SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_____________________
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
Commission file number: 000-26103
_____________________
CAIS INTERNET, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-2066769
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
1255 22nd Street, N.W., Fourth Floor, Washington, D.C. 20037
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (202) 715-1300
Securities registered pursuant to Section 12(b) of the Act:
None.
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, par value $.01 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period than the
Registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Based on the closing sale price of our common stock on April 9, 2001, the
aggregate market value of common stock held by nonaffiliates of the Registrant
was $8,474,659.
The number of shares of the Registrant's common stock outstanding as of April 9,
2001 was 23,656,790.
CAIS INTERNET, INC.
FORM 10-K/A
For the Fiscal Year Ended December 31, 2000
INDEX
Page
----
PART III
Item 10. Directors and Executive Officers of the Registrant.............. 3
Item 11. Executive Compensation.......................................... 6
Item 12. Security Ownership of Certain Beneficial Owners and Management.. 8
Item 13. Certain Relationships and Related Transactions.................. 10
Signatures................................................................ 13
Page 2
Introductory Note
This amendment on Form 10-K/A (the "Amendment") amends the Registrant's
Annual Report on Form 10-K filed by the Registrant on April 16, 2001, and is
being filed solely to include in Registrant's Annual Report on Form 10-K the
information required by Part III of Form 10-K. This Amendment does not amend
or alter the information set forth in Parts I, II or IV of Registrant's Annual
Report on Form 10-K filed on April 16, 2001 and, accordingly, this information
is not included in the Amendment.
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors and Executive Officers
The directors and executive officers of the Company and certain of the
officers of the Company's subsidiaries, their ages, and summaries of their
respective business experiences are set forth below:
Name Age Position
- ---- --- --------
Michael Lee................. 39 President, Chief Executive Officer and Director
Andrew P. Hines............. 61 Chief Operating Officer and Chief Financial Officer
Michael Abbott.............. 41 Chief Technology Officer
Peter Benedict.............. 35 Senior Vice President, Marketing
Russell Helmick............. 31 Vice President of Information Technology
Kim Kao..................... 38 Vice President, Business Anywhere
Michael Martinez............ 35 Senior Vice President, Hospitality
Amit Rikhy.................. 36 Senior Vice President, Strategic Planning
Stephen R. Roberts.......... 41 Senior Vice President, Data Connectivity Sales
Ulysses G. Auger, II........ 48 Chairman of the Board
William M. Caldwell, IV..... 53 Vice Chairman of the Board
R. Theodore Ammon(1)(2)..... 51 Director
Vernon L. Fotheringham(1)... 52 Director
James H. Greene, Jr.(1)..... 50 Director
Richard F. Levin(1)(2)...... 48 Director
Alexander Navab Jr.(2)...... 35 Director
John K. Saer, Jr............ 44 Director
- --------
(1) Member of the Compensation Committee
(2) Member of the Audit Committee
Michael Lee has served as President and Chief Executive Officer of CAIS
Internet since March 2001. Mr. Lee has more than 12 years of experience in the
high technology and Internet industries. Most recently, Mr. Lee was Chief
Business Development Officer at TelePacific Communications, a Los Angeles-based
next generation integrated communications provider of converged voice
and data services to businesses in the western United States. Mr. Lee also
served as Chief Technology Officer of TelePacific and was one of its original
employees since the founding of the Company.
Prior to joining TelePacific, Mr. Lee founded DigitalVelocity(TM), a Los
Angeles-based Internet Service Provider that provides superior connectivity to
multiple backbone carriers. Mr. Lee developed network methodology, marketing,
and operational plans, and assembled a technical and management team to fully
develop and deploy the service. DigitalVelocity(TM) was successfully launched in
Los Angeles in 1998 and was merged with TelePacific in January 1999. Previously,
Mr. Lee was a principal at CERFnet, one of the original commercial ISP's in
1994. CERFnet was acquired by TCG, which was later acquired by AT&T. Subsequent
to this acquisition, Mr. Lee served as National Director
Page 3
of Internet Sales for AT&T CERFnet.
Andrew Hines has served as Chief Operating Officer and Chief Financial Officer
of CAIS Internet since October 2000. Mr. Hines is responsible for financial and
operational strategies for CAIS Internet. Prior to joining CAIS, Mr. Hines held
various senior executive positions at both Fortune 100 and entrepreneurial
companies, directing operational and strategic aspects of global business. He is
a Certified Public Accountant.
