Exhibit 2.3
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
THIS REGISTRATION RIGHTS AND LOCK-UP AGREEMENT (this "Agreement") is made
and entered into as of September 2, 1999, between CAIS Internet, Inc., a
Delaware corporation (the "Company"), and the persons listed on Schedule A
----------
attached hereto, including their successors and assigns (collectively, the
"Holders" and individually a "Holder").
WHEREAS, on August 4, 1999, the Company, Atcom, Inc., a California
corporation ("Atcom"), and CIAM Corp., a California corporation ("CIAM") and a
wholly owned subsidiary of the Company, entered into an Amended and Restated
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which CIAM
will be merged with and into Atcom (the "Merger");
WHEREAS, the Holders are holders of Atcom capital stock who on the date
hereof shall receive shares of Common Stock (as defined below) in connection
with the Merger (the "Shares");
WHEREAS, the Merger Agreement provides, among other things, that the
Company shall grant the Holders certain registration rights with respect to the
Shares and certain other shares of Common Stock, as more fully set forth herein;
WHEREAS, the execution and delivery of this Agreement is a condition
precedent to the consummation of the Merger and the other transactions
contemplated by the Merger Agreement;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
there parties hereto agree as follows:
1. Definitions.
-----------
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"CAIS Prospectus" shall have the meaning set forth in Section 6(d)
---------------
hereof.
"CAIS SEC Reports" shall have the meaning set forth in Section 6(d)
----------------
hereof.
"Common Stock" shall mean the Common Stock, par value $.01 per share,
------------
of the Company.
"Company" shall have the meaning set forth in the preamble and also
-------
shall include the Company's successors.
1
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
------------
amended from time to time.
"Form S-3" means such form under the Securities Act as in effect on
--------
the date hereof or any registration form under the Securities Act subsequently
adopted by the SEC which permits inclusion or incorporation of substantial
information by reference to other documents filed by the Company with the SEC.
"Holder" or "Holders" shall have the meaning set forth in the
------ -------
preamble.
"Merger" shall have the meaning set forth in the preamble.
------
"Offering" shall mean the sale of Common Stock in connection with any
--------
public offering by the Company.
"Other Holders" shall have the meaning set forth in Section 4(c)
-------------
hereof.
"Person" shall mean an individual, partnership, limited liability
------
company, corporation, trust, unincorporated organization or other entity, or a
government or agency or political subdivision thereof.
"Piggyback Notice" shall have the meaning set forth in Section 4(b)
----------------
hereof.
"Piggyback Registration" shall have the meaning set forth in Section
----------------------
4(b) hereof.
"Prospectus" shall mean the prospectus included in a Registration
----------
Statement for the registration with the SEC of all or a portion of the
Registrable Securities, including any preliminary prospectus, and any such
prospectus as amended or supplemented by any prospectus supplement and by all
other amendments and supplements to such prospectus, including post-effective
amendments, and in each case including all material incorporated by reference
therein.
"Registrable Securities" shall mean the Shares, any shares of Common
----------------------
Stock issued or issuable upon the exercise of warrants held as of the date
hereof by any of the Holders and shares of Common Stock issuable to the Holders
and any other Atcom shareholders as Additional Consideration (as defined in the
Merger Agreement), excluding, (i) Registrable Securities for which a
Registration Statement relating to the sale thereof shall have become effective
under the Securities Act and which have been sold or otherwise distributed under
such Registration Statement or (ii) Registrable Securities which the Holder
thereof may sell in any one three month period pursuant to Rule 144 under the
Securities Act (or such successor rule as may be adopted).
"Registration Expenses" shall mean any and all expenses incident to
---------------------
performance of or compliance with the registration rights granted under Section
3 of this Agreement, including, without limitation: (i) all SEC, stock exchange
or National Association of Securities Dealers, Inc. ("NASD") registration and
filing fees, (ii) all fees
2
and expenses incurred in connection with compliance with state securities or
blue sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualification of any of the Registrable Securities and
the preparation of a Blue Sky Memorandum) and compliance with the rules of the
NASD, (iii) all expenses of any Persons in preparing or assisting in preparing,
word processing, printing and distributing any Registration Statement, any
Prospectus, certificates and other documents relating to the performance of and
compliance with this Agreement, (iv) all fees and expenses incurred in
connection with the listing, if any, of any of the Registrable Securities on any
securities exchange or exchanges pursuant to Section 5(1) hereof, and (v) the
fees and disbursements of counsel for the Company and of the independent public
accountants of the Company, including fees and expenses of one counsel to the
Holders in an amount not to exceed $10,000 and the expenses of any special
audits or "cold comfort" letters required by or incident to such performance and
compliance. Registration Expenses shall specifically exclude underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of Registrable Securities by a selling Holder, all of which shall be
borne by such Holder in all cases.
"Registration Statement" shall mean a registration statement of the
----------------------
Company and any other entity required to be a registrant with respect to such
registration statement pursuant to the requirements of the Securities Act which
covers some or all of the Registrable Securities, and all amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto
and all materials incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
---
"Securities Act" shall mean the Securities Act of 1933, as amended
--------------
from time to time.
