion therein within fifteen (15) days
after the date of delivery of the Piggyback Notice. The Company shall use its
reasonable best efforts to keep any such Registration Statement effective for up
to sixty (60) days. If the Piggyback Registration is an underwritten offering on
behalf of the Company, then the Company shall not be required to include any
Registrable Securities in such offering unless the Holder enters into a
customary form of underwriting agreement in form and substance reasonably
satisfactory to the underwriters and the Company.
(b) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the managing underwriters advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
exceeds the number that can be sold in an orderly manner in such offering within
a price range acceptable to the Company, the Company will include in such
registration, (i) first, the securities the Company proposes to sell, and (ii)
second, other securities requested to be included in such registration,
including the Registrable Securities (subject to any other priority arrangements
existing under registration rights agreements to which the Company is a party as
of the date hereof).
(c) PRIORITY ON SECONDARY REGISTRATION. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders of
the Company's securities other than the Holder (the "OTHER Holder"), and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number that can be sold in an orderly manner in such offering within a price
range acceptable to the Other Holder requesting such registration, the Company
will include in such registration (i) first, the securities requested to be
included therein by the Other Holder requesting such registration, (ii) second,
the securities the Company proposes to sell, and (iii) third, other securities
requested to be included in such registration, including the Registrable
Securities (subject to any other priority arrangements existing under
registration rights agreements to which the Company is a party as of the date
hereof).
(d) SELECTION OF UNDERWRITERS. In the case of an underwritten
Piggyback Registration, the Company shall have the right to select the
investment banker(s) and manager(s) to administer the Offering.
6. REGISTRATION PROCEDURES.
In connection with the obligations of the Company with respect
to the Registration Statements pursuant to this Agreement, the Company shall:
(a) prepare and file with the SEC, within the time periods set
forth herein, a Registration Statement, which Registration Statement (i) shall
be available for sale of the subject Registrable Securities in accordance with
the intended method or methods of distribution by the Holder, and (ii) 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;
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(b) subject to the last three sentences of this Section 6(b)
and Section 6(i) hereof, (i) prepare and file with the SEC such amendments and
post-effective amendments to each such Registration Statement as may be
necessary to keep such Registration Statement effective for the applicable
period; (ii) cause each such Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented, to be filed pursuant to Rule 424
or any similar rule that may be adopted under the Securities Act; (iii) respond
as promptly as practicable to any comments received from the SEC with respect to
the Registration Statement, or any amendment, post-effective amendment or
supplement relating thereto; and (iv) comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by each
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the selling holders thereof.
Notwithstanding anything to the contrary contained therein, the Company shall
not be required to take any of the actions described in subsections (i), (ii),
or (iii) above with respect to Registrable Securities under a Demand
Registration, Shelf Registration or a Piggyback Registration unless and until
the Company has received a Demand Registration Request, Shelf Request or a
Piggyback Notice from the Holder that the Holder intends to make offers or sales
under the Registration Statement as specified in any such request or notice;
PROVIDED, HOWEVER, that the Company shall have ten (10) business days to prepare
and file any such amendment or supplement after receipt of the Demand
Registration Request, Shelf Request or Piggyback Notice. Once the Holder has
delivered a Demand Registration Request, Shelf Request or Piggyback Notice to
the Company, the Holder shall promptly provide to the Company such information
as the Company reasonably requests in order to describe the Holder and the
method of distribution in a post-effective amendment to the Registration
Statement or a supplement to the Prospectus. The Holder also shall notify the
Company in writing upon completion of such offer or sale or at such time as the
Holder no longer intends to make offers or sales under the Registration
Statement;
(c) furnish to the Holder, without charge, as many copies of
each Prospectus, including each preliminary Prospectus, and any amendment or
supplement thereto and such other documents as the Holder may reasonably
request, in order to facilitate the public sale or other disposition of the
Registrable Securities; the Company consents to the use of the Prospectus,
including each preliminary Prospectus, by the Holder in connection with the
offering and sale of the Registrable Securities covered by the Prospectus or the
preliminary Prospectus;
(d) use its reasonable best efforts to register or qualify the
Registration Statement by the time the applicable Registration Statement is
declared effective by the SEC under all applicable state securities or blue sky
laws of such jurisdictions as the Holder shall reasonably request in writing,
keep each such registration or qualification effective during the period such
Registration Statement is required to be kept effective as provided herein and
all other acts and things that may be reasonably necessary or advisable to
enable the Holder to consummate the disposition in each such jurisdiction of
such Registrable Securities owned by the Holder to the extent required
hereunder; PROVIDED, HOWEVER, that the Company shall not be required to (i)
qualify generally to do business in any jurisdiction or to register as a broker
or dealer in such jurisdiction where it would not otherwise be required to
qualify but for this Section 6(d), (ii) subject itself to
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taxation in any such jurisdiction, or (iii) submit to the general service of
process in any such jurisdiction.