Michael Abbott joined CAIS in January 2000 and is currently the Chief
Technology Officer. Previously he served as the Company's Director and Vice
President of Engineering. Prior to CAIS, Mr. Abbott was director of ISM security
and e-business at INTELSAT, the world's largest commercial satellite service
provider, where he was both senior technical officer and senior systems
engineering architect. At INTELSAT, Mr. Abbott had also served as the company's
manager of network engineering and operations. Prior to INTELSAT Abbott held
technology positions at ACT, Systems Engineering and Management Associates and
the Defense Communications Support Group.
Peter Benedict has served as the Company's Senior Vice President of Marketing
since March 2001. Mr. Benedict has a wealth of experience in developing and
executing comprehensive public relations and marketing programs with a variety
of established and startup communications companies. Most recently Mr. Benedict
was the Director of Product Marketing at Tachion Networks. He has experience
running media and analyst relations, having launched and promoted a wide variety
of service provider data solutions including Internet protocal (IP) telephony,
multi-service access, ATM/frame relay, Internet access management, virtual
private network (VPN) policy management and dial/broadband remote access
services.
Russell Helmick has served as the Company's Vice President of Information
Technology since April 2001. Mr. Helmick was employed by CAIS from TelePacific
Communications with over 10 years experience in Information Technology. At
TelePacific, Mr. Helmick was the team leader in developing sales automation
tools, order management and internal help systems. His department was also
responsible for back office communications systems such as corporate messaging,
file, print, database and backup servers, running on both Windows NT and Unix
systems. Mr. Helmick also developed the company's customer workflow automation
and information processing systems, supporting the quality assurance (QA)
department environment, and designed a bug tracking and enhancement request
system.
Kim Y. Kao is Vice President and General Manager of Business Anywhere USA,
Inc. Prior to the Company's acquisition of Business Anywhere USA, Inc., he was
President and Chief Executive Officer of Business Anywhere, USA, Inc. and Logic
Micro Systems, Inc from 1991 to 1999. Prior to co-founding Logic Micro Systems,
he held senior positions at Mattel Toys and Armor All Products.
Michael Martinez has served as the Company's Senior Vice President for
Hospitality Sales since April 2001. Mr. Martinez has 12 years experience in the
computer and telecommunications industries. In his most recent position as VP of
Alternate Channels at TelePacific Communications, Mr. Martinez was responsible
for all channel activities, including strategic partnerships, hospitality
services, multi-dwelling units, agents, alternate channel sales and processes,
business plans, marketing strategies, and operations relationships.
Amit Rikhy has served as the Company's Senior Vice President of Strategic
Planning since March 2001. Mr. Rikhy joined CAIS with over 14 years of domestic
and
Page 4
international experience in corporate finance, strategy, mergers and
acquisitions, and business development. Mr. Rikhy most recently comes from
TelePacific Communications where he was acting CFO and Vice President of
Corporate Development. He was responsible for all aspects of the finance
department, including financial development activities, reporting, budgeting,
and analysis. Mr. Rikhy has also managed finance and equity investment
activities, including capital raising, strategic partnerships, due diligence,
and negotiations.
Stephen R. Roberts has served as Senior Vice President, Data Connectivity
Sales for CAIS Internet since November 1999. Mr. Roberts served as the
President of Cleartel Communications, Inc., a telecommunications company, from
February 1999 until joining CAIS in November 1999. Mr. Roberts previously was
Cleartel's Vice President of Sales and General Manager. Mr. Roberts has 16
years experience in the telecommunications industry including a variety of
sales and sales management positions.
Ulysses G. Auger, II has served as the Chairman of the Board since January
1998, and was the Company's Chief Executive Officer from January 1998 to October
2000. Mr. Auger has an extensive background in the telecommunications industry,
and is a three-term member of the Board of Directors of Comptel, a
telecommunications industry trade association with approximately 225 member
companies. Until February 1999, Mr. Auger chaired Comptel's IP Committee, which
was formed to address Internet issues affecting the telecommunications industry.
In 1987, Mr. Auger founded Cleartel Communications, Inc. and has served as a
director since July 1987. Mr. Auger also served as President of Cleartel from
August 1987 to June 1988, and then again from June 1990 to February 1999.
