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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 14, 2000
REGISTRATION NO. 333-_____
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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REDBACK NETWORKS INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 77-0438443
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
1195 BORREGAS AVENUE
SUNNYVALE, CA 94089
(408) 571-5000
(Address, Including Zip Code, and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
--------------
VIVEK RAGAVAN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
REDBACK NETWORKS, INC.
1195 BORREGAS AVENUE
SUNNYVALE, CA 94089
(408) 571-5000
(Name, Address, Including Zip Code, and Telephone Number,
Including Area Code, of Agent for Service)
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THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
GREGORY K. MILLER, ESQ. ELISSA WELLIKSON, ESQ.
JARLON TSANG, ESQ. REDBACK NETWORKS, INC.
GUNDERSON DETTMER STOUGH 1195 BORREGAS AVENUE
VILLENEUVE FRANKLIN & HACHIGIAN, LLP SUNNYVALE, CALIFORNIA 94089
155 CONSTITUTION DRIVE (408) 571-5000
MENLO PARK, CALIFORNIA 94025
(650) 321-2400
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
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CALCULATION OF REGISTRATION FEE
<TABLE>
<S><C>
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PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING PRICE AMOUNT OF
REGISTERED REGISTERED SHARE (1) (1) REGISTRATION FEE
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Common Stock, par value $0.0001 per share...... 2,440,526 $83.25 $203,173,790 $53,638
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(1) Estimated solely for the purpose of determining the registration fee in
accordance with Rule 457 of the Securities Act of 1933, as amended (the
"Securities Act"). Based upon the average of the high and low sales prices
per share of Redback's common stock on November 10, 2000 as reported on the
Nasdaq National Market, pursuant to Rule 457(c) of the Securities Act.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, DATED NOVEMBER 14, 2000
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
[REDBACK LOGO]
2,440,526 SHARES OF COMMON STOCK
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This prospectus relates to 2,440,526 shares of our common stock that we may
issue from time to time in exchange for exchangeable shares issued by one of our
Canadian subsidiaries, 610381 B.C. Inc. The exchangeable shares were issued by
610381 B.C. Inc. in September 2000 to shareholders of Abatis Systems Corporation
in connection with our acquisition of Abatis Systems Corporation. As a holder of
exchangeable shares, you may exchange your exchangeable shares for shares of our
common stock at any time. Upon an exchange of exchangeable shares, you are
entitled to receive one share of our common stock for each exchangeable share.
You also are entitled to receive a cash amount equal to any declared and unpaid
dividends on the exchangeable shares if the record date for any such dividend is
prior to the date of exchange. However, we do not anticipate declaring any
dividends. 610381 B.C. Inc. may redeem or 610380 B.C. Inc., another one of our
Canadian subsidiaries, may acquire all exchangeable shares on or after January
31, 2010; PROVIDED, HOWEVER, in certain circumstances, 610381 B.C. Inc. has the
right to redeem, and 610380 B.C. Inc. has a right to acquire the exchangeable
shares prior to January 31, 2010. On that date, 610381 B.C. Inc. may redeem, or
610380 B.C. Inc. may acquire, all of the then outstanding exchangeable shares by
delivering, for each exchangeable share, one share of our common stock plus a
cash amount equal to any declared and unpaid dividends.
The common stock is quoted on the Nasdaq National Market under the symbol
"RBAK." The last reported bid price of the common stock on November 10, 2000,
was $78-7/16 per share.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 TO READ ABOUT FACTORS APPLICABLE TO
HOLDERS OF REDBACK'S COMMON STOCK.
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Neither the Securities and Exchange Commission nor any other regulatory
body has approved or disapproved of these securities or passed upon the accuracy
or adequacy of this prospectus. Any representation to the contrary is a criminal
offense.
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Prospectus dated November __, 2000
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SUMMARY
YOU SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER "RISK
FACTORS." UNLESS THE CONTEXT OTHERWISE REQUIRES, THE TERMS "REDBACK," "WE," "US"
AND "OUR" REFER TO REDBACK NETWORKS INC.
REDBACK NETWORKS INC.
Redback Networks Inc. is a leading provider of advanced networking
systems that enable carriers, cable operators and service providers to rapidly
deploy high-speed access to the Internet and corporate networks. Our product
lines, which consist of the Subscriber Management System(TM), SmartEdge(TM),
Enterprise Service Point(TM), and Service Management product families, combine
networkiNg hardware with sophisticated software. Together, these product
families are designed to enable our customers to create end-to-end regional
networks that will support all major broadband access technologies, as well as
the new services that these high-speed connections will enable.
Our Subscriber Management System(TM), or SMS, products connect and
manage large numbers of subscribers across all major high-speed access
technologies, including digital subscriber line, cable and wireless and bridge
the gap between high-speed access concentrators and the routers which connect to
the Internet backbone. Our SmartEdge(TM) optical networking and multi-service
products simplify the architecture of today's regional voice and data networks,
as well as improve their capacity and performance. Enterprise Service Point(TM),
or ESP, products are a new breed of intelligent carrier-managed devices designed
specifically to help service providers capture high-margin revenue from advanced
IP services. The Service Management products allow service providers to easily
publish, activate and manage IP services and allow their customers to subscribe
to these services on demand.
We sell our products through our direct sales force, resellers and
distribution partners. Our products are used by many of the largest carriers and
service providers worldwide.
We announced our family of ESP and Service Management products during the
third quarter of 2000. We cannot be certain that the ESP and Service Management
products, or any future products designed around this technology, will be
successfully developed or will achieve widespread market acceptance.
In recent years, there has been a significant increase in demand by
businesses and consumers for broadband, or high-speed, access to the Internet
and to corporate networks. While carriers, cable operators and service providers
are attempting to provide inexpensive and comprehensive broadband access, there
are several major challenges associated with scaling and configuring existing
network architectures to accommodate large numbers of new high-speed
subscribers. We believe widespread deployment of broadband services requires a
new model for subscriber management that efficiently terminates subscriber
connections, manages broadband subscribers, provides flexibility for
connections, and supports multiple broadband access technologies simultaneously.
We also believe that widespread deployment of broadband will require carriers
and service providers to re-architect their regional voice and data networks to
accommodate the massive increase in data traffic that will occur as a result of
the volume of new broadband connections. Carriers and service providers are also
seeking to simplify the operation of the existing technologies in their regional
networks and improve their ability to respond to customer requests for enhanced
services.
Whether deployed at aggregation points by carriers, by cable operators or
by service providers, our SMS products accept a large concentration of
high-speed data traffic from such devices as digital subscriber line
concentrators, cable modem termination systems and wireless termination systems.
Our SMS products reduce the processing requirements placed on routers connecting
to the Internet backbone in broadband networks.
Equally important, our SmartEdge products add significantly more capacity
and flexibility to regional voice and data networks, making them simpler to
architect and operate. With integrated Time Division Multiplexing (TDM) and IP
functionality in the SmartEdge platform, carriers and providers can evolve their
networks from today's structure to include a broad range of new services.
Finally, our ESP and Service Management solutions provide yet additional
service-enabling capabilities that allow providers to migrate their networks
from being primarily access-based to being able to support a wide range of new
IP-based services.
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Our solution provides the following key benefits:
o ENHANCES BROADBAND OPERATIONS. Our SMS products bridge the
operational gap between "last mile" access networks that serve
businesses and homes and the routers connecting to the Internet
backbone and corporate networks.
o SIMPLIFIES REGIONAL NETWORK ARCHITECTURE. Our SmartEdge products
simplify the design of regional voice and data networks, and enable
our customers to increase their capacity and performance with less
equipment.
o PROVIDES COST-SAVINGS AND REVENUE-GENERATING BENEFITS. Our ESP and
Service Management product provide service creation capabilities that
provide significant operational cost savings and revenue generating
benefits for carriers and service providers.
o SUPPORTS ALL MAJOR ACCESS TECHNOLOGIES. Our products support all
major access technologies, including digital subscriber line, cable,
wireless, SONET, SDH, leased lines, frame relay and ATM. Equally
important, these products will enable customers to operate multiple
broadband technologies simultaneously, reducing operational expenses
and improving responsiveness to customers.
o FACILITATES RAPID AND SCALABLE DEPLOYMENT. Our products allow service
providers to quickly deploy high-speed access and achieve rapid
time-to-market for significant revenue-generating services while
using existing access, accounting and management control systems.
o PROVIDES PLATFORM FOR THE DELIVERY OF VALUE-ADDED SERVICES. Our
products enable carriers, cable operators and service providers to
create and market new service offerings that extend broadband
connectivity and capabilities.
o SIMPLIFIES END-USER ADMINISTRATION AND SUPPORT. Our products allow
easy configuration and administration of subscribers, reducing the
cost of providing service and enabling faster response to customer
requirements.
We are focused on delivering solutions for subscriber management, optical
and multi-service networking, and service creation. We believe the combination
of our operating system software and our hardware technology differentiates our
solution and provides a competitive advantage by delivering advanced services
and functionality. We will continue to develop features and functionalities and
expand our product families to further enhance the ability of carriers, cable
operators and service providers to deliver profitable services.
Our principal executive offices are located at 1195 Borregas Avenue,
Sunnyvale, California 94089. Our telephone number is (408) 571-5000.
4
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RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. IN
ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, YOU SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS BEFORE MAKING AN INVESTMENT.
THE EXCHANGE OF YOUR 610381 B.C. INC. EXCHANGEABLE SHARES IS GENERALLY A TAXABLE
EVENT AND YOUR TAX CONSEQUENCES WILL VARY DEPENDING ON A NUMBER OF FACTORS
The exchange of 610381 B.C. Inc. exchangeable shares for shares of our
common stock is generally a taxable event in Canada and the United States. Your
tax consequences can vary depending on a number of factors, including your
residency, the method of exchange and the length of time that the exchangeable
shares were held prior to exchange. Canadian and United States federal income
tax considerations will vary according to your particular circumstances. You
should consult with your own tax advisor as to the tax consequences of
exchanging your exchangeable shares for shares of our common stock.
OUR COMMON STOCK WILL BE FOREIGN PROPERTY IN CANADA AND SOME TRUSTS HOLDING OUR
COMMON STOCK MAY BE SUBJECT TO TAX
Our common stock will be foreign property in Canada for trusts governed
by registered pension plans, registered retirement savings plans, registered
retirement income funds and deferred profit sharing plans and for some other
tax-exempt persons. Under the Income Tax Act (Canada) Part XI, tax is generally
imposed on these trusts where the cost amount of foreign property held by the
trust at the end of exceeds 25% of the cost amount of all property held by the
trust at the end of each month in the year 2000 and 30% for months thereafter.
Part XI tax is imposed at the rate of one percent per month of the cost amount
of any excess foreign property.
OUR BUSINESS IS DIFFICULT TO EVALUATE BECAUSE WE HAVE A LIMITED
OPERATING HISTORY
We were founded in August 1996 and only began shipping products in
material quantities in the second quarter of 1998. You should consider the risks
and difficulties frequently encountered by companies like us in a new and
rapidly evolving market. Our ability to sell products and services, and the
level of success, if any, we achieve, depends, among other things, on the level
of demand for broadband access services, which is a new and rapidly evolving
market. Our business strategy may be unsuccessful and we may not successfully
address the risks we face.
WE HAVE A HISTORY OF LOSSES AND EXPECT TO INCUR FUTURE LOSSES
We incurred net losses of $4.4 million for the year ended December 31,
1997, $9.9 million for the year ended December 31, 1998, and $7.9 million for
the year ended December 31, 1999, and $680.0 million for the nine months ended
September 30, 2000. As of September 30, 2000, we had an accumulated deficit of
approximately $702.3 million. Although we were profitable in the fourth quarter
of 1999, we have not had a history of profitability. We have incurred
significant net losses in the past and expect to continue to incur significant
net losses in the future.
To date, we have funded our operations from both private and public sales
of equity securities and notes, from bank borrowings and by means of equipment
lease financing. We expect to continue to incur significant product development,
sales and marketing, and general and administrative expenses. As a result, we
must generate significant revenues to achieve profitability. We may not sustain
recent growth rates in our revenues. Further, we cannot be certain that we can
attain profitability on a quarterly or annual basis in the future.
