As filed with the Securities and Exchange Commission on July 25, 2000
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------
FORM F-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------------------
360NETWORKS INC.
(Exact name of registrant as specified in its charter)
Nova Scotia, Canada 4813 Not Applicable
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification
Number)
1500-1066 West Hastings Street
Vancouver, British Columbia
Canada V6E 3X1
(604) 681-1994
(Address, including Zip Code, and telephone number, including area code, of
registrant's principal executive offices)
---------------------------------
CT Corporation System
111 Eighth Avenue, 13th Floor
New York, New York 10011
(212) 590-9200
(Name, address, including Zip Code, and telephone number,
including area code, of agent for service)
with copies to:
Roger Andrus, Esq. Cameron G. Belsher, Esq.
Cahill Gordon & Reindel Farris, Vaughan, Wills & Murphy
80 Pine Street 2600-700 West Georgia Street
New York, NY 10005-1702 Vancouver, British Columbia
U.S.A. Canada V7Y 1B3
Approximate date of commencement of proposed sale to the public:
As soon as practicable after this registration statement becomes effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 426(b) under the Securities Act, check the following 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(d)
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.
|_| __________________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================================
Proposed Maximum
Title of each Class of Securities Amount to be Offering Price Per Proposed Maximum Amount of
to be Registered Registered Unit Aggregate Offering Price (1) Registration Fee (2)
---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
13% Senior Notes due 2008 $600,000,000 97.590% $585,540,000 $154,583
---------------------------------------------------------------------------------------------------------------------------------
13% Senior Notes due 2008 EUR0 200,000,000 97.593% $182,869,763 (3) $48,278
---------------------------------------------------------------------------------------------------------------------------------
Total $768,409,763 $202,861
=================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(f)(2) under the Securities Act of 1933, as amended
(the "Securities Act").
(2) Calculated pursuant to Rule 457(f)(2) under the Securities Act.
(3) Calculated using an exchange rate of EURO 1.00 = $0.9369.
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 this registration statement shall become
effective on such date as the Commission, acting pursuant to said section 8(a),
may determine.
================================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 25, 2000
Information contained in this prospectus is subject to completion or amendment.
A registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any jurisdiction in which such offer, solicitation or sale would be unlawful
prior to registration or qualification under the securities laws of the relevant
jurisdiction.
PROSPECTUS
[OBJECT OMITTED -COMPANY LOGO]
Offer to exchange our 13% senior notes due 2008,
which have been registered under the Securities Act,
for our 13% senior notes due 2008, which have not been registered
Terms of the Exchange Offer:
o Offer to exchange up to $600,000,000 aggregate principal amount of
our new 13% senior notes and EURO 200,000,000 aggregate principal
amount of our new 13% Senior Notes, all of which will mature in
2008, for an equal amount of our old 13% senior notes, which will
mature in 2008.
o In the case of the dollar notes, expires 5:00 p.m., New York City
time, on , 2000 unless extended. In the case of the euro notes,
expires 5:00 p.m., London time, on , 2000 unless extended.
o You may withdraw your tender of old notes any time before the
exchange offer expires.
o We will accept any and all old notes validly tendered and not
withdrawn for exchange before the exchange offer expires.
o Not subject to any condition, other than that the exchange offer
not violate applicable law or any applicable interpretation of the
staff of the Securities and Exchange Commission and certain other
customary conditions.
o We will not receive any proceeds from the exchange offer.
o The exchange of notes will not be a taxable exchange for U.S.
federal income tax purposes.
o The terms of the new notes and the old notes are identical in all
material respects, except for certain transfer restrictions
relating to the old notes.
o The new notes will be evidence of the same indebtedness as the old
notes and will be issued under, and entitled to the benefits of,
the same indentures that govern the old notes.
The New Notes:
o Interest Payment: semiannually in arrears on May 1 and November 1,
beginning on November 1, 2000.
o Redemption: The new notes will not be redeemable, except in some
instances relating to withholding taxes. Holders of the new notes
may also require us to redeem all or any part of their new notes
upon a change of control or if we sell certain assets.
See "Risk Factors," which begins on page 15, for a discussion of
certain factors that should be considered by holders before tendering their old
notes in the exchange offer.
--------------------------------------
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
--------------------------------------
The date of this prospectus is , 2000.
<PAGE>
TABLE OF CONTENTS
Page
----
Prospectus Summary............................................................1
Risk Factors.................................................................15
The Exchange Offer...........................................................35
Description of Notes.........................................................44
Description of Other Indebtedness............................................87
Description of Book-Entry System.............................................91
Material United States and Canadian Income Tax Considerations................96
Plan of Distribution........................................................100
Legal Matters...............................................................103
Experts.....................................................................103
Enforceability of Civil Liabilities Against Foreign Persons.................103
Currency Translation........................................................103
Where You Can Find More Information.........................................104
General Listing Information.................................................106
Index to Pro Forma Financial Information...................................PF-1
i
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this
prospectus. You should read the entire prospectus carefully. Worldwide Fiber
Inc. recently has been renamed 360networks inc. to reflect our global focus and
evolution from constructing networks to offering a range of network and
value-added services. References in this prospectus to "360networks," "we,"
"our" and "us" refer to 360networks inc. (and its predecessor) and all of its
subsidiaries as a combined entity, except where it is clear that those terms
mean only the parent company. Industry and market data in this prospectus are
based on or derived from sources that we believe are reliable. There can be no
assurance, however, as to the accuracy of the industry or market data.
The Exchange Offer
Purpose and Effect............. 360networks inc. sold $600 million 13%
senior notes due 2008 (the "old dollar
notes") on April 26, 2000 and sold EURO 200
million 13% senior notes due 2008 (the "old
euro notes" and, together with the old
dollar notes, the "old notes") on April 28,
2000. The old notes were sold to Donaldson,
Lufkin & Jenrette Securities Corporation,
Goldman, Sachs & Co., Bear Stearns & Co.
Inc., Chase Securities Inc., Credit Suisse
First Boston Corporation, Morgan Stanley &
Co. Incorporated, Salomon Smith Barney Inc.,
RBC Dominion Securities Corporation and TD
Securities (USA) Inc., the initial
purchasers, who privately placed the old
notes with certain institutional investors.
In connection with this sale, we executed
and delivered for the benefit of the holders
of the old notes registration rights
agreements providing for, among other
things, the exchange offer. See "The
Exchange Offer--Terms of the Exchange
Offer."
Terms of the Exchange Offer.... We are offering to exchange $1,000 principal
amount of new dollar notes (as defined) for
each $1,000 principal amount of old dollar
notes. Old dollar notes may only be
exchanged in $1,000 principal amount
increments. We are offering to exchange EURO
1,000 principal amount of new euro notes (as
defined) for each EURO 1,000 principal
amount of old euro notes. Old euro notes may
only be exchanged in EURO 1,000 principal
amount increments. We will issue the new
notes (as defined) on or promptly after the
expiration of the exchange offer. See "Risk
Factors--Consequences of Failure to
Exchange."
Minimum Condition.............. The exchange offer is not conditioned upon
any minimum total amount of old notes being
tendered or accepted for exchange. See "The
Exchange Offer--Certain Conditions to the
Exchange Offer."
1
<PAGE>
Expiration Date................ In the case of the dollar notes, 5:00 p.m.,
New York City time, on , 2000, unless the
exchange offer is extended, and in the case
of the euro notes, 5:00 p.m., London time,
on , 2000, unless the exchange offer is
extended, in which case the expiration date
means the latest date and time to which the
exchange offer is extended. See "The
Exchange Offer--Terms of the Exchange
Offer."
Conditions...................... The exchange offer is subject to certain
customary conditions, which may be waived by
us. We reserve the right to terminate or
amend the exchange offer at any time before
the expiration date if these conditions
occur. The exchange offer is also subject to
the terms and provisions of the registration
rights agreements. See "The Exchange
Offer--Certain Conditions to the Exchange
Offer."
Procedures for Tendering
Old Notes..................... If you wish to tender your old notes through
the exchange offer, you must either (1)
complete, sign and date the letter of
transmittal, or a facsimile of it, according
to the instructions contained in this
prospectus and in the letter of transmittal
or (2) send an agent's message to the
appropriate exchange agent, which is a
message that indicates you have agreed to
the contents of the letter of transmittal
and the letter of transmittal may be
enforced against you. You must mail or
otherwise deliver the letter of transmittal,
or a facsimile of it, or the agent's message
with the old notes or a Book-Entry
Confirmation (as defined) and any other
required documentation to the appropriate
exchange agent at the address listed in this
prospectus. The method of delivery of this
documentation is at your election and risk.
By executing the letter of transmittal or
sending the agent's message you will
represent to us, among other things, that:
o the new notes acquired through the
exchange offer by you and any
beneficial owners of old notes are
being obtained in the ordinary course
of business of the person receiving
the new notes;
o neither you nor the beneficial owner
is participating in, intends to
participate in or has an arrangement
or understanding with any person to
participate in the distribution of the
new notes; and
o neither you nor the beneficial owner
is an affiliate, as defined under Rule
405 of the Securities Act, of
360networks inc.
2
<PAGE>
Each broker-dealer that receives new notes
for its own account in exchange for old
notes, where the old notes were acquired by
the broker or dealer as a result of
market-making activities or other trading
activities (except for old notes acquired
directly from us), must acknowledge in the
letter of transmittal that it will deliver a
prospectus for any resale of the new notes.
See "The Exchange Offer--Procedures for
Tendering Old Notes" and "Plan of
Distribution."
Special Procedures for
Beneficial Owners.......... If you are a beneficial owner whose old
notes are registered in the name of a
broker, dealer, commercial bank, trust
company or other nominee and you wish to
tender your old notes in the exchange offer,
you should contact the registered holder
promptly and instruct the registered holder
to tender on your behalf. If you wish to
tender on your own behalf, you must, before
completing and executing the letter of
transmittal and delivering your old notes,
either make appropriate arrangements to
register ownership of the old notes in your
name or obtain a properly completed bond
power from the registered holder. The
transfer of registered ownership may take
considerable time and may not be able to be
completed before the expiration date. See
"The Exchange Offer--Procedures for
Tendering Old Notes."
Book-Entry Transfer............ Any financial institution that is a
participant in the Book-Entry Transfer
Facility's (as defined) system may make
book-entry delivery of old notes by causing
the Book-Entry Transfer Facility to transfer
these old notes into the appropriate
exchange agent's account at the Book-Entry
Transfer Facility in accordance with the
Book-Entry Transfer Facility's procedures
for transfer. See "The Exchange Offer--Book
Entry Transfer."
Withdrawal Rights.............. In the case of the dollar notes, tenders may
be withdrawn at any time before 5:00 p.m.,
New York City time, on the expiration date,
and in the case of the euro notes, tenders
may be withdrawn at any time before 5:00
p.m., London time, on the expiration date.
See "The Exchange Offer--Withdrawal of
Tenders."
Acceptance of Old Notes and
Delivery of New Notes.... Upon satisfaction or waiver of all
conditions of the exchange offer, we will
accept for exchange any and all old dollar
notes which are properly tendered and not
withdrawn before 5:00 p.m., New York City
time, on the expiration date and any and all
old euro notes which are properly tendered
and not withdrawn before 5:00 p.m., London
time, on the expiration date.. The new notes
issued through the exchange offer will be
delivered promptly following acceptance of
the old notes by us after the expiration
date. See "The Exchange Offer--Acceptance of
Old Notes for Exchange; Delivery of New
Notes."
3
<PAGE>
U.S. Federal Income Tax
Consequences................. The exchange of old notes for new notes by
tendering holders will not be a taxable
exchange for United States federal income
tax purposes. See "Material United States
and Canadian Federal Income Tax
Considerations--United States."
Regulatory Approvals........... We do not believe that the receipt of any
material federal or state regulatory
approvals will be necessary for the exchange
offer. See "The Exchange Offer--Regulatory
Approvals."
Use of Proceeds................ We will not receive any proceeds from the
exchange offer.
Exchange Agents................ HSBC Bank USA is serving as exchange agent
in the exchange offer for the Dollar Notes
(the "dollar note exchange agent"). HSBC
Bank plc is serving as exchange agent in the
exchange offer for the Euro Notes (the "euro
note exchange agent"). See "The Exchange
Offer--Exchange Agents."
Resales of the New Notes....... The new notes are being offered by this
prospectus to satisfy certain obligations
contained in the registration rights
agreements. Based on positions of the
Securities and Exchange Commission and
no-action or interpretive letters issued to
others, we believe that the new notes issued
through the exchange offer may be offered
for resale, resold and otherwise transferred
by you, without compliance with the
registration and prospectus delivery
provisions of the Securities Act, provided
that:
o you are acquiring the new notes
in the ordinary course of your
business;
o you are not participating, do
not intend to participate and
have no arrangement or
understanding with any person to
participate in the distribution
of the new notes; and
o you are not an affiliate of
360networks inc.
If you acquire new notes in the exchange
offer to distribute or participate in a
distribution of new notes, you cannot rely
on the position of the staff of the
Securities and Exchange Commission contained
in its no-action and interpretive letters
and must comply with the registration and
prospectus delivery requirements of the
Securities Act concerning a secondary resale
transaction, unless an exemption from
registration is otherwise available. Each
broker-dealer that receives new notes for
its own account through the exchange offer
must acknowledge that:
o old notes tendered by it in the
exchange offer were acquired in
the ordinary course of its
business as a result of
market-making or other trading
activities; and
4
<PAGE>
o it will deliver a prospectus in
connection with any resale of
new notes received in the
exchange offer.
This prospectus, as it may be amended or
supplemented from time to time, may be used
by a broker-dealer in connection with any
resale of the new notes received in exchange
for old notes where the old notes were
acquired by a broker-dealer as a result of
market-making or other trading activities,
except for old notes acquired directly from
us. We have agreed that, for a period of 180
days following the consummation of the
exchange offer, we will make this prospectus
available to any broker-dealer for use with
resale. See "The Exchange Offer--Resales of
the New Notes" and "Plan of Distribution."
5
<PAGE>
Summary Description of New Notes
Total Amount of New Notes
Offered...................... $600.0 million in aggregate principal amount
of 13% Senior Notes due 2008 (the "new
dollar notes").
EURO 200.0 million in aggregate principal
amount of 13% Senior Notes due 2008 (the
"new euro notes"). The new euro notes,
together with the new dollar notes, are
referred to in this prospectus as the "new
notes." The old notes, together with the new
notes, are referred to in this prospectus as
the "notes."
Issuer......................... 360networks inc.
Maturity....................... New dollar notes: May 1, 2008.
New euro notes: May 1, 2008.
Interest....................... Interest on the new dollar notes will accrue
at the rate of 13% per annum and will be
payable in cash in arrears semiannually on
May 1 and November 1 of each year,
commencing on November 1, 2000.
Interest on the new euro notes will accrue
at the rate of 13% per annum and will be
payable in cash in arrears semiannually on
May 1 and November 1 of each year,
commencing on November 1, 2000.
Ranking of the New Notes....... The new notes are senior debts. They will
effectively rank behind all of our secured
debts to the extent of the value of the
assets securing those debts and all existing
and future debts and other liabilities of
our subsidiaries.
They will rank equally with all of our
existing and future unsubordinated,
unsecured debts that do not expressly
provide that they are subordinated to the
new notes.
They will rank ahead of all of our future
debts that expressly provide that they are
subordinated to the new notes.
Assuming we had sold the old notes on
December 31, 1999 and applied the proceeds
as intended, the old notes would have been
effectively subordinated to approximately
$244 million of liabilities of our
subsidiaries. In addition, the new notes
will rank equally with our outstanding $175
million principal amount of 12 1/2% Senior
Notes due 2005 and our outstanding $500
million principal amount of 12% Senior Notes
due 2009. No other debt of ours having an
equal ranking with the old notes or that is
subordinate to the old notes would have been
outstanding on such date.
6
<PAGE>
Optional Redemption............ The new notes may not be redeemed at our
option, except in certain instances relating
to withholding taxes. Upon a change in the
withholding tax laws of Canada, we may
redeem all of the new notes at any time at
the face amount of the new notes.
Mandatory Offer to Repurchase.. If in we sell certain assets or experience
specific kinds of changes in control, we
must offer to repurchase the new notes at
the prices listed in the section
"Description of Notes" under the heading
"Repurchase at the Option of Holders."
Basic Covenants of Indentures.. The indentures governing the new notes,
among other things, place certain
limitations on our ability, and the ability
of some of our subsidiaries, to:
o borrow money;
o pay dividends on stock or
repurchase stock;
o make investments;
o use assets as security in other
transactions; and
o sell certain assets or merge
with or into other companies.
For more details, see the section
"Description of Notes" under the heading
"Certain Covenants."
Form of the Notes.............. The old notes were issued in global form and
are governed by the laws of the State of New
York.
When issued, the new notes will be issued in
global form and governed by the laws of the
State of New York.
Trustee, Paying Agent
and Registrar................ HSBC Bank USA
Luxembourg Paying Agent
and Registrar.................. Banque Generale du Luxembourg
London Paying Agent and Common
Depositary................... HSBC Bank plc
7
<PAGE>
The Company
We are a leading independent, facilities-based provider of fiber optic
communications network products and services. By the end of 2001, we expect our
currently planned network to consist of approximately 70,000 route miles in
North America, Europe, South America and Asia, including undersea cables between
North America and Europe, North America and South America and across Asia.
We intend to expand our network to provide connectivity on a global
basis. Our network's design uses state-of-the-art optical technologies that we
believe greatly reduce complexity and cost while allowing us to offer increased
reliability and a wide range of products and services.
We offer network services to meet our customers' requirements and
enable Internet services and intend to develop products and services that
capitalize on the convergence of telecommunications and high-bandwidth
applications and services.
We believe that there is growing demand for fiber optic capacity and
related network elements to transmit and service high-bandwidth data, voice and
video. This growing demand is being accelerated by new applications and services
and by improvements in "last mile" technology such as digital subscriber line
and cable modems. In this changing market environment, we believe that we are in
a favorable competitive position to satisfy this demand relative to other
service providers due to our low-cost, seamless technologies and consistent
operating architecture. We have achieved a low-cost position by:
o leveraging our construction skills;
o co-developing and swapping along some corridors of our
network;
o using equity as payment for important elements such as bulk
rights-of-way; and
o using optical design and technologies that eliminate layers of
equipment traditionally required to support legacy systems.
Our current and targeted customers include new and incumbent
telecommunications service providers, Internet service providers, application
service providers, storage service providers and large organizations with
enterprise network needs. We believe that these customers have a limited choice
of independent service providers capable of offering high-capacity, reliable,
secure and cost-effective services, including enabling Internet services,
between major population centers in North America, Europe and South America. As
a result, we believe that our targeted customers will buy services from us
rather than purchase them from another source or build these service
capabilities themselves. To meet our customers' requirements, we offer a wide
range of services on a scalable basis, including:
o network services--optical channels, private line transmission,
packet-based data services such as Internet protocol transport
and Asynchronous Transfer Mode, and virtual voice trunking;
and
o network infrastructure--dark fiber and conduit for sale, grant
of indefeasible right of use or lease and construction
services supporting the development of our network.
Through the colocation facilities that we have agreed to acquire or are
co-developing and through additional colocation facilities that we intend to
acquire, we intend to provide additional network services such as Internet data
centers, applications hosting, electronic commerce support and web hosting. We
also intend to expand our business to include additional network services such
as video transport, independent Internet access for transport and peering and
management services to allow carriers to migrate from circuit-switched
technologies to packet-based technologies.
8
<PAGE>
We expect to enable our customers to establish and maintain a strong
competitive position in providing services to their end users. We believe that
our independence, product design, seamless technology, consistent network
architecture, simple billing systems and end-to-end international connectivity
will enable us to gain a strong market position.
Our principal executive offices are located at 1500-1066 West Hastings
Street, Vancouver, British Columbia, Canada V6E 3X1, and our electronic mail
address for investor relations is [email protected]. Our telephone number is (604)
681-1994.
Recent Development
We have entered into a letter of intent to enter into a strategic
relationship with C2C, a subsidiary of Singapore Telecommunications ("SingTel"),
to develop a fully redundant, diversified Asia-Pacific network capable of
providing city-to-city connectivity. This matter is subject to finalization and
execution of definitive documentation.
9
<PAGE>
Summary Financial Data
The summary historical financial data for the year ended March 31,
1996, the five months ended August 31, 1996, the year ended August 31, 1997 and
the nine months ended May 31, 1998 of our predecessor, the telecommunications
division of Ledcor Industries, are derived from the audited financial statements
of the predecessor division, which have been audited by Deloitte & Touche LLP,
independent auditors.
Our summary consolidated historical financial data for the period from
February 5, 1998 to December 31, 1998 and year ended December 31, 1999 are
derived from our audited consolidated financial statements, which have been
audited by PricewaterhouseCoopers LLP, independent auditors. Our summary
consolidated historical financial data as of and for the six months ended June
30, 1999 and June 30, 2000 are derived from our unaudited interim consolidated
financial statements and include, in the opinion of management, all adjustments,
consisting of normal and recurring adjustments, necessary to present fairly the
data for these periods.
The unaudited pro forma consolidated income statement data for the year
ended December 31, 1999 are derived from our audited consolidated financial
statements for the year ended December 31, 1999, and the audited consolidated
financial statements of GlobeNet Communications Group Limited ("GlobeNet") for
the year ended December 31, 1999, audited by PricewaterhouseCoopers LLP,
independent auditors, incorporated by reference in this prospectus. The
unaudited pro forma consolidated income statement data for the year ended
December 31, 1999 gives effect to the following transactions as if they occurred
on January 1, 1999:
o our acquisition of all outstanding stock of GlobeNet;
o the issuance of the old dollar notes and old euro notes giving
rise to interest expense;
o the issuance in July 1999 of $500 million of senior notes
giving rise to interest expense; and
o the acquisition of the minority equity interests in certain of
our subsidiaries giving rise to amortization of goodwill.
The unaudited pro forma consolidated income statement data for the six
months ended June 30, 2000 is derived from our unaudited consolidated financial
statements for the six months ended June 30, 2000 incorporated by reference in
this prospectus. The unaudited pro forma consolidated income statement for the
six months ended June 30, 2000 gives effect to the following transactions as if
they occurred on January 1, 2000:
o our acquisition of all outstanding stock of GlobeNet;
o the issuance of the old dollar notes and old euro notes giving
rise to interest expense;
o the acquisition of the minority equity interests in certain of
our subsidiaries giving rise to the amortization of goodwill.
Our consolidated financial statements and the divisional financial
statements of the predecessor division have been prepared in accordance with
U.S. GAAP. The results of operations for the predecessor division are not
comparable to our results of operations after the telecommunications division of
Ledcor was reorganized.
EBITDA presented in the following table consists of net income (loss)
before interest expense, net of interest income, provision for income taxes,
depreciation, stock based compensation, amortization of goodwill and income
attributable to minority interest. EBITDA is presented because we believe that
it is a useful indicator of our ability to meet debt service and capital
expenditure requirements. It is not intended as an alternative measure of
operating results or cash flow from operations (as determined in accordance with
generally acceptable
10
<PAGE>
accounting principles). EBITDA is not necessarily comparable to similarly titled
measures for other companies and does not necessarily represent amounts of funds
available for management's discretionary use.
For purposes of calculating the ratio of earnings to fixed charges,
earnings consists of earnings (loss) before equity income, provision for income
taxes, income attributable to minority interest and fixed charges. Fixed charges
consists of interest expensed and capitalized, plus the portion of rental
expense which we believe to be representative of interest (assumed to be
one-third of rental expense) and pre-tax earnings required to cover the
accretion on the redeemable convertible preferred shares. Pro forma loss for the
year ended December 31, 1999 would have been insufficient to cover fixed charges
by approximately $152 million. Net loss for the six months ended June 30, 2000
would have been insufficient to cover fixed charges by approximately $150
million. Pro forma loss for the six month period ended June 30, 2000 would have
been insufficient to cover fixed charges by approximately $227 million.
Capital expenditures represent actual cash expenditures incurred during
the period and do not include acquisitions of assets for non-cash consideration.
Route miles represent the number of miles spanned by fiber optic cable owned by
us or in respect of which we have acquired capacity pursuant to swaps, leases,
indefeasible rights of use or other contractual rights at the end of the period,
calculated without including physically overlapping segments of cable.
The following table presents summary consolidated financial data
derived from our consolidated financial statements. You should read the
following information along with "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the financial statements and
the related notes incorporated by reference in this prospectus.
11
<PAGE>
Summary Financial Data
(Dollars in millions except per share amounts)
360networks inc.
<TABLE>
<CAPTION>
Pro Forma Pro Forma
February 5, 1998 Year Ended Year Ended Six Months Six Months Six Months
to December 31, December 31, December 31, Ended June Ended Ended
1998 1999 1999 30, 1999 June 30, 2000 June 30, 2000
---------------- ---------- ---------- ---------- ------------- --------------
(unaudited) (unaudited) (unaudited) (unaudited)
<S> <C> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue ................. $ 164 $ 360 $ 386 $ 124 $ 234 $ 247
Operating expenses:
Costs ................ 147 251 262 86 147 151
General and
administrative ...... 2 22 37 6 36 55
Stock-based
compensation ........ -- 7 11 2 153 164
Depreciation ......... 1 3 5 -- 2 9
Amortization of ...... -- -- 52 -- 6 20
goodwill
------------- ------------- ------------- ------------- ------------- -------------
Total operating expenses 150 283 367 94 344 399
------------- ------------- ------------- ------------- ------------- -------------
Operating income (loss) . 14 77 19 30 (110) (152)
Interest expense, net ... -- 16 166 6 24 58
------------- ------------- ------------- ------------- ------------- -------------
Income (loss) before
income taxes,
minority interest
and equity .......... 14 61 (147) 24 (134) (210)
accounted for
investment
Provision for income .... 6 30 (35) 11 13 (2)
taxes
------------- ------------- ------------- ------------- ------------- -------------
8 31 (112) 13 (147) (208)
Income attributable to
minority interest
and equity
accounted for ....... 1 (7) (1) (3) (2) --
investment
------------- ------------- ------------- ------------- ------------- -------------
Net income (loss) ....... $ 9 $ 24 $ (113) $ 10 $ (149) $ (208)
============= ============= ============= ============= ============= =============
Basic and fully diluted
earnings (loss) per
share (1) ........... $ 0.43 $ (0.03) $ (0.19) $ 0.04 $ (0.33) $ (0.29)
Shares used to
calculate earnings
(loss) per share :
Basic ............... 20,964,178 327,313,808 614,964,070 231,429,000 542,174,000 724,945,262
Fully diluted ....... 20,964,178 327,313,808 614,964,070 236,921,000 542,174,000 724,945,262
Other Financial Data
(unaudited):
EBITDA .................. $ 15 $ 87 $ 32 $ 51
Capital expenditures .... 1 300 19 535
Ratio of earnings to
fixed charges ....... 26.8x 1.7x 3.8x --
Statement of Cash Flows
Data:
Operating activities .... $ (13) $ (97) $ (50) $ (63)
Investing activities .... 1 (321) (19) (535)
Financing activities .... 168 785 (1) 1,607
Operating Data:
Route miles ............. 2,735 12,217 5,255 19,751
</TABLE>
12
<PAGE>
Actual
------
December 31, 1999 June 30, 2000
----------------- -------------
Balance Sheet Data: (unaudited)
Cash and cash equivalents .................. $ 521 $1,529
Property and equipment ..................... 77 310
Assets under construction .................. 301 799
Total assets ............................... 1,311 4,564
Total debt ................................. 675 2,021
Redeemable convertible preferred shares .... 350 --
Shareholders' equity ....................... 30 2,180
(1) To compute basic and fully diluted loss per share for the year ended
December 31, 1999 and six months ended June 30, 2000 net loss
attributable to common stockholders is computed as follows (amounts in
millions):
December 31, 1999 June 30, 2000
----------------- -------------
(unaudited)
Net income (loss)........................... $24 $(149)
Stock dividend.............................. (5) --
Preferred stock accretion................... (7) (6)
Purchase price adjustment
to preferred shares......................... (22) (24)
------ -------
Net income (loss)........................... $(10) $(179)
13
<PAGE>
Summary Financial Data
(Dollars in millions except per share amounts)
Predecessor Division
<TABLE>
<CAPTION>
Five Months Nine Months
Year Ended Ended Year Ended Ended
March 31, 1996 August 31, 1996 August 31, 1997 May 31, 1998
<S> <C> <C> <C> <C>
Income Statement Data:
Revenue....................................... $4 $7 $58 $55
Operating expenses:
Costs...................................... 4 5 48 45
General and administrative................. -- -- 1 1
Depreciation............................... -- -- -- --
Total operating expenses...................... 4 5 49 46
Operating income.............................. -- 2 9 9
Interest expense, net......................... -- -- 1 --
Equity income................................. -- -- -- --
Earnings before income taxes.................. -- 2 8 9
Income tax expense............................ -- 1 4 4
-- 1 4 5
Income attributable to minority interest...... -- -- -- --
Net income.................................... $ -- $ 1 $4 $5
Other Financial Data (unaudited):
EBITDA........................................ $ -- $2 $9 $9
Capital expenditures.......................... -- -- 1 7
Ratio of earnings to fixed charges............ 24.3x 45.5x 10.3x 17.7x
Statement of Cash Flows Data:
Operating activities.......................... $ 1 $(3) $(4) $(3)
Investing activities.......................... -- -- (1) (7)
Financing activities.......................... (1) 3 5 9
Operating Data:
Route miles................................... -- -- 1,090 1,430
Balance Sheet Data:
Cash and cash equivalents..................... $ -- $ -- $-- $ --
Fixed assets, net............................. -- 1 2 8
Total assets.................................. -- 6 32 40
Total debt.................................... -- 2 7 11
Redeemable convertible preferred shares....... -- -- -- --
Shareholders' equity.......................... -- 1 6 9
</TABLE>
14
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before deciding
whether to invest in the notes. The risks and uncertainties described below are
not the only ones we face. Additional risks and uncertainties not presently
known to us may also impair our business operations.
If we do not successfully address any of the risks described below,
there could be a material adverse effect on our business, financial condition or
results of operations. We cannot assure you that we will successfully address
these risks.
Leverage
Negative Cash Flows--Our negative cash flows while our network is being built
may adversely affect our ability to make payments when due on the notes.
Continued negative cash flow may restrict our ability to pursue our
business strategy. In addition, if we cannot achieve profitability or positive
cash flows from operating activities, we may not be able to meet our debt
service obligations, including our obligations under our existing indebtedness,
capital expenditure requirements or working capital needs.
We intend to use most of the proceeds from the sale of the old notes to
develop and construct our network and expand our network services business.
Until the principal segments of the network are complete, we will spend more
money building the network than we will earn from exploiting it. Accordingly, we
expect to experience negative cash flows after capital expenditures during
network development. We cannot assure you that the exploitation of our network,
including the sale of our fiber and network services, will result in an adequate
revenue base to meet our debt service obligations or that we will ever generate
profitability or positive cash flow.
Substantial Leverage--Our substantial debt could adversely affect our financial
health and prevent us from fulfilling our obligations under the notes.
We have substantial debt and debt service requirements.
Our substantial indebtedness could have important consequences to you.
For example, it could:
o increase our vulnerability to general adverse economic and industry
conditions;
o limit our ability to fund future capital expenditures, working
capital and other general corporate requirements;
o require us to dedicate a substantial portion of our cash flow from
operations to make interest and principal payments on our
indebtedness, reducing the availability of our cash flow to fund
capital expenditures, working capital and other general corporate
purposes;
o make it more difficult for us to make interest and principal
payments on our other indebtedness, which would be a default under
the indentures;
o limit our flexibility in planning for, or reacting to, changes in
our business and the industry in which we operate; and
o place us at a competitive disadvantage compared to our competitors
that have less debt. We also intend to obtain other sources of
financing for the construction of the network, including project
financing
15
<PAGE>
for individual segments of our network. This project financing
would also be secured by the assets being financed. The following
chart shows some important credit statistics as of the date or for
the periods specified below:
As of June 30, 2000
(unaudited)
---------------------
(dollars in millions)
Total indebtedness $2,021
Shareholders' equity $2,180
Debt to equity ratio 0.9x
-------------------------
The initial annual interest expense on the old dollar notes and old
euro notes is $109 million.
Pro forma loss for the year ended December 31, 1999 would have been
insufficient to cover fixed charges by approximately $152 million. Net loss for
the six months ended June 30, 2000 would have been insufficient to cover fixed
charges by approximately $150 million. Pro forma loss for the six months ended
June 30, 2000 would have been insufficient to cover fixed charges by
approximately $227 million.
Additional Borrowings Required--Despite our current debt level, we and our
subsidiaries may incur substantially more debt. Increased debt could worsen
the risks described above, but failure to obtain the debt needed could
prevent the completion of the network.
If additional debt is incurred, the risks mentioned above that are
associated with high leverage will increase. We expect to need significant
amounts of additional capital to complete the development of our planned network
and fulfill our long-term business strategies. The terms of our indentures
generally permit us and our restricted subsidiaries to incur additional debt to
finance the cost of designing and building or acquiring our network. The
indentures also allow us to incur additional indebtedness for other purposes,
subject to some limitations. In addition, the indentures permit us to create
"unrestricted subsidiaries" that will be allowed to incur debt without regard to
the limitations on debt incurrence contained in the indentures. Our ability to
arrange financing and the cost of financing depend upon many factors, including:
o general economic and capital markets conditions, and in particular
the non-investment grade debt market;
o conditions in the telecommunications industry;
o regulatory developments;
o investor confidence and credit availability from banks or other
lenders;
o the success of our network; and
o provisions of tax and securities laws that affect raising capital.
Our inability to raise additional funds would have an adverse effect on
our ability to complete the network. If we decide to raise additional funds
through the incurrence of debt, we may become subject to additional or more
restrictive financial covenants. In addition, we expect to incur additional debt
that is secured by our assets and therefore those assets will be available to
other creditors before they are available to you.
16
<PAGE>
A portion of our investment in 360atlantic was funded from our recently
completed private sale of our equity securities. The indebtedness to finance
that project has been or will be incurred by our subsidiary without recourse to
360networks inc. We estimate that approximately $565 million of indebtedness
will be required for the 360atlantic project. 360atlantic will be owned by one
or more subsidiaries created for the purpose of owning the project. They will
not hold any assets unrelated to 360atlantic and will not be restricted
subsidiaries under the indentures. If we were to incur additional debt at the
360networks inc. level in order to contribute to the financing of 360atlantic,
however, it would further increase the risks associated with high leverage.
Ability to Service Debt--To service our debt we will require significant amounts
of cash and our ability to generate sufficient cash will depend on many
factors beyond our control.
We cannot assure you that we will be successful in implementing our
strategy or in realizing our anticipated financial results. You should be aware
that our ability to repay or refinance our debt we incur will depend on our
successful financial and operating performance and on our ability to
successfully implement our business strategy. You should also be aware that our
financial and operating performance depends upon a number of factors, many of
which are beyond our control. These factors include:
o our ability to complete network development on time and in a
cost-effective manner;
o the economic and competitive conditions in the telecommunications
industry, including the demand for fiber optic systems;
o any construction or operating difficulties, increased operating
costs or pricing pressures we may experience;
o the passage of legislation or other regulatory developments that
may adversely affect us; and
o any material delays in implementing any strategic projects.
We cannot assure you that our cash flow and capital resources will be
sufficient to repay the notes and any of our other existing or future debt, or
that we will be successful in obtaining alternative financing. If we are unable
to repay our debts, we may be forced to reduce or delay the completion or
expansion of our network, sell some of our assets, obtain additional equity
capital or refinance or restructure our debt. If we are unable to meet our debt
service obligations or comply with our covenants, a default under our debt
agreements would result. To avoid a default, we might need waivers from third
parties, which might not be granted.
Financing Change of Control Offer--We may not have the ability to raise the
funds necessary to finance the change of control offer required by the
indentures.
Upon the occurrence of certain specific kinds of change of control
events, we will be required to offer to repurchase all outstanding notes.
However, it is possible that we will not have sufficient funds at the time of
the change of control to make the required repurchase of notes or that
restrictions in our credit facilities or other indebtedness will not allow these
repurchases. In addition, certain important corporate events, such as leveraged
recapitalizations that would increase the level of our indebtedness, would not
constitute a change of control under the indentures. See "Description of
Notes--Repurchase at the Option of Holders."
Effective Subordination--Although your notes are referred to as "senior notes,"
they will be effectively subordinated to our secured debt and the debt of our
subsidiaries.
The notes are unsecured and therefore will be effectively subordinated
to any secured debt we may incur to the extent of the value of the assets
securing it. In the event of a bankruptcy or similar proceeding involving us,
our assets which serve as collateral will be available to satisfy the
obligations under any secured debt before
17
<PAGE>
any payments are made on the notes. In addition, our subsidiaries will not
guarantee the notes. In the event of a bankruptcy, liquidation or reorganization
of any of our subsidiaries, creditors of our subsidiaries will generally be
entitled to payment of their claims from the assets of those subsidiaries before
any assets are made available for distribution to us, except to the extent we
may also have a claim as a creditor.
Holding Company Structure--We will depend on the cash flow of our subsidiaries
to satisfy our obligations under our indebtedness.
Our operating cash flow and our ability to service our indebtedness,
including the notes, depends upon the operating cash flow of our subsidiaries
and their payments to us in the form of loans, dividends or otherwise. Our
subsidiaries are separate legal entities and have no obligation to pay any
amounts due on the notes or to make any funds available for that purpose,
whether by dividends, interest, loans, advances or other payments. In addition,
our subsidiaries' payment of dividends and the making of loans, advances and
other payments to us may be subject to regulatory and contractual restrictions.