"Shares" shall have the meaning set forth in the preamble.
------
"Shelf Registration" shall mean a registration required to be effected
------------------
pursuant to Section 3 hereof.
"Shelf Registration Statement" shall mean a "shelf" Registration
----------------------------
Statement of the Company and any other entity required to be a registrant with
respect to such shelf Registration Statement pursuant to the requirements of the
Securities Act which covers some or all of the Registrable Securities on an
appropriate form under Rule 415 under the Securities Act, or any similar rule
that may be adopted by the SEC, and all amendments and supplements to such
Registration Statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
materials incorporated by reference therein.
2. Lock-up Agreement.
-----------------
(a) Each Holder agrees that it shall not transfer, offer, pledge,
sell, contract to sell, grant any options for the sale of or otherwise dispose
of, directly or indirectly, any Shares held by such Holder through November 21,
1999. If requested by
3
an underwriter of Common Stock, each Holder will reaffirm the agreement set
forth in this Section 2 in a separate writing in a form satisfactory to such
underwriter. The Company may impose stop-transfer instructions with respect to
the Shares, subject to the foregoing restriction until the end of said period.
(b) Notwithstanding anything in this Agreement to the contrary, in
connection with any Offering, each Holder agrees that, if requested by the
managing underwriter of the Offering, such Holder shall not, directly or
indirectly, sell, offer, contract to sell, grant any option to purchase,
transfer the economic risk of ownership in, make any short sale, pledge or
otherwise dispose of, any Shares, without the prior written consent of the
Company and the managing underwriters of the Offering for a period of ninety
(90) days from the effective date of the registration statement under the
Securities Act relating to such Offering and to the extent otherwise permissible
under the requirements for a tax-free Merger; provided, however, that all
-------- -------
officers and directors of the Company enter into similar agreements; and
provided, further, that such Holder has been provided the opportunity to
-------- -------
participate in such Offering, subject to any applicable cutback arrangements as
set forth herein. This restriction shall be binding upon any transferee of the
Shares (except for those transferees who purchased the Shares from a Holder
under a Registration Statement or a sale pursuant to Rule 144) and the
certificates for the Shares shall bear a legend to such effect. In order to
enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Shares until the end of such period.
3. Shelf Registration Under the Securities Act.
-------------------------------------------
(a) Filing of Shelf Registration Statement. The Company shall use
--------------------------------------
its best efforts to cause to be filed and declared effective on or before
November 21, 1999 a Shelf Registration Statement providing for the sale by the
Holders of the Registrable Securities. The Company agrees to use its best
efforts to keep the Shelf Registration Statement continuously effective (on Form
S-1 or, when the Company is so eligible, Form S-3) for a period expiring on the
earlier of (i) the date on which all of the Registrable Securities covered by
the Shelf Registration Statement have been sold pursuant to the Shelf
Registration Statement or (ii) the date on which the Shares cease to be
Registrable Securities. The Company further agrees to, subject to Section 5(b)
and Section 5(i), supplement or amend the Shelf Registration Statement, if and
as required by the rules, regulations or instructions applicable to the
registration form used by the Company for such Shelf Registration Statement or
by the Securities Act or by any other rules and regulations thereunder for shelf
registration; provided, however, that the Company shall not be deemed to have
-------- -------
used its best efforts to keep a Registration Statement effective during the
applicable period if it voluntarily takes any action that would result in
selling Holders covered thereby not being able to sell such Registrable
Securities during that period, unless such action is required under applicable
law or the Company has filed a post-effective amendment to the Registration
Statement and the SEC has not declared it effective. The Company shall have the
right to include securities which are not Registrable Securities, including
without limitation a primary Offering of securities by the Company for its own
account, in any such Offering under this Section 3; provided, that the inclusion
of such additional securities would not adversely affect or
4
reduce the number of shares of Registrable Securities to be registered for the
account of the Holders in any Offering of Registrable Securities which the
Holders are effecting under such Registration Statement. The Company undertakes
to file as soon practicable and use its best efforts to have the SEC declare
effective any post-effective amendment necessary to permit the sale of
Registrable Securities pursuant to such Registration Statement.
(b) Expenses. The Company shall pay all Registration Expenses in
--------
connection with the Shelf Registration. Each Holder shall pay all underwriting
discounts, commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to the Shelf
Registration Statement or Rule 144 under the Securities Act.
(c) Inclusion in Shelf Registration Statement. Any Holder who does
-----------------------------------------
not provide the information reasonably requested by the Company in connection
with the Shelf Registration Statement as promptly as practicable after receipt
of such request, but in no event later than twenty (20) days thereafter, shall
not be entitled to have its Registrable Securities included in the Shelf
Registration Statement.