WE FACE RISKS ASSOCIATED WITH ACQUISITIONS GENERALLY
We expect to continue our acquisition and expansion strategy. Future
acquisitions could materially adversely affect our operating results as a result
of dilutive issuances of equity securities and the incurrence of additional
debt. In addition, the purchase price for many of these acquired businesses
likely will significantly exceed the current fair values of the tangible net
assets of the acquired businesses. As a result, we would be required to record
material goodwill and other intangible assets that would result in significant
amortization charges in future periods. These charges, in addition to the
financial impact of such acquisitions, could have a material adverse effect on
our business, financial condition and results of operations. We cannot assure
you of the number, timing or size of future acquisitions, or the effect that any
such acquisitions might have on our operating or financial results. Further, we
must successfully combine the acquired businesses. We may not be able to
integrate the technologies and operations quickly and smoothly. In the event
that our integration does not go smoothly, serious harm to our business,
financial condition
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and prospects may result. Integrating acquired businesses entails significant
diversion of management's time and attention. The integration of technology,
products and services may require the partial or wholesale conversion or
redesign of some or all of our technologies, products and services or those of
the acquired business. In addition, we may be required to spend additional time
or money on integration that would otherwise have been spent on developing our
business and services or other matters.
OUR OPERATING RESULTS ARE LIKELY TO FLUCTUATE SIGNIFICANTLY
Factors likely to cause quarterly fluctuations in revenues and operating
results include:
o fluctuations in demand for broadband access services;
o the timing and size of sales of our products and services;
o announcements of new products and product enhancements by
competitors;
o the entry of new competitors into our market, including by
acquisition;
o unexpected delays in introducing new or enhanced products, including
manufacturing delays;
o unexpected delays in product shipments due to component shortages;
o unexpected technical problems with our products;
o our ability to control expenses;
o our ability to ship products on a timely basis and at a reasonable
cost; and
o the mix of our products sold and the mix of distribution channels
through which our products are sold.
A high percentage of our expenses, including those related to
engineering, sales and marketing, research and development, and general
administrative functions, are essentially fixed in the short term. As a result,
if we experience delays in generating or recognizing revenue, our quarterly
operating results are likely to be materially adversely affected. In addition,
we plan to increase our operating expenses to expand our engineering and sales
and marketing operations, broaden our customer support capabilities, develop new
distribution channels, fund increased levels of research and development and
build our operational infrastructure. If growth in our revenues does not outpace
the increase in these expenses, our business, results of operations and
financial condition could be materially adversely affected.
We rely on a limited number of third-party manufacturers to build our
products. Any interruption in the operations of such manufacturers would
adversely affect our ability to meet our scheduled product deliveries to our
customers. This would cause significant variations in our quarterly operating
results and our business, results of operations and financial condition would be
materially adversely affected.
Due to these and other factors, we believe that quarter-to-quarter
comparisons of our operating results may not be meaningful. You should not rely
on our results for one quarter as any indication of our future performance. It
is likely that in some future quarter our operating results may be below the
expectations of public market analysts or investors. If this occurs, the price
of our common stock would likely decrease.
OUR LENGTHY AND VARIABLE SALES CYCLE MAKES IT DIFFICULT FOR US TO PREDICT IF OR
WHEN A SALE WILL BE MADE
The timing of our sales revenue is difficult to predict because of the
length and variability of the sales cycle for our products. Customers often view
the purchase of our products as a significant and strategic decision. This
evaluation process frequently results in a lengthy sales cycle, typically
ranging from three months to over one year. While our customers are evaluating
our products and before they place an order with us, we may incur substantial
sales and marketing expenses and expend significant management efforts. In
addition, product purchases are frequently subject to unplanned administrative,
processing and other delays. This is particularly true for larger customers for
whom our products represent a very small percentage of their overall purchase
activities. These customers are often engaged in multiple simultaneous
purchasing decisions, some of which may pertain to more immediate needs and
absorb the immediate attention of the customer. If sales forecasted from a
specific customer for a particular quarter are not realized in that quarter or
at all, our business, results of operations and financial condition could be
materially adversely affected.
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IN ANY QUARTER, A SMALL NUMBER OF CUSTOMERS ARE LIKELY TO ACCOUNT FOR A
SUBSTANTIAL MAJORITY OF OUR REVENUE
In each of the eleven quarters in the period ended September 30, 2000, we
have had at least one customer that accounted for 10% or more of our total
revenue in the quarter. In the third quarter of 2000, Qwest Communications
International, Inc. accounted for 24% of our total revenue and Genuity Inc.
accounted for 11% of our total revenue. For the twelve months ended December 31,
1999, sales to Bell Atlantic and Southwestern Bell Information Systems, a
subsidiary of SBC, accounted for 24% and 11%, respectively. We anticipate that a
small number of customers with large orders will continue to account for a
majority of our quarterly revenue. However, we do not have any contracts or
other agreements that guarantee continued sales to these or any other customers.
If our customers alter their purchasing habits or reevaluate their need for our
products, or if we fail to receive a large order in any future period, our
business, results of operations and financial condition would be materially
adversely affected.
WE ARE CURRENTLY ENTIRELY DEPENDENT ON THE SMS AND SMARTEDGE PRODUCT
FAMILIES FOR REVENUE
The SMS and SmartEdge families of products are the only products that we
currently sell. We have introduced, but have not begun shipping, the ESP and
Service Management family of products and intend to introduce new products and
enhancements to existing products in the future. We cannot be certain that the
SMS, SmartEdge or ESP and Service Management products or any future products
will achieve widespread market acceptance. Our inability to timely and
successfully introduce new products and enhancements, or the failure of these
new products or enhancements to achieve market acceptance, could materially
adversely affect our business, results of operations and financial condition.
THERE IS A LIMITED NUMBER OF POTENTIAL CUSTOMERS FOR OUR SMS AND
SMARTEDGE PRODUCTS
The products that we have developed or may develop and introduce in the
future are marketed primarily to large customers. There are only a limited
number of large existing and potential customers and this number is not expected
to increase significantly in the future.
IF OUR PRODUCTS DO NOT ANTICIPATE AND MEET SPECIFIC CUSTOMER REQUIREMENTS AND
DEMANDS, OUR BUSINESS WOULD BE ADVERSELY AFFECTED
Many of our customers require product features and capabilities that our
products may not have. The requirement that we add features to our products in
order to achieve a sale may result in a longer sales cycle, increased research
and development expenses and reduced margins on our products. To achieve market
acceptance for our products, we must effectively and timely anticipate and adapt
to customer requirements and offer products and services that meet customer
demands. Our failure to develop products or offer services that satisfy customer
requirements would materially adversely affect our business, results of
operations and financial condition.
We intend to continue to invest in product and technology development.
The development of new or enhanced products is a complex and uncertain process
that requires the accurate anticipation of technological and market trends. We
may experience design, manufacturing, marketing and other difficulties that
could delay or prevent the development, introduction or marketing of new
products and enhancements. The introduction of new or enhanced products also
requires that we manage the transition from older products in order to minimize
disruption in customer ordering patterns and ensure that adequate supplies of
new products can be delivered to meet anticipated customer demand. Our inability
to effectively manage this transition would materially adversely affect our
business, results of operations and financial condition.
WE NEED TO GAIN ACCEPTANCE IN OTHER BROADBAND ACCESS MARKETS
To date, we have derived most of our revenues from sales of the SMS
family products for use in the digital subscriber line market for broadband
access. We intend to expend a substantial amount of time and resources to
achieve market acceptance of our products in other markets, including the cable,
wireless and optical markets. We may be unable to simultaneously or effectively
address evolving demands in these markets, and customers in these markets may
choose to implement competing technologies or products. In addition, if our
competitors gain market acceptance in these markets first, it will be difficult,
if not impossible, for us to gain subsequent market acceptance in these markets.
If we are unable to achieve acceptance of our products in these markets, our
ability to generate revenues will be limited, and our business, results of
operations and financial condition would be materially adversely affected.
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WE EXPECT INCREASED COMPETITION
We may be unable to compete successfully with current or future
competitors. If we do not compete successfully against current or future
competitors, our business, results of operations and financial condition will be
materially adversely affected. Currently, competition in our market is intense.
The broadband access markets we are targeting, including digital subscriber
line, cable, wireless and optical, are new and rapidly evolving and we expect
these markets to become highly competitive in the future. In addition, we expect
new competitors to emerge in the broadband access market as that market evolves
due to technological innovation and regulatory changes. We face actual and
potential competition from public and private companies providing routers
connecting to the Internet backbone, access concentrators and subscriber
aggregation systems. For instance, Cisco Systems, Inc., the leading provider of
routers connecting to the Internet backbone, offers products that compete
directly with our products, and also provides a comprehensive range of broadband
access systems and network access systems.
We expect companies that offer access concentrators and routers to
incorporate, or in the future will incorporate, some subscriber management
functionality into their products. These companies include Cisco, Nortel
Networks, and Lucent Technologies. In addition, there are several other
companies that provide subscriber management features in access concentrators or
routing platforms.
Many of our principal competitors, including Alcatel, Cisco, Fujitsu,
Lucent Technologies, Nortel Networks, Siemens/Unisphere and some companies that
may compete with us in the future, are large public companies that have longer
operating histories and significantly greater financial, technical, marketing
and other resources than we have. As a result, these competitors are able to
devote greater resources to the development, promotion, sale and support of
their products. In addition, our competitors that have large market
capitalizations or cash reserves are much better positioned than we are to
acquire other companies, including our competitors, and thereby acquire new
technologies or products that may displace our product lines. Any of these
acquisitions could give our competitors a strategic advantage that would
materially adversely affect our business, results of operations and financial
condition.
Many of our competitors have significantly more established customer
support and professional services organizations than we do. In addition, many of
our competitors have much greater name recognition and have a more extensive
customer base, broader customer relationships and broader product offerings than
we have. These companies can leverage their customer bases and broader product
offerings and adopt aggressive pricing policies to gain market share. We have
encountered, and expect to continue to encounter, potential customers that, due
to existing relationships with our competitors, are committed to the product
offerings of these competitors. As a result, these potential customers may not
consider purchasing our products. We expect to face competition in the following
areas:
o product pricing;
o breadth of product lines;
o sales and distribution capabilities;
o product features and enhancements, including product performance,
reliability, size, compatibility and scalability;
o product ease of deployment;
o conformance to industry standards; and
o technical support and service.
We expect that competitive pressures may result in price reductions,
reduced margins and loss of market share, which would materially adversely
affect our business, results of operations and financial condition.
THE ACCOUNTING TREATMENT OF THE SIARA MERGER AND THE ABATIS ACQUISITION WILL
RESULT IN SIGNIFICANT CHARGES TO OUR OPERATIONS
In addition to our merger with Siara Systems, Inc. completed on March 8,
2000, we recently acquired Abatis Systems Corporation on September 28, 2000. We
accounted for the Siara merger and the Abatis acquisition under the purchase
method of accounting. The results of operations of Siara and Abatis are included
in our consolidated financial statements for all periods after March 8, 2000 and
September 28, 2000, respectively. The excess of cost
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over the fair value of the net tangible assets acquired from these transactions
is recorded as goodwill, other intangible assets and deferred stock
compensation, which will be amortized by charges to operations. These
transactions resulted in aggregate goodwill and other intangible assets of
approximately $5.1 billion. Our annual amortization of goodwill and other
intangible assets is estimated to be approximately $1.3 billion per year, which
will have a significant negative impact on our operating results and could cause
our stock price to decline.
WE ARE DEPENDENT ON A LIMITED NUMBER OF CONTRACT MANUFACTURERS
We currently use a limited number of third party manufacturers to assemble
our products. We may not be able to effectively manage our relationship with
these manufacturers and such manufacturers may not meet our future requirements
for timely delivery. Although these third-party manufacturers are capable of
building our products, any interruption in the operations of our contract
manufacturers would adversely affect our ability to meet our scheduled product
deliveries to our customers. This could cause the loss of existing or potential
customers and could materially adversely affect our business, results of
operations and financial condition.
