Common Stock Warrant - Hilton Hotels Corp. and CAIS Internet Inc.
The securities represented by this certificate 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 requirements of said Act.
COMMON STOCK WARRANT
OF
CAIS INTERNET, INC.
THIS CERTIFIES THAT, subject to the terms of this Warrant, for value
received, Hilton Hotels Corporation ("Hilton"), or its successors and permitted
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assigns (the "Warrantholder"), is entitled to purchase shares of Common Stock,
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par value $.01 per share (the "Common Stock"), of CAIS Internet, Inc., a
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Delaware corporation (the "Company"), from the Company in such number and at
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such price determined in accordance with this Warrant.
This Warrant is issued pursuant to a First Amendment to Master License
Agreement, dated as of April 23, 1999, by and between the Company, CAIS, Inc.
and the Warrantholder (the "Amendment").
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Upon delivery of this Warrant (with the Notice of Exercise in the form
attached hereto as Exhibit B-1), together with payment of the Warrant Price (as
defined below) for the shares of Common Stock to be issued, which payment may be
made by converting this Warrant, or any portion thereof, pursuant to Section 5
below ("Warrant Conversion"), at the principal office of the Company or at such
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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.
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
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any time on or after the date hereof; provided, however, that this Warrant shall
expire to the extent then unexercised as of 5:00 p.m., eastern time, on April
23, 2004.
2. Number of Warrant Shares. Subject to adjustment from time to time
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pursuant to Section 4 hereof, the Warrantholder may exercise this Warrant with
respect to 66,667 shares of Common Stock (or other securities issuable in the
event of a reclassification, change, merger or consolidation as set forth in
Section 4(a) hereof) (the "Shares"); provided, that if the initial public
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offering price per share of Common Stock (the "IPO Price") is less than $15, the
number of
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Shares for which this Warrant is exercisable shall be increased to the
number of Shares equal to $1.0 million divided by the IPO Price.
3. Warrant Price. The exercise price of this Warrant (the "Warrant
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Price") shall equal $.01 per share, subject to adjustment from time to time
pursuant to Section 4 hereof.
4. Adjustment of Number of Shares and Warrant Price. The number and kind
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of Shares purchasable upon the exercise of the Warrant and the Warrant Price
shall be subject to adjustment from time to time in accordance with the
following provisions.
(a) Reclassification, Consolidation or Merger. In case of any capital
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reorganization, reclassification or change of outstanding securities of the
class issuable upon exercise of the Warrant (other than as a result of a
subdivision, split, combination or stock dividend), or in case of any
consolidation or merger of the Company with or into another entity, the Company,
or such successor entity, as the case may be, shall execute new Warrants, with
substantially the same terms as this Warrant, or amend this Warrant, to provide
that the holder of this Warrant shall have the right to exercise such new
Warrant or amended Warrant and procure upon such exercise in lieu of the Common
Stock theretofore issuable upon exercise of this Warrant the kind and amount of
shares of stock, other securities, money and/or property receivable upon such
reorganization, reclassification, change, consolidation or merger by the
Warrantholder if this Warrant had been fully exercised immediately prior to such
event. Any such new Warrant shall provide for adjustments which shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Section 4. The provisions of this subsection (a) shall similarly apply to
successive reorganizations, reclassifications, changes, consolidations and
mergers.
(b) Subdivision or Combination of Shares. If at any time while this
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Warrant remains outstanding and unexpired, the Company shall subdivide, split or
combine its Common Stock (or declare a dividend or make a distribution payable
in shares of Common Stock or other capital stock), the number of Shares into
which the Warrants are exercisable immediately prior to such action shall be
proportionately adjusted so that the holder of any Warrant thereafter exercised
may receive the aggregate number and kind of shares of capital stock of the
Company which the holder would have owned immediately following such action if
such Warrant had been exercised immediately prior to such action and the Warrant
Price shall be proportionately adjusted.
5. Payment by Warrant Conversion. The Warrantholder may exercise the
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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
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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-
1. 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
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to the exercise of the Warrant from (B) the aggregate fair market value of the
Converted Warrant Shares issuable upon exercise of this Warrant (or the
specified portion hereof) on the date of exercise, by (y) the fair market value
of one Share on the date of exercise. For purposes of this Section 5, fair
market value of a Share as of a particular date shall be the closing price on
the business day immediately prior to the exercise of the applicable Warrant.
6. Notices. Upon any adjustment of the Warrant Price and any increase or
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decrease in the number of Shares purchasable upon the exercise of this Warrant,
then, and in each such case, the Company, within 30 days thereafter, shall give
written notice thereof to the registered holder of this Warrant (the "Notice").
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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.