(d) Underwriting Arrangements. The managing underwriter for any
-------------------------
Offering under this Section 3 shall be selected by the Holders of a majority of
the Registrable Securities, subject to the consent of the Company, which shall
not be unreasonably withheld. Notwithstanding any other provision of this
Section 3, if the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in the Shelf
Registration exceeds the number that can be sold in an orderly manner within a
price range reasonably acceptable to the Company, the Company will include in
the Shelf Registration, (i) first, the Registrable Securities to be included in
the Shelf Registration, pro rata among the Holders of such Registrable
Securities on the basis of the number of Shares owned by each such Holder, (ii)
second, the securities the Company proposes to sell, and (iii) third, other
securities requested to be included in the Shelf Registration, pro rata on the
basis of the number of shares of such securities owned by each holder thereof.
The number of shares of Registrable Securities held by the Holders shall not be
reduced until such time as the shares referenced in subclauses (ii) and (iii)
have been reduced to zero.
(e) Market Stand-Off. Notwithstanding anything to the contrary set
----------------
forth herein, no Holder shall sell, directly or indirectly, any Shares under a
Shelf Registration Statement filed in connection with a Shelf Registration
during the period starting with the date such Holder receives a Piggyback Notice
(as defined below) and ending on the date which is sixty (60) days after the
effective date of a Registration Statement subject to Section 4 hereof.
4. Piggyback Registrations.
-----------------------
(a) Right to Piggyback. If the Company proposes to file any
------------------
registration statement under the Securities Act for purposes of an Offering of
securities of the Company (including, but not limited to, registration
statements relating to secondary
5
Offerings of securities of the Company, but excluding (i) Registration
Statements filed pursuant to Section 3 of this Agreement or (ii) Registration
Statements relating to employee benefit plans or with respect to corporate
reorganizations, or other transactions under Rule 145 of the Securities Act) (a
"Piggyback Registration"), the Company will give prompt written notice to all
Holders of Registrable Securities of its intention to effect such a registration
(each, a "Piggyback Notice") and, subject to the terms hereof, the Company will
include in such registration all Registrable Securities with respect to which
the Company has received written requests for inclusion therein within twenty
(20) days after the date of delivery of the Piggyback Notice. The Company shall
use its best efforts to keep any such Registration Statement effective for up to
sixty (60) days. If the Piggyback Registration is an underwritten Offering on
behalf of the Company, then the Company shall not be required to include any
Registrable Securities of a Holder in such Offering unless such Holder enters
into a customary form of underwriting agreement in form and substance reasonably
satisfactory to the underwriters and the Company.
(b) Priority on Primary Registrations. If a Piggyback Registration
---------------------------------
is an underwritten primary registration on behalf of the Company, and the
managing underwriters advise the Company in writing that in their opinion the
number of securities requested to be included in such registration exceeds the
number that can be sold in an orderly manner in such Offering within a price
range acceptable to the Company, the Company will include in such registration,
(i) first, the securities the Company proposes to sell, and (ii) second, other
securities requested to be included in such registration, including without
limitation the Registrable Securities, pro rata on the basis of the number of
shares of such securities owned by each holder thereof (subject to any other
priority arrangements existing under registration rights agreements to which the
Company is a party as of the date hereof).
(c) Priority on Secondary Registration. If a Piggyback Registration
----------------------------------
is an underwritten secondary registration on behalf of holders of the Company's
securities other than the Holders of Registrable Securities (the "Other
Holders"), and the managing underwriters advise the Company in writing that in
their opinion the number of securities requested to be included in such
registration exceeds the number that can be sold in an orderly manner in such
Offering within a price range acceptable to the Other Holders requesting such
registration, the Company will include in such registration (i) first, the
securities requested to be included therein by the Other Holders requesting such
registration, (ii) second, the securities the Company proposes to sell, and
(iii) third, other securities requested to be included in such registration,
including without limitation the Registrable Securities, pro rata on the basis
of the number of shares of such securities owned by each holder thereof (subject
to any other priority arrangements existing under registration rights agreements
to which the Company is a party as of the date hereof).
(d) Selection of Underwriters. In the case of an underwritten
-------------------------
Piggyback Registration, the Company shall have the right to select the
investment banker(s) and manager(s) to administer the Offering.