In addition, the products that these manufacturers build for us may be
insufficient in quality or in quantity to meet our needs. These manufacturers
may not meet the technological or delivery requirements of our current products
or any future products that we may develop and introduce. The inability of our
contract manufacturers in the future to provide us with adequate supplies of
high-quality products, or the loss of our contract manufacturers in the future,
would cause a delay in our ability to fulfill customer orders while another of
our third-party manufacturers begins production and would have a material
adverse effect on our business, results of operations and financial condition.
SOME OF THE KEY COMPONENTS IN OUR PRODUCTS COME FROM SINGLE OR
LIMITED SOURCES OF SUPPLY
We currently purchase several key components used in our products from
single or limited sources of supply. These manufacturers include Altera,
Brooktree, Connector Technologies, Foresight, Intel, Level One, Powerspec,
Siemens and Ziatech. In addition, we rely on Wyle Electronics and LSI Logic as
our foundry for a number of our application specific integrated circuits, or
ASICs, and IBM Microelectronics as a foundry for other ASICs. We have no
guaranteed supply arrangement with these suppliers, and we, or our
manufacturers, may fail to obtain these supplies in a timely manner in the
future. Financial or other difficulties faced by these suppliers or significant
changes in demand for these components could limit the availability to us of
these components. Any interruption or delay in the supply of any of these
components, or the inability to obtain these components from alternate sources
at acceptable prices and within a reasonable amount of time, would adversely
affect our ability to meet scheduled product deliveries to our customers and
would materially adversely affect our business, results of operations and
financial condition. In addition, qualifying additional suppliers is
time-consuming and expensive.
WE DEPEND ON THIRD-PARTY TECHNOLOGY FOR OUR SMARTEDGE PRODUCT
Cerent Corporation has granted Siara a non-exclusive license to
technology related to two ASICs and parts of Cerent's system-level hardware
technology that are used in the SmartEdge product. In November 1999, Cerent was
acquired by Cisco Systems, a provider of networking products and a significant
competitor of ours. Although we believe we have sufficient rights to this Cerent
technology to conduct our business as currently conducted, we do not have a
business relationship with Cisco. Any loss of access to the technology that is
the subject of the agreement with Cerent would seriously harm our business.
WE MAY BE UNABLE TO MATCH PRODUCTION WITH PRODUCT DEMAND
We currently use a rolling six-month forecast based on anticipated
product orders, product order history and backlog to determine our materials
requirements. Lead times for the materials and components that we order vary
significantly and depend on numerous factors, including the specific supplier,
contract terms and demand for a component at a given time. If actual orders do
not match our forecasts, we may have excess or inadequate inventory of materials
and components, which could materially adversely affect our business, results of
operations and financial condition. In order to meet our inventory needs, we may
incur expedite fees charged by our suppliers, which could materially adversely
affect our business, results of operations and financial condition.
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WE MAY BE UNABLE TO RETAIN EMPLOYEES OR PROPERLY MANAGE GROWTH
We have expanded our operations rapidly since our inception. The number
of our employees increased from 39 on February 28, 1998 to approximately 1,000
by the end of the third quarter of 2000.
Our future performance depends on our continuing ability to attract and
retain highly qualified technical and managerial personnel. We intend to
continue to expand in order to pursue existing and potential market
opportunities and are in the process of hiring additional engineering and sales
personnel. Our ability to continue to attract and retain highly skilled
personnel is a critical factor in determining whether we will be successful in
the future. Competition for highly skilled personnel is intense, especially in
the San Francisco Bay Area. We may fail to attract, assimilate or retain
qualified personnel to fulfill our current or future needs. If we fail, our
business, results of operations and financial condition could be materially
adversely affected. Our planned rapid growth places a significant demand on
management and financial and operational resources.
IF WE BECOME SUBJECT TO UNFAIR HIRING CLAIMS, WE COULD INCUR SUBSTANTIAL COSTS
IN DEFENDING AGAINST THESE CLAIMS
Companies in our industry whose employees accept positions with
competitors frequently claim that their competitors have engaged in unfair
hiring practices. We have received in the past, and may receive in the future,
claims of this kind as we seek to hire qualified personnel and those claims may
result in material litigation. We could incur substantial costs in defending
ourselves or our employees against such claims, regardless of their merits. In
addition, defending ourselves from such claims could divert the attention of our
management away from our operations.
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY GOVERNMENT REGULATION OF
THE COMMUNICATIONS INDUSTRY
The jurisdiction of the Federal Communications Commission, or FCC,
extends to the communications industry, to our customers and to the products and
services that our customers sell. Future FCC regulations, or regulations
established by other regulatory bodies, may slow or end the growth of the
broadband access services industry. Regulation of our customers may materially
harm our business and financial condition. For example, FCC regulatory policies
that affect the availability of data and Internet services may impede our
customers' penetration into broadband access markets. In addition, international
regulatory bodies are beginning to adopt standards for the communications
industry. The delays that these governmental processes entail may cause order
cancellations or postponements or product purchases by our customers, which
would materially harm our business, results of operations and financial
condition.
OUR PLANNED EXPANSION TO INTERNATIONAL MARKETS WILL INVOLVE NEW RISKS
For the years ended December 31, 1998 and 1999, and the nine months ended
September 30, 2000, we derived approximately 15%, 7%, and 23%, respectively, of
our revenues from sales to customers outside of the United States. Our ability
to achieve future success will depend in part on the expansion of our
international sales and operations. International operations are generally
subject to a number of risks, including:
o expenses associated with customizing products for foreign countries;
o protectionist laws and business practices that favor local
competition;
o dependence on local vendors;
o multiple, conflicting and changing governmental laws and regulations;
o longer sales cycles;
o longer accounts receivable cycles;
o increased difficulties in collecting accounts receivable;
o difficulties in managing operations across disparate
geographic areas;
o difficulties associated with enforcing agreements through foreign
legal systems;
o reduced or limited protection of our intellectual property rights in
some countries;
o foreign currency exchange rate fluctuations; and
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o political and economic instability.
In addition, if we grow internationally, we will need to expand our
worldwide operations and enhance our communications infrastructure. If we fail
to implement and improve these systems, our ability to accurately forecast sales
demand, manage our supply chain and record and report financial and management
information would be adversely affected. This could materially adversely affect
our business, results of operations and financial condition.
UNDETECTED SOFTWARE OR HARDWARE ERRORS COULD HAVE A MATERIAL
ADVERSE EFFECT ON US
Networking products frequently contain undetected software or hardware
errors when first introduced or as new versions are released. We have
experienced errors in the past in connection with new products. We expect that
errors will be found from time to time in new or enhanced products after we
begin commercial shipments. These problems may cause us to incur significant
warranty and repair costs, divert the attention of our engineering personnel
from our product development efforts and cause significant customer relations
problems. The occurrence of these problems could result in the delay or loss of
market acceptance of our products and would likely have a material adverse
effect on our business, results of operations and financial condition.
Our customers use our products to provide broadband access to their
customers. Defects, integration issues or other performance problems in our
products could result in financial or other damages to our customers or could
damage market acceptance for our products. Our customers could seek damages for
losses from us, which, if they were successful, could have a material adverse
effect on our business, results of operations and financial condition. A product
liability claim brought against us, even if unsuccessful, would likely be
time-consuming and costly.
WE MAY BE UNABLE TO PROTECT OUR PROPRIETARY TECHNOLOGY
We rely on a combination of patent, copyright, trademark and trade secret
laws and restrictions on disclosure to protect our intellectual property rights.
We have filed a limited number of U.S. patent application. There can be no
assurance that this application will be approved, that any issued patents will
protect our intellectual property or that any issued patents will not be
challenged by third parties. Furthermore, other parties may independently
develop similar or competing technology or design around any patents that may be
issued to us. Although we attempt to protect our intellectual property rights,
we may be unable to prevent the misappropriation of our intellectual property,
particularly in foreign countries where the laws may not protect our proprietary
rights as fully as in the United States.
Others may allege that our products infringe upon their proprietary
rights. Any parties asserting that our products infringe upon their proprietary
rights would force us to defend ourselves or our customers, manufacturers or
suppliers against alleged infringement of intellectual property rights. We could
incur substantial costs to prosecute or defend this litigation. In addition,
intellectual property litigation could force us to do one or more of the
following:
o cease selling, incorporating or using products or services that
incorporate the challenged intellectual property;
o obtain from the holder of the infringed intellectual property right a
license to sell or use the relevant technology, which license may not
be available on acceptable terms, if at all; or
o redesign those products or services that incorporate the
disputed technology.
In the event of a successful claim of infringement against us and our
failure or inability to develop non-infringing technology or license the
infringed technology on acceptable terms and on a timely basis, our business,
results of operations and financial condition would be materially adversely
affected. We may be subject to these claims in the future.
We may in the future initiate claims or litigation against third parties
for infringement of our proprietary rights in order to determine the scope and
validity of our proprietary rights or the proprietary rights of competitors.
These claims could result in costly litigation and the diversion of our
technical and management personnel. As a result, our business, results of
operations and financial condition could be materially adversely affected.
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WE MAY NEED ADDITIONAL CAPITAL, WHICH MAY NOT BE AVAILABLE
The development and marketing of new products, which are not yet
complete, will require a significant commitment of resources. Likewise, the
expansion of our operations and reseller channels will require significant
resources.
Furthermore, if the market for broadband access develops at a slower pace
than anticipated or if we fail to establish significant market share and achieve
a meaningful level of revenue, we may continue to incur significant operating
losses and utilize significant amounts of capital. While we believe that our
existing capital resources are adequate to meet our current needs, we may
require additional capital in the future. Additional capital may not be
available to us at all, or, if available, may be available only on unfavorable
terms. Any inability to raise additional capital when we require it would
materially adversely affect our business, results of operations and financial
condition.
WE ARE DEPENDENT ON THE WIDESPREAD ADOPTION OF BROADBAND ACCESS SERVICES
Sales of our products depend on the increased use and widespread adoption
of broadband access services, and the ability of our customers to market and
sell broadband access services. Our business, results of operations and
financial condition would be materially adversely affected if the use of
broadband access services does not increase as anticipated or if our customers'
broadband access services are not received well by the marketplace. Critical
issues concerning use of broadband access services are unresolved and will
likely affect use of broadband access services. These issues include:
o security;
o reliability;
o bandwidth;
o congestion;
o cost;
o ease of access; and
o quality of service.
Even if these issues are resolved, if the market for products that
provide broadband access to the Internet and to corporate networks fails to
develop, or develops at a slower pace than anticipated, our business, results of
operations and financial condition would be materially adversely affected.
WE MAY HAVE INSUFFICIENT CASH FLOW TO MEET OUR DEBT SERVICE OBLIGATIONS
We are required to generate cash sufficient to pay all amounts due on our
outstanding notes and to conduct our business operations. Currently, our
earnings are insufficient to cover our anticipated debt service obligations, and
this may materially hinder our ability to make payments on our outstanding
notes. Our ability to meet our future debt service obligations will be dependent
upon our future performance, which will be subject to financial, business and
other factors affecting our operations, many of which are beyond our control.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS MAY ADVERSELY
AFFECT OUR CASH FLOW
We have substantial amounts of outstanding indebtedness, primarily due to
our convertible notes. We also may obtain additional long-term debt and working
capital lines of credit. As a result of this indebtedness, our principal and
interest payment obligations will increase substantially. There is the
possibility that we may be unable to generate cash sufficient to pay the
principal of, interest on and other amounts due in respect of our indebtedness
when due.
Our substantial leverage could have significant negative consequences,
including:
o increasing our vulnerability to general adverse economic and
industry conditions;
o limiting our ability to obtain additional financing;
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o requiring the dedication of a substantial portion of our cash from
operations to service our indebtedness, thereby reducing the amount
of our cash available for other purposes, including capital
expenditures;
o limiting our flexibility in planning for, or reacting to, changes in
our business and the industry which we compete; and
o placing us at a possible competitive disadvantage vis-a-vis less
leveraged competitors and competitors that have better access to
capital resources.