William M. Caldwell, IV has served as a member of the Board of CAIS Internet
since January 1998 and of CAIS, Inc. since May 1996, as CAIS Internet's Vice
Chairman from January 1998 to February 1999 and as CAIS Internet's and CAIS,
Inc.'s President beginning February 1999 and as Chief Executive Officer from
October 2000 to March 2001. Mr. Caldwell also served as the Vice Chairman of
CAIS, Inc. and Cleartel Communications, Inc. from September 1997 to February
1999. Since June 1995, Mr. Caldwell also has served as a member of the Board of
Directors of Cleartel. Prior to joining CAIS, Inc. and Cleartel, from 1993 to
August 1997, Mr. Caldwell served as President of Digital Satellite Broadcasting
Corporation. Prior to 1993, Mr. Caldwell founded The Union Jack Group, an
investment banking advisory firm, and served as a Vice President in Corporate
Finance at Kidder Peabody. In addition, Mr. Caldwell also has served as both
President and Chief Financial Officer of Van Vorst Industries, an international
home furnishing manufacturer; as Vice President of Marketing for Flying Tiger
Line, Inc., one of the world's largest all-cargo air carriers before its
acquisition by Federal Express Corporation; and as a consultant with Booz Allen,
Hamilton Inc. Mr. Caldwell currently sits on the Board of Directors for both Lee
Pharmaceuticals and King Koil Franchising, Inc.
R. Theodore Ammon has served as a member of the Board of CAIS Internet since
February 1999. Mr. Ammon has served as the Chairman of the Board of Big Flower
Holdings, Inc. (and predecessors) since its inception in 1993 and was the
Chief Executive Officer of Big Flower Holdings, Inc. predecessor from
inception until April 1997. Mr. Ammon is also a director of Big Flower Press
Holdings, Inc., a subsidiary of Big Flower Holdings, Inc. Mr. Ammon was a
General Partner of Kohlberg Kravis Roberts & Co. from 1990 to 1992, and an
executive of such firm prior to 1990. Mr. Ammon is also a member of the Board
of Directors of Host Marriott Corporation and Chairman of the Board of
Directors of 24/7 Media, Inc. In addition, Mr. Ammon serves on the Board of
Directors of the New York YMCA, The Municipal Art Society of New York,
Jazz@Lincoln Center and on the Board of Trustees of Bucknell University.
Vernon L. Fotheringham has served as a member of the Board of CAIS Internet
since January 1999. Mr. Fotheringham has served as Chairman, President and
Chief Executive Officer of Nutel Corporation since August 1998. From December
1995 to August 1998, Mr. Fotheringham served as Chairman and Chief Executive
Officer of Advanced Radio Telecom. From April 1993 to December
1995, Mr. Fotheringham served as President and Chief Executive Officer of
Page 5
Norcom Networks Corporation, a nationwide provider of mobile satellite
services. Over the last ten years, Mr. Fotheringham has advised several
businesses in the telecommunications industry, including American Mobile
Satellite Corporation, ClairCom Communications and McCaw Cellular
Communications, Inc.
James H. Greene, Jr. has served as a director of the Company since February
2000. Mr. Greene is a member of KKR & Co., LLC, the limited liability company
which serves as the General Partner of KKR. From January 1, 1993 until January
1, 1996, he was a general partner of KKR. Mr. Greene also is a director of
Accuride Corporation, Birch Telecom, Inc., Intermedia Communications, Inc.,
Owens-Illinois, Inc., Safeway Inc. and Zhone Technologies, Inc.
Richard F. Levin has served as a member of the Board of CAIS Internet since
December 1997. Mr. Levin also served as a member of the Board of Directors of
Cleartel Communications, Inc. from June 1995 to June 1998. Mr. Levin is a
partner in the Washington, D.C. law firm of Grossberg, Yochelson, Fox and
Beyda, where he has practiced since 1979.
Alexander Navab, Jr. has served as a director of the Company since February
2000 and has been a Director of KKR since 1998. He was an executive at KKR
from 1993 through 1998. He is also a director of Birch Telecom, Inc., Borden,
Inc., Intermedia Communications, Inc., KSL Recreation Group, Inc., Regal
Cinemas, World Kitchen Inc., and Zhone Technologies, Inc.
John K. Saer, Jr. has served as a director of the Company since March 2001 and
has been an executive of KRR since 2001. Prior to joining KKR in 2001, Mr. Saer
was the Chief Financial Officer of KSL Recreation Corporation, a KKR sponsored
company organized in 1992 as a management buildup. He joined KSL Recreation in
1993, initially serving as Vice President of Business Development and
Acquisitions. Mr. Saer replaced Ulysses G. Auger, Sr. on the board.
All officers serve at the discretion of the Board.