7. Transfer and Exchange of the Warrant and Shares. When this Warrant or
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Shares are presented to the Company with a request:
(i) to register their transfer; or
(ii) to exchange such Warrant for an equal number of Warrants of other
authorized denominations,
the Company shall register the transfer or make the exchange as requested if the
following requirements are met:
(x) the Warrant shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Company, duly executed
by the Warrantholder thereof or by his attorney-in-fact, duly authorized in
writing; and
(y) in the case of Shares, such request shall be accompanied by the
following additional information and documents (all of which may be
submitted by facsimile), as applicable:
(A) if such Shares are being transferred (1) to a "qualified
institutional buyer" (as defined in Rule 144A) in accordance with Rule
144A or (2) pursuant to an exemption from registration in accordance
with Rule 144 (and based on an opinion of counsel if the Company so
requests) or (3) pursuant to an effective registration statement under
the Securities Act, a certification to that effect;
(B) if such Shares are being transferred pursuant to an
exemption from registration in accordance with Rule 904 under the
Securities Act (and based on an opinion of counsel if the Company so
requests), a certification to that effect; or
(C) if such Shares are being transferred in reliance on another
exemption from the registration requirements of the Securities Act
(and based on an opinion of counsel if the Company so requests), a
certification to that effect.
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8. Representations and Warranties. The Company represents and warrants to
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the Warrantholder as follows:
(a) Organization and Powers. The Company (i) is a corporation duly
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organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation; and (ii) has all the requisite power and
authority to carry on its business and to execute, deliver and perform its
obligations under this Warrant and the Warrant Agreement dated as of the date
hereof, between the Company and Hilton Hotels Corporation (the "Warrant
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Agreement").
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(b) Authorization; No Conflict. The offer and sale of the Warrants
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and the Common Stock underlying the Warrants, and the execution, delivery and
performance by the Company of the Warrant and the Warrant Agreement have been
duly authorized by all necessary corporate action of the Company and do not and
will not (i) contravene the Company's articles of incorporation or bylaws; (ii)
result in a breach or default under any material instrument, contract or other
agreement to which the Company is a party; or (iii) violate any provision of any
law, rule, regulation, order, judgment, decree or the like binding on or
affecting the Company.
(c) Binding Obligations. The Warrant and Warrant Agreement
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constitute, or will constitute, legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with their respective
terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally and general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing and the
possible unavailability of specific performance or injunctive relief, regardless
of whether considered in a proceeding of equity or at law.
(d) Shares Duly Issued, Fully Paid and Non-Assessable. The Shares,
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when issued upon the exercise of this Warrant pursuant to the terms hereof,
shall be duly issued, fully paid and non-assessable.
(e) No Registration. The offer and sale of the Warrants and the
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underlying Shares of Common Stock are exempt from the registration and
prospectus delivery requirements of the Securities Act.
9. Miscellaneous.
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(a) The terms of this Warrant shall be binding upon and shall inure to
the benefit of any successors or permitted 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 (i) to confer upon the
Warrantholder, as such, any rights of a stockholder of the Company, or any right
to vote, give or withhold consent to any corporate action, receive notice of
meetings, receive dividends or subscription rights, or otherwise, or (ii)
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as imposing any obligation on the Warrantholder to purchase any securities or
any liability as a stockholder of the Company, whether such obligation or
liabilities are asserted by the Company or its creditors.
(c) Receipt of this Warrant by the Warrantholder 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 Warrantholder against impairment.
(e) Upon receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant and, in the case of
any such loss, theft or distribution, upon delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Company or, in the case of any
such mutilation, upon surrender and cancellation of such Warrants, the Company
at its expense will execute and deliver, in lieu thereof, a new Warrant of like
date and tenor.
(f) Any provision of this Warrant may be amended, waived or modified
upon the written consent of the Company and the Warrantholders.
(g) The Company hereby agrees that at all times there shall be
reserved for issuance and/or deliver upon exercise of this Warrant, free from
preemptive rights, such number of authorized but unissued shares of Common Stock
as from time to time shall be required for issuance or delivery upon exercise of
this Warrant. The Company further agrees that it will promptly to take all
action as may from time to time be required in order to permit the holder hereof
to exercise this Warrant and the Company duly and effectively to issue shares of
Common Stock hereunder.
(h) This Warrant shall be governed by and construed in accordance with
the laws of the State of Delaware without regard to the conflicts of laws
provisions thereof.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by its
duly authorized officer.
Dated: April 23, 1999
CAIS INTERNET, INC.
/s/ William M. Caldwell, IV
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William M. Caldwell, IV
President
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EXHIBIT B-1
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NOTICE OF EXERCISE
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TO: CAIS Internet, Inc.
1. The undersigned 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 5 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:
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(Name)
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(Address)
Signature of Warrantholder:
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By:
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Title
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Date:
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