We May Be Unable to Repurchase the Notes
At maturity, the entire outstanding principal amount of our convertible
notes will become due and payable. In addition, if a change in control occurs,
each holder of the notes may require us to repurchase all or a portion of that
holder's notes. At maturity or if a change in control occurs, we may not have
sufficient funds or may be unable to arrange for additional financing to pay the
principal amount or repurchase price due. Under the terms of the indenture for
the notes, we may elect, if we meet certain conditions, to pay the repurchase
price with shares of common stock. Our borrowing arrangements or agreements
relating to senior debt to which we become a party may contain restrictions on,
or prohibitions against, our repurchases of the notes. If the maturity date or
change in control occurs at a time when our other arrangements prohibit us from
repurchasing the notes, we could try to obtain the consent of the lenders under
those arrangements to purchase the notes, or we could attempt to refinance these
borrowings that contain the restrictions. If we do not obtain the necessary
consents or refinance these borrowings, we will be unable to repurchase the
notes. In that case, our failure to repurchase any tendered notes or notes due
upon maturity would constitute an event of default under the indenture. Any such
default, in turn, may cause a default under the terms of our senior debt. As a
result, in those circumstances, the subordination provisions of the indenture
would, absent a waiver, prohibit any repurchase of the notes until we pay the
senior debt in full.
PROVISIONS OF OUR CHARTER DOCUMENTS MAY HAVE ANTI-TAKEOVER EFFECTS THAT
COULD PREVENT A CHANGE IN OUR CONTROL
Provisions of our amended and restated certificate of incorporation,
bylaws and Delaware law could make it more difficult for a third party to
acquire us, even if doing so would be beneficial to our stockholders.
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DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus and the information incorporated by reference in it
include "forward-looking statements" within the meaning of Section 27A of the
Securities Act and Section 21E of the Exchange Act. We intend that the
forward-looking statements be covered by the safe harbor provisions for
forward-looking statements in these sections. In some cases, you can identify
forward-looking statements by terminology such as "may," "will," "could,"
"expect," "plan," "anticipate," "believe," "estimate," "predict," "potential,"
"intend" or "continue," the negative of such terms or other comparable
terminology. These statements are only predictions, reflecting our expectations
for future events or our future financial performance. Actual events or results
may differ materially. In evaluating these statements you should specifically
consider various factors, including the risks outlined under "Risk Factors."
These factors may cause our actual results to differ materially from any
forward-looking statement. These factors include, but are not limited to:
o our limited operating history
o our history of losses
o our limited ability to forecast quarterly operating results
o our development and introduction of new products
o obtaining and expanding market acceptance of the products we offer
o increasing competition
Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Moreover, neither we nor any
other person assumes responsibility for the accuracy and completeness of the
forward-looking statements. Nor do we undertake any obligation to update or
revise publicly any forward-looking statements, whether as a result of new
information, future events or otherwise. You should not place undue reliance on
these forward-looking statements, which apply only as of the date of this
prospectus.
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USE OF PROCEEDS
Because the shares of our common stock offered under this prospectus will
be issued in exchange for exchangeable shares of 610381 B.C. Inc., we will
receive no cash proceeds from holders of exchangeable shares for the issuance of
shares of our common stock.
PLAN OF DISTRIBUTION
GENERAL
You may receive shares of our common stock in exchange for your
exchangeable shares as follows:
o you may elect to exchange your exchangeable shares for shares of our common
stock at any time;
o 610381 B.C. Inc. may redeem or 610380 B.C. Inc., another one of our
Canadian subsidiaries, may acquire all exchangeable shares that are
outstanding on January 31, 2010, and may redeem or acquire the exchangeable
shares at an earlier date in certain circumstances including (i) there
being outstanding fewer than 5% of the number of exchangeable shares
originally issued and outstanding on September 28, 2000, (ii) the
occurrence of a merger, amalgamation, tender offer, material sale of shares
or rights or interest in or to such shares or rights or similar
transactions involving Redback, or any proposal to do so, (iii) the
proposal of any matter requiring a vote of the holders (other than a matter
discussed under (iv) below) of the exchangeable shares which the board of
directors of 610381 B.C. Inc. determines is not reasonably practicable to
accomplish without an early redemption of the exchangeable shares, or (iv)
the failure by the holders of exchangeable shares to approve or disapprove
any change in the rights of the exchangeable shares where the approval or
disapproval of such change is necessary to maintain the equivalence of the
exchangeable shares and our common stock;
o 610381 B.C. Inc. may, subject to applicable law, at any time purchase for
cancellation all or any part of the outstanding exchangeable shares by
tender to all holders of exchangeable shares and may at any time purchase
exchangeable shares by private agreement with any holders where the
consideration consists solely of shares of 610381 B.C. Inc; or
o upon a liquidation of 610381 B.C. Inc. or Redback, your exchangeable shares
will be exchanged for shares of our common stock.
Upon exchange of your exchangeable shares, you are entitled to receive,
for each exchangeable share you hold, one share of our common stock (subject to
adjustment in certain circumstances) and a cash amount equal to any declared and
unpaid dividends on the exchangeable share. We have not engaged any broker,
dealer or underwriter in connection with this offering of our common stock. The
following is a summary of the material rights, privileges, restrictions and
conditions relating to the issuance of our common stock in exchange for your
exchangeable shares. The specific provisions governing the exchangeable shares
are set forth in the Arrangement Agreement, the Plan of Arrangement and the
Exchange Trust Agreement, which are included as exhibits to the registration
statement of which this prospectus is a part. You should read the Arrangement
Agreement, the Plan of Arrangement and the Exchange Trust Agreement for a more
complete understanding of the exchangeable shares.
ELECTION BY HOLDERS OF EXCHANGEABLE SHARES TO EXCHANGE THEIR SHARES
As a holder of exchangeable shares, you have the right at any time to
require 610381 B.C. Inc. to redeem any or all of the exchangeable shares you
hold for shares of our common stock. In order to request a redemption of your
shares, you must present to 610381 B.C. Inc. or 610381 B.C. Inc.'s transfer
agent, Montreal Trust Company of Canada, the following documents:
o a certificate or certificates representing the number of exchangeable
shares to be redeemed;
o a written redemption request, the form of which you may obtain from 610381
B.C. Inc. or its transfer agent, that specifies the number of exchangeable
shares you wish to have redeemed, the desired redemption date (which shall
not be less than 10 business days nor more than 15 business days after the
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date of the redemption request) and acknowledges the overriding purchase
right, which is described below, of 610380 B.C. Inc., one of our Canadian
subsidiaries; and
o any other documents that 610381 B.C. Inc. or its transfer agent may require
to effect the redemption of your exchangeable shares.
Upon receipt of a redemption request, the transfer agent must promptly
notify 610380 B.C. Inc. and us of the request. 610380 B.C. Inc. has an
overriding right to purchase the exchangeable shares specified in the redemption
request. If 610380 B.C. Inc. elects to exercise this right, then 610381 B.C.
Inc. will not redeem your exchangeable shares, but, instead, 610380 B.C. Inc.
will purchase your exchangeable shares in exchange for shares of our common
stock. In that event, 610380 B.C. Inc. will deliver to the transfer agent for
payment to you one share of our common stock for each exchangeable share
purchased plus a cash amount equal to any declared and unpaid dividends on each
exchangeable share, provided that the record date of the dividend is prior to
the date of purchase. The purchase by 610380 B.C. Inc. of your exchangeable
shares will occur on the redemption date specified in your redemption request.
610380 B.C. Inc. will notify the transfer agent no later than three business
days from the transfer agent's receipt of your redemption request if it elects
to exercise its overriding purchase right. The transfer agent will notify you if
610380 B.C. Inc. has decided not to exercise this right. If 610380 B.C. Inc.
does not elect to exercise its overriding purchase right, then 610381 B.C. Inc.
will redeem your shares on the redemption date specified in your redemption
request. In that event, 610381 B.C. Inc. will deliver to the transfer agent for
payment to you one share of our common stock for each exchangeable share
redeemed plus a cash amount equal to any declared and unpaid dividends on each
exchangeable share provided that the record date of the dividend is prior to the
date of exchange. If, as a result of solvency requirements or applicable law,
610381 B.C. Inc. is not able to redeem all of the exchangeable shares you
requested, then 610381 B.C. Inc. will redeem only those exchangeable shares
permitted by law. 610380 B.C. Inc. will purchase the remaining exchangeable
shares not redeemed by 610381 B.C. Inc. In that event, you are entitled to
receive one share of our common stock for each share purchased by 610380 B.C.
Inc. plus a cash amount equal to any declared and unpaid dividends on each
exchangeable share provided that the record date of the dividend is prior to the
date of our purchase. You may revoke your redemption request at any time prior
to the close of business on the business day immediately preceding the purchase
or redemption date. If you revoke your redemption request, your exchangeable
shares will not be purchased by 610380 B.C. Inc. or redeemed by 610381 B.C. Inc.
REDEMPTION OF EXCHANGEABLE SHARES BY 610381 B.C. INC.
The automatic redemption date for the exchangeable shares is January 31,
2010. On that date, 610381 B.C. Inc. will redeem all of the then outstanding
exchangeable shares by delivering to the transfer agent for payment to you one
share of our common stock for each exchangeable share you hold and a cash amount
equal to any declared but unpaid dividends on each exchangeable share up to the
redemption date. 610381 B.C. Inc. has the right to redeem the exchangeable
shares prior to January 31, 2010 in certain circumstances including (i) there
being outstanding fewer than 5% of the number of exchangeable shares originally
issued and outstanding on September 28, 2000, (ii) the occurrence of a merger,
amalgamation, tender offer, material sale of shares or rights or interest in or
to such shares or rights or similar transactions involving Redback, or any
proposal to do so, (iii) the proposal of any matter requiring a vote of the
holders (other than a matter discussed under (iv) below) of the exchangeable
shares which the board of directors of 610381 B.C. Inc. determines is not
reasonably practicable to accomplish without an early redemption of the
exchangeable shares; or (iv) the failure by the holders of exchangeable shares
to approve or disapprove any change in the rights of the exchangeable shares
where the approval or disapproval of such change is necessary to maintain the
equivalence of the exchangeable shares and our common stock. 610381 B.C. Inc.
will, in the case of a redemption in the circumstances provided under (i) above,
at least 75 days prior to a redemption date, provide all holders of exchangeable
shares with written notice of the proposed redemption of the exchangeable
shares. In the event of a redemption in any of the circumstances provided in
(ii) to (iv) above, 610381 B.C. Inc. will provide such advance notice as its
board of directors determines to be reasonably practicable in the circumstances.
The redemption of the exchangeable shares by 610381 B.C. Inc. is subject to
applicable law and to the overriding right of 610380 B.C. Inc. to purchase all
but not less than all of the outstanding exchangeable shares on the proposed
redemption date. If 610380 B.C. Inc. elects to exercise this right, it must
notify the transfer agent and 610381 B.C. Inc. of its intention to exercise this
right at least 60 days prior to the proposed redemption date, except in an early
redemption situation which notice shall be provided prior to the proposed
redemption date. The transfer agent will notify you whether or not 610380 B.C.
Inc. has decided to exercise its overriding purchase right. If 610380 B.C. Inc.
does exercise this right, it will deliver to the transfer agent for payment to
you on the redemption
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date one share of our common stock for each exchangeable share you hold and a
cash amount equal to all declared but unpaid dividends on each exchangeable
share up to the redemption date.
RIGHTS ON THE LIQUIDATION OF 610381 B.C. INC. OR REDBACK
LIQUIDATION OR INSOLVENCY OF 610381 B.C. INC.
If 610381 B.C. Inc. liquidates, dissolves, or winds up its affairs or
otherwise distributes its assets among its shareholders for the purposes of
winding up its affairs, you are entitled to receive from 610381 B.C. Inc. a
liquidation payment equal to one share of our common stock for each exchangeable
share you hold plus a cash amount equal to all declared but unpaid dividends on
each exchangeable share up to the effective date of the liquidation. 610381 B.C.