Pursuant to the terms of a Stockholders Agreement dated December 20, 1999 (the
"CII Stockholders Agreement") between the Company and CII Ventures LLC ("CII
Ventures"), a limited liability company affiliated with Kohlberg Kravis Roberts
& Co. L.P., the Board was expanded from six persons to eight persons,
and CII Ventures was granted the right to nominate two members of the Board
("Investor Directors"). CII Ventures also was granted a right to increase the
Board to nine persons and to nominate a third Investor Director. Messrs, James
H. Greene, Jr., Alexander Navab, Jr., and John K. Saer, Jr. are principals of
KKR and/or its affiliates. The terms of the Stockholders Agreement further
provide that, in addition to any other Board or Stockholder action that may be
required, the written consent of at least one Investor Director will be required
to take certain corporate governance actions with respect to the Company, its
securities, certain transactions, or certain changes to the Company's
Certificate of Incorporation or Bylaws. CII Ventures' right to designate
nominees as Investor to require the consent of at least one Investor Director to
certain of the Company's activities is dependent on CII Ventures' continuing to
own specified percentages of the Company's Common Stock.
Compliance With Section 16 of
the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers, directors and persons who beneficially own more than 10%
of the Company's Common Stock to file initial reports of ownership and reports
of changes in ownership with the Securities and Exchange Commission ("SEC").
Such persons are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms filed by such persons.
Based solely on the Company's review of such forms and amendments thereto
furnished to the Company and written representations from certain reporting
persons, the Company believes that all executive officers, directors and
greater than 10% Stockholders complied with all filing requirements applicable
to them with respect to transactions during fiscal 2000.
Item 11. Executive Compensation
The following table sets forth certain summary information concerning
compensation for services in all capacities awarded to, earned by or paid to,
each of the individuals serving as the Company's Chief Executive Officer during
the fiscal year ended December 31, 2000, each of the four other most highly
compensated executive officers, whose total cash and cash equivalent
compensation exceeded $100,000, and two additional individuals who would have
been among the four most highly compensated executive officers during fiscal
2000 but were not employed by the Company at the end of fiscal 2000. Each of the
Company's officers received perquisites and other personal benefits in addition
to salary and bonuses. The aggregate amount of these perquisites and other
personal benefits, however, did not exceed the lesser of $50,000 or 10% of the
total of the annual salary and bonus reported for any of the persons listed in
this chart for 2000.
Page 6
ANNUAL COMPENSATION LONG TERM COMPENSATION AWARDS
------------------- -----------------------------
Other Annual Securities
Salary Bonus Compensation Underlying All Other
Name and Principal Position Year ($) ($) ($) Options (#) Compensation
- ------------------------------------- ---- ------- ------- ------------ ----------- ------------
Ulysses G. Auger, II (1) 2000 270,481 125,000 - - -
Chairman of the Board and 1999 339,253 50,000 - - -
Chief Executive Officer 1998 280,140 28,000 - - -
William M. Caldwell, IV (2) 2000 317,885 125,000 - 100,000 -
Vice Chairman of the Board and 1999 263,462 50,000 - - -
Chief Executive Officer 1998 237,498 (3) - - - -
Evans K. Anderson (4) 2000 271,442 100,000 - 80,000 -
Executive Vice President 1999 242,309 50,000 - 20,000 -
of Sales and Marketing 1998 179,956 - - 135,800 -
Gary Rabin (5) 2000 242,883 100,000 - 80,000 -
Executive Vice President 1999 134,225 - - 340,000 -
of Finance and Strategic Planning
Kevin Brand (6) 2000 225,000 50,000 - - -
Executive Vice President of Operations 1999 17,308 - - 200,000 -
Stephen Price (7) 2000 170,000 90,000 - 60,000 -
Vice President of Business Development 1999 115,385 - - 180,000 -
Wendell S. Nye (8) 2000 230,841 309,583 - 120,783 -
Executive Vice President of 1999 72,396 - - 338,825 -
CAIS Internet and President of
CAIS Software Solutions, Inc.
Thomas Caldwell (9) 2000 154,671 273,012 - 86,470 -
Vice President of Engineering and 1999 46,161 - - 73,295 -
Design of CAIS Software Solutions, Inc.
(1) Mr. Auger ceased being Chief Executive Officer in October 2000.
(2) Mr. Caldwell ceased being Chief Executive Officer in March 2001.
(3) During 1998, Mr. Caldwell received a base salary of $176,922 for services
performed in 1998 and $60,576 in deferred income for services performed in
1997.
