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CAIS, a Internet Access Provider for the Hospitality Industry,  Receives Investment of up to $200 Million 
from Kohlberg Kravis Roberts Co.
Will Accelerate Growth Plans; KKR on CAIS Board of Directors
 
December 21, 1999 - CAIS Internet (NASDAQ:CAIS) a leading provider of broadband Internet access solutions, announced today it had signed a definitive agreement with an affiliate of Kohlberg Kravis Roberts Co. (KKR) under which KKR will make a strategic investment of up to $200 million in this fast-growing company.

CAIS currently has master agreements to be the exclusive provider of high-speed Internet access to over 9,000 hotels worldwide, covering in excess of 1.1 million rooms. In addition, the company has long-term agreements to provide Internet access to 575 multi-family communities, reaching close to 200,000 residences.

An initial $100 million investment will be in the form of convertible preferred stock with a conversion price of $16.50 per share. The agreement also includes a one-year option for KKR to purchase an additional $100 million of convertible preferred stock with a conversion price of $20.00 per share.

KKR’s initial purchase will represent a 16.5 percent fully diluted capital interest in CAIS Internet. Upon the exercise of the option, KKR’s investment would represent a 26.4 percent fully diluted capital interest in CAIS Internet. As a result of its investment, KKR will have two of eight seats on CAIS Internet’s Board of Directors.  KKR would have three Board seats upon the exercise of the option.

Assuming the exercise of KKR’s option, the average conversion price represents a 22% premium to CAIS’s 30-day average closing price.

“KKR is discerning in its investments, and its relationship with CAIS represents the perfect marriage between “traditional” strategic financial capital and the new online economy,” said Ulysses G. Auger II, Chief Executive Officer of CAIS Internet. “We welcome KKR’s
investment as a key validation of our business model. We are fortunate to be partnering with a firm with significant experience in the communications industry as well as with substantial access to investment capital. KKR’s investment will enable us to ramp up our growth plans in the hospitality and apartment markets, both of which offer accelerating opportunities for our patented, simultaneous telephone and high speed Internet access solutions.”

James H. Greene, Jr., a KKR partner, said, “CAIS is well positioned to provide faster, more cost effective Internet access and enhanced Internet services. We believe that CAIS has all the ingredients for significant value creation - an expanding customer base, exclusive long-term contracts, patented technology and, most important, a strong management team. This investment is another example of our ongoing focus on rapidly growing segments within the communications industry.”

During 1999, CAIS signed a number of exclusive long-term contracts to provide turn-key broadband access and portal content solutions to hotels and apartment buildings with reliable, affordable services and customized content for an enhanced online experience.
CAIS Internet has master agreements with major hotel chains like Hilton Hotels, John Q. Hammons Hotels, Carlson Worldwide Properties, Staybridge Suites by Holiday Inn, Cendant Corporation and Bass Hotels  including brands like Hilton, Hilton Garden Inn, Radisson, Embassy Suites, Doubletree Suites, Ramada, Hampton Inn, Holiday Inn, Sheraton, Crowne Plaza and Inter-Continental.

Most recently CAIS signed a multi-year contract with Prime Hospitality, which includes the AmeriSuites and Wellesley Inn  Suites brands. Many of these hotels also plan to carry CAIS meeting room and kiosk Internet access solutions.

CAIS is also a leader in delivering Internet solutions to apartment communities, having signed contracts covering more than 575 buildings. To date, CAIS has a strategic relationship with One Point Communications, and contracts with Town  Country, Tarragon Realty and United Dominion apartment residences nationwide.

The Company was advised by Bear Stearns. KKR’s initial investment is expected to be made, subject to customary closing conditions, in January of 2000.

KKR is a private investment firm with offices in New York City, Menlo Park, and London. Recent communications industry investments include Reltec Corporation, Amphenol Corporation, Birch Telecom, Inc. and Zhone Technologies, Inc.
 

About CAIS Internet
CAIS Internet, Inc. (Nasdaq: CAIS) is a leading broadband access solutions company. CAIS provides customers with comprehensive high speed Internet solutions while at home in apartments, at work in small-to-medium businesses, or on-the-go at hotels, airports, travel plazas, cruise ships and retail stores.

Whether it’s an innovative solution for DSL  leased-line dedicated access, creating an in-building network for multiple users, or providing a public area Internet kiosk, the company delivers a cost-effective, easy and convenient Internet experience for customers.

The customer experience is the result of a one-stop, integrated solutions package of innovative CAIS network access and technologies, award-winning IPORT™software, customer support, portal content and systems.

CAIS Internet currently is the designated Internet access solution in the largest footprint of hotels and apartment buildings nationwide. Additionally, CAIS recently unveiled its portal with 110 leading Internet content partners, which upon full installation of its properties will be the widest viewed in the hospitality industry and multifamily or apartment community.

The CAIS portal is the first portal built at broadband speeds, especially designed to provide a media-rich experience for the millions of CAIS customers who will log onto its service.
Combined with CAIS Internet, the company’s software subsidiary CAIS Software Solutions, and its business center subsidiary Business Anywhere™CAIS brings broadband connectivity to markets where Internet access did not previously exist. CAIS Internet operates a Cisco-Powered, clear-channel Internet and ATM Network.

CAIS currently peers with public and private partners, and at national exchange points MAE East, MAE East ATM, MAE West, and AADS.  CAIS recently announced an agreement with Qwest that expands the CAIS network to 38 POPs nationwide, which accelerated CAIS network development one year ahead of forecast. Qwest also took a 6.2% equity stake in the broadband solutions provider.

CAIS Internet is headquartered in Washington, DC. 

 
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Contact:
CAIS Internet
Minda Markle, 202/715-1325
or
KKR:
Kekst and Company
Ruth Pachman/ Molly Morse
212/521-4800
 
 
Also See: CAIS Internet Unveils Portal for its Hospitality Customers / Nov 1999 
Bass Hotels Selects CAIS Internet as Preferred Broadband Access Solution for Properties / Oct 1999 
Choice Hotels Room of the Future Includes Panel Display Mounted on the Room Wall and a Desk Keyboard for Guest Internet Access / Aug 1999 

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