Initial Public Offering (IPO): Pre-Effective Amendment to Registration Statement (General Form) — Form S-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-1/A Form S-1 Amendment Number 1 107 579K
2: EX-3.1 Restated Certificate of Incorporation 25 111K
3: EX-3.2 Amended and Restated By-Laws 18 82K
4: EX-4.1 Specimen Common Stock Certificate 2 12K
5: EX-4.2 Warrant Agreement Dtd September 4, 1998 33 94K
6: EX-4.3 Common Stock Warrant Dtd 02/19/1999 8 37K
7: EX-4.4 Common Stock Warrant Dtd 02/19/1999 8 37K
8: EX-4.5 Stockholders Agreement Dated 02/19/1999 28 142K
9: EX-10.1 Investment Agreement Dated 04/22/1998 2 19K
16: EX-10.10 Assignment and Assumption Dtd 10/02/1998 3 18K
17: EX-10.12 Employment Agreement Dtd 6/29/1998 15 53K
18: EX-10.13 Agreement for Cooperative Use Dtd 11/5/1996 37 112K
19: EX-10.14 Letter of Agreement Dtd 2/28/1997 2 15K
20: EX-10.15 Letter of Agreement Option Dtd 4/4/1997 2± 14K
21: EX-10.16 Letter Amendement Agreement Dtd 8/1/1997 3 17K
22: EX-10.17 Letter Amendement Agreement Dtd 10/21/1997 2± 14K
23: EX-10.18 Application Transfer Dtd 01/06/1999 2± 15K
24: EX-10.19 Assignment of Ussn and Pct Dtd 01/06/1999 2 16K
25: EX-10.20 Letter Amendment Agreement Dtd 01/26/1999 2 20K
26: EX-10.21 Assignmt of 50% of Certain Patent Prop Dtd 3 24K
01/26/1999
27: EX-10.22 Assignmt of Certain Trademarks Dtd 02/09/1999 2 15K
28: EX-10.23 Internet Services Agreement Dtd 10/24/1997 6 37K
29: EX-10.24 Collaboration Agreement Dtd 02/18/1998 2 17K
30: EX-10.25 Cais Iport License Agreement Dtd 09/10/1998 19 70K
31: EX-10.26 Marketing Assoc. Solution Agreement Dtd 11/11/1998 10 50K
32: EX-10.27 Master License Agreement Dtd 12/23/1998 51 175K
33: EX-10.28 Agreement for High Speed Net Access Serv Dtd 26 93K
02/19/1999
34: EX-10.29 Deed of Lease Dtd July 28, 1997 13 44K
10: EX-10.3 Series A Stock Dtd 02/19/1999 43 177K
35: EX-10.30 Deed of Lease Dtd May 28, 1998 12 41K
36: EX-10.31 Office Building Lease Dtd 11/21/1998 71± 279K
37: EX-10.32 Settle Agreement Dtd 01/24/1999 17 48K
38: EX-10.33 Amended and Restated Equity Dtd 02/12/1999 9 46K
11: EX-10.4 Exchange Agreement Dtd 10/02/1998 5 22K
12: EX-10.5 Agreement of Merger Dtd 10/02/1998 5 25K
13: EX-10.6 Amended and Restated Employment Agreement Dtd 9 43K
06/03/1997
14: EX-10.7 Assignment and Assumption Dtd 10/02/1998 3 17K
15: EX-10.9 Amended Employment Agreement Dtd 9/8/1997 11 49K
EXHIBIT 10.3
CAIS INTERNET, INC.
1255 22/ND/ Street, N.W.
Washington, DC 20037
SERIES A PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
February 19, 1999
TABLE OF CONTENTS
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Page
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Section 1 Authorization and Sale of Preferred Stock and Warrants.............................................. 1
1.1 Authorization................................................................................ 1
1.2 Sale and Issuance of Shares and Warrants..................................................... 1
Section 2 Closing Dates; Delivery............................................................................. 1
2.1 Closing...................................................................................... 1
2.2 Delivery..................................................................................... 2
Section 3 Representations and Warranties of the Company........................................................ 2
3.1 Organization and Standing; Certificate and By-Laws........................................... 2
3.2 Corporate Power.............................................................................. 2
3.3 Authorization................................................................................ 3
3.4 Subsidiary................................................................................... 3
3.5 No Violation or Default...................................................................... 4
3.6 Consent...................................................................................... 4
3.7 Capitalization............................................................................... 5
3.8 Financial Statements......................................................................... 5
3.9 Changes...................................................................................... 6
3.10 Environmental Matters........................................................................ 7
3.11 Litigation................................................................................... 7
3.12 Title to Properties and Assets; Liens........................................................ 8
3.13 Intellectual Property; Trademarks............................................................ 8
3.14 Tax Matters.................................................................................. 9
3.15 Investment Company........................................................................... 9
3.16 Employee Matters............................................................................. 9
3.17 Condition of System.......................................................................... 9
3.18 Fees; License Compliance..................................................................... 9
3.19 No Conflict of Interest...................................................................... 10
3.20 Agreements; Action........................................................................... 10
3.21 Brokers or Finders........................................................................... 11
3.22 Disclosure................................................................................... 11
Section 4 Representations and Warranties of the Purchasers..................................................... 11
4.1 Experience; Speculative Nature of Investment................................................. 11
4.2 Investment................................................................................... 11
4.3 Restricted Securities........................................................................ 12
4.4 No Public Market............................................................................. 12
4.5 Access to Data............................................................................... 12
4.6 Authorization................................................................................ 12
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4.7 Brokers or Finders........................................................................... 12
4.8 Tax Liability................................................................................ 13
Section 5 Conditions to Purchasers' Obligations to Close....................................................... 13
5.1 Representations and Warranties Correct....................................................... 13
5.2 Covenants.................................................................................... 13
5.3 Opinion of Company's Counsel................................................................. 13
5.4 Blue Sky..................................................................................... 13
5.5 Stockholders Agreement....................................................................... 13
5.6 Conversion of Affiliate Debt................................................................. 13
5.7 ING Consent.................................................................................. 13
Section 6 Conditions to Company's Obligations to Close......................................................... 14
6.1 Representations and Warranties Correct....................................................... 14
6.2 Covenants.................................................................................... 14
6.3 Blue Sky..................................................................................... 14
6.4 Stockholders Agreement....................................................................... 14
6.5 ING Consent.................................................................................. 14
Section 7 Confidential Information............................................................................. 14
7.1 Confidential Company Information............................................................. 14
7.2 Confidential Purchaser Information........................................................... 15
Section 8 Miscellaneous........................................................................................ 15
8.1 Governing Law................................................................................ 15
8.2 Jurisdiction; Jury Trial Waiver.............................................................. 15
8.3 Survival..................................................................................... 15
8.4 Successors and Assigns....................................................................... 15
8.5 Entire Agreement; Amendment.................................................................. 15
8.6 Notices, etc................................................................................. 16
8.7 Delays or Omissions.......................................................................... 16
8.8 Counterparts................................................................................. 16
8.9 Severability................................................................................. 16
8.10 Titles and Subtitles......................................................................... 17
8.11 Expenses..................................................................................... 17
8.12 Use of Proceeds.............................................................................. 17
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EXHIBITS
A Schedule of Purchasers
B Form of Warrant
C Amended and Restated Certificate of Incorporation
D Bylaws
E Disclosure Schedule
F Stockholders Agreement
G Financial Statements
H Opinion of Counsel for the Company
I Form of Promissory Note
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CAIS INTERNET, INC.
SERIES A PREFERRED STOCK
AND WARRANT PURCHASE AGREEMENT
This Series A Preferred Stock and Warrant Purchase Agreement (this
"Agreement") is made as of February 19, 1999 by and among CAIS Internet, Inc.
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(f/k/a CGX Communications, Inc.), a Delaware corporation (the "Company"), and
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the persons and entities listed on the Schedule of Purchasers attached hereto as
Exhibit A (collectively the "Purchasers," and each individually a "Purchaser").
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SECTION 1
AUTHORIZATION AND SALE OF PREFERRED STOCK AND WARRANTS
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1.1 AUTHORIZATION. The Company has authorized the sale and issuance of
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(i) up to an aggregate of 2,827,168 shares of the Company's Series A Preferred
Stock, par value $.01 per share ("Series A Shares"), and (ii) warrants (the
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"Warrants") to purchase shares of the Company's Common Stock, par value $.01 per
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share (the "Common Stock"), in such number and at such exercise price as to be
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determined in accordance with the form of Warrant attached hereto as Exhibit B.