(4) Mr. Anderson ceased being Executive Vice President of Sales and Marketing
in April 2001.
(5) Mr. Rabin ceased being Executive Vice President of Finance and Strategic
Planning in February 2001.
(6) Mr. Brand ceased being Executive Vice President of Operations in February
2001.
(7) Mr. Price ceased being Vice President of Business Development in March
2001.
(8) Mr. Nye ceased being Executive Vice President of CAIS Internet and
President of CAIS Software Solutions, Inc. in December 2000.
(9) Mr. Caldwell ceased being Vice President of Engineering and Design of CAIS
Software Solutions, Inc. in December 2000.
Page 7
Options Granted in Fiscal Year 2000
The following table sets forth certain information regarding options to
acquire Common Stock granted to each of the individuals serving as the Company's
Chief Executive Officer during the fiscal year ended December 31, 2000, each of
the four other most highly compensated executive officers, whose total cash and
cash equivalent compensation exceeded $100,000 and two additional individuals
who would have been among the four most highly compensated executive officers
during fixed 2000 but were not employed by the Company at the end of fiscal
2000. There were no stock appreciation rights granted in 2000. The assumed rates
of growth were selected for illustration purposes only. They are not intended to
forecast possible future appreciation, if any, of stock prices. No gain to the
Recipients is possible without an increase in stock prices, which will benefit
all Stockholders.
Potential
Realizable
Value at Assumed
Annual Rates of
Number of Percent of Stock Price
Securities Total Appreciation for
Underlying Options Exercise Option Term (1)
Options Granted in Price ------------------------
Name Granted Fiscal Year ($/sh) Expiration Date 5% ($) 10% ($)
- ---------------------------- ---------- ----------- -------- --------------- -------- ----------
Ulysses G. Auger, II - - - - - -
William M. Caldwell, IV 100,000 5.8 12.00 April 17, 2010 754,674 1,912,491
Evans K. Anderson 80,000 4.6 12.00 April 17, 2010 603,739 1,529,993
Gary Rabin 80,000 4.6 12.00 April 17, 2010 603,739 1,529,993
Kevin Brand - - - - - -
Stephen Price 60,000 3.5 4.31 November 1, 2010 162,632 412,142
Wendell S. Nye 15,783 0.9 12.00 April 17, 2010 119,110 301,848
Wendell S. Nye 105,000 6.1 3.00 December 1, 2005 87,029 192,311
Thomas Caldwell 9,470 0.5 12.00 April 17, 2010 71,468 181,113
Thomas Caldwell 77,000 4.4 3.00 December 1, 2005 63,821 141,028
- --------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date based upon the exercise prices of the options, which
were granted at the fair market value of the Company's Common Stock on the
date of grant. These assumptions are not intended to forecast future
appreciation of the Company's stock price. The potential realizable value
computation does not take into account federal or state income tax
consequences of option exercises or sales of appreciated stock.
Page 8
Fiscal Year End Option Values
The following table sets forth certain information regarding unexercised
options held by each of the individuals serving as the Company's Chief Executive
Officer during the fiscal year ended December 31, 2000, and each of the four
other most highly compensated executive officers, whose total cash and cash
equivalent compensation exceeded $100,000 and two additional individuals who
would have been among the four most highly compensated executive officers during
fiscal 2000 but were not employed by the Company at the end of fiscal 2000. Mr.
Price exercised 15,000 options in 2000. The calculations of the value of
unexercised options are based on the difference between the closing price of the
Company's Common Stock of $0.9688 per share on the NASDAQ National Market System
on December 29, 2000, and the exercise price of each option, multiplied by the
number of shares covered by the option.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at Fiscal Year End (#) Options at Fiscal Year End ($)
------------------------------- ------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ----------------------- ----------- ------------- ----------- -------------
Ulysses G. Auger, II - - - -
William M. Caldwell, IV 1,275,441 408,902 - -
Evans K. Anderson 175,039 362,181 - -
Gary Rabin 113,332 186,668 - -
Kevin Brand 50,000 150,000 - -
Stephen Price 45,000 180,000 - -
Wendell S. Nye 170,275 - - -
Thomas Caldwell 87,922 - 141 -
Employment Agreements
Mr. Gary Rabin ceased being Executive Vice President of Finance and
Strategic Planning in February 2001. Mr. Rabin and the Company entered into a
severance agreement in February 2001 under which the Company paid Mr. Rabin
$50,000 in severance pay and forgave all principal and accrued interest payable
by Mr. Rabin to the Company under the terms of a $400,000 promissory note. Mr.