6
5. Registration Procedures.
-----------------------
In connection with the obligations of the Company with respect to the
Registration Statements pursuant to this Agreement, the Company shall:
(a) prepare and file with the SEC, within the time periods set forth
herein, a Registration Statement, which Registration Statement (i) shall be
available for sale of the Registrable Securities in accordance with the intended
method or methods of distribution by the selling Holders thereof, and (ii) shall
comply as to form in all material respects with the requirements of the
applicable form and include all financial statements required by the SEC to be
filed therewith;
(b) subject to the last three sentences of this Section 5(b) and
Section 5(i) hereof, (i) prepare and file with the SEC such amendments and post-
effective amendments to each such Registration Statement as may be necessary to
keep such Registration Statement effective for the applicable period; (ii) cause
each such Prospectus to be supplemented by any required prospectus supplement,
and as so supplemented, to be filed pursuant to Rule 424 or any similar rule
that may be adopted under the Securities Act; (iii) respond as promptly as
practicable to any comments received from the SEC with respect to the
Registration Statement, or any amendment, post-effective amendment or supplement
relating thereto; and (iv) comply with the provisions of the Securities Act with
respect to the disposition of all securities covered by each Registration
Statement during the applicable period in accordance with the intended method or
methods of distribution by the selling Holders thereof. Notwithstanding anything
to the contrary contained therein, the Company shall not be required to take any
of the actions described in subsections (i), (ii), or (iii) above with respect
to each particular Holder of Registrable Securities under a Piggyback
Registration unless and until the Company has received a Piggyback Notice from
the Holder that such Holder intends to make offers or sales under the
Registration Statement as specified in such Piggyback Notice; provided, however,
-------- -------
that the Company shall have 10 business days to prepare and file any such
amendment or supplement after receipt of the Piggyback Notice. Once a Holder has
delivered a Piggyback Notice to the Company, such Holder shall promptly provide
to the Company such information as the Company reasonably requests in order to
identify such Holder and the method of distribution in a post-effective
amendment to the Registration Statement or a supplement to the Prospectus. Such
Holder also shall notify the Company in writing upon completion of such offer or
sale or at such time as such Holder no longer intends to make offers or sales
under the Registration Statement;
(c) furnish to each selling Holder of Registrable Securities, without
charge, as many copies of each Prospectus, including each preliminary
Prospectus, and any amendment or supplement thereto and such other documents as
such Holder may reasonably request, in order to facilitate the public sale or
other disposition of the Registrable Securities; the Company consents to the use
of the Prospectus, including each preliminary Prospectus, by each such Holder of
Registrable Securities in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or the preliminary Prospectus;
7
(d) use its best efforts to register or qualify the Registration
Statement by the time the applicable Registration Statement is declared
effective by the SEC under all applicable sate securities or "blue sky" laws of
such jurisdictions as any Holder of Registrable Securities covered by a
Registration Statement shall reasonably request in writing, keep each such
registration or qualification effective during the period such Registration
Statement is required to be kept effective as provided herein and all other acts
and things that may be reasonably necessary or advisable to enable such Holder
to consummate the disposition in each such jurisdiction of such Registrable
Securities owned by such Holder to the extent required hereunder; provided,
--------
however, that the Company shall not be required to (i) qualify generally to do
-------
business in any jurisdiction or to register as a broker or dealer in such
jurisdiction where it would not otherwise be required to qualify but for this
Section 5(d), (ii) subject itself to taxation in any such jurisdiction, or (iii)
submit to the general service of process in any such jurisdiction.
(e) notify each selling Holder of Registrable Securities promptly
and, if requested by such Holder, confirm such advice in writing (i) when a
Registration Statement has become effective and when any post-effective
amendments and supplements thereto become effective, (ii) of the issuance by the
SEC or any state securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any proceedings
for that purpose, (ii) if the Company receives any notification with respect to
the suspension of the qualification of the Registrable Securities for sale in
any jurisdiction or the initiation of any proceeding for such purpose, and (iv)
of the happening of any event during the period a Registration Statement is
effective as a result of which such Registration Statement or the related
Prospectus contains any untrue statement of a material fact or omits to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made (in
the case of the Prospectus), not misleading;
(f) take all best efforts to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment;
(g) furnish to each selling Holder of Registrable Securities, without
charge, at least one conformed copy of each Registration Statement and any post-
effective amendment thereto (without documents incorporated therein by reference
or exhibits thereto, unless requested);
(h) cooperate with the selling Holders of Registrable Securities to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any Securities Act legend; and
enable certificates for such Registrable Securities to be issued for such
numbers of shares and registered in such names as the selling Holder may
reasonably request at least two business days prior to any sale of Registrable
Securities;
(i) subject to the last three sentences of Section 5(b) hereof, upon
the occurrence of any event contemplated by Section 5(e)(iv) hereof, use its
best efforts promptly to prepare and file a supplement or prepare, file and
obtain effectiveness of a
8
post-effective amendment to a Registration Statement or the related Prospectus
or any document incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of the Registrable
Securities, such Prospectus will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made not misleading;
(j) make available for inspection by the Holders of the Registrable
Securities and any representatives, counsel or accountant retained by such
Holders, all financial and other records, pertinent corporate documents and
properties of the Company, and cause the respective officers, directors and
employees of the Company to supply all information reasonably requested by any
such representative, counsel or accountant in connection with a Registration
Statement; provided, however, that such records, documents or information which
-------- -------
the Company determines, in good faith, to be confidential and notifies such
representatives, counsel or accountants in writing that such records, documents
or information are confidential shall not be disclosed by the representatives,
counsel or accountants unless (i) the disclosure of such records, documents or
information is necessary to avoid or correct a material misstatement or omission
in a Registration Statement; (ii) the release of such records, documents or
information is ordered pursuant to a subpoena or order from a court of competent
jurisdiction; or (iii) such records, documents or information have been
generally made available to the public;
(k) a reasonable time prior to the filing of any Registration
Statement, any Prospectus, any amendment to a Registration Statement or
amendment or supplement to a Prospectus, provide copies of such document (not
including any documents incorporated by reference therein unless requested) to
the selling Holders of Registrable Securities;
(l) use its best efforts to cause all Registrable Securities to be
listed on any securities exchange on which similar securities issued by the
Company are then listed;
(m) provide a CUSIP number for all Registrable Securities, not later
than the effective date of a Registration Statement;
(n) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make available to its security holders, as
soon as reasonably practicable, an earnings statement covering at least 12
months that shall satisfy the provisions of Section 11(a) of the Securities Act
and Rule 158 thereunder; and
(o) use its best efforts to cause the Registrable Securities covered
by the Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary by virtue of the
business and operations of the Company to enable selling Holders to consummate
the disposition of such Registrable Securities.