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The Series A Shares and the Warrants are herein sometimes collectively referred
to as the "Securities."
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1.2 SALE AND ISSUANCE OF SHARES AND WARRANTS. Subject to the terms and
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conditions of this Agreement, each Purchaser agrees to purchase from the
Company, and the Company agrees to sell and issue to each Purchaser (i) the
number of Series A Shares set forth in the column designated "Number of Series A
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Shares" opposite such Purchaser's name on the Schedule of Purchasers attached
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hereto as Exhibit A, at a purchase price of $4.07 per share, and (ii) a Warrant
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having a "Warrant Share Percentage" set forth in the column designated as such
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opposite such Purchaser's name on the Schedule of Purchasers attached hereto as
Exhibit A. The Company's agreement with each Purchaser is a separate agreement,
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and the sale of the Series A Shares to each Purchaser is a separate sale.
SECTION 2
CLOSING DATES; DELIVERY
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2.1 CLOSING. The purchase and sale of the Securities hereunder shall take
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place at a closing (the "Closing") on February 19, 1999 (the "Closing Date").
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The Closing shall be held at the offices of Swidler Berlin Shereff Friedman,
LLP, 3000 K Street, N.W., Washington, D.C. 20007, at 2:00 p.m. local time, on
the Closing Date, or at such other time and place upon which the Company and the
Purchasers shall agree.
2.2 DELIVERY. At the Closing, the Company will deliver to each Purchaser,
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as set forth opposite such Purchaser's name on the Schedule of Purchasers
attached hereto as Exhibit
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A, (i) a certificate registered in such Purchaser's name representing the number
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of Series A Shares to be purchased specified in the column designated "Number of
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Series A Shares" against payment of the purchase price therefor, and (ii) a
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Warrant having a Warrant Share Percentage specified in the column designated
"Warrant Share Percentage" opposite such Purchaser's name on the Schedule of
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Purchasers. At the Closing, each Purchaser will pay to the Company by
cancellation of indebtedness and/or wire transfer of immediately available
federal funds per the Company's instructions cash in the amount set forth
opposite such Purchaser's name on the Schedule of Purchasers attached hereto as
Exhibit A in the column designated "Purchase Price." Notwithstanding the
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foregoing, of such amount payable by Chancery Lane, L.P., $2,000,000 shall be
paid in cash as aforesaid, and $8,000,000 shall be paid by delivery of a
promissory note in the form of Exhibit I hereto.
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SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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The Company represents and warrants to the Purchasers as of the date of
this Agreement that except as set forth in the disclosure schedule (the
"Disclosure Schedule") attached as Exhibit E:
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3.1 ORGANIZATION AND STANDING; CERTIFICATE AND BY-LAWS. The Company is a
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corporation duly organized and existing under, and by virtue of, the laws of the
State of Delaware and is in good standing under such laws. The Company has all
requisite corporate power and authority to own and operate its properties and
assets, and to carry on its business as presently conducted and as proposed to
be conducted. The Company is presently qualified to do business as a foreign
corporation in each jurisdiction where the failure to be so qualified would
reasonably be expected to have a material adverse effect on the financial
condition, results of operations, assets or liabilities of the Company and its
Subsidiary (as defined in Section 3.4 below) taken as a whole (a "Material
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Adverse Effect"). A true and correct copy of the Company's Amended and Restated
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Certificate of Incorporation (the "Restated Certificate") is attached hereto as
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Exhibit C, and a true and correct copy of the Company's By-Laws (the "By-Laws")
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is attached hereto as Exhibit D, which in each case shall be in full force and
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effect as of the Closing Date. Such copies contain all amendments through the
Closing Date.
3.2 CORPORATE POWER. The Company has all requisite legal and corporate
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power and authority to execute and deliver this Agreement, the Warrants and that
certain Stockholders Agreement entered into by and among the Company, the
Purchasers and the Existing Stockholders (as defined therein) dated as of the
date hereof and attached as Exhibit F (the "Stockholders Agreement"), to sell
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and issue the Securities hereunder, to issue the shares of the Common Stock
issuable upon conversion of the Series A Shares and upon exercise of the
Warrants, and to carry out and perform its obligations under the terms of this
Agreement, the Warrants and the Stockholders Agreement. The shares of Common
Stock issuable upon conversion of the Series A Shares and upon exercise of the
Warrants are sometimes collectively referred to as the "Conversion Stock." This
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Agreement, the Warrants and the Stockholders Agreement are sometimes
collectively referred to as the "Transaction Documents."
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3.3 AUTHORIZATION. All action on the part of the Company, its directors
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and stockholders necessary for the authorization, execution and delivery of the
Transaction Documents, the performance by the Company of its obligations
thereunder, and the authorization, sale, issuance and delivery of the Securities
has been taken or will be taken prior to each Closing. The Transaction
Documents, when executed and delivered by the Company, shall constitute valid
and binding obligations of the Company, enforceable in accordance with their
terms, subject to laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies, and except as the indemnification
provisions of Section 5.7 of the Stockholders Agreement may be limited by
principles of public policy. The Series A Shares, when issued in compliance
with the provisions of this Agreement, will be validly issued, fully paid and
nonassessable, and will have the rights, preferences and privileges described in
the Restated Certificate; the Conversion Stock has been duly and validly
reserved and, when issued in compliance with the terms of this Agreement, the
Warrants 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 Series A Shares and the Conversion Stock will
be delivered to the Purchasers free of any liens or encumbrances, other than any
liens or encumbrances created by or imposed upon or by virtue of the Purchasers;
provided, however, that the Series A 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 Stockholders Agreement. Except as set forth in the
Certificate of Incorporation and the Stockholders Agreement, the Series A
Shares, the Warrants and the Conversion Stock are not subject to any preemptive
rights or rights of first refusal.
3.4 SUBSIDIARY.
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(a) The Disclosure Schedule sets forth a list of (i) the only
corporation, partnership, limited liability company, firm or other entity of
which 50 percent or more of the voting power, equity securities or equity
interest is owned, directly or indirectly, by the Company (the "Subsidiary") and
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(ii) any other corporation, partnership, limited liability company or other
entity in which the Company or any Subsidiary currently owns, directly or
indirectly, any equity interest (an "Affiliated Entity"). For purposes of
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determining whether an entity is an Affiliated Entity, unexercised options or
other future or contingent rights to acquire equity in those entities in which
the Company or the Subsidiary has invested less than U. S. $50,000 individually
or less than U.S. $250,000 in the aggregate shall not be deemed to be equity
interests that are currently owned directly or indirectly. The Disclosure
Schedule sets forth the percentage record and beneficial ownership interest of
the Company in the Subsidiary and each Affiliated Entity. The Subsidiary has
been fully formed and is validly existing under the laws of the jurisdiction of
its formation, is duly licensed or qualified to transact business in each
jurisdiction where the failure to be qualified would have a material adverse
effect on the financial condition, results of operations, assets or liabilities
of such Subsidiary, and has the requisite corporate power and authority to own
and operate its properties and assets and to carry on its business as presently
conducted and as proposed to be conducted. The issued and outstanding shares of
capital stock of the Subsidiary has been duly and validly authorized and issued
and is fully paid and nonassessable. The equity interests held by the Company
or the Subsidiary in each Affiliated
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Entity are owned beneficially or of record by the Company and/or the Subsidiary
free and clear of any liens, encumbrances or adverse claims, other than rights
set forth in agreements listed in Section 3.4 of the Disclosure Schedule, copies
of which agreements will be provided to the Purchasers upon request, relating to
arrangements between the Company and the Subsidiary or their nominees.
(b) On February 12, 1999, the Company completed a reorganization (the
"Reorganization") whereby the following transactions were effectuated: (i) the
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Company transferred to its then wholly owned subsidiary Cleartel Communications,
Inc., a District of Columbia corporation ("Cleartel, Inc."), all of its limited
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partnership interests in Cleartel Communications Limited Partnership, a District
of Columbia limited partnership ("Cleartel, L.P."), of which Cleartel, Inc. was
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then the sole general partner, and the Company was the sole limited partner;
(ii) Cleartel, Inc. was liquidated; and (iii) the Company spun-off Cleartel,
Inc. by means of a stock dividend paid to stockholders of record of the Company
as of February 12, 1999. Cleartel, Inc. and Cleartel, L.P. were solvent as of
the date of, and after giving effect to, the Reorganization. Neither the
Company nor the Subsidiary has any liabilities or obligations related to the
Cleartel, Inc. or Cleartel, L.P. except for the $3,491,000 of indebtedness of
the Company to Cleartel, Inc., a portion of which is to be repaid as provided
in Section 8.12. Neither the execution of the Transaction Documents by the
Purchasers nor their acquisition and ownership of the Securities will result in
any tax liability for the Purchasers resulting from the Reorganization.