Brand ceased being Executive Vice President of Operations in February 2001. Mr.
Brand and the Company entered into a severance agreement in February 2001
whereby the Company agreed to pay Mr. Brand $131,250 in severance pay which will
be fully paid by June 30, 2001. Mr. Price ceased being Vice President of
Business Development in March 2001. In November 2000, Mr. Price and the Company
entered into an amendment to Mr. Price's employment agreement under which the
Company paid Mr. Price $50,000 as year 2000 cash bonus compensation and
severance pay of $93,750.
Directors' Compensation
Non-employee Board members were reimbursed for their reasonable expenses
incurred in connection with attending Board meetings in 2000. Non-employee
Board members received no additional compensation for attending Board
meetings, or otherwise in connection with the performance of their duties in
2000. Non-employee Board members are eligible to receive option grants under
the Company's Amended and Restated 1998 Equity Incentive Plan, however, no
such options were granted to non-employee Board members in 2000. The Company
anticipates no increase in such directors' compensation during fiscal 2001.
Page 9
Compensation Committee Interlocks And Insider Participation
The Compensation Committee of the Board of Directors was expanded in
February, 2000 from three members to four, and currently consists of Messrs.
Levin, Fotheringham, Ammon and Greene. No member of the Committee was at any
time during fiscal 2000 or at any other time an officer or employee of the
Company.
No executive officer of the Company served on the board of directors or
compensation committee of any entity that has one or more executive officers
serving as a member of the Company's Board or Compensation Committee.
For a description of transactions between the Company and members of the
Compensation Committee or their affiliates, see Item 13 "Certain Relationships
and Related Transactions," below.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of April 25, 2001 the number and percentage
of outstanding shares of Common Stock and Preferred Stock beneficially owned
by (a) each person known by the Company to beneficially own more than 5% of
such stock, (b) each director of the Company, (c) each of the executive
officers of the Company required to be disclosed pursuant to Item 403(b) of
Regulation S-K, and (d) all directors and executive officers of the Company as
a group.
Shares of Common Stock Percent of Shares of Preferred Stock Percent of
Name and Address of Beneficial Owner Beneficially Owned(1) Common Stock Beneficially Owned (1) Preferred Stock
- ----------------------------------- ---------------------- ------------ ------------------------- ---------------
CII Ventures LLC 7,994,825 (3) 25.3% 7,589,794 (4) 97.6%
c/o Kohlberg Kravis Roberts & Co. L.P.
9 W. 57th Street
New York, NY 10019 (2)
Microsoft Corporation 1,740,273 (5) 6.9% 41,767 (6) 0.5%
One Microsoft Way
Redmond, WA 98052
U.S. Telesource, Inc. 1,750,000 (8) 6.9% 125,000 (9) 1.6%
700 Qwest Tower
555 Seventeenth Street
Denver, CO 80202 (7)
Ulysses G. Auger II 5,166,674 (10) 21.6%
William M. Caldwell, IV 1,300,441 (11) 5.2%
Evans K. Anderson 395,986 (12) 1.6%
Gary Rabin - *
Kevin Brand 25,000 (13) *
Stephen Price 60,000 (14) *
Wendell S. Nye 167,919 (15) *
Thomas Caldwell 99,946 (16) *
R. Theodore Ammon 3,559,620 (17) 14.5%
Vernon L. Fotheringham 15,000 (18) *
James H. Greene, Jr. - *
Richard F. Levin 15,000 (18) *
Alexander Navab, Jr. 12,500 *
John K. Saer, Jr. - *
Ulysses G. Auger, Sr. 4,808,704 20.3%
All directors and executive 11,324,119 (19) 42.0%
officers as a group of 22 persons
- --------
* Less than 1%
(1) For purpose of this table, the number and percent of class of shares
beneficially owned are determined in accordance with Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
such information is not necessary indicative of beneficial ownership for
any other purpose. Under Rule 13d-3, beneficial ownership includes any
shares as to which the person has sole or shared voting power or
investment power and any shares subject to options, warrants or other
rights to acquire shares held by that person that are currently
exercisable or exercisable within 60 days of the Record Date. In
addition, such shares are deemed to be outstanding in calculating the
percent of class of such person, but are not deemed to be outstanding as
to any other person. Unless otherwise indicated in the footnotes, each
beneficial owner has sole voting and investment power (or shares such
powers with his spouse) with respect to the shares shown as beneficially
owned, subject to community property laws where applicable. Unless
otherwise noted, the address of each of the persons listed is c/o CAIS
Internet, Inc., 1255 22nd Street, N.W., Fourth Floor, Washington, D.C.