Inc. will make this liquidation payment to you, as a holder of exchangeable
shares, before it makes any payments to any holder of a class of stock ranking
junior to the exchangeable shares. The payment of this liquidation payment to
you is subject to applicable law and the overriding right of 610380 B.C. Inc. to
purchase all but not less than all of the outstanding exchangeable shares. If
610380 B.C. Inc. elects to exercise this right, it must notify the transfer
agent and 610381 B.C. Inc. of its intention to exercise the right at least 45
days prior to the proposed liquidation date in the case of a voluntary
liquidation, dissolution or winding up of 610381 B.C. Inc. In the case of an
involuntary liquidation, dissolution or winding up of 610381 B.C. Inc., 610380
B.C. Inc. must notify the transfer agent and 610381 B.C. Inc. of its intention
to exercise this right at least five business days prior to the proposed
liquidation date. The transfer agent will notify you whether or not 610380 B.C.
Inc. has decided to exercise its overriding purchase right. If 610380 B.C. Inc.
does exercise this right, it will deliver to the transfer agent for payment to
you one share of our common stock for each exchangeable share you hold plus a
cash amount equal to all declared but unpaid dividends on each exchangeable
share up to the effective date of the liquidation. If a 610381 B.C. Inc.
insolvency event occurs, as a holder of exchangeable shares, you may instruct
Montreal Trust Company of Canada, as trustee on behalf of the holders of
exchangeable shares, to exercise its exchange right on your behalf. This
exchange right enables the trustee to require Redback to purchase any or all of
your exchangeable shares. The purchase price payable by Redback to you upon
exercise of the trustee's exchange right is one share of our common stock for
each exchangeable share purchased plus a cash amount equal to all declared but
unpaid dividends on each exchangeable share. The occurrence of any of the
following will constitute a 610381 B.C. Inc. insolvency event:
o the institution by 610381 B.C. Inc. of any proceeding to be adjudicated a
bankrupt or insolvent or to be dissolved or wound up, or the consent of
610381 B.C. Inc. to the institution of bankruptcy, insolvency, dissolution
or winding up proceedings against it;
o the filing of a petition, answer or consent seeking the dissolution or
winding up under any bankruptcy, insolvency or analogous laws, and the
failure by 610381 B.C. Inc. to contest in good faith the commencement of
any of these proceedings within 30 days of becoming aware of it;
o 610381 B.C. Inc.'s consent to the filing of any petition referenced above
or to the appointment of a receiver;
o the making by 610381 B.C. Inc. of a general assignment for the benefit of
creditors;
o the admission in writing by 610381 B.C. Inc. of its inability to pay its
debts generally as they become due; or
o 610381 B.C. Inc.'s not being permitted, pursuant to solvency requirements
of applicable law, to redeem any exchangeable shares presented for
redemption by a holder of exchangeable shares.
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LIQUIDATION OF REDBACK
If a Redback liquidation event occurs, Redback will purchase all of your
outstanding exchangeable shares on the fifth business day prior to the Redback
liquidation event. The purchase price that Redback will pay for your
exchangeable shares will be one share of our common stock for each exchangeable
share you hold plus a cash amount equal to all declared but unpaid dividends on
each exchangeable share up to the effective date of the liquidation. This
purchase of your exchangeable shares by Redback will enable you to participate
on an equal basis with the holders of our common stock if a Redback liquidation
event occurs. The occurrence of any of the following will constitute a Redback
liquidation event:
o a determination by our board of directors to institute voluntary
liquidation, dissolution or winding up proceedings or to effect any
other distribution of our assets among our shareholders for the
purpose of winding up our affairs; or
o the receipt by us of notice of, or our otherwise becoming aware of,
any threatened or instituted claim, suit, petition or other
proceedings with respect to our involuntary liquidation, dissolution
or winding up or to effect any other distribution of our assets among
our shareholders for the purpose of winding up our affairs, in each
case where we failed to contest in good faith any such proceeding
commenced within 30 days of becoming aware thereof.
ADJUSTMENTS IN OUR COMMON STOCK
The number of shares of our common stock into which each of your
exchangeable shares is exchangeable will be adjusted to reflect any:
o stock split of our common stock;
o reverse stock split of our common stock;
o stock dividend on our common stock;
o consolidation, merger, arrangement or amalgamation of Redback with
or into another entity;
o recapitalization or reclassification of our outstanding
common stock; or
o other similar change regarding our common stock.
INCOME TAX CONSIDERATIONS FOR HOLDERS OF EXCHANGEABLE SHARES
CANADIAN FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the principal Canadian federal income tax
consequences applicable to holders of exchangeable shares who for purposes of
the INCOME TAX ACT (CANADA), commonly known as the Canadian Tax Act, and at all
relevant times are residents of Canada. For this summary it is assumed that a
holder:
o holds exchangeable shares as capital property,
o deals at arm's length, and
o is not affiliated, with Redback, 610380 B.C. Inc., or
610381 B.C. Inc.
This summary does not apply to holders with respect to whom Redback is or
will be a "foreign affiliate", as defined in the Canadian Tax Act. This summary
does not take into account the potential application to certain "financial
institutions", as defined in the Canadian Tax Act, of the mark-to-market rules
contained in the Canadian Tax Act.
Holders should consult with their own tax advisors as to whether they
hold or will hold their exchangeable shares as capital property for purposes of
the Canadian Tax Act. Shares in the capital of a corporation will generally be
considered to be capital property to a holder unless:
o the holder holds the shares in the course of carrying on a business
of trading or dealing in securities or otherwise as part of a
business of buying and selling securities,
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o the holder acquired the shares in an adventure or concern in the
nature of trade, or
o the holder is a financial institution and the shares are
"mark-to-market property", as defined in the Canadian Tax Act of such
holder.
Certain holders whose shares might not otherwise qualify as capital
property may be entitled to have their shares deemed to be capital property by
making an irrevocable election permitted by subsection 39(4) of the Canadian Tax
Act.
This summary is based on current provisions of the Canadian Tax Act and
regulations thereunder in force as of the date hereof, counsel's understanding
of current published administrative policies of the Canadian Customs and Revenue
Agency and all specific proposals to amend the Canadian Tax Act and the Income
Tax Regulations publicly announced by the Minister of Finance of Canada prior to
the date hereof. No assurance can be given that any of the proposed amendments
will be enacted in the form proposed, or at all.
This summary is not exhaustive of all possible Canadian federal income
tax consequences and, except for the proposed amendments, does not take into
account or anticipate any changes in law, whether by legislative, governmental
or judicial action or decision, and does not take into account provincial,
territorial or foreign tax consequences, which may differ significantly from
those discussed herein. No advance income tax ruling has been sought or obtained
from the Canada Customs and Revenue Agency to confirm the tax consequences
described herein.
THIS SUMMARY IS OF A GENERAL NATURE ONLY AND IS NOT INTENDED TO BE, NOR
SHOULD IT BE CONSTRUED TO BE, LEGAL OR TAX ADVICE TO ANY PARTICULAR HOLDER.
ACCORDINGLY, HOLDERS AND OTHERS SHOULD CONSULT WITH THEIR OWN TAX ADVISORS AS TO
THE TAX CONSEQUENCES TO THEM HAVING REGARD TO THEIR PARTICULAR CIRCUMSTANCES.
For purposes of the Canadian Tax Act, all amounts relating to the
acquisition, holding and disposition of exchangeable shares and/or shares of
Redback common stock (including dividends, adjusted cost base and proceeds of
disposition) must be expressed in Canadian dollars and all amounts denominated
in United States dollars must be converted into Canadian dollars based on the
prevailing United States dollar exchange rate at the time such amounts arise. In
computing a holder's liability for tax under the Canadian Tax Act, any cash
amounts received by the holder in United States dollars must be converted into
the Canadian dollar equivalent, and the amount of any non-cash consideration
received by the holder must be expressed in Canadian dollars at the time such
consideration is received.
DIVIDENDS ON EXCHANGEABLE SHARES
Dividends on exchangeable shares which are received, or are deemed to be
received, by a holder of such shares must be included in computing the holder's
income for purposes of the Canadian Tax Act.
In the case of a holder of exchangeable shares who is an individual, the
gross-up and dividend tax credit rules normally applicable in respect of taxable
dividends from taxable Canadian corporations will apply to the holder in respect
of any such dividends.
In the case of a holder of exchangeable shares that is a corporation, the
holder will generally be entitled to deduct any dividends received on the
exchangeable shares in computing its taxable income.
A holder of exchangeable shares that is a "private corporation", as
defined in the Canadian Tax Act, or any other corporation resident in Canada
controlled or deemed to be controlled by or for the benefit of an individual or
a related group of individuals may be liable under Part IV of the Canadian Tax
Act to pay refundable tax of 33 1/3% on dividends received or deemed to be
revived on the exchangeable shares to the extent that such dividends are
deductible in computing the holder's taxable income.
A holder of exchangeable shares that is throughout the relevant taxation
year a "Canadian controlled private corporation", as defined in the Canadian Tax
Act, may be liable to pay an additional refundable tax of 6 2/3% determined by
reference to its aggregate investment income for the year, which is defined to
include any non-deductible dividends.
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Exchangeable shares will be "taxable preferred shares" and "short-term
preferred shares", as those terms are defined in the Canadian Tax Act.
Accordingly, 610381 B.C. Inc. will be subject to a 66 2/3% tax under Part VI.1
of the Canadian Tax Act on dividends (other than "excluded dividends" as defined
in the Canadian Tax Act) paid or deemed to be paid on the exchangeable shares
and will be entitled to deduct an amount equal to 9/4 of the tax so payable in
computing its taxable income for purposes of the Canadian Tax Act. Dividends
received or deemed to be received on exchangeable shares will not be subject to
the 10% tax under Part IV.1 of the Canadian Tax Act applicable to certain
corporations.
REDEMPTION, RETRACTION, EXCHANGE OR PURCHASE OF EXCHANGEABLE SHARES
REDEMPTION OR RETRACTION. On the redemption (or retraction) of the
exchangeable shares, the holder of the exchangeable shares:
o will receive a dividend equal to any declared and unpaid dividend on
each exchangeable shares redeemed (or retracted) that was held by the
holder on any dividend record date which occurred prior to the
redemption date, and
o will be deemed to have received a dividend equal to the amount, if
any, by which the redemption (or retraction) proceeds (namely, the
fair market value at that time of Redback common stock received by
the holder of the exchangeable shares from 610381 B.C. Inc. on the
redemption (or retraction) of the exchangeable shares) exceeds the
paid-up capital of the exchangeable shares for purpose of the
Canadian Tax Act.
The amount of any such dividend or deemed dividend will be subject to the
tax treatment described above under "Dividends on Exchangeable Shares". In the
case of a holder of exchangeable shares that is a corporation, in some
circumstances, the amount of any deemed dividend arising on redemption (or
retraction) of the exchangeable shares may be treated as proceeds of disposition
and not as a dividend.
On the redemption (or retraction) of exchangeable shares, the holder of
the exchangeable shares will also be considered to have disposed of the
exchangeable shares for proceeds of disposition equal to the redemption (or
retraction) proceeds less the amount of such deemed dividend. The holder of the
exchangeable shares redeemed (or retracted) will, in general, realize a capital
gain (or capital loss) equal to the amount by which such proceeds of
disposition, net of any reasonable costs or disposition, exceed (or are less
than) the adjusted cost base of such exchangeable shares to that holder
immediately before the redemption (or retraction). Refer to "Taxation of Capital
Gain or Capital Loss" below.
EXCHANGE. The transfer of exchangeable shares by the holder thereof to
610380 B.C. Inc. in exchange for shares of Redback common stock pursuant to the
Arrangement will be treated as a disposition of such exchangeable shares for
purposes of the Canadian Tax Act. The holder will, in general, realize a capital
gain (or capital loss) equal to the amount by which the holder's proceeds of
disposition of such exchangeable shares (namely, the fair market value of the
shares of Redback common stock acquired by the holder on the exchange), net of
any reasonable costs of disposition, exceed (or are less than) the adjusted cost
base of such exchangeable shares to that holder immediately before the exchange.
Refer to "Taxation of Capital Gain or Capital Loss" below.