3.5 NO VIOLATION OR DEFAULT. The execution, delivery and performance of
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and compliance with the Transaction Documents, and the issuance of the
Securities and the Conversion Stock (i) have not resulted and will not result in
any violation of, or conflict with, or constitute a default under, the Restated
Certificate or the Company's By-Laws or any of its material agreements or
obligations or, in any material respect, any applicable order, statute, rule,
regulation, order or decree, nor (ii) will it result in the creation of, any
mortgage, pledge, lien, encumbrance or charge upon any of the material
properties or assets of the Company. Neither the Company nor the Subsidiary is
in violation of or in default under (i) its certificate of incorporation or By-
Laws or, to the best of the Company's knowledge, 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.
3.6 CONSENTS. No consent, approval or authorization of or designation,
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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 the Transaction Documents, or the offer, sale or issuance of the
Securities 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 Securities and the Conversion Stock
under applicable blue sky laws, which qualifications, if required, will be
accomplished in a timely manner, and the consent referred to in Sections 5.7 and
6.5.
3.7 CAPITALIZATION. The authorized capital stock of the Company consists
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of 100,000,000 shares of Common Stock, of which 9,965,505 shares are issued and
outstanding as of
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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 Shares,
none of which are issued and outstanding prior to the Closing, and 1,119,679
shares are designated as Series B Preferred Stock, par value $.01 per share (the
"Series B Shares"), all of which are issued and outstanding as of the date of
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this Agreement. The outstanding Series B Shares and shares of Common Stock have
been duly authorized and validly issued in compliance with applicable laws, and
are fully paid and nonassessable. The Company has reserved (a) 2,827,168 Series
A Shares for issuance hereunder, (b) 1,500,000 shares of Common Stock for
issuance to employees, consultants or directors pursuant to its Amended and
Restated 1998 Equity Incentive Plan, (c) 2,033,926 shares of Common Stock for
issuance to two executive officers of the Company pursuant to option agreements,
(d) 390,000 shares of Common Stock for issuance upon exercise of warrants held
by ING (U.S.) Capital, Inc., (e) 2,827,168 shares of Common Stock for issuance
upon conversion of the Series A Shares to be issued hereunder, (f) 1,119,679
shares of Common Stock for issuance upon conversion of the Series B Shares, (g)
1,000,000 shares of Common Stock for issuance upon exercise of the Warrants to
be issued hereunder and (h) 25,000 shares of Common Stock for issuance pursuant
to the Settlement Agreement dated January 24, 1999 between CAIS, Inc. and Terk
Technologies Corp. The Common Stock, the Series A Shares and the Series B Shares
have the rights, preferences, privileges and restrictions set forth in the
Restated Certificate. Except as set forth above, there are no options, warrants
or other rights to purchase any of the Company's authorized and unissued capital
stock.
3.8 FINANCIAL STATEMENTS. Exhibit G includes: (i) the audited balance
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sheet, statement of operations, statement of changes in stockholders' deficit
and statement of cash flows of the Company and its consolidated Subsidiary as of
and for the fiscal years ending December 31, 1997 and December 31, 1998
(collectively the "Financial Statements"), which have been prepared in
--------------------
accordance with United States generally accepted accounting principles
("USGAAP") consistently applied and are complete and correct in all material
------
respects, and accurately set out and describe and fairly present the financial
condition and operating results of the Company and its consolidated Subsidiary
as of the dates and during the periods indicated therein; and (ii) an accurate
and complete unaudited capitalization table (including all indebtedness other
than accounts payable incurred in the ordinary course of business) for the
Company and its consolidated Subsidiary as of February 12, 1999. Except as set
forth in the Financial Statements, the Company has no material indebtedness or
liabilities, contingent or otherwise, other than (A) indebtedness or liabilities
incurred in the ordinary course of business subsequent to December 31, 1998 and
(B) obligations under contracts and commitments incurred in the ordinary course
of business and not required under USGAAP to be reflected in the Financial
Statements, which, in both cases, individually or in the aggregate, are not
material to the financial condition or operating results of the Company. Except
as disclosed in the Financial Statements, the Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with USGAAP.
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3.9 CHANGES. Since December 31, 1998, there has not been:
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(i) any change in the assets, liabilities, financial condition or
operations of the Company or the Subsidiary except changes in the ordinary
course of business which have not been in any case materially adverse and except
that the Company and the Subsidiary have continued to incur operating losses
consistent with the budgets previously provided to the Purchasers;
(ii) any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties or business of the
Company or the Subsidiary;
(iii) any waiver or compromise by the Company or the Subsidiary of
a valuable right or of a material debt owed to it;
(iv) any loans in excess of $10,000 made by the Company or the
Subsidiary to their respective employees, officers or directors other than
travel advances made in the ordinary course of business (other than loans repaid
in connection with the issuance of the Series B Shares);
(v) any satisfaction or discharge of any lien, claim or
encumbrance or payment of any obligation by the Company or the Subsidiary,
except in the ordinary course of business and that is not material to the
assets, properties, financial condition, operating results or business of the
Company and the Subsidiary (as such business is presently conducted and as it is
proposed to be conducted) (other than the discharge of certain indebtedness in
connection with the issuance of the Series B Shares);
(vi) any material change or amendment to a material contract or
arrangement by which the Company or the Subsidiary or any of their respective
assets or properties is bound or subject;
(vii) any material change in any compensation arrangement or
agreement with any employee of the Company or the Subsidiary;
(viii) any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets of the Company or the
Subsidiary;
(ix) any resignation or termination of employment of any key
officer of the Company or the Subsidiary (and the Company, to the best of its
knowledge, does not know of the impending resignation or termination of
employment of any such officer);
(x) receipt of notice that there has been a loss of, or material
order cancellation by, any major customer of the Company or the Subsidiary;
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(xi) any mortgage, pledge, transfer of a security interest in, or
lien, created by the Company or the Subsidiary, with respect to any of their
respective material properties or assets, except liens for taxes not yet due or
payable;
(xii) any declarations, setting aside or payment or other
distribution in respect of any of the Company's capital stock, or any direct or
indirect redemption, purchase or other acquisition of any of such stock by the
Company;
(xiii) since February 12, 1999, any incurrence of indebtedness by
the Company or the Subsidiary (other than accounts payable incurred in the
ordinary course of business);
(xiv) to the best of the Company's knowledge, the occurrence of
any other event or condition of any character that materially and adversely
affects the assets, properties, financial condition, operating results or
business of the Company and the Subsidiary (as such business is presently
conducted and as it is proposed to be conducted);
(xv) the making of an agreement or commitment by the Company to do
any of the things described in this Section 3.9, other than as contemplated
hereby.
3.10 ENVIRONMENTAL MATTERS. The properties, assets and operations of the
---------------------
Company and its Subsidiary 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 or the Subsidiary.
3.11 LITIGATION. There are no actions, suits, proceedings or
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investigations pending against the Company or its Subsidiary or their respective
properties before any court or governmental agency (nor, to the best of the
Company's knowledge, is there any threat thereof). Neither the Company nor the
Subsidiary is a party or subject to the provision of any order, writ,
injunction, judgment or decree of any court or governmental agency or
instrumentality. There is no action, suit, proceeding or investigation by the
Company or the Subsidiary currently pending or that the Company or the
Subsidiary intends to initiate.
3.12 TITLE TO PROPERTIES AND ASSETS; LIENS. Each of the Company and the
-------------------------------------
Subsidiary 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 or the Subsidiary,
and which have not arisen otherwise than in the ordinary course of business,
(iii) liens to secure vendor financing or installment purchases, and (iv) liens
in favor of ING (U.S.) Capital Corporation.
3.13 INTELLECTUAL PROPERTY; TRADEMARKS.
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(a) Each of the Company and the Subsidiary 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 or the
Subsidiary, as the case may be, as presently conducted. To the best of the
Company's knowledge, neither the Company nor the Subsidiary is 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 Attachment A to the Disclosure
Schedule (the "Properties"), and, in particular, is a 100 percent owner of the
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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
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 right to do so) all of the pending patent
applications listed in Attachment A to the Disclosure Schedule, 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.