(e) notify the Holder promptly and, if requested by the
Holder, confirm such advice in writing (i) when a Registration Statement has
become effective and when any post-effective amendments and supplements thereto
become effective, (ii) 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, (iii) if the
Company receives any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation of any proceeding for such purpose, and (iv) of the happening of any
event during the period a Registration Statement is effective as a result of
which such Registration Statement or the related Prospectus contains any untrue
statement of a material fact or omits to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made (in the case of the Prospectus), not
misleading;
(f) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of a Registration Statement at the
earliest possible moment;
(g) furnish to the Holder, 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) cooperate with the Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold and not bearing any Securities Act legend; and enable certificates for
such Registrable Securities to be issued for such numbers of shares and
registered in such name as the Holder may reasonably request at least two
business days prior to any sale of Registrable Securities;
(i) subject to the last three sentences of Section 6(b)
hereof, upon the occurrence of any event contemplated by Section 6(e)(iv)
hereof, use its reasonable best efforts promptly to prepare and file a
supplement or prepare, file and obtain effectiveness of a 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 Securities, such
Prospectus will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(j) make available for inspection by representatives of the
Holder and any counsel or accountant retained by the Holder, all financial and
other records and pertinent corporate documents of the Company, and cause the
officers, directors and employees of the Company to supply all information
reasonably requested by any such representative, counsel or accountant in
connection with a Registration Statement; provided, HOWEVER, that such records,
documents or information which the Company determines, in good faith, to be
confidential and notifies such representatives, counsel or
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accountants in writing that such records, documents or information are
confidential shall not be disclosed by the representatives, counsel or
accountants unless (i) the disclosure of such records, documents or information
is necessary to avoid or correct a material misstatement or omission in a
Registration Statement; (ii) the release of such records, documents or
information is ordered pursuant to a subpoena or order from a court of competent
jurisdiction; or (iii) such records, documents or information have been
generally made available to the public;
(k) 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, provide copies of such document (not
including any documents incorporated by reference therein unless requested) to
the Holder;
(l) use its reasonable best efforts to cause all Registrable
Securities to be listed on any securities exchange on which similar securities
issued by the Company are then listed;
(m) provide a CUSIP number for all Registrable Securities, not
later than the effective date of a Registration Statement;
(n) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the SEC and make available to its
security holders, as soon as reasonably practicable, an earnings statement
covering at least twelve (12) months that shall satisfy the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder; and
(o) use its reasonable best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
by virtue of the business and operations of the Company to enable the Holder to
consummate the disposition of its Registrable Securities.
The Company may require the Holder to furnish to the Company
in writing such information regarding the proposed distribution by the Holder of
the Registrable Securities as the Company may from time to time reasonably
request in writing.