COST OF SHARES OF REDBACK COMMON STOCK SO ACQUIRED. The cost to a holder
of a share of Redback common stock who acquires such share on the redemption,
retraction or exchange of exchangeable shares will be equal to the fair market
value of the share of Redback common stock at the time of such event. The
adjusted cost base of such share will be determined under the averaging rules of
the Canadian Tax Act by averaging the cost of that share with the adjusted cost
base of any other shares of Redback common stock held at that time by the holder
as capital property.
PURCHASE. On the purchase for cancellation of exchangeable shares by
610381 B.C. Inc. by tender to all the holders of record of exchangeable shares
then outstanding, the Holder of exchangeable shares will be deemed to have
received a dividend equal to the amount, if any, by which the amount paid by
610381 B.C. Inc. for the exchangeable shares exceeds the paid-up capital, for
purposes of the Canadian Tax Act, at the time the exchangeable shares are
purchased for cancellation. The amount of any such deemed dividend will be
subject to the tax treatment described above under "Dividends on Exchangeable
Shares". In the case of a holder of exchangeable shares that is a corporation,
in some circumstances, the amount of any deemed dividend arising on purchase for
cancellation of the exchangeable shares may be treated as proceeds of
disposition and not as a dividend.
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On the purchase for cancellation of exchangeable shares, the holder of
the exchangeable shares will also be considered to have disposed of the
exchangeable shares for proceeds of disposition equal to the purchase price less
the amount of such deemed dividend. The holder of the exchangeable shares
purchased for cancellation will, in general, realize a capital gain (or capital
loss) equal to the amount by which such proceeds of disposition, net of any
reasonable costs of disposition, exceed (or are less than) the adjusted cost
base of such exchangeable shares to that holder immediately before such shares
are purchased for cancellation. Refer to "Taxation of Capital Gain or Capital
Loss" below.
DIVIDENDS ON REDBACK COMMON SHARES
Dividends on shares of Redback common stock which are received, or are
deemed to be received, by the holder of such shares who is an individual will be
included in computing the holder's income for purposes of the Canadian Tax Act
but will not be subject to the gross-up and dividend tax credit rules in the
Canadian Tax Act.
In the case of a holder of shares of Redback common stock that is a
corporation, dividends received, or deemed to be received, by the holder on such
shares will be included in computing the holder's income and generally will not
be deductible in computing the holder's taxable income. A holder of such shares
that is a Canadian-controlled private corporation may be liable to pay an
additional refundable tax of 6 2/3% on such dividends. United States
non-resident withholding tax on dividends generally will be eligible for foreign
tax credit or deduction treatment where applicable under the Canadian Tax Act.
DISPOSITION OF SHARES OF REDBACK COMMON STOCK
A holder who disposes of, or is deemed to dispose of, shares of Redback
common stock will, in general, realize a capital gain (or capital loss) equal to
the amount by which the holder's proceeds of disposition of such shares, net of
any reasonable costs of disposition, exceed (or are less than) the adjusted cost
base of such shares to that holder immediately before the disposition or deemed
disposition. Refer to "Taxation of Capital Gain or Capital Loss" below.
TAXATION OF CAPITAL GAIN OR CAPITAL LOSS
A holder will, in general, realize a capital gain (or capital loss) equal
to the amount by which the holder's proceeds of disposition of such exchangeable
shares and/or shares of Redback common stock, net of any reasonable costs of
disposition, exceed (or are less than) the adjusted cost base of the
exchangeable shares and/or shares of Redback common stock, to the holder
immediately before the exchange. Whether an election under section 85 of the
Canadian Tax Act was made in connection with the holder's acquisition of the
holder's exchangeable shares will affect the computation of the holder's
adjusted cost base for such exchangeable shares.
Generally, three-quarters of any capital gain realized by a holder must
be included in computing the holder's income for that year as a taxable capital
gain. Similarly, three-quarters of any capital loss realized by a holder in a
taxation year is an allowable capital loss that may generally be deducted from
the holder's taxable capital gains (but not against other income) for that year
or the three preceding taxation years or any subsequent taxation year, subject
to detailed rules in the Canadian Tax Act in this regard. Under the proposed
amendments, the three-quarters inclusion rate for capital gains and capital
losses would be reduced to two-thirds effective for dispositions occurring after
February 27, 2000 and before October 18, 2000 and to one-half for dispositions
occurring after October 17, 2000.
If the holder is a corporation, the amount of any capital loss realized
on the disposition of exchangeable shares or shares of Redback common stock may
be reduced by the amount of dividends received or deemed to have been received
by it on such shares to the extent and under circumstances prescribed by the
Canadian Tax Act. Similar rules may apply where a holder is a corporation which
is a member of a partnership or a beneficiary of a trust that owns such shares
or where a partnership or trust of which such holder is a member or beneficiary
is a member of a partnership or a beneficiary of a trust that owns any such
shares.
A holder that is throughout the relevant taxation year a
"Canadian-controlled private corporation", as defined in the Canadian Tax Act,
may be liable to pay an additional refundable tax of 6 2/3% determined by
reference to its aggregate investment income for the year, which is defined to
include an amount in respect of taxable capital gains.
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Capital gains realized by a holder who is an individual or trust, other
than certain trusts, may be subject to alternative minimum tax under the
Canadian Tax Act. The Canadian Tax Act provides that the tax payable by
individuals and such trusts is the greater of the tax otherwise determined and
an alternative minimum tax. For purposes of computing the alternative minimum
tax, one-quarter (increased to one-third under the proposed amendments effective
for dispositions occurring after February 27, 2000 and before October 18, 2000
and to one-half for dispositions occurring after October 17, 2000) is added back
to the individual's or the trust's income as otherwise determined.
FOREIGN PROPERTY INFORMATION REPORTING
In general, a "specified Canadian entity", as defined in the Canadian Tax
Act, for a taxation year or fiscal period whose total cost amount of "specified
foreign property", as defined in the Canadian Tax Act, at any time in the year
or fiscal period exceeds Cdn.$100,000, is required to file an information return
for the year or period disclosing prescribed information regarding their
specified foreign property, including the cost amount, any dividends received in
the year and any gains or losses realized in the year, in respect of such
property. Subject to certain exceptions, a taxpayer resident in Canada in the
year will be a specified Canadian entity. exchangeable shares and shares of
Redback common stock will be specified foreign property to a holder.
Accordingly, Holders of exchangeable shares or shares of Redback common stock
should consult their own advisers regarding compliance with these rules.
FOREIGN INVESTMENT ENTITY RULES
Under the proposed amendments, where a taxpayer holds a "participating
interest" in a "foreign investment entity", other than an "exempt interest", as
these terms are defined in the proposed amendments, unless the taxpayer makes a
valid election to be taxed under an accrual regime, the taxpayer will be taxed
under a mark-to-market regime and must include in computing its income for the
year an amount determined, in part, by any increase in the fair market value of
the participating interest during the taxation year of the taxpayer. Shares of
Redback common stock and rights to acquire shares of Redback common stock will
constitute an exempt interest to a holder under the proposed amendments if
throughout the holder's taxation year the shares of Redback common stock are:
o widely-held, actively traded on a regular basis and listed on a
prescribed stock exchange (including the Nasdaq National Market), and
o Redback's principal business is not an "investment business", as
defined in the proposed amendments, during the period which they are
held by the holder.
ELIGIBILITY FOR INVESTMENT
NON-QUALIFIED INVESTMENTS. Exchangeable shares will not be "qualified
investments", as defined in the Canadian Tax Act, for trusts governed by a
"registered retirement savings plan", a "registered retirement income fund" or a
"deferred profit sharing plan", each as defined in the Canadian Tax Act. If, in
a taxation year, such a trust acquires an exchangeable share, it will be subject
to Canadian income tax in respect of such share, and annuitants thereunder may
be required to include the fair market value of such share in computing their
income for the year of acquisition. Such trusts and annuitants thereunder should
consult their own tax advisors regarding the possible consequences of acquiring
or holding exchangeable shares in their particular circumstances.
FOREIGN PROPERTY. Although shares of Redback common stock will be a
qualified investments for such trusts, provided that the shares remain listed on
the Nasdaq National Market, or are listed on another prescribed stock exchange,
such shares will be "foreign property", as defined in Part XI of the Canadian
Tax Act.
Such trusts which hold foreign property will generally be liable to pay a
monthly penalty tax imposed under subsection 206(2) of the Canadian Tax Act
equal to 1% of the amount by which the aggregate cost amount to the trust of
each foreign property held by the trust at the end of each such month exceeds
25% of the aggregate cost amount to the trust of all property held by it at that
time. Under proposed amendments the percentage will be increased to 30% for the
2001 taxation year and thereafter. For this purpose, the aggregate cost amount
to such a trust of shares of Redback common stock received may, in certain
circumstances, be excluded in computing the amount of the penalty tax payable
for up to 24 consecutive months commencing at the time of their acquisition by
the trust. Such trusts and the annuitants thereunder should consult their own
tax advisors regarding the possible application of such penalty tax in their
particular circumstances.
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UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS
The following is a summary of the material United States federal income
tax considerations generally applicable to holders of exchangeable shares that
are United States holders and that own exchangeable shares as capital assets.
For purposes of this summary, United States holders are United States citizens
or residents (including certain former citizens and residents), corporations or
partnerships organized under the laws of the United States or any state thereof,
any estate subject to United States federal income tax on its income regardless
of source, and any trust if a United States court is able to exercise primary
supervision over the administration of the trust and one or more United States
persons have authority to control all substantial decisions of the trust.
This summary is based on United States federal income tax law in effect
as of the date of this prospectus. No statutory, judicial, or administrative
authority exists that directly addresses certain of the United States federal
income tax consequences of the issuance and ownership of instruments and rights
comparable to the exchangeable shares and the related rights. Consequently, some
aspects of the United States federal income tax treatment of the transactions,
including the ownership of exchangeable shares and the exchange of exchangeable
shares for shares of our common stock, are not certain. No advance income tax
ruling from the United States Internal Revenue Service and no opinion of United
States tax counsel has been sought or obtained regarding the tax consequences of
any of the transactions described herein.
This summary does not address aspects of United States taxation other
than United States federal income taxation, nor does it address all aspects of
United States federal income taxation that may be applicable to particular
United States holders, including, without limitation, former holders of Abatis
common shares acquired as a result of the exercise of employee stock options. In
addition, this summary does not address (i) the United States state or local tax
consequences, or (ii) the foreign tax consequences of our acquisition of Abatis.
UNITED STATES HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE UNITED STATES FEDERAL, STATE, AND LOCAL TAX CONSEQUENCES AND THE
FOREIGN TAX CONSEQUENCES OF THE ACQUISITION, INCLUDING THE RECEIPT AND OWNERSHIP
OF EXCHANGEABLE SHARES AND THE RELATED RIGHTS AND THE RECEIPT AND OWNERSHIP OF
OUR COMMON STOCK.
EXCHANGE OR REDEMPTION OF EXCHANGEABLE SHARES
It is anticipated that a United States holder that exercises such holder's
rights to exchange, or is subject to a redemption of, the exchangeable shares
and the related rights for shares of our common stock generally will recognize
gain or loss on the receipt of the shares of our common stock in exchange for
such exchangeable shares and the related rights. Such gain or loss will be equal
to the difference between the fair market value of the shares of our common
stock at the time of the exchange and the United States holder's tax basis in
the exchangeable shares and the related rights exchanged. The gain or loss
should generally be capital gain or loss, except that, with respect to any
declared but unpaid dividends on the exchangeable shares, ordinary income may be
recognized by the holder. Capital gain or loss should generally be long-term
capital gain or loss if the exchangeable shares have been held as capital assets
for more than one year at the time of the exchange. Gain realized on the
exchange of exchangeable shares for shares of our common stock should generally
be treated as United States source gain. The United States holder's tax basis in
the shares of our common stock will be the fair market value of the shares of
our common stock received by the United States holder in the exchange. Such
holder's holding period will begin on the day after the United States holder
receives the shares of our common stock.
If a United States holder of exchangeable shares owns other shares of
610381 B.C. Inc. at the time of a redemption of the exchangeable shares by
610381 B.C. Inc., the Internal Revenue Service could take the position that the
redemption is treated as a dividend. The amount of any such dividend could be
the entire amount of money or the value of property received in the redemption.