9
The Company may require each Holder of Registrable Securities to
furnish to the Company in writing such information regarding the proposed
distribution by such Holder of such Registrable Securities as the Company may
from time to time reasonably request in writing.
In connection with and as a condition to the Company's obligations
with respect to the Registration Statement, each Holder agrees that: (i) it
will not offer or sell its Registrable Securities under the Registration
Statement (other than the Shelf Registration Statement) until it has provided a
Piggyback Notice, if and to the extent applicable, and has received copies of
the supplemental or amended Prospectus contemplated by Section 5(b) hereof and
receives notice that any post-effective amendment has become effective; or (ii)
upon receipt of any written notice from the Company of the happening of any
event of the kind described in Section 5(e)(iv) hereof, such Holder will
forthwith discontinue disposition of Registrable Securities pursuant to a
Registration Statement under such Holder receives copies of the supplemental or
amended Prospectus contemplated by Section 5(i) hereof and receives notice that
any post-effective amendment has become effective, and, if so directed by the
Company, such Holder will deliver to the Company (at the expense of the Company)
all copies in its possession, other than permanent file copies then in such
Holder's possession, of the Prospectus covering such Registrable Securities
current at the time of receipt of such notice. If at any time after any
Registration Statement becomes effective, the Company advises the Holders in
writing that due to the existence of material information that has not been
disclosed to the public and included in the Registration Statement it is thus
necessary to amend the Registration Statement, the Holders shall suspend any
further sale of Registrable Securities until the Registration Statement has been
amended (each such period being referred to herein as a "Suspension Period").
In such event the Company shall use its best efforts to amend the Registration
Statement as soon as reasonably practicable. The Company shall only have the
right to impose a Suspension Period not more than twice from the date of this
Agreement until such time as the Company files and the SEC declares effective a
Registration Statement on Form S-3 covering the Registrable Securities. Each
Suspension Period shall not be longer than 60 days.
Notwithstanding anything to the contrary contained herein, the Company
shall have the right to postpone the filing of any Registration Statement
hereunder (other than the Shelf Registration Statement, which shall not be
subject to this provision) for a reasonable period of time (not exceeding 60
days) if the Company furnishes the Holders of Registrable Securities a
certificate signed by the Chairman of the Board of Directors or the President of
the Company stating that in its good faith judgment, the Company's Board of
Directors (or the executive committee thereof) has determined that effecting the
registration at such time would adversely affect a material financing,
acquisition or disposition of assets or securities, merger or other comparable
transaction, or would require the Company to make public disclosure of
information the public disclosure of which would have a material adverse effect
upon the Company.
10
6. Investment Representations. With respect to the Shares, each Holder
--------------------------
represents and warrants as follows:
(a) The Holder, by reason of his or her business and financial
experience has such knowledge, sophistication and experience in financial and
business matters and in making investment decisions of this type that he or she
is capable of (i) evaluating the merits and risks of an investment in Common
Stock and making an informed investment decision, (ii) protecting his or her own
interest and (iii) bearing the economic risk of such investment. If the Holder
retained a purchaser's representative with respect to the investment in Common
Stock that may be made pursuant to the Merger Agreement then the Holder shall,
prior to or at the Closing, (i) acknowledge in writing such representation and
(ii) cause such representative to deliver a certificate to the Company
containing such representations as are reasonably requested by the Company.
(b) The Holder is acquiring the Common Stock for investment for the
Holder's own account, not as a nominee or agent and not with the view to, or any
intention of, a resale or distribution thereof, in whole or in part, or the
grant of any participation therein. The Holder understands that, except as
expressly provided herein, the Common Stock has not been registered under the
Securities Act or state securities laws by reason of a specific exemption from
the registration provisions of the Securities Act and applicable state
securities laws that depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of the Holder's representations as
expressed in this Agreement. The Holder further understands that the Company
shall have no obligation to register the Common Stock under the Securities Act
or any state securities laws or to take any action that would make available any
exemption from the registration requirements of such laws. The Holder hereby
acknowledges that because of the restrictions on transfer or assignment of the
Common Stock to be issued in connection with the Merger the Holder may have to
bear the economic risk of the investment commitment in Common Stock for an
indefinite period of time.