In connection with and as a condition to the Company's
obligations with respect to the Registration Statement, the Holder agrees that:
(i) it will not offer or sell its Registrable Securities under the Registration
Statement until it has provided a Demand Registration Request, Shelf Request or
a Piggyback Notice, if and to the extent applicable, and has received copies of
the supplemental or amended Prospectus contemplated by Section 6(b) hereof and
receives notice that any post-effective amendment has become effective; (ii)
upon receipt of any notice from the Company of the happening of any event of the
kind described in Section 6(e)(iv) hereof, the Holder will forthwith discontinue
disposition of Registrable Securities pursuant to a Registration Statement until
the Holder receives copies of the supplemental or amended Prospectus
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contemplated by Section 6(i) hereof and receives notice that any post-effective
amendment has become effective, and, if so directed by the Company, the Holder
will deliver to the Company (at the expense of the Company) all copies in its
possession, other than permanent file copies then in the Holder's possession, of
the Prospectus covering such Registrable Securities current at the time of
receipt of such notice; and (iii) all offers and sales under the Registration
Statement shall be completed within sixty (60) days after the first date on
which offers or sales can be made pursuant to clause (i) above, and upon
expiration of such sixty (60) day period the Holder will not offer or sell its
Registrable Securities under the Registration Statement until it has again
complied with the provisions of clause (i) of this paragraph.
Notwithstanding anything to the contrary contained herein, the Company
shall have the right to postpone the filing of any Registration Statement
hereunder for a reasonable period of time (not exceeding ninety (90) days) if
the Company furnishes the Holder a certificate signed by the Chairman of the
Board of Directors or the President of the Company stating that in its good
faith judgment, the Company's Board of Directors (or the executive committee
thereof) has determined that effecting the registration at such time would
adversely affect a material financing, acquisition or disposition of assets or
securities, merger or other comparable transaction, or would require the Company
to make public disclosure of information the public disclosure of which would
have a material adverse effect upon the Company.
Notwithstanding anything to the contrary contained herein, the Company
shall cause each Registration Statement and the related Prospectus and any
amendment or supplement thereto, as of the effective date of the Registration
Statement, amendment or supplement, (i) to comply in all material respects with
the applicable requirements of the Securities Act and the rules and regulations
of the SEC, and (ii) not to contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
7. INVESTMENT REPRESENTATIONS. With respect to the Shares and the
Registrable Securities, the Holder represents and warrants as follows:
(a) The Holder, by reason of its business and financial
experience, has such knowledge, sophistication and experience in financial and
business matters and in making investment decisions of this type that it is
capable of (i) evaluating the merits and risks of an investment in the Shares
and making an informed investment decision, (ii) protecting its own interest and
(iii) bearing the economic risk of such investment.
(b) The Holder is acquiring the Shares for investment for the
Holder's own account, not as a nominee or agent and not with the view to, or any
intention of, a resale or distribution thereof, in whole or in part, or the
grant of any participation therein. The Holder understands that, except as
expressly provided herein, the Shares have not been registered under the
Securities Act or state securities laws by reason of a specific exemption from
the registration provisions of the Securities Act and applicable state
securities laws that depends upon, among other things, the bona fide nature of
the
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investment intent and the accuracy of the Holder's representations as expressed
in this Agreement. The Holder further understands that except as expressly
provided herein the Company shall have no obligation to register the Shares or
the Registrable Securities under the Securities Act or any state securities laws
or to take any action that would make available any exemption from the
registration requirements of such laws. The Holder hereby acknowledges that
because of the restrictions on transfer or assignment of the Shares to be issued
in connection with the Purchase, the Holder may have to bear the economic risk
of the investment commitment in the Shares for an indefinite period of time.