The redemption proceeds would be taxed as ordinary income to the extent of the
allocable current and accumulated earnings and profits of 610381 B.C. Inc., if
any, with any excess treated next as a recovery of basis and then as a capital
gain. In determining whether a United States holder owns other shares of 610381
B.C. Inc., a holder's directly-owned shares and shares that the holder owns
constructively under Section 318 of the Code must be considered. The rules of
constructive ownership are complex, can produce unexpected results, and depend
on each shareholder's specific facts. Holders of 610381 B.C. Inc. stock other
than the
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exchangeable shares, or holders who believe that a person or entity to whom they
are related may hold such shares, directly, indirectly or constructively, should
consult their tax advisors in this regard.
DISTRIBUTIONS ON THE EXCHANGEABLE SHARES
A United States holder of exchangeable shares generally will be required
to include dividends paid on the exchangeable shares in gross income as ordinary
income to the extent the dividends were paid out of the current or accumulated
earnings and profits of 610381 B.C. Inc., as determined under United States
federal income tax principles. Such dividends generally will be treated as
foreign source passive income for foreign income tax credit limitation purposes.
Under the Canada-United States Income Tax Convention, such distributions will be
subject to Canadian withholding tax at a rate of 15%. Subject to certain
limitations of United States federal income tax law, a United States holder
generally should be entitled to credit such withholding tax against such
holder's United States federal income tax liability or to deduct such tax in
computing United States taxable income.
PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS
For United States federal income tax purposes, a foreign corporation
generally will be classified as a passive foreign investment company, known as a
"PFIC," for any taxable year during which either (i) 75% or more of its gross
income is passive income (as defined for United States federal income tax
purposes) or (ii) on average for such taxable year, 50% or more of its assets
produce or are held for the production of passive income. For purposes of
applying the foregoing tests, the assets and gross income of corporations with
respect to which the foreign corporation owns at least 25% of the value of the
stock will be attributed to the foreign corporation. Passive income does not
include, however, dividends received by the foreign corporation from a related
person to the extent such dividends are properly allocable to the income of the
related person which is not passive income.
While there can be no assurance with respect to the classification of
either Abatis or 610381 B.C. Inc. as a PFIC, each of Abatis and 610381 B.C. Inc.
believes that it did not constitute a PFIC during its taxable years ending
before the Combination. At the present time, we intend to endeavor to cause
Abatis and 610381 B.C. Inc. to avoid PFIC status in the future, although there
can be no assurance that they will be able to do so or that their intent will
not change. Following the end of each taxable year, 610381 B.C. Inc. will notify
United States holders of exchangeable shares if it believes that 610381 B.C.
Inc. was a PFIC for that taxable year.
If 610381 B.C. Inc. becomes a PFIC during a United States holder's holding
period for exchangeable shares, and the United States holder does not make an
election to treat 610381 B.C. Inc. as a qualified electing fund under Section
1295 of the United States Internal Revenue Code, then:
(i) the United States holder would be required to allocate income
recognized upon receiving certain excess distributions with respect
to, and gain recognized upon the disposition of, such United States
holder's exchangeable shares (including upon the exchange of
exchangeable shares for shares of our common stock) ratably over
the United States holder's holding period for such exchangeable
shares;
(ii) the amount allocated to each year other than: (A) the year of the
excess distribution or disposition of the exchangeable shares, or
(B) any year before the beginning of the first taxable year of
610381 B.C. Inc. for which it was a PFIC, would be subject to tax
at the highest rate applicable to individuals or corporations, as
the case may be, for the taxable year to which such income is
allocated, and an interest charge would be imposed upon the
resulting tax attributable to each such year (which charge would
accrue from the due date of the return for the taxable year to
which such tax was allocated); and
(iii) amounts allocated to periods described in (A) and (B) will be
taxable to the United States holder as ordinary income.
If the United States holder of exchangeable shares makes a qualified
electing fund election, then the United States holder generally will be
currently taxable on such holder's pro rata share of 610381 B.C. Inc.'s ordinary
earnings and net capital gains (at ordinary income and capital gains rates,
respectively) for each taxable year of 610381 B.C. Inc. in which 610381 B.C.
Inc. is classified as a PFIC, even if no dividend distributions are received by
such United States holder, unless such United States holder makes an election to
defer such taxes. If 610381 B.C. Inc. believes that it was a PFIC for a taxable
year, it will provide United States holders of exchangeable shares with
information sufficient to allow eligible holders to make a qualified electing
fund election and report and pay any current or deferred taxes due with respect
to their pro rata shares of 610381 B.C. Inc.'s ordinary earnings and profits and
net capital gains for such taxable year. United States holders should consult
their tax advisors concerning the
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merits and mechanics of making a qualified electing fund election and other
relevant tax considerations if either Abatis or 610381 B.C. Inc. is a PFIC for
any applicable taxable year.
The foregoing summary of the possible application of the PFIC rules to
Abatis and 610381 B.C. Inc. and the United States holders of exchangeable shares
is only a summary of certain material aspects of those rules. Because the United
States federal income tax consequences to a United States holder of exchangeable
shares under the PFIC provisions may be significant, United States holders of
exchangeable shares are urged to discuss those consequences with their tax
advisors.
SHAREHOLDERS NOT RESIDENT IN OR CITIZENS OF THE UNITED STATES
The following summary is applicable to holders of exchangeable shares
that are not United States holders.
A non-United States holder generally will not be subject to United States
federal income tax on gain (if any) recognized on the sale or exchange of the
exchangeable shares, or on the receipt of or sale of shares of our common stock
unless such gain is effectively connected with a United States trade or business
or, in the case of gains recognized by an individual, such individual is present
in the United States for 183 days or more and has a United States "tax home," as
defined in the United States Internal Revenue Code, during the taxable year.
Dividends received by a non-United States holder with respect to the
exchangeable shares are probably not subject to United States withholding tax,
and Redback and Abatis do not intend that Redback, 610381 B.C. Inc. or Abatis
will withhold any amounts in respect of such tax from such dividends. There is
some possibility, however, that the Internal Revenue Service may assert that
United States withholding tax is payable with respect to dividends paid on the
exchangeable shares to non-United States holders. In such case, holders of
exchangeable shares could be subject to United States withholding tax at a rate
of 30 percent, which rate may be reduced by an income tax treaty in effect
between the United States and the non-United States holder's country of
residence. This reduction would result in a withholding tax of 15 percent on
dividends paid to residents of Canada under the applicable tax treaty.
Dividends received by non-United States holders with respect to our
common stock generally will be subject to United States withholding tax at a
rate of 30 percent, which rate may be subject to reduction by an applicable
income tax treaty. This reduction would result in a withholding tax of 15
percent on dividends paid to residents of Canada under the applicable tax
treaty.
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DESCRIPTION OF CAPITAL STOCK
We are authorized to issue 750,000,000 shares of common stock, $0.0001
par value per share, and 10,000,000 shares of preferred stock, $0.0001 par value
per share. As of the close of business on October 31, 2000, 152,974,193 shares
of common stock, including 2,440,526 shares issuable upon exchange for our
subsidiary's exchangeable shares, no shares of preferred stock, options to
purchase 28,420,364 shares of common stock and warrants to purchase 427,667
shares of common stock were issued and outstanding.
COMMON STOCK
Our amended and restated certificate authorizes the issuance of up to
750,000,000 shares of common stock, $0.0001 par value per share. Holders of
common stock are entitled to one vote per share on all matters submitted to a
vote of stockholders and do not have cumulative voting rights. Accordingly,
holders of a majority of the shares of common stock entitled to vote in any
election of directors may elect all of the directors standing for election.
Holders of common stock are entitled to receive ratably such dividends, if any,
as may be declared by the board of directors out of funds legally available
therefor and subject to any preferential dividend rights of any then outstanding
preferred stock. In the event of a liquidation, dissolution or winding up of
Redback, the holders of common stock are entitled to share ratably all assets of
Redback available after the payment of debts and all other liabilities and
subject to any preferential dividend rights of any then outstanding preferred
stock. Holders of common stock have no preemptive, subscription, redemption or
conversion rights. The outstanding shares of common stock are, and the shares
issuable by Redback upon the exchange of the exchangeable shares will be, when
issued and paid for, fully paid and nonassessable.
PREFERRED STOCK
We have an authorized class of undesignated preferred stock consisting of
10,000,000 shares, $0.0001 par value per share. The board of directors is
authorized, subject to any limitation prescribed by law, without further
stockholder approval, to issue from time to time up to 10,000,000 shares of
preferred stock, in one or more series. Each such series of preferred stock
shall have such number of shares, designations, preferences, voting powers,
qualifications and special or relative rights or privileges as shall be
determined by the board of directors, which may include, among others, dividend
rights, voting rights, redemption and sinking fund provisions, liquidation
preferences, conversion rights and preemptive rights.
Our stockholders have granted the board of directors authority to issue
the preferred stock and to determine its rights and preferences in order to
eliminate delays associated with a stockholder vote on specific issuances. The
rights of the holders of common stock will be subject to, and may be adversely
affected by, the rights of holders of any preferred stock that may be issue in
the future. The issuance of preferred stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could have the effect of making it more difficult for a third party to
acquire, or of discouraging a third party from attempting to acquire, a majority
of our outstanding voting stock. We have no present plans to issue any shares of
the preferred stock.
WARRANTS
As of October 31, 2000, there were warrants outstanding to purchase an
aggregate of 427,667 shares of common stock, at exercise prices ranging from
$0.79 per share to $102.34 per share.
REGISTRATION RIGHTS
Pursuant to the terms of an amended and restated Investors' Rights
Agreement, some holders of our common stock are entitled to rights with respect
to the registration of their shares under the Securities Act. Under the terms of
our agreement with the holders of these shares, if we propose to register any of
our securities under the Securities Act, either for our own account or for the
account of other stockholders exercising registration rights, these holders are
entitled to notice of that registration and are entitled to include shares of
their registrable common stock therein. Additionally, these holders are also
entitled to demand registration rights pursuant to which they may require us to
file a registration statement under the Securities Act at our expense with
respect to their shares of common stock, and require us to use our best efforts
to effect that registration. Further, the holders of these demand rights may
require us to file additional registration statements on Form S-3. All of these
registration rights are subject to conditions and limitations, including the
right of the underwriters of an offering to limit the number of shares
26
<PAGE>
included in that registration and our right not to effect a requested
registration within six months following an offering of our securities.
Pursuant to the terms of a Registration Rights Agreement, holders of our
common stock received upon the exchange of exchangeable shares are entitled to
rights with respect to the registration of their shares under the Securities
Act. In addition to the filing of this registration statement and after the
termination of this registration statement, these holders are also entitled to
demand registration rights pursuant to which they may require us to file a
registration statement on Form S-3 at our expense with respect to their shares
of common stock and require us to use our reasonable best efforts to effect that
registration. All of these registration rights are subject to conditions and
limitations, including the right of the underwriters of an offering to limit the
number of shares included in that registration and our right not to effect a
requested registration for a period of not to exceed 60 days in any 90-day
period or an aggregate of 120 days in any 365 day period.
EFFECT OF SELECTED PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND
BYLAWS, AND THE DELAWARE ANTITAKEOVER STATUTE
We are subject to the provisions of Section 203 of the Delaware General
Corporation Law. Subject to exceptions, Section 203 of Delaware law prohibits a
publicly-held Delaware corporation from engaging in a "business combination"
with an "interested stockholder" for a period of three years following the date
that the interested stockholder became an interested stockholder, unless the
interested stockholder attained such status with the approval of the board of
directors or unless the business combination is approved in a prescribed manner.
SHAREHOLDER ACTION; SPECIAL MEETING OF SHAREHOLDERS
Our certificate of incorporation provides that all stockholder actions
must be effected at a duly called meeting and not by a consent in writing. The
bylaws provide that our stockholders may call a special meeting of stockholders
only upon a request of stockholders owning at least 50% of our capital stock.
