<PAGE>
As filed with the Securities and Exchange Commission on February 9, 2000
Registration No. 333-
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________
PSINet Inc.
(Exact name of registrant as specified in its charter)
New York
(State or other jurisdiction of
incorporation or organization)
4813
(Primary Standard Industrial
Classification Code Number)
16-1353600
(I.R.S. Employer
Identification No.)
510 Huntmar Park Drive, Herndon, Virginia 20170
(703) 904-4100
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
Kathleen B. Horne, Esq.
Senior Vice President and General Counsel
PSINet Inc.
510 Huntmar Park Drive, Herndon, Virginia 20170
Telephone No.: (703) 904-4100/Facsimile No.: (703) 904-9527
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
______________
Copies To:
Nixon Peabody LLP
437 Madison Avenue, New York, New York 10022
Attention: Richard F. Langan, Jr., Esq.
Bruce E. Rosenthal, Esq.
Telephone No.: (212) 940-3140/Facsimile No.: (212) 940-3111
______________
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
CALCULATION OF REGISTRATION FEE
- ------------------------------- -------------------- -------------------- ---------------------- ---------------------
Title of Class of Securities Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price Aggregate Offering Registration Fee
Per Unit (1) Price (1)
- ------------------------------- -------------------- -------------------- ---------------------- ---------------------
<S> <C> <C> <C> <C>
10 1/2% Senior Notes Due 2006 $600,000,000 100.5% $603,000,000 $159,192.00
- ------------------------------- -------------------- -------------------- ---------------------- ---------------------
10 1/2% Senior Notes Due 2006 Euro 97.0% $147,522,450 38,946.00
150,000,000(2)
(152,085,000)
- ------------------------------- -------------------- -------------------- ---------------------- ---------------------
Total $750,522,450 $198,138.00
- ------------------------------- -------------------- -------------------- ---------------------- ---------------------
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee
calculated pursuant to the provisions of Rule 457(f) under the
Securities Act of 1933, as amended, as the market value of the
securities to be canceled in the exchange.
(2) Euro amounts have been translated into U.S. Dollars at Euro 1=$1.0139,
which was the New York foreign exchange mid-range rate as quoted at
4 p.m. Eastern time on February 8, 2000 by Reuters.
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
THE INFORMATION IN THIS PROSPECTUS
WILL BE AMENDED OR COMPLETED; DATED
FEBRUARY 9, 2000.
PSINet Inc.
Exchange Offer for
$600,000,000
Euro 150,000,000
10 1/2% Senior Notes Due 2006
____________________________________________
PSINet: . Tenders of outstanding notes
. We are the leading independent may be withdrawn at any time
global provider of Internet and prior to the expiration of
eCommerce solutions to businesses. the exchange offer.
. PSINet Inc. . The exchange of notes should
510 Huntmar Park Drive not be a taxable exchange for
Herndon, Virginia 20170 U.S. federal income tax
(703) 904-4100 purposes.
The Exchange Offer: . We will not receive any
proceeds from the exchange
. Expires at 5:00 p.m, New York offer.
City time (10:00 p.m., London
time), on _______, 2000, . The terms of the notes to be
unless extended. issued are substantially
identical to the outstanding
. The exchange offer is subject to notes, except for the
customary conditions which we outstanding notes being
may waive. subject to transfer restrictions
under the Securities Act of
. All outstanding notes that are 1933 and entitled to exchange
validly tendered and not validly and registration rights, most
withdrawn will be exchanged. of which will be fulfilled upon
completion of the exchange
offer.
____________________________________________
Investment in the notes to be issued in the exchange offer involves risk.
See "Risk Factors" beginning on page 17.
This prospectus and the accompanying letters of transmittal are first being
mailed to holders of outstanding notes on or about _______, 2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary
is a criminal offense.
____________________________________________
__________, 2000
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PROSPECTUS SUMMARY....................................................... 1
RISK FACTORS............................................................. 17
USE OF PROCEEDS.......................................................... 35
THE EXCHANGE OFFER....................................................... 36
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS........................... 52
CAPITALIZATION........................................................... 58
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION................... *
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................... *
BUSINESS................................................................. *
DESCRIPTION OF NOTES..................................................... 64
DESCRIPTION OF CERTAIN INDEBTEDNESS...................................... 114
DESCRIPTION OF BOOK-ENTRY SYSTEM......................................... 118
PLAN OF DISTRIBUTION..................................................... 124
DOCUMENTS INCORPORATED BY REFERENCE...................................... 124
LEGAL MATTERS............................................................ 126
EXPERTS.................................................................. 127
WHERE YOU CAN FIND MORE INFORMATION...................................... 127
GLOSSARY................................................................. *
</TABLE>
* Incorporated by reference to our Current Report on Form 8-K dated January 26,
2000 which was filed on February 9, 2000.
-i-
<PAGE>
PROSPECTUS SUMMARY
This summary highlights some information from this prospectus. Because
this is a summary, it may not contain all of the information that may be
important to you. To understand this exchange offer fully, please read the
entire prospectus, including the Risk Factors section which begins on page 17
and the financial statements. There are technical terms used in this prospectus
that are important to an understanding of our business that are defined in the
glossary incorporated by reference in this prospectus.
We have announced a two-for-one split of our common stock, to be effected
by means of a stock dividend, to holders of record of our common stock as of the
close of business on January 28, 2000. Certificates for the additional shares
will be distributed by our transfer agent on or about February 11, 2000.
References in this prospectus do not give effect to that stock split, except
where noted.
THE EXCHANGE OFFER
Initial Notes......................... $600,000,000 aggregate principal amount
of unregistered 10 1/2% Senior Notes due
2006, which were issued in December
1999.
Euro 150,000,000 aggregate principal
amount of unregistered 10 1/2% Senior
Notes due 2006, which were issued in
December 1999.
Exchange Notes........................ $600,000,000 aggregate principal amount
of 10 1/2% Senior Notes due 2006, which
have been registered under the
Securities Act of 1933, that we are
offering hereby.
Euro 150,000,000 aggregate principal
amount of 10 1/2% Senior Notes due 2006,
which have been registered under the
Securities Act of 1933, that we are
offering hereby.
The initial notes and the exchange notes
are referred to collectively as the
notes.
The Exchange Offer.................... We are offering to exchange $1,000
principal amount of exchange dollar
notes for each $1,000 principal amount
of initial dollar notes. Initial dollar
notes may only be exchanged in $1,000
principal amount increments. As of the
date of this prospectus, there are
$600,000,000 aggregate principal amount
of initial dollar notes outstanding.
We are offering to exchange Euro 1,000
principal amount of exchange euro notes
for each Euro 1,000 principal amount of
initial euro notes.
<PAGE>
Initial euro notes may only be exchanged
in Euro 1,000 principal amount
increments. As of the date of this
prospectus, there are Euro 150,000,000
aggregate principal amount of initial
euro notes outstanding.
Resales............................... Based on an interpretation by the
Securities and Exchange Commission set
forth in no-action letters issued to
third parties, we believe that you may
resell or otherwise transfer exchange
notes issued pursuant to the exchange
offer in exchange for initial notes.