(c) The Holder will observe and comply with the Securities Act
and all applicable state securities and blue sky laws and the rules and
regulations promulgated thereunder, as now in effect and as from time to time
amended, in connection with any offer, sale, pledge, transfer or other
disposition of the Shares or the Registrable Securities. In furtherance of the
foregoing, and in addition to any restrictions contained in this Agreement, the
Holder will not offer to sell, exchange, transfer, pledge, or otherwise dispose
of any of the Shares or the Registrable Securities unless at such time at least
one of the following is satisfied:
(i) a Registration Statement under the Securities Act
covering the Shares or the Registrable Securities proposed to be sold,
transferred or otherwise disposed of, describing the manner and terms of the
proposed sale, transfer or other disposition, and containing a current
Prospectus, shall have been filed with the SEC and made effective under the
Securities Act;
(ii) such transaction shall be permitted pursuant to
the provisions of Rule 144;
(iii) counsel representing the Holder, satisfactory
to the Company, shall have advised the Company in a written opinion letter
reasonably satisfactory to the Company and its counsel, and upon which the
Company and its counsel may rely, that no registration under the Securities Act
or any applicable state securities law would be required in connection with the
proposed sale, transfer or other disposition; or
(iv) an authorized representative of the SEC shall
have rendered written advice to the Holder (sought by the Holder or counsel to
the Holder, with a copy thereof and of all other related communications
delivered to the Company) to the effect that the SEC would take no action, or
that the staff of the SEC would not recommend that the SEC take action, with
respect to the proposed sale, transfer or other disposition if consummated.
(d) The Holder understands that an investment in the Shares
involves substantial risks. Holder has been given the opportunity to make a
thorough investigation of the proposed activities of the Company and, upon
request to the Company, has been furnished with materials relating to the
Company and its proposed activities, including, without limitation, a copy of
the Prospectus dated May 20, 1999 (the "CAIS Prospectus")
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and all reports filed by the Company with the SEC since May 20, 1999 (the "CAIS
SEC Reports"). The Holder has been afforded the opportunity to obtain any
additional information deemed necessary by the Holder to verify the accuracy of
any representations made or information conveyed to the Holder. The Holder
confirms that all documents, records and books pertaining to its investment in
the Shares and requested by the Holder have been made available or delivered to
the Holder. The Holder has had an opportunity to ask questions of and receive
answers from the Company, or from a person or persons acting on the Company's
behalf, concerning the terms and conditions of this investment. The Holder has
relied upon, and is making its investment decision upon, the CAIS Prospectus,
the CAIS SEC Reports, the representations and warranties of the Company set
forth in the Purchase Agreement and other information publicly available about
the Company.
(e) The Holder has no knowledge of any causes of action or
other claims that could have been or in the future might be asserted by the
Holder against the Company or any of its predecessors, successors, assigns,
directors, employees, agents or representatives arising out of facts or
circumstances occurring at any time on or prior to the date hereof and in any
way relating to any duty or obligation of the Holder.
8. RESTRICTIVE LEGEND. All certificates representing the Shares
deliverable to the Holder pursuant to the Purchase Agreement and any
certificates subsequently issued with respect thereto or in substitution
therefor, unless a sale, transfer or other disposition is executed pursuant to
one or more of the alternative conditions set forth in Section 6(c) shall have
occurred, or unless the conditions of paragraph (k) of Rule 144 promulgated
under the Securities Act shall have been satisfied, shall bear a legend
substantially as follows, in addition to any legend the Company determines is
required pursuant to any applicable legal requirement:
"The shares represented by this certificate may not be offered, sold,
pledged, transferred or otherwise disposed of except in accordance with
the requirements of the Securities Act of 1933, as amended, and the
other conditions specified in that certain Series C Preferred Stock
Purchase Agreement dated as of September 29, 1999 and that certain
Registration Rights and Lock-Up Agreement dated as of September 29,
1999, copies of which agreements CAIS Internet, Inc. will furnish,
without charge, to the holder of this certificate upon written request
therefor."
The Company, at its discretion, may cause a stop transfer order to be placed
with its transfer agent with respect to the certificates for the Shares but not
as to the certificates for any part of the Shares as to which said legend is no
longer appropriate when one or more of the alternatives set forth in Section
7(c) shall have been satisfied or the conditions of paragraph (k) of Rule 144
promulgated under the Securities Act shall have been satisfied.