(f) There are no encumbrances, third party or otherwise, against any
of the Properties.
3.14 TAX MATTERS. The Company, the Subsidiary, any predecessor of the
-----------
Company or the Subsidiary, and all current and former members for income tax
purposes of any affiliated group of corporations of which the Company, the
Subsidiary 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 (as shown on the Disclosure Schedule), in conformity with USGAAP
-8-
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 the Subsidiary or any other Taxpayer, and
there are no claims known by the Company or any Taxpayer which have been or may
be asserted relating to any of the 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 each 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 EMPLOYEE MATTERS. Except as set forth in the Disclosure Schedule,
----------------
neither the Company nor the Subsidiary has any employment contracts with any of
its employees not terminable at will or has any collective bargaining agreement
covering any of its employees. The Company is not aware of any labor
organization activity involving its or its Subsidiary's employees. The Company
and the Subsidiary are 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 and the Subsidiary 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. Each of the Company and the Subsidiary
------------------------
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 USGAAP for any such fees and charges which have accrued. The
Company and the Subsidiary have 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 or the
Subsidiary. All of the Company's licenses, including licenses held through or
by its Subsidiary or 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 Subsidiary or
Affiliated Entities, will not be renewed in the ordinary course.
3.19 NO CONFLICT OF INTEREST. Except as set forth in the Disclosure
-----------------------
Schedule, neither the Company nor the Subsidiary is 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
-9-
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 or the Subsidiary. The Disclosure
Schedule sets forth a description of all transactions since January 1, 1996,
between the Company or the Subsidiary and any of their respective officers,
directors and stockholders, and their respective spouses and children in which
such persons had a direct or indirect material interest.
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 or the Subsidiary in excess of
$50,000, (ii) the license of any patent, copyright, trade secret or other
proprietary rights to or from the Company or the Subsidiary, (iii) provisions
restricting or affecting the development, manufacture or distribution of the
Company's or the Subsidiary's products or services or (iv) indemnification by
the Company or the Subsidiary with respect to infringements of proprietary
rights.
(b) Neither the Company nor the Subsidiary is a party to or is bound
by any contract, agreement or instrument, or subject to any restriction under
its certificate or articles of incorporation or its by-laws, that adversely
affects its business as now conducted or as proposed to be conducted, or its
properties or financial condition.
(c) Neither the Company nor the Subsidiary has 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 or the
Subsidiary 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 the Subsidiary 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 acquisition, liquidation, dissolution or winding up of the Company or
the Subsidiary.
(d) Except as provided in the Stockholders Agreement, the Company has
not granted or agreed to grant any registration rights, including piggyback
rights, to any person or entity other than ING (U.S.) Capital Corporation.
3.21 BROKERS OR FINDERS. The Company has not engaged any broker, finder or
------------------
agent, and the Purchasers have 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 changes 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 each Purchaser
from any liability for any commission or compensation in the nature of a
finder's fee (and the costs and expenses of defending against such liability)
for which any Purchaser, or any of their officers, directors, employees or
representatives, is responsible.
-10-
3.22 DISCLOSURE. The Transaction Documents, and all other information
----------
about the Company and the Subsidiary provided by the Company to the Purchasers
in writing in connection herewith, when taken as a whole, do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained herein or therein, in light of the
circumstances under which they were made, not misleading.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
------------------------------------------------
Each Purchaser hereby severally represents and warrants to the Company with
respect to the purchase of Series A Shares by such Purchaser and with respect
only to such Purchaser, as follows:
4.1 EXPERIENCE; SPECULATIVE NATURE OF INVESTMENT. The Purchaser (or its
--------------------------------------------
principals or advisors) 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.
The Purchaser acknowledges that its investment in the Company is highly
speculative and entails a substantial degree of risk and the Purchaser is in a
position to lose the entire amount of such investment.
4.2 INVESTMENT. The Purchaser is acquiring the Securities 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. The Purchaser understands that the Securities to be
purchased hereby and the underlying Conversion Stock have not been, and will not
be, registered under the Securities Act by reason of a specific exemption from
the registration provisions of the Securities Act, the availability of which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of the Purchaser's representations as expressed herein. The
Purchaser is an "accredited investor" within the meaning of Regulation D, Rule
501(a), promulgated by the Securities and Exchange Commission.
4.3 RESTRICTED SECURITIES. The Purchaser acknowledges that the Securities
---------------------
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 NO PUBLIC MARKET. The Purchaser understands that no public market now
----------------
exists for any of the securities issued by the Company and that the Company has
made no assurances that a public market will ever exist for the Company's
securities.
4.5 ACCESS TO DATA. The Purchaser has had an opportunity to discuss the
--------------
Company's business, management and financial affairs with the Company's
management. The Purchaser had an opportunity to ask questions of officers of the
Company, which questions were answered to its satisfaction. The Purchaser
understands that such discussions, as well as any other written
-11-
information issued by the Company, were intended to describe certain aspects of
the Company's business and prospects but were not an exhaustive description. The
foregoing, however, shall not limit or modify the representations and warranties
of the Company in Section 3 of this Agreement or the right of the Purchaser to
rely thereon.
4.6 AUTHORIZATION. This Agreement and the Stockholders Agreement, when
-------------
executed and delivered by the Purchaser, will constitute valid and legally
binding obligations of the Purchaser enforceable in accordance with their terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies, and except as the indemnification
provisions of Section 5.7 of the Stockholders Agreement may be limited by
principles of public policy.
4.7 BROKERS OR FINDERS. The 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 the Purchaser, 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, such Purchaser agrees to indemnify and hold harmless the Company
and each other Purchaser from any liability for any commission or compensation
in the nature of a finder's fee (and the costs and expenses of defending against
such liability) for which the Company, any other Purchaser, or any of their
officers, directors, employees or representatives, is responsible.
4.8 TAX LIABILITY. The Purchaser has reviewed with its own tax advisors
-------------
the federal, state, local and foreign tax consequences of this investment and
the transactions contemplated by the Transaction Documents. With respect to
such matters, the Purchaser relies solely on such advisors and not on any
statements or representations of the Company or any of its agents other than the
representations and warranties set forth herein. The 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 the
Transaction Documents. The foregoing representations of the Purchasers shall
not affect their entitlement to rely upon the representations of the Company set
forth in Section 3.4(b).
SECTION 5
CONDITIONS TO PURCHASERS' OBLIGATIONS TO CLOSE
----------------------------------------------
The Purchasers' obligations to purchase the Series A Shares at each Closing
are, unless waived by the Purchasers, 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.
-12-
5.2 COVENANTS. All covenants and agreements contained in this Agreement
---------
and the Stockholders Agreement to be performed by the Company on or prior to the
Closing shall have been performed or complied with in all material respects.
5.3 OPINION OF COMPANY'S COUNSEL. The Purchasers shall have received from
----------------------------
Swidler Berlin Shereff Friedman, LLP, counsel to the Company, an opinion
addressed to them, dated the Closing Date, in substantially the form of Exhibit
-------
H.
-
5.4 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 Series A Shares and the
Conversion Stock.
5.5 STOCKHOLDERS AGREEMENT. The Purchasers shall have executed and
----------------------
delivered the Stockholders Agreement.
5.6 CONVERSION OF AFFILIATE DEBT. Ulysses G. Auger, Sr. and Ulysses G.
----------------------------
Auger, II shall have exchanged all of the debt owed to them by the Company for
1,119,679 Series B Shares.
5.7 ING CONSENT. The Purchasers shall have received from the Company the
-----------
consent of ING (U.S.) Capital Corporation to the transactions contemplated by,
and to be consummated in connection with, this Agreement, which consent shall be
reasonably satisfactory to the Purchasers.
SECTION 6
CONDITIONS TO COMPANY'S OBLIGATIONS TO CLOSE
--------------------------------------------
The Company's obligation to sell and issue the Securities at each 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 the Purchasers 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 the Stockholders Agreement to be performed by the Purchasers 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 Series A Shares and the
Conversion Stock.
6.4 STOCKHOLDERS AGREEMENT. The Purchasers shall have executed and
----------------------
delivered the Stockholders Agreement.
-13-
6.5 ING CONSENT. The Company shall have received from ING (U.S.) Capital
-----------
Corporation its consent to the transactions contemplated by, and to be
consummated in connection with, this Agreement, which consent shall be
reasonably satisfactory to the Company.