However, there are exceptions to this
general statement. You may not freely
transfer the exchange notes if:
. you are an "affiliate" of PSINet
within the meaning of Rule 405 under
the Securities Act of 1933,
. you are a broker-dealer who acquired
the initial notes directly from us
without compliance with the
registration and prospectus delivery
provisions of the Securities Act of
1933,
. you did not acquire the exchange
notes in the ordinary course of your
business, or
. you have engaged in, intend to engage
in, or have an arrangement or
understanding with any person to
participate in the distribution of
the exchange notes.
Any holder subject to any of the
exceptions above and each participating
broker-dealer that receives exchange
notes for its own account pursuant to
the exchange offer in exchange for
initial notes that were acquired as a
result of market-making, must comply
with the registration and prospectus
delivery requirements of the Securities
Act of 1933 in connection with the
resale of the exchange notes.
Expiration Date....................... 5:00 p.m., New York City time (10:00
p.m., London time), on __________, 2000
unless we extend the exchange offer, in
which case the term "expiration date"
means the latest date and time to which
the exchange offer is extended.
-2-
<PAGE>
Interest on the Exchange Notes and the
Initial Notes............................ Each exchange note will bear
interest from December 2, 1999, the
date of issuance of the initial
notes. If your initial notes are
accepted for exchange, you will not
receive accrued interest on the
initial notes, and will be deemed
to have waived the right to receive
any interest on the initial notes
from and after December 2, 1999.
Conditions to the Exchange Offer......... The exchange offer is subject to
certain customary conditions, which
we may waive. See "The Exchange
Offer--Conditions."
Procedures for Tendering Initial Notes... If you wish to accept the exchange
offer, you must complete, sign and
date, if you are a holder of
initial dollar notes, the
accompanying letter of transmittal
for dollar notes or, if you are a
holder of initial euro notes, the
accompanying letter of transmittal
for euro notes, in each case in
accordance with such letter of
transmittal's instructions and
deliver the applicable letter of
transmittal, together with the
initial notes and any other
required documentation, to the
exchange agent at the address set
forth in the applicable letter of
transmittal.
If you hold initial dollar notes
through The Depository Trust
Company or initial euro notes
through Euroclear or Cedelbank and
wish to accept the exchange offer,
you must do so pursuant to such
book-entry transfer facility's
procedures for book-entry transfer
(or other applicable procedures),
all in accordance with this
prospectus and the applicable
letter of transmittal. See "The
Exchange Offer--Procedures for
Tendering Initial Notes," "--Book-
Entry Delivery Procedures," and "--
Tender of Initial Notes Held
Through Book-Entry Transfer
Facilities."
Special Procedures for
Beneficial Owners........................ If you are a beneficial owner whose
initial notes are registered in the
name of a broker, dealer,
commercial bank, trust company or
other nominee and you wish to
tender in the exchange offer, you
should contact the person in whose
name your initial notes are
registered promptly and instruct
the person to tender on your
behalf. If you wish to tender in
the exchange offer on your own
behalf, you must, prior to
completing and executing the
-3-
<PAGE>
applicable letter of transmittal
and delivering your initial notes,
either make appropriate
arrangements to register ownership
of the initial notes in your name
or obtain a properly completed bond
power from the person in whose name
your initial notes are registered.
The transfer of registered
ownership may take considerable
time.
Guaranteed Delivery Procedures........... If you wish to tender your initial
notes in the exchange offer and
your initial notes are not
immediately available or you cannot
deliver your initial notes, the
applicable letter of transmittal or
any other required documents or you
cannot comply with the procedures
for book-entry transfer (or other
applicable procedures) prior to the
expiration date, you may tender
your initial notes according to the
guaranteed delivery procedures set
forth in "The Exchange Offer--
Guaranteed Delivery Procedures."
Withdrawal Rights........................ Tenders may be withdrawn at any
time prior to 5:00 p.m., New York
City time (10:00 p.m., London
time), on the expiration date
pursuant to the procedures
described under "The Exchange
Offer--Withdrawals of Tenders."
-4-
<PAGE>
Acceptance of Initial Notes and
Delivery of Exchange Notes............... Subject to certain conditions as
described more fully herein under
"The Exchange Offer--Conditions,"
we will accept for exchange any and
all initial notes that are properly
tendered in the exchange offer
prior to the expiration date. The
exchange notes issued pursuant to
the exchange offer will be
delivered as promptly as
practicable after the expiration
date. See "The Exchange Offer--
Terms of the Exchange Offer."
Certain United States Federal Income Tax
Consequences............................ With respect to the exchange of
initial notes for exchange notes:
. the exchange should not
constitute a taxable exchange
for U.S. federal income tax
purposes,
. you should not recognize gain or
loss upon receipt of the
exchange notes, and
. you must include interest on the
exchange notes in gross income
to the same extent as the
initial notes.
Registration Rights Agreement............ In connection with our issuance and
sale of the initial notes on
December 2, 1999, we entered into a
registration rights agreement with
the initial purchasers of the
initial notes which grants the
holders of the initial notes
certain exchange and registration
rights. As a result of the making
of this exchange offer, we will
have fulfilled certain of our
obligations under the registration
rights agreement. If you do not
tender your initial notes in the
exchange offer, you will not have
any further registration rights
under the registration rights
agreement or otherwise, unless you
were not eligible to participate in
the exchange offer. See "The
Exchange Offer--Registration
Rights." In such event, you will
continue to hold the untendered
initial notes and will be entitled
to all the rights and subject to
all the limitations applicable to
the initial notes under the
indenture governing the notes,
except to the extent such rights or
limitations, by their terms,
terminate or cease to have further
effectiveness as a result of the
exchange offer. All untendered
initial notes will continue to be
subject to restrictions on transfer
under the Securities Act of 1933.
-5-
<PAGE>
Exchange Agent........................... Wilmington Trust Company is serving
as our exchange agent in connection
with the exchange offer.
TERMS OF EXCHANGE NOTES
The form and terms of the exchange notes will be substantially the same as
the form and terms of the initial notes except that:
(1) the exchange notes have been registered under the Securities Act of
1933 and, therefore, will not bear legends restricting their transfer,
and
(2) the holders of the exchange notes, except for limited instances, will
not be entitled to further registration rights under the registration
rights agreement.
The exchange notes will evidence the same debt as the initial notes and
will be entitled to the benefits of the indenture under which the initial notes
were issued.
Notes Offered............................ $600,000,000 aggregate principal
amount of 10 1/2% Senior Notes due
2006.
Euro 150,000,000 aggregate
principal amount of 10 1/2% Senior
Notes due 2006.
The euro notes and the dollar notes
will generally be treated for
purposes of the indenture as a
single series of securities ranking
pari passu with each other.
Maturity Date............................ December 1, 2006.
Interest Rate and
Payment Dates............................ The euro notes will accrue interest
at the rate of 10 1/2% per annum.
Interest on the euro notes will be
payable semi-annually in cash (in
euros) in arrears on June 1 and
December 1 of each year, commencing
June 1, 2000.
The dollar notes will accrue
interest at the rate of 10 1/2% per
annum. Interest on the dollar notes
will be payable semi-annually in
cash (in U.S. dollars) in arrears
on June 1 and December 1 of each
year, commencing June 1, 2000.