<PAGE>
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9. INDEMNIFICATION; CONTRIBUTION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to
indemnify and hold harmless the Holder and its officers and directors and each
Person, if any, who controls the Holder within the meaning of Section 15 of the
Securities Act as follows:
(i) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, arising out of any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) pursuant to which the Holder's Registrable
Securities were registered under the Securities Act, including all documents
incorporated therein by reference, or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in any Prospectus (or any
amendment or supplement thereto), including all documents incorporated therein
by reference, or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim,
damage and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or investigation or proceeding by
any governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, if such settlement
is effected with the written consent of the Company; and
(iii) against any and all expense (including
reasonable fees and disbursements of counsel), as reasonably incurred in
investigating, preparing or defending against any litigation, or investigation
or proceeding by any governmental agency or body, commenced or threatened, in
each case whether or not a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under subparagraph (i) or (ii)
above, PROVIDED, HOWEVER, that the indemnity provided pursuant to this Section
9(a) does not apply to the Holder with respect to any loss, liability, claim,
damage or expense to the extent arising out of any untrue statement or omission
or alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by the Holder expressly for
use in a Registration Statement (or any amendment thereto) or any Prospectus (or
any amendment or supplement thereto).
(b) INDEMNIFICATION BY HOLDER. The Holder agrees to indemnify
and hold harmless the Company and its directors and officers (including each
director and officer of the Company who signed the Registration Statement), and
each Person, if any, who controls the Company within the meaning of Section 15
of the Securities Act, to the same extent as the indemnity contained in Section
9(a) hereof (except that any settlement described in Section 9(a)(ii) shall be
effected with the written consent of the Holder), but
<PAGE>
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only insofar as such loss, liability, claim, damage or expense arises out of or
is based upon any untrue statement or omission, or alleged untrue statement or
omission, made in a Registration Statement (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by the Holder expressly for use in such Registration Statement
(or amendment thereto) or such Prospectus (or any amendment or supplement
thereto). In no event shall the liability of the Holder under this Section 9(b)
be greater in amount than the dollar amount of the proceeds received by the
Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Each indemnified
party shall give reasonably prompt notice to the indemnifying party of any
action or proceeding commenced against it in respect of which indemnity may be
sought hereunder, but failure to so notify the indemnifying party (i) shall not
relieve it from any liability that it may have under the indemnity agreement
provided in Section 9(a) or (b) above, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the indemnified party
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (ii) shall not relieve, in any event, the indemnifying party from
any obligations to the indemnified party other than the indemnification
obligation provided under Section 9(a) or (b) above. If the indemnifying party
so elects within a reasonable time after receipt of such notice, the
indemnifying party may assume the defense of such action or proceeding at the
indemnifying party's own expense with counsel chosen by the indemnifying party
and approved by the indemnified party defendant in such action or proceeding,
which approval shall not be unreasonably withheld; PROVIDED, HOWEVER, that, if
the indemnified party reasonably determines that a conflict of interest exists
where it is advisable for such indemnified party to be represented by separate
counsel or that, upon advice of counsel, there may be legal defenses available
to it that are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled to assume
such defense and the indemnified party shall be entitled to one separate counsel
at the indemnifying party's expense. If the indemnifying party is not entitled
to assume the defense of such action or proceeding as a result of the proviso to
the preceding sentence, the indemnifying party's counsel shall be entitled to
conduct the indemnifying party's defense and counsel for the indemnified party
shall be entitled to conduct the defense of the indemnified party, it being
understood that both such counsel will cooperate with each other to conduct the
defense of such action or proceeding as efficiently as possible. In such event,
however, no indemnifying party will be liable for any settlement effected
without the written consent of the indemnifying party. If the indemnifying party
is entitled to assume, and assumes, the defense of such action or proceeding in
accordance with this paragraph, the indemnifying party shall not be liable for
the fees and expenses of counsel for the indemnified party incurred thereafter
in connection with such action or proceeding.
