SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) November 25, 1997
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PSINET INC.
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(Exact name of registrant as specified in its charter)
NEW YORK 0-25812 16-1353600
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
510 HUNTMAR PARK DRIVE, HERNDON, VIRGINIA 20170
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (703)904-4100
_________________________________________________________________
(Former name or former address, if changed since last report)
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Item 5. OTHER EVENTS.
On November 25, 1997, Chatterjee Management Company
("Chatterjee") initiated arbitration proceedings against PSINet Inc. (the
"Company") before the International Chamber of Commerce, Court of
Arbitration, in London, England, with respect to a joint venture agreement
dated as of September 19, 1996 previously entered into by Chatterjee and
the Company.
As previously disclosed, on September 19, 1996, the Company and
Chatterjee signed an agreement pursuant to which the Company and an
investment group led by Chatterjee would establish a joint venture for the
purpose of building an Internet network across Europe and providing
Internet-related services in Europe. Such investment group was to invest
up to $41 million in the joint venture. No monies were invested by
Chatterjee or the investment group pursuant to the joint venture agreement
nor were any other actions undertaken to implement it. Following the
signing of the agreement, the parties acknowledged structural difficulties
associated with the joint venture as originally contemplated, which
prevented implementation of it. Instead, they sought, for several months,
to negotiate a direct investment in the Company by Chatterjee in lieu of
the prior agreement. Those negotiations were not successful. Given this
inability to effect a transaction with Chatterjee, the Company has been
required to proceed on its own to provide Internet-related services in the
European market.
In the arbitration proceeding, Chatterjee has now alleged that
the Company breached the joint venture agreement by repudiating its
obligations under the agreement and by breaching a covenant not to compete.
In the arbitration, Chatterjee requests an award declaring that the
agreement is still valid and binding upon the parties and that the Company
stands in breach of the agreement, directing the Company to specifically
perform its obligations under the agreement or, in the alternative,
awarding Chatterjee compensatory damages in an amount not less than $25
million, awarding Chatterjee profits that the Company has earned or stands
to earn in Europe, and awarding Chatterjee the costs of arbitration,
including attorneys' fees, and interest on the award of damages.
The Company believes that Chatterjee's claims are without merit
and Chatterjee has not suffered any damages, and intends vigorously to
defend itself in the arbitration.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Dated: December 17, 1997 PSINET INC.
By: /S/ David N. Kunkel
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David N. Kunkel
Senior Vice President,
Secretary and General
Counsel
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