These restrictions include requirements to maintain minimum levels of working
capital and other assets. Subsidiary payments are contingent upon earnings and
various business and other considerations. As part of the Canadian
telecommunications arrangement we placed certain operating assets in 360
Urbanlink Ltd. ("Urbanlink"), which subsidiary we do not and cannot control.
Restrictions Imposed by Terms of Our Indebtedness--We may be unable to repay our
indebtedness if there is an event of default.
If an event of default occurs under any of our credit facilities or
indentures, the lenders under the credit facilities and the holders of our notes
could elect to declare all amounts outstanding under the credit facilities and
the notes, along with accrued and unpaid interest, to be immediately due and
payable. Our indentures limit, among other things, our ability to incur
additional indebtedness, pay dividends and make certain other restricted
payments, incur liens, enter into some transactions with affiliates and
consummate asset sales and impose restrictions on our ability to merge or
consolidate or sell, assign, transfer, lease, convey or otherwise dispose of all
or substantially all of our assets. In addition, credit facilities that we may
enter into in the future may contain other and more restrictive covenants,
including concerning debt incurrence and the making of capital expenditures and
may require us to meet or maintain specified financial ratios and tests. Our
ability to meet these financial ratios could be affected by events beyond our
control, and no assurance can be given that we will be able to comply with these
provisions. A breach of any of these covenants could result in a default under
these credit facilities and/or the indentures. If we were unable to repay any of
these amounts, the lenders could proceed against any collateral securing the
indebtedness, which could include security interests in all of our future
accounts receivable and inventory and other assets. If the lenders under
potential credit facilities were to accelerate the payment of the indebtedness
under these credit facilities, there would be no assurance that our assets at
the time would be sufficient to repay in full the indebtedness and our other
indebtedness, including the notes.
Capital Markets
Currency Exchange Rate Fluctuations Could Adversely Affect Our Financial
Results.
Fluctuations in foreign currency exchange rates may affect our results
of operations and the value of our foreign assets, which in turn may adversely
affect reported earnings and the comparability of period-to-period results of
operations. Changes in currency exchange rates may affect the relative prices at
which we and foreign competitors sell products in the same market. In addition,
changes in the value of the relevant currencies may affect the cost of items
required in our operations.
No Prior Market for Notes--You cannot be sure that an active trading market
will develop for the notes.
There is no public market for the notes. We have been informed by the
initial purchasers that they intend to make a market in the notes after this
offering are completed. However, the initial purchasers may cease
18
<PAGE>
their market-making at any time. In addition, the liquidity of the trading
market in the notes, and the market price quoted for the notes, may be adversely
affected by changes in the overall market for high yield securities and by
changes in our financial performance or prospects or in the prospects for
companies in our industry generally. As a result, you cannot be sure that an
active trading market will develop for the notes.
There May Be No Public Market for the New Notes.
There has previously been only a limited secondary market, and no
public market, for the old notes. The new notes are a new issue of securities,
have no established trading market and may not be widely distributed. We do not
intend to list the new notes on any national securities exchange or The Nasdaq
Stock Market or to apply for the trading of the new notes on any automated
quotation system. No assurance can be given that an active public or other
market will develop for the new notes or as to the liquidity of or the trading
market for the new notes. If a trading market does not develop or is not
maintained, holders of the new notes may experience difficulty in reselling the
new notes or may be unable to sell them at all. If a market for the new notes
develops, this market may be discontinued at any time. If a public trading
market develops for the new notes, future trading prices of the new notes will
depend on many factors, including, among other things, prevailing interest
rates, our results of operations and the market for similar securities, and the
price at which the holders of new notes will be able to sell the new notes is
not assured and the new notes could trade at a premium or discount to their
purchase price or face value. Depending on prevailing interest rates, the market
for similar securities and other factors, including our financial condition, the
new notes may trade at a discount from their principal amount.
Failure to Exchange or Comply with the Exchange Offer--This will result in
continuing transfer restrictions or result in the inability to exchange.
There has previously been only a limited secondary market, and no
public market, for the old notes. To the extent that old notes are tendered and
accepted in the exchange offer, the trading market, if any, for the old notes
not so tendered could be adversely affected. We cannot assure the future
development of a market for the old notes or the ability of holders of the old
notes to sell their old notes or the price at which the old notes may be sold.
If you do not exchange your old notes for new notes under the exchange offer,
you will continue to be restricted from transferring your old notes.
In general, the old notes may not be offered or sold, unless registered
under the Securities Act, except under an exemption from, or in a transaction
not subject to, the Securities Act and applicable state securities laws. We do
not currently anticipate that we will register the old notes under the
Securities Act. Based on interpretations by the staff of the Securities and
Exchange Commission contained in no-action letters issued to third parties, we
believe that the new notes issued to you under the exchange offer in exchange
for old notes may be offered for resale, resold or otherwise transferred by any
holder of them, except for any holder which is an affiliate of 360networks
within the meaning of Rule 405 under the Securities Act, without compliance with
the registration and prospectus delivery provisions of the Securities Act, if
the new notes are acquired in the ordinary course of the holder's business and
the holder is not participating, does not intend to participate and has no
arrangement or understanding with any person to participate in the distribution
of the new notes. This prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer for any resale of new notes
received in exchange for old notes where the old notes were acquired by this
broker-dealer as a result of market-making activities or other trading
activities, except for old notes acquired from us. We have agreed that, for a
period of 180 days following the completion of the exchange offer, we will make
this prospectus available to any broker-dealer for use in any resale. However,
your ability to resell the new notes is subject to applicable state securities
laws. See "The Exchange Offer" and "Plan of Distribution."
To participate in the exchange offer and avoid the restrictions on
transfer of the old notes, you must deliver a properly completed letter of
transmittal, including all other documents required by the letter of
transmittal, to the appropriate exchange agent at one of the addresses listed
below under "The Exchange Offer--Exchange Agents" on or before the expiration
date. In addition, either
19
<PAGE>
o certificates for the old notes must be received by the appropriate
exchange agent along with the letter of transmittal, or
o a timely confirmation of book-entry transfer of the old dollar
notes, if this procedure is available, into the dollar exchange
agent's account at the Book-Entry Transfer Facility under the
procedure for book-entry transfer described in this prospectus, or
for the old euro notes, the participants must advise Euroclear or
Clearstream their intention to exchange. Euroclear or Clearstream
will then notify the euro exchange agent of the participant's
intention to exchange (thereby blocking the participant's account).
The letter of transmittal or agent's message, must be received by
the appropriate exchange agent before the expiration date, or
o the holder must comply with the guaranteed delivery procedures
described in this prospectus and in the letter of transmittal.
You may elect to choose method of delivery of the old notes and the
letter of transmittal and all other required documents to the appropriate
exchange agent but it is at your own risk. See "The Exchange Offer."
General Business
Limited History of Operations--Given our limited operating history, you should
consider the notes to be a highly speculative investment.
You have very limited historical financial information upon which to
base your evaluation of our performance and an investment in the notes. We began
operations as an independent company in May 1998 and have a limited operating
history. Before that time we conducted business as the telecommunications
division of Ledcor Industries. We believe that our financial results are not
directly comparable to theirs. You must consider our prospects in light of the
risks, expenses and difficulties frequently encountered by companies in an early
stage of development.
RisksAssociated with Development and Expansion of Our Network--Our inability to
implement our business strategy and manage our growth could impair our
operating results.
Successful implementation of our business strategy depends on numerous
factors beyond our control, including economic, competitive and other conditions
and uncertainties, the ability to obtain licenses, permits, franchises and
rights-of-way on reasonable terms and conditions and the ability to hire and
retain qualified personnel. Adverse economic or competitive conditions or the
failure to obtain the necessary authorizations or to hire and retain qualified
personnel could prevent or delay the completion of all or part of our network or
increase completion costs. In order to implement our proposed business strategy,
we must accomplish the following in a timely manner at a reasonable cost to us
and on acceptable conditions:
o obtain continued access to capital markets;
o design, engineer and operate fiber networks;
o install fiber optic facilities, transmission equipment and related
infrastructure;
o acquire additional rights-of-way;
o obtain required regulatory approvals;
o swap, lease, purchase or obtain other contractual rights in
additional fiber optic facilities;
20
<PAGE>
o attract and retain high-quality operating personnel and management;
and
o continue to implement and improve our operational, financial and
accounting systems.
In addition, construction of future networks entails significant risks,
including:
o management's ability to effectively control and manage these
projects;
o shortages of materials, equipment or skilled labor;
o unforeseen engineering, environmental or geological problems; and
o work stoppages, weather interference, floods and unanticipated cost
increases.
We cannot assure you that the anticipated costs of our current and
future projects will not be exceeded or that these projects will commence
operations within the contemplated schedules, if at all.
Our success will depend, to a significant degree, upon our ability to
secure a market for our network capacity and obtain and maintain contractual and
other relationships with telecommunications service providers, Internet service
providers, application service providers, storage service providers and large
organizations with enterprise network needs. If we are unable to enter into
contracts, comply with the terms of contracts or maintain relationships with
these constituencies, our operations would be materially and adversely affected.
Some of our current contracts to supply fiber capacity allow the buyer or lessee
to terminate the contracts and provide for liquidated damages if we do not
supply the stated fiber capacity by a specified time. Terminating any of these
contracts could adversely affect our operations.
Additionally, we expect to significantly expand the range of services
that we offer. This expansion includes providing various network services to
carriers and other service providers. We may enter into joint ventures where we
or our partners supply the venture with dark fiber and the appropriate optical
transmission equipment by facilitating the involvement of third party suppliers,
vendors and contractors. We cannot assure you that a market will develop for our
new services, that implementing these services will be technically or
economically feasible, that we can successfully develop or market them or that
we can operate and maintain our new services profitably.
In order to reach our operating and financial goals, we must
substantially increase the current volume of voice, data, Internet and video
transmission on our network. If we do not develop long-term commitments with new
large-volume customers as well as maintain our relationships with current
customers, we will be unable to increase traffic on our network, which would
adversely affect our profitability.
Risk of Network Failure--Network disruptions could adversely affect our
operating results.
Our success will require that our network provide competitive
reliability, capacity and security. Some of the risks to our network and
infrastructure include:
o physical damage;
o power loss;
o capacity limitations;
o hardware and software defects;
21
<PAGE>
o excessive sustained or peak user demand;
o breaches of security; and
o disruptions beyond our control.
These disruptions may cause interruptions in service or reduced
capacity for customers, any of which could have an adverse effect on our ability
to retain customers.
The sale or lease of network services will require the addition of
transmission equipment to our network. The network will use a combination of
communications equipment, software, operating protocols and proprietary
applications for the high speed transportation of large quantities of digital
signals among multiple locations. Given the complexity of our network, digital
signals may become lost or distorted, which may cause significant losses to our
customers. The network may also contain undetected design faults and software
"bugs" that, despite our testing, may be discovered only after the network has
been completed and is in use. The failure of any equipment or facility on our
network could result in the interruption of customer service until we make
necessary repairs or install replacement equipment and have an adverse impact on
our revenues and our ability to secure customers in the future. We do not
possess adequate insurance to guard against the losses we could incur as a
result of the factors enumerated above.
Limited Experience--We have little experience in the offering of bandwidth and
value added network services and this could increase our risk of failure.
We expect an increasing portion of our revenues to be derived through
our offering of bandwidth and value added network services. We have limited
experience offering these services. Presently, we derive substantially all of
our revenues from the sale, grant of an indefeasible right of use or lease of
dark fiber and conduit and construction services. See "Description of
Business--Customers" and "--Competition" incorporated herein by reference from
our annual report on Form 20-F for the year ended December 31, 1999.
Pricing Pressures--We anticipate that prices for network services and fiber
assets will decline.
We anticipate that prices for our products and services specifically,
and network transmission capacity in general, will continue to decline over the
next several years, due primarily to the following:
o price competition as various network providers complete
construction of networks that will compete with our network;
o installation by us and our competitors of fiber capacity in excess
of actual demand;
o recent technological advances that enable substantial increases in
the transmission capacity of both new and existing fiber optic
networks; and
o strategic alliances or similar transactions, such as long distance
capacity purchasing alliances, that increase our customers'
purchasing power.
Need for Rights-of-Way--A failure to obtain or maintain appropriate
rights-of-way could delay the completion of the network and increase its
cost.
We cannot assure you that we will be successful in obtaining additional
rights-of-way and other permits required to install underground conduit from
parties such as railroads, utilities, highway authorities and governments and
transit authorities. After we have obtained rights-of-way, we may not be able to
maintain them. Some of our rights-of-way agreements may be short-term or
revocable at will. Some rights-of-way may require regulatory
22
<PAGE>
filings or may be subject to legal challenge by third parties such as municipal
governments, aboriginal citizens or land owners concerning rights-of-way granted
for specific purposes. For example, Urbanlink, the Canadian telecommunications
common carrier which has granted indefeasible rights of use to us of its fiber
optic transmission facilities in Canada for sale on a resale basis, is seeking
an order from the Canadian Radio-television and Telecommunications Commission to
prescribe the terms and conditions of access to street crossings and other
municipal properties in the city of Vancouver. In a related matter, the city of
Vancouver has served the company that provides conduit to Urbanlink for certain
of its facilities located in the city of Vancouver with a notice of termination
for access to street crossings and other municipal property in the city. Failure
on the part of Urbanlink to obtain the order requested in its application to the
Canadian Radio-television and Telecommunications Commission or a renegotiation
of municipal access arrangements with the city of Vancouver by Urbanlink's
conduit provider which results in an increase to the costs of municipal access
could have a material adverse effect on the business of Urbanlink and, as a
result, on our resale business in Canada. See "Description of
Business--Regulation--Canada--CRTC Proceedings" incorporated herein by reference
from our annual report on Form 20-F for the year ended December 31, 1999.
In addition, in the United States, landholders who granted
rights-of-way to some railroad companies in the past have filed class action
lawsuits against communications carriers that received rights-of-way from
railroad companies in order to develop their fiber optic networks. The
rights-of-way challenged in these class action lawsuits are similar to some of
the rights-of-way that we use to develop our network, including the
rights-of-way granted to us in the agreements with Canadian National Railway
Company and Illinois Central Railroad Company. Loss of substantial rights and
permits or loss of the ability to use these rights-of-way or the failure to
enter into or maintain required arrangements for the network could have a
material adverse effect on our business, financial condition and results of
operations, if, as a result, the completion of our network is delayed or becomes
more costly. See "Description of Business--Rights-of-way and Permitting."
incorporated herein by reference from our annual report on Form 20-F for the
year ended December 31, 1999.
RisksAssociated with Joint Ventures--Our business strategy contemplates
investments in joint ventures to leverage our fiber assets. These
investments may involve significant risks and our capital assets may not be
returned.
We are continually evaluating potential joint ventures and strategic
opportunities to expand our network, enhance our connectivity and add traffic to
our network. Any investments, strategic alliances or related efforts are
accompanied by risks such as:
o the difficulty of identifying appropriate joint venture partners or
opportunities;
o the time our senior management must spend negotiating agreements
and monitoring joint venture activities;
o potential regulatory issues applicable to telecommunications
businesses;
o the possibility that we may not be able to reach agreement on
definitive agreements, including for our proposed colocation
acquisitions;
o the investment of our capital or fiber assets and the loss of
control over the return of this capital or assets;
o the inability of management to capitalize on the growth
opportunities presented by joint ventures; and
o the insolvency of any joint venture partner.
23
<PAGE>
We cannot assure you that we would be successful in overcoming these
risks or any other problems encountered with these joint ventures, strategic
alliances or related efforts.
Risks Associated with International Markets--We will encounter additional risks
as we pursue international business opportunities.
Our strategy includes expanding our services to provide fiber optic
networks and network services outside of North America. In particular, we have
entered into an agreement for an undersea cable between North America and Europe
called 360atlantic. We have acquired GlobeNet, which is constructing an undersea
cable between South America and North America that we call 360americas. We also
recently announced the expansion of our network into Europe. We are still
evaluating all of the risks associated with these new projects. The risks
associated with 360atlantic and 360americas include:
o activities from our competitors which could limit the market share
obtained by 360atlantic and 360americas;
o pricing pressures which could reduce profitability;
o risk that there will be delay under our supply agreement as a
result of the highly concentrated nature of the cable manufacturing
and installation industry; and
o inability to obtain sufficient pre-construction sales commitments
and post-construction sales targets.
Other risks associated with our international plans, including our
expansion into Europe and South America, are:
o regulatory limitations restricting or prohibiting us from providing
our services;
o additional regulatory requirements, tariffs, customs, duties and
other trade barriers;
o difficulties in staffing and managing foreign operations;
o problems in collecting accounts receivable; o political risks;
o fluctuations in the currency exchange and restrictions on the
repatriation of earnings;
o delays from customs brokers or government agencies;
o potentially adverse tax consequences resulting from operating in
multiple countries with different laws and regulations; and
o an economic downturn in the countries in which we expect to do
business.
Furthermore, the international rates customers are charged are likely
to decrease in the future for many reasons, including increased competition
between existing carriers, increased competition with new carriers in the
international markets and additional strategic alliances or joint ventures among
large international carriers that facilitate targeted pricing and cost
reductions. We cannot assure you that we will be successful in overcoming these
risks or any other problems arising from operating in international markets.
24
<PAGE>
Competition--Our business is very competitive and increased competition could
adversely affect us.
The telecommunications industry is extremely competitive, particularly
concerning price and service. It is relatively common for telecommunications
service providers to be both customers and competitors. This is a concept
referred to as co-opetition. Therefore, we face competition and co-opetition
from existing and planned telecommunications service providers and customers on
each of our planned routes. Our competitors include:
o interexchange carriers, including AT&T Corp., MCI WorldCom, Inc.,
Sprint Corporation, British Telecommunications plc, Deutsche
Telekom AG, France Telecom S.A. and Qwest Communications
International Inc.;
o wholesale providers of terrestrial and undersea connectivity,
including Williams Communications Group, Inc., Global Crossing Ltd.
("Global Crossing"), KPNQwest, N.V., Colt Telecom Group plc and
Level 3 Communications, Inc.;
o incumbent local exchange carriers, which currently dominate their
local telecommunications markets, including SBC Communications Inc.
and BellSouth Corporation;
o competitive local exchange carriers, including NEXTLINK
Communications, Inc. and Metromedia Fiber Network, Inc.; and
o companies capable of offering services similar to those provided by
us, including communications service providers, cable television
companies, electric utilities, microwave carriers, satellite
carriers and wireless telephone operators.
Some of our competitors have already made substantial long-term
investments in the construction of fiber optic networks and the acquisition of
bandwidth. Some of these competitors have substantially greater resources and
more experience than we do and could directly compete with us in marketing fiber
assets or network services.
In addition, some communications carriers and local cable companies
have extensive networks in place that could be upgraded to fiber optic cable, as
well as numerous personnel and substantial resources to begin construction to
equip their networks. If communications carriers and local cable companies
decide to equip their networks with fiber optic cable, they could become
significant competitors of ours in a short period of time.
Other companies may choose to compete with us in our current or planned
markets, by selling or leasing fiber assets or bandwidth to our targeted
customers. A significant increase in industry capacity or reduction in overall
demand would adversely affect our ability to maintain or increase prices.
Additional competition could materially and adversely affect our operations. See
"Description of Business--Competition" incorporated herein by reference from our
annual report on Form 20-F for the year ended December 31, 1999.
Future sources of competition for the 360atlantic cable include:
o AC-2, a transatlantic cable system which is being developed by
Global Crossing;
o FLAG Atlantic, a 50/50 joint venture between Global Telesystems
Inc. and Flag Telecom Holdings Ltd.;
o Level 3 Communications Inc.'s linear Yellow cable project; and
o Tyco International Ltd.'s proposed transatlantic cable project.
25
<PAGE>
Future sources of competition for the 360americas cable include:
o Americas-2, a new carriers' consortium cable system with a
scheduled ready for service date in the first half of 2000 that
will connect Brazil, Venezuela, Florida and the Caribbean;
o South American Crossing, a new self-healing ring cable system being
developed by Global Crossing that will link coastal countries in
South America to Global Crossing's planned Mid-Atlantic Crossing in
St. Croix, U.S.V.I. and Global Crossing's planned Pan American
Crossing in Ft. Amador, Panama; and
o the SAm-I cable system, a self-healing ring cable system being
developed by Telefonica Internacional S.A. and Tyco International
Ltd. that will connect the United States, Guatemala, Brazil,
Argentina, Chile, Peru and Colombia.
Dependence on Third Parties, Including Suppliers--The loss of key sources of
supply could adversely affect us.
We are dependent upon third party suppliers, including Pirelli Cables
and Systems Inc., for fiber optic cable and a number of components and parts
used in the network, including optical equipment. Recently, some companies have
experienced a shortage of fiber optic cable. We cannot assure you that we will
not experience such a shortage. We are also dependent on Nortel Networks Corp.,
Newbridge Networks Corporation and Marconi plc for the transmission equipment we
need to offer network services. We believe that there are alternative suppliers
or alternative components for all of the components, including fiber optic cable
and transmission equipment contained in the network or required to offer network
services. However, any delay or extended interruption in the supply of fiber
optic cable or any other key network components, changes in the pricing
arrangements with our suppliers and manufacturers or delay in a transition to a
replacement supplier's product into the network could disrupt our operations. If
the disruption continued for an extended period of time, it could have a
material adverse effect on our business, financial condition and results of
operations. In addition, we have contracted with Tyco Submarine Systems Ltd. as
our primary contractor for our 360atlantic undersea cable project. Alcatel
Submarine Networks, Inc. is the primary contractor on the 360americas undersea
cable project. We plan to continue to use third-party contractors on various
segments of the network. The failure of the contractors to complete their
activities in a timely manner, within anticipated budgets and in accordance with
our quality standards and performance criteria could have a material adverse
effect on our business, financial condition and results of operations, if, as a
result, the completion of our network is delayed or becomes more costly.
Rapid Technological Change--New technologies could reduce the demand for fiber
optic systems.
The telecommunications industry generally is subject to rapid and
significant changes in technology that may adversely affect the continued use of
fiber optic cable. Although we have been able to capitalize on some recent
technological advances, such as the use of dense wave division multiplexing to
greatly expand the capacity of our network at constant construction costs, we
cannot assure you that the introduction of new products or the emergence of new
technologies will not enable competitors to install competing systems at a lower
per-circuit cost on routes currently targeted by us. Moreover, these potential
competitors may be able to expand capacity on existing competitive systems,
which could render our network and network services uncompetitive from a cost
perspective. We cannot predict the likelihood of these changes and we cannot
assure you that any technological changes will not materially and adversely
affect our business and operating results.
Potential Conflicts of Interest with Ledcor--We are controlled by Ledcor and
rely on it for particular things. Its interests may conflict with your
interests.
As of May 31, 2000, Ledcor holds shares in us which entitle Ledcor to
approximately 69% of the votes attached to our shares and Ledcor has the ability
to control our affairs and business. Ledcor also owns 66 2/3%
26
<PAGE>
of the voting shares of Urbanlink, which owns certain Canadian
telecommunications facilities used by us. See "Interest of Management in Certain
Transactions--Transactions with Ledcor--Description of reorganization and
related agreements" incorporated herein by reference from our annual report on
Form 20-F for the year ended December 31, 1999. It is possible that Ledcor's
interests could conflict with your interests. In addition, Ledcor may have an
interest in causing us or Urbanlink to pursue transactions that, in its
judgment, enhance the value of its equity investment in us or in Urbanlink, even
though these transactions may involve greater risks to you. There can be no
assurance that any of these conflicts of interests will be resolved in your
favor.
In Canada, our network is comprised in part of indefeasible rights of
use in fiber optic transmission facilities obtained from Urbanlink, as part of
our Canadian telecommunications arrangement. Because Urbanlink is controlled by
Ledcor, Urbanlink's interests could conflict with our interests as well as your
own. In addition, because we have no control over Urbanlink's operations, there
can be no assurance that Urbanlink will continue to supply us with fiber optic
transmission facilities and services should we require these facilities and
services from Urbanlink in the future. As part of our Canadian
telecommunications arrangement, we entered into a number of contractual
arrangements with Ledcor. "Interest of Management in Certain
Transactions--Transactions with Ledcor--Description of reorganization and
related agreements" incorporated herein by reference from our annual report on
Form 20-F for the year ended December 31, 1999.
Ledcor has agreed not to compete with us in the business of developing
or constructing fiber optic communications infrastructure for a period ending on
the earlier of May 31, 2008 and six months after a change of control of
360networks inc. Ledcor has also agreed to grant to us a worldwide exclusive
license for the use and other exploitation of the railplow technology. The
license will cease to be exclusive six months after a change of control of
360networks inc. As a result, if a change of control of 360networks inc. were to
occur, Ledcor would be legally entitled to compete with us and to grant a
license for the use and other exploitation of the railplow technology to
competitors of ours. Either of these events could have a material adverse effect
on our business, financial condition and results of operations. "Interest of
Management in Certain Transactions--Transactions with Ledcor--Description of
reorganization and related agreements" incorporated herein by reference from our
annual report on Form 20-F for the year ended December 31, 1999.
Telecommunications Regulation
Extensive Regulation--Regulatory matters could impact our ability to conduct our
business.
Existing and future governmental regulation may substantially affect
the way in which we conduct business and the procedural and substantive
regulatory requirements with which we must comply. These regulations may
increase the cost of doing business or may restrict the way in which we offer
products and services. There is no way to predict the future regulatory
framework of our business. These regulations are summarized in more detail in
the section entitled "Description of Business--Regulation" incorporated herein
by reference from our annual report on Form 20-F for the year ended December 31,
1999.
United States
Federal telecommunications law directly shapes the telecommunications
market. Consequently, regulatory requirements and/or changes could adversely
affect our operations by increasing our costs or restricting the way in which we
offer products and services. Federal telecommunications law imposes special
legal requirements on "common carriers" who engage in "interstate or foreign
communication by wire or radio," and on "telecommunications carriers." The
different ways we intend to offer fiber-optic supported services could trigger
four alternative types of regulatory requirements: (1) non-communications
services, (2) private carrier services, (3) telecommunications services or
common carriage and (4) competitive local exchange carrier offerings. The law
establishing these alternative regulatory requirements is often unclear, so it
is impossible to predict in many instances how the Federal Communications
Commission will classify our services. Risks associated with each type of
offering are described below.
27
<PAGE>
Non-communications Services
The provision of dark fiber can be viewed as a non-communications
service in that it is not a service, but rather the provision of a physical
facility that is indistinguishable from other non-communications offerings such
as the construction of an office building. Many providers of dark fiber are
currently operating on the assumption that they are providing unregulated
facilities. Nevertheless, the Federal Communications Commission had previously
found that when an incumbent local exchange carrier provided dark fiber it was
providing a common carrier service. A federal appeals court reversed and
remanded this decision to the agency for further proceedings. The Federal
Communications Commission's action in response to this remand could affect our
position that dark fiber is not a communications service.
Private Carrier Services
Even if some of our offerings are treated as communications services,
they could be viewed as a private carrier offering. Private carrier offerings
typically entail the offering of telecommunications, but are provided to a
limited class of users on the basis of individually negotiated terms and
conditions that do not meet the definition of a telecommunications service under
the Telecommunications Act of 1996. If our services are treated as private
carriage, they are generally unregulated by the Federal Communications
Commission, but would be subject to universal service payments based on the
gross revenues from end users. See "Description of Business--Regulation--United
States--Federal--Telecommunications Services--Universal Service" incorporated
herein by reference from our annual report on Form 20-F for the year ended
December 31, 1999. Private carriers may also be subject to access charges if
they interconnect with local exchange carriers.
Telecommunications Services
Some of our services, such as the provision of bandwidth capacity and
lit fiber, may be treated as telecommunications services by the Federal
Communications Commission. If any of our services are treated as
telecommunications services, we could be subject to a number of new and
potentially burdensome regulations.
The precise parameters of the definition of a telecommunications
service are currently unclear. The Federal Communications Commission has held
that telecommunications and common carrier services are essentially the same.
Some railroad, power and telecommunications providers have asked the Federal
Communications Commission to clarify the status of fiber providers. If the
Federal Communications Commission decides that these companies are
telecommunication carriers, we would be subject to certain regulatory
requirements which may impose substantial administrative and other burdens on
us. If any of our services are treated as telecommunications services, we may be
subject to a number of new and potentially burdensome regulations. These general
regulations include the obligation not to charge unreasonable rates or engage in
unreasonable practices, the obligations not to unreasonably discriminate in our
service offerings, the need to tariff our services (subject to the proceeding
described below), the potential obligation to permit others to offer their
services for resale under certain circumstances and the fact that third parties
may file complaints against us at the Federal Communications Commission for
violations of the Communications Act of 1934 or the Federal Communications
Commission regulations. Certain statistical reporting requirements may also
apply. Telecommunications carriers are also required to interconnect, either
directly or indirectly, with the facilities of other telecommunications carriers
and to ensure that they do not install network features, functions or
capabilities that do not comply with Federal Communications Commission
guidelines on accessibility by disabled persons and regulations promoting
interconnectivity of networks. In addition, Federal Communications Commission
rules require that telecommunications carriers contribute to universal service
support mechanisms, the Telecommunications Relay Services fund, the number
portability fund and the North American Numbering Plan Administrator fun. Also,
the Communications Assistance for Law Enforcement Act requires
telecommunications carriers to provide law enforcement officials with
call-related information and reserved circuits. We cannot assure you that the
cost of compliance with these various programs will not have a material adverse
effect upon our results of operations and financial condition and our ability to
meet our obligations.
28
<PAGE>
The continuation of tariff filing requirements for interstate domestic
services provided by non-dominant carriers is in dispute. The Federal
Communications Commission has ordered that all non-dominant carriers, the
classification we would qualify for, may not file tariffs with the Federal
Communications Commission for domestic service. The D.C. Circuit has recently
upheld that decision, but further appeals challenging the Federal Communications
Commission's order may be filed. Filing tariffs can entail increased costs and
may lead to intrusive regulation by the Federal Communications Commission,
although to date the Federal Communications Commission has engaged in only minor
regulation of non-dominant carriers. On the other hand, if tariffs are no longer
required, telecommunications carriers will no longer be able to rely on the
filing of tariffs with the Federal Communications Commission as a means of
providing notice to customers of prices, terms and conditions on which they
offer interstate services, since tariff provisions limit carriers' liability for
defects in service and consequential damages from such defects. The Federal
Communications Commission has ruled that by January 31, 2001 non-dominant
interexchange carriers must post on their Internet web site their rates, terms
and conditions for all of their interstate, domestic services if they have an
Internet web site. With the elimination of tariffs, we may become subject to
significantly increased liability risks, and there can be no assurance that the
liabilities will not have a material adverse effect on our results of operations
and financial conditions and our ability to meet our obligations.
The Federal Communications Commission adopted rules which govern the
use of customer proprietary network information by telecommunications carriers.
These rules may impede our ability to effectively market integrated packages of
services and to expand existing customers' use of our offerings.
Competitive Local Exchange Carrier Offerings
It is also possible that some of our lit fiber or bandwidth capacity
services could be viewed as the provision of local exchange service. See
"Description of Business--Regulation--United States--Federal--Competitive Local
Exchange Carrier Offerings" incorporated herein by reference from our annual
report on Form 20-F for the year ended December 31, 1999. To the extent that any
of our offerings are treated as competitive local exchange carrier services, we
would also be subject to a number of interconnection obligations under the
Telecommunications Act of 1996. We would be required to offer our services for
resale at retail prices, provide number portability if technically feasible,
provide dialing parity to competing providers and non-discriminatory access to
telephone numbers, directory assistance, operator services and directory
listings, provide access to poles, ducts, conduits and rights-of-way and
establish reciprocal compensation arrangements for the transport and termination
of telecommunications. Although competitive local exchange carrier interstate
access charges are generally regulated as non-dominant carrier offerings and
subject to minimal burdens, the Federal Communications Commission recently
adopted a Notice of Proposed Rulemaking that asks whether it should regulate the
terminating access charges of such providers.
The Federal Communications Commission determined that Internet traffic
is interstate in nature, not local, and has initiated a proceeding to determine
appropriate carrier-to-carrier compensation. At the same time, the Federal
Communications Commission declined to overturn a multitude of state decisions
requiring incumbent local exchange carriers to pay competitive local exchange
carriers compensation for delivering Internet traffic to Internet service
providers. A federal court has recently remanded that decision to the Federal
Communications Commission on the grounds that it did not adequately justify its
decision. To the extent we are treated as a competitive local exchange carrier,
this ruling would adversely affect the revenues that we might expect to receive
from the carriage of Internet service provider-bound traffic.
International Facilities
We are required to obtain regulatory approval to construct and operate
facilities used to provide international telecommunications services. If any of
our services are treated as international telecommunications services, we may be
required to obtain regulatory approvals and file tariffs to offer these
international services. Although these facilities authorizations and tariffs are
regulated on a streamlined basis subject to minimal regulation,
29
<PAGE>
there is a risk that the Federal Communications Commission may deny or place
burdensome conditions on authorizations and tariff filings.
Other Federal Communications Regulations
With limited exceptions, the current policy of the Federal
Communications Commission prohibits incumbent local exchange carriers from
lowering prices to certain customers without also lowering charges for the same
service to all similarly situated customers in the same geographic area. The
Federal Communications Commission, however, modified this constraint on
incumbent local exchange carriers who have specified levels of competition from
competing local exchange service providers and permit them to offer special rate
packages to certain customers, as it has done in a few cases, and permit other
forms of rate flexibility. The rules contemplate an increasing level of
flexibility on a city-by-city basis as competitors have facilities in place to
compete for local exchange services in those markets. Once such facilities
attain 50% coverage the rules contemplate only minimal regulation of carrier
access offerings. This added flexibility could have a material adverse effect on
our ability to compete in providing facilities or services that compete with
incumbent local exchange carriers interstate access services.
The Telecommunications Act of 1996 currently requires Regional Bell
Operating Companies to obtain Federal Communications Commission authorization
prior to providing inter-local area and transport area telecommunications. Bell
Atlantic received such authorization for New York in December 1999. It is
anticipated that additional Regional Bell Operating Companies may receive
authorization in some states to provide telecommunications during 2000. Such
authority, if granted, could increase competition from Regional Bell Operating
Companies in providing fiber and fiber services, which could adversely affect
our business operations.
The Federal Communications Commission has the responsibility under the
Telecommunications Act of 1996 to determine what elements of an incumbent local
exchange carrier's network must be provided to competitors on an unbundled
basis. In August 1999, the Federal Communications Commission required dark fiber
to be offered as an unbundled element. In addition, the Federal Communications
Commission had previously allowed state commissions to establish additional
unbundling requirements, and some states have required that incumbent local
exchange carriers unbundle dark fiber. The decisions by the Federal
Communications Commission to require unbundling of incumbent local exchange
carriers' dark fiber could increase the supply of dark fiber and decrease the
demand for our dark fiber and thereby have an adverse effect on the results of
our operations.
The Federal Communications Commission recently instituted a proceeding
that could impose obligations on telecommunication carriers' obligation to
provide access to competitors or customers to their wiring located in
multi-tenant residential and business buildings. It is unknown at this time how
the Federal Communications Commission will rule in this proceeding so it is
impossible to evaluate its impact on our operations.
State Regulation
Each state in the United States, as well as the District of Columbia
and U.S. territories, which are treated as states for the purpose of regulation
of telecommunications services, has its own laws for regulating providers of
some telecommunications-related services as "common carriers," as "public
utilities," or under similar rubrics. We believe that the sale or lease of dark
fiber facilities is not subject to this type of regulation in most jurisdictions
in which we plan to construct facilities. However, our offering of transmission
services, as distinct from dark fiber capacity, likely will be subject to
regulation in each of these jurisdictions to the extent that these services are
offered for intrastate use, and the regulation may have an adverse effect on the
results of our operations.
30
<PAGE>
Local Regulation
In addition to federal and state laws, local governments exercise legal
authority that may affect our business. For example, some local governments
retain the ability to license public rights-of-way, subject to the federal
limitation that local authorities may not prohibit entities from entering
telecommunications markets. Compliance with local requirements may delay entry
and increase our costs of doing business.
Canada
Regulation under the Telecommunications Act (Canada)
Regulation of Resellers
We offer network services to our customers in Canada through resale
arrangements. Under these resale arrangements, we obtain the use of transmission
facilities on a contractual basis from Urbanlink and then offer bandwidth
services to our customers through the subsequent sale or lease, on a commercial
basis, of these contracted facilities. As a reseller, we are not generally
subject to the regulatory requirements of the Telecommunications Act (Canada).
However, there can be no assurance that the regulation of resellers in Canada
may not become more extensive in the future. In addition, while we believe that
our operations as a reseller in Canada fully comply with Canadian law, there can
be no assurance that a future determination of the Canadian Radio-television and
Telecommunications Commission or events beyond our control will not result in a
change in our status or affect our ability to offer services in Canada.
Restrictions on Foreign Ownership
Under the Canadian ownership provisions of the Telecommunications Act,
a "telecommunications common carrier" is not eligible to operate in Canada
unless it is owned and controlled by Canadians. Furthermore, no more than 20% of
the members of the board of directors of a telecommunications common carrier may
be non-Canadians, and no more than 20% of the voting shares of a
telecommunications common carrier may be beneficially owned by non-Canadians. In
addition, no more than 33 1/3% of the voting shares of a non-operating parent
corporation of a telecommunications common carrier may be beneficially owned or
controlled by non-Canadians and neither the telecommunications common carrier
nor its parent may be otherwise controlled in fact by non-Canadians.