(d) CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for in
this Section 8 is held to be unenforceable for any reason even though it is
applicable in accordance with its terms, the Company and the Holder shall
contribute to the aggregate losses, liabilities, claims, damages and expenses of
the nature contemplated by this
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indemnity agreement incurred by the Company and the Holder, in such proportion
as is appropriate to reflect the relative fault of and benefits to the Company
on the one hand and the Holder on the other, in connection with the statements
or omissions that resulted in such losses, claims, damages, liabilities or
expenses, as well as any other relative equitable considerations. The relative
benefits to the indemnifying party and indemnified party shall be determined by
reference to, among other things, the total proceeds received by the indemnified
party and the indemnifying party in connection with the Offering to which such
losses, claims, damages, liabilities or expenses relate. The relative fault of
the indemnifying party and the indemnified party shall be determined by
reference to, among other things, whether the action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, the indemnifying party or the indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action.
The parties hereto agree that it would not be just or
equitable if contribution pursuant to this Section 9(d) 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 the immediately preceding
paragraph. Notwithstanding the provisions of this Section 9(d), the Holder shall
not be required to contribute any amount in excess of the amount by which the
total price at which the Registrable Securities were offered to the public
exceeds the amount of any damages that the Holder has otherwise been required to
pay by reason of such untrue statement or omission.
Notwithstanding the foregoing, no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 9(d), each Person, if
any, who controls a holder within the meaning of Section 5 of the Securities Act
and directors and officers of a holder shall have the same rights to
contribution as such holder, and each director of the Company, each officer of
the Company who signed the Registration Statement and each Person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act
shall have the same rights to contribution as the Company.
10. RULE 144 SALES.
(a) The Company covenants that it will file the reports
required to be filed by the Company under the Securities Act and the Securities
Exchange Act, as amended, so as to enable the Holder to sell the Registrable
Securities pursuant to Rule 144 under the Securities Act, to the extent such
securities are otherwise transferable.
(b) In connection with any sale, transfer or other disposition
by the Holder of any Registrable Securities pursuant to Rule 144 under the
Securities Act, the Company shall cooperate with the Holder to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be sold and not bearing any Securities Act legend, and enable
certificates to be for such number of shares and
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registered as the Holder may reasonably request at least two business days prior
to any sale of Registrable Securities.
11. MISCELLANEOUS.
(a) 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, without the written consent of the Company and the Holder.
Notice of any amendment, modification or supplement to this Agreement adopted in
accordance with this Section 10(a) shall be provided by the Company to the
Holder at least thirty (30) days prior to the effective date of such amendment,
modification or supplement.
(b) 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 the Holder, at the most current address given by the Holder
to the Company by means of a notice given in accordance with the provisions of
this Section 10(b), or (ii) if to the Company, at 1255 22nd Street, N.W.,
Washington, D.C. 20037, Attention: Chief Executive Officer.
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; or
at the time delivered if delivered by an air courier guaranteeing overnight
delivery.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns as permitted
hereunder of each of the parties and, except as provided in Section 9 hereof, no
other Person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of the Shares from the Holder shall be deemed a
successor or assign by reason of such purchase. The benefits and obligations of
the Holder under this Agreement may be assigned only by a written instrument
signed by the Holder and such assignee. If any successor or such an assignee of
the Holder shall acquire Registrable Securities, whether by operation of law or
otherwise, such Registrable Securities shall be held subject to all of the terms
of this Agreement.
(d) 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.
(e) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF
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THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAW PROVISIONS
THEREOF.
(g) SPECIFIC PERFORMANCE. The parties hereto acknowledge that
there would be no adequate remedy at law if either party fails to perform any of
its obligations hereunder, and accordingly agree that each party, in addition to
any other remedy to which it may be entitled at law or in equity, shall be
entitled to compel specific performance of the obligations of the other party
under this Agreement in accordance with the terms and conditions of this
Agreement in any court of the United States or any State thereof having
jurisdiction.