These provisions of the certificate of incorporation and bylaws could discourage
potential acquisition proposals and could delay or prevent a change in control
of us. These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the board of directors and in the policies
formulated by the board of directors and to discourage transactions that may
involve an actual or threatened change of control of us. These provisions are
designed to reduce our vulnerability to an unsolicited acquisition proposal. The
provisions also are intended to discourage tactics that may be used in proxy
fights. However, these provisions could have the effect of discouraging others
from making tender offers for our shares and, as a consequence, they also may
inhibit fluctuations in the market price of our shares that could result from
actual or rumored takeover attempts. These provisions also may have the effect
of preventing changes in our management.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for our common stock is U.S. Stock
Transfer Corporation.
27
<PAGE>
LEGAL MATTERS
The validity of our common stock offered hereby will be passed upon for
us by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, Menlo Park,
California. Certain matters of Canadian law will be passed upon for us by Fraser
Milner Casgrain, Vancouver, British Columbia. As of the date of this prospectus,
certain partners of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP beneficially own shares of our common stock.
EXPERTS
The financial statements of Redback as of December 31, 1998 and 1999 and
for each of the three years in the period ended December 31, 1999 incorporated
in this prospectus by reference to the Annual Report on Form 10-K for the year
ended December 31, 1999 have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements of Siara as of December 31, 1998 and 1999 and
for the period from inception (July 20, 1998) through December 31, 1998, the
year ended December 31, 1999, and the period from inception (July 20, 1998)
through December 31, 1999 incorporated in this prospectus by reference to
Redback's Proxy Statement included within the Registration Statement on Form S-4
Amendment Number 1 (No. 333-95947) have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, independent accountants, given on the
authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement that we filed with
the SEC. The registration statement, including the attached exhibits, contain
additional relevant information about us and our common stock. The rules and
regulations of the SEC allow us to omit some of the information included in the
registration statement from this prospectus. In addition, we file reports, proxy
statements and other information with the SEC under the Exchange Act. You may
read and copy any of this information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center Citicorp Center
Room 1024 Suite 1300 500 West Madison Street
Washington, D.C. 20549 New York, New York 10048 Suite 1400
Chicago, Illinois 60661-2511
</TABLE>
Please call the SEC at 1-800-SEC-0330 for further information on the
public reference rooms. Our SEC filings are also available to the public from
the SEC's website at http://www.sec.gov. The SEC file number for our documents
filed under the Exchange Act is 0-25853.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. This prospectus
incorporates by reference important business and financial information about us.
The information incorporated by reference is considered to be a part of this
prospectus, except for any such information that is superceded by information
included directly in this document, and later information that we file with the
SEC will automatically update and supercede all of such information.
We incorporate by reference the documents listed below and any future
filings we will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934:
1. Our Proxy Statement dated February 7, 2000, included within
the Registration Statement on Form S-4 Amendment Number 1 filed on
February 7, 2000 in connection with our March 8, 2000 Special
Meeting of Stockholders (File No. 333-95947);
2. Our Annual Report on Form 10-K for the year ended December 31,
1999, filed on February 11, 2000;
3. Our Current Report on Form 8-K filed with the SEC on
March 20, 2000;
28
<PAGE>
4. Our Current Report on Form 8-K filed with the SEC on
March 21, 2000;
5. Our Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 2000, filed on May 15, 2000;
6. Our Current Report on Form 8-K filed with the SEC on
August 2, 2000;
7. Our Quarterly Report on Form 10-Q for the quarterly period ended
June 30, 2000, filed on August 14, 2000;
8. Our Current Report on Form 8-K filed with the SEC on
October 13, 2000;
9. Our Current Report on Form 8-K filed with the SEC on
October 13, 2000;
10. Our Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2000, filed on November 13, 2000;
11. Our Current Report on Form 8-K filed with the SEC on
November 14, 2000; and
12. All of our filings pursuant to the Exchange Act after the date of
filing the initial registration statement and prior to the
effectiveness of the registration statement.
You may obtain a copy of these filings, at no cost, by writing or
telephoning us at the following address:
Investor Relations
1195 Borregas Avenue
Sunnyvale, CA 94089
(408) 571-5200
29
<PAGE>
================================================================================
THIS PROSPECTUS IS PART OF A REGISTRATION STATEMENT WE FILED WITH THE SEC. YOU
SHOULD RELY ONLY ON THE INFORMATION OR REPRESENTATIONS PROVIDED IN THIS
PROSPECTUS. WE HAVE AUTHORIZED NO ONE TO PROVIDE YOU WITH DIFFERENT INFORMATION.
WE ARE NOT MAKING AN OFFER OF THESE SECURITIES IN ANY STATE WHERE THE OFFER IS
NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS IS
ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF THE DOCUMENT.
TABLE OF CONTENTS
PAGE
----
Summary.......................................... 3
Risk Factors..................................... 5
Disclosure Regarding Forward-Looking
Statements..................................... 14
Use of Proceeds.................................. 15
Plan of Distribution............................. 15
Income Tax Considerations for Holders of
Exchangeable Shares............................ 18
Description of Capital Stock..................... 26
Legal Matters.................................... 28
Experts.......................................... 28
Where You Can Find More Information.............. 28
================================================================================
================================================================================
[REDBACK LOGO]
2,440,526 SHARES OF COMMON STOCK
-------------
November ___, 2000
--------------
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses to be incurred in
connection with the registration of the securities being registered hereby, all
of which will be borne by us (except any underwriting discounts and commissions
and expenses incurred by the selling stockholders for brokerage, accounting, tax
or legal services or any other expenses incurred by the selling stockholders in
disposing of the shares). All amounts shown are estimates except the Securities
and Exchange Commission registration fee.
Securities and Exchange Commission Registration Fee............ $ 53,638
Legal Fees and Expenses........................................ $100,000
Accounting Fees and Expenses................................... $100,000
Miscellaneous.................................................. $ 212
---------
Total..................................................... $253,850
=========
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS.
Redback's certificate of incorporation limits the liability of its
directors for monetary damages arising from a breach of their fiduciary duty as
directors, except to the extent otherwise required by the Delaware General
Corporation Law. Such limitation of liability does not affect the availability
of equitable remedies such as injunctive relief or rescission.
Redback's bylaws provide that Redback shall indemnify its directors and
officers to the fullest extent permitted by Delaware law, including in
circumstances in which indemnification is otherwise discretionary under Delaware
law. Redback has also entered into indemnification agreements with its officers
and directors containing provisions that may require Redback, among other
things, to indemnify such officers and directors against certain liabilities
that may arise by reason of their status or service as directors or officers and
to advance their expenses incurred as a result of any proceeding against them as
to which they could be indemnified.
ITEM 16. EXHIBITS.
The exhibits listed in the Exhibit Index as filed as part of this
Registration Statement.
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
-------- -----------
2.1* Arrangement Agreement, dated as of July 30, 2000, among Registrant,
610381 B.C. Inc. and Abatis Systems Corporation
5.1 Opinion of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP
5.2 Opinion of Fraser Milner Casgrain
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP (included in the opinion filed as Exhibit 5.1)
23.4 Consent of Fraser Milner Casgrain (included in the opinion filed as
Exhibit 5.2)
24.1 Power of Attorney (reference is made to the signature page of this
Registrant Statement).
99.1** Registration Rights Agreement, dated as of September 28, 2000,
between Registrant and Andrew Waitman acting as agent to the
shareholders of Abatis Systems Corporation
99.2** Exchange Trust Agreement, dated as of September 28, 2000, among
Registrant, 610381 B.C. Inc. and Montreal Trust Company of Canada
99.3** Support Agreement, dated as of September 28, 2000, among
Registrant, 610381 B.C. Inc. and 610380 B.C. Inc.
II-1
<PAGE>
99.4** Escrow Agreement, dated as of September 28, 2000, among Registrant,
610381 B.C. Inc., Montreal Trust Company of Canada and Andrew
Waitman acting as agent to the shareholders of Abatis Systems
Corporation
--------------
* Incorporated by reference from Exhibits to the Registrant's Current Report
on Form 8-K filed with the SEC on October 13, 2000.
** Included as an exhibit to the Arrangement Agreement under Exhibit 2.1.
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement: (i) to include any
prospectus required by section 10(a)(3) of the Securities Act; (ii) to reflect
in the prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial BONA
FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 15, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the 1934 Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial BONA FIDE offering
thereof.
For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Sunnyvale, State of California, on this 13th day of
November 2000.
REDBACK NETWORKS INC.
By: /S/ VIVEK RAGAVAN
---------------------------------
Vivek Ragavan
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally Vivek Ragavan and
Craig M. Gentner, and each of them, the lawful attorneys and agents, with power
and authority to do any and all acts and things and to execute any and all
instruments which said attorneys and agents determine may be necessary or
advisable or required to enable Redback Networks Inc., a Delaware corporation,
to comply with the Securities Act, and any rules or regulations or requirements
of the Securities and Exchange Commission in connection with this Registration
Statement. Without limiting the generality of the foregoing power and authority,
the powers granted include the power and authority to sign the names of the
undersigned officers and directors in the capacities indicated below to this
Registration Statement, to any and all amendments, both pre-effective and
post-effective, and supplements to this Registration Statement, and to any and
all instruments or documents filed as part of or in conjunction with this
Registration Statement or amendments or supplements thereof, and each of the
undersigned hereby ratifies and confirms all that said attorneys and agents or
any of them shall do or cause to be done by virtue hereof. This Power of
Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/S/ VIVEK RAGAVAN President, Chief Executive Officer and Director November 13,
------------------------------------------ (PRINCIPAL EXECUTIVE OFFICER) 2000
Vivek Ragavan
/S/ CRAIG M. GENTNER Senior Vice President of Finance, Chief Financial
------------------------------------------ Officer and Corporate Secretary (PRINCIPAL FINANCIAL November 13,
Craig M. Gentner OFFICER) 2000
/S/ DENNIS L. BARSEMA Director, Vice Chairman of the Board November 13,
------------------------------------------ 2000
Dennis L. Barsema
/S/ JAMES R. FLACH Director November 13,
------------------------------------------ 2000
James R. Flach
/S/ PROMOD HAGUE Director November 13,
------------------------------------------ 2000
Promod Hague
/S/ VINOD KHOSLA Director November 13,
------------------------------------------ 2000
Vinod Khosla
/S/ WILLIAM H. KURTZ Director November 13,
------------------------------------------ 2000
William H. Kurtz
/S /PIERRE R. LAMOND Director, Chairman of the Board November 13,
------------------------------------------ 2000
Pierre R. Lamond
/S/ DANIEL J. WARMENHAVEN Director November 13,
------------------------------------------ 2000
Daniel J. Warmenhaven
</TABLE>
II-3
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------------ ------------
2.1* Arrangement Agreement, dated as of July 30, 2000, among
Registrant, 610381 B.C. Inc. and Abatis Systems Corporation
5.1 Opinion of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP
5.2 Opinion of Fraser Milner Casgrain
23.1 Consent of PricewaterhouseCoopers LLP
23.2 Consent of PricewaterhouseCoopers LLP
23.3 Consent of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP (included in the opinion filed as Exhibit 5.1)
23.4 Consent of Fraser Milner Casgrain (included in the opinion
filed as Exhibit 5.2)
24.1 Power of Attorney (reference is made to the signature page of this
Registrant Statement).
99.1** Registration Rights Agreement, dated as of September 28, 2000,
between Registrant and Andrew Waitman acting as agent to the
shareholders of Abatis Systems Corporation
99.2** Exchange Trust Agreement, dated as of September 28, 2000, among
Registrant, 610381 B.C. Inc. and Montreal Trust Company of Canada
99.3** Support Agreement, dated as of September 28, 2000, among
Registrant, 610381 B.C. Inc. and 610380 B.C. Inc.
99.4** Escrow Agreement, dated as of September 28, 2000, among
Registrant, 610381 B.C. Inc., Montreal Trust Company of Canada and
Andrew Waitman acting as agent to the shareholders of Abatis
Systems Corporation
--------------
* Incorporated by reference from Exhibits to the Registrant's Current Report
on Form 8-K filed with the SEC on October 13, 2000.
** Included as an exhibit
to the Arrangement Agreement under Exhibit 2.1.