20037.
(2) CII Ventures LLC is a limited liability company of which KKR 1996 Fund
L.P. is the managing member. KKR 1996 GP L.L.C. is the sole general
partner of KKR Associates 1996 L.P., which is the sole general partner of
KKR 1996 Fund L.P. KKR 1996 GP L.L.C. is a limited liability company, the
managing members of which are Messrs. Henry R. Kravis and George R.
Roberts, and the other members of which are Messrs. Paul E. Raether,
Michael W. Michelson, James H. Greene, Jr., Michael T. Tokarz, Edward A.
Page 10
Gilhuly, Perry Golkin, Scott M. Stuart and Robert I. MacDonnell. Mr. Greene
is a director of the Company. Each of the individuals who are the members
of KKR 1996 GP L.L.C. may be deemed to share beneficial ownership of any
shares beneficially owned KKR 1996 GP L.L.C. Each of such individuals
disclaims beneficial ownership. Mr. Alexander Navab, Jr., is also an
executive of KKR and a limited partner of KKR Associates 1996 L.P. Mr.
Navab disclaims that he is the beneficial owner of securities in which he
has no economic interest. KKR Partners II, L.P. owns less than a 4%
membership interest in CII Ventures LLC.
(3) Comprises 7,994,825 shares of Common Stock issuable upon conversion of
shares of Series D Stock (based on a conversion ratio of approximately
0.8484 of one share of Common Stock for each issued and outstanding share
of Series D Stock), and warrants to purchase 1,555,000 shares of Common
Stock.
(4) Comprises 7,589,794 shares of Series D Stock.
(5) Comprises 1,740,273 shares of Common Stock issuable upon the conversion of
41,767 shares of Series F Stock.
(6) Comprises 41,767 shares of Series F Stock.
(7) Information based upon Schedule 13D filed by U.S. Telesource, Inc.
("USTI"), Qwest Communications Corporation ("Qwest Communications"), Qwest
Corporation ("Qwest"), Qwest Communications International Inc. ("QCI"),
Anshutz Company ("Anshutz Company") and Philip F. Anshutz ("Anshutz"). USTI
is a Delaware corporation and a direct wholly-owned subsidiary of Qwest
Communications. Qwest Communications is a Delaware corporation and a direct
wholly-owned subsidiary of Qwest. Qwest is a Colorado corporation and is a
direct wholly-owned subsidiary of QCI. QCI is a publicly traded Delaware
corporation. Anshutz Company is a Delaware corporation and the beneficial
owner of approximately 39% of the outstanding shares of QCI. Anshutz is the
beneficial owner of 100% of the capital stock of Anshutz Company. USTI's,
Qwest Communication's, Qwest's, QCI's, Anshutz Company's and Anshutz's
principal and business address is 555 17th Street, Denver, Colorado 80202.
(8) Includes 1,250,000 shares of Common Stock issuable upon conversion of
125,000 shares of Series C Stock owned by USTI and 500,000 shares of Common
Stock issuable upon exercise of a warrant owned by USTI.
(9) Comprises 125,000 shares of Series C Stock.
(10) Comprises 4,824,214 shares of Common Stock, 97,460 shares of Common Stock
held in family trusts, and warrants to purchase 255,000 shares of Common
Stock.
(11) Comprises 1,300,441 shares of Common Stock that may be acquired by Mr.
William Caldwell, IV upon the exercise of currently exercisable options.
(12) Comprises 395,986 shares of Common Stock that may be acquired by Mr.
Anderson upon the exercise of currently exercisable options.
(13) Comprises 25,000 shares of Common Stock that may be acquired by Mr. Brand
upon the exercise of currently exercisable options.
(14) Comprises 60,000 shares of Common Stock that may be acquired by Mr. Price
upon the exercise of currently exercisable options.
(15) Includes 105,000 shares of Common Stock that may be acquired by Mr. Nye
upon the exercise of currently exercisable options.
(16) Includes 77,000 shares of Common Stock that may be acquired by Mr. Thomas
Caldwell upon the exercise of currently exercisable options.
(17) Includes 833,140 shares of Common Stock that may be may be acquired by Mr.
Ammon upon the exercise of currently exercisable warrants and options.