Ranking of the Notes..................... If our September 30, 1999 balance
sheet were restated to give effect
to the offering of the initial
notes, and the application of those
net proceeds and the acquisition of
TNI, the notes:
. would have been effectively
subordinated to approximately
$329.3 million of our secured
debt
-6-
<PAGE>
(including secured debt of our
subsidiaries),
. would have been structurally
subordinated to approximately
$163.4 million of other
liabilities, including trade
payables and accrued
liabilities, of our
subsidiaries, and
. would have ranked equally with
an aggregate of $2.16 billion of
our other senior debt.
See "Description of Notes--
General."
Sinking Fund........................... None.
Optional Redemption.................... We may not redeem the notes at any
time.
Change of Control...................... In the event of a change of control
(as defined in the indenture
governing the notes), we will be
required to make an offer to
purchase all of the notes at a
purchase price equal to 101% of the
principal amount thereof, plus
accrued and unpaid interest, if
any, to the repurchase date. We may
not have sufficient funds or the
financial resources necessary to
satisfy our obligations to
repurchase the notes and other debt
that may become repayable upon a
change of control. See "Risk
Factors --We may not have the
ability to raise the funds
necessary to finance the change of
control offer which may be required
by the indenture" and "Description
of Notes--Change of Control."
Basic Covenants of
the Indenture.......................... We will issue the notes under an
indenture with Wilmington Trust
Company, as trustee. The indenture
will, among other things, restrict
our ability to:
. incur indebtedness,
. make restricted payments,
. engage in transactions with
affiliates,
. permit liens to exist,
. sell assets,
. issue guarantees,
. engage in sale and leaseback
transactions,
. issue and sell subsidiary
capital stock,
. impose limitations on our
subsidiaries' ability to pay
dividends to us,
. designate or create unrestricted
subsidiaries, and
. change our business.
We will also have to comply with
many affirmative
-7-
<PAGE>
covenants, including the provision
of financial statements.
Exchange Offer; Registration Rights...... To remove the transferability
restrictions on the notes, we have
agreed:
. to file a registration statement
with the Securities and Exchange
Commission relating to the
exchange offer of the initial
notes for our exchange notes
with terms identical to the
initial notes by February 15,
2000,
. to use our best efforts to cause
the registration statement to be
declared effective by the
Securities and Exchange
Commission by May 1, 2000,
. to make an exchange offer of the
exchange notes for the initial
notes, and
. to keep that exchange offer open
for not less than 20 business
days and cause that exchange
offer to be consummated no later
than the 30th business day after
the registration statement is
declared effective.
If the exchange offer is not
permitted by applicable law or
Securities and Exchange Commission
policy, or a holder is not
otherwise able to exchange its
notes for certain reasons, we will
file with the Securities and
Exchange Commission, subject to our
receipt of certain information, a
shelf registration statement to
register restricted notes for
public resale. We will seek to have
any shelf registration statement
declared effective by the
Securities and Exchange Commission
on or before the 60th day after its
filing. If we default on any of
these registration obligations, we
will pay certain liquidated damages
to each holder of restricted
initial notes. See "The Exchange
Offer--Registration Defaults;
Liquidated Damages."
Listing.................................. The initial dollar notes have been
designated as eligible for trading
in the PORTAL market of the
National Association of Securities
Dealers, Inc. Application has been
made for listing the initial euro
notes and the exchange euro notes
on the Luxembourg Stock Exchange,
but we cannot assure you that the
initial euro notes and the exchange
euro notes will be admitted for
listing with the Luxembourg Stock
Exchange.
Use of Proceeds.......................... We will not receive any cash
proceeds from the exchange offer.
See "Use of Proceeds."
-8-
<PAGE>
THE COMPANY
Our Business
We are a leading independent global provider of Internet and eCommerce
solutions to businesses. As an Internet Super Carrier, or ISC, we offer global
distribution of our services over our worldwide fiber optic network, which is
capable of transmission speeds in excess of three terabits. We provide Internet
connectivity and Web hosting services to customers in approximately 90 of the
100 largest metropolitan statistical areas in the United States and the 20
largest global telecommunications markets and operate in 27 countries. In
addition to these services, we also offer a suite of value-added products and
services that are designed to enable our customers, through their use of the
Internet, to communicate more efficiently with their customers, suppliers,
business partners and remote office locations. We conduct our business through
operations organized into five geographic operating segments--U.S./Canada, Latin
America, Europe, Asia/Pacific and India/Middle East/Africa. Our services and
products include the following:
. Access services that offer dedicated, dial-up, wireless and digital
subscriber line, or xDSL, connections that link our customers' networks
to the Internet;
. Web hosting services that provide cost-effective solutions for the
management and maintenance of our customers' Web sites and Web-based
applications;
. Intranets and virtual private networks, or VPNs, that allow our
customers to provide secure and seamless wide area networks, or WANs,
connecting their remote offices and employees, customers and suppliers;
. E-commerce services designed to enable our customers to securely
transact business over the Internet;
. Voice-over-IP services that enable companies with multiple business
locations to transmit voice conversations over our network at a
significant savings as compared to traditional long-distance calling;
. E-mail services that enable our customers to outsource to us the day-to-
day management and maintenance of their internal message systems; and
. Managed security services designed to protect, monitor and maintain the
integrity of our customers' networks.
We also provide wholesale and private label network connectivity and
related services to other Internet service providers, known as ISPs, and
telecommunications carriers to further utilize our network capacity.
Our Global Network
We operate one of the largest global commercial data communications
networks. Our Internet-optimized network has a footprint that extends around
the globe and is connected to more than 700 sites, called points of presence, or
POPs, situated throughout our geographic operating regions that enable our
customers to connect to the Internet. Our network reach allows
-9-
<PAGE>
our customers to access their corporate network and systems resources through
local calls in over 150 countries. Our network architecture consists of high
capacity frame relay switches and routers designed to deliver superior Internet
connections, reliable packet control and intelligent data traffic routing and is
compatible with all of the most widely deployed transmission technologies. We
further expand the reach of our network by connecting with other large ISPs at
163 points through 67 contractual arrangements, called peering agreements, that
permit the exchange of information between our network and the networks of our
peering partners. As part of our ISC strategy, we have opened seven global
Internet and eCommerce hosting facilities. These facilities are located in the
Los Angeles, New York City, Washington, D.C., Amsterdam, Basel, London and
Toronto metropolitan areas and contain approximately 200,000 square feet. We
have two network operating centers that monitor and manage network traffic 24-
hours per day, seven-days per week.
Our Target Market and Customers
Internet access services is one of the fastest growing segments of the
global telecommunication services marketplace. For example, Gartner Group
estimates that worldwide Internet access revenues will grow from $13.7 billion
in 1998 to $42.5 billion in 2003. Trends contributing to this growth in demand
include:
. the increase in corporate Internet sites and connectivity as a means to
expand customer reach and improve communications efficiency,
. business demand for advanced, highly reliable information technology
solutions designed specifically to enhance productivity and improve
efficiency,
. the need of businesses to securely and efficiently connect multiple,
geographically-dispersed locations and provide global remote access
capabilities, and
. increased business use of the Internet as a lower-cost alternative to
traditional telecommunications services.