(c) The Holder will observe and comply with the Securities Act and all
applicable state securities and "blue sky" laws and the rules and regulations
promulgated thereunder, as now in effect and as from time to time amended, in
connection with any offer, sale, pledge, transfer or other disposition of Common
Stock. In furtherance of the foregoing, and in addition to any restrictions
contained in this Agreement, the Holder will not offer to sell, exchange,
transfer, pledge, or otherwise dispose of any of the Common Stock unless at such
time at least one of the following is satisfied:
(i) a Registration Statement under the Securities Act covering
the Common Stock proposed to be sold, transferred or otherwise disposed of,
describing the manner and terms of the proposed sale, transfer or other
disposition, and containing a current Prospectus, shall have been filed with the
SEC and made effective under the Securities Act;
(ii) such transaction shall be permitted pursuant to the
provisions of Rule 144;
11
(iii) counsel representing the Holder, satisfactory to the
Company, shall have advised the Company in a written opinion letter reasonably
satisfactory to the Company and its counsel, and upon which the Company and its
counsel may rely, that no registration under the Securities Act or any
applicable state securities law would be required in connection with the
proposed sale, transfer or other disposition; or
(iv) an authorized representative of the SEC shall have rendered
written advice to the Holder (sought by the Holder or counsel to the Holder,
with a copy thereof and of all other related communications delivered to the
Company) to the effect that the SEC would take no action, or that the staff of
the SEC would not recommend that the SEC take action, with respect to the
proposed sale, transfer or other disposition if consummated.
(d) The Holder understands that an investment in the Common Stock
involves substantial risks. Holder has been given the opportunity to make a
thorough investigation of the proposed activities of the Company and, upon
request to the Company, has been furnished with materials relating to the
Company and its proposed activities, including, without limitation, a copy of
the Prospectus dated May 21, 1999 (the "CAIS Prospectus") and all reports filed
by the Company with the SEC since May 21, 1999 (the "CAIS SEC Reports"). The
Holder has been afforded the opportunity to obtain any additional information
deemed necessary by the Holder to verify the accuracy of any representations
made or information conveyed to the Holder. The Holder confirms that all
documents, records and books pertaining to its investment in Common Stock and
requested by the Holder have been made available or delivered to the Holder. The
Holder has had an opportunity to ask questions of and receive answers from the
Company, or from a person or persons acting on the Company's behalf, concerning
the terms and conditions of this investment. The Holder has relied upon, and is
making his or her investment decision upon, the CAIS Prospectus, the CAIS SEC
Reports, certain consent solicitation materials distributed by Atcom in
connection with the Merger and other information publicly available about the
Company.
7. Restrictive Legend. All certificates representing the Common Stock
------------------
deliverable to the Holders pursuant to the Merger Agreement and any certificates
subsequently issued with respect thereto or in substitution therefor, unless a
sale, transfer or other disposition is executed pursuant to one or more of the
alternative conditions set forth in Section 6(c) shall have occurred, or unless
the conditions of paragraph (k) of Rule 144 promulgated under the Securities Act
shall have been satisfied, shall bear a legend substantially as follows, in
addition to any legend the Company determines is required pursuant to any
applicable legal requirement:
"The shares represented by this certificate may not be offered, sold,
pledged, transferred or otherwise disposed of except in accordance with the
requirements of the Securities Act of 1933, as amended, and the other
conditions specified in that certain Agreement and Plan of Merger dated as
of August 4, 1999 and that certain Registration Rights and Lock-Up
Agreement dated as of
12
_________, 1999, copies of which agreements CAIS Internet, Inc. will
furnish, without charge, to the holder of this certificate upon written
request therefor."
The Company, at its discretion, may cause a stop transfer order to be placed
with its transfer agent(s) with respect to the certificates for the Common Stock
but not as to the certificates for any part of the Common Stock as to which said
legend is no longer appropriate when one or more of the alternatives set forth
in Section 6(c) shall have been satisfied or the conditions of paragraph (k) of
Rule 144 promulgated under the Securities Act shall have been satisfied.
8. Affiliate Agreements. If and to the extent that a Holder is deemed to
--------------------
be an "affiliate" of the Company within the meaning of the Securities Act, and
as used for purposes of paragraphs (c) and (d) of Rule 145 of the SEC, then the
following terms of this Section 8 shall apply:
(a) The Holder agrees not to sell, transfer or otherwise dispose of
the Shares unless (i) such sale, transfer or other disposition is made pursuant
to an effective Registration Statement under the Securities Act, (ii) such sale,
transfer or other disposition is made in conformity with the requirements of
Rule 145(d) promulgated under the Securities Act, or (iii) such sale, transfer
or other disposition is executed pursuant to one or more of the alternative
conditions set forth in Section 6(c).
(b) The Company will give stop-transfer instructions to its transfer
agent with respect to the Shares and there will be placed on the certificates
representing such Shares, or any substitutions therefor, a legend stating in
substance:
"The shares represented by this certificate may only be transferred in
conformity with Rule 145(d) or in accordance with a written opinion of
counsel, reasonably acceptable to the issuer in form and substance, that
such transfer is exempt from registration under the Securities Act of
1933."