SECTION 7
CONFIDENTIAL INFORMATION
------------------------
7.1 CONFIDENTIAL COMPANY INFORMATION. The Purchasers covenant and agree
--------------------------------
that they shall maintain the confidentiality of all nonpublic information
related to the business of the Company made available to them and/or any of
their representatives by the Company ("Confidential Company Information"). The
--------------------------------
Purchasers further covenant and agree that they shall not disclose any
Confidential Company Information to any person or entity, other than their
partners, officers, directors, employees, attorneys, accountants and other
agents with a legitimate need for such information (which individuals and
entities the Purchasers shall cause to comply with this Section 7.1), except as
required by law, without the prior written consent of the Company. The
Purchasers agree that violation of this Section 7.1 would cause immediate and
irreparable damage to the business of the Company, and consent 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 the business of the Purchasers made available to it and/or any of its
representatives by the Purchasers ("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 partners,
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 the Purchasers. The Company agrees that violation
of this Section 7.2 would cause immediate and irreparable damage to the business
of the Purchasers, 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 Delaware, 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 Delaware with respect to any action or proceeding
arising out of this Agreement or in any way arising herefrom 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
-14-
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 the Purchasers 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, assigns, heirs, executors and administrators of the parties hereto;
provided, however, that the rights of the Purchasers to purchase the Securities
shall not be assignable without the consent of the Company.
8.5 ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other documents
---------------------------
delivered pursuant hereto at each 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 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 the holders of a majority of the Series A Shares and
Conversion Stock may, with the Company's prior written consent, waive, modify or
amend on behalf of all Purchasers any provision hereof governing the rights and
obligations of such holders hereunder.
8.6 NOTICES, 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 a Purchaser, at such Purchaser's address, as shown on the
Schedule of Purchasers attached hereto as Exhibit A, or at such other address as
---------
such Purchaser shall have furnished to the Company in writing, or (b) if to any
other holder of any Securities, at such address as such holder shall have
furnished the Company in writing, or, until any such holder so furnishes an
address to the Company, then to and at the address of the last holder of such
Securities who has so furnished an address to the Company, or (c) if to the
Company, at its address set forth on the cover page of this Agreement, or at
such other address as the Company shall have furnished to the Purchasers, and
addressed to the attention of the President. 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 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 any party to this
Agreement upon any breach or default of any 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
-15-
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 any party of any
breach or default under this Agreement, or any waiver on the part of any 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 any
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 parties 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 any
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.
8.11 EXPENSES. The Company shall bear its own expenses, and the
--------
documented out-of-pocket expenses of the Purchasers, incurred thereby with
respect to this Agreement and the transactions contemplated hereby, and any
amendments or waivers hereto; provided, that the total liability of the Company
to the Purchasers pursuant to this Section 8.11 shall not exceed $35,000 in the
aggregate; and provided further, that the Company shall have no obligation to
pay the expenses of any Purchaser which fails to purchase and pay for the
securities purchased thereby in accordance with the terms hereof, which expenses
shall be for the sold account of such Purchaser.
8.12 USE OF PROCEEDS. The Company shall use the net proceeds of the
---------------
issuance and sale of the Series A Shares for the following purposes and in the
following order and priority: (a) $1,500,000 for the payment of a portion of its
outstanding indebtedness to Cleartel Communications, Inc.; and (b) the balance
for capital expenditures and general corporate purposes (but excluding any
further payment of the indebtedness referred to in the preceding clause (a)).
-16-
[THIS SPACE INTENTIONALLY LEFT BLANK]
-17-
The foregoing Agreement is hereby executed as of the date first above written.
"COMPANY"
CAIS INTERNET, INC.,
a Delaware corporation
By: /s/ Ulysses G. Auger, II
-------------------------
Ulysses G. Auger, II,
Chief Executive Officer
"PURCHASERS"
CHANCERY LANE, L.P.
By: RTA Associates, Inc., General Partner
By: /s/ R. Theodore Ammon
---------------------
R. Theodore Ammon, Managing Member
CAIS-SANDLER PARTNERS, L.P.
By: /s/ John Kornreich
------------------
John Kornreich, General Partner
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
-18-
EXHIBIT A
---------
SCHEDULE OF PURCHASERS
[Download Table]
Number of Warrant Share
Name and Address Series A Shares Percentage Purchase Price
---------------- --------------- ---------- --------------
Chancery Lane, L.P. 2,261,734 2.61% $10,000,000.00
Three East Fifty-Fourth Street
Suite 1700
New York, NY 10022
CAIS-Sandler Partners, L.P. 565,434 0.39% $ 1,500,000.00
------- ---- --------------
New York, NY ____
TOTAL 2,827,168 3.0% $11,500,000.00
A-1
EXHIBIT B
---------
FORM OF COMMON STOCK WARRANT
----------------------------
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. SUCH
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION
UNLESS THE COMPANY RECEIVES AN OPINION OF COUNSEL REASONABLY ACCEPTABLE TO IT
STATING THAT SUCH SALE OR TRANSFER IS EXEMPT FROM THE REGISTRATION AND
PROSPECTUS DELIVERY REQUIREMENTS OF SAID ACT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A CERTAIN
STOCKHOLDERS AGREEMENT BY AND AMONG THE COMPANY AND THE STOCKHOLDERS THEREOF,
WHICH STOCKHOLDERS AGREEMENT IMPOSES CERTAIN RESTRICTIONS UPON THE TRANSFER OF
SUCH SECURITIES. THE COMPANY WILL PROVIDE A COPY OF SUCH STOCKHOLDERS AGREEMENT
TO THE HOLDER OF THIS CERTIFICATE UPON REQUEST.
COMMON STOCK WARRANT
OF
CAIS INTERNET, INC.
Warrant Share Percentage: _____%/(1)/
THIS CERTIFIES THAT, subject to the terms of this Warrant,
__________________, or its permitted successors and assigns (the
"Warrantholder"), is entitled to subscribe for and purchase from CAIS Internet,
-------------
Inc., a Delaware corporation (the "Company"), shares of the fully paid and
-------
nonassessable shares of the Company's common stock, par value $.01 per share
(the "Common Stock"), in such number and at such price determined in accordance
------------
with this Warrant.
This Warrant is issued pursuant to a Series A Preferred Stock and Warrant
Purchase Agreement dated as of February 19, 1999 between the Company and the
purchasers named therein (the "Purchase Agreement").
------------------
Upon delivery of this Warrant (with the Notice of Exercise in the form
attached hereto as Exhibit B-A), together with payment of the Warrant Price of
the shares of Common Stock thereby purchased, 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 Warrantholder shall be entitled to receive a certificate or
certificates for the shares of Common Stock so purchased. All shares of Common
Stock which 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.
__________________
/(1)/ Warrant Share Percentages of all Warrant holders are collectively to
equal 3%.
B-1
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 on or after the earlier of (a) the closing by the Company of an
initial underwritten public offering pursuant to an effective registration
statement under the Securities Act of 1933, as amended, covering the offer and
sale of Common Stock for the account of the Company to the public (the "IPO")
---
and (b) the occurrence of a Corporate Transaction (as defined in the Certificate
of Incorporation of the Company as in effect on the date hereof; provided,
however, that this Warrant shall expire to the extent then unexercised as of
5:00 p.m., Washington, D.C. time, on the earlier of (i) February 19, 2009 or
(ii) the date five years after the Warrants are first exercisable.
2. Number of Warrant Shares. The Warrantholder may exercise the purchase
------------------------
right represented by this Warrant with respect to a particular number of shares
of Common Stock (or other securities of the Company issuable in the event of a
reclassification, change, merger or consolidation as set forth in Section 4(a)
hereof) (the "Shares") determined as follows (which number shall be subject to
------
adjustment pursuant to Section 4 hereof):
(a) Corporate Transaction. If the Company closes a Corporate
---------------------
Transaction prior to closing an IPO, the number of Shares issuable upon
exercise hereof shall be adjusted to equal the product of (i) the Warrant Share
Percentage set forth on the first page of this Warrant (expressed as a decimal
fraction) multiplied by (ii) the total number of Shares then issued and
outstanding on a fully-diluted basis (excluding out of the money options and
warrants in the event of a Corporate Transaction involving the sale of the
Company or its assets as an entirety).
(b) Initial Public Offering. If the Company closes an IPO prior to
-----------------------
closing a Corporate Transaction, the number of Shares issuable upon exercise
hereof shall equal the product of (i) the Warrant Share Percentage set forth on
the first page of this Warrant (expressed as a decimal fraction) multiplied by
(ii) the total number of Shares then issued and outstanding on a fully-diluted
basis.