(h) ENTIRE AGREEMENT. This Agreement is intended by the
parties as a final expression of their agreement and intended to be a complete
and exclusive statement of the agreement and understanding of the parties hereto
in respect of the subject matter contained herein. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
(i) ADDITIONAL ACTIONS AND DOCUMENTS. The parties hereto shall
take or cause to be taken such further actions, shall execute, deliver and file,
or cause to be executed, delivered or filed, such further documents and
instruments, and shall obtain such consents as may be necessary or as the other
party may reasonably request, without the payment of further consideration, in
order fully to effectuate the purposes, terms and conditions of this Agreement.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
and Lock-Up Agreement as of the date first written above.
CAIS INTERNET, INC.
By: /s/ ULYSSES G. AUGER, II
-----------------------------------------
Name: ULYSSES G. AUGER, II
---------------------------------------
Chief Executive Officer
U.S. TELESOURCE, INC.
By: /s/ MARC B. WEISBERG
-----------------------------------------
Name: MARC B. WEISBERG
---------------------------------------
Address: 700 Qwest Tower
555 Seventeenth Street
<PAGE>
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FIRST AMENDMENT TO
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
This FIRST AMENDMENT TO REGISTRATION RIGHTS AND LOCK-UP AGREEMENT (this
"AMENDMENT"), is dated as of October 27, 1999, by and between CAIS Internet,
Inc., a Delaware corporation (the "COMPANY"), and U.S. Telesource, Inc., a
Delaware corporation (the "HOLDER"). Except as otherwise provided below, all
undefined, capitalized terms used herein will have the meanings ascribed to such
terms in that certain Registration Rights and Lock-Up Agreement dated as of
September 29, 1999, by and between the Company and the Holder (the "AGREEMENT").
W I T N E S S E T H:
WHEREAS, the Company and the Holder have entered into the Agreement,
pursuant to which the Company granted to the Holder certain registration rights
with respect to shares of Common Stock issued or issuable upon the conversion of
the Holder's Shares in accordance with the Company's Amended and Restated
Certificate of Incorporation, as amended, and the Certificate of Designation
related to the Shares, and the Holder agreed to certain transfer restrictions
with respect to the Shares; and
WHEREAS, the Company has issued to the Holder a certain Common Stock
Warrant of even date herewith (the "WARRANT") that entitles the Holder to
purchase from the Company up to 500,000 shares of Common Stock of the Company
(the "WARRANT SHARES"), and the Company and the Holder desire that the same
registration rights and transfer restrictions applicable to the Shares apply to
the Warrant Shares;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
1. AMENDMENT TO AGREEMENT.
Upon execution of this Amendment, the Agreement will be
amended by deleting the definition of the term "Registrable Securities" in its
entirety from Section 1 thereof and replacing such definition as follows:
"REGISTRABLE SECURITIES" shall mean any shares of Common Stock
issued or issuable upon (i) the conversion of the Holder's Shares in accordance
with the Company's Amended and Restated Certificate of Incorporation, as
amended, and the Certificate of Designation related to the Shares, and (ii) the
exercise of the Warrant, but excluding, in each case, (x) Registrable Securities
for which a Registration Statement relating to the sale thereof shall have
become effective under the Securities Act or (y) Registrable Securities which
the holder thereof may sell in any one three month period pursuant to Rule 144
under the Securities Act (or such successor rule as may be adopted).
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2. OTHER TERMS.
Except as otherwise provided herein, all other terms and
conditions of the Agreement will remain in full force and effect.
[SIGNATURES APPEAR ON THE FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed this First Amendment to
Registration Rights and Lock-Up Agreement as of the date first written above.
CAIS INTERNET, INC.
By: /s/ WILLIAM M. CALDWELL IV
--------------------------------
Name: William M. Caldwell IV
-------------------------------
U.S. TELESOURCE, INC.
By: /s/ MARC B. WEISBERG
--------------------------------
Name: MARC B. WEISBERG
--------------------------------