The legend and stop order set forth above shall be removed (by delivery of a
substitute certificate without such legend) if the Holder delivers to the
Company (i) satisfactory written evidence that the Shares have been sold in
compliance with Rule 145 (in which case, the substitute certificate will be
issued in the name of the transferee), or (ii) an opinion of counsel, in form
and substance reasonably satisfactory to the Company, to the effect that public
sale of the Shares by the Holder thereof is no longer subject to Rule 145.
9. Indemnification; Contribution.
-----------------------------
(a) Indemnification by the Company. The Company agrees to indemnify
------------------------------
and hold harmless each Holder and its officers and directors and each Person, if
any, who controls any Holder within the meaning of Section 15 of the Securities
Act as follows:
13
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement (or
any amendment thereto) pursuant to which such Holder's Registrable Securities
were registered under the Securities Act, including all documents incorporated
therein by reference, or the omission or alleged omission therefrom of a
material fact required to be stated therein or necessary to make the statements
therein not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any Prospectus (or any amendment or
supplement thereto), including all documents incorporated therein by reference,
or the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any governmental
agency, body or third party, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, if such settlement is effected
with the written consent of the Company which shall not be unreasonably
withheld; and
(iii) against any and all expense (including reasonable fees and
disbursements of counsel), as reasonably incurred in investigating, preparing or
defending against any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, in each case whether or
not a party, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent that
any such expense is not paid under subparagraph (i) or (ii) above.
provided, however, that the indemnity provided pursuant to this Section 9(a)
-------- -------
does not apply to any Holder with respect to any loss, liability, claim, damage
or expense to the extent arising out of any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by such Holder expressly for
use in a Registration Statement (or any amendment thereto) or any Prospectus (or
any amendment or supplement thereto).
(b) Indemnification by Holders. Each Holder severally agrees to
--------------------------
indemnify and hold harmless the Company and the other selling Holders, and each
of their respective directors and officers (including each director and officer
of the Company who signed the Registration Statement), and each Person, if any,
who controls the Company or any other selling Holder within the meaning of
Section 15 of the Securities Act, to the same extent as the indemnity contained
in Section 9(a) hereof (except that any settlement described in Section 9(a)(ii)
shall be effected with the written consent of such Holder), but only insofar as
such loss, liability, claim, damage or expense arises out of or is based upon
any untrue statement or omission, or alleged untrue statement or omission, made
in a Registration Statement (or any amendment or supplement thereto) in reliance
upon and in conformity with written information furnished to the Company by such
selling Holder expressly for use in such Registration Statement (or amendment
thereto) or
14
such Prospectus (or any amendment or supplement thereto). In no event shall the
liability of any Holder under this Section 9(b) be greater in amount than the
dollar amount of the proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
(c) Conduct of Indemnification Proceedings. Each indemnified party
--------------------------------------
shall give reasonably prompt notice to each indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party (i) shall not relieve
it from any liability that it may have under the indemnity agreement provided in
Section 9(a) or (b) above, unless and to the extent it did not otherwise learn
of such action and the lack of notice by the indemnified party results in the
forfeiture by the indemnifying party of substantial rights and defenses and (ii)
shall not relieve, in any event, the indemnifying party from any obligations to
any indemnified party other than the indemnification obligation provided under
Section 9(a) or (b) above. If the indemnifying party so elects within a
reasonable time after receipt of such notice, the indemnifying party may assume
the defense of such action or proceeding at such indemnifying party's own
expense with counsel chosen by the indemnifying party and approved by the
indemnified parties defendant in such action or proceeding, which approval shall
not be unreasonably withheld; provided, however, that, if such indemnified party
-------- -------
or parties reasonably determine that a conflict of interest exists where it is
advisable for such indemnified party or parties to be represented by separate
counsel or that, upon advice of counsel, there may be legal defenses available
to them that are different from or in addition to those available to the
indemnifying party, then the indemnifying party shall not be entitled to assume
such defense and the indemnified party or parties shall be entitled to one
separate counsel at the indemnifying party's expense. If an indemnifying party
is not entitled to assume the defense of such action or proceeding as a result
of the proviso to the preceding sentence, such indemnifying party's counsel
shall be entitled to conduct such indemnifying party's defense and counsel for
the indemnified party or parties shall be entitled to conduct the defense of
such indemnified party or parties, it being understood that both such counsel
will cooperate with each other to conduct the defense of such action or
proceeding as efficiently as possible. In such event, however, no indemnifying
party will be liable for any settlement effected without the written consent of
such indemnifying party. If an indemnifying party is entitled to assume, and
assumes, the defense of such action or proceeding in accordance with this
paragraph, such indemnifying party shall not be liable for the fees and expenses
of counsel for the indemnified parties incurred thereafter in connection with
such action or proceeding.
(d) Contribution. In order to provide for just and equitable
------------
contribution in circumstances in which the indemnity agreement provided for in
this Section 9 is held to be unenforceable for any reason even though it is
applicable in accordance with its terms, the Company and the selling Holders
shall contribute to the aggregate losses, liabilities, claims, damages and
expenses of the nature contemplated by such indemnity agreement incurred by the
Company and the selling Holders, in such proportion as is appropriate to reflect
the relative fault of and benefits to the Company on the one hand and the
selling Holders on the other (in such proportions that the selling Holders are
severally, not jointly, responsible for the balance), in connection with the
15
statements or omissions that resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relative equitable considerations.