3. Warrant Price. The exercise price of this Warrant (the "Warrant
------------- -------
Price") shall equal (a) the price per share at which Common Stock is issued and
-----
sold by the Company in the IPO if this Warrant is exercised pursuant to clause
(a) of Section 1 above, and (b) $12.50 per share (subject to appropriate
adjustments for any stock dividends, combinations, subdivisions, splits or the
like) if this Warrant is exercised pursuant to clause (b) of Section 1 above.
4. Adjustment of Number of Shares and Warrant Price. The number and kind
------------------------------------------------
of Shares purchasable upon the exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time in accordance with the
following provisions.
(a) Reclassification, Consolidation or Merger. In case of any
-----------------------------------------
reclassification or change of outstanding securities of the class issuable upon
exercise of this Warrant (other than as a result of a subdivision, split,
combination or stock dividend), or in case of any consolidation or merger of the
Company with or into another corporation, the Company, or such successor
corporation, as the case may be, shall execute a new Warrant, with substantially
the same terms as this Warrant, and providing that the holder of this Warrant
shall have the right to exercise such new Warrant and procure upon such exercise
in lieu of the Common Stock theretofore issuable
B-2
upon exercise of this Warrant the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change,
consolidation or merger by the Warrantholder if this Warrant had been fully
exercised as of the date giving rise to the issuance of the new Warrant. For
such purposes, if the number of Shares for which the Warrantholder may exercise
this Warrant has not yet been determined pursuant to Section 2, then the number
of Shares for which this Warrant shall be deemed to have been exercisable as of
such date shall be determined as if a Corporate Transaction had occurred on such
date. 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
reclassifications, changes, consolidations and mergers.
(b) Subdivision or Combination of Shares. If at any time while this
------------------------------------
Warrant remains outstanding and unexpired, and subsequent to the determination
of the total number of Shares subject to issuance upon exercise of this Warrant
pursuant to Section 2 hereof, the Company shall subdivide, split or combine its
Common Stock (or declare a dividend payable in shares of Common Stock), the
Warrant Price shall be proportionately decreased in the case of a subdivision or
increased in the case of a combination.
(c) Adjustment of Number of Shares. Upon each adjustment in the
------------------------------
Warrant Price pursuant to this Section 4, the number of Shares purchasable
hereunder shall be adjusted, to the nearest whole share, to the product obtained
by multiplying the number of Shares purchasable immediately prior to such
adjustment in the Warrant Price by a fraction, the numerator of which shall be
the Warrant Price immediately prior to such adjustment and the denominator of
which shall be the Warrant Price immediately thereafter.
5. Payment by Warrant Conversion. The Warrantholder 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 B-
A. In such event, the Company shall deliver to the Warrantholder (without
payment by the Warrantholder 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 as determined in accordance with the procedures for
valuing the Series A Preferred set forth in subsection IV.C.4(a) of the
Certificate of Incorporation of the Company as in effect on the date hereof
(with the Representative (as defined therein) to be selected by the Majority
Warrantholders).
6. Notices.
-------
(a) 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
B-3
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.
(b) In the event that the Company shall propose at any time to effect
a Corporate Transaction or an IPO, the Company shall send to the Warrantholder
at least 20 days' prior written notice of the date when the same shall take
place. Any such written notice shall be given by first class mail, postage
prepaid, addressed to the Warrantholder at the address as shown on the books of
the Company for the Warrantholder.
7. 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 Warrantholder, 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 to confer upon the holder
of this Warrant, 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.
(c) Receipt of this Warrant by the holder hereof shall constitute
acceptance of and agreement to the foregoing terms and conditions.
(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 of this Warrant 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 Warrant, 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 holders of at least a majority
of the aggregate outstanding and unexercised Warrants issued pursuant to the
Purchase Agreement.
(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
B-4
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 Delaware without regard to the conflicts of laws
provisions thereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Dated: February 19, 1999
CAIS INTERNET, INC.
_____________________________________________
Ulysses G. Auger, II, Chief Executive Officer
B-5
EXHIBIT B-A
-----------
NOTICE OF EXERCISE
------------------
TO: CAIS Internet, Inc.
1. The undesigned hereby elects to purchase _______________ shares of the
Common Stock of CAIS Internet, Inc. pursuant to the terms of the attached
Warrant, and tenders herewith payment of the purchase price of such shares in
full, together with all applicable transfer taxes, if any.
2. The undersigned hereby elects to exercise the purchase right with
respect to ___________ shares of such Common Stock through Warrant Conversion,
as set forth in Section 3 of the attached Warrant.
3. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other names as is
specified below:
_______________________________________
(Name)
_______________________________________
_______________________________________
(Address)
4. The undersigned represents that the aforesaid shares of Common Stock
are being acquired for the account of the undersigned for investment and not
with a view to, or for resale in connection with, the distribution thereof, and
that the undersigned has no present intention of distributing or reselling such
shares. In support thereof, the undersigned has executed the Investment
Representation Statement attached hereto as Exhibit B-B.
Signature of Warrantholder:
___________________________________
By:________________________________
Title_______________________________
Date:______________________________
B-A-1
EXHIBIT B-B
-----------
CAIS INTERNET, INC.
WARRANT EXERCISE
INVESTMENT REPRESENTATION STATEMENT
PURCHASER : ______________________________
COMPANY : CAIS Internet, Inc.
SECURITY : Common Stock (the "Securities")
----------
NUMBER OF SHARES : ______________________________
DATE : ____________________, _____
In connection with the purchase of the above-listed Securities, the
undersigned Purchaser hereby represents and warrants to the Company as follows:
(a) The undersigned is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Securities. The
undersigned is purchasing these Securities for his, her or its own account for
investment purposes only and not with a view to, or for the resale in connection
with, any "distribution" thereof for purposes of the Securities Act of 1933, as
amended (the "Securities Act").
--------------
(b) The undersigned understands that the Securities have not been
registered under the Securities Act in reliance upon a specific exemption
therefrom, which exemption depends upon, among other things, the bona fide
nature of the investment intent of the undersigned as expressed herein. In this
connection, the undersigned understands that, in the view of the Securities and
Exchange Commission (the "SEC"), the statutory basis for such exemption may be
---
unavailable if the undersigned's representation was predicated solely upon a
present intention to hold these Securities for the minimum capital gains period
specified under tax statutes, for a deferred sale, for or until an increase or
decrease in the market price of the Securities, or for a period of one year or
any other fixed period in the future.
(c) The undersigned further understands that the Securities must be
held indefinitely unless subsequently registered under the Securities Act or
unless an exemption from registration is otherwise available. Moreover, the
undersigned understands that the certificate evidencing the Securities will be
imprinted with a legend which prohibits the transfer of the Securities unless
they are registered or such registration is not required in the opinion of
counsel for the purchaser satisfactory to the Company or unless the Company
received a no-action letter from the SEC.
B-B-1
(d) The undersigned further understands that at the time the
undersigned wishes to sell the Securities there may be no public market upon
which to make such a sale, and that, even if such a public market exists, the
Company may not be satisfying the current public information requirements of
Rule 144 promulgated under the Securities Act, and that, in such event, the
undersigned may be precluded from selling the Securities under Rule 144.
(e) The undersigned further understands that in the event all of the
applicable requirements of Rule 144 are not satisfied, registration under the
Securities Act, compliance with Regulation A promulgated under the Securities
Act, or some other registration exemption will be required; and that,
notwithstanding the fact that Rule 144 is not exclusive, the Staff of the SEC
has expressed its opinion that persons proposing to sell private placement
securities other than in a registered offering and otherwise than pursuant to
Rule 144 will have a substantial burden of proof in establishing that an
exemption from registration is available for such offers or sales, and that such
persons and their respective brokers who participate in such transactions do so
at their own risk.
Signature of Purchaser:
___________________________________
Print Name:_________________________
Title:______________________________
Date:_______________________________
B-B-2
EXHIBIT C
---------
See Exhibit 3.1 to the Registration Statement.
C-1
EXHIBIT D
---------
See Exhibit 3.2 to the Registration Statement.