Our target market consists primarily of mid-and large-sized businesses in
information intensive industries. As of September 30, 1999, we served
approximately 79,900 business accounts, including approximately 640 ISPs. The
following table provides a summary as of September 30, 1999 of our operations
across the five geographic operating segments in which we then operated:
<TABLE>
<CAPTION>
Revenue for
Nine Months Revenue 9/30/99
Ended 9/30/99 Growth 9/30/99 Wholesale and
(In millions of 9/30/98 to Business Consumer Commencement
U.S. dollars) 9/30/99 Accounts Accounts of Operations
--------------- ---------- -------- ------------- -------------
<S> <C> <C> <C> <C> <C>
U.S./Canada........................... $204.3 57% 38,100 932,000 1989
Latin America......................... 10.5 * 4,500 167,000 1999
Europe................................ 58.3 130% 18,300 96,000 1995
Asia/Pacific.......................... 96.2 816% 19,000 66,000 1994
India/Middle East/Africa.............. ** ** ** ** 1999
------ ------ ---------
All Segments.......................... $369.3 123% 79,900 1,261,000
====== ====== =========
</TABLE>
____________________
* Latin America is new in 1999.
**India/Middle East/Africa is new subsequent to September 30, 1999.
-10-
<PAGE>
Our Strategy
Our objective is to be one of the top three providers of Internet access
services and related communications services and products in each of the 20
largest global telecommunications markets. The principal elements of our
business strategy are summarized below:
. Leverage Multiple Sales Channels. We are pursuing growth opportunities
through multiple channels consisting of our direct sales force of over
1,000 individuals worldwide, over 2,500 resellers and referral sources,
and strategic alliances with selected telecommunications services and
equipment suppliers, networking service companies, systems integrators
and computer retailers.
. Increase Sales of Value-Added Services and New Products. We intend to
capitalize on the trend of companies seeking to increasingly outsource
their critical business applications and integrate Web-based services
and products as part of their core data networking strategy. We are
aggressively marketing value-added services and products to our existing
account base and prospective business customers, and are significantly
increasing our Internet and eCommerce hosting center capacity to
accommodate the anticipated growth in this business.
. Accelerate Growth Through Targeted Acquisitions. We intend to make
strategic investments in or acquire:
. local or regional ISPs in markets where we have an established POP
and can benefit from the increased network utilization and local
sales force,
. ISPs in the 20 largest global telecommunications markets where we
currently do not have a presence or in those global
telecommunications markets where our current presence would be
significantly enhanced,
. related or complementary businesses to broaden our market presence
and expand our strengths in key product areas, and
. telecommunication or information technology companies which have
strong relationships with major corporations.
. Continue to Invest in Our Network. We remain focused on reducing costs
as a percentage of revenue by maintaining a scaleable network and
increasing utilization of and controlling strategic assets, such as
acquisition of long-term rights in telecommunications bandwidth.
. Enhance Brand Name Recognition. We intend to leverage our PSINet brand
by rebranding acquired ISP operations and services under the PSINet
name, selectively using television commercials, print ads and direct
mailings which target key business decision makers in the U.S. and
abroad, and acquiring corporate sponsorship rights, such as our recent
acquisition of the naming rights to the NFL Stadium of the Baltimore
Ravens.
-11-
<PAGE>
RECENT DEVELOPMENTS
Acquisition of Transaction Network Services. On November 23, 1999, we
acquired Transaction Network Services, Inc., which we refer to as TNI. We paid
TNI shareholders approximately $340.8 million in cash and approximately 7.6
million shares of our common stock ($15.2 million shares after giving effect to
our common stock split) which represented an aggregate value of approximately
$346.2 million based upon the price per share of our common stock of $45.719
($22.859 after giving effect to our common stock split) at the time we reached a
definitive agreement with TNI. In addition, we assumed options to acquire
approximately 463,000 shares of TNI common stock, representing an aggregate
value of approximately $13.0 million, which have become exercisable into an
equal number of shares of our common stock (or twice the number of shares after
giving effect to our common stock split). Additionally, we repaid principal and
interest outstanding under TNI's revolving credit facility in the amount of
$52.1 million. The source of the cash consideration for the TNI merger and the
repayment of the TNI revolving credit facility obligation was from cash on hand.
TNI shareholders could elect to receive cash, shares of our common stock, or
both cash and shares, subject to adjustments and limitations.
Stock split. On January 18, 2000, we announced a two-for-one split of our
common stock to be effected on February 11, 2000 by means of a stock dividend to
holders of record as of the close of business on January 28, 2000. We have
disclosed the effect of the stock split, where relevant, within the unaudited
pro forma consolidated financial information that is incorporated by reference
to our Form 8-K dated January 26, 2000 and filed February 9, 2000. Upon
completion of the stock split, we will have approximately 146,495,756 shares of
common stock outstanding (without giving effect to the exercise or conversion of
any options, warrants or convertible securities).
7% Series D Preferred Stock. In February 2000, we completed an offering of
16,500,000 shares of 7% Series D cumulative convertible preferred stock for
aggregate net proceeds of approximately $738.8 million after expenses (excluding
amounts paid by the purchasers of the convertible preferred stock into the
deposit account therefor).
-----------------------
PSINet was incorporated in New York in 1988. Our principal executive
offices are located at 510 Huntmar Park Drive, Herndon, Virginia 20170. Our
telephone number is (703) 904-4100.
-12-
<PAGE>
Summary Consolidated Financial and Operating Data
(in millions of U.S. dollars, except per share, ratio and operating data)
The following summary consolidated statement of operations data, cashflow
data and balance sheet data as of and for the years ended December 31, 1994,
1995, 1996, 1997 and 1998 and as of September 30, 1999 and for the nine months
ended September 30, 1998 and 1999 have been derived from our consolidated
financial statements. The results of operations for the nine month period ended
September 30, 1999 may not be indicative of the results for the entire year
ending December 31, 1999.
The summary unaudited pro forma consolidated statement of operations and
other financial data for the year ended December 31, 1998 and for the nine month
period ended September 30, 1999 present, on a pro forma basis, our consolidated
results of operations and other financial data for such periods assuming that
each of the following had occurred on January 1, 1998:
. our acquisition of TNI;
. TNI's acquisition from AT&T Corp. of the right to provide services under
specified customer service contracts and specified equipment related to
AT&T's Transaction Access Service, assuming that those services were
conducted under TNI's communications services agreement with AT&T and
assuming the elimination of specified costs allocated to Transaction
Access Service, which we refer to as the TAS Acquisition;
. a specific group of our other acquisitions, which we refer to as our
Other Acquisitions, as more fully described in our Unaudited Pro Forma
Consolidated Financial Information incorporated by reference herein;
. this offering of 10 1/2% senior notes and the application of the related
estimated net proceeds; and
. our February 2000 offering of 7% Series D cumulative convertible
preferred stock and the application of the related estimated net
proceeds.
The summary unaudited pro forma consolidated balance sheet data as of
September 30, 1999 presents, on a pro forma basis, our consolidated financial
position assuming that each of the following had occurred on September 30, 1999:
. our acquisition of TNI;
. this offering of 10 1/2% senior notes and the application of the related
estimated net proceeds; and
. our February 2000 offering of 7% Series D cumulative convertible
preferred stock and the application of the related estimated net
proceeds.
EBITDA is used in the Internet services industry as one measure of a
company's operating performance and historical ability to service debt. EBITDA
is not determined in accordance with generally accepted accounting principles,
is not indicative of cash used by operating activities and should not be
considered in isolation or as an alternative to, or more meaningful than,
measures of performance determined in accordance with generally accepted
-13-
<PAGE>
accounting principles. We define EBITDA as earnings (losses) before interest
expense and interest income, taxes, depreciation and amortization, other non-
operating income and expense, and charges for intangible asset write-down and
acquired in-process research and development. Our definition of EBITDA may not
be comparable to similarly titled measures used by other companies.
For the purposes of computing the ratio of earnings to combined fixed
charges and preferred dividends, earnings consist of losses before income taxes,
equity in loss of affiliate, amortization of capitalized interest and fixed
charges. Fixed charges consist of interest on all indebtedness, including
amounts capitalized, amortization of debt financing costs and that portion of
rental expense which we believe to be representative of interest (deemed to be
one-third of rental expense).
The information contained in this table should be read in conjunction with
the sections entitled "Selected Consolidated Financial and Operating Data,"
"Unaudited Pro Forma Consolidated Financial Information," "Use of Proceeds" and
our consolidated financial statements and notes thereto and other financial and
operating data included or incorporated by reference in this prospectus.
The basic and diluted loss per share (after stock split) presented below
gives effect to a two-for-one stock split of our common stock, to be effected by
means of a stock dividend, to holders of record of our common stock as of the
close of business on January 28, 2000, which will be effected on February 11,
2000. The effect is being presented as additional information in our pro forma
statement of operations for the periods presented.
-14-
<PAGE>
<TABLE>
<CAPTION>
Nine
Year Ended December 31, Months Ended September 30,
------------------------------------------------------------------------------------------
(In millions of U.S. dollars except share, per share data and operating data)
1998
--------------------------
Actual Pro Forma
--------------- ---------
1994 1995 1996 1997 Actual Pro Forma 1998 1999 1999
---- ---- ---- ---- ------ --------- ---- ---- ---------
Statement of Operations Data:
Revenue:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
U.S........................... $ 15.2 $ 36.2 $ 77.6 $ 104.0 $ 156.0 $ 318.4 $ 110.7 $ 177.7 $ 312.8
International................. -- 2.5 6.8 17.9 103.6 203.2 55.0 191.6 219.3
------- ------- ------- ------- ------- -------- ------- --------- --------
15.2 38.7 84.4 121.9 259.6 521.6 165.7 369.3 532.1
Other income, net................. -- -- 5.4 -- -- -- -- -- --
Operating costs and expenses:
Data communications and
operations................. 9.5 32.1 70.1 94.4 199.4 362.3 130.5 261.3 362.2
Sales and marketing........... 3.6 23.9 27.1 25.8 57.0 76.3 37.9 68.1 76.6
General and administrative.... 3.6 10.6 20.7 23.0 45.3 82.7 29.4 47.3 63.8
Depreciation and
amortization............... 3.2 14.8 28.0 28.3 63.4 172.1 37.0 102.8 165.8
Charge for acquired in-
process research and
development................ -- -- -- -- 70.8 70.8 40.4 -- --
Intangible asset write-down... -- 9.9 -- -- -- -- -- -- 0.9
------- ------- ------- ------- ------- -------- ------- --------- --------
Total operating costs
and expenses............... 19.9 91.3 145.9 171.5 435.9 764.2 275.2 479.5 669.3
------- ------- ------- ------- ------- -------- ------- --------- --------
Loss from operations............... (4.7) (52.6) (56.1) (49.6) (176.3) (242.6) (109.5) (110.2) (137.2)
Interest expense................... (0.7) (2.0) (5.0) (5.4) (63.9) (152.2) (38.2) (120.8) (183.7)
Non-recurring arbitration
charge........................... -- -- -- -- (49.0) (49.0) -- -- --
Loss before income taxes........... (5.3) (53.2) (55.3) (46.1) (262.7) (416.1) (130.0) (199.9) (288.7)
Net loss........................... (5.3) (53.2) (55.1) (45.6) (261.8) (416.3) (130.1) (199.2) (288.8)
Return to preferred
shareholders.................... -- -- -- (0.4) (3.1) (60.9) (2.3) (11.2) (54.5)
Net loss available to
common shareholders............. $ (5.3) $ (53.2) $ (55.1) $ (46.0) $(264.9) $ (477.2) $(132.4) $ (210.4) $ (343.3)
======= ======= ======= ======= ======= ======== ======= ========= ========
Basic and diluted loss
per share....................... $ (0.42) $ (2.01) $ (1.40) $ (1.14) $ (5.32) $ (8.31) $ (2.70) $ (3.50) $ (5.07)
======= ======= ======= ======= ======= ======== ======= ========= ========
Shares used in computing basic and
diluted loss per share
(in thousands).................. 12,805 26,485 39,378 40,306 49,806 57,406 49,120 60,105 67,705
======= ======= ======= ======= ======= ======== ======= ========= ========
Basic and diluted loss
per share (after stock split)... $ (0.21) $ (1.01) $ (0.70) $ (0.57) $ (2.66) $ (4.16) $ (1.35) $ (1.75) $ (2.54)
======= ======= ======= ======= ======= ======== ======= ========= ========
Shares used in computing basic
and diluted loss per share
(after stock split) in
thousands)................... 25,610 52,970 78,756 80,612 99,612 114,812 98,240 120,210 135,410
======= ======= ======= ======= ======= ======== ======= ========= ========
Other Financial Data:
EBITDA:
U.S........................... $ (0.8) $ (26.9) $ (20.5) $ (13.1) $ (26.2) $ 14.3 $ (17.4) $ (20.6) $ 12.6
International................. (0.7) (1.0) (7.5) (8.1) (15.9) (14.0) (14.7) 13.2 16.9
------- ------- ------- ------- ------- -------- ------- --------- --------
$ (1.5) $ (27.9) $ (28.0) $ (21.2) $ (42.1) $ 0.3 $ (32.1) $ (7.4) $ 29.5
======= ======= ======= ======= ======= ======== ======= ========= ========
Capital expenditures............. $ 5.0 $ 45.2 $ 38.4 $ 50.1 $ 303.6 $ 130.9 $ 380.8
Ratio of earnings to combined
fixed charges and preferred
dividends (deficiency of
earnings to combined fixed
charges and preferred
dividends)........ (5.3) (53.0) (54.4) (46.5) (266.6) (132.3) (214.1)
Cash Flow Data:
Cash flows used in
operating activities............ $ (1.1) $ (30.1) $ (32.5) $ (15.5) $ (87.6) $ (76.9) $ (203.5)
Cash flows used in
investing activities............ (1.9) (22.0) (7.9) (15.6) (783.9) (326.0) (1,241.1)
Cash flows provided by (used
in) financing activities........ 4.5 151.4 (10.5) 12.6 874.2 654.2 1,878.5
Operating Data:
Number of POPs................... 82 241 350 350 500 500 700
Number of business accounts...... 4,220 8,200 17,800 26,400 54,700 46,700 79,900
</TABLE>
-15-
<PAGE>
<TABLE>
<CAPTION>
September 30, 1999
----------------------
Pro
Actual Forma
---------- ----------
<S> <C> <C>
Balance Sheet Data:
Cash, cash equivalents, short-term investments and marketable securities....................... $1,573.3 $2,672.0
Restricted cash and short-term investments..................................................... 137.5 137.5
Total assets................................................................................... 3,299.5 5,113.8
Current portion of debt........................................................................ 89.5 89.6
Long-term debt, less current portion........................................................... 2,402.8 3,157.7
Total liabilities.............................................................................. 2,813.0 3,613.3
Shareholders' equity........................................................................... 486.5 1,500.5
</TABLE>
-16-
<PAGE>
RISK FACTORS
Before you invest in our securities, you should be aware that there are
various risks, including the ones listed below. Please carefully consider these
risk factors, as well as the other information contained in this prospectus and
our periodic reports and documents filed with the Securities and Exchange
Commission, in evaluating an investment in our securities.
We have significant indebtedness and we may not be able to meet our obligations
We are highly leveraged and have significant debt service requirements. At
December 31, 1999, our total indebtedness was $3.3 billion. We estimate that
our annual interest expense for the year 2000 would be approximately $346.6
million, assuming that we do not incur any additional indebtedness or refinance
any existing indebtedness.
Our high level of indebtedness could have several important effects on our
future operations, which, in turn, could have important consequences for the
holders of our securities, including the following:
. a substantial portion of our cash flow from operations must be used to
pay interest on our indebtedness and, therefore, will not be available
for other business purposes;
. covenants contained in the agreements evidencing our debt obligations
require us to meet many financial tests, and other restrictions limit
our ability to borrow additional funds or to dispose of assets and may
affect our flexibility in planning for, and reacting to, changes in our
business, including possible acquisition activities and capital
expenditures; and
. our ability to obtain additional financing in the future for working
capital, capital expenditures, acquisitions, general corporate purposes
or other purposes may be impaired.
Our ability to meet our debt service obligations and to reduce our total
indebtedness depends on our future operating performance and on economic,
financial, competitive, regulatory and other factors affecting our operations.
Many of these factors are beyond our control and our future operating
performance could be adversely affected by some or all of these factors. We
historically have been unable to generate sufficient cash flow from operations
to meet our operating needs and have relied on equity, debt and capital lease
financings to fund our operations. However, based on our current level of
operations, management believes that existing working capital, capital lease
financings and proceeds of future equity or debt financings (including, without
limitation, from the offering of the initial notes) will be adequate to meet our
presently anticipated future requirements for working capital, capital
expenditures and scheduled payments of interest on our debt, including the
offering of the initial notes. We cannot assure you, however, that our business
will generate sufficient cash flow from operations or that future working
capital borrowings will be available in an amount sufficient to enable us to
service our debt, including the initial notes, or to make necessary capital
expenditures. In addition, we cannot assure you that we will be able to raise
additional capital for any refinancing of our debt in the future.
-17-
<PAGE>
If we are unable to generate sufficient cash from operations to service our
indebtedness, we will be adversely affected. We historically have been unable
to generate sufficient cash flow from operations to meet our operating needs and
have relied upon financings to fund our operations. We cannot assure you that
our business will generate cash flow from operations, or that future financings
will be available, sufficient to fund our operations or satisfy our debt service
or working capital requirements. Our leverage could adversely affect our
ability to obtain additional financing for working capital, acquisitions or for
other purposes. It could make us more susceptible to economic downturns,
contractions in the general market availability of equity or debt financing and
competitive pressures. Our leverage could also affect our liquidity as a
substantial portion of available cash from operations must be applied to debt
service requirements. In the event of a cash short-fall, we could be forced to
reduce expenditures or forego potential acquisitions and other elements of our
business plan to meet such requirements.
We have experienced continuing losses, negative cash flow and fluctuations in
operating results
Our prospects must be considered in light of the risks, expenses and
difficulties frequently encountered by companies in new and rapidly evolving
markets. To address these risks, we must, among other things, respond to
competitive developments, continue to attract and retain qualified persons,
continue to upgrade our management and financial systems, and continue to
upgrade our technologies and commercialize our network services incorporating
such technologies. We cannot assure you that we will be successful in addressing
such risks, and the failure to do so could have a material adverse effect on our
business, financial condition, results of operations and ability to pay when due
principal, interest and other amounts in respect of our debt, including the
initial notes. Although we have experienced revenue growth on an annual basis
with revenue increasing from $84.4 million in 1996 to $369.3 million for the
nine months ended September 30, 1999, we have incurred losses and experienced
negative EBITDA during each of those periods. We may continue to operate at a
net loss and may experience negative EBITDA as we continue our acquisition
program and the expansion of our global network operations. We have incurred net
losses available to common shareholders of $55.1 million, $46.0 million, $264.9
million and $210.4 million, and have incurred negative EBITDA of $28.0 million,
$21.2 million, $42.1 million and $7.4 million for each of the years ended
December 31, 1996, 1997 and 1998 and for the nine months ended September 30,
1999, respectively. During the nine months ended September 30, 1999, on a pro
forma basis after giving effect to our acquisition of TNI, the TAS Acquisition,
the other acquisitions, our offering of the initial notes, and our Series D
preferred stock offering, we would have incurred a net loss available to common
shareholders of $343.3 million and positive EBITDA of $29.5 million. At
September 30, 1999, on a pro forma basis after giving effect to our acquisition
of TNI, we would have had an accumulated deficit of $722.0 million. We cannot
assure you that we will be able to achieve or sustain profitability or positive
EBITDA.
Our operating results have fluctuated in the past and may fluctuate
significantly in the future as a result of a variety of factors, some of which
are outside our control. These factors include, among others:
. general economic conditions and specific economic conditions in the
Internet access industry;
-18-
<PAGE>
. user demand for Internet services;
. capital expenditures and other costs relating to the expansion of
operations of our network;
. the introduction of new services by us or our competitors;
. the mix of services sold and the mix of channels through which those
services are sold;
. pricing changes and new product introductions by us and our competitors;
. delays in obtaining sufficient supplies of sole or limited source
equipment and telecom facilities; and
. potential adverse legislative and regulatory developments.
As a strategic response to a changing competitive environment, we may elect
from time to time to make pricing, service or marketing decisions that could
have a material adverse effect on our business, results of operations and cash
flow.
We particularly depend on the cash flows of our subsidiaries in order to satisfy
our obligations
Our operating cash flow and consequently our ability to service our debt is
partially dependent upon the ability of our subsidiaries to distribute their
earnings to us in the form of dividends. We also depend on loans, advances or
other payments of funds to us by our subsidiaries. If for some reason, these
funds were restricted, we would be adversely affected. We would
not, if that were the case, be able to pay cash dividends on our Series C
preferred stock or on our Series D preferred stock. Our subsidiaries are
separate legal entities and have no obligation, contingent or otherwise, to pay
any amount due pursuant to our financing commitments or to make any funds
available for that purpose. Our subsidiaries' ability to make payments may be
subject to the availability of sufficient surplus funds, the terms of such
subsidiaries' financings, applicable law and other factors. Our subsidiaries'
creditors generally will have priority to the assets of those subsidiaries over
the claims, if any, that we may have against those assets and claims that
holders of our indebtedness may indirectly have.
Although the notes are referred to as "senior," they will be effectively
subordinated to our secured debt and the debt and other liabilities of our
subsidiaries
The euro notes and the dollar notes are being issued under a single
indenture, will be treated for purposes of that indenture as a single series
(including for voting in connection with consents, waivers or other matters),
and will rank pari passu with each other. In the event of bankruptcy or similar
proceedings involving us, our assets which serve as collateral will be available
to satisfy the obligations under our secured debt before any payments are made
on the notes. In addition, our subsidiaries will not guarantee the notes. In
any event, the notes are effectively subordinated in right of payment to all
existing and future indebtedness and other liabilities of our subsidiaries,
including trade payables. As of September 30, 1999, after giving pro forma
effect to our acquisition of TNI and our offering of the initial notes, we would
have had approximately $329.3 million of secured debt (including secured debt
of our subsidiaries)
-19-
<PAGE>
and our subsidiaries had in the aggregate approximately $163.4 million of
other liabilities, including trade payables and accrued liabilities, to which
holders of the notes are structurally subordinated. Under the terms of
agreements evidencing our debt obligations, some of our subsidiaries are
restricted in their ability to incur debt in the future.
We may not be able to fund the expansion we will need to remain competitive
In order to maintain our competitive position, enhance our capabilities as
an Internet Super Carrier and continue to meet the increasing demands for
service quality, availability and competitive pricing, we expect to make
significant capital expenditures. At December 31, 1999, we were obligated to
make future cash payments that total $392.5 million for acquisitions of global
fiber-based and satellite telecommunications bandwidth, including IRUs or other
rights. In addition, if a supplier makes delivery of certain additional fiber-
based bandwidth, which is delivered as expected in 2001, we will have additional
payment obligations ranging from $120.0 million to $180.0 million, depending on
the when the bandwidth is delivered. We also expect that there will be
additional costs, such as connectivity and equipment charges, to take full
advantage of this acquired bandwidth and IRUs. Some of this fiber-based and
satellite telecommunications bandwidth may require the acquisition and
installation of equipment necessary to access and light the bandwidth in order
to make it operational. At December 31, 1999, we expected to make estimated
capital expenditures totaling $245.8 million for such equipment. In addition, we
anticipate making significant investments to acquire and build-out new Internet
and eCommerce hosting centers in key financial and business centers throughout
the world and to purchase other facilities. We currently anticipate that these
expenditures could exceed $1.0 billion, of which $183.0 million was subject to
firm commitments at December 31, 1999. Additionally, in connection with our
awards of external and local wireless licenses in Hong Kong, we have committed
to invest approximately $387.0 million to build a next generation IP network. If
we cannot continue to provide bandwidth, our business will suffer.
We historically have been unable to generate sufficient cash flow from
operations to meet our operating needs and have relied on equity, debt and
capital lease financings to fund our operations. However, we believe that we
will have a reasonable degree of flexibility to adjust the amount and timing of
capital expenditures in response to market conditions, competition, our then
existing financing capabilities, competition and other factors. We also believe
that working capital generated from the use of acquired bandwidth, together with
other existing working capital from capital lease financings, from our offering
of the initial notes, from our recent debt and equity offerings and from future
equity or debt financings will be sufficient to meet the presently anticipated
working capital and capital expenditure requirements of our operations. We
cannot assure you, however, that we will have sufficient additional capital
and/or obtain financing on satisfactory terms to enable us to meet our capital
expenditures and working capital requirements.
We may need to raise additional funds in order to take advantage of
unanticipated opportunities, more rapid international expansion or acquisitions
of complementary businesses. In addition, we may need to raise additional funds
to develop new products or otherwise respond to changing business conditions or
unanticipated competitive pressures. We cannot assure you that we will be able
to raise such funds on favorable terms. In the event that we are unable to
obtain such additional funds on acceptable terms, we may determine not to enter
into various expansion opportunities.
-20-
<PAGE>
Acquisitions may strain our management, personnel, accounting, information
systems and other resources
During the two years ended December 31, 1999 and 1998, in addition to our
acquisition of TNI, we completed a total of 60 ISP acquisitions for aggregate
purchase prices and related payments of approximately $1.4 billion exclusive
of assumed debt. In order to successfully integrate these businesses into our
own existing business, we need to expand and refine our management, personnel,
accounting, information systems and other resources.
If we do not effectively expand our capabilities and deploy our resources
to meet these needs, our business may be disrupted and adversely affected.
Other risks include:
. Possible inability of management to incorporate licensed or acquired
technology and rights into our service offering; and
. Possible impairment of relationships with employees, customers and
suppliers as a result of changes in management.
We cannot assure you that we will be successful in overcoming these risks
or other problems encountered in connection with such acquisitions, strategic
alliances or investments. We believe that after eliminating redundant network
architecture and administrative functions and taking other actions to integrate
the operations of acquired companies we will be able to realize cost savings.
However, although we have assembled teams for integration of businesses acquired
by us, we cannot assure you that our integration of acquired companies'
operations will be successfully accomplished. We may take charges or make
adjustments to the depreciable lives of our assets as we integrate acquired
companies and also seek to reduce our cost structure. Our inability to improve
the operating performance of businesses we acquired or to integrate successfully
the operations of those companies could have a material adverse effect on us. In
addition, as we proceed with acquisitions in which the consideration consists of
cash, a substantial portion of our available cash may be used to consummate for
those purposes.
The purchase price of many of the businesses that might become attractive
acquisition candidates for us likely will significantly exceed the fair values
of the net assets of the acquired businesses. As a result, material goodwill
and other intangible assets would be required to be recorded which would result
in significant amortization charges in future periods.
In addition, an intangible asset that frequently arises in connection with
the acquisition of a technology company is "acquired in-process research and
development," which under U.S. accounting standards as presently in effect must
be expensed immediately upon acquisition. Such expenses, in addition to the
financial impact of acquisitions, could have a material adverse effect on us and
could cause substantial fluctuations in our quarterly and yearly operating
results. We have recently incurred an expense, estimated to be approximately
$84.0 million, for acquired in-process research and development in connection
with our TNI acquisition. Furthermore, in connection with acquisitions or
strategic alliances, we could incur substantial expenses including
-21-
<PAGE>
the expenses of integrating the business of the acquired company or the
strategic alliance with our existing business.
Although we have been successful to date identifying acquisition candidates
at prices we consider to be reasonable, we cannot assure you that this will
continue. We expect that competition for appropriate acquisition candidates may
be significant. We may compete with other telecommunications companies with
similar acquisition strategies, many of which may be larger and have greater
resources than we have. Competition for Internet companies is based on a number
of factors including price, terms and conditions, size and access to capital,
ability to offer cash, stock or other forms of consideration and other matters.
We cannot assure you that we will be able to successfully identify and acquire
suitable companies on acceptable terms and conditions.
If we do not effectively expand our capabilities and deploy our resources
to meet these needs, our business may be disrupted and adversely affected.
Our growth and expansion may strain our ability to manage our operations and our
financial resources
Our rapid growth has placed a strain on our administrative, operational and
financial resources and has increased demands on our systems and controls. We
have over 700 points-of-presence and we plan to continue to expand the capacity
of existing points-of-presence as customer-driven demand dictates. In addition,
we have completed a number of acquisitions of companies and telecommunications
bandwidth during 1998 and 1999 and plan to continue to do so. We anticipate that
we may be required to continue enhancements to and expand our network. The
process of consolidating the businesses and implementing the strategic
integration of these acquired businesses with our existing business may take a
significant amount of time. It may also place additional strain on our resources
and could subject us to additional expenses. We cannot assure you that we will
be able to integrate these companies successfully or in a timely manner. In
addition, we cannot assure you that our existing operating and financial control
systems and infrastructure will be adequate to maintain and effectively monitor
future growth. Our continued growth may also increase our need for qualified
personnel. We cannot assure you that we will be successful in attracting,
integrating and retaining such personnel.
We face risks associated with our acquisitions of bandwidth from network
suppliers relating to our dependence on their ability to satisfy their
obligations to us, the possibility that we may need to incur significant
expenses to utilize bandwidth and their ability to build out their networks
under construction that could adversely affect our ability to utilize acquired
bandwidth
We are subject to a variety of risks relating to our recent acquisitions of
fiber-based and satellite telecommunications bandwidth from our various global
network suppliers and the delivery, operation and maintenance of such bandwidth.
Such risks include, among other things, the following:
. the risk that financial, legal, technical and/or other matters may
adversely affect such suppliers' ability to perform their respective
operation, maintenance and other
-22-
<PAGE>
services relating to such bandwidth, which may adversely affect our use
of such bandwidth;
. the risk that we will not have access to sufficient additional capital
and/or financing on satisfactory terms to enable us to make the
necessary capital expenditures to take full advantage of such bandwidth;
. the risk that such suppliers may not continue to have the necessary
financial resources to enable them to complete, or may otherwise elect
not to complete, their contemplated buildout of their respective fiber
optic telecommunications systems; and
. the risk that such buildout may be delayed or otherwise adversely
affected by presently unforeseeable legal, technical and/or other
factors.
We cannot assure you that we will be successful in overcoming these risks
or any other problems encountered in connection with our acquisitions of
bandwidth.
Continued international expansion is a key component of our business strategy
and, if we are unable to complete this expansion, our business may suffer
A key component of our business strategy is our continued expansion into
international markets. Revenue from our non-U.S. operations continues to
increase as a percentage of consolidated results, comprising 53% of revenue in
the third quarter of 1999. By comparison, our non-U.S. operations comprised 40%
for all of 1998. As a result of our acquisition of TNI, our revenue mix may
likely change again in 2000 because TNI's revenues are derived primarily from
U.S. operations. We may need to enter into joint ventures or other strategic
relationships with one or more third parties in order to conduct our foreign
operations successfully. However, we cannot assure you that we will be able to
obtain the permits and operating licenses required for us to operate, to hire
and train employees or to market, sell and deliver high quality services in
these markets. To the extent that we cannot do so, our business may be adversely
affected. In addition, there are a number of risks involved with doing business
abroad including:
. unexpected changes in or delays resulting from foreign laws, regulatory
requirements, tariffs, customs, duties and other trade barriers;
. difficulties in staffing and managing foreign operations;
. longer payment cycles and problems in collecting accounts receivable;
. fluctuations in currency exchange rates and foreign exchange controls
which restrict or prohibit repatriation of funds;
. technology export and import restrictions or prohibitions;
. delays from customs brokers or government agencies;
. seasonal reductions in business activity during the summer months in
Europe and other parts of the world; and
. potentially adverse tax consequences, which could adversely impact the
success of our international operations.
-23-
<PAGE>
Asian-Pacific and Latin American countries in which we operate have
experienced economic difficulties and uncertainties during the past few years.
These economic difficulties and uncertainties could have a material adverse
effect on our business, financial condition and results of operations.
Our financial results and our financial position may be adversely affected by
currency and exchange risks
During the year ended December 31, 1998 and the nine months ended September
30, 1999, 40% and 52%, respectively, of our revenue was derived from operations
outside of the United States and at September 30, 1999, 27% of our assets were
in operations outside of the United States. During the year ended December 31,
1998 and the nine months ended September 30, 1999, on a pro forma basis after
giving effect to our acquisition of TNI, the TAS Acquisition and the Other
Acquisitions, 39% and 41%, of our revenue, respectively would have been derived
from operations outside the United States and at September 30, 1999, on a pro
forma basis after giving effect to our acquisition of TNI, 25% of our assets
would have been in operations outside of the United States. We anticipate that a
significant percentage of our future revenue and operating expenses will
continue to be generated from operations outside the United States and we expect
to continue to invest in non-U.S. businesses. Consequently, a substantial
portion of our revenue, operating expenses, assets and liabilities will be
subject to significant foreign currency and exchange risks. Obligations of
customers and of PSINet in foreign currencies will be subject to unpredictable
and indeterminate fluctuations in the event that such currencies change in value
relative to U.S. dollars. Furthermore, those customers and PSINet may be subject
to exchange control regulations which might restrict or prohibit the conversion
of such currencies into U.S. dollars. Although we have not entered into hedging
transactions to limit our foreign currency risks, as a result of the increase in
our foreign operations and our recent issuance of euro-denominated 10 1/2% and
11% senior notes, we may implement such practices in the future. We cannot
assure you that the occurrence of any of these factors will not have a material
adverse effect on our business, financial position or results of operations.
We depend on key personnel and could be affected by the loss of their services
Competition for qualified employees and personnel in the Internet services
industry is intense and there are a limited number of persons with knowledge of
and experience in the Internet service industry. The process of locating such
personnel with the combination of skills and attributes required to carry out
our strategies is often lengthy. Our success depends to a significant degree
upon our ability to attract and retain qualified management, technical,
marketing and sales personnel and upon the continued contributions of such
management and personnel. In particular, our success is highly dependent upon
the personal abilities of our senior executive management, including William L.
Schrader, our Chairman of the Board and Chief Executive Officer and the founder
of PSINet, Harold S. "Pete" Wills, our President and Chief Operating Officer,
and Edward D. Postal, our Executive Vice President and Chief Financial Officer.
We have employment agreements with each of these senior executive officers. The
loss of the services of any one of them could have a material adverse effect on
our business, financial condition or results of operations.
-24-
<PAGE>
We depend on suppliers and could be affected by changes in suppliers or delays
in delivery of their products and services
From time to time, we are dependent on third party suppliers for our
leased-line connections, or bandwidth, and some hardware components. Some of
these suppliers are or may become competitors of ours, and they are not subject
to any contractual restrictions upon their ability to compete with us. If these
suppliers change their pricing structures, we