The relative benefits to the indemnifying party and indemnified parties shall be
determined by reference to, among other things, the total proceeds received by
the indemnified parties and indemnifying parties in connection with the Offering
to which such losses, claims, damages, liabilities or expenses relate. The
relative fault of the indemnifying party and indemnified parties shall be
determined by reference to, among other things, whether the action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such indemnifying party or the indemnified parties, and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such action.
The parties hereto agree that it would not be just or equitable if
contribution pursuant to this Section 9(d) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 9(d), no selling Holder shall be
required to contribute any amount in excess of the amount by which the total
price at which the Registrable Securities of such selling Holder were offered to
the public exceeds the amount of any damages that such selling Holder has
otherwise been required to pay by reason of such untrue statement or omission.
Notwithstanding the foregoing, no Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 9(d), each Person,
if any, who controls a Holder within the meaning of Section `5 of the Securities
Act and directors and officers of a Holder shall have the same rights to
contribution as such Holder, and each director of the Company, each officer of
the Company who signed the Registration Statement and each Person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act
shall have the same rights to contribution as the Company.
10. Rule 144 Sales.
--------------
(a) The Company covenants that it will file the reports required to be
filed by the Company under the Securities Act and the Securities Exchange Act,
as amended, so as to enable any Holder to sell Registrable Securities pursuant
to Rule 144 under the Securities Act, to the extent such securities are
otherwise transferable.
(b) In connection with any sale, transfer or other disposition by any
Holder of any Registrable Securities pursuant to Rule 144 under the Securities
Act, the Company shall cooperate with such Holder to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold and not bearing any Securities Act legend, and enable certificates for
such Registrable Securities to be for such number of shares and registered in
such names as the selling Holders may reasonably request at least two business
days prior to any sale of Registrable Securities.
16
(c) The Company shall use its best efforts so that the Company becomes
eligible to use Form S-3 for registration of its capital stock on May 20, 2000,
and shall thereafter use its best efforts to remain so eligible after such date.
11. Miscellaneous.
-------------
(a) Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given without the written consent of the Company and the Holders of a
majority in amount of the outstanding Registrable Securities. Notice of any
amendment, modification or supplement to this Agreement adopted in accordance
with this Section 11(a) shall be provided by the Company to each Holder of
Registrable Securities at least thirty (30) days prior to the effective date of
such amendment, modification or supplement.
(b) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, registered first-
class mail, telex, telecopier, or any courier guaranteeing overnight delivery,
(i) if to a Holder, at the most current address given by such Holder to the
Company by means of a notice given in accordance with the provisions of this
Section 11(b), which address initially is, with respect to each Holder, the
address set forth next to such Holder's name on the signature page hereof, or
(ii) if to the Company, at ▇▇▇▇ ▇▇/▇▇/ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇,
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; or at
the time delivered if delivered by an air courier guaranteeing overnight
delivery.
(c) Successors and Assigns. This Agreement shall inure to the benefit
----------------------
of and be binding upon the successors and permitted assigns as permitted
hereunder of each of the parties and, except as provided in Section 9 hereof, no
other Person shall acquire or have any right under or by virtue of this
Agreement. No purchaser of the Shares from a Holder shall be deemed a successor
or assign by reason of such purchase. The benefits and obligations of a Holder
under this Agreement may be assigned (only by a written instrument signed by a
Holder and such assignee) to a Person then holding or acquiring an aggregate of
at least [10,000] Shares. If any successor or such an assignee of any Holder
shall acquire Registrable Securities, whether by operation of law or otherwise,
such Registrable Securities shall be held subject to all of the terms of this
Agreement.
(d) Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
17
(e) Headings. The headings in this Agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
-------------
IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAW PROVISIONS THEREOF.
(g) Specific Performance. The parties hereto acknowledge that there
--------------------
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other party under this
Agreement in accordance with the terms and conditions of this Agreement in any
court of the United States or any State thereof having jurisdiction.
(h) Entire Agreement. This Agreement is intended by the parties as a
----------------
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.
(i) Additional Actions and Documents. The parties hereto shall take or
--------------------------------
cause to be taken such further actions, shall execute, deliver and file, or
cause to be executed, delivered or filed, such further documents and
instruments, and shall obtain such consents as may be necessary or as the other
party may reasonably request, without the payment of further consideration, in
order fully to effectuate the purposes, terms and conditions of this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
CAIS INTERNET, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇
-------------------------------
Name: Chief Executive Officer and President
---------------------------------------
18
HOLDER
__________________________________
Name:_____________________________
Address:__________________________
__________________________________
__________________________________
19
Schedule A
----------
HOLDERS
-------
Common Stock
------------
Holder Shares
------ ------
Warrants
--------
Holder No. of Shares into which
------ -------------------------
Warrants are Convertible
------------------------
20