D-1
EXHIBIT E
---------
DISCLOSURE SCHEDULE
This disclosure of exceptions is made and given pursuant to the CAIS
Internet, Inc. Series A Preferred Stock and Warrant Purchase Agreement, dated as
of February 19, 1999 (the "Agreement"). The section numbers below correspond to
the section numbers of the representations and warranties in the Agreement which
are modified by the disclosures; however, any information disclosed herein under
any section number shall be deemed to be disclosed and incorporated into any
other section number under the Agreement where such disclosure would be
appropriate. All capitalized terms shall have the meanings as defined in the
Agreement, unless the context otherwise requires. Dollars references are to
United States dollars, unless otherwise indicated. Descriptions of agreements
herein are summaries only and are qualified in their entirety by the specific
terms of such agreements, copies of which are available upon request to the
Company. Where any representation or warranty contained in the Agreement is
limited or qualified by materiality, inclusion of information in this Schedule
does not constitute a determination by the Company that such matters are
material.
AS EACH PURCHASER'S INVESTMENT IN THE COMPANY IS HIGHLY SPECULATIVE AND ENTAILS
A SUBSTANTIAL DEGREE OF RISK, EACH PURCHASER IS STRONGLY URGED TO REVIEW
CAREFULLY THIS SCHEDULE.
SECTION 3.4 SUBSIDIARIES. The Company has one Subsidiary, CAIS, Inc.,
-------------
a corporation organized under the laws of the Commonwealth of Virginia, which is
a direct wholly owned subsidiary of the Company, and no Affiliated Entities:
SECTION 3.9 CHANGES. (a) On February 12, 1999, the Company (i)
--------
transferred interests in Cleartel Communications Limited Partnership ("Cleartel
LP") to Cleartel Communications, Inc. ("Cleartel Inc."), (ii) liquidated
Cleartel LP and (iii) effected a spin-off of Cleartel Inc. to the existing
shareholders of the Company (the "Spin-off"). Holders of options to purchase
shares of the Company's Common Stock received, as a result of the Spin-off, pro
rata options to purchase shares of Common Stock in Cleartel Inc.
(b) Reference is made to the schedule entitled "Certain
Relationships and Related Transactions, " attached hereto.
(c) Reference is made to the schedules entitled (i)
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" ("MD&A"), (ii) "Business," (iii) "Management," (iv) "Principal
Stockholders," (v) "Description of Capital Stock" and (vi) "Risk Factors,"
attached hereto.
(d) Reference is made to the Financial Statements.
SECTION 3.11 LITIGATION. Reference is made to the schedules entitled
-----------
(i) "Risk Factors," (ii) "MD&A" and (iii) "Business," attached hereto.
SECTION 3.13 INTELLECTUAL PROPERTY; TRADEMARKS. Reference is made to the
----------------------------------
schedules entitled (i) "Risk Factors" and (ii) "Business," attached hereto.
E-1
SECTION 3.16 EMPLOYEE MATTERS. Reference is made to the schedules
-----------------
entitled (i) "Management" and (ii) "Certain Relationships and Related
Transactions," attached hereto.
SECTION 3.19 NO CONFLICT OF INTEREST. Reference is made to the schedules
------------------------
entitled (i) "Risk Factors," (ii) "Management" and "Certain Relationships and
Related Transactions," attached hereto.
SECTION 3.20 DISCLOSURE. Reference is made to the schedules entitled (i)
-----------
"Risk Factors," (ii) "MD&A," (iii) "Management," and (ii) "Certain Relationships
and Related Transactions."
E-2
EXHIBIT F
---------
See Exhibit 4.4 to the Registration Statement.
EXHIBIT G
---------
See Registration Statement's Financial Statements.
EXHIBIT H
---------
FORM OF OPINION OF COMPANY COUNSEL
February 19, 1999
To the Purchasers Listed in Exhibit A
to the CAIS Internet, Inc.
Series A Preferred Stock and Warrant
Purchase Agreement Dated
as of February 19, 1999
Ladies and Gentlemen:
Reference is made to the Series A Preferred Stock and Warrant Purchase
Agreement, dated as of February 19, 1999 (the "Purchase Agreement"), complete
------------------
with all listed exhibits thereto, by and between CGX Communications, Inc., a
Delaware corporation (the "Company"), and the persons and entities listed in
-------
Exhibit A to the Purchase Agreement (the "Investors"), which provides for the
---------
issuance by the Company to the Investors of (i) up to an aggregate of 2,827,168
shares of Series A Preferred Stock of the Company (the "Shares") and (ii)
------
warrants to purchase shares of Common Stock (the "Warrants"). This opinion is
--------
rendered to you pursuant to Section 5.3 of the Purchase Agreement, and all terms
used herein have the meanings defined for them in the Purchase Agreement unless
otherwise defined herein.
We have acted as counsel for the Company in connection with the negotiation
of the Purchase Agreement and the Stockholders Agreement dated as of February
19, 1999 (the "Stockholders Agreement") (collectively the "Agreements") and the
---------------------- ----------
issuance of the Shares and the Warrants. As such counsel, we have made such
legal and factual examinations and inquiries as we have deemed advisable or
necessary for the purpose of rendering this opinion. In addition, we have
examined, among other things, originals or copies of such corporate records of
the Company, certificates of public officials and such other documents and
questions of law that we consider necessary or advisable for the purpose of
rendering this opinion, including without limitation the Transaction Certificate
attached hereto (the "Transaction Certificate"). In such examination we have
-----------------------
assumed the genuineness of all signatures on original documents, the
authenticity of all documents submitted to us as originals, the conformity to
original documents of all copies submitted to us as copies thereof, the legal
capacity of natural persons and the due execution and delivery of all documents
(except as to due execution and delivery by the Company) where due execution and
delivery are a prerequisite to the effectiveness thereof.
As used in this opinion, the expression "to our knowledge" with reference
to matters of fact means that, after an examination of documents made available
to us by the Company, and after inquiries of officers of the Company, but
without any further independent factual investigation, we find no reason to
believe that the opinions expressed herein are factually incorrect. Further,
the expression "to our knowledge" with reference to matters of fact refers to
the current actual knowledge of the attorneys of this firm who have worked on
matters for the.
H-1
Company solely in connection with the Agreements and the transactions
contemplated thereby. Except to the extent expressly set forth herein or as we
otherwise believe to be necessary to our opinion, we have not undertaken any
independent investigation to determine the existence or absence of any fact, and
no inference as to our knowledge of the existence or absence of any fact should
be drawn from our representation of the Company or the rendering of the opinions
set forth below.
For purposes of this opinion, we are assuming that you have all requisite
power and authority, and have taken any and all necessary corporate or
partnership action, to execute and deliver the Agreements and we are assuming
that the representations and warranties made by you in the Purchase Agreement
and pursuant thereto are true and correct. We are also assuming that the
Investors have purchased the Shares for value, in good faith and without notice
of any adverse claims within the meaning of the District of Columbia Uniform
Commercial Code.
Based upon and subject to the foregoing, and except as set forth in the
Purchase Agreement and the exhibits thereto, we are of the opinion that:
1. The Company is a corporation duly organized and (based solely on the
attached Certificate of Good Standing issued by the Secretary of State of the
State of Delaware) validly existing under, and by virtue of, the laws of the
State of Delaware and is in good standing under such laws. The Subsidiary is a
corporation duly formed and (based solely on the attached letter of confirmation
from CT Corporation System) validly existing and in good standing under, and by
virtue of the laws of the Commonwealth of Virginia, and is in good standing
under such laws. Each of the Company and the Subsidiary has requisite corporate
power to own and operate its properties and assets, and to carry on its business
as presently conducted.
2. The Company has all requisite legal and corporate power to execute and
deliver the Agreements, to sell and issue the Shares and the Warrants under the
Purchase Agreement, to issue the Conversion Stock and to carry out and perform
its obligations under the terms of the Agreements.