(18) Includes 15,000 shares of Common Stock that may be acquired upon the
exercise of currently exercisable options.
(19) Includes 3,183,400 shares of Common Stock that may be acquired upon the
exercise of currently exercisable options.
Page 11
Item 13. Certain Relationships and Related Transactions
Bridge Loan
In the fourth quarter of 2000, the Company entered into a credit agreement
with Ulysses G. Auger II (Chairman of the Board), R. Theodore Ammon (Director)
and CII Ventures (administrative agent for KKR), collectively called the
Lenders. The Lenders made a bridge loan of $20 million available to the Company
which was repaid from proceeds of the CAISSoft assets sale to Cisco. Borrowings
incurred interest at LIBOR plus 6 percent or approximately 12.6 percent per
annum. The Company paid approximately $164,000 in interest expense. In
connection with the loan, the Company granted 2,000,000 warrants to the Lenders
at an exercise price of $4.56 per share. Per the warrant agreement, the warrants
were repriced subsequent to year end to the average of the ten lowest trading
days from October 25, 2000 through January 25, 2001, or $1.00 per share. The
warrants expire on October 25, 2010.
Real Property Leases
The Company entered into a ten year lease in 1999 for approximately 39,000
square feet of office space in Washington, DC, which is used as the Company's
corporate headquarters. The initial base annual rent is approximately $861,000
per year with annual rent escalations of 2 percent each year thereafter. The
Company recognizes rental expense on a straight-line basis over the lease term
based on the total lease commitment, including escalations. Other long-term
liabilities as of December 31, 2000 primarily reflect the value of leasehold
improvements in the Washington, DC location paid for by the landlord, which are
being amortized against rent expense. In April 2001, the Company subleased
approximately 16,000 square feet of office space under this lease for
approximately seven years.
The building is approximately 45% owned by Ulysses G. Auger, Sr., a former
director of the Company, and his wife. The Company believes that the terms of
the lease, including the rental rate, are at least as favorable to the Company
as those which could have been negotiated with an unaffiliated third party.
Executive Officer Loans
In June 1999, the Company advanced a $400,000 unsecured loan to Gary Rabin,
former Executive Vice President of Finance and Strategic Planning executives as
part of Mr. Rabin's employment contract. The Company provided a valuation
reserve against the loan in the fourth quarter of 2000 and forgave the note upon
the resignation of Mr. Rabin in lieu of contractual severance payments in 2001.
In December 1999, the Company advanced a $50,000 unsecured loan to Stephen R.
Roberts, Senior Vice President, Data Connectivity Sales. In lieu of bonus
payments, the Company did not require the loan to be repaid and it was written
off in the fourth quarter of 2000.
Other Transactions
For the past several years, Richard F. Levin, a director of the Company, has
performed legal services on the Company's behalf in his capacity as a partner
in the Washington, D.C., law firm of Grossberg, Yochelson, Fox & Beyda.
However, at no time were the fees paid by the Company to the law firm in
excess of 5% of the law firm's gross revenues. The Company believes that the
costs of such services are at least as favorable to the Company as those which
could have been negotiated with an unaffiliated third party.
Page 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed on its behalf by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
CAIS Internet, Inc.
Signature Capacity Date
--------- -------- ----
/s/ Ulysses G. Auger, II Chairman of the Board April 30, 2001
- -----------------------------------
Ulysses G. Auger, II
/s/ William M. Caldwell, IV Vice Chairman of the Board April 30, 2001
- -----------------------------------
William M. Caldwell, IV
/s/ Michael Lee President and Chief April 30, 2001
___________________________________ Executive Officer
Michael Lee
/s/ Andrew P. Hines Chief Operating Officer April 30, 2001
___________________________________ and Chief Financial Officer
Andrew P. Hines (Principal Financial and
Accounting Officer)
/s/ R. Theodore Ammon Director April 30, 2001
- -----------------------------------
R. Theodore Ammon
/s/ Vernon Fotheringham Director April 30, 2001
- -----------------------------------
Vernon Fotheringham
/s/ James H. Greene, Jr. Director April 30, 2001
- -----------------------------------
James H. Greene, Jr.
/s/ Richard F. Levin Director April 30, 2001
- -----------------------------------
Richard F. Levin
/s/ Alexander Navab, Jr. Director April 30, 2001
- -----------------------------------
Alexander Navab, Jr.
/s/ John K. Saer, Jr. Director April 30, 2001
- -----------------------------------
John K. Saer, Jr.