Although we believe that our activities in Canada, including the
Canadian telecommunications arrangement, comply with the foreign ownership
provisions of the Telecommunications Act, there can be no assurance that a
future Canadian Radio-television and Telecommunications Commission determination
or events beyond our control will not result in our being required to comply
with the ownership provisions of the Telecommunications Act.
On October 1, 1998, the Canadian Radio-television and
Telecommunications Commission issued Telecom Decision CRTC 98-17, which
established a framework for competition in Canada's international
telecommunications services market to coincide with the Government of Canada's
decision to terminate the monopoly of Teleglobe Canada Inc. over
telecommunications facilities linking Canada to overseas destinations. In that
decision, the Canadian Radio-television and Telecommunications Commission
determined that a party acquiring an indefeasible right of use interest in an
international submarine cable would not necessarily fall within the definition
of a telecommunications common carrier. As a result, acquirers of indefeasible
rights of use in international submarine cables need not be Canadian owned and
controlled. However, given the fact that the Canadian Radio-television and
Telecommunications Commission's findings in Decision 98-17 were limited to
indefeasible right of use interests held in international submarine cables, as
well as the fact that indefeasible right of use arrangements can involve varying
degrees of ownership and control over fiber facilities, there can be no
assurance that holders
31
<PAGE>
of indefeasible rights of use acquired in domestic fiber facilities, including
those obtained by us from Urbanlink, would be exempt from the Canadian ownership
provisions contained in the Telecommunications Act.
Contribution
The Canadian Radio-television and Telecommunications Commission is
considering reform of the current contribution regime. The Canadian
Radio-television and Telecommunications Commission's contribution regime was
originally established in 1992 as a means of ensuring that rates for local
residential telephone service remain affordable. Under the regime, providers of
certain types of long distance voice and data services are required to pay a
subsidy or "contribution" on each minute of traffic that is originated or
terminated on local switched telephone networks or on cross-border or overseas
access circuits. These contribution payments are pooled within each incumbent
local exchange carriers' territory and are paid out to incumbent local exchange
carriers and competitive local exchange carriers serving residential local
customers, based on the number of residential network access services they serve
and the level of the subsidy available in the rate band being served. On March
1, 1999, the Canadian Radio-television and Telecommunications Commission
initiated a proceeding to consider possible reforms to the current contribution
mechanism. In the public notice that initiated the proceeding, the Canadian
Radio-television and Telecommunications Commission invited interested parties to
submit proposals on other mechanisms which could be used to collect
contribution. Although this public notice proceeding is not yet closed, some
parties in the proceeding have advocated that the current contribution regime be
converted to a revenue-based regime under which contribution would be paid on a
percentage of a telecommunications service provider's revenues (regardless of
the types of services offered by the service provider), rather than on certain
types of telecommunications traffic.
We do not believe that the majority of our operations in Canada are
subject to any requirement to pay contributions under the current contribution
regime. However, given that the current contribution regime is under review by
the Canadian Radio-television and Telecommunications Commission, there can be no
assurance that we would be exempt from the requirement to pay contributions in
the future, particularly if the Canadian Radio-television and Telecommunications
Commission decides to adopt a revenue-based regime.
Europe
In Europe, in addition to those risk factors mentioned, there may be
additional regulatory or legal factors or changes which could adversely affect
our operations by increasing our costs or restricting the way in which we offer,
or our ability to offer, products, services or dark fiber capacity.
Major delays in the construction and establishment of submarine cables
could occur due to delays in the granting of the environmental, planning and
other permissions relating to land which are required in order to land such
cables.
We may be refused other requisite rights of way, or there may be delays
in construction due to delays in the granting of such rights of way.
Contrary to what is expected to be the case, in some or all European
countries, an individual telecommunications license or other telecommunications
authorization may be required in order for us to offer or control dark fiber,
and there may consequently either be a delay in carrying out the construction of
the projected dark fiber network, or, contrary to European Community directive
requirements, national authorities in particular states of the European Union
may refuse to grant a license for such activities.
Concerning other planned services, including the offering of lit
capacity and other telecommunications services, individual Member States of the
European Union might refuse to grant a license, contrary to the requirement of
European Community directives, or may subject the grant of a license or other
authorization to
32
<PAGE>
onerous conditions, including but not limited to investment
requirements or commitments, guarantees or bonds, which make the supply of the
projected services less profitable or not commercially viable.
Regulatory intervention by the European Community or Member State
telecommunications or antitrust authorities could reduce the price level of
local, national or international leased circuits/capacity to a level where it is
less profitable or not commercially viable for the projected activities to be
undertaken in specific countries or in the European Union.
To the extent that we qualify in any individual Member State of the
European Union as an operator with a right to interconnect pursuant to the
European Community Interconnection directive, we may be required to negotiate
interconnection with other operators with a right to interconnect in that Member
State or throughout the European Union.
If we are required to obtain a license or authorization in any Member
State of the European Union then we may be obliged to pay license or
authorization fees which are high, or higher than anticipated, or we may be
subject to statistical reporting requirements or other regulatory burdens
pursuant to such licenses or authorizations.
Other Regulation
We have operations based in Canada and the United States, Brazil,
Venezuela and Bermuda and anticipate operations in Europe and other foreign
jurisdictions. We are exposed to risks inherent in international operations,
including the following:
o general economic, social and political conditions;
o the difficulty of enforcing agreements and collecting receivables
through some foreign legal systems;
o tax rates in some foreign countries may exceed those in Canada and
foreign earnings may be subject to withholding requirements or the
imposition of tariffs, exchange controls or other restrictions;
o required compliance with a variety of foreign laws and regulations;
and
o changes in Canadian laws and regulations relating to foreign trade
and investment.
You May Not Be Able to Rely on Forward-Looking Statements.
The information contained in this prospectus includes some
forward-looking statements that involve a number of risks and uncertainties. A
number of factors could cause our actual results, performance, achievements or
industry results to be very different from the results, performance or
achievements expressed or implied by our forward-looking statements. These
factors include, but are not limited to:
o general economic and business conditions, both nationally and in
the markets in which we operate or will operate;
o our ability to access markets, design effective fiber optic routes,
install cable and facilities, and obtain rights-of-way, building
access rights and any required governmental authorizations,
franchises and permits, all in a timely manner, at reasonable costs
and on satisfactory terms and conditions;
o demographic change;
33
<PAGE>
o competition;
o existing government regulations and changes in, or the failure to
comply with, government regulations;
o the loss of any significant number of customers;
o changes in business strategy or development plans;
o technological developments;
o the ability to attract and retain qualified personnel; and
o other factors we refer to throughout this prospectus and the other
documents incorporated by reference herein.
Certain of these factors are discussed in more detail elsewhere in this
prospectus including, without limitation, in this section, "Risk Factors" and
the "Management's Discussion and Analysis of Financial Condition and Results of
Operations" incorporated by reference herein.
In addition, forward-looking statements depend upon assumptions,
estimates and dates that may not be correct or precise and involve known and
unknown risks, uncertainties and other factors. Accordingly, a forward-looking
statement in this prospectus is not a prediction of future events or
circumstances and those future events or circumstances may not occur. Given
these uncertainties, you are warned not to rely on the forward-looking
statements. Neither we nor any other person assumes responsibility for the
accuracy and completeness of these statements. A forward-looking statement is
usually identified by our use of certain terminology, including "believes,"
"expects," "may," "will," "should," "seeks," "pro forma," "anticipates" or
"intends" or by discussions of strategy or intentions. We are not undertaking
any obligation to update these factors or to publicly announce the results of
any changes to our forward-looking statements due to future events or
developments.
34
<PAGE>
THE EXCHANGE OFFER
Purpose and Effect of Exchange Offer
We sold the old dollar notes and the old euro notes on April 26, 2000
and April 28, 2000, respectively, to the initial purchasers, who placed the old
notes with certain institutional investors. We and the initial purchasers
entered into registration rights agreements, concerning the placement of the old
notes, under which we agreed, for the benefit of the holders of the old notes,
that we would, at our sole cost, (1) within 90 days following the original
issuance of the old notes, file with the Securities and Exchange Commission the
exchange offer registration statement under the Securities Act concerning an
issue of a series of new notes of 360networks inc. identical in all material
respects to the series of old notes and (2) use our best efforts to cause the
exchange offer registration statement to become effective under the Securities
Act within 180 days following the original issuance of the old notes. Upon the
effectiveness of the exchange offer registration statement, we will offer to the
holders of the old notes the opportunity to exchange their old notes for an
equal amount of new notes, to be issued without a restrictive legend and which
may be reoffered and resold by the holder without restrictions or limitations
under the Securities Act. The term "holder" concerning any note means any person
in whose name the note is registered on our books or any other person who has
obtained a properly completed bond power from the registered holder.
Terms of the Exchange Offer
Upon the terms and subject to the conditions described in this
prospectus and in the accompanying letter of transmittal (which together
constitute the exchange offer), we will accept for exchange old notes that are
properly tendered on or before the expiration date and not withdrawn as
permitted below. In the case of the dollar notes the term expiration date means
5:00 p.m., New York City time, on , 2000, and in the case of the euro notes the
term expiration date means 5:00 p.m., London time, on
, 2000; but if we, in our sole discretion, extend the period of time
during which the exchange offer is open, the term expiration date means the
latest time and date to which the exchange offer is extended. We may choose to
extend the period of time during which the exchange offer is open if we do not
receive substantially all of the old notes in the exchange offer.
As of the date of this prospectus, $600,000,000 aggregate principal
amount of old notes and EURO 200,000,000 aggregate principal amount of old notes
are outstanding. This prospectus, along with the letter of transmittal, is first
being sent on or about
, 2000, to all holders of old notes known to us. Our obligation to
accept old notes for exchange under the exchange offer is subject to certain
customary conditions as described below under "--Certain Conditions to the
Exchange Offer."
We expressly reserve the right, at any time and from time to time, to
extend the period of time during which the exchange offer is open, and,
therefore, to delay acceptance for exchange of any old notes, by giving oral or
written notice of an extension to the holders of the old notes as described
below. During the extension, all old notes previously tendered will remain
subject to the exchange offer and may be accepted for exchange by us. Any old
notes not accepted for exchange for any reason will be returned without expense
to the tendering holders of old notes as promptly as practicable after the
expiration or termination of the exchange offer.
Old dollar notes tendered in the exchange offer must be in
denominations of $1,000 or any integral multiple of $1,000. Old euro notes
tendered in the exchange offer must be in denominations of EURO 1,000 or any
integral multiple of EURO 1,000.
We expressly reserve the right to amend or terminate the exchange
offer, and not to accept for exchange any old notes not previously accepted for
exchange, upon the occurrence of any of the conditions to the exchange offer
specified below under "--Certain Conditions to the Exchange Offer." We will give
oral or written notice of any extension, amendment, non-acceptance or
termination to the holder of the old notes as promptly as practicable,
35
<PAGE>
the notice in the case of any extension to be issued by a press release or other
public announcement no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date.
Procedures for Tendering Old Notes
If you are a registered holder of old notes you may tender your old
notes in the exchange offer. If you tender old notes to 360networks inc. as
described below, our acceptance of your old notes will constitute a binding
agreement between you and 360networks inc. upon the terms and subject to the
conditions described in this prospectus and in the accompanying letter of
transmittal. Except as described below, if you wish to tender old notes for
exchange through the exchange offer, you must transmit either (1) a properly
completed and duly executed letter of transmittal, including all other documents
required by the letter of transmittal to the appropriate exchange agent at one
of the addresses listed below under "Exchange Agents" on or before the
expiration date or (2) if you tender your old notes under the procedures for
book-entry transfer described below, you may transmit an agent's message to the
appropriate exchange agent instead of the letter of transmittal, in either case
on or prior to the expiration date. In addition, either
o certificates for the old notes must be received by the appropriate
exchange agent along with the letter of transmittal, or
o a timely confirmation of book-entry transfer (a "Book-Entry
Confirmation") of the old dollar notes, if this procedure is
available, into the dollar exchange agent's account at The
Depository Trust Company (the "Book-Entry Transfer Facility") under
the procedure for book-entry transfer described in this prospectus,
or for the old euro notes, the participants must advise Euroclear
or Clearstream their intention to exchange. Euroclear or
Clearstream will then notify the euro exchange agent of the
participant's intention to exchange (thereby blocking the
participant's account). The letter of transmittal or agent's
message, must be received by the appropriate exchange agent before
the expiration date, or
o the holder must comply with the guaranteed delivery procedures
described below.
The term "agent's message" means a message, transmitted to the
appropriate exchange agent, which states that the Book-Entry Transfer Facility
has received an express acknowledgment from you that you have received and agree
to be bound by the letter of transmittal and that 360networks inc. may enforce
the letter of transmittal against you.
The method of delivery of old notes, letters of transmittal or the
agent's message and all other required documents is at your election and risk.
If you mail these documents, we recommend that you use registered mail, properly
insured, with return receipt requested. Always allow sufficient time to assure
timely delivery. Do not send letters of transmittal or old notes to the company.
You may request your respective brokers, dealers, commercial banks, trust
companies or nominees to effect the above transactions for you.
If your old notes are registered in the name of a broker, dealer,
commercial bank, trust company, or other nominee and you wish to tender your old
notes in the exchange offer, then you should contact the registered holder
promptly and instruct the registered holder to tender on your behalf. If you
wish to tender on your own behalf, you must, before completing and executing the
letter of transmittal and delivering the old notes, either make appropriate
arrangements to register ownership of the old notes in your name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal
described below (see "--Withdrawal of Tenders") must be guaranteed (see
"--Guaranteed Delivery Procedures") unless the old notes surrendered for
exchange are tendered (1) by a registered holder of the old notes who has not
completed the box entitled "Special
36
<PAGE>
Issuance Instructions" or "Special Delivery Instructions" on the letter of
transmittal or (2) for the account of an Eligible Institution (as defined
below). If signatures on a letter of transmittal or a notice of withdrawal are
required to be guaranteed, these guarantees must be by a financial institution
(including most banks, savings and loan associations and brokerage houses) that
is a participant in the Securities Transfer Agents Medallion Program, the New
York Stock Exchange Medallion Program or the Stock Exchange Medallion Program
(collectively, "Eligible Institutions"). If old notes are registered in the name
of a person other than a signer of the letter of transmittal, the old notes
surrendered for exchange must be endorsed by or be accompanied by a written
instrument or instruments of transfer or exchange in satisfactory form as
determined by us in our sole discretion, duly executed by the registered holder
exactly as the name or names of the registered holder or holders appear on the
old notes with the signature on it guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of old notes tendered for exchange will be determined by
us in our discretion, which determination shall be final and binding. We reserve
the absolute right to reject any and all tenders of any particular old notes not
properly tendered or the acceptance of which might, in our judgment or in the
judgment of our counsel, be unlawful. We also reserve the absolute right to
waive any defects or irregularities or conditions of the exchange offer as to
any particular old notes either before or after the expiration date (including
the right to waiver the ineligibility of any holder who seeks to tender old
notes in the exchange offer). Our interpretation of the terms and conditions of
the exchange offer as to any particular old notes either before or after the
expiration date (including the letter of transmittal and its instructions) shall
be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of old notes for exchange must be
cured within a reasonable period of time as we shall determine. None of
360networks inc., the exchange agent or any other person shall be under any duty
to notify of any defect or irregularity of any tender of old notes for exchange,
nor shall any of them have any liability for failure to notify.
By tendering old notes for exchange, you represent to us that, among
other things:
o the new notes acquired through the exchange offer are being
acquired in the ordinary course of business of the person receiving
the new notes, whether or not this person is the holder, and
o that neither the holder nor the other person has any arrangement or
understanding with any person to engage or participate in a
distribution of the new notes.
If any holder or an other person is an affiliate, as defined under Rule
405 of the Securities Act, of us or is engaged in or intends to engage in, or
has an arrangement or understanding with any person to participate in, a
distribution of the new notes to be acquired through the exchange offer, the
holder or the other person (1) may not rely on the applicable interpretation of
the staff of the Securities and Exchange Commission and (2) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. Each broker-dealer that receives new
notes for its own account in exchange for old notes, where the old notes were
acquired by the broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of the new notes. See "Plan of Distribution." The
letter of transmittal states that by so acknowledging and by delivering a
prospectus, a broker-dealer will not have admitted that it is an "underwriter"
within the meaning of the Securities Act.
Acceptance of Old Notes for Exchange; Delivery of New Notes
Upon satisfaction or waiver of all of the conditions to the exchange
offer, we will accept, promptly after the expiration date, all old notes
properly tendered and will issue the new notes promptly after acceptance of the
old notes. See "--Certain Conditions to the Exchange Offer" below. For purposes
of the exchange offer, we will be considered to have accepted properly tendered
old notes for exchange when we have given oral or written notice of it to the
exchange agent.
37
<PAGE>
For each old note accepted for exchange you will receive a new note
having a principal amount equal to that of the surrendered old note.
Accordingly, registered holders of new dollar notes or new euro notes on the
relevant record date for the first interest payment date following the
consummation of the exchange offer will receive interest accruing from the most
recent date of which interest has been paid on the old dollar notes or old euro
notes, as the case may be, or, if no interest has been paid, from April 26,
2000, in the case of the dollar notes and from April 28, 2000 in the case of the
euro notes. Old notes accepted for exchange will cease to accrue interest from
and after the date of consummation of the exchange offer. Holders whose old
notes are accepted for exchange will not receive any payment of accrued interest
on these old notes otherwise payable on any interest payment date for which the
record date occurs on or after the completion of the exchange offer. Old notes
not tendered or not accepted for exchange will continue to accrue interest from
and after the date of the completion of the exchange offer.
In all cases, issuance of new notes for old notes that are accepted for
exchange through the exchange offer will be made only after timely receipt by
the appropriate exchange agent of certificates for these old notes or a timely
Book-Entry Confirmation of these old notes into the appropriate exchange agent's
account at the Book-Entry Transfer Facility, a properly completed and duly
executed letter of transmittal and all other required documents or, in the case
of a Book-Entry Confirmation, an agent's message. If any tendered old notes are
not accepted for any reason under the terms and conditions of the exchange offer
or if old notes are submitted for a greater amount than the holder desires to
exchange, those unaccepted or non-exchanged old notes will be returned without
expense to the tendering holder of the notes or, in the case of old notes
tendered by book-entry transfer into the appropriate exchange agent's account at
the Book-Entry Transfer Facility according to the book-entry procedures
described below, and any financial institution that is a participant in the
Book-Entry Transfer Facility's systems may make book-entry delivery of old notes
by causing the Book-Entry Transfer Facility under the Book-Entry Transfer
Facility's procedures for transfer. However, although delivery of old notes may
be effected through book-entry transfer at the Book-Entry Transfer Facility, the
letter of transmittal or facsimile of it, with any required signature guarantees
or an agent's message instead of a letter of transmittal, and any other required
documents, must be transmitted to and received by exchange agent at the
addresses described below under "--Exchange Agents" on or before the expiration
date or the guaranteed delivery procedures described below must be complied
with.
Guaranteed Delivery Procedures
If a registered holder of the old notes desires to tender its old notes
and the old notes are not immediately available, or time will not permit the
holder's old notes or other required documents to reach the appropriate exchange
agent before the expiration date, or the procedures for book-entry transfer
cannot be completed on a timely basis, a tender may be effected if:
o the tender is made through an Eligible Institution;
o in the case of the dollar notes, on or before 5:00 p.m., New York
City time, on the expiration date, and in the case of the euro
notes, on or before 5:00 p.m., London time, on the expiration date,
the appropriate exchange agent receives from the Eligible
Institution a properly completed and duly executed letter of
transmittal or a facsimile of it, and Notice of Guaranteed
Delivery, substantially in the form provided by us, by telegram,
telex, facsimile transmission, mail or hand delivery, setting forth
the name and address of the holder of the old notes and the amount
of old notes tendered, stating that the tender is being made by the
delivery of the letter of transmittal and guaranteeing that within
three New York Stock Exchange trading days after the date of
execution of the Notice of Guaranteed Delivery, the certificates
for all physically tendered old notes, in proper form for transfer,
or a Book-Entry Confirmation and any other documents required by
the letter of transmittal will be deposited by the Eligible
Institution with the appropriate exchange agent; and
38
<PAGE>
o the certificates for all physically tendered old notes, in paper
form for transfer, or a Book-Entry Confirmation, and any other
documents required by the letter of transmittal will be deposited
by the Eligible Institution within three New York Stock Exchange
trading days after the date of execution of the Notice of
Guaranteed Delivery.
Withdrawal of Tenders
Tenders of old dollar notes may be withdrawn at any time before 5:00
p.m., New York City time, on the expiration date, and tenders of old euro notes
may be withdrawn at any time before 5:00 p.m., London time, on the expiration
date. For a withdrawal to be effective, a written notice of withdrawal must be
received by the appropriate exchange agent at one of the addresses described
below under "--Exchange Agents." This notice of withdrawal must specify the name
of the person having tendered the old notes to be withdrawn, identify the old
notes to be withdrawn, including the principal amount of the old notes, and,
where certificates for old notes have been transmitted, specify the name in
which the old notes are registered, if different from that of the withdrawing
holder. If certificates for old notes have been delivered or otherwise
identified to the appropriate exchange agent, then before the release of these
certificates the withdrawing holder must also submit the serial numbers of the
particular certificates to be withdrawn and a signed notice of withdrawal with
signatures guaranteed by an Eligible Institution unless the holder is an
Eligible Institution in which case the guarantee will not be required. If old
notes have been tendered under the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn old notes
and otherwise comply with the procedures of the facility. We will determine all
questions concerning the validity, form and eligibility, including time of
receipt, of the notices. This determination will be final and binding on all
parties. Any old notes so withdrawn will be considered not to have been validly
tendered for exchange and will be returned to the holder of the old notes
without cost to the holder, or, in the case of old notes tendered by book-entry
transfer into the appropriate exchange agent's account at the Book-Entry
Transfer Facility maintained with the Book-Entry Transfer Facility for the old
notes, as soon as practicable after withdrawal, rejection of tender or
termination of the exchange offer. Properly withdrawn old notes may be
retendered by following one of the procedures described under "--Procedures for
Tendering Old Notes" above at any time on or before the expiration date.
Material Conditions to the Exchange Offer
Despite any other provisions of the exchange offer, and subject to our
obligations under the registration rights agreements, we shall not be required
to accept for exchange, or to issue new notes in exchange for, any old notes,
and may terminate or amend the exchange offer, if, at any time before the
acceptance of the new notes for exchange, any of the following events shall
occur:
(a) any injunction, order or decree shall have been issued by any
court or any governmental agency that would prohibit, prevent or
otherwise materially impair our ability to proceed with the exchange
offer;
(b) any change, or any development involving a prospective change,
in our business or financial affairs or any or our subsidiaries has
occurred which, in our sole judgment, might materially impair our
ability to proceed with the exchange offer or materially impair the
contemplated benefits of the exchange offer to us;
(c) any law, statute, rule or regulation is proposed, adopted or
enacted, which, in our sole judgment, might materially impair our
ability to proceed with the exchange offer or materially impair the
contemplated benefits of the exchange offer to us;
(d) any governmental approval has not been obtained, which approval
we shall, in our sole discretion, consider necessary for the completion
of the exchange offer; or
39
<PAGE>
(e) the exchange offer will violate any applicable law or any
applicable interpretation of the staff of the Securities and Exchange
Commission.
The above conditions are for our sole benefit and may be asserted by us
in whole or in part at any time and from time to time in our sole discretion.
Our failure at any time to exercise any of the above rights shall not be
considered a waiver of any of these rights, and these rights shall be considered
ongoing rights which may be asserted at any time and from time to time.
In addition, we will not accept for exchange any old notes tendered,
and no new notes will be issued in exchange for any of these old notes, if at
the time any stop order is threatened by the Securities and Exchange Commission
or in effect concerning the registration statement of which this prospectus is a
part or the qualification of the indenture under the Trust Indenture Act of
1939, as amended.
The exchange offer is not conditioned on any minimum principal amount
of old notes being tendered for exchange.
Exchange Agents
HSBC Bank USA has been appointed as the exchange agent for the dollar
notes for the exchange offer. HSBC Bank plc has been appointed as exchange agent
for the euro notes for the exchange offer . All executed letters of transmittal
should be directed to the appropriate exchange agent at one of the addresses
listed below. Questions and requests for assistance, requests for additional
copies of this prospectus or of the letter of transmittal and requests or
Notices of Guaranteed Delivery should be directed to the appropriate exchange
agent addressed as follows:
HSBC Bank USA,
Dollar Note Exchange Agent
By Registered or Certified Mail:
HSBC Bank USA
140 Broadway, Level A
New York, New York 10005-1180
Attention: Paulette Shaw
By Hand or Overnight Courier:
HSBC Bank USA
140 Broadway, Level A
New York, New York 10005-1180
Attention: Paulette Shaw
By Facsimile:
(212) 658-2292
Confirm by Telephone:
(212) 658-5931
40
<PAGE>
HSBC Bank plc,
Euro Note Exchange Agent
By Registered or Certified Mail:
HSBC Bank plc
Issuer Services (3rd Floor)
Mariner House
Pepys Street
London EC3N 4DA, United Kingdom
Attn: Mark Allen, Bond Paying Agency Desk
By Hand or Overnight Courier:
HSBC Bank plc
Issuer Services (3rd Floor)
Mariner House
Pepys Street
London EC3N 4DA, United Kingdom
Attn: Mark Allen, Bond Paying Agency Desk
By Facsimile:
44 20 7260 8932
Confirm by Telephone:
44 20 7260 6702
Delivery of the letter of transmittal to an address other than one
listed above or transmission of instructions via facsimile other than as listed
above does not constitute a valid delivery of the letter of transmittal.
Resales of the New Notes
Based on positions of the Securities and Exchange Commission described
in Morgan Stanley & Co. Incorporated (available June 5, 1991) and Exxon Capital
Holdings Corporation (available July 2, 1993) and K-III Communications
Corporation (available May 14, 1993), and similar no-action letters issued to
third parties, we believe that the new notes issued in the exchange offer to a
holder in exchange for old notes may be offered for resale, resold and otherwise
transferred by any holder of old notes, except for a holder which is an
affiliate of 360networks inc. within the meaning of Rule 405 under the
Securities Act, without compliance with the registration and prospectus delivery
provisions of the Securities Act, if the new notes are acquired in the ordinary
course of the holder's business and the holder is not participating, does not
intend to participate and has no arrangement or understanding with any person to
participate in the distribution of the new notes. We have not requested or
obtained, and do not intend to seek, an interpretive letter from the staff of
the Securities and Exchange Commission concerning this exchange offer, and
neither we nor the holders of notes are entitled to rely on interpretive advice
provided by the staff of the Securities and Exchange Commission to other
persons, which advice was based on the facts and conditions represented in the
letters. Although there can be no assurance that the staff of the Securities and
Exchange Commission would make a similar determination relating to the exchange
offer, the exchange offer is being conducted in a manner intended to be
consistent with the facts and conditions represented in these letters. If any
holder acquires new notes in the exchange offer to distribute or participate in
a distribution of the new notes, the holder cannot rely on the position of the
staff of the Securities and Exchange Commission
41
<PAGE>
described in the above no-action and interpretive letters and must comply with
the registration and prospectus delivery requirements of the Securities Act
concerning a secondary resale transaction, unless an exemption from registration
is otherwise available.
Each broker-dealer that receives new notes for its own account through
the exchange offer must acknowledge that it will deliver a prospectus concerning
any resale of these new notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer concerning
resales of new notes received in exchange for old notes where the old notes were
acquired by the broker-dealer as a result of market-making activities or other
trading activities, except for old notes acquired directly from us. We have
agreed that, for a period of 180 days following the completion of the exchange
offer, we will make this prospectus available to any broker-dealer for use with
any of these resales. See "Plan of Distribution." Under the registration rights
agreements, we are required to allow the broker-dealers and other persons, if
any, subject to similar prospectus delivery requirements to use this prospectus
concerning the resale of the new notes.
Fees and Expenses
We will pay the expenses of soliciting tenders. The principal
solicitation is being made by mail; however, additional solicitation may be made
by telegraph, telephone or in person by our officers and regular employees and
our affiliates.
We have not retained any dealer-manager relating to the exchange offer
and will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. However, we will pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses relating to these services.
We will pay the cash expense incurred for the exchange offer. These
expenses include fees and expenses of the exchange agents and trustee,
accounting and legal fees and printing costs, among others.
We will pay all transfer taxes, if any, applicable to the exchange of
old notes through the exchange offer. If, however, certificates representing new
notes or old notes for principal amounts not tendered or accepted for exchange
are to be delivered to, or are to be issued in the name of, any person other
than the registered holder of the old notes tendered, or if tendered old notes
are registered in the name of any person other than the person signing the
letter of transmittal, or if a transfer tax is imposed for any reason other than
the exchange of old notes under the exchange offer, then the amount of these
transfer taxes, whether imposed on the registered holder or any other person,
will be payable by the tendering holder. If satisfactory, evidence of payment of
these taxes or exemption from payment of these taxes is not submitted with the
letter of transmittal, the amount of the transfer taxes must accompany the
tender of old notes.
Accounting Treatment
The new notes will be recorded at the same carrying value as the old
notes, which is the aggregate principal amount less discount as reflected in our
accounting records on the date of the exchange. Accordingly, we will recognize
no gain or loss for accounting purposes. The expenses of the exchange offer and
the unamortized expenses related to the issuance of the old notes will be
amortized over the term of the new notes.
Regulatory Approvals
We do not believe that we need to obtain any material federal or state
regulatory approvals concerning the exchange offer.
42
<PAGE>
Transfer Taxes
Holders who tender their old notes for exchange will not be obligated
to pay any transfer taxes except that holders who instruct us to register new
notes in the name of, or request that old notes not tendered or not accepted in
the exchange offer be returned to, a person other than the registered tendering
holder will be responsible for the payment of any applicable transfer tax on the
old notes.
Other
Participation in the exchange offer is voluntary and you should
carefully consider whether to accept the terms and conditions of the exchange
offer. You are urged to consult your financial and tax advisors in making your
decisions on what action to take concerning to the exchange offer.
As a result of the making of, and upon acceptance for exchange of all
validly tendered old notes under the terms of the exchange offer, we will have
fulfilled a covenant contained in the terms of the old notes and the
registration rights agreements. If you do not tender your old notes in the
exchange offer you will continue to hold these old notes and will be entitled to
all the rights, and limitations applicable to them, under the indentures, except
for the rights under the registration rights agreements, including rights to
receive Additional Interest, which by their terms terminate or cease to have
further effect as a result of the making and completion of the exchange offer.
All untendered old notes will continue to be subject to the restrictions on
transfer contained in the indentures and we do not currently anticipate that we
will register the old notes under the Securities Act. If old notes are tendered
and accepted in the exchange offer, the trading market, if any, for any
remaining old notes could be adversely affected. See "Risk Factors--Failure to
Exchange or Comply with the Exchange Offer--This will result in continuing
transfer restrictions or result in the inability to exchange."
43
<PAGE>
DESCRIPTION OF NOTES
You can find the definitions of certain terms used in this description
under the subheading "Certain Definitions." In this description, the word
"360networks" refers only to 360networks inc. and not to any of its
subsidiaries.
The old dollar notes were, and the new dollar notes will be, issued
under an Indenture (the "Dollar Indenture") between 360networks and HSBC Bank
USA, as trustee (the "Dollar Notes Trustee"), and the old euro notes were, and
the new euro notes will be, issued under an Indenture (the "Euro Indenture" and
together with the Dollar Indenture, the "Indentures") between 360networks and
HSBC Bank USA, as trustee (the "Euro Notes Trustee" and together with the Dollar
Notes Trustee, the "Trustee"). The terms of the new notes are identical in all
material respects to the old notes, except that the new notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting their transfer and will not contain certain provisions providing for
an increase in interest on them under certain circumstances described in the
registration rights agreements, the provisions of which will terminate upon the
completion of the exchange offer. The terms of the Notes include those stated in
the Indentures and those made part of the Indentures by reference to the U.S.
Trust Indenture Act of 1939 (the "Trust Indenture Act").
The following description is a summary of the material provisions of
the Indentures and the Registration Rights Agreements. It does not restate those
agreements in their entirety. We urge you to read the Indentures and
Registration Rights Agreements because they, and not this description, define
your rights as holders of these Notes. Copies of the proposed form of Indentures
and Registration Rights Agreements are available as set forth below under
"Additional Information."
Description of the Notes
The Notes:
o are our general unsecured obligations;
o are effectively subordinated in right of payment to all of our
existing and future secured Indebtedness to the extent of the value
of the assets securing such Indebtedness and to all liabilities
(including trade payables) of our subsidiaries;
o are equal in right of payment to all our existing and future
unsubordinated, unsecured Indebtedness; and
o will be senior in right of payment to any of our future
subordinated Indebtedness.
The Indentures will permit us to incur additional Indebtedness,
including secured Indebtedness.
We conduct substantially all of our operations through our
subsidiaries. As a result, we depend upon the cash flow of our subsidiaries to
meet our obligations, including our obligations under the Notes. As of the Issue
Date, all of our subsidiaries, other than the Hibernia Subsidiaries, will be
"Restricted Subsidiaries." However, under the circumstances described below
under the caption "Certain Covenants--Designation of Restricted and Unrestricted
Subsidiaries," we will be permitted to designate certain other of our
subsidiaries as "Unrestricted Subsidiaries." Unrestricted Subsidiaries are not
subject to many of the restrictive covenants in the Indentures. None of our
subsidiaries will guarantee these Notes.
44
<PAGE>
Principal, Maturity and Interest
We issued Dollar Notes and Euro Notes with an aggregate principal
amount of $600.0 million and EURO 200.0 million, respectively. The Dollar Notes
and Euro Notes are and will be in denominations of $1,000 and EURO 1,000 and
integral multiples of $1,000 and EURO 1,000, respectively. The Notes will mature
on May 1, 2008.
Interest on the Dollar Notes and Euro Notes will accrue at the rate of
13% per annum and will be payable semi-annually in arrears on May 1 and November
1, commencing on November 1, 2000. 360networks will make each interest payment
to the Holders of record of these Notes on the immediately preceding April 15
and October 15.
Interest on these Notes will accrue from the Issue Date or, if interest
has already been paid, from the date it was most recently paid. Interest will be
computed on the basis of a 360-day year comprised of twelve 30-day months.
Methods of Receiving Payments on the Notes
If a Holder has given wire transfer instructions to 360networks,
360networks will make all principal, premium, if any, and interest payments on
those Notes in accordance with those instructions. With respect to the Dollar
Notes, all other payments will be made at the office of the Paying Agent in New
York City and, subject to any applicable laws and regulations, at the office of
the Paying Agent in Luxembourg. With respect to the Euro Notes, all other
payments will be made at the office of the Paying Agent in Luxembourg. Holders
of Euro Notes who wish to receive payment in any currency other than euros must
make arrangements at their own expense.
For so long as the Notes are listed on the Luxembourg Stock Exchange
and the rules of such stock exchange so require, 360networks will maintain a
Paying Agent in Luxembourg. If a payment date is not a Business Day (as defined
in the Indentures) at a place of payment, payment may be made at that place on
the next succeeding Business Day and no interest shall accrue for the
intervening period.
Paying Agent and Registrar for the Notes
The Trustee will initially act as Paying Agent and Registrar at its
office in New York and Banque Generale du Luxembourg will initially act as an
additional Paying Agent in Luxembourg. 360networks may change the Paying Agent
or Registrar without prior notice to the Holders, and 360networks or any of its
Subsidiaries may act as Paying Agent or Registrar; provided, however, that for
so long as the Notes are listed on the Luxembourg Stock Exchange and the rules
of such exchange so require, 360networks will publish notice of the change in
the Paying Agent in Luxembourg in a daily newspaper with general circulation in
Luxembourg (which is expected to be the Luxemburger Wort). Any notices regarding
the Notes to be published in Luxembourg will be published in this same manner.
Transfer and Exchange
A Holder may transfer or exchange Notes in accordance with the
applicable Indenture. The Registrar and the Trustee may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and
360networks may require a Holder to pay any transfer taxes and similar fees
required by law or permitted by the Indentures. 360networks is not required to
transfer or exchange any Note selected for redemption. Also, 360networks is not
required to transfer or exchange any Note for a period of 15 days before a
selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for
all purposes, other than with respect to the payment of Additional Amounts (as
defined below).
45
<PAGE>
Optional Redemption
Except as set forth below under the caption "Redemption for Changes in
Canadian Withholding Taxes," the Notes will not be redeemable at 360networks'
option.
Redemption for Changes in Withholding Taxes
In the event we become obligated to pay any Additional Amounts as a
result of a change in the laws or regulations of Canada or any Canadian Taxing
Authority, or a change in any official position regarding the application or
interpretation thereof, which is publicly announced or becomes effective on or
after the Issue Date, the affected issue of Notes may be redeemed at our option.
Upon the occurrence of any such change, 360networks may, at any time, redeem
all, but not part, of the affected issue of Notes at a price equal to 100% of
the principal amount thereof, plus accrued and unpaid interest, if any, to the
redemption date. We will inform the Luxembourg Stock Exchange and give written
notice of any such redemption not less than 30 nor more than 60 days prior to
the redemption date. At any time that the aggregate principal amount of Notes of
the affected issue is greater than $100.0 million, any Holder of Notes of the
affected issue may, to the extent that it does not adversely affect 360networks'
after-tax position, at its option, waive 360networks' compliance with the
covenant set forth under the caption "Payment of Additional Amounts," provided
that if any Holder waives such compliance, 360networks may not redeem that
Holder's Notes pursuant to this "Redemption for Changes in Withholding Taxes"
provision.
Payment of Additional Amounts
All payments made by or on behalf of 360networks on or with respect to
the Notes will be made without withholding or deduction for any Taxes imposed by
any Canadian Taxing Authority, unless required by law or the interpretation or
administration thereof by the relevant Taxing Authority. If 360networks or any
other payor is required to withhold or deduct any amount on account of Taxes
from any payment made with respect to the Notes, 360networks will:
(1) make such withholding or deduction;
(2) remit the full amount deducted or withheld to the relevant
government authority in accordance with applicable law;
(3) pay such additional amounts ("Additional Amounts") as may be
necessary so that the net amount received by each Holder
(including Additional Amounts) after such withholding or
deduction will not be less than the amount the Holder would have
received if such Taxes had not been withheld or deducted;
(4) furnish to the Holders, within 30 days after the date the payment
of any Taxes is due, certified copies of tax receipts evidencing
such payment by 360networks;
(5) indemnify and hold harmless each Holder (other than an Excluded
Holder) for the amount of (a) any Taxes paid by such Holder as a
result of payments made on or with respect to the Notes, (b) any
liability (including penalties, interest and expenses) arising
therefrom or with respect thereto and (c) any Taxes imposed with
respect to any reimbursement under (a) or (b), but excluding any
such Taxes on such Holder's net income; and
(6) at least 30 days prior to each date on which any Additional
Amounts are payable, deliver to the Trustee an Officers'
Certificate stating the amounts so payable and such other
information necessary to enable the Trustee to pay such
Additional Amounts to Holders on the payment date.
46
<PAGE>
Notwithstanding the foregoing, no Additional Amounts will be payable to
a Holder in respect of a beneficial owner of a Note (an "Excluded Holder"):
(1) with which 360networks does not deal at arm's length (within the
meaning of the Income Tax Act (Canada)) at the time of making
such payment; or
(2) which is subject to such Taxes by reason of its being connected
with Canada or any province or territory thereof otherwise than
by the mere acquisition, holding or disposition of Notes or the
receipt of payments thereunder.
Whenever in the Indentures there is mentioned, in any context, the
payment of principal, premium, if any, redemption price, Change of Control
Payment, offer price and interest, or any other amount payable under or with
respect to any Note, such mention shall be deemed to include mention of the
payment of Additional Amounts to the extent that, in such context, Additional
Amounts are, were or would be payable in respect thereof. The obligation of
360networks to make payments of Additional Amounts hereunder shall survive any
termination of the Indentures or the defeasance of any rights thereunder. For a
discussion of the exemption from Canadian withholding taxes applicable to
payments under or with respect to the Notes, see "Material United States and
Canadian Income Tax Considerations--Canada."
Mandatory Redemption
Except as set forth below under "Repurchase at the Option of Holders,"
360networks is not required to make mandatory redemption with respect to the
Notes. In addition, 360networks is not required to make any sinking fund
payments with respect to the Notes.
Repurchase at the Option of Holders
Change of Control
If a Change of Control occurs, each Holder of Notes will have the right
to require 360networks to repurchase all or any part (equal to $1,000 or an
integral multiple thereof with respect to Dollar Notes and equal to EURO 1,000
or an integral multiple thereof with respect to Euro Notes) of that Holder's
Notes pursuant to the Change of Control Offer. In the Change of Control Offer,
360networks will offer a Change of Control Payment in cash equal to 101% of the
aggregate principal amount of Notes repurchased plus accrued and unpaid
interest, if any, thereon to the date of purchase. Within 20 days following any
Change of Control, 360networks will mail a notice to each Holder (with a copy to
the Trustee) describing the transaction or transactions that constitute the
Change of Control and offering to repurchase Notes on the Change of Control
Payment Date specified in such notice, pursuant to the procedures required by
the Indentures and described in such notice. 360networks will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes as a result of a
Change of Control.
On the Change of Control Payment Date, 360networks will, to the extent
lawful:
(1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer;
(2) deposit with the Paying Agent an amount equal to the Change of
Control Payment plus accrued and unpaid interest, if any, thereon
in respect of all Notes or portions thereof so tendered; and
47
<PAGE>
(3) deliver or cause to be delivered to the Trustee the Notes so
accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being
purchased by 360networks.
The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment plus accrued and unpaid interest, if any, thereon
for such Notes, and the Trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered, if any; provided
that each such new Note will be in a principal amount of $1,000 or an integral
multiple thereof in the case of Dollar Notes and EURO 1,000 or an integral
multiple thereof in the case of Euro Notes. 360networks will publicly announce
the results of the Change of Control Offer and give notice to the Luxembourg
Stock Exchange on or as soon as practicable after the Change of Control Payment
Date. See "--Paying Agent and Registrar for the Notes."
The provisions described above that require 360networks to make a
Change of Control Offer following a Change of Control will be applicable
regardless of whether or not any other provisions of the Indentures are
applicable. Except as described above with respect to a Change of Control, the
Indentures do not contain provisions that permit the Holders of the Notes to
require that 360networks repurchase or redeem the Notes in the event of a
takeover, recapitalization or similar transaction.
360networks' ability to purchase Notes pursuant to a Change of Control
Offer may be limited by a number of factors. In the event that 360networks
enters into one or more Credit Facilities, as currently anticipated, any such
Credit Facility is expected to prohibit 360networks from purchasing any Notes
and is expected to provide that certain change of control events with respect to
360networks would constitute a default thereunder. In the event a Change of
Control occurs at a time when 360networks is prohibited from purchasing Notes,
360networks could seek consent to the purchase of Notes or could attempt to
refinance the borrowings that contain such prohibition. If we do not obtain such
consent or repay such borrowings, 360networks will remain prohibited from
purchasing Notes. In such case, 360networks' failure to purchase tendered Notes
would constitute an Event of Default under the Indentures which likely would, in
turn, constitute a default under any such Credit Facility and under the terms of
the 1998 Notes and the 1999 Notes. In such circumstances, any security granted
in respect of any such Credit Facility could result in the Holders of Notes
receiving less ratably than the lenders under such Credit Facility.
We will not be required to make a Change of Control Offer upon a Change
of Control if a third party makes the Change of Control Offer in the manner, at
the times and otherwise in compliance with the requirements set forth in the
Indentures applicable to a Change of Control Offer made by 360networks and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
The definition of Change of Control includes a phrase relating to the
sale, lease, transfer, conveyance or other disposition of "all or substantially
all" of the assets of 360networks and its Subsidiaries taken as a whole.
Although there is a limited body of case law interpreting the phrase
"substantially all," there is no precise established definition of the phrase
under applicable law. Accordingly, the ability of a Holder of Notes to require
360networks to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of 360networks
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
48
<PAGE>
Asset Sales
360networks will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless:
(1) 360networks (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least
equal to the fair market value of the assets or Equity Interests
issued or sold or otherwise disposed of;
(2) such fair market value is determined by 360networks' Board of
Directors and evidenced by a resolution of the Board of Directors
set forth in an Officers' Certificate delivered to the Trustee;
(3) at least 80% of the consideration therefor received by
360networks or such Restricted Subsidiary is in the form of cash
or Telecommunications Assets. For purposes of this provision,
each of the following shall be deemed to be cash:
(a) any liabilities (as shown on our or such Restricted
Subsidiary's most recent balance sheet), of 360networks or
any Restricted Subsidiary (other than contingent liabilities
and liabilities that are by their terms subordinated to the
Notes) that are assumed by the transferee of any such assets
pursuant to a customary novation agreement that releases
360networks or such Restricted Subsidiary from further
liability;
(b) any securities, notes or other obligations received by us or
any such Restricted Subsidiary from such transferee that are
within 180 days converted by 360networks or such Restricted
Subsidiary into cash (to the extent of the cash received in
that conversion); and
(4) 360networks delivers to the Trustee, with respect to any Asset
Sale involving aggregate consideration in excess of $100.0
million, an opinion as to the fairness to 360networks of such
Asset Sale from a financial point of view issued by an
accounting, appraisal or investment banking firm of national
standing.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, 360networks or such Restricted Subsidiary, as applicable, may apply such
Net Proceeds at its option:
(1) to permanently repay or retire
(a) secured Indebtedness of 360networks, including Indebtedness
under Credit Facilities, or
(b) Indebtedness of any Restricted Subsidiary of 360networks (in
each case other than any Indebtedness owed to 360networks or
any Restricted Subsidiary); or
(2) to acquire Telecommunications Assets.
Pending the final application of any such Net Proceeds, 360networks may
temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Indentures.
Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the preceding paragraph will constitute Excess Proceeds. When the
aggregate amount of Excess Proceeds exceeds $10.0 million, 360networks will be
required to make an Asset Sale Offer to all Holders of Notes and all holders of
other Indebtedness that, is pari passu with the Notes containing provisions
similar to those set forth in the Indentures with
49
<PAGE>
respect to offers to purchase or redeem with the proceeds of sales of assets to
purchase the maximum principal amount of Notes and such other pari passu
Indebtedness that may be purchased out of the Excess Proceeds. The offer price
in any Asset Sale Offer will be equal to 100% of principal amount plus accrued
and unpaid interest, if any, thereon to the date of purchase and will be payable
in cash. If any Excess Proceeds remain after consummation of an Asset Sale
Offer, 360networks may use such Excess Proceeds for any purpose not otherwise
prohibited by the Indentures. If the aggregate principal amount of Notes and
such other pari passu Indebtedness tendered into such Asset Sale Offer exceeds
the amount of Excess Proceeds, the Trustee shall select the Notes and such other
pari passu Indebtedness to be purchased on a pro rata basis. Upon completion of
each Asset Sale Offer, the amount of Excess Proceeds shall be reset at zero.
Selection and Notice
If less than all of the Notes are to be redeemed at any time, the
Trustee will select Notes for redemption on a pro rata basis.
No Dollar Notes of $1,000 or less or Euro Notes of EURO 1,000 or less,
shall be redeemed in part. Notices of redemption shall be mailed by first class
mail at least 30 but not more than 60 days before the redemption date to each
Holder of Notes to be redeemed at its registered address. Notices of redemption
may not be conditional.
If any Note is to be redeemed in part only, the notice of redemption
that relates to that Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion of the original Note will be issued in the name of the Holder thereof
upon cancellation of the original Note. Notes called for redemption become due
on the date fixed for redemption. On and after the redemption date, interest
ceases to accrue on Notes or portions of them called for redemption.
In the case of any redemption, 360networks will inform the Luxembourg
Stock Exchange, and a notice will be published. See "--Paying Agent and
Registrar for the Notes."
Certain Covenants
Restricted Payments
360networks will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly:
(1) declare or pay any dividend or make any other payment or
distribution on account of 360networks' or any of its Restricted
Subsidiaries' Equity Interests (including, without limitation,
any payment in connection with any merger or consolidation
involving 360networks or any of its Restricted Subsidiaries) or
to the direct or indirect holders of 360networks' or any of its
Restricted Subsidiaries' Equity Interests in their capacity as
such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of 360networks or to
360networks or a Restricted Subsidiary of 360networks);
(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or
consolidation involving 360networks) any Equity Interests of
360networks or any direct or indirect parent of 360networks
(other than any such Equity Interests owned by 360networks or any
Restricted Subsidiary of 360networks);
(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness
that is subordinated to the Notes, except a payment of interest
or principal at the Stated Maturity thereof; or
50
<PAGE>
(4) make any Restricted Investment (all such payments and other
actions set forth in clauses (1) through (4) above, being
collectively referred to as "Restricted Payments"),
unless:
(1) at the time of and after giving effect to such Restricted
Payment, no Default or Event of Default shall have occurred and
be continuing or would occur as a consequence thereof; and
(2) 360networks would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted
Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00
of additional Indebtedness pursuant to clause (i) or (ii) of the
first paragraph of the covenant described below under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(3) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by 360networks and its
Restricted Subsidiaries after the Issue Date (excluding
Restricted Payments permitted by clauses (2), (3), (4), (6), (7),
(8)(i), (9), (10), (11) and (13)), is less than the sum, without
duplication, of
(a) Consolidated Cash Flow less 1.5 times Interest Expense for
the period (taken as one accounting period) from the Issue
Date to the end of 360networks' most recently ended fiscal
quarter for which internal financial statements are
available at the time of such Restricted Payment (or, if
such Consolidated Cash Flow for such period is a deficit,
less 100% of such deficit), plus
(b) 100% of the aggregate net cash proceeds received by
360networks (i) since the Issue Date as a contribution to
its common equity capital or from the issue or sale of
Equity Interests of 360networks (other than Disqualified
Stock) or from the issue or sale of Disqualified Stock or
debt securities of 360networks that have been converted into
or exchanged for such Equity Interests (other than Equity
Interests (or Disqualified Stock or debt securities) sold to
a Subsidiary of 360networks), plus the aggregate net cash
proceeds received by 360networks upon any such conversion or
exchange and (ii) without duplication, from the sale by
360networks of its Subordinate Voting Shares in the
Concurrent Equity Offering, plus
(c) 100% of the net reduction in Investments on and after the
Issue Date, resulting from payments of interest on
Indebtedness, dividends, repayments of loan or advances, or
other transfers of property (but only to the extent such
interest, dividends, repayments or other transfers of
property are not included in the calculation of Consolidated
Net Income), in each case to 360networks or any of its
Restricted Subsidiaries from any Person (including, without
limitation, from Unrestricted Subsidiaries of 360networks)
or from redesignations of Unrestricted Subsidiaries as
Restricted Subsidiaries (in each case, valued as provided in
the definition of "Investments"), not to exceed in the case
of any Person the amount of Restricted Investments
previously made by 360networks or any of its Restricted
Subsidiaries in such Unrestricted Subsidiary (subsequent to
the Issue Date) and in each such case which was treated as a
Restricted Payment (other than any such Restricted Payment
that was made pursuant to the provisions of paragraph (1)
through (13) below).
51
<PAGE>
The preceding provisions will not prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such payment
would have complied with the provisions of the Indentures;
(2) the redemption, repurchase, retirement, defeasance or other
acquisition of any subordinated Indebtedness of 360networks or of
any Equity Interests of 360networks or any Restricted Subsidiary
in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Subsidiary of
360networks) of, Equity Interests of 360networks (other than
Disqualified Stock); provided that the amount of any such net
cash proceeds that are utilized for any such redemption,
repurchase, retirement, defeasance or other acquisition shall be
excluded from clause (3)(b) of the preceding paragraph;
(3) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness of 360networks with the net cash
proceeds from an incurrence of Permitted Refinancing
Indebtedness; provided that the amount of any such net cash
proceeds that are so utilized shall be excluded from clause
(3)(b) of the preceding paragraph;
(4) Investments made out of the net cash proceeds from the issue and
sale (other than to a Subsidiary of 360networks) of Equity
Interests (other than Disqualified Stock) of 360networks;
provided that the amount of any such net cash proceeds that are
utilized for any such Investment shall be excluded from clause
(3)(b) of the preceding paragraph;
(5) the repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of 360networks pursuant to any
management equity subscription agreement or stock option
agreement and the repurchase of Equity Interests of 360networks
from employees, officers or directors of 360networks or any of
its Restricted Subsidiaries or their authorized representatives
upon the death, disability or termination of employment of such
officers, directors and employees in an aggregate amount not to
exceed $5.0 million in any calendar year plus (i) the aggregate
cash proceeds from any issuance during such calendar year of
Equity Interests by 360networks to employees, officers or
directors of 360networks and its Restricted Subsidiaries and (ii)
the aggregate cash proceeds received by 360networks or any of its
Restricted Subsidiaries from any payments on life insurance
policies in which 360networks or any of its Restricted
Subsidiaries is the beneficiary with respect to any employees,
officers or directors of 360networks or its Restricted
Subsidiaries which proceeds are used to purchase Equity Interests
of 360networks held by any such employees, officers or directors;
(6) Investments in Telecommunications Assets; provided that the
aggregate fair market value of any such Investment, when taken
together with all other Investments made pursuant to this clause
(6) (measured on the date each such Investment was made), does
not exceed $75.0 million;
(7) Permitted Fiber Investments in Telecommunications Assets;
(8) Investments in any Unrestricted Subsidiary of 360networks, if
either (i) such Investment is a Permitted Project Financing
Investment or (ii) the aggregate fair market value of any such
Investment, when taken together with all other Investments made
pursuant to this subclause 8(ii) (measured on the date each such
Investment was made), does not exceed $20.0 million;
(9) Investments the payment for which consists exclusively of Equity
Interests (other than Disqualified Stock) of 360networks;
52
<PAGE>
(10) pro rata dividends or other distributions made by a Restricted
Subsidiary of 360networks to minority stockholders (or owners of
an equivalent interest in the case of a Restricted Subsidiary
that is not a corporation);
(11) an Investment in any Person the primary business of which is
Telecommunication Business in an amount not to exceed at any one
time outstanding 20% of the Adjusted Consolidated Cash Flow, if
positive, accrued on a cumulative basis during the period (taken
as one accounting period) beginning on the first day of the first
full fiscal quarter immediately following the Issue Date and
ending on the last day of the last fiscal quarter preceding the
date of such Investment;
(12) payment when due of cash dividends on preferred stock of any
Person that merges with or otherwise becomes a Restricted
Subsidiary of 360networks which preferred stock is not issued in
contemplation of such merger or other transaction, pursuant to
the terms of such preferred stock as in effect on the date on
which such Person merges with or otherwise becomes a Restricted
Subsidiary of 360networks; provided that the aggregate amount of
cash dividends paid on any series of preferred stock so acquired
by 360networks pursuant to this clause (12) shall not exceed the
aggregate liquidation preference of such series; and
(13) the repurchase of Equity Interests of 360networks deemed to occur
upon the exercise of stock options if such Equity Interests
represent a portion of the exercise price thereof.
provided, however, that at the time of, and after giving effect to, any
Restricted Payment permitted under clauses (2), (3), (4), (5), (8)(ii), (10) and
(11) above, no Default in the payment of interest on the Notes or Event of
Default exists or would occur as a consequence thereof.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by 360networks or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this covenant shall be determined by the Board of Directors whose resolution
with respect thereto shall be delivered to the Trustee. The Board of Directors'
determination must be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $15.0 million. No such opinion or appraisal shall be
required for any Restricted Payment made pursuant to clause (7) above. In any
year in which 360networks makes one or more Restricted Payments, 360networks
shall include in its compliance certificate to the Trustee a certification
stating that all such Restricted Payments are, or were, permitted by the
Indentures and shall set forth the basis upon which the calculations required by
this "Restricted Payments" covenant were computed, together with a copy of any
fairness opinion or appraisal required by the Indentures.
Incurrence of Indebtedness and Issuance of Preferred Stock
360networks will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt), and 360networks will not issue any Disqualified Stock and will not permit
any of its Restricted Subsidiaries to issue any shares of preferred stock;
provided, however, that 360networks may incur Indebtedness (including Acquired
Debt) and issue Disqualified Stock and any Restricted Subsidiary may incur
Acquired Debt, if either:
(i) the Consolidated Leverage Ratio at the end of 360networks' most
recently ended full fiscal quarter (the "Reference Period") for
which a consolidated balance sheet of 360networks is available
immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued
would have been less than 5.0 to 1.0 determined on a pro forma
basis (including a pro forma application of the net proceeds
therefrom),
53
<PAGE>
as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the
beginning of the Reference Period; or
(ii) the Consolidated Capital Ratio at the end of the Reference Period
would have been less than 2.0 to 1.0, determined after giving
effect to the incurrence or issuance of such Indebtedness or
Disqualified Stock and, to the extent set forth in the
definitions used herein, on a pro forma basis (including, to the
extent set forth in the definitions used herein, a pro forma
application of the net proceeds therefrom).
The first paragraph of this covenant will not prohibit the incurrence
of any of the following items of Indebtedness (collectively, "Permitted Debt"):
(1) the incurrence by 360networks or any of its Restricted
Subsidiaries of Indebtedness under Credit Facilities or Permitted
Vendor Facilities; provided that the aggregate principal amount
of all Indebtedness of 360networks and its Restricted
Subsidiaries outstanding under all Credit Facilities or Permitted
Vendor Facilities after giving effect to such incurrence (with
letters of credit being deemed to have a principal amount equal
to the maximum potential liability of 360networks thereunder)
does not exceed an amount equal to $725.0 million less the
aggregate amount of all Net Proceeds of Asset Sales applied by
360networks or any of its Restricted Subsidiaries since the Issue
Date to permanently repay Indebtedness under a Credit Facility
pursuant to the covenant described above under the caption
"Repurchase at the Option of Holders--Asset Sales;"
(2) the incurrence by 360networks and its Restricted Subsidiaries of
Existing Indebtedness;
(3) the incurrence by 360networks of Indebtedness represented by the
Notes and the Series B Notes;
(4) the incurrence by 360networks or any of its Restricted
Subsidiaries of Purchase Money Indebtedness and Vendor Financing
Indebtedness; provided (A) that the amount thereof does not
exceed 100% of 360networks' and its Restricted Subsidiaries'
aggregate cost (determined in accordance with GAAP in good faith
by the Board of Directors of 360networks) of the construction,
acquisition, development, engineering, installation and
improvement of the applicable Telecommunications Assets and (B)
in the case of the incurrence of either Purchase Money
Indebtedness or Vendor Financing Indebtedness by a Restricted
Subsidiary, such Indebtedness shall be Qualified Subsidiary
Indebtedness;
(5) the incurrence by 360networks or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange
for, or the net proceeds of which are used to refund, refinance
or replace, Indebtedness (other than intercompany Indebtedness)
that was permitted by the Indentures to be incurred under the
first paragraph of this covenant or clause (2), (3), (4), (12),
(14), (15) or (16) of this paragraph;
(6) the incurrence by 360networks or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among
360networks and any of its Restricted Subsidiaries and the
issuance of preferred stock by a Restricted Subsidiary to
360networks or another Restricted Subsidiary of 360networks;
provided, however, that:
(a) if 360networks is the obligor on such Indebtedness, such
Indebtedness must be expressly subordinated to the prior
payment in full in cash of all Obligations with respect to
the Notes; and
54
<PAGE>
(b) (i) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness or preferred stock
being held by a Person other than 360networks or a
Restricted Subsidiary thereof and (ii) any sale or other
transfer of any such Indebtedness or preferred stock to a
Person that is not either 360networks or a Restricted
Subsidiary thereof, shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by 360networks
or such Restricted Subsidiary, as the case may be, that was
not permitted by this clause (6);
(7) the incurrence by 360networks or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the
purpose of fixing or hedging interest or foreign currency
exchange rate risk with respect to any floating rate Indebtedness
or foreign currency based Indebtedness, respectively, that is
permitted by the terms of the Indentures to be outstanding;
provided that the notional amount of any such Hedging Obligation
does not exceed the amount of Indebtedness or other liability to
which such Hedging Obligation relates; and provided further that
such Hedging Obligations are not incurred for speculative
purposes;
(8) the guarantee by 360networks or any of its Restricted
Subsidiaries of Indebtedness of 360networks or any Restricted
Subsidiary of 360networks that was permitted to be incurred by
another provision of this covenant;
(9) the accrual of interest, accretion or amortization of original
issue discount, the payment of interest on any Indebtedness in
the form of additional Indebtedness with the same terms, and the
payment of dividends on Disqualified Stock in the form of
additional shares of the same class of Disqualified Stock;
provided, in each such case, that the amount thereof is included
in Fixed Charges of 360networks as accrued;
(10) 360networks and its Restricted Subsidiaries may incur
Indebtedness solely in respect of bankers acceptances, letters of
credit and performance bonds or similar arrangements, all in the
ordinary course of business (other than to the extent not
supporting Indebtedness);
(11) the incurrence by 360networks or any of its Restricted
Subsidiaries arising from agreements of 360networks or any of its
Restricted Subsidiaries providing for indemnification, adjustment
of purchase price, earn out or other similar obligation, in each
case, incurred or assumed in connection with the disposition of
any business, assets or Restricted Subsidiary of 360networks or
any of its Restricted Subsidiaries, other than guarantees of
Indebtedness incurred by any Person acquiring all or any portion
of such business, assets or Restricted Subsidiary for the purpose
of financing such acquisition;
(12) the incurrence of Indebtedness by Foreign Subsidiaries not to
exceed $50.0 million (or the equivalent amount thereof, in other
foreign currencies);
(13) the incurrence by 360networks or any of its Restricted
Subsidiaries of Acquired Debt in an aggregate amount not to
exceed $100.0 million at any time outstanding;
(14) Indebtedness of 360networks not to exceed, at any one time
outstanding, two times the net cash proceeds received by
360networks after the Measurement Date from the issuance and sale
of its Equity Interest (other than Disqualified Stock) to a
Person that is not a Subsidiary of 360networks, to the extent
such net cash proceeds have not been used pursuant to (A) clause
3(b) of the first paragraph of the "Restricted Payments" covenant
described above or (B) clauses (2) or (4) of the second paragraph
of the "Restricted Payments" covenant described above to make a
Restricted Payment; and
55
<PAGE>
(15) the incurrence by 360networks or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal
amount (or accreted value, as applicable) at any time outstanding
not to exceed $50.0 million.
Indebtedness or preferred stock of any Person which is outstanding at
the time such Person becomes a Restricted Subsidiary of 360networks (including
upon designation of any Subsidiary or other Person as a Restricted Subsidiary)
or is merged with or into or consolidated with 360networks or a Restricted
Subsidiary of 360networks shall be deemed to have been incurred at the time such
Person becomes such a Restricted Subsidiary of 360networks or is merged with or
into or consolidated with 360networks or a Restricted Subsidiary of 360networks,
as applicable.
360networks will not incur any Indebtedness (including Permitted Debt)
that is contractually subordinated in right of payment to any other Indebtedness
of 360networks unless such Indebtedness is also contractually subordinated in
right of payment to the Notes on substantially identical terms; provided,
however, that no Indebtedness of 360networks shall be deemed to be contractually
subordinated in right of payment to any other Indebtedness of 360networks solely
by virtue of being unsecured.
Notwithstanding any other provisions of this covenant, the maximum
amount of Indebtedness that 360networks or a Restricted Subsidiary may incur
shall not be deemed to be exceeded solely as a result of fluctuations in the
exchange rates of currencies.
For purposes of determining compliance with this "Incurrence of
Indebtedness and Issuance of Preferred Stock" covenant, in the event that an
item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (1) through (16) above, or is
entitled to be incurred pursuant to the first paragraph of this covenant,
360networks will be permitted to classify such item of Indebtedness on the date
of its incurrence, or later reclassify all or a portion of such item of
Indebtedness, in any manner that complies with this covenant.
Liens
360networks will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind on any asset now owned or hereafter acquired, except
Permitted Liens, without providing that the Notes shall be secured equally and
ratably with the Indebtedness so secured for so long as such obligations are so
secured; provided, that if the Indebtedness so secured is subordinated to the
Notes, the Notes shall be secured by a Lien senior to the Lien securing such
secured Indebtedness.
Dividend and Other Payment Restrictions Affecting Restricted
Subsidiaries
360networks will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or permit to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary to:
(1) pay dividends or make any other distributions on its Capital
Stock to 360networks or any of our Restricted Subsidiaries, or
with respect to any other interest or participation in, or
measured by, its profits, or pay any indebtedness owed to
360networks or any of 360networks' Restricted Subsidiaries;
(2) make loans or advances to 360networks or any of our Restricted
Subsidiaries; or
(3) transfer any of its properties or assets to 360networks or any of
our Restricted Subsidiaries.
56
<PAGE>
However, the preceding restrictions will not apply to encumbrances or
restrictions existing under or by reason of:
(1) Existing Indebtedness as in effect on the Issue Date and any
amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof;
provided that such amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacement or
refinancings are no more restrictive with respect to such
dividend and other payment restrictions than those contained in
such Existing Indebtedness, as in effect on the Issue Date;
(2) the Credit Facilities, the Indentures, the Notes and the Series B
Notes, Qualified Subsidiary Indebtedness and Indebtedness ranking
pari passu with the Notes; provided that with respect to
Indebtedness ranking pari passu with the Notes such provisions
are no more restrictive than those set forth in the Notes;
(3) applicable law;
(4) any instrument governing Indebtedness or Capital Stock of a
Person acquired by 360networks or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except
to the extent such Indebtedness was incurred in connection with
or in contemplation of such acquisition), which encumbrance or
restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or
assets of the Person, so acquired; provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the
Indentures to be incurred;
(5) customary non-assignment provisions restricting subletting or
assignment in leases or other agreements entered into in the
ordinary course of business and consistent with past practices;
(6) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions on the property so
acquired of the nature described in clause (3) of the preceding
paragraph;
(7) any agreement for the sale or other disposition of a Restricted
Subsidiary that restricts distributions by such Restricted
Subsidiary pending its sale or other disposition; provided that
the consummation of such transaction would not result in a
Default or an Event of Default, that such restriction terminates
if such transaction is not consummated and that the consummation
or abandonment of such transaction occurs within one year of the
date such agreement was entered into;
(8) Permitted Refinancing Indebtedness; provided that the
restrictions contained in the agreements governing such Permitted
Refinancing Indebtedness are no more restrictive than those
contained in the agreements governing the Indebtedness being
refinanced;
(9) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described above under
the caption "Liens" that limit the right of 360networks or any of
its Restricted Subsidiaries to dispose of the assets subject to
such Lien;
(10) customary limitations on the disposition or distribution of
assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business;
(11) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of
business;
57
<PAGE>
(12) encumbrances and restrictions in Indebtedness incurred by Foreign
Subsidiaries in accordance with the covenant described above
under the caption "Incurrence of Indebtedness and Issuance of
Preferred Stock;" and
(13) any Indebtedness or any agreement pursuant to which such
Indebtedness was issued if (A) the encumbrance or restriction
applies only upon a payment or financial covenant default or
event of default contained in such Indebtedness or agreement and
(B) the encumbrance or restriction is not materially more
disadvantageous to the Holders of the Notes than is customary in
comparable financings (as determined in good faith by the Board
of Directors of 360networks).
Amalgamation, Merger, Consolidation, or Sale of Assets
360networks may not, directly or indirectly: (1) amalgamate or
consolidate or merge with or into another Person (whether or not 360networks is
the surviving corporation); or (2) sell, assign, transfer, convey or otherwise
dispose of all or substantially all of its properties or assets, in one or more
related transactions, to another Person; unless:
(1) either: (a) 360networks is the surviving corporation; or (b) the
Person formed by or surviving any such amalgamation,
consolidation or merger (if other than 360networks) or to which
such sale, assignment, transfer, conveyance or other disposition
shall have been made is a corporation organized or existing under
the laws of Canada or any province thereof or the United States,
any state thereof or the District of Columbia;
(2) the Person formed by or surviving any such amalgamation,
consolidation or merger (if other than 360networks) or the Person
to which such sale, assignment, transfer, conveyance or other
disposition shall have been made assumes all the obligations of
360networks under the Notes, the Series B Notes, the Indentures
and the Registration Rights Agreements pursuant to agreements
reasonably satisfactory to the Trustee;
(3) no Default or Event of Default (or an event that, with the
passing of time or giving of notice or both, would constitute an
Event of Default) shall exist or shall occur immediately after
giving effect on a pro forma basis to such transaction;
(4) 360networks or the Person formed by or surviving any such
amalgamation, consolidation or merger (if other than
360networks), or to which such sale, assignment, transfer,
conveyance or other disposition has been made will, on the date
of such transaction after giving pro forma effect thereto and any
related financing transactions as if the same had occurred at the
beginning of the applicable Reference Period, be permitted to
incur at least $1.00 of additional Indebtedness pursuant to the
Consolidated Leverage Ratio test or the Consolidated Capital
Ratio test set forth in the first paragraph of the covenant
described above under the caption "--Incurrence of Indebtedness
and Issuance of Preferred Stock";
(5) the transaction will not result in 360networks or the Person
formed by or surviving any such amalgamation, consolidation or
merger (if other than 360networks) being required to make any
deduction or withholding on account of Taxes as described under
the caption "Redemption for Changes in Canadian Withholding
Taxes" and "Payment of Additional Amounts" from any payment under
or in respect of the Notes that 360networks would not have been
required to make had such transaction or series of related
transactions not occurred; and
(6) 360networks shall have delivered to the Trustee an Officers'
Certificate and an opinion of counsel, each stating that such
amalgamation, consolidation, merger or transfer and such
supplemental indenture, if any, comply with the Indentures.
58
<PAGE>
In addition, 360networks may not, directly or indirectly, lease all or
substantially all of its properties or assets, in one or more related
transactions, to any other Person. This "Amalgamation, Merger, Consolidation, or
Sale of Assets" covenant will not apply to a sale, assignment, transfer,
conveyance or other disposition of assets between or among 360networks and any
of its Wholly-Owned Restricted Subsidiaries.
Upon any amalgamation, consolidation or merger or any transfer of all
or substantially all of the assets of 360networks in accordance with the
foregoing, the successor corporation formed by such amalgamation or
consolidation or into which 360networks is merged or to which such transfer is
made shall succeed to and (except in the case of a lease) be substituted for,
and may exercise every right and power of, 360networks under the Indentures with
the same effect as if such successor corporation had been named therein as
360networks, and (except in the case of a lease) 360networks shall be released
from the obligations under the Notes, and the Indentures except with respect to
any obligations that arise from, or are related to, such transaction.
For purposes of the foregoing, the transfer (by assignment, sale or
otherwise) of all or substantially all of the properties and assets of one or
more Subsidiaries, 360networks, interest in which constitutes all or
substantially all of the properties and assets of 360networks, shall be deemed
to be the transfer of all or substantially all of the properties and assets of
360networks.
In the case of any such amalgamation, consolidation or merger or any
transfer of all or substantially all of our assets, a notice will be published
in Luxembourg. See "--Paying Agent and Registrar for the Notes."
Transactions with Affiliates
360networks will not, and will not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties, assets or securities to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each, an "Affiliate Transaction"), unless:
(1) such Affiliate Transaction is on terms that are no less favorable
to 360networks or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by
360networks or such Restricted Subsidiary with a Person that is
not an Affiliate; and
(2) 360networks delivers to the Trustee:
(a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate
consideration in excess of $5.0 million, a resolution of the
Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with
this covenant and that such Affiliate Transaction has been
approved by a majority of the disinterested members of the
Board of Directors and is in the best interests of
360networks or such Restricted Subsidiary; and
(b) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate
consideration in excess of $10.0 million, an opinion as to
the fairness to the Holders of such Affiliate Transaction
from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing.
The following items shall not be deemed to be Affiliate Transactions
and, therefore, will not be subject to the provisions of the prior paragraph:
(1) reasonable fees and compensation paid to, and indemnity provided
on behalf of, officers, directors, employees, agents or
consultants of 360networks or any of its Restricted Subsidiaries
as determined in good faith by the Board of Directors or senior
management of 360networks;
59
<PAGE>
(2) transactions between or among 360networks and any of its
Restricted Subsidiaries;
(3) any sale or other issuance of Equity Interests (other than
Disqualified Stock) of 360networks;
(4) Restricted Payments that are permitted by the provisions of the
Indentures described above under the caption "Restricted
Payments" or by clause (1), (3), (7), (8) or (9) of the
definition of "Permitted Investments";
(5) any agreement or arrangement as in effect on the Issue Date or
any amendment thereto or any transaction contemplated thereby
(including pursuant to any amendment thereto) in any replacement
agreement or arrangement thereto so long as any such amendment or
replacement agreement or arrangement is not more disadvantageous
to 360networks or its Restricted Subsidiaries, as the case may
be, in any material respect than the original agreement as in
effect on the Issue Date;
(6) transactions involving aggregate consideration of up to $25.0
million between 360networks or its Restricted Subsidiaries and
Ledcor Inc. or any of its Subsidiaries (other than 360networks
and its Restricted Subsidiaries); provided that 360networks
delivers to the Trustee a resolution of the Board of Directors,
set forth in an Officers' Certificate, stating that such
Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors; and
(7) transactions with Urbanlink pertaining to the Canadian
telecommunications arrangements consistent with the description
under "Related Party Transactions--Transactions with
Ledcor--Canadian telecommunications arrangements," and any
contracts, transactions and arrangements in connection therewith.
Issuances of Guarantees by Restricted Subsidiaries
360networks will not permit any Restricted Subsidiary, directly or
indirectly, to guarantee, assume or in any other manner become liable with
respect to any Indebtedness of 360networks which is pari passu (other than any
Indebtedness incurred under a Credit Facility) with or subordinate in right of
payment to the Notes ("Guaranteed Indebtedness"), unless (i) such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture to the
Indentures providing for a guarantee (a "Subsidiary Guarantee") of payment of
the Notes by such Restricted Subsidiary and (ii) such Restricted Subsidiary
waives and will not in any manner whatsoever claim, or take the benefit or
advantage of, any rights of reimbursement, indemnity or subrogation or any other
rights against 360networks or any other Restricted Subsidiary as a result of any
payment by such Restricted Subsidiary under its Subsidiary Guarantee; provided
that this paragraph shall not be applicable to any guarantee of any Restricted
Subsidiary that existed at the time such Person became a Restricted Subsidiary
and was not incurred in connection with, or in contemplation of, such Person
becoming a Restricted Subsidiary. If the Guaranteed Indebtedness is (A) pari
passu with the Notes, then the guarantee of such Guaranteed Indebtedness shall
be pari passu with, or subordinated to, the Subsidiary Guarantee or (B)
subordinated to the Notes, then the guarantee of such Guaranteed Indebtedness
shall be subordinated to the Subsidiary Guarantee at least to the extent that
the Guaranteed Indebtedness is subordinated to the Notes.
Notwithstanding the foregoing, any Subsidiary Guarantee by a Restricted
Subsidiary may provide by its terms that it shall be automatically and
unconditionally released and discharged upon (i) any sale, exchange or transfer,
to any Person that is not an Affiliate of 360networks, of all of our and each
Restricted Subsidiary's Capital Stock in, or all or substantially all of the
assets of, such Restricted Subsidiary (which sale, exchange or transfer is not
prohibited by the Indentures) or (ii) the release or discharge of the guarantee
which resulted in the creation of such Subsidiary Guarantee, except a discharge
or release by or as a result of payment under such guarantee.
60
<PAGE>
Designation of Restricted and Unrestricted Subsidiaries
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if that designation would not cause a Default. If a
Restricted Subsidiary is designated as an Unrestricted Subsidiary, all
outstanding Investments owned by 360networks and its Restricted Subsidiaries in
the Subsidiary so designated will be deemed to be an Investment made as of the
time of such designation and will reduce the amount available for Restricted
Payments under the first paragraph of the covenant described above under the
caption "Restricted Payments." All such outstanding Investments will be valued
at their fair market value at the time of such designation; provided that any
determination of fair market value equal to or greater than $100.0 million shall
be determined by an independent accounting, appraisal or investment banking firm
of national standing. That designation will only be permitted if such Restricted
Payment would be permitted at that time and if such Restricted Subsidiary
otherwise meets the definition of an Unrestricted Subsidiary. The Board of
Directors may redesignate any Unrestricted Subsidiary to be a Restricted
Subsidiary if the redesignation would not cause a Default and such redesignation
will increase the amount available for Restricted Payments under the first
paragraph of the covenant described under the caption "Restricted Payments" as
provided therein or Permitted Investments, as applicable.
Business Activities
360networks will not, and will not permit any Restricted Subsidiary to,
engage to any material extent in any business other than the Telecommunications
Business.
Payments for Consent
360networks will not, and will not permit any of its Subsidiaries to,
directly or indirectly, pay or cause to be paid any consideration to or for the
benefit of any Holder of Notes for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indentures or the Notes
unless such consideration is offered to be paid and is paid to all Holders of
the Notes that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
Reports
For so long as any Notes remain outstanding, 360networks will furnish
to the Holders the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act. Whether or not 360networks is subject to
Section 13(a) or 15(d) of the Exchange Act, 360networks shall file with the
Commission and furnish to the Holders and the Trustee (i) within 140 days after
the end of each fiscal year, annual reports on Form 20-F or 40-F, as applicable
(or any successor form), containing the information required to be contained
therein (or required in such successor form) and (ii) (a) within 45 days after
the end of each of the first three fiscal quarters of each fiscal year, reports
on Form 10-Q or (b) within 60 days after the end of each of the first three
fiscal quarters of each fiscal year, reports on Form 6-K (or any successor form)
which, regardless of applicable requirements, shall, at a minimum, contain a
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." All reports and information required by the section will also be
available for review by Holders, without charge, at the offices of the Paying
Agent and Registrar in Luxembourg.
Events of Default and Remedies
Each of the following is an Event of Default under each Indenture:
(1) default for 30 days in the payment when due of interest on, or
Additional Amounts, if any, with respect to, the Notes;
(2) default in payment when due of the principal of or premium, if
any, on the Notes;
61
<PAGE>
(3) failure by 360networks or any of its Restricted Subsidiaries to
comply with the provisions described under the captions
"--Certain Covenants--Restricted Payments," "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock," "--Certain Covenants--Amalgamation, Merger, Consolidation
or Sale of Assets" and "--Certain Covenants--Transactions with
Affiliates";
(4) failure by 360networks or any of its Restricted Subsidiaries for
15 days after written notice thereof has been given to
360networks by the Trustee or to 360networks and the Trustee by
Holders of at least 25% of the aggregate principal amount of
Notes outstanding to comply with the provisions described under
the captions "Repurchase at the Option of Holders--Change of
Control" or "Asset Sales";
(5) failure by 360networks or any of its Restricted Subsidiaries for
60 days after written notice thereof has been given to
360networks by the Trustee or to 360networks and the Trustee by
Holders of at least 25% of the aggregate principal amount of
Notes outstanding to comply with any of the other agreements in
the Indentures or the Notes;
(6) the voluntary relinquishment by 360networks of any of its rights
under the Non-Competition Agreement or the failure by 360networks
for 30 days after written notice thereof has been given to
360networks by the Trustee or to 360networks and the Trustee by
Holders of at least 25% of the aggregate principal amount of
Notes outstanding to enforce any of such rights, in each case
which is materially detrimental to the interests of 360networks
or the Holders;
(7) default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced
any Indebtedness for money borrowed by 360networks or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by
360networks or any of its Restricted Subsidiaries) whether such
Indebtedness or guarantee now exists, or is created after the
Issue Date, if that default:
(a) is caused by a failure to pay principal of or premium, if
any, on such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of
such default (a "Payment Default"); or
(b) results in the acceleration of such Indebtedness prior to
its express maturity, and, in each case, the principal
amount of any such Indebtedness, together with the principal
amount of any other such Indebtedness under which there has
been a Payment Default or the maturity of which has been so
accelerated, aggregates $10.0 million or more;
(8) failure by 360networks or any of its Restricted Subsidiaries to
pay final judgments which are non-appealable aggregating in
excess of $10.0 million (net of applicable insurance coverage
which is acknowledged in writing by the insurer), which judgments
are not paid, discharged or stayed for a period of 60 days; and
(9) certain events of bankruptcy or insolvency with respect to
360networks or any of its Restricted Subsidiaries.
In the case of an Event of Default arising from certain events of
bankruptcy or insolvency, with respect to 360networks, any Restricted Subsidiary
that is a Significant Subsidiary or any group of Restricted Subsidiaries that,
taken together, would constitute a Significant Subsidiary, all outstanding Notes
will become due and payable immediately without further action or notice. If any
other Event of Default occurs and is continuing, the Trustee by notice to
360networks or the Holders of at least 25% of the aggregate principal amount of
the then outstanding
62
<PAGE>
Notes under an Indenture by notice to 360networks and the Trustee may declare
all such Notes to be due and payable immediately.
Holders of the Notes may not enforce the Indentures or the Notes except
as provided in the Indentures. Subject to certain limitations, Holders of a
majority of the aggregate principal amount of the then outstanding Notes under
an Indenture may direct the Trustee in its exercise of any trust or power.
The Holders of a majority in aggregate principal amount of the Notes
then outstanding under an Indenture by notice to the Trustee may on behalf of
the Holders of such Notes waive any existing Default or Event of Default and its
consequences under the relevant Indenture except a continuing Default or Event
of Default in the payment of premium, if any, or interest on, or the principal
of, the Notes.
360networks is required to deliver to the Trustee annually a statement
regarding compliance with the Indentures. Upon becoming aware of any Default or
Event of Default, 360networks is required to deliver to the Trustee a statement
specifying such Default or Event of Default.
No Personal Liability of Directors, Officers, Employees and Stockholders
No director, officer, employee, incorporator or stockholder of
360networks or any of its Subsidiaries, as such, shall have any liability for
any obligations of 360networks or its Subsidiaries under the Notes, the
Indentures or for any claim based on, in respect of, or by reason of, such
obligations or their creation. Each Holder of Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of the
consideration for issuance of the Notes. The waiver may not be effective to
waive liabilities under the federal securities laws.
Legal Defeasance and Covenant Defeasance
360networks may, at its option and at any time, elect to have all of
its obligations discharged with respect to the outstanding Notes of any series
("Legal Defeasance") except for:
(1) the rights of Holders of outstanding Notes of such series to
receive payments in respect of the principal of, premium, if any,
and interest on such Notes when such payments are due from the
trust referred to below;
(2) our obligations with respect to the Notes of such series
concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of
an office or agency for payment and money for security payments
held in trust;
(3) the rights, powers, trusts, duties and immunities of the Trustee,
and 360networks' obligations in connection therewith;
(4) the Legal Defeasance provisions of the Indentures; and
(5) 360networks' obligation to pay Additional Amounts.
In addition, 360networks may, at its option and at any time, elect to
have the obligations of 360networks released with respect to certain covenants
that are described in the Indentures ("Covenant Defeasance") and thereafter any
omission to comply with those covenants shall not constitute a Default or Event
of Default with respect to the affected Notes. In the event Covenant Defeasance
occurs, certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the affected Notes.
63
<PAGE>
In order to exercise either Legal Defeasance or Covenant Defeasance:
(1) 360networks must irrevocably deposit with the Trustee, in trust,
for the benefit of the Holders of the Notes of such series, cash
in U.S. dollars or legal tender in the countries constituting the
European Monetary Union, non-callable Government Securities or
EEA Government Obligations, or a combination thereof in such
amounts as will be sufficient, in the opinion of a nationally
recognized firm of independent public accountants, to pay the
principal of, premium, if any, and interest on the outstanding
Notes on the stated maturity or on the applicable redemption
date, as the case may be, and 360networks must specify whether
such Notes are being defeased to maturity or to a particular
redemption date;
(2) in the case of Legal Defeasance, 360networks shall have delivered
to the Trustee an Opinion of Counsel reasonably acceptable to the
Trustee confirming that (a) 360networks has received from, or
there has been published by, the Internal Revenue Service a
ruling or (b) since the Issue Date, there has been a change in
the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Notes of such series
will not recognize income, gain or loss for United States federal
income tax purposes as a result of such Legal Defeasance and will
be subject to United States federal income tax on the same
amounts, in the same manner and at the same times as would have
been the case if such Legal Defeasance had not occurred and
360networks shall have delivered to the Trustee an opinion of
counsel in Canada reasonably acceptable to the Trustee confirming
that the Holders of the outstanding Notes of such series will not
recognize income, gain or loss for Canadian federal income tax
purposes as a result of such Legal Defeasance and will be subject
to Canadian federal income tax on the same amounts, in the same
manner and at the same times as would have been the case if such
Legal Defeasance had not occurred;
(3) in the case of Covenant Defeasance, 360networks shall have
delivered to the Trustee an Opinion of Counsel reasonably
acceptable to the Trustee confirming that the Holders of the
outstanding Notes of such series will not recognize income, gain
or loss for United States federal income tax purposes as a result
of such Covenant Defeasance and will be subject to United States
federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Covenant
Defeasance had not occurred and 360networks shall have delivered
to the Trustee an opinion of counsel in Canada reasonably
acceptable to the Trustee confirming that the Holders of the
outstanding Notes of such series will not recognize income, gain
or loss for Canadian federal income tax purposes as a result of
such Covenant Defeasance and will be subject to Canadian federal
income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant
Defeasance had not occurred;
(4) no Default or Event of Default shall have occurred and be
continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be
applied to such deposit);
(5) such Legal Defeasance or Covenant Defeasance will not result in a
breach or violation of, or constitute a default under any
material agreement or instrument (other than the Indentures) to
which 360networks or any of its Restricted Subsidiaries is a
party or by which 360networks or any of its Restricted
Subsidiaries is bound;
(6) 360networks must deliver to the Trustee an Officers' Certificate
stating that the deposit was not made by 360networks with the
intent of preferring the Holders of Notes over the other
creditors
64
<PAGE>
of 360networks with the intent of defeating, hindering, delaying
or defrauding creditors of 360networks or others; and
(7) 360networks must deliver to the Trustee an Officers' Certificate
and an opinion of counsel, in the case of the Officers'
Certificate, stating that all conditions precedent relating to
the Legal Defeasance or the Covenant Defeasance have been
complied with and, in the case of the opinion of counsel, that
the conditions precedent in clauses (1) (with respect to the
validity and perfection of the security interest), (2), (3) and
(5) have been complied with and that the trust referred to in
clause (1) will not be required to register under the Investment
Company Act of 1940.
Indemnification for Judgment Currency Fluctuations
The obligations of 360networks to any Holder of Notes shall,
notwithstanding any judgment in a currency (the "Judgment Currency") other than
the Agreement Currency (in the case of Dollar Notes, U.S. Dollars shall
constitute the "Agreement Currency" and in the case of Euro Notes, euros shall
constitute the "Agreement Currency"), be discharged only to the extent that on
the day following receipt by such Holder of Notes or the Trustee, as the case
may be, of any amount in the Judgment Currency, such Holder of Notes may in
accordance with normal banking procedures purchase the Agreement Currency with
the Judgment Currency. If the amount of the Agreement Currency so purchased is
less than the amount originally to be paid to such Holder of Notes or the
Trustee, as the case may be, in the Agreement Currency, 360networks will pay the
difference and if the amount of the Agreement Currency so purchased exceeds the
amount originally to be paid to such Holder of Notes or the Trustee, as the case
may be, such Holder of Notes or the Trustee, as the case may be, will pay to or
for the account of 360networks such excess; provided that such Holder of Notes
or the Trustee, as the case may be, shall not have any obligation to pay any
such excess as long as a Default by 360networks in its obligations under the
Notes or the Indentures has occurred and is continuing, in which case such
excess may be applied by such Holder of Notes to such obligations.
Satisfaction and Discharge
An Indenture will be discharged and will cease to be of further effect
as to all Notes issued thereunder, when either (a) all such Notes theretofore
authenticated and delivered (except lost, stolen or destroyed Notes which have
been replaced or paid and Notes for whose payment money has theretofore been
deposited in trust and thereafter repaid to 360networks) have been delivered to
the Trustee for cancellation; or (b)(i) all such Notes not theretofore delivered
to such Trustee for cancellation have become due and payable by reason of the
making of a notice of redemption or otherwise or will become due and payable
within one year and 360networks or a Subsidiary Guarantor, if any, has
irrevocably deposited or caused to be deposited with such Trustee as trust funds
in trust an amount of money sufficient to pay and discharge the entire
Indebtedness on such Notes not theretofore delivered to the Trustee for
cancellation for principal, premium, if any, and accrued interest to the date of
maturity or redemption; (ii) no Default or Event of Default with respect to such
Indentures or such Notes shall have occurred and be continuing on the date of
such deposit or shall occur as a result of such deposit and such deposit will
not result in a breach or violation of, or constitute a default under, any other
instrument to which 360networks or a Subsidiary Guarantor, if any, is a party or
by which 360networks or a Subsidiary Guarantor, if any, is bound; (iii)
360networks or a Subsidiary Guarantor, if any, has paid or caused to be paid all
sums payable by it under such Indenture; and (iv) 360networks has delivered
irrevocable instructions to the Trustee under such Indenture to apply the
deposited money toward the payment of such Notes at maturity or the redemption
date, as the case may be.
In addition, 360networks must deliver an Officers' Certificate and an
opinion of counsel to the Trustee stating that all conditions precedent to
satisfaction and discharge have been satisfied.
65
<PAGE>
Amendment, Supplement and Waiver
With the consent of Holders of not less than a majority of the Notes of
any series issued under an Indenture at the time outstanding, 360networks and
the Trustee are permitted to amend or supplement such Indenture or any
supplemental indenture or modify the rights of the Holders of such series of
Notes; provided that without the consent of each Holder affected, no amendment,
supplement, modification or waiver may (with respect to any Notes of such series
held by a non-consenting Holder):
(1) reduce the principal amount of Notes whose Holders must consent
to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of such
Note (other than provisions relating to the covenants described
above under the caption "Repurchase at the Option of Holders");
(3) reduce the rate of or change the time for payment of interest on
any Note;
(4) waive a Default or Event of Default in the payment of principal
of or premium, if any, or interest on such Notes (except a
rescission of acceleration of such Notes by the Holders of at
least a majority of such series of Notes then outstanding issued
under an Indenture and a waiver of the payment default that
resulted from such acceleration);
(5) make any Note payable in money other than that stated in such
Note;
(6) make any change in the provisions of the relevant Indenture
relating to waivers of past Defaults or the rights of Holders of
such Notes to receive payments of principal of or premium, if
any, or interest on such Notes;
(7) waive a redemption payment with respect to any Note (other than a
payment required by one of the covenants described above under
the caption "Repurchase at the Option of Holders");
(8) cause such Notes to become subordinate in right of payment to any
other Indebtedness or to otherwise reduce the ranking of such
Notes;
(9) make any change that would adversely affect the rights of the
Holders to receive Additional Amounts;
(10) modify the obligation of 360networks to make a Change of Control
Offer to purchase Notes after the occurrence of an event which
constitutes a Change of Control; or
(11) make any change in the preceding amendment and waiver provisions.
Notwithstanding the preceding, without the consent of any Holder of
Notes, 360networks and the Trustee may amend or supplement the Indentures or the
Notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated Notes in addition to or in place of
certificated Notes;
(3) to provide for the assumption of our obligations to Holders of
Notes in the case of a merger or consolidation or sale of all or
substantially all of our assets;
66
<PAGE>
(4) to make any change that would provide any additional rights or
benefits to the Holders of Notes or that does not adversely
affect the legal rights under the Indentures of any such Holder;
or
(5) to comply with requirements of the Commission in order to effect
or maintain the qualification of the Indentures under the Trust
Indenture Act.
360networks will inform the Luxembourg Stock Exchange of any amendment
or supplement to either Indenture, and notice will be published in Luxembourg.
See "--Paying Agent and Registrar for the Notes."
Concerning the Trustee
If the Trustee becomes a creditor of 360networks, the Indentures limit
its right to obtain payment of claims in certain cases, or to realize, on
certain property received in respect of any such claim as security or otherwise.
The Trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the Commission for permission to continue or resign.
The Holders of a majority of the then outstanding Notes under an
Indenture will have the right to direct the time, method and place of conducting
any proceeding for exercising any remedy available to the trustee, subject to
certain exceptions. The Indentures provide that in case an Event of Default
shall occur and be continuing, the Trustee will be required, in the exercise of
its power, to use the degree of care of a prudent man in the conduct of his own
affairs. Subject to such provisions, the Trustee will be under no obligation to
exercise any of its rights or powers under the Indentures at the request of any
Holder of Notes, unless such Holder shall have offered to the Trustee security
and indemnity satisfactory to it against any loss, liability or expense.
Additional Information
Anyone who receives this prospectus may obtain copies of the Indentures
and Registration Rights Agreements without charge by writing to 360networks
inc., 1500-1066 West Hastings Street, Vancouver, British Columbia, Canada V6E
3X1, Attention: Secretary.
Governing Law
The Indentures provide that they and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of laws to the extent that the
application of the law of another jurisdiction would be required thereby.
Enforceability of Judgments
Since a portion of our assets are outside the United States, any
judgments obtained in the United States against us, including judgments with
respect to the payment of principal, premium, interest, Additional Amounts,
Change of Control Payment, offer price, redemption price or other amounts
payable under the Notes, may be not collectible within the United States.
We have been informed by our Canadian counsel, Farris, Vaughan, Wills &
Murphy, that the laws of the Province of British Columbia and the federal laws
of Canada applicable therein permit an action to be brought in a court of
competent jurisdiction in the Province of British Columbia (a "Canadian Court")
on any final and conclusive judgment in personam of any federal or state court
located in the Borough of Manhattan in The City of New York ("New York Court")
that is not impeachable as void or voidable under the internal laws of the State
of New York for a sum certain in respect of the enforcement of the Indentures or
the Notes if (i) the court rendering such judgment had jurisdiction over the
judgment debtor, as recognized by the Canadian Court (and submission by us in
the Indentures to the non-exclusive jurisdiction of the New York Court will be
sufficient for that purpose),
67
<PAGE>
(ii) such judgment was not obtained by fraud or in
a manner contrary to natural justice and the enforcement thereof would not be
inconsistent with public policy, as that term is applied by a Canadian Court, or
contrary to any order made by the Attorney General of Canada under the Foreign
Extraterritorial Measures Act (Canada), (iii) the enforcement of such judgment
does not constitute, directly or indirectly, the enforcement of such foreign
revenue, expropriatory or penal laws and (iv) the action to enforce such
judgment is commenced within the applicable limitation period. We have been
advised by Farris, Vaughan, Wills & Murphy that it knows of no reason, based
upon public policy under the laws of the Province of British Columbia and the
federal laws of Canada applicable therein, for avoiding recognition of a
judgment of a New York Court to enforce the Indentures or the Notes.
Listing
The Notes are listed on the Luxembourg Stock Exchange. The legal notice
relating to the issuance of the Notes and the Articles of Association of
360networks will be registered prior to the listing with the Registrar of the
District Court in Luxembourg, where such documents are available for inspection
and where copies thereof can be obtained upon request. As long as the Notes are
listed on the Luxembourg Stock Exchange, an agent for making payments on, and
transfers of, Notes will be maintained in Luxembourg. 360networks has initially
designated Banque Generale du Luxembourg as its agent for such purposes.
Consent to Jurisdiction and Service
The Indentures provide that 360networks will irrevocably appoint CT
Corporation System as its agent for service of process in any suit, action, or
proceeding with respect to the Indentures or the Notes and for actions brought
under federal or state securities laws in any federal or state court located in
the Borough of Manhattan in The City of New York, and submits to such
non-exclusive jurisdiction.
Certain Definitions
Set forth below are certain defined terms used in the Indentures.
Reference is made to the Indentures for a full disclosure of all such terms, as
well as any other capitalized terms used herein for which no definition is
provided.
"Acquired Debt" means, with respect to any specified Person:
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of such
specified Person; provided that such Indebtedness was not
incurred in connection with, or in contemplation of, such other
Person merging with or into, or becoming a Subsidiary of, such
specified Person; and
(2) Indebtedness secured by a Lien encumbering any asset acquired by
such specified Person.
"Adjusted Consolidated Cash Flow" means Consolidated Cash Flow minus
all non-cash items increasing Consolidated Net Income for the applicable period
to the extent not previously deducted in computing Consolidated Cash Flow,
whether or not such non-cash items were accrued or incurred in the ordinary
course of the business or otherwise.
"Adjusted Fiber Value" means, at any time after certain Affiliates of
Ledcor Inc. have contributed dark fiber strands to 360networks pursuant to the
Undertaking Agreements, an amount equal to $72.5 million less one-twelfth (1/12)
of such amount for each of such dark fiber strands which has been sold, leased,
contributed or with respect to which an IRU has been granted to any Person.
68
<PAGE>
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control,"
as used with respect to any Person, shall mean the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control. For purposes of this
definition, the terms "controlling," "controlled by" and "under common control
with" shall have correlative meanings.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights other than any sale, lease, transfer, conveyance or other
disposition of telecommunications capacity, transmission rights,
or other telecommunications services provided over our network in
the ordinary course of business; provided that the sale,
conveyance or other disposition of all or substantially all of
the assets of 360networks and its Restricted Subsidiaries taken
as a whole will be governed by the provisions of the Indentures
described above under the caption "Change of Control" and/or the
provisions described above under the caption "Merger,
Consolidation or Sale of Assets" and not by the provisions of the
"Asset Sale" covenant; and
(2) the issuance of Equity Interests by any of our Restricted
Subsidiaries or the sale of Equity Interests in any of our
Subsidiaries,
Notwithstanding the preceding, the following items shall be deemed not
to be Asset Sales:
(1) any single transaction or series of related transactions that:
(a) involves assets having a fair market value of less than $1.0
million; or (b) results in net proceeds to 360networks and its
Restricted Subsidiaries of less than $1.0 million;
(2) a transfer of assets between or among 360networks and its
Restricted Subsidiaries or between Restricted Subsidiaries,
(3) Permitted Telecommunication Asset Dispositions;
(4) an issuance of Equity Interests by a Restricted Subsidiary to
360networks or to a Wholly-Owned Restricted Subsidiary;
(5) a Permitted Investment or a Restricted Payment that is permitted
by the covenant described above under the caption "Restricted
Payments;" and
(6) sales of Equity Interests to minority shareholders; provided such
sales do not increase the ownership percentage of the minority
shareholders.
"Beneficial Owner" has the meaning assigned to such term in Rule 13d-3
and Rule 13d-5 under the Exchange Act, except that in calculating the beneficial
ownership of any particular "person" (as such term is used in Section 13(d)(3)
of the Exchange Act), such "person" shall be deemed to have beneficial ownership
of all securities that such "person" has the right to acquire, whether such
right is currently exercisable or is exercisable only upon the occurrence of a
subsequent condition.
"Canadian Taxing Authority" shall mean any federal, provincial,
territorial or other Canadian government or any authority or agency therein or
thereof having power to tax.
69
<PAGE>
"Capital Lease Obligation" means, at the time any determination thereof
is to be made, the amount of the liability in respect of a capital lease that
would at that time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents
(however designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or limited);
and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or
distributions of assets of, the issuing Person.
"Cash Equivalents" means any of the following:
(1) any investment in direct obligations of the United States of
America or any agency thereof, of any member states of the
European Union or any agency thereof or of Canada or any province
or agency thereof, of obligations guaranteed by the United States
of America or any agency thereof, of any member states of the
European Union or any agency thereof or of Canada or any province
or agency thereof, in each case with a term of not more than one
year (provided that any province of Canada must be rated at least
"R-1" by the Dominion Bond Rating Service Limited);
(2) investments in time deposit accounts, term deposit accounts,
certificates of deposit, money-market deposits, bankers
acceptances and obligations maturing within one year of the date
of acquisition thereof issued by a bank or trust company which is
organized under the laws of the United States of America, any
state thereof, any member state of the European Union, Canada or
any province thereof, and which bank or trust company has, or the
obligations of which bank or trust company is guaranteed by a
bank or trust company which has, capital, surplus and undivided
profits aggregating in excess of $150.0 million (or the foreign
currency equivalent thereof) and has outstanding debt which is
rated "A" (or such similar equivalent rating) or higher by at
least one "nationally recognized statistical rating organization"
(as defined in Rule 436 under the Securities Act) or by Dominion
Bond Rating Service Limited or Canadian Bond Rating Service, Inc.
or any money-market fund sponsored by a registered broker dealer
or mutual fund distributor;
(3) repurchase obligations with a term of not more than 30 days for
underlying securities of the types described in clause (1) above
entered into with a bank meeting the qualifications described in
clause (2) above;
(4) investments in commercial paper, maturing not more than 90 days
after the date of acquisition, issued by a corporation (other
than 360networks or an Affiliate of 360networks) organized and in
existence under the laws of the United States of America, a
member state of the European Union or Canada with a rating at the
time as of which any investment therein is made of "P-1" (or
higher) according to Moody's or "A-1" (or higher) according to
S&P or at least "R-1" by Dominion Bond Rating Service Limited or
Canadian Bond Rating Service (in the case of a Canadian issuer);
70
<PAGE>
(5) investments in securities with maturities of six months or less
from the date of acquisition issued or fully guaranteed by any
state, commonwealth, territory or province of the United States
of America, a member state of the European Union or Canada, or by
any political subdivision or taxing authority thereof, and rated
at least "R-1" by the Dominion Bond Rating Service Limited (in
the case of a Canadian issuer);
(6) investments in money market funds at least 95% of the assets of
which constitute Cash Equivalents of the kinds described in
clauses (1) through (5) of this definition; and
(7) all obligations of the United States of America, a member state
of the European Union, Canada or any other sovereign nation which
are authorized under the terms governing any Indebtedness of
360networks from time to time outstanding to be deposited in
connection with a legal defeasance, covenant defeasance or final
discharge of such Indebtedness.
"Change of Control" means the occurrence of any of the following:
(1) the sale, transfer, conveyance or other disposition (other than
by way of merger or consolidation), in one or a series of related
transactions, of all or substantially all of the assets of
360networks and its Subsidiaries taken as a whole to any "person"
(as such term is used in Section 13(d)(3) of the Exchange Act)
other than a Permitted Holder;
(2) the adoption of a plan relating to the liquidation or dissolution
of 360networks;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which is
that any "person" (as defined above), other than a Permitted
Holder, becomes the Beneficial Owner, directly or indirectly, of
more than 50% (the "Voting Threshold") of the Voting Stock of
360networks, measured by voting power rather than number of
shares provided that if, in the opinion of nationally recognized
tax counsel to 360networks, based on a change to the Income Tax
Act (Canada) or regulations adopted thereunder, the published
administrative practices of the Canada Customs and Revenue Agency
or the publication of a judicial decision in each case enacted,
promulgated or published after the date of the sale of the Series
A Notes, which change in law, regulation or publication of an
administrative practice or judicial decision provides that in
reference to a change of control which is an acceptable
"triggering event" for purposes of subparagraph 212(1)(b)(vii) of
the Income Tax Act (Canada), requiring 360networks to initiate a
Change of Control Offer, that control generally means a voting
threshold of 50% or less (the "Reduced Voting Threshold"), then
the Voting Threshold shall be reduced on a prospective basis to
such Reduced Voting Threshold, but in no event shall the Reduced
Voting Threshold be less than 35%;
(4) the first day on which a majority of the members of the Board of
Directors of 360networks are not Continuing Directors;
(5) 360networks consolidates with, or merges with or into, any
Person, or any Person consolidates with, or merges with or into,
360networks, in any such event pursuant to a transaction in which
any of the outstanding Voting Stock of 360networks is converted
into or exchanged for cash, securities or other property, other
than any such transaction where the Voting Stock of 360networks
outstanding immediately prior to such transaction is converted
into or exchanged for Voting Stock (other than Disqualified
Stock) of the surviving or transferee Person constituting a
majority of the outstanding shares of such Voting Stock of such
surviving or transferee Person immediately after giving effect to
such issuance;
71
<PAGE>
(6) any person other than a Permitted Holder shall succeed in having
a sufficient number of its nominees elected to the Board of
Directors of 360networks such that such nominees will constitute
a majority of 360networks' Board of Directors; or
(7) certain events of bankruptcy or insolvency with respect to
360networks or any of its Restricted Subsidiaries.
"Concurrent Equity Offering" means the initial public offering by
360networks of its Subordinate Voting Shares to be made pursuant to a
registration statement on Form F-1 (No. 333-95621) filed with the Commission on
January 28, 2000, as such registration statement is amended or supplemented from
time to time.
"Consolidated Capital Ratio" means, with respect to 360networks as of
any date, the ratio of (i) the aggregate consolidated principal amount of
Indebtedness of 360networks and its Restricted Subsidiaries then outstanding to
(ii) the Consolidated Net Worth of 360networks and its Restricted Subsidiaries
as of such date, in each case as shown on the consolidated balance sheet of
360networks in accordance with GAAP.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus:
(1) provision for taxes based on income or profits of such Person and
its Restricted Subsidiaries for such period, to the extent that
such provision for taxes was deducted in computing such
Consolidated Net Income; plus
(2) Fixed Charges of such Person and its Restricted Subsidiaries for
such period, whether paid or accrued and whether or not
capitalized (including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment
obligations, the interest component of all payments associated
with Capital Lease Obligations, commissions, discounts and other
fees and charges incurred in respect of letter of credit or
bankers acceptance financings, and net payments, if any, pursuant
to Hedging Obligations), to the extent that any such expense was
deducted in computing such Consolidated Net Income; plus
(3) depreciation, amortization (including amortization of goodwill
and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that
it represents an accrual of or reserve for cash expenses in any
future period or amortization of a prepaid cash expense that was
paid in a prior period) of such Person and its Restricted
Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income; minus
(4) non-cash items increasing such Consolidated Net Income for such
period, other than items that were accrued in the ordinary course
of business, in each case, on a consolidated basis and determined
in accordance with GAAP. Notwithstanding the preceding, the
provision for taxes based on the income or profits of, and the
depreciation and amortization and other non-cash charges of, a
Restricted Subsidiary of 360networks shall be added to
Consolidated Net Income to compute Consolidated Cash Flow of
360networks only to the extent that a corresponding amount would
be permitted at the date of determination to be dividended to
360networks by such Restricted Subsidiary without prior approval
(that has not been obtained), pursuant to the terms of its
charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable
to that Subsidiary or its stockholders.
72
<PAGE>
"Consolidated Leverage Ratio" means, with respect to 360networks, as of
any date, the ratio of (i) the aggregate amount of Indebtedness of 360networks
and its Restricted Subsidiaries then outstanding (other than intercompany debt)
to (ii) the Consolidated Cash Flow of 360networks and its Restricted
Subsidiaries on a consolidated basis for the most recently ended four fiscal
quarters immediately preceding the date of determination for which consolidated
financial statements of 360networks are available (the "Reference Period").
In addition to the foregoing, for purposes of this definition,
"Consolidated Cash Flow" shall be calculated on a pro forma basis after giving
effect to the issuance of the Notes and the incurrence of the Indebtedness (and
the application of the proceeds therefrom) giving rise to the need to make such
calculation and any incurrence (and the application of the proceeds therefrom)
or repayment of Indebtedness, other than the incurrence or repayment of
Indebtedness for ordinary working capital purposes, at any time subsequent to
the beginning of the Reference Period and on or prior to the date of
determination, as if such incurrence (and the application of the proceeds
thereof), or the repayment, as the case may be, occurred on the first day of the
Reference Period.
"Consolidated Net Income" means, with respect to any specified Person
for any period, the aggregate of the Net Income of such Person and its
Restricted Subsidiaries for such period, on a consolidated basis, determined in
accordance with GAAP; provided that:
(1) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity
method of accounting shall be included only to the extent of the
amount of dividends or distributions paid in cash to the
specified Person or a Restricted Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary shall be excluded to
the extent that the declaration or payment of dividends or
similar distributions by that Restricted Subsidiary of that Net
Income is not at the date of determination permitted without any
prior governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its charter
or any agreement, instrument, judgment, decree, order, statute,
rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders, it being understood that the Net
Income of any such Restricted Subsidiary for such period shall be
included in Consolidated Net Income up to the aggregate amount of
cash that such Restricted Subsidiary could have paid pursuant to
such dividends or similar distributions during such period to
360networks or any of its Restricted Subsidiaries;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition
shall be excluded;
(4) the Net Income (but not loss) of any Unrestricted Subsidiary
shall be excluded, whether or not distributed to the specified
Person or one of its Subsidiaries, except for purposes of the
covenants described under the caption "Certain
Covenants--Restricted Payments" and "--Incurrence of Indebtedness
Issuance of Preferred Stock" in which case the Net Income of any
Unrestricted Subsidiary will be included to the extent it would
otherwise be included under clause (1) of this definition above;
and
(5) the cumulative effect of a change in accounting principles shall
be excluded.
"Consolidated Net Worth" means, with respect to 360networks as of any
date, the sum of (i) the consolidated equity of the common stockholders of
360networks and its Restricted Subsidiaries that are Restricted Subsidiaries as
of such date plus (ii) the respective amounts reported on 360networks' balance
sheet as of such date with respect to any series of Preferred Stock (other than
Disqualified Stock) that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to the
extent of any cash received by 360networks upon issuance
73
<PAGE>
of such Preferred Stock plus (iii) the Adjusted Fiber Value, less (x) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the Issue Date in the book
value of any asset owned by 360networks or a Restricted Subsidiary of
360networks, (y) all outstanding net Investments as of such date in
unconsolidated Restricted Subsidiaries and in Persons that are not Restricted
Subsidiaries, and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"Continuing Director" means, as of any date of determination, any
member of the Board of Directors of 360networks who:
(1) was a member of such Board of Directors on the Issue Date; or
(2) was nominated for election or elected to such Board of Directors
with the approval of a majority of the Continuing Directors who
were members of such Board at the time of such nomination or
election
"Credit Facilities" means, with respect to 360networks or any of its
Restricted Subsidiaries, one or more debt facilities or commercial paper
facilities, in each case with banks or other institutional lenders providing for
loans or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"Default" means any event that is, or with the passage of time or the
giving of notice or both would be, an Event of Default.
"Disqualified Stock" means any Capital Stock that, by its terms (or by
the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature.
Notwithstanding the preceding sentence, any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require 360networks to repurchase such Capital Stock upon the occurrence of a
change of control or an asset sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that 360networks may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenant described above under the caption
"Certain Covenants--Restricted Payments."
"EEA Government Obligation" means direct non-callable obligations of,
or non-callable obligations guaranteed by, any European Union member for the
payment of which obligation or guarantee the full faith and credit of the
respective nation is pledged; provided that such nation has a credit rating at
least equal to that of the highest rated member nation of the European Economic
Area.
"Eligible Investments" means cash or Cash Equivalents or such other
investment grade debt securities as the Board of Directors shall approve from
time to time; provided, however, that in no event shall any funds required to be
held as Eligible Investments be used, directly or indirectly, to repurchase any
Notes, except as specifically provided in the Unrestricted Offer.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
74
<PAGE>
"European Economic Area" means the member nations of the European
Economic Area pursuant to the Oporto Agreement on the European Economic Area,
dated May 2, 1992, as amended.
"European Union Member" means any country that is or becomes a member
of the European Union or any successor organization thereto.
"Existing Indebtedness" means Indebtedness of 360networks or any of its
Restricted Subsidiaries outstanding on the Issue Date (other than the Credit
Facilities).
"Fixed Charges" means, with respect to any Person for any period, the
sum, without duplication, of:
(1) the consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued,
including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments,
the interest component of any deferred payment obligations, the
interest component of all payments associated with Capital Lease
Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance
financings, and net payments, if any, pursuant to Hedging
Obligations; plus
(2) the consolidated interest of such Person and its Restricted
Subsidiaries that was capitalized during such period; plus
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries
or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries, whether or not such Guarantee or Lien is
called upon; plus
(4) the product of (a) all dividend payments, whether or not in cash,
on any series of preferred stock (including, without limitation,
Disqualified Stock) of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests of 360networks (other than
Disqualified Stock) or to 360networks or a Restricted Subsidiary
of 360networks, times (b) a fraction, the numerator of which is
one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of such
Person, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP.
"Foreign Subsidiary" means any Restricted Subsidiary of 360networks
which (i) is not organized under the laws of (x) the United States or any state
thereof, (y) the District of Columbia or (z) Canada or any province thereof and
(ii) conducts substantially all of its business operations outside the United
States of America and Canada.
"GAAP" means generally accepted accounting principles in the United
States as set forth in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public Accountants and
statements and pronouncements of the Financial Accounting Standards Board or in
such other statements by such other entity as have been approved by a
significant segment of the accounting profession, which are in effect from time
to time.
"Guarantee" means a guarantee other than by endorsement of negotiable
instruments for collection in the ordinary course of business, direct or
indirect, in any manner including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof, of all or any part of any Indebtedness.
75
<PAGE>
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under:
(1) interest rate swap agreements, interest rate cap agreements and
interest rate collar agreements; and
(2) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates.
"Hibernia Subsidiaries" means Worldwide Telecom (USA) Inc., Worldwide
Telecom (Canada) Inc., WTI Telecom (UK) Limited, WTI Telecom (Ireland) Limited,
Worldwide Telecom (Barbados) Inc., Worldwide Telecom (Bermuda) Ltd., Worldwide
Telecom Limited, Worldwide Telecom (Denmark) ApS, WTI Telecom Distribution (UK)
Limited and Worldwide Telecom Distribution (USA) Inc.
"Indebtedness" means, with respect to any specified Person, any
indebtedness of such Person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, notes, debentures or similar instruments or
letters of credit (or reimbursement agreements in respect
thereof);
(3) banker's acceptances;
(4) representing Capital Lease Obligations;
(5) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued
expense or trade payable; or
(6) representing any Hedging Obligations, if and to the extent any of
the preceding items (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of
the specified Person prepared in accordance with GAAP. In
addition, the term "Indebtedness" includes all Indebtedness of
others secured by a Lien on any asset of the specified Person
(whether or not such Indebtedness is assumed by the specified
Person, which shall be deemed the lesser of the full amount of
such Indebtedness and the fair market value of the property or
asset so secured) and, to the extent not otherwise included, the
Guarantee by such Person of any indebtedness of any other Person.
The amount of any Indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any Indebtedness
issued with original issue discount; and
(2) the principal amount thereof, together with any interest thereon
that is more than 30 days past due, in the case of any other
Indebtedness.
"Interest Expense" means, with respect to any Person for any period,
without duplication, the sum of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization or original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings), all calculated
after taking into account the effect of all Hedging Obligations, and (ii) the
consolidated interest expense of such Person and its Restricted Subsidiaries
that was capitalized
76
<PAGE>
during such period, and (iii) any interest expense on Indebtedness of another
Person that is guaranteed by such Person or one of its Restricted Subsidiaries
or secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the
product of (a) all dividend payments on any series of preferred stock of such
Person or any of its Restricted Subsidiaries, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in accordance
with GAAP.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If 360networks or any Restricted Subsidiary of 360networks sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of 360networks such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of 360networks, 360networks
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "Restricted Payments."
"Issue Date" means the first date on which any Notes were issued under
the Indentures.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law,
including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction.
"Measurement Date" means the date that begins the first fiscal quarter
commencing after December 23, 1998.
"Moody's" means Moody's Investors Service, Inc. or any successor to the
rating agency business thereof.
"Net Income" means, with respect to any Person, the net income (loss)
of such Person and its Restricted Subsidiaries, determined in accordance with
GAAP and before any reduction in respect of preferred stock dividends,
excluding, however:
(1) any gain or loss, together with any related provision for taxes
on such gain or loss, realized in connection with: (a) any Asset
Sale; or (b) the disposition of any securities by such Person or
any of its Restricted Subsidiaries or the extinguishment of any
Indebtedness of such Person or any of its Restricted
Subsidiaries; and
(2) any extraordinary gain or loss, together with any related
provision for taxes on such extraordinary gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by
360networks or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale, including, without limitation,
legal, accounting and investment banking fees, and sales commissions, and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof, in each case after taking into account any available tax credits
or deductions and any tax sharing arrangements and amounts required
77
<PAGE>
to be applied to the repayment of Indebtedness secured by a Lien on the asset or
assets that were the subject of such Asset Sale.
"Network" means the fiber optic telecommunications network constructed
or owned from time to time by 360networks and its Restricted Subsidiaries.
"Non-Competition Agreement" means that certain Letter to 360networks
from Ledcor Inc., dated as of May 31, 1998, regarding Ledcor Inc.'s agreement
not to compete with 360networks in the business of developing or constructing
fiber optic communications infrastructure.
"Non-Recourse Debt" means Indebtedness:
(1) as to which neither 360networks nor any of its Restricted
Subsidiaries (a) provides credit support of any kind (including
any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable as a
guarantor or otherwise, or (c) constitutes the lender; and
(2) no default with respect to which (including any rights that the
holders thereof may have to take enforcement action against an
Unrestricted Subsidiary) would permit upon notice, lapse of time
or both any holder of any other Indebtedness (other than the
Notes, the 1998 Notes, the 1999 Notes or the Credit Facilities)
of 360networks or any of its Restricted Subsidiaries to declare a
default on such other Indebtedness or cause the payment thereof
to be accelerated or payable prior to its stated maturity.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Parent Companies" means Ledcor Inc., an Alberta corporation, Worldwide
Fiber Holdings Ltd., an Alberta corporation, Ledcor Industries Limited, an
Alberta corporation, Ledcor Limited Partnership, a limited partnership of which
Ledcor Industries Limited is the general partner, and Ledcom Holdings Ltd., an
Alberta corporation.
"Permitted Fiber Investment" means any Investment of up to 12 fibers on
any Segment of the Network.
"Permitted Holder" means any Parent Company and its Affiliates.
"Permitted Investments" means:
(1) any Investment in 360networks or in any Restricted Subsidiary of
360networks;
(2) any Investment in Cash Equivalents;
(3) any Investment by 360networks or any Restricted Subsidiary of
360networks in a Person, if as a result of such Investment:
(a) such Person becomes a Restricted Subsidiary of 360networks;
or
(b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its
assets to, or is liquidated into, 360networks or a
Restricted Subsidiary of 360networks;
78
<PAGE>
(4) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in
compliance with the covenant described above under the caption
"Repurchase at the Option of Holders--Asset Sales";
(5) any Investment made as a result of the receipt of non-cash
consideration used or useful in a Telecommunications Business
from any sale, lease, transfer, conveyance or other disposition
of telecommunications capacity, transmission rights or other
telecommunications services provided over 360networks' network in
the ordinary course of business which, if treated as an Asset
Sale, would have been made in compliance with the covenant
described above under the caption "Repurchase at the Option of
Holders--Asset Sales";
(6) advances and loans to officers and employees of 360networks or
any Restricted Subsidiary in an amount not exceeding $5.0 million
any one time outstanding;
(7) Investments in the form of intercompany Indebtedness to the
extent permitted under clause (6) of the second paragraph under
the caption "Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock";
(8) Hedging Obligations; provided that such Hedging Obligations
constitute Permitted Indebtedness permitted by clause (7) of the
second paragraph under the caption "Certain Covenants--Incurrence
of Indebtedness and Issuance of Preferred Stock";
(9) Investments of 360networks or any Restricted Subsidiary existing
on the Issue Date;
(10) Investments in securities of trade creditors or customers
received pursuant to any plan of reorganization or similar
arrangement upon the bankruptcy or insolvency of such trade
creditors or customers; and
(11) other Investments in any Person having an aggregate fair market
value (measured on the date each such Investment was made and
without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause
(11) since the Issue Date, not to exceed the sum of $150.0
million plus 33 1/3% of the net proceeds of the Concurrent Equity
Offering at any one time outstanding.
"Permitted Liens" means:
(1) Liens on the assets of 360networks and any Restricted Subsidiary
of 360networks securing Indebtedness and other Obligations under
Credit Facilities that are permitted by the terms of the
Indentures to be incurred;
(2) Liens in favor of 360networks or its Restricted Subsidiaries;
(3) Liens on property of a Person existing at the time such Person
becomes a Restricted Subsidiary of 360networks or is merged with
or into or consolidated with 360networks or any Restricted
Subsidiary of 360networks; provided that such Liens were in
existence prior to the contemplation of such Person becoming a
Restricted Subsidiary of 360networks or merger or consolidation
and do not extend to any assets other than those of such person
or the Person merged into or consolidated with 360networks or the
Restricted Subsidiary;
(4) Liens on property existing at the time of acquisition thereof by
360networks or any Restricted Subsidiary of 360networks; provided
that such Liens were in existence prior to the contemplation of
such acquisition;
79
<PAGE>
(5) Liens to secure the performance of statutory obligations, surety
or appeal bonds, performance bonds or other obligations of a like
nature incurred in the ordinary course of business;
(6) Liens to secure Purchase Money Indebtedness and Vendor Financing
Indebtedness permitted by clause (4) of the second paragraph of
the covenant entitled "Incurrence of Indebtedness and Issuance of
Preferred Stock" covering only the assets (or portion thereof)
acquired with such Indebtedness;
(7) Liens existing on the Issue Date;
(8) Liens for taxes, assessments or governmental charges or claims
that are not yet delinquent or that are being contested in good
faith by appropriate proceedings promptly instituted and
diligently concluded; provided that any reserve or other
appropriate provision as shall be required in conformity with
GAAP shall have been made therefor;
(9) Liens created for the benefit of the Notes;
(10) Liens imposed by law or arising by operation of law, including,
without limitation, landlords' mechanics', carriers'
warehousemen's materialmen's, suppliers' and vendors' Liens,
Liens for master's and crew's wages and other similar maritime
liens and mechanics' Liens, in each case which are incurred in
the ordinary course of business for sums not yet delinquent or
being contested in good faith, if such reserves or other
appropriate provisions, if any, as shall be required by GAAP
shall have been made with respect thereto;
(11) zoning restrictions, easements, license, covenants, reservations,
restrictions on the use of real property and defects,
irregularities and deficiencies in title to real property that do
not, individually or in the aggregate, materially affect the
ability of 360networks or any Restricted Subsidiary to conduct
its business and are incurred in the ordinary course of business;
(12) Liens incurred or pledges and deposits made in the ordinary
course of business in connection with workers' compensation and
unemployment insurance and other types of social security;
(13) Liens to secure any extension, renewal, refinancing or refunding
(or successive extensions, renewals, refinancings or refundings),
in whole or in part, of any Indebtedness secured by Liens
referred to in the foregoing clauses (3), (4), (6), and (7) of
this definition; provided that such Liens do not extend to any
other property of 360networks or any Restricted Subsidiary and
the principal amount of the Indebtedness secured by such Lien is
not increased;
(14) judgment Liens not giving rise to an Event of Default so long as
such Lien is adequately bonded and any appropriate legal
proceedings that may have been initiated for the review of such
judgment, decree or order shall not have been finally terminated
or the period within which such proceedings may be initiated
shall not have expired;
(15) Liens securing obligations of 360networks under Hedging
Obligations permitted to be incurred under clause (7) of the
second paragraph of the covenant entitled "Incurrence of
Indebtedness and Issuance of Preferred Stock" or any collateral
for the Indebtedness to which such Hedging Obligations relate;
(16) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in
respect of banker's acceptances issued or credited for the
account of such Person to facilitate the purchase, shipment or
storage of such inventory or other goods;
80
<PAGE>
(17) Liens securing reimbursement obligations with respect to
commercial letters of credit which encumber documents and other
property relating to such letters of credit and products and
proceeds thereof;
(18) Liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual, or warranty requirements
of 360networks or any of its Restricted Subsidiaries, including
rights of offset and set-off;
(19) Liens arising out of consignment or similar arrangements for the
sale of goods in the ordinary course of business;
(20) any interest or title of a lessor in the Property subject to any
lease other than a Capital Lease;
(21) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of 360networks and
its Restricted Subsidiaries;
(22) Liens encumbering Property or other assets under construction
arising from progress or partial payments by a customer or
360networks or its Restricted Subsidiaries relating to such
Property or other assets;
(23) Liens arising from filing Uniform Commercial Code financing
statements regarding leases; provided that such Liens do not
extend to any property or assets which are not leased property
subject to such leases or subleases;
(24) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection
with the importation of goods;
(25) Liens securing Permitted ROW Indebtedness;
(26) Liens securing other Indebtedness not exceeding $5.0 million at
any time outstanding;
(27) Liens incurred in the ordinary course of business of 360networks
or any Restricted Subsidiary of 360networks with respect to
obligations that do not exceed $5.0 million at any one time
outstanding and that (a) are not incurred in connection with the
borrowing of money or the obtaining of advances or credit (other
than trade credit in the ordinary course of business) and (b) do
not in the aggregate materially detract from the value of the
property or materially impair the use thereof in the operation of
business by 360networks or such Restricted Subsidiary;
(28) Liens securing Qualified Subsidiary Indebtedness to the extent
permitted to be incurred under the "Incurrence of Indebtedness
and Issuance of Preferred Stock" covenant; and
(29) Liens securing Indebtedness which does not exceed 1.5 times
360networks' Consolidated Cash Flow.
"Permitted Project Financing Investment" means an Investment by
360networks or any Restricted Subsidiary in any Unrestricted Subsidiary for the
purpose of facilitating the incurrence by such Unrestricted Subsidiary of
Non-Recourse Debt for the purpose of financing a portion of the cost of
construction, engineering, acquisition, installation, development or improvement
by such Unrestricted Subsidiary of any Segment of the Network; provided,
however, that the amount of any such Investment shall not exceed 55% of the
total capitalization of any such Unrestricted Subsidiary.
81
<PAGE>
"Permitted Refinancing Indebtedness" means any Indebtedness of
360networks or any of its Restricted Subsidiaries issued in exchange for, or the
net proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of 360networks or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the principal
amount of (or accreted value, if applicable), plus accrued
interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable
expenses incurred in connection therewith);
(2) such Permitted Refinancing Indebtedness has a final maturity date
equal to or later than the final maturity date of, and has a
Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded;
(3) if the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of
payment to the Notes, such Permitted Refinancing Indebtedness has
a final maturity date equal to or later than the final maturity
date of, and is subordinated in right of payment to, the Notes on
terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being
extended, refinanced, renewed, replaced, defeased or refunded;
and
(4) such Indebtedness is incurred either by 360networks or by the
Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or
refunded.
"Permitted ROW Indebtedness" means Indebtedness evidencing the deferred
obligation to the seller of any ROW on which any Segment of 360networks' Network
is being constructed to pay the purchase price for such ROW; provided, however,
that in no event shall the aggregate principal amount of any such Indebtedness
exceed, with respect to any Segment of the Network, more than 50% of the total
anticipated construction cost of such Segment, as determined by the Board of
Directors in good faith.
"Permitted Telecommunications Asset Disposition" means the transfer,
conveyance, sale, lease, grant of an IRU or other disposition (each, a
"Disposition") in the ordinary course of business of dark fiber, conduit or
associated infrastructure of the Network, (i) the proceeds of which are treated
as revenues by 360networks in accordance with GAAP and (ii) that, in the case of
the sale of dark fiber, would not result in 360networks retaining less than (x)
24 fibers per route mile or (y) 12 fibers and one empty conduit per route mile,
in each case, on every Segment of the Network constructed or developed by
360networks (other than the Canadian FOTS in which 360networks shall only be
required to retain six fibers per route mile on each Segment); provided,
however, that any Permitted Fiber Investment that results in 360networks
retaining a minimum of 12 fibers per route mile (in the case of clause (x)
above) or one empty conduit (in the case of clause (y) above) shall be deemed to
be a Permitted Telecommunications Asset Disposition; provided further that any
subsequent Disposition of such Permitted Fiber Investment shall be deemed to be
an Asset Sale.
"Permitted Vendor Facilities" shall mean Vendor Financing Indebtedness
that is permitted to include working capital facilities.
"Person" means any individual, corporation, partnership, joint venture,
association, limited liability company, joint stock company, trust,
unincorporated organization, government or agency or political subdivision
thereof or any other entity.
82
<PAGE>
"Property" means, with respect to any Person, any interest of such
Person in any kind of property or asset, whether real, personal or mixed, or
tangible or intangible, including Capital Stock in, and other securities of, any
other Person.
"Purchase Money Indebtedness" means Indebtedness of 360networks or a
Restricted Subsidiary (including Acquired Indebtedness and Capital Lease
Obligations, mortgage financings and purchase money obligations) incurred for
the purpose of financing all or any part of the cost of construction,
engineering, acquisition, installation, development or improvement by
360networks or any Restricted Subsidiary of any Telecommunications Assets of
360networks or any Restricted Subsidiary and including any related notes,
Guarantees, collateral documents, instruments and agreements executed in
connection therewith, as the same may be amended, supplemented, modified or
restated from time to time.
"Qualified Equity Offering" means (A) any underwritten public offering
(other than on Form S-4 or S-8 or any successor forms thereto) of common stock
of 360networks in which the gross proceeds to 360networks are at least $100.0
million; provided, however, that the Concurrent Equity Offering shall not be
deemed to be a Qualified Equity Offering, or (B) the sale by 360networks of its
Equity Interests to any Strategic Equity Investor, the net proceeds of which are
at least $25.0 million.
"Qualified Subsidiary Indebtedness" means Indebtedness of any
Restricted Subsidiary under one or more senior credit agreements, senior secured
loan agreements or similar senior credit facilities (including any supply or
similar agreement under which the goods to be financed were obtained) entered
into from time to time, including related notes, guarantees, collateral
documents, instruments and agreements executed in connection therewith.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw Hill,
Inc., or any successor to the rating agency business thereof.
"Segment" means (x) with respect to the intercity portions of the
Network, the through-portion of the Network between two local networks and (y)
with respect to a local portion of the Network, the entire through- portion of
the Network, excluding the spurs which branch off the through- portion.
"Series A Notes" means 360networks' $600,000,000 13% Senior Notes due
2008 and EURO 200,000,000 13% Senior Notes due 2008.
"Series B Notes" means 360networks' $600,000,000 13% Senior Notes due
2008 and EURO 200,000,000 13% Senior Notes due 2008, each to be issued pursuant
to the Exchange Offer.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
83
<PAGE>
"Strategic Equity Investor" means a corporation, partnership or other
entity engaged in one or more Telecommunications Businesses that has 80% or more
of the voting power of its Capital Stock owned by a Person or Persons that has
or have, as the case may be, at the time of the initial investment in
360networks, an equity market capitalization in excess of $1.0 billion; provided
that in no event shall any Affiliate of 360networks (immediately prior to the
time of such investment) be eligible to be a Strategic Equity Investor.
"Subsidiary" means, with respect to any Person:
(1) any corporation a majority of whose Capital Stock with voting
power, under ordinary circumstances, to elect directors is, at
the date of determination, directly or indirectly, owned by such
Person (a "subsidiary"), by one or more subsidiaries of such
Person or by such Person and one or more subsidiaries of such
Person; (2) a partnership in which such Person or a subsidiary of
such Person is, at the date of determination, a general partner
of such partnership; or
(3) any partnership, limited liability company or other Person in
which such Person, a subsidiary of such Person or such Person and
one or more subsidiaries of such Person, directly or indirectly,
at the date of determination, has (x) at least a majority
ownership interest or (y) the power to elect or appoint or direct
the election or appointment of the managing partner or member of
such Person or, if applicable, a majority of the directors or
other governing body of such Person.
"Tax" shall mean any tax, duty, levy, impost, assessment or other
governmental charge (including penalties, interest and any other liabilities
related thereto).
"Telecommunications Assets" means all assets, rights (contractual or
otherwise) and properties, whether tangible or intangible, used or intended for
use in connection with a Telecommunications Business and the Equity Interests or
Indebtedness of a Person engaged primarily in a Telecommunications Business.
"Telecommunications Business" means the business of (i) transmitting,
or providing services relating to the transmission of, voice, video or data
through owned or leased terrestrial or submarine transmission facilities and
(ii) constructing, installing, maintaining, creating, developing or marketing
terrestrial or submarine communications related network infrastructure,
components, equipment, software and other devices for use in a
telecommunications business and any other business or opportunity that is
reasonably related or complementary thereto; provided that the determination of
what constitutes a Telecommunications Business shall be made in good faith by
the Board of Directors of 360networks.
"Undertaking Agreements" means those certain Undertaking Agreements
dated as of May 31, 1998 between 360networks (formerly known as Starfiber Inc.)
and 786522 Alberta Ltd. pursuant to which 786522 Alberta Ltd. agreed to
contribute 12 fiber strands on the Canadian FOTS to 360networks in exchange for
the issuance of certain Capital Stock and the Agreement, dated May 28, 1999, as
amended, between 360networks and certain affiliates of Ledcor Inc. whereby
360networks agreed to acquire certain fiber optic assets.
"Unrestricted Subsidiary" means any Subsidiary of 360networks that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with 360networks or any Restricted Subsidiary of
360networks unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to 360networks
or such Restricted Subsidiary
84
<PAGE>
than those that might be obtained at the time from Persons who
are not Affiliates of 360networks;
(3) is a Person with respect to which neither 360networks nor any of
its Restricted Subsidiaries has any direct or indirect obligation
to maintain or preserve such Person's financial condition or to
cause such Person to achieve any specified levels of operating
results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of 360networks or any of its
Restricted Subsidiaries; and
(5) has at least one director on its board of directors that is not a
director or executive officer of 360networks or any of its
Restricted Subsidiaries and has at least one executive officer
that is not a director or executive officer of 360networks or any
of its Restricted Subsidiaries.
Any designation of a Subsidiary of 360networks as an Unrestricted
Subsidiary shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such designation complied with the
preceding conditions and was permitted by the covenant described above under the
caption "Certain Covenants Restricted Payments." If, at any time, any
Unrestricted Subsidiary would fail to meet the preceding requirements as an
Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indentures and any Indebtedness of such
Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of
360networks as of such date and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under the caption
"Incurrence of Indebtedness and Issuance of Preferred Stock," 360networks shall
be in default of such covenant. The Board of Directors of 360networks may at any
time designate any Unrestricted Subsidiary to be a Restricted Subsidiary;
provided that such designation shall be deemed to be an incurrence of
Indebtedness by a Restricted Subsidiary of 360networks of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (1) such Indebtedness is permitted under the covenant described
under the caption "Certain Covenants Incurrence of Indebtedness and Issuance of
Preferred Stock," calculated on a pro forma basis as if such designation had
occurred at the beginning of the four-quarter reference period; and (2) no
Default or Event of Default would be in existence following such designation.
"Vendor Financing Indebtedness" means Indebtedness of 360networks or a
Restricted Subsidiary incurred pursuant to any agreements between 360networks
and one or more vendors or lessors (or any Affiliate of any such vendor or
lessor) of Telecommunications Assets used or intended for use in a
Telecommunications Business by 360networks providing financing for all or any
part of the cost of construction, engineering, acquisition, installation,
development or improvement by 360networks or any Restricted Subsidiary of any
Telecommunications Assets from any such vendor or lessor (or any Affiliate of
such vendor or lessor) and including any related notes, Guarantees, collateral
documents, instruments and agreements executed in connection therewith, as the
same may be amended, supplemented, modified or restated from time to time.
Vendor Financing Indebtedness shall not include any working capital facility or
Indebtedness to fund interest or other similar expenses made available by any
vendor or lessor.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or
other required payments of principal, including payment at final
maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment; by
85
<PAGE>
(2) the then outstanding principal amount of such Indebtedness.
"Wholly-Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person and/or by one or more Wholly-Owned Restricted
Subsidiaries of such Person.
86
<PAGE>
DESCRIPTION OF OTHER INDEBTEDNESS
1999 Notes
General. The 1999 Notes are senior obligations of ours, limited to $500
million in principal amount, and mature on August 1, 2009. The 1999 Notes, which
were issued pursuant to the 1999 Indenture, accrue interest at a rate of 12% per
annum. Interest is payable each August 1 and February 1, commencing on February
1, 2000.
Ranking. The 1999 Notes rank senior in right of payment to any of our
future subordinated indebtedness and pari passu in right of payment with all of
our senior indebtedness, including the 1998 Notes (see below).
Optional Redemption. The 1999 Notes are not redeemable prior to August
1, 2004. Thereafter, the 1999 Notes will be redeemable, in whole or in part, at
our option, at the redemption prices set forth in the 1999 Indenture, plus
accrued and unpaid interest to the applicable redemption date. Specifically, if
redeemed during the 12-month period beginning on August 1 of the years set forth
below, the redemption price will be that amount, expressed as a percentage of
the principal amount of the 1999 Notes, listed below:
Year Redemption Price
----- ---------------
2004...................................................... 106.000%
2005...................................................... 104.000%
2006...................................................... 102.000%
2007...................................................... 100.000%
In addition, (1) prior to August 1, 2002, we may redeem up to 35% of
the sum of (a) the originally issued principal amount of the 1999 Notes and b)
any subsequent notes issued under the 1999 Indenture, at 112% of their principal
amount, plus accrued and unpaid interest through the redemption date, with the
net cash proceeds of one or more public equity offerings; provided, however,
that at least 65% of the sum of (a) the originally issued principal amount of
the 1999 Notes and (b) any subsequent notes issued under the 1999 Indenture,
remains outstanding after the occurrence of the redemption and (2) we may redeem
the 1999 Notes at their face value if we become obligated to pay any additional
amounts as a result of change in the laws or regulations of Canada or any
Canadian taxing authority, or a change in any official position regarding their
application or interpretation.
Change of Control. Upon the occurrence of a change of control, each
holder of 1999 Notes will have the right to require us to repurchase all or any
part of that holder's 1999 Notes at a purchase price in cash equal to 101% of
their principal amount, plus accrued and unpaid interest to the date of
purchase.
Covenants. The 1999 Indenture contains certain covenants that, among
other things, limit our ability and the ability of our restricted subsidiaries
to:
o borrow money;
o pay dividends on stock or repurchase stock;
o make investments;
o use assets as security in other transactions; and
o sell certain assets or merge with or into other companies.
87
<PAGE>
Events of Default. The 1999 Indenture contains customary events of
default, including:
o defaults in the payment of principal, premium or interest;
o defaults in the compliance with covenants contained in the 1999
Indenture;
o cross defaults on more than $10 million of other indebtedness;
o failure to pay more than $10 million of judgments that have not
been stayed by appeal or otherwise; and
o the bankruptcy of 360networks inc. or certain of its subsidiaries.
1998 Notes
General. The 1998 Notes are senior obligations of ours, limited to $175
million in principal amount and mature on December 15, 2005. The 1998 Notes,
which were issued pursuant to the 1998 Indenture, accrue interest at a rate of
12 1/2% per annum. Interest is payable each June 15 and December 15, commencing
on June 15, 1999.
Ranking. The 1998 Notes rank senior in right of payment to any of our
future subordinated indebtedness and pari passu in right of payment with all of
our senior indebtedness, including the 1999 Notes.
Optional Redemption. The 1998 Notes are not redeemable prior to
December 31, 2003. Thereafter, the 1998 Notes will be redeemable, in whole or in
part, at our option, at the redemption prices set forth in the 1998 Indenture,
plus accrued and unpaid interest to the applicable redemption date.
Specifically, if redeemed during the 12-month period beginning on December 31 of
the years set forth below, the redemption price will be that amount, expressed
as a percentage of the principal amount of the 1998 Notes, listed below:
Year Redemption Price
----- ----------------
2003 106.250%
2004 100.000%
Despite the foregoing, however, we shall not be permitted to make an
optional redemption until we consummate an offer with respect to the amount of
cash generated by us which is not used for the provision of taxes, fixed
charges, extraordinary losses or to repay secured indebtedness (the "Accumulated
Excess Cash Flow Amount") existing at December 31, 2003 as described in "Excess
Cash Flow Offer" below.
In addition, (1) prior to December 15, 2001, we may redeem up to 35% of
the originally issued principal amount of the 1998 Notes at 112.5% of their
principal amount, plus accrued and unpaid interest through the redemption date,
with the net cash proceeds of one or more public equity offerings; provided,
however, that at least 65% of the originally issued principal amount of the 1998
Notes remains outstanding after the occurrence of the redemption and (2) we may
redeem the 1998 Notes at their face value if we become obligated to pay any
additional amounts as a result of change in the laws or regulations of Canada or
any Canadian taxing authority, or a change in any official position regarding
their application or interpretation.
Change of Control. Upon the occurrence of a change of control, each
holder of 1998 Notes will have the right to require us to repurchase all or any
part of that holder's 1998 Notes at a purchase price in cash equal to 101% of
their principal amount, plus accrued and unpaid interest to the date of
purchase.
88
<PAGE>
Excess Cash Flow Offer. If at the end of our fiscal quarter ended
December 31, 2000 or any fiscal quarter ending on June 30 or December 31
thereafter, our Accumulated Excess Cash Flow Amount exceeds $10.0 million, we
will be required to make an offer to all holders of 1998 Notes to purchase the
maximum principal amount of 1998 Notes that may be purchased using that
Accumulated Excess Cash Flow Amount at an offer price equal to 110% of the
principal amount of the 1998 Notes, plus accrued and unpaid interest to the date
of purchase, subject to a limitation that we are not obliged to repurchase more
than 25% of the original principal amount of the 1998 Notes before December 31,
2003.
Covenants. The 1998 Indenture contains certain covenants that, among
other things, limit our ability and the ability of our restricted subsidiaries
to:
o borrow money;
o pay dividends on stock or repurchase stock;
o make investments;
o use assets as security in other transactions; and
o sell certain assets or merge with or into other companies.
Events of Default. The 1998 Indenture contains customary events of
default, including:
o defaults in the payment of principal, premium or interest;
o defaults in the compliance with covenants contained in the 1998
Indenture;
o cross defaults on more than $10 million of other indebtedness;
o failure to pay more than $10 million of judgments that have not
been stayed by appeal or otherwise; and
o the bankruptcy of 360networks inc. or certain of its subsidiaries.
360atlantic Credit Facility
In February 2000, a group of our subsidiaries entered into $565 million
senior secured credit facilities arranged by Goldman Sachs Credit Partners L.P.,
DLJ Capital Funding, Inc., Credit Suisse First Boston and Export Development
Corporation. This credit facility consists of a $365 million tranche A term loan
facility, a $175 million tranche B term loan facility and a $25 million working
capital revolving credit facility. Our subsidiaries have borrowed $175 million
under this credit facility and will use these proceeds, as well as future
proceeds, for the development, design, engineering, construction and
installation of 360atlantic.
The indebtedness outstanding under this credit facility is guaranteed
by four of our subsidiaries within the borrowing group and is secured by all of
their capital stock and substantially all of the assets and property owned by
our subsidiaries within the borrowing group. This credit facility is
non-recourse to 360networks inc.
The credit facility contains customary covenants which restrict and
limit the ability of our subsidiaries within the borrowing group with respect
to, among other things, incurring indebtedness, entering into merger or
consolidation transactions, making certain restricted payments, creating liens
on assets, making investments and entering into sale and leaseback transactions
and transactions with affiliates. The credit facility also limits the ability of
our subsidiaries within the borrowing group to engage in activities unrelated to
360atlantic.
89
<PAGE>
In addition, the credit facility also requires that our subsidiaries within the
borrowing group comply with various financial covenants, including the receipt
of a minimum amount of revenue derived from sales of capacity on 360atlantic,
maximum leverage ratios and a limit on capital expenditures.
The credit facility also contains customary events of default,
including the nonpayment of principal, interest, fees or other amounts, a
cross-default with respect to other obligations of our subsidiaries within the
borrowing group, failure to materially comply with certain covenants, conditions
or provisions under the credit facility, the making of materially false or
misleading representations or warranties, the occurrence of any default under
material contracts related to 360atlantic that could have a material adverse
effect on our subsidiaries within the borrowing group, the failure to achieve
the commercial operation date of 360atlantic by a specified date, the occurrence
of reorganization, bankruptcy, insolvency or similar proceedings or the
occurrence of a change of control. Upon the occurrence and during the
continuance of an event of default under the credit facility, all obligations
under the credit facility could be deemed to be immediately due and payable.
Proposed Credit Facility
A subsidiary of ours has accepted an underwritten commitment from The
Chase Manhattan Bank and an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation to provide up to $2.0 billion of financing under a senior credit
facility. The credit facility consists of a Senior Secured Tranche A Term Loan
Facility in the aggregate principal amount of up to $600 million; a Senior
Secured Tranche B Term Loan Facility in the aggregate principal amount of up to
$300 million; a Senior Secured Revolving Credit Facility in the aggregate
principal amount of up to $300 million; and additional term loan facilities, if
required, in an aggregate principal amount of up to $800 million to be utilized
solely to finance the development or improvement of telecommunications assets or
to refinance indebtedness of our subsidiaries.
All obligations of the borrower will be guaranteed on a senior basis by
us and each existing and subsequently acquired or organized subsidiary other
than unrestricted subsidiaries and GlobeNet; GlobeNet will be providing a
guarantee once it is no longer prohibited from doing so under its existing $400
million bank facilities. The obligations of the borrower and the guarantees will
be secured by substantially all our assets and those of our restricted
subsidiaries other than GlobeNet, including (1) a first priority pledge of
capital stock and inter-company indebtedness and (2) perfected first priority
security interests in substantially all tangible and intangible assets.
The proposed credit facility contains customary covenants and customary
events of default similar to those of the 360atlantic credit facility described
above.
The proceeds of the credit facility will be used solely (1) to fund the
construction, engineering, acquisition, installation, development or improvement
of telecommunications assets or to refinance our indebtedness or that of our
subsidiaries; (2) to refinance outstanding indebtedness of 360atlantic; and (3)
to invest in GlobeNet so that GlobeNet may repay its outstanding 13% Senior
Notes due 2008.
This commitment is subject to negotiation of definitive documentation
and other closing and lending conditions. Amounts borrowed under this facility
will be required to be used in compliance with restrictions contained under our
indentures. There can be no assurance that this credit facility will be entered
into in a timely fashion or at all.
90
<PAGE>
DESCRIPTION OF BOOK-ENTRY SYSTEM
The old dollar notes are, and the new dollar notes will be, represented
by one or more notes in registered, global form (the "Dollar Global Notes"). The
Dollar Global Notes will be deposited on the date of the acceptance for exchange
of the old dollar notes and the issuance of the new dollar notes (the "Closing
Date") with the Trustee as custodian for The Depository Trust Company ("DTC")
and registered in the name of Cede & Co. as nominee of DTC, in each case for
credit to the accounts of DTC Participants and indirect participants (each as
defined below) including, without limitation, Morgan Guaranty Trust Company of
New York, Brussels office, as operator (the "Euroclear Operator") of Euroclear,
and Clearstream Banking. The old euro notes are, and the new euro notes will be,
represented by one or more notes in registered, global form (the "Euro Global
Notes," and together with the Dollar Global Notes, the "Global Notes"). The Euro
Global Notes will be deposited on the date of the acceptance for exchange of the
old euro notes and the issuance of the new euro notes with HSBC Bank plc, as
common depositary (such capacity, the "Common Depositary") for Euroclear and
Clearstream Banking. The new euro notes will not be eligible for clearance
through DTC, except indirectly through DTC's participation in Euroclear or
Clearstream Banking.
Except in the limited circumstances set forth below, notes in certificated
form will not be issued.
Investors who purchased old euro notes pursuant to Rule 144A and investors
who purchased old euro notes pursuant to Regulation S who exchange their old
euro notes for new euro notes in the Exchange offer will each hold their
interests through the Euro Global Notes.
Depositary Procedures
DTC. DTC has advised us as follows: DTC is a limited purpose trust company
organized under the laws of the State of New York, a member of the Federal
Reserve System, a "clearing corporation" within the meaning of the Uniform
Commercial Code and a "clearing agency" registered pursuant to the provisions of
Section 17A of the Exchange Act. DTC was created to hold securities for persons
who have accounts with it ("DTC Participants") and to facilitate the clearance
and settlement of securities transactions between DTC Participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical movement of certificates. DTC Participants
include securities brokers and dealers, banks, trust companies and clearing
corporations and may include certain other organizations. Indirect access to the
DTC system is available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a DTC
Participant, either directly or indirectly ("indirect participants").
Euroclear and Clearstream Banking. We understand as follows with respect
to Euroclear and Clearstream Banking: Euroclear and Clearstream Banking each
hold securities for their account holders and facilitate the clearance and
settlement of securities transactions by electronic book-entry transfer between
their respective account holders, thereby eliminating the need for physical
movements of certificates and any risk from lack of a simultaneous transfers of
securities. Euroclear and Clearstream Banking each provide various services
including safekeeping, administration, clearance and settlement of
internationally traded securities and securities lending and borrowing. Each of
Euroclear and Clearstream Banking can settle securities transactions in any of
more than 30 currencies, including euros. Euroclear and Clearstream Banking each
also deal with domestic securities markets in several countries through
established depository and custodial relationships. The respective systems of
Euroclear and Clearstream Banking have established an electronic bridge between
their two systems across which their respective account holders may settle
trades with each other. Account holders in both Euroclear and Clearstream
Banking are worldwide financial institutions including underwriters, securities
brokers and dealers, banks, trust companies and clearing corporations. Indirect
access to both Euroclear and Clearstream Banking is available to other
institutions that clear through or maintain a custodial relationship with an
account holder of either system. An account holder's overall contractual
relations with either Euroclear or Clearstream Banking are governed by the
respective rules and operating procedures of Euroclear or Clearstream Banking
and any applicable laws. Both Euroclear and Clearstream Banking act under such
rules and operating procedures only on behalf of
91
<PAGE>
their respective account holders, and have no record of or relationship with any
persons who are not direct account holders.
Dollar Notes. With respect to the Dollar Global Notes, DTC has advised us
that pursuant to procedures established by it, (i) upon initial deposit of a
Dollar Global Note, DTC will credit the accounts of DTC Participants with
portions of the principal amount of such Dollar Global Note deposited, (ii) for
DTC participants, initial ownership of interests in such Dollar Global Notes
will be shown on, and the transfer of ownership thereof will be effected
through, records maintained by DTC and (iii) for non-DTC participant owners,
ownership interests in such Dollar Global Notes will only be shown on, and the
transfer of ownership thereof will only be effected through, the records of the
DTC participants, including Euroclear and Clearstream Banking, or others through
which they hold their account. All interests in a Dollar Global Note deposited
with DTC, including those held through Euroclear or Clearstream Banking, are
subject to the procedures and requirements of DTC. Those interests held through
Euroclear or Clearstream Banking are also subject to the procedures and
requirements of such system.
Euro Notes. With respect to the Euro Global Notes, investors who hold
accounts with the Euroclear Operator or Clearstream Banking may acquire, hold
and transfer security entitlements with respect to the Euro Global Notes against
the Euroclear Operator or Clearstream Banking and their respective property by
book-entry to accounts with the Euroclear Operator or Clearstream Banking, each
of which has an account with the Common Depositary and subject at all times to
the procedures and requirements of Euroclear or Clearstream Banking, as the case
may be. "Security entitlement" means the rights and property interests of an
accountholder against its securities intermediary under applicable law in or
with respect to a security, including any ownership, co-ownership, contractual
or other rights. Investors who do not have accounts with the Euroclear Operator
or Clearstream Banking may acquire, hold and transfer security entitlements with
respect to the Euro Global Notes against the securities intermediary and its
property with which such investors hold accounts by book-entry to accounts with
such securities intermediary, which in turn may hold a security entitlement with
respect to the Euro Global Notes through the Euroclear Operator on Clearstream
Banking. Investors electing to acquire security entitlements with respect to the
Euro Global Notes through an account with the Euroclear Operator or Clearstream
Banking or some other securities intermediary must follow the settlement
procedures of their securities intermediary with respect to the settlement of
new issues of securities. Security entitlements with respect to the Euro Global
Notes to be acquired through an account with the Euroclear Operator or
Clearstream Banking will be credited to such account as of the settlement date
against payment in Euro for value as of the settlement date. Investors electing
to acquire, hold or transfer security entitlements with respect to a Euro Global
Notes through an account with the Euroclear Operator, Clearstream Banking or
some other securities intermediary other than in connection with the initial
distribution of the Euro Notes must follow the settlement procedures of their
securities intermediary with respect to the settlement of secondary market
transactions in securities.
Except as described below, owners of interests in the Dollar Global Notes
and the Euro Global Notes will not have notes registered in their names, will
not receive physical delivery of notes in certificated form and will not be
considered the registered owners or holders of notes for any purpose. So long as
DTC (or its nominee) or the Common Depositary, as the case may be, is the
registered owner or holder of a Global Note, such party will be considered the
sole owner or holder of the notes represented by such Global Note for all
purposes under the indentures and the notes. Accordingly, each person owning a
beneficial interest in a Global Note must rely on the procedures of DTC,
Euroclear and Clearstream Banking, as the case may be, and their participants or
account holders to exercise any rights and remedies of a holder of notes under
the indentures. Payments of principal and interest on the Global Notes will be
made to DTC or its nominee, or to the Common Depositary on behalf of Euroclear
and Clearstream Banking, as the case may be, as the registered owners thereof.
The laws of some countries and some states in the United States require
that certain persons take physical delivery in definitive form of securities
that they own. Consequently, the ability to transfer beneficial interests in a
Global Note to such persons may be limited to that extent. Because DTC,
Euroclear and Clearstream Banking can act only on behalf of their respective
participants or account holders, as the case may be, the ability of a person
92
<PAGE>
having beneficial interests in a Global Note to pledge such interests to persons
or entities that do not participate in the relevant clearing system, or
otherwise take actions in respect of such interests, may be affected by the lack
of a physical certificate evidencing such interests.
Payments on the Global Notes
Payments in respect of the principal of, premium, if any, and interest on
a Global Note will be made through a paying agent appointed pursuant to the
applicable indenture and will be payable to DTC (or its nominee) or the Common
Depositary on behalf of Euroclear and Clearstream Banking, as the case may be,
each in its capacity as the registered holder of such notes under such
indentures. Under the terms of the indentures, we and the Trustee will treat the
persons in whose names the notes, including the Global Notes, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, none of us, the Trustee or any
agent of ours or the Trustee has or will have any responsibility or liability
for (i) any aspect or accuracy of the records of the relevant clearing system,
the participants therein or the account holders thereof, as the case may be,
relating to payments made on account of beneficial ownership interests in the
Global Notes, or for maintaining, supervising or reviewing any records of such
clearing system, participant or account holder relating to beneficial ownership
interests in the Global Notes, or (ii) any other matter relating to the actions
and practices of the relevant clearing system or the participants therein or the
account holders thereof.
DTC, Euroclear or Clearstream Banking, as the case may be, upon receipt of
any such payment, will immediately credit the accounts of their relevant
participants or account holders, as the case may be, with payments in amounts
proportionate to their respective holdings in principal amount of beneficial
interests in the relevant Global Note, as shown on the records of DTC, Euroclear
or Clearstream Banking, as the case may be. We expect that payments by such
participants or account holders, as the case may be, to the beneficial owners of
Global Notes will be governed by standing instructions and customary practices
and will be the responsibility of such participants or account holders. Neither
we nor the Trustee will have responsibility or liability for the payment of
amounts owing in respect of beneficial interests in the Global Notes held by DTC
or by the Common Depositary for Euroclear and Clearstream Banking.
Transfers of Global Securities and Interests Therein
Unless definitive securities are issued, (i) the Dollar Global Notes may
be transferred, in whole and not in part, only to another nominee of DTC or to a
successor of DTC or its nominee, and (ii) the Euro Global Notes may be
transferred, in whole and not in part, only by Euroclear and Clearstream Banking
to the Common Depositary, as the case may be, or by the Common Depositary to
Euroclear and Clearstream Banking, respectively, or to another nominee or
successor thereof or a nominee of such successor.
Transfers of beneficial interests in the Dollar Global Notes will be
subject to the applicable rules and procedures of DTC and its direct and
indirect participants (including, if applicable, those of Euroclear and
Clearstream Banking), which are subject to change from time to time. Transfers
of beneficial interests in the Euro Global Notes will be subject to the
applicable rules and procedures of Euroclear and Clearstream Banking, as the
case may be, and their respective account holders and intermediaries. Any
secondary market trading activity in beneficial interests in the Global Notes is
expected to occur through the participants or account holders and
intermediaries, as the case may be, of DTC, Euroclear and Clearstream Banking,
and the securities custody accounts of investors will be credited with their
holdings against payment in same-day funds on the settlement date.
No service charge will be made for any registration of transfer or
exchange of notes, but the Trustee may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Although DTC, Euroclear and Clearstream Banking have agreed to certain
procedures to facilitate transfers of interests in the Global Notes among
participants in DTC and account holders in Euroclear and Clearstream
93
<PAGE>
Banking, they are under no obligation to perform or to continue to perform such
procedures, and such procedures may be discontinued at any time. None of
360networks, the Trustee or any agent of ours or the Trustee will have any
responsibility for the nonperformance or misperformance (as a result of
insolvency, mistake, misconduct or otherwise) by DTC, Euroclear or Clearstream
Banking or their respective participants, indirect participants, account holders
or intermediaries of their respective obligations under the rules and procedures
governing their operations.
We understand that under existing industry practices, if either we or the
Trustee requests any action of holders of notes, or if an owner of a beneficial
interest in a Global Note desires to give instructions or take an action that a
holder is entitled to give or take under the indentures, DTC, Euroclear or
Clearstream Banking, as the case may be, would authorize their respective
participants or account holders, as the case may be, owning the relevant
beneficial interest to give instructions or take such action, and such
participants or account holders would authorize indirect participants or
intermediaries to give instructions or take such action, or would otherwise act
upon the instructions of such indirect participants or intermediaries.
We understand that under existing practices of DTC, Euroclear and
Clearstream Banking if less than all of the respective class of notes are to
redeemed at any time, DTC, Euroclear or Clearstream Banking, as the case may be,
will credit their participants' or account holders' accounts on a proportionate
basis (with adjustments to prevent fractions) or by lot or on such other basis
as DTC, Euroclear or Clearstream Banking, as the case may be, deems fair and
appropriate, provided that no beneficial interests of less than $1,000 or
EURO 1,000, as the case may be, may be redeemed in part.
Certificated Notes
Beneficial interests in a Global Note are exchangeable for definitive
notes in registered certificated form only if: (i)in the case of the Dollar
Global Notes, DTC (x) notifies us that it is unwilling or unable to continue as
depositary for such Dollar Global Notes or (y) has ceased to be a "clearing
agency" registered under the Exchange Act and, in each case, we thereupon fail
to appoint a successor depositary within 90 days; (ii) in the case of the Euro
Global Notes, Euroclear and Clearstream Banking are unwilling or unable to
continue as depositary for such Euro Global Notes and we thereupon fail to
appoint a successor depositary within 90 days; or (iii) there shall have
occurred and be continuing a Default or an Event of Default with respect to the
applicable notes. In all cases, certificated notes delivered in exchange for any
Global Note or beneficial interest therein will be registered in the names, and
issued in any approved denominations, requesting by or on behalf of DTC,
Euroclear or Clearstream Banking, as the case may be, in accordance with their
customary procedures. The notes may not be issued in bearer form.
In the case of the issuance of certificated notes in the limited
circumstances set forth above, the Holder of any such certificated note may
transfer such note by surrendering it at the offices or agencies of 360networks
maintained for such purpose within the City and State of New York. Until
otherwise designated by us, our office or agency in the City and State of New
York will be the offices of the Trustee maintained for such purpose. In the
event of a partial transfer of a holding of notes represented by one
certificate, or partial redemption of such a holding represented by one
certificate, a new certificate shall be issued to the transferee in respect of
the part transferred or redeemed and a further new certificate in respect of the
balance of the holding not transferred or redeemed shall be issued to the
transferor, provided that no certificate in denominations less than $1,000 or
EURO 1,000 as the case may be, shall be issued. Each new certificate to be
issued shall be available for delivery within ten business days at the office of
the Trustee. The cost of preparing, printing, packaging and delivering the
certificated notes shall be borne by us.
We shall not be required to register the transfer or exchange of
certificated notes for a period of 15 days preceding (a) the due date for any
payment or principal of or interest on the notes or (b) a selection of notes to
be redeemed. Also, we are not required to register the transfer or exchange of
any notes selected for redemption. In the event of the transfer of any
certificated note, the Trustee may require a Holder, among other things, to
furnish
94
<PAGE>
appropriate endorsements and transfer documents, and we may require a Holder to
pay any taxes and fees required by law and permitted by the indentures and the
notes.
If certificated notes are issued and a Holder of a certificated note
claims that the note has been lost, destroyed or wrongfully taken or if such
note is mutilated and is surrendered to the Trustee, we shall issue and the
Trustee shall authenticate a replacement note if the Trustee's and our
requirements are met. If required by the Trustee or us, an indemnity bond
sufficient in the judgment of both to protect us, the Trustee or any paying
agent or authenticating agent appointed pursuant to the indentures from any loss
which any of them may suffer if a note is replaced must be posted. We may charge
for its expenses in replacing a note.
In any case any such mutilated, destroyed, lost or stolen note has become
or is about to become due and payable, or is about to be redeemed or purchased
by us pursuant to the provisions of the indentures, we in our discretion may,
instead of issuing a new note, pay, redeem or purchase such note, as the case
may be.
95
<PAGE>
MATERIAL UNITED STATES AND CANADIAN INCOME TAX CONSIDERATIONS
The discussion below is a general description of certain material
United States and Canadian income tax consequences to beneficial owners of the
new notes. This discussion does not take into account the individual
circumstances of any particular investor and does not purport to discuss all of
the possible tax consequences of the exchange of old notes for new notes or the
ownership and disposition of the new notes. Therefore, prospective investors are
urged to consult their own tax advisors concerning the tax consequences of
exchanging old notes for new notes and holding and disposing of the new notes,
including the application of state, provincial, local, foreign and other tax
laws.
United States
The following is a general discussion of the material U.S. federal
income tax consequences of the exchange of old notes for new notes under the
exchange offer and the ownership and disposition of new notes to beneficial
owners who are U.S. Holders. As used in this prospectus, "U.S. Holder" means a
beneficial owner of a new note that is
o an individual who is a citizen or resident of the United States,
o a corporation or other entity taxable as a corporation, created or
organized in or under the laws of the United States or of any state of
the United States (including the District of Columbia),
o an estate the income of which is includible in gross income for U.S.
federal income tax purposes regardless of its source or
o a trust if a U.S. court is able to exercise primary supervision over
the trust's administration and one or more U.S. persons have authority
to control all substantial decisions of the trust.
This discussion is based on the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury regulations promulgated under the Code, and
administrative and judicial interpretations of the Code, all as in effect or
proposed on the date of this prospectus and all of which are subject to change,
possibly with retroactive effect. This discussion is limited to U.S. Holders
that purchased old notes at the issue price, held such notes as capital assets
and will hold new notes as capital assets, within the meaning of Section 1221 of
the Code. This discussion does not address federal alternative minimum tax
consequences or all aspects of U.S. federal income taxation that may be relevant
to particular purchasers in light of their personal circumstances or to
purchasers subject to special treatment under U.S. federal income tax law
(including, without limitation, dealers in securities or foreign currency,
tax-exempt entities, banks, insurance companies or other financial institutions,
persons that hold Notes as part of a "straddle," "hedge" or "conversion
transaction," persons that have a "functional currency" other than the U.S.
dollar and persons that own Notes through partnerships or other pass-through
entities). This discussion also does not address any tax consequences arising
out of the tax laws of any state, local or foreign jurisdiction.
Prospective purchasers are urged to consult their own tax advisors as
to the particular tax consequences to them of tendering old notes for new notes
and the ownership and disposition of new notes, including the applicability of
any state, local or foreign tax laws, and any changes (or proposed changes) in
applicable tax laws or their interpretation.
Federal Income Tax Consequences of Tendering Old Notes for New Notes
Exchange Offer. A U.S. Holder will not recognize taxable gain or loss
on the exchange of old notes for new notes pursuant to the exchange offer, and a
U.S. Holder's tax basis and holding period for the new notes will be the same as
for the old notes immediately before the exchange.
96
<PAGE>
Federal Income Tax Consequences of Owning and Disposing of New Notes
Interest on New Notes. Interest paid on the new notes will be taxable
to a U.S. Holder as ordinary interest income, generally at the time it is
received or accrued, in accordance with such holder's regular method of
accounting for U.S. federal income tax purposes. If Canadian withholding taxes
are imposed on the interest payments, 360networks inc. will be required to pay
Additional Amounts to holders of the new notes (see "Description of
Notes--Payment of Additional Amounts"). 360networks inc. believes that the
imposition of Canadian withholding taxes with respect to interest on the new
notes as a result of a change in Canadian tax law is a remote and incidental
contingency. Accordingly, 360networks inc. does not intend to treat the new
notes as contingent payment debt instruments for U.S. federal income tax
purposes.
Interest paid on a new euro note will be includible in income by a U.S.
Holder in an amount equal to the U.S. Dollar value of the payment, regardless of
whether the payment is in fact converted to U.S. Dollars at that time. If such
U.S. Holder uses the cash method of accounting for tax purposes, the U.S. Dollar
value of such payment is determined using the spot rate at the time such payment
is received. If a U.S. Holder uses the accrual method of accounting for tax
purposes, the U.S. Dollar value of such payment is determined using the average
exchange rate during the relevant accrual period (or partial accrual period with
respect to interest paid in a subsequent taxable year) or, if elected, the spot
rate (a) on the last day of the relevant accrual period (or partial accrual
period) or (b) on the payment date, if such date is within five business days of
the last day of the accrual period or taxable year. Any differences in the
exchange rate between the rate at which interest on a new euro note is included
in income and the spot rate on the payment (or disposition) date for interest
will result in exchange gain or loss with respect to the related amount of
interest, and will generally be treated as ordinary income or loss for U.S.
federal income tax purposes. The U.S. Dollar value of interest accrued or
received, adjusted for any exchange gain or loss with respect to the amount
accrued, generally will be a U.S. Holder's tax basis in the euros received as
interest on a new euro note.
Original Issue Discount. Because the new notes are issued at a discount
from their stated redemption price at maturity, the new notes will have original
issue discount ("OID") for federal tax purposes and U.S. Holders of new notes
will be subject to special tax accounting rules, as described in greater detail
below. U.S. Holders of new notes should be aware that they generally must
include OID in gross income for U.S. federal income tax purposes on an annual
basis under the constant-yield-to-maturity method regardless of their method of
tax accounting. As a result, U.S. Holders will include OID in income in advance
of the receipt of cash attributable to such income. However, U.S. Holders of the
new notes generally will not be required to include separately in income cash
payments received on such new notes, to the extent such payments constitute
payments of previously accrued OID.
A new note will be treated as issued with OID equal to the excess of
the "stated redemption price at maturity" of a new note over its "issue price."
The "stated redemption price at maturity" of a new note is the total of all
payments on the new note that are not payments of "qualified stated interest." A
"qualified stated interest" payment is a payment of stated interest
unconditionally payable in cash or property (other than debt instruments of the
Company), at least annually at a single fixed rate during the entire term of the
new note that appropriately takes into account the length of intervals between
payments. The stated interest on the new note will constitute "qualified stated
interest" and thus will not be included in the stated redemption price.
The amount of OID includible in income by an initial U.S. Holder of a
new note is the sum of the "daily portions" of OID with respect to the new note
for each day during the taxable year or portion thereof in which such U.S.
Holder holds such new note ("accrued OID"). The daily portion is determined by
allocating to each day in any "accrual period" a pro-rata portion of the OID
that accrued in such period. The "accrual period" for a new note will generally
be the semi-annual period between interest payment dates, but may be of any
length and may vary in length over the term of an OID note, provided that each
accrual period is no longer than one year and each scheduled payment of
principal or interest occurs either on the first or last day of an accrual
period.
97
<PAGE>
The amount of OID on a new euro note will be determined for any accrual
period using Euro and then translated into U.S. Dollars in the same manner as
interest income accrued by a U.S. Holder on the accrual basis, as described
above, whether the U.S. Holder is a cash method taxpayer or an accrual method
taxpayer. A U.S. Holder will generally recognize exchange gain or loss when the
OID is paid (including a payment attributable to OID upon the sale or other
disposition of a new euro note) to the extent of the difference between the U.S.
Dollar value of such payment, determined based on the spot rate for Euro on the
date of payment, and the U.S. Dollar value of the accrued OID, determined in the
same manner as for accrued interest.
Sale, Redemption or Retirement of Notes. Upon the sale, redemption,
retirement at maturity or other taxable disposition of a new note, a U.S. Holder
generally will recognize gain or loss equal to the difference between the sum of
cash plus the fair market value of all other property received on that sale,
redemption, retirement or disposition (except to the extent the cash or property
is attributable to accrued but unpaid interest that has not previously been
included in the holder's income) and the U.S. Holder's tax basis in the new note
(generally, its cost).
Gain or loss recognized on the sale or other taxable disposition of a
new note generally will be capital gain or loss and will be long-term capital
gain or loss if, at the time of the disposition, the new note has been held for
more than one year. In the case of a U.S. Holder who is an individual, long term
capital gains generally are subject to a maximum capital gains rate of 20%.
The cost of a new euro note to a U.S. Holder will be the U.S. Dollar
value of the euro purchase price translated at the spot rate for the date of
purchase (or, in some cases, the settlement date). The conversion of U.S.
Dollars into euros and the immediate use of those euros to purchase a new euro
note generally will not result in a taxable gain or loss for a U.S. Holder. A
U.S. Holder will have a tax basis in any euros received on the sale, exchange or
retirement of a new euro note equal to the U.S. Dollar value of the euro on the
date of receipt.
Upon the sale, exchange, retirement or repayment of a new euro note, a
U.S. Holder will also recognize exchange gain or loss to the extent that the
rate of exchange on the date of retirement or disposition differs from the rate
of exchange on the date of the new euro note was acquired, or deemed acquired.
Exchange gain or loss is recognized, however, only to the extent of total gain
or loss on the transaction. For purposes of determining the total gain or loss
on the transaction, a U.S. Holder's tax basis in a new euro note will generally
equal the U.S. Dollar cost of the new euro note.
Exchange gain or loss recognized by a U.S. Holder will generally be
treated as ordinary income or loss.
Foreign Tax Credit Considerations. Interest on the new notes will
constitute income from sources without the United States for U.S. foreign tax
credit purposes. Payment of interest on the new notes will not be subject to
Canadian withholding tax. See "--Canada." If, however, the interest payments
become subject to Canadian withholding taxes as the result of a change in
Canadian tax law, U.S. Holders will be treated for U.S. federal income tax
purposes as having actually received the amount of the taxes withheld and as
having paid that amount to the Canadian taxing authorities. As a result, the
amount of interest income included in gross income by a U.S. Holder generally
will be greater than the amount of cash actually received by the U.S. Holder
from 360networks inc. for the interest income. A U.S. Holder may be able,
subject to generally applicable limitations, to claim a foreign tax credit or
take a deduction for Canadian withholding taxes imposed on interest payments
(including withholding taxes imposed on Additional Amounts).
Gain or loss on the sale, redemption, retirement at maturity or other
taxable disposition of a new note generally will constitute U.S. source gain or
loss for U.S. foreign tax credit purposes.
Backup Withholding. Backup withholding may apply to certain payments of
principal, premium, if any, and interest on a new note and to proceeds of the
sale or other disposition of a new note before maturity. 360networks inc., or
its U.S. agent or broker, will be required to withhold from any payment that is
subject to
98
<PAGE>
backup withholding a tax equal to 31% of the payment, unless the U.S. Holder
furnishes its taxpayer identification number (social security or employer
identification number), certifies that the number is correct, certifies as to no
loss of exemption from backup withholding and otherwise complies with the
applicable requirements of the backup withholding rules. Certain U.S. Holders,
including corporations, are not subject to backup withholding. Any amounts
withheld under the backup withholding rules from a payment to a U.S. Holder
generally will be allowed as a credit against the U.S. Holder's U.S. federal
income tax liability and may entitle the U.S. Holder to a refund, provided that
the required information is furnished to the Internal Revenue Service.
Canada
The following summarizes the material Canadian federal income tax
considerations as of the date of this prospectus under the Income Tax Act
(Canada) (the "Canadian Tax Act") and the published administrative practice of
the Canada Customs and Revenue Agency generally applicable to a holder of new
notes who acquires new notes under the exchange offer.
This summary is based upon the provisions of the Canadian Tax Act and
the regulations adopted under the Canadian Tax Act (the "Regulations") in force
on the date of this prospectus, proposed amendments to the Canadian Tax Act and
the Regulations publicly announced prior to the date of this prospectus by or on
behalf of the Minister of Finance (Canada) and current published administrative
practices and assessing policies of the Canada Customs and Revenue Agency. This
summary does not otherwise take into account or anticipate any changes in law or
administrative practice, whether by legislative, governmental or judicial
action, nor does it take into account provincial or foreign income tax
considerations. This summary of Canadian federal income tax considerations does
not take into account the individual circumstances of any particular investor
and does not purport to discuss all of the possible tax consequences of an
investment in the new notes. Prospective holders should consult their tax
advisors for advice regarding the income tax considerations applicable to them.
The following discussion is applicable to a holder (other than an
initial purchaser) who, for purposes of the Canadian Tax Act and any relevant
tax treaty, deals at arm's length with 360networks, is not and is not deemed to
be a resident of Canada, does not use or hold, and is not deemed to use or hold,
the new notes in the course of carrying on a business in Canada and, in the case
of a person who carries on an insurance business in Canada and elsewhere,
establishes the new notes are not effectively connected with the insurance
business carried on in Canada and are not "designated insurance property" for
purposes of the Canadian Tax Act (a "Non-Resident Holder"). For purposes of the
Canadian Tax Act, related persons (as defined in the Canadian Tax Act) are
deemed not to deal at arm's length, and it is a question of fact whether persons
not related to each other deal at arm's length.
The payment by 360networks of interest, principal or premium on the new
notes to a Non-Resident Holder will be exempt from Canadian withholding tax.
No other tax on income (including taxable capital gains) will be
payable by a Non-Resident Holder under the Canadian Tax Act as a result of the
acquisition, holding, sale, redemption or other disposition of the new notes,
including the receipt of interest or premium thereon.
99
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account through
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the new notes. This prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of new notes received in exchange for old notes where
the old notes were acquired by the broker-dealer as a result of market-making
activities or other trading activities. We have agreed that, starting on the
expiration date and ending on the close of business on the 180th day following
the expiration date, we will make this prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with a resale.
We will not receive any proceeds from any sale of new notes by
broker-dealers. New notes received by broker-dealers for their own account
through the exchange offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions through
the writing of options on the new notes or a combination of these methods of
resale, at market prices prevailing at the time of resale, at prices related to
prevailing market prices or at negotiated prices. The resale may be made
directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from the broker-dealer
and/or the purchasers of the new notes. Any broker-dealer that resells new notes
that were received by it for its own account under the exchange offer and any
broker or dealer that participates in a distribution of new notes may be
considered to be an "underwriter" within the meaning of the Act and any profit
of resale of new notes and any commissions or concessions received by any person
may be considered to be underwriting compensation under the Securities Act. The
letter of transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not have admitted that it is an
"underwriter" within the meaning of the Securities Act. By acceptance of the
exchange offer, each broker-dealer that receives new notes under the exchange
offer agrees to notify us before using this prospectus in connection with the
sale or transfer of new notes, and acknowledges and agrees that, upon receipt of
notice from us of the happening of any event which makes any statement in this
prospectus untrue in any material respect or which requires the making of any
changes in this prospectus to make the statements in this prospectus not
misleading, which notice we agree to deliver promptly to the broker-dealer, the
broker-dealer will suspend use of this prospectus until we have amended or
supplemented the prospectus to correct the misstatement or omission and have
furnished copies of the amended or supplemented prospectus to the broker-dealer.
For a period of 180 days after the expiration date, we will promptly
send additional copies of this prospectus and any amendment or supplement to
this prospectus to any broker-dealer that requests these documents in the letter
of transmittal. We have agreed to pay all expenses for the exchange offer
(including the expenses of any one special counsel for the holders of the notes)
other than commissions or concessions of any brokers or dealers and will
indemnify the holders of the notes participating in the exchange offer
(including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
The holder of each old note accepted for exchange will receive a new
note in an amount equal to the surrendered old note. Old notes accepted for
exchange will not accrue interest from the date the exchange offer is completed.
Holders of old notes accepted for exchange will not receive any payment of
accrued interest on those old notes. Old notes which are not tendered or not
accepted for exchange will continue to accrue interest.
The old dollar notes were issued on April 26, 2000 and the old euro
notes were issued on April 28, 2000, each in transactions exempt from the
registration requirements of the Securities Act. They may not be offered or sold
in the United States unless registered or under an applicable exemption under
the Securities Act. We are offering the new notes under this prospectus to
satisfy certain of our obligations contained in the registration rights
agreements we entered into concerning the offerings. Based on interpretations by
the staff of the Securities and Exchange Commission as described in no-action
letters issued to others, we believe that new notes issued through the exchange
offer in exchange for old notes may be offered for resale, resold and otherwise
transferred by any holder of notes, except a holder that is an affiliate of ours
within the meaning of Rule 405 under the Securities Act, without compliance with
the registration and prospectus delivery provisions of the Securities Act,
100
<PAGE>
provided that these new notes are acquired in the ordinary course of the
holder's business and the holder has no arrangement or understanding with any
person to participate in a distribution of these new notes. However, we have not
sought a no-action letter concerning the exchange offer and we cannot assure you
that the staff of the Securities and Exchange Commission would make a similar
determination about the exchange offer. Each holder of old notes, other than a
broker-dealer, must acknowledge that it is not engaged in, and does not intend
to engage or participate in, a distribution of new notes and has no arrangement
or understanding to participate in a distribution of new notes. Each
broker-dealer that receives new notes for its own account through the exchange
offer must acknowledge that it will deliver a prospectus in connection with any
resale of new notes. The letter of transmittal states that by so acknowledging
and by delivering a prospectus, a broker-dealer will not have admitted that it
is an "underwriter" within the meaning of the Securities Act. This prospectus,
as it may be amended or supplemented from time to time, may be used by a
broker-dealer with resales of new notes received in exchange for old notes
acquired by that broker-dealer as a result of market-making activities or other
trading activities. We have agreed that, for a period ending at the close of
business on the 180th day following the expiration date, we will make this
prospectus available to any broker-dealer to use with resales. See "Plan of
Distribution."
We will not receive any proceeds from the exchange offer. We will pay
all the expenses of the exchange offer. In the event we terminate the exchange
offer and do not accept any old notes for exchange we will promptly return the
old notes to the holders of the notes. See "The Exchange Offer."
There has previously been only a limited secondary market, and no
public market, for the old notes. The old notes are eligible for trading in The
Portal Market. We have been advised by the initial purchasers that they intend
to make a market for the new notes; however, the initial purchasers are not
obligated to do so. We do not currently intend to list the new notes on any
securities exchange. Any market-making may be discontinued at any time, and
there is no assurance that an active public market for the new notes will
develop or, if it does develop, that it will continue. This prospectus may be
used by the initial purchasers in connection with offers and sales of the new
notes which may be made by them from time to time in market-making transactions
at negotiated prices relating to prevailing market prices at the time of sale.
The initial purchasers may act as principal or agent in this transaction.
The exchange offer is not being made to, nor will we accept surrenders
for exchange from, holders of old notes in any jurisdiction in which the
exchange offer or the acceptance of it would not comply with the securities or
blue sky laws of that jurisdiction.
You should rely only on the information contained in this document or
what we have referred you to. We have not authorized anyone to provide you with
information that is different.
The market data included in this prospectus, including information
relating to our relative position in the industry, are based on independent
industry publications, other publicly available information or our management's
good faith beliefs. Although we believe that these independent sources are
reliable, the accuracy and completeness of these independent sources has not
been independently verified.
Old dollar notes in the aggregate principal amount of $600 million were
issued originally in global form. The global old note was deposited with The
Depository Trust Company, as initial depository. The global old note is
registered in the name of Cede & Co., as nominee of the depository. Beneficial
interests in the global old note are shown on, and transfers of the global old
note are effected only through, records maintained by the depository and its
participants. The use of the global old note to represent certain of the old
notes permits the depository's participants, and anyone holding a beneficial
interest in an old note registered in the name of that a participant, to
transfer interests in the old notes electronically in accordance with the
depository's established procedures without the need to transfer a physical
certificate. The new notes will also be issued initially as a note in global
form and deposited with the depository.
Old euro notes in the aggregate principal amount of EURO 200 million
were issued originally in global form. The global old note was deposited with
HSBC Bank plc, as common depositary for Euroclear and Clearstream
101
<PAGE>
Banking, as initial depository. The global old note is registered in the name of
MSS (Common Depositary) Nominees Limited. Beneficial interests in the global old
note are shown on, and transfers of the global old note are effected only
through, records maintained by the depository and its participants. The use of
the global old note to represent certain of the old notes permits the
depository's participants, and anyone holding a beneficial interest in an old
note registered in the name of that a participant, to transfer interests in the
old notes electronically in accordance with the depository's established
procedures without the need to transfer a physical certificate. The new notes
will also be issued initially as a note in global form and deposited with HSBC
Bank plc, as common depositary for Euroclear and Clearstream Banking, as initial
depository.
102
<PAGE>
LEGAL MATTERS
Certain legal matters concerning the new notes will be passed upon for
us by Cahill Gordon & Reindel, New York, New York (concerning matters of U.S.
law), Farris, Vaughan, Wills & Murphy, Vancouver, British Columbia (concerning
matters of Canadian law) and Stewart McKelvey Stirling Scales, Halifax, Nova
Scotia (concerning matters of Nova Scotia law).
EXPERTS
Our financial statements for the years ended December 31, 1998 and 1999
incorporated by reference in this prospectus and elsewhere in the registration
statement have been audited by PricewaterhouseCoopers LLP, chartered
accountants, Vancouver, British Columbia, as indicated in their reports with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said reports. The divisional
financial statements of the predecessor division incorporated by reference in
this prospectus and elsewhere in the registration statement have been audited by
Deloitte & Touche LLP, Edmonton, Alberta, as indicated in their reports with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said reports. The financial
statements of GlobeNet Communications Group Limited incorporated by reference in
this prospectus and elsewhere in the registration statement have been audited by
PricewaterhouseCoopers LLP, chartered accountants, Toronto, Ontario, as
indicated in their reports with respect thereto, and are incorporated by
reference herein in reliance upon the authority of said firm as experts in
giving said reports.
ENFORCEABILITY OF CIVIL LIABILITIES AGAINST FOREIGN PERSONS
We are a corporation organized under the laws of Nova Scotia, Canada. A
majority of our directors and officers as well as certain experts named in this
prospectus reside principally in Canada. Because all or a substantial portion of
our assets and the assets of these persons are located outside the United
States, it may not be possible for you to effect service of process within the
United States upon us or those persons. Furthermore, it may not be possible for
you to enforce against us or them in the United States, judgments obtained in
U.S. courts based upon the civil liability provisions of the U.S. Federal
securities laws or other laws of the United States. We have been advised by
Farris, Vaughan, Wills & Murphy, our Canadian counsel, that there is doubt as to
the enforceability, in original actions in Canadian courts, of liabilities based
upon the U.S. Federal securities laws and as to the enforceability in Canadian
courts of judgments of U.S. courts obtained in actions based upon the civil
liability provisions of the U.S. Federal securities laws. Therefore, it may not
be possible to enforce those actions against us, our directors and officers or
the experts named in this prospectus.
CURRENCY TRANSLATION
Unless otherwise indicated, all references to "$" or dollars in this
prospectus refer to United States dollars and all references to "Cdn.$" refer to
Canadian dollars. As of May 31, 2000, the noon buying rate in New York City for
cable transfers in Canadian dollars was U.S.$1.00 = Cdn.$1.4974.
The following table sets forth, for each period presented, the high and
low exchange rates, the average of the exchange rates on the last day of each
month during the period indicated and the exchange rates at the end of the
period indicated for one United States dollar, expressed in Canadian dollars,
based on the noon buying rate in New York City for cable transfer payable in
Canadian dollars as certified for customs purposes by the Federal Reserve Bank
of New York.
103
<PAGE>
Year Ended December 31,
------------------------------------------
1999 1998 1997 1996 1995
------ ------ ------ ------ -------
End of Period..................... 1.4455 1.5295 1.4293 1.3706 1.3641
Average for the period............ 1.4945 1.4940 1.3875 1.3560 1.3770
High for the period............... 1.5470 1.5845 1.4413 1.3865 1.4267
Low for the period................ 1.4420 1.4037 1.3338 1.3263 1.3270
In this prospectus references to euros are converted to dollars at a rate of
0.9369 dollars to 1.0 euro.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a
registration statement on Form F-4 under the Securities Act, and the rules and
regulations promulgated thereunder, concerning the new notes offered by this
prospectus. This prospectus, which forms a part of the registration statement,
does not contain all of the information included in or annexed as exhibits or
schedules to the registration statement. Any statement in this prospectus about
any of our contracts or other documents is not necessarily complete. If the
contract or document is filed as an exhibit to the registration statement, the
contract or document is deemed to modify the description contained in this
prospectus. You must review the exhibits themselves for a complete description
of the contract or document. Our Commission file number is 001-15841.
You may review a copy of the registration statement, including exhibits
and schedules filed with it, at the Commission's public reference facilities in
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and
at the regional offices of the Commission located at 7 World Trade Center, 13th
Floor, New York, New York 10048 and at the Northwestern Atrium Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You may also obtain copies
of such materials from the Public Reference Section of the Commission, Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. You may call the Commission at 1-800-SEC-0330 for further
information on the public reference rooms. The Commission maintains a web site
(http://www.sec.gov) that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission.
You may read and copy any reports, statements or other information that
we file with the Commission at the addresses indicated above, and you may also
access them electronically at the web site set forth above. These Commission
filings are also available to the public from commercial document retrieval
services.
We are a "foreign private issuer" as defined in Rule 405 of the
Securities Act. As a foreign private issuer, we are exempt from provisions of
the Exchange Act which prescribe the furnishing and content of proxy statements
to shareholders and relating to short swing profits reporting and liability. We
have agreed that for so long as any notes remain outstanding we will furnish to
the holders of notes the information required to be delivered under Rule
144A(d)(4) under the Securities Act. Whether or not we are subject to Section
13(a) or 15(d) of the Exchange Act, we will file with the Securities and
Exchange Commission and furnish to the holders of notes and the trustee (1)
within 140 days after the end of each fiscal year, annual reports on Form 20-F
or 40-F, as applicable (or any successor form), containing the information
required to be contained therein (or required in such successor form) and (2)
(a) within 45 days after the end of each of the first three fiscal quarters of
each fiscal year, reports on Form 10-Q or (b) within 60 days after the end of
each of the first three fiscal quarters of each fiscal year, reports on Form 6-K
(or any successor form) which, regardless of applicable requirements, shall, at
a minimum, contain a "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
We are required to file reports and other information with the
securities commission in all provinces of Canada. You are invited to read and
copy any reports, statements or other information, other than confidential
104
<PAGE>
filings, that we file with the provincial securities commissions. These filings
are also electronically available from the Canadian System for Electronic
Document Analysis and Retrieval (SEDAR) (http://www.sedar.com), the Canadian
equivalent of the Commission's electronic document gathering and retrieval
system.
We have previously filed the following documents with the Commission
and incorporate them by reference into this prospectus:
1. our annual report on Form 20-F for the year ended December 31,
1999;
2. the consolidated financial statements of 360networks inc. for the
six months ended June 30, 2000 and 1999, contained in our report of
foreign issuer on Form 6-K, filed with the Commission on July 25,
2000;
3. the consolidated financial statements of 360networks inc, together
with the report thereon of PricewaterhouseCoopers LLP dated
February 25, 2000, except for note 15 which is as of March 20,
2000, appearing on pages F-2 to F-27 in Amendment No. 2 to our
Registration Statement on Form F-1 (No. 333-95621), filed with the
Commission on April 18, 2000;
4. the consolidated financial statements of Worldwide Fiber (USA),
Inc., together with the report thereon of PricewaterhouseCoopers
LLP dated March 12, 1999 appearing on pages F-28 to F-36 in
Amendment No. 2 to our Registration Statement on Form F-1 (No.
333-95621), filed with the Commission on April 18, 2000;
5. the consolidated financial statements of our predecessor division,
the telecommunications division of Ledcor Industries Limited,
together with the report thereon of Deloitte & Touche LLP dated
November 30, 1998, appearing on page F-37 to F-47 in Amendment No.
2 to our Registration Statement on Form F-1 (No. 333-95621), filed
with the Commission on April 18, 2000;
6. the consolidated financial statements of GlobeNet Communications
Group Limited, together with the report thereon of
PricewaterhouseCoopers LLP dated February 16, 2000, appearing on
page F-48 to F-67 in Amendment No. 2 to our Registration Statement
on Form F-1 (No. 333-95621), filed with the Commission on April 18,
2000; and
7. our reports of foreign issuer on Form 6-K, filed with the
Commission on June 21, 2000, May 16, 2000 and May 5, 2000.
All subsequent annual reports filed by us on Form 20-F, Form 10-K or
Form 40-F and all reports filed pursuant to sections 13(a) or 15(d) of the
Exchange Act subsequent to the date of this prospectus and before the
termination of the offering shall be deemed to be incorporated by reference and
a part of this prospectus from the date such documents are filed. We may
incorporate by reference any reports of foreign issuer submitted by us on Form
6-K by identifying on such forms that they are being incorporated by reference
into this prospectus.
For purposes of this prospectus, any statement in a document
incorporated or deemed incorporated by reference is modified or superseded to
the extent that a statement in this prospectus, or in any subsequently filed
document which is or is deemed to be incorporated by reference, modifies or
supersedes it. Any statement so modified or superseded is not, except as so
modified or superseded, to constitute a part of this prospectus.
105
<PAGE>
We will provide without charge to each person, including any beneficial
owner, to whom a copy of this prospectus has been delivered, on the written or
oral request of such person, a copy of any or all documents referred to above
which have been or may be incorporated by reference in this prospectus (not
including exhibits to such incorporated information that are not specifically
incorporated by reference into such information). Requests for such copies
should be directed to us at the following address: 360networks inc., 1500-1066
West Hastings Street, Vancouver, British Columbia, Canada V6E 3X1, Attention:
Secretary, telephone number: (604) 681-1994. In order to obtain timely delivery
of these documents you must request this information no later than five business
days before the date on which you would like to receive the documents. YOU MUST
REQUEST THIS INFORMATION BY .
GENERAL LISTING INFORMATION
Listing
Our articles of association and the legal notice relating to the issue
of the notes have been deposited with the Registrar of the District Court in
Luxembourg (Greffier en Chef du Tribunal d'Arrondissement a Luxembourg), where
such documents are available for inspection and where copies thereof can be
obtained upon request. As long as the notes are listed on the Luxembourg Stock
Exchange, an agent for making payments on, and transfers of, notes will be
maintained in Luxembourg.
The issuance of the notes was authorized by the board of directors of
360networks inc. by meeting on April 19, 2000.
Documents
For so long as the notes are listed on the Luxembourg Stock Exchange
and the rules of such exchange so require, copies of the following documents may
be inspected at the specified office of the Paying Agent and Registrar in
Luxembourg:
o Memorandum of Association and Articles of Association of
360networks inc.;
o the purchase agreement;
o the indentures relating to the notes, which include the forms of
the note certificates;
o the registration rights agreements; and
o other documents that we state in this prospectus will be available
at the office of the Paying Agent and Registrar in Luxembourg.
In addition, copies of the most recent consolidated financial
statements of 360networks inc. for the preceding financial year and any interim
quarterly financial statements published by 360networks inc. will be available
at the specified office of the Paying Agent in Luxembourg for so long as the
notes are listed on the Luxembourg Stock Exchange and the rules of such exchange
so require.
Responsibility Statement
Having made all reasonable inquiries, we confirm that this prospectus
contains all information with respect to 360networks inc. and the notes which is
material in the context of the issue and offering of the notes, that such
information is true and accurate in every material respect and is not misleading
in any material respect and that this prospectus does not omit to state any
material fact necessary to make such information not misleading.
106
<PAGE>
The opinions, assumptions and intentions expressed in this prospectus with
regard to 360networks inc. are honestly held, have been reached after
considering all relevant circumstances and are based on reasonable assumptions.
We accept responsibility for the information contained in this prospectus
accordingly. We represent that, other than as contemplated by the pro forma
financial information presented in this prospectus, there has been no material
adverse change in our financial position since December 31, 1999.
Neither we nor any of our affiliates is involved in any litigation or
arbitration proceedings that relate to claims or amounts that are material in
the context of the issue of the notes or that may have, or have had during the
12 months preceding the date of this prospectus, a material adverse effect on
our financial position, nor, so far as we or any of our affiliates is aware, is
any such proceeding pending or threatened.
107
<PAGE>
PRINCIPAL OFFICE OF 360NETWORKS INC.
1500-1066 West Hastings Street
Vancouver, British Columbia
Canada V6E 3X1
TRUSTEE, PAYING AGENT AND REGISTRAR
HSBC Bank USA
140 Broadway, Level A
New York, New York 10005-1180
LISTING, PAYING AND TRANSFER AGENT
Banque Generale du Luxembourg
50 Avenue John F. Kennedy
L-2951 Luxembourg
PAYING AGENT AND COMMON DEPOSITARY
HSBC Bank plc
Mariner House
Pepys Street
London EC3N 4DA, United Kingdom
LEGAL ADVISORS TO
THE COMPANY
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Farris, Vaughan, Wills & Murphy
2600-700 West Georgia Street
Vancouver, British Columbia
Canada V7Y 1B3
Stewart McKelvey Stirling Scales
Suite 900, Purdy's Wharf Tower One
1959 Upper Water Street
Halifax, Nova Scotia
Canada B3J 3N2
<PAGE>
360networks inc.
Index to Pro Forma Financial Information
(unaudited)
Page
----
Pro Forma Consolidated Income Statement for
the six month period ended June 30, 2000............................. PF-2
Pro Forma Consolidated Income Statement for
the year ended December 31, 1999..................................... PF-3
Notes to Pro Forma Financial Information............................... PF-4
PF-1
<PAGE>
360networks inc.
Pro Forma Consolidated Income Statement
(unaudited)
For the six month period ended June 30, 2000
(tabular amounts expressed in thousands of U.S. dollars except
per share amounts)
<TABLE>
<CAPTION>
Pro forma
-------------------------
GlobeNet Pro forma
Communications Pro forma Consolidated Income
360networks inc. Group Limited Acquisition Combined Adjustments Statement
$ $ Adjustments $ $ $
---------------- ------------- ----------- -------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue....................... 234,000 13,373 -- 247,373 -- 247,373
Costs......................... 147,000 4,408 -- 151,408 -- 151,408
---------------- ------------- ----------- -------- --------- ---------------
Gross Profit.................. 87,000 8,965 -- 95,965 -- 95,965
---------------- ------------- ----------- -------- --------- ---------------
Expenses
General and administrative.... 36,000 18,451 -- 54,451 -- 54,451
Stock-based compensation...... 153,000 10,670 -- 163,670 -- 163,670
Depreciation.................. 8,000 1,368 -- 9,368 -- 9,368
13,548 4(i)
Amortization of goodwill...... -- -- 6,962 4(ii) 20,510 -- 20,510
---------------- ------------- ----------- -------- --------- ----------------
197,000 30,489 20,510 247,999 -- 247,999
---------------- ------------- ----------- -------- --------- ---------------
(110,000) (21,524) (20,510) (152,034) -- (152,034)
Interest expense.............. 52,000 16,190 (1,310) 4(i) 66,880 32,770 4(iii) 99,650
Interest income............... 28,000 13,785 -- 41,785 -- 41,785
---------------- ------------- ----------- -------- --------- ---------------
Income (loss) before
income taxes and minority
interest.................... (134,000) (23,929) (19,200) (177,129) (32,770) (209,899)
Provision for income taxes.... 13,000 56 -- 13,056 (14,943) 4(iv) (1,887)
---------------- ------------- ----------- -------- --------- ----------------
Income (loss) before minority
interest ................... (147,000) (23,985) (19,200) (190,185) (17,827) (208,012)
Income attributable to
minority interest........... (2,000) -- 2,000 4(ii) -- -- --
---------------- ------------- ----------- -------- --------- ----------------
Net income (loss) for the
period........................ (149,000) (23,985) (17,200) (190,185) (17,827) (208,012)
================ ============= =========== ======== ========= ================
Basic and fully diluted loss
per share. .................... $(0.33) $(0.29)
Weighted average number of
shares used to compute basic
and fully diluted loss per
share....................... 524,174,000 4(v) 724,945,262
</TABLE>
PF-2
<PAGE>
360networks inc.
Pro Forma Consolidated Income Statement
(unaudited)
For the year ended December 31, 1999
(tabular amounts expressed in thousands of U.S. dollars except
per share amounts)
<TABLE>
<CAPTION>
Pro forma
-------------------------
GlobeNet Pro forma
Communications Pro forma Consolidated Income
360networks inc. Group Limited Acquisition Combined Adjustments Statement
$ $ Adjustments $ $ $
---------------- ------------- ----------- -------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue ...................... 359,746 26,348 -- 386,094 -- 386,094
Costs ........................ 250,612 10,989 -- 261,601 -- 261,601
------------
Gross Profit ................. 109,134 15,359 -- 124,493 -- 124,493
------------
Expenses
General and administrative ... 21,846 15,104 -- 36,950 36,950
Stock-based compensation ..... 7,116 4,207 -- 11,323 -- 11,323
Depreciation ................. 2,998 1,854 -- 4,852 -- 4,852
28,583 5(i)
Amortization of goodwill ..... -- -- 23,100 5(ii) 51,683 -- 51,683
------------
31,960 21,165 51,683 104,808 -- 104,808
77,174 (5,806) (51,683) 19,685 -- 19,685
Interest expense ............. 33,908 20,965 (1,310) 5(i) 53,563 143,443 5(iii) 197,006
Interest income .............. 18,122 12,588 -- 30,710 -- 30,710
------------
Income (loss) before income
taxes, minority interest and
equity accounted for
investment.................. 61,388 (14,183) (50,373) (3,168) (143,443) (146,611)
Provision for income taxes ... 30,314 141 -- 30,455 (65,410) 5(iv) (34,955)
------------
Income (loss) before minority
interest and equity
accounted for investment ... 31,074 (14,324) (50,373) (33,623) (78,033) (111,656)
Income attributable to
minority interest and equity
accounted for investment ... (7,434) (773) 7,434 5(ii) (773) -- (773)
------------
Net income (loss) for
the year.................... 23,640 (15,097) (42,939) (34,396) (78,033) (112,429)
============
Basic and fully diluted loss
per share .................. $ (0.03) $ (0.19)
Weighted average number of
shares used to compute basic
and fully diluted loss per
share....................... 327,313,808 5(vi) 614,964,070
</TABLE>
PF-3
<PAGE>
360networks inc.
Notes to Pro Forma Financial Information
(unaudited)
For the six month period ended June 30, 2000 and the year
ended December 31, 1999
(tabular amounts expressed in thousands of U.S. dollars)
1. Nature and Purpose of Pro Forma Financial Information
The pro forma consolidated income statement of the Company for the six
months ended June 30, 2000 assumes that the following transactions occurred on
January 1, 2000: (i) the Company's acquisition of GlobeNet, (ii) the elimination
of minority interest earnings and amortization of goodwill as a result of the
Michels and CN/IC minority interest acquisitions and (iii) the effect of the
interest expense including accretion of the discount on the $600 million 13%
senior notes due 2008 and EURO 200 million 13% senior notes due 2008
(collectively, the "Notes") and amortization of deferred financing costs
relating to the Notes. The pro forma consolidated income statement of the
Company for the year ended December 31, 1999 assumes that the following
transactions occurred on January 1, 1999: (i) the Company's acquisition of
GlobeNet; (ii) the elimination of minority interest earnings and amortization of
goodwill as a result of the Michels and CN/IC minority interest acquisitions;
and (iii) the effect of the interest expense including accretion of the discount
on the Notes and amortization of deferred financing costs relating to the Notes
and $500,000,000 12% senior notes issued July 28, 1999 (the "1999 Notes").
2. Basis of presentation
The unaudited pro forma consolidated income statements have been
prepared by management in accordance with generally accepted accounting
principles in the United States and the pro forma assumptions and adjustments
described in notes 1, 4 and 5.
The unaudited pro forma consolidated income statement for the year
ended December 31, 1999 is based on the audited historical consolidated
financial statements of the Company for the year ended December 31, 1999 and
audited historical consolidated financial statements of GlobeNet for the year
ended December 31, 1999.
The unaudited pro forma consolidated income statement for the six
months ended June 30, 2000 is based on the unaudited historical consolidated
financial statements of the Company and GlobeNet for the six months ended June
30, 2000.
The unaudited pro forma financial statements give effect to the
acquisition by the Company of GlobeNet in a transaction to be accounted for as a
purchase. The unaudited pro forma consolidated income statements are based on
the individual statements of income of the Company and GlobeNet and combines the
results of the operations for the year ended December 31, 1999 and the six month
period ended June 30, 2000, as if the acquisition occurred on January 1, 1999
and January 1, 2000 respectively.
The unaudited pro forma consolidated financial statements are not
necessarily indicative of the results that actually would have resulted if the
transactions reflected herein had been completed on the dates indicated or the
results which may be obtained in the future. The unaudited pro forma
consolidated financial statements should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements of the Company, including
the respective notes thereto, incorporated by reference.
3. Significant accounting policies
The significant accounting policies used in the preparation of the pro
forma consolidated income statements include those disclosed in the consolidated
financial statements of the Company.
4. Pro forma consolidated income statement assumptions and adjustments for
the six month period ended June 30, 2000
(i) Acquisition of GlobeNet
PF-4
<PAGE>
360networks inc.
Notes to Pro Forma Financial Information
(unaudited)
For the six month period ended June 30, 2000 and the year
ended December 31, 1999
(tabular amounts expressed in thousands of U.S. dollars)
The pro forma income statement has been prepared to reflect the
following adjustments and assumptions resulting from the acquisition of
GlobeNet:
o This elimination of the amortization of deferred financing costs of
$1,310,000 related to GlobeNet's debt.
o The amortization of goodwill of $13,548,000.
o The assumption that GlobeNet's long term debt will not be repaid as
a result of a change in control of GlobeNet.
(ii) Michels and CN/IC minority interest acquisitions
This adjustment records the amortization of goodwill from the
acquisition of the minority equity interests of Michels and CN/IC and
elimination of minority interest earnings assuming the acquisitions occurred on
January 1, 2000.
(iii) Interest expense on the Notes
This adjustment records the interest expense, including accretion of
the discount on the Notes and amortization of deferred financing costs of
$32,770,000 for the six months ended June 30, 2000 assuming the Notes were
issued on January 1, 2000. Amortization of the deferred financing costs and
accretion of the discount on the Notes was computed based on the effective
interest rate method. The Company would have capitalized a portion of interest
expense related to the Notes to the cost of the fiber optic network assets
constructed in 2000, which is not reflected in these pro forma statements.
(iv) Income taxes
This adjustment records an income tax recovery of $1,887,000 for the
six months ended June 30, 2000 using an effective tax rate of 45.6%. Management
believes that, based on a number of factors, it is more likely than not that the
deferred tax asset will be fully realized, such that no valuation allowance
would be recorded.
(v) Pro forma basic and fully diluted loss per share
The weighted average number of shares used to compute pro forma basic
and fully diluted loss per share is determined as follows:
Weighted average number of shares used to compute historical
basic and fully diluted loss per share....................... 542,174,000
Issuance of shares in a public offering........................ 51,566,250
Purchase of GlobeNet........................................... 42,822,316
Purchase of Michels minority equity interest................... 22,285,714
Purchase of CN/IC minority equity interests.................... 11,428,571
Issuance and conversion or exchange of Series A Non-Voting 160,084,346
Preferred Shares.............................................
Reciprocal shareholdings adjustment from the Canadian
telecommunications arrangement transaction................... (536,935)
PF-5
<PAGE>
360networks inc.
Notes to Pro Forma Financial Information
(unaudited)
For the six month period ended June 30, 2000 and the year
ended December 31, 1999
(tabular amounts expressed in thousands of U.S. dollars)
Less: Weighted average number of shares for the above noted pro forma
transactions already included in June 30, 2000 historical basic and fully
diluted earnings per share. (104,879,000)
-----------------
724,945,262
=================
5. Pro forma consolidated income statement assumptions and adjustments for
the year ended December 31, 1999
(i) Acquisition of GlobeNet
The pro forma income statement has been prepared to reflect the
following adjustments and assumptions resulting from the acquisition of
GlobeNet:
o This elimination of the amortization of deferred financing costs of
$1,310,000 related to GlobeNet's debt.
o The amortization of goodwill of $28,583,000.
o The assumption that GlobeNet's long term debt will not be repaid as
a result of a change in control of GlobeNet.
(ii) Michels and CN/IC minority interest acquisitions
This adjustment records the amortization of goodwill from the
acquisition of the minority equity interests of Michels and CN/IC and
elimination of minority interest earnings assuming the acquisitions occurred on
January 1, 1999.
(iii) Interest expense on the Notes and 1999 Notes
This adjustment records the interest expense, including accretion of
the discount on the Notes and amortization of deferred financing costs of
$143,443,000 for the year ended December 31, 1999 assuming the Notes and the
1999 Notes were issued on January 1, 1999. Amortization of the deferred
financing costs and accretion of the discount on the Notes was computed based on
the effective interest rate method. The Company would have capitalized a portion
of interest expense related to the Notes and the 1999 Notes to the cost of the
fiber optic network assets constructed in 1999, which is not reflected in these
pro forma statements.
(iv) Income taxes
This adjustment records an income tax recovery of $34,955,000 for 1999
using an effective tax rate of 45.6%. Management believes that, based on a
number of factors, it is more likely than not that the deferred tax asset will
be fully realized, such that no valuation allowance would be recorded.
(v) Pro forma basic and fully diluted loss per share
PF-6
<PAGE>
360networks inc.
Notes to Pro Forma Financial Information
(unaudited)
For the six month period ended June 30, 2000 and the year
ended December 31, 1999
(tabular amounts expressed in thousands of U.S. dollars)
The weighted average number of shares used to compute pro forma basic
and fully diluted loss per share is determined as follows:
Weighted average number of shares used to compute historical 327,313,808
basic and fully diluted loss per share........................
Issuance of shares in a public offering......................... 51,566,250
Purchase of GlobeNet............................................ 42,822,316
Purchase of Michels minority equity interest.................... 22,285,714
Purchase of CN/IC minority equity interests..................... 11,428,571
Issuance and conversion or exchange of Series A Non-Voting 160,084,346
Preferred Shares..............................................
Reciprocal shareholdings adjustment from the Canadian
telecommunications arrangement transaction.................... (536,935)
------------
614,964,070
Pro forma loss available to common stockholders is computed as follows:
Pro forma net loss............................................ $ (112,429)
Stock dividend................................................ (5,000)
------------
Pro forma net loss available to common stockholders........... $ (117,429)
============
PF-7
<PAGE>
July , 2000
[OBJECT OMITTED - COMPANY LOGO]
$600,000,000 13% senior notes due 2008
EURO 200,000,000 13% senior notes due 2008
--------------
PROSPECTUS
--------------
--------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor any
sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or our affairs have not
changed since the date hereof.
--------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to our Amended and Restated Articles of Association of the
Company (the "Articles of Association"), subject to Articles 142 and 143 of the
Articles of Association, every director, Secretary, Treasurer and other officer
of the Company shall be indemnified by the Company against, and it shall be the
duty of the directors out of the funds of the Company to pay, all costs, losses
and expenses that any such director, Secretary, Treasurer or other officer may
incur or become liable to pay by reason of any contract entered into, or act or
thing done by him or her as such officer or servant or in any way in the
discharge of his or her duties including traveling expenses; and the amount for
which such indemnity is proved shall immediately attach as a lien on the
property of the Company and have priority as against the members over all other
claims.
The Company has purchased insurance against potential claims against
the directors and officers of the Company and against loss for which the Company
may be required or permitted by law to indemnify such directors and officers.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been
informed that in the opinion of the U.S. Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The Exhibits to this Registration Statement are listed in the Exhibit
Index on page II-6 of this Registration Statement, which Index is incorporated
herein by reference.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in this
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.
(b) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, 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 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 Act and will
be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes to file an application
for the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act ("Act") in accordance
with the rules and regulations prescribed by the Commission under Section
305(b)(2) of the Act.
II-1
<PAGE>
(d) The undersigned registrant hereby undertakes: (i) to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means; and (ii) to arrange or provide for a
facility in the U.S. for the purpose of responding to such requests. The
undertaking in subparagraph (i) above includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(e) The undersigned registrant hereby undertakes to supply by means of
a post-effective amendment all information concerning a transaction and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has
duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Seattle, State of
Washington, on the 25th of July, 2000.
360NETWORKS INC.
(Registrant)
By: /s/ GREGORY MAFFEI
-------------------------------------------------
Name: Gregory Maffei
Title: President and Chief Executive Officer
II-3
<PAGE>
POWER OF ATTORNEY
Each of the undersigned hereby constitutes and appoints Gregory Maffei,
Larry Olsen and Ron Stevenson, and each of them (with full power to each of them
to act alone) his true and lawful attorney-in-fact, with power of substitution
and resubstitution, in his name, place and stead, in any and all capacities, to
sign any and all amendments (including post-effective amendments) and
supplements to this registration statement, and to file the same, with exhibits
thereto and other documents in connection therewith, with the Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any or them, or their substitutes,
may lawfully do or cause to be done by virtue hereof.
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/ DAVID LEDE
------------------------- Chairman of the Board July 25, 2000
David Lede
/S/ GREGORY MAFFEI
------------------------- Director (Principal Executive Officer) July 25, 2000
Gregory Maffei
/S/ CLIFFORD LEDE
------------------------- Vice Chairman July 25, 2000
Clifford Lede
/S/ LARRY OLSEN
------------------------- Vice Chairman (Principal Financial and July 25, 2000
Larry Olsen Accounting Officer)
/S/ RON STEVENSON
------------------------- Director July 25, 2000
Ron Stevenson
/S/ KEVIN COMPTON
------------------------- Director July 25, 2000
Kevin Compton
/S/ GLENN CREAMER
------------------------- Director July 25, 2000
Glenn Creamer
/S/ JOHN MALONE
------------------------- Director July 25, 2000
John Malone
/S/ CLAUDE MONGEAU
------------------------- Director July 25, 2000
Claude Mongeau
/S/ ANDREW RUSH
------------------------- Director July 25, 2000
Andrew Rush
------------------------- Director July 25, 2000
John Stanton
II-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/S/ GENE SYKES
------------------------- Director July 25, 2000
Gene Sykes
/S/ JAMES VOELKER
------------------------- Director July 25, 2000
James Voelker
WFI Fiber Inc. WFI Fiber Inc. (Authorized U.S. July 25, 2000
Representative)
</TABLE>
By: /S/ LARRY OLSEN
-----------------------------------
Larry Olsen, Authorized Signatory
II-5
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
----------- -----------
1.1 Purchase Agreement between 360networks inc. and the Initial
Purchasers dated April 20, 2000.
3.1 (3) Memorandum of Association of 360networks inc.
3.2 (3) Articles of Association of 360networks inc.
4.1 (1) Indenture between Worldwide Fiber Inc. and HSBC Bank USA
(formerly Marine Midland Bank) dated December 23, 1998.
4.2 (1) Form of 12 1/2% Series A Senior Notes due 2005.
4.3 (1) Form of 12 1/2% Series B Senior Notes due 2005.
4.4 (1) Indenture between Worldwide Fiber Inc. and HSBC Bank USA
(formerly Marine Midland Bank) dated July 28, 1999.
4.5 (2) Form of 12% Series A Senior Notes due 2009 (included in
exhibit 4.4 hereto).
4.6 (2) Form of 12% Series B Senior Notes due 2009 (included in
exhibit 4.4 hereto).
4.7 Indenture between 360networks inc. and HSBC Bank USA dated
April 26, 2000.
4.8 Form of 13% Series A Senior Notes due 2008 (included in
exhibit 4.7 hereto).
4.9 Form of 13% Series B Senior Notes due 2008 (included in
exhibit 4.7 hereto).
4.10 Registration Rights Agreement between 360networks inc. and
the Initial Purchasers dated April 26, 2000.
4.11 Indenture between 360networks inc. and HSBC Bank USA dated
April 28, 2000.
4.12 Form of 13% Series A Senior Notes due 2008 (included in
exhibit 4.11 hereto).
4.13 Form of 13% Series B Senior Notes due 2008 (included in
exhibit 4.11 hereto).
4.14 Registration Rights Agreement between 360networks inc. and
the Initial Purchasers dated April 28, 2000.
5.1 Opinion of Stewart McKelvey Stirling Scales regarding the
legality of the securities being registered.
5.2 Opinion of Cahill Gordon & Reindel regarding the legality of
the securities being registered.
9.1 (3) Form of Trust Agreement among Worldwide Fiber Holdings Ltd.,
Gregory B. Maffei, Madison Square Inc., Larry R. Olsen,
Worldwide Fiber Inc. and Trust Company dated as of , 2000.
10.1 (1) Shareholders Agreement between Worldwide Fiber Inc.,
Worldwide Fiber Networks Ltd., Ledcor Communications Ltd.,
Ledcor Industries, Inc., Worldwide Fiber (USA), Inc.
(formerly Pacific Fiber Link, Inc.), Mi-Tech Communications,
LLC, Ledcor Inc., and Michels Pipeline Construction, Inc.
dated December 31, 1998.
10.2 (1) Railplow License Agreement between Ledcor Industries Limited
and Worldwide Fiber Communications Ltd. (formerly 786520
Alberta Ltd.) dated May 31, 1998.
10.3 (1) Non-exclusive Railplow License Agreement between Ledcor
Industries Limited and Ledcom Holdings Ltd. (formerly
Starfiber Communications Ltd.) dated May 31, 1998.
10.4 (1) Letter from Ledcor, Inc. committing Ledcom Holdings Ltd. to
grant an exclusive Railplow license to Worldwide Fiber
Communications Ltd. dated December 1, 1998.
10.5 (1) Management Services Agreement between Ledcor Industries
Limited and Worldwide Fiber Inc. (formerly Worldwide
Fiberlink Ltd.) dated May 31, 1998.
10.6 (1) Employment Agreement between Ledcor Industries Limited and
Ledcor Communications Ltd., a wholly owned subsidiary of the
Worldwide Fiber Inc. dated May 31, 1998.
10.7 (1) Employment Agreement between Ledcor Industries Inc. and
Ledcor Communications Inc., a subsidiary of Worldwide Fiber
Inc. dated May 31, 1998.
10.8 (1) Construction Services Agreement between Ledcor Industries
Limited and Ledcor Communications Ltd., a wholly-owned
subsidiary of the Worldwide Fiber Inc. dated May 31, 1998.
10.9 (1) Construction Services Agreement between Ledcor Industries
Inc. and Ledcor Communications Ltd. (formerly Ledcor
Communications Inc.) dated May 31, 1998.
10.10 (1) Non-Competition Agreement between Worldwide Fiber Inc.
(formerly Starfiber Inc.) and Ledcor, Inc., dated May 31,
1998.
10.11 (1) Roll-over Agreement between Ledcor Industries Limited and
Ledcom Holdings Ltd. (formerly Starfiber Communications
Ltd.) dated May 31, 1998 transferring certain technology of
Ledcor Industries Limited.
II-6
<PAGE>
10.12 (1) Roll-over Agreement between Ledcor Industries Limited,
Worldwide Fiber (USA), Inc. (formerly Pacific Fiber Link,
Inc.) and Ledcor Industries Inc. dated August 31, 1998
transferring assets of Ledcor Inc.'s telecommunications
division.
10.13 (1) Roll-over Agreement between Mi-Tech Communications, LLC,
Worldwide Fiber (USA), Inc. (formerly Pacific Fiber Link,
Inc.) dated August 31, 1998 transferring assets of Ledcor
Inc.'s telecommunications division.
10.14 (1) Roll-over Agreement between Ledcor Industries Limited and
Worldwide Fiber Holdings Ltd. (formerly Worldwide Fiberlink
Holdings Ltd., dated August 31, 1998 transferring assets of
Ledcor Inc.'s telecommunications division.
10.15 (1) Roll-over Agreement between Worldwide Fiber Holdings Ltd.
(formerly Worldwide Fiberlink Holdings Ltd., and Worldwide
Fiber Inc. (formerly Worldwide Fiberlink Ltd.) dated August
31, 1998 transferring assets of Ledcor Inc.'s
telecommunications division.
10.16 (1) Roll-over Agreement between Worldwide Fiber Inc. (formerly
Worldwide Fiberlink Ltd.) and Worldwide Fiber Networks Ltd.
(formerly Worldwide Fiber Ltd.) dated August 31, 1998
transferring assets of Ledcor Inc.'s telecommunications
division.
10.17 (1) Roll-over Agreement between Ledcor Inc. And Worldwide Fiber
Holdings Ltd. dated December 1, 1998 transferring assets of
Ledcor Inc.'s telecommunications division.
10.18 (1) Roll-over Agreement between Worldwide Fiber Holdings Ltd.
and Worldwide Fiber Inc. dated December 1, 1998 transferring
assets of Ledcor Inc.'s telecommunications division.
10.19 (1) Roll-over Agreement between Worldwide Fiber Inc. and
Worldwide Fiber Communications Ltd. dated December 1, 1998
transferring assets of Ledcor Inc.'s telecommunications
division.
10.20 (1) License Agreement among WFI-CN Fiber Inc., Worldwide Fiber
Inc. and Canadian National Railway Company, dated May 28,
1999.
10.21 (1) Unanimous Shareholders Agreement among Worldwide Fiber
Networks Ltd., Canadian National Railway Company and WFI-CN
Fiber Inc. dated May 28, 1999.
10.22 (1) Limited Liability Company Agreement of Worldwide Fiber IC
LLC between Worldwide Fiber IC Holdings, Inc., and IC Fiber
Holding Inc., dated May 28, 1999.
10.23 (1) Form of License Agreement among Worldwide Fiber Inc.,
Illinois Central Railroad Company and each of IC Fiber
Alabama LLC, IC Fiber Illinois LLC, IC Fiber Iowa LLC, IC
Fiber Kentucky LLC, IC Fiber Louisiana LLC, IC Fiber
Mississippi LLC and IC Fiber Tennessee LLC, dated as of May
28, 1999.
10.24 (1) Amended and Restated Share Purchase Agreement by and between
Ledcor Industries Limited, Ledcor Industries Inc. and
Worldwide Fiber Inc. dated May 28, 1999.
10.25 (1) Supply contract for Hibernia Undersea Cable System between
Worldwide Telecom (Bermuda) Ltd. and Tyco Submarine Systems
Ltd. dated June 18, 1999.
10.26 (2) Preferred Share Purchase Agreement by and among Worldwide
Fiber Inc., DWF SRL, GSCP3 WWF (Barbados) SRL, WWF
(Barbados) SRL, Providence Equity Fiber L.P., and Tyco Group
S.A.R.L. dated as of September 7, 1999.
10.27 (2) Shareholders Agreement by and among Worldwide Fiber Inc.,
DWF SRL, GS Capital Partners III, L.P., GSCP3 WWF (Barbados)
SRL, Providence Equity Fiber, L.P., Tyco Group S.a.r.l.,
Worldwide Fiber Holdings Ltd., Ledcor Inc. and the Several
Shareholders named in Schedule 1.15 thereto dated as of
September 9, 1999.
10.28 (2) Amended and Restated Share Purchase Agreement between Ledcor
Industries Limited, Ledcor Industries Inc. and Worldwide
Fiber Inc. dated September 7, 1999.
10.29 (2) Letter Agreement between Ledcor Industries Limited, Ledcor
Industries Inc., Worldwide Fiber Inc. and Worldwide Fiber
(F.O.T.S.) No. 3, Ltd. dated September 27, 1999.
10.30 (3) Stock Purchase Agreement by and between Worldwide Fiber Inc.
and Gregory B. Maffei, dated December 22, 1999.
10.31 (3) Agreement and Plan of Arrangement between Worldwide Fiber
Inc. and GlobeNet Communications Group Limited dated as of
March 11, 2000.
10.32 (3) Share Exchange Agreement by and among 360networks inc.,
Worldwide Fiber Networks Ltd., Ledcor Communications Ltd.,
Ledcor Industries, Inc., Worldwide Fiber (USA), Inc.,
Mi-Tech Communications, LLC, Ledcor Inc. and Michels
Pipeline Construction, Inc. dated as of March 20, 2000.
II-7
<PAGE>
10.33 (3) Share Exchange Agreement by and among Worldwide Fiber Inc.
and Canadian National Railway Company dated as of March 6,
2000.
10.34 (3) Purchase Agreement by and between IC Fiber Holding Inc.,
Worldwide Fiber IC Holdings, Inc. and Illinois Central
Railroad Company dated as of March 3, 2000.
10.35 (3) Urbanlink Reorganization Definitive Agreement between
360networks inc., Worldwide Fiber Holdings Ltd. and WFI
Urbanlink Ltd., dated April 17, 2000.
10.36 (3) Asset Purchase Agreement between Ledcor Communications Ltd.
and WFI Urbanlink Ltd., dated April 17, 2000.
10.37 (3) Asset Purchase Agreement between WFI-CN Fibre Inc. and WFI
Urbanlink Ltd., dated April 17, 2000.
10.38 (3) Asset Purchase Agreement between Worldwide Fiber (F.O.T.S.)
No. 3, Ltd. and WFI Urbanlink Ltd., dated April 17, 2000.
10.39 (3) Asset Purchase Agreement between Worldwide Fiber Network
Services Ltd. and WFI Urbanlink Ltd., dated April 17, 2000.
10.40 (3) Reseller Agreement between 360networks inc., Worldwide Fiber
Network Services Ltd. and WFI Urbanlink Ltd., dated April
17, 2000.
10.41 (3) Initial Capacity Purchase Agreement under the Reseller
Agreement between Worldwide Fiber Network Services Ltd. and
WFI Urbanlink Ltd., dated April 17, 2000.
10.42 (3) Network Operating Center Agreement between 360networks inc.,
Worldwide Fiber Network Services Ltd. and WFI Urbanlink
Ltd., dated April 17, 2000.
10.43 (3) Rollover Agreement between 360 Urbanlink Ltd. and Urbanlink
Holdings, Ltd., dated April 17, 2000.
10.44 (3) Rollover Agreement between Worldwide Fiber Holdings Ltd. and
Urbanlink Holdings, Ltd. regarding transfer of Subordinate
Voting Shares of 360network services inc., dated April 17,
2000.
10.45 (3) Unanimous Shareholders Agreement for Urbanlink Holdings
between 360networks inc., 360 Urbanlink Ltd., Worldwide
Fiber Holdings Ltd., Urbanlink Holdings Ltd. and WFI
Urbanlink Ltd. dated April 17, 2000.
10.46 (4) 1998 Long Term Incentive and Share Award Plan of 360networks
inc., as amended.
21.1 Subsidiaries of 360 networks inc.
23.1 Consent of PricewaterhouseCoopers LLP, Independent Auditors.
23.2 Consent of Deloitte & Touche LLP, Independent Auditors.
23.3 Consent of PricewaterhouseCoopers LLP, Independent Auditors.
23.4 Consent of Stewart McKelvey Stirling Scales (included in
Exhibit 5.1).
23.5 Consent of Cahill Gordon & Reindel (included in Exhibit
5.2).
23.6 Consent of Farris, Vaughan, Wills & Murphy.
24.1 Powers of Attorney authorizing execution of Registration
Statement on Form F-4 on behalf of certain officers and
directors of the Registrant and on behalf of WFI Fiber Inc.
(included on signature pages to this Registration
Statement).
25.1 Statement of eligibility of Trustee on Form T-1.
99.1 Form of Letter of Transmittal for the Dollar Notes.
99.2 Form of Notice of Guaranteed Delivery for the Dollar Notes.
99.3 Form of Letter of Transmittal for the Euro Notes.
99.4 Form of Notice of Guaranteed Delivery for the Euro Notes.
-----------
(1) Incorporated herein by reference to the Form F-4 Registration Statement
(No. 333-10254) of the Registrant.
(2) Incorporated herein by reference to the Form F-4 Registration Statement
(No. 333-89695) of the Registrant.
(3) Incorporated herein by reference to the Form F-1 Registration Statement
(No. 333-95621) of the Registrant.
(4) Incorporated herein by reference to the Form S-8 Registration Statement
(No. 333-39774) of the Registrant.
II-8