3. The authorized capital stock of the Company consists of 100,000,000
shares of Common Stock, of which 9,966,074 shares are issued and outstanding,
and 25,000,000 shares of Preferred Stock, of which 2,827,168 shares are
designated as Series A Shares, none of which are issued and outstanding prior to
the Initial Closing, and 1,119,679 Series B Shares, all of which are issued and
outstanding. All such issued and outstanding Series B Shares and shares of
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable and free of any preemptive or similar rights contained in the
Restated Certificate or By-Laws of the Company. The Company has reserved (a)
2,827,168 Series A Shares for issuance under the Purchase Agreement, (b)
2,827,168 shares of Common Stock for issuance upon conversion of the Series A
Shares, (c) 1,119,679 shares of Common Stock for issuance upon conversion of the
Series B Shares, (d) 1,000,000 shares of Common Stock for issuance upon
conversion of the Warrants, (e) 1,500,000 shares of Common Stock for issuance
pursuant to the Company's Amended and Restated l998 Equity Incentive Plan, (f)
2,033,926 shares of Common Stock for issuance to two executive officers of the
Company pursuant to two option agreements, (g) 390,000 shares of Common Stock
for issuance of Warrants held by ING (U.S.) Capital, Inc., and (h) 25,000 shares
of Common Stock for issuance pursuant to the Settlement Agreement dated
H-2
January 24, 1999 between the Subsidiary and Terk Technologies Corp. The Series A
Shares to be issued under the Purchase Agreement will be validly issued, fully
paid and nonassessable and will be free of any liens, encumbrances and
preemptive or similar rights contained in the Restated Certificate or By-Laws of
the Company other than liens created by the Investors. The Conversion Stock has
been duly and validly reserved and, when issued in compliance with the Purchase
Agreement, the Warrants and the Restated Certificate, will be validly issued,
fully paid and nonassessable and free of any liens, encumbrances and preemptive
or similar rights contained in the Restated Certificate or By-Laws of the
Company other than liens created by the Investors; provided, however, that the
Shares and the Conversion Stock may be subject to restrictions on transfer under
state and/or federal securities laws as set forth in the Stockholders Agreement.
To our knowledge, except for rights described in the Purchase Agreement
(including the exhibits thereto) and the Restated Certificate, there are no
other options, warrants, conversion privileges or other rights presently
outstanding to purchase or otherwise acquire any authorized but unissued shares
of capital stock or other securities of the Company, or any other agreements to
issue any such securities or rights.
4. The authorized capital stock of the Subsidiary consists of 1,000
shares of common stock, par value $.01, of which 100 shares are issued and
outstanding and owned by the Company.
5. All corporate action on the part of the Company, its directors and
stockholders necessary for the authorization, execution and delivery by the
Company of the Agreements, and the authorization, sale, issuance and delivery of
the Series A Shares and the Warrants (and the Conversion Stock), and the
performance of the Company's obligations under the Agreements has been taken.
The Agreements have been duly and validly executed and delivered by the Company
and each constitutes a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms.
6. The execution, delivery and performance of and compliance with the
terms of the Agreements and the issuance of the Series A Shares and the Warrants
(and the Conversion Stock) do not violate any provision of the Restated
Certificate or the Company's By-Laws or, to our knowledge, any provision of any
applicable federal or state statute, rule or regulation. To our knowledge, the
Company is not in violation of any term of the Restated Certificate or the
Company's By-Laws.
7. Except as identified in the Purchase Agreement and the exhibits
thereto, to our knowledge, there are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court or
governmental agency (nor, to our knowledge, is there any written threat
thereof), which, if adversely determined, questions the validity of the
Agreements or any action taken or to be taken by the Company in connection
therewith or would have a Material Adverse Effect on the Company.
8. The Company is not an "investment company" within the meaning of the
Investment Company Act of 1940, as amended.
9. No consent, approval or authorization of or designation, declaration
or filing with any governmental authority on the part of the Company is required
in connection with the valid execution and delivery of the Agreements or the
offer, sale or issuance of the Series A Shares and
H-3
the Warrants (and the Conversion Stock), or the consummation of any other
transaction contemplated thereby, except for such as have been obtained and for
qualification (or taking such action as may be necessary to secure an exemption
from qualification, if available) under applicable blue sky laws (but excluding
jurisdictions outside of the United States) of the offer and sale of the Series
A Shares and the Warrants (and the Conversion Stock) under applicable blue sky
laws.
The opinions expressed below are subject to the following qualifications:
(a) We express no opinion as to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other similar federal or state laws
affecting the rights of creditors;
(b) We express no opinion as to the effect or availability of rules
of law governing specific performance, injunctive relief or other equitable
remedies (regardless of whether any such remedy is considered in a proceeding at
law or in equity);
(c) We express no opinion as to compliance with applicable anti-fraud
provisions of federal or state securities laws;
(d) We express no opinion as to the enforceability of the
indemnification provisions of Section 5.7 of the Stockholders Agreement executed
by the Investors contemporaneously with the Purchase Agreement to the extent the
provisions thereof may be subject to limitations of public policy and the effect
of applicable statutes and judicial decisions; and
(e) We are members of the Bar of the District of Columbia and we are
not expressing any opinion as to any matter relating to the laws of any
jurisdiction other than the federal laws of the United States of America and the
Delaware General Corporation Law.
This opinion is furnished to the Purchasers as of the date first written
above solely for their benefit in connection with the purchase of the Shares and
the Warrants, and may not be relied upon by any other person or for any other
purpose without our prior written consent.
Very truly yours,
SWIDLER BERLIN SHEREFF FRIEDMAN, LLP
EXHIBIT I
---------
FORM OF PROMISSORY NOTE
$8,000,000.00 February 19, 1999
FOR VALUE RECEIVED, the undersigned, Chancery Lane, L.P. ("Maker"), hereby
-----
H-4
unconditionally promises to pay to CAIS Internet, Inc., a Delaware corporation
("Payee"), on March 12, 1999, at its offices at 1255 22/nd/ Street, N.W.,
-----
Washington, D.C. 20037, or at such other place as Payee may designate, in
immediately available funds, the sum of $8,000,000.00.
1. This Promissory Note (the "Note") is issued in connection with that
----
certain Series A Preferred Stock and Warrant Purchase Agreement (the
"Agreement") dated as of even date herewith among Payee and the persons and
---------
entities listed in Exhibit A thereto. Terms used but not defined herein shall
have the meanings ascribed to such terms in the Agreement.
2. Whenever, under the terms of this Note, any amount outstanding and
unpaid shall become due and payable, Payee may pursue whatever remedies, legal
or equitable, are available to collect the unpaid balance thereof. No delay or
omission on the part of Payee in exercising any right or remedy hereunder shall
operate as a waiver thereof or preclude the exercise thereof at any time during
the continuance of any default and no extension of the maturity of this Note or
the time of any payment shall affect the liability of Maker. Maker hereby
waives presentment, protest and demand, notice of protest, demand and dishonor
and nonpayment of this Note.
3. This Note for all purposes shall be governed by and construed in
accordance with the laws of the State of Delaware, without regard to the
conflicts of laws provisions thereof.
4. Maker hereby waives all rights to interpose any claims, deductions,
setoffs or counterclaims of any kind, nature or respect to this Note or any
matter arising herefrom or relating hereto, except compulsory counterclaims.
5. The execution and delivery of this Note has been authorized by the
Board of Directors of Maker. If the undersigned are more than one, this Note
shall be binding jointly and severally upon the undersigned and their respective
successors and assigns and the term "Maker" shall mean all the undersigned and
any one or more of them and their successors and assigns. If any term or
provision of this Note shall be held invalid, illegal or unenforceable, the
validity of all other terms and provisions hereof shall in no way be affected
thereby.
MAKER HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE
AND FEDERAL COURTS LOCATED IN THE STATE OF DELAWARE WITH RESPECT TO ANY ACTION
OR PROCEEDING ARISING OUT OF THIS NOTE OR ANY MATTER ARISING HEREFROM OR
RELATING HERETO.
MAKER HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING INSTITUTED BY EITHER MAKER OR PAYEE AGAINST THE OTHER ARISING ON, OUT
OF OR BY REASON OF THIS NOTE, ANY ALLEGED TORTIOUS CONDUCT BY MAKER OR PAYEE OR
IN ANY WAY, DIRECTLY OR INDIRECTLY, ARISING OUT OF OR RELATED TO THE
RELATIONSHIP BETWEEN MAKER AND PAYEE.
IN WITNESS WHEREOF, Maker has caused this Note to be duly executed and
delivered as of the date first above written.
I-1
CHANCERY LANE, L.P.
By: RTA Associates, L.L.C., General Partner
By:__________________________________
R. Theodore Ammon, Managing Member
I-2
Dates Referenced Herein
| Referenced-On Page |
|---|
| This ‘S-1/A’ Filing | | Date | | First | | Last | | | Other Filings |
|---|
| |  |
| | 2/19/09 | | 25 | | | | | None on these Dates |
| Filed on: | | 3/16/99 |
| | 3/12/99 | | 42 |
| | 2/19/99 | | 1 | | 41 |
| | 2/12/99 | | 8 | | 34 |
| | 1/24/99 | | 9 | | 40 |
| | 12/31/98 | | 9 | | 10 |
| | 12/31/97 | | 9 |
| | 1/1/96 | | 14 |
| List all Filings |
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Filing Submission 0000928385-99-000779 – Alternative Formats (Word / Rich Text, HTML, Plain Text, et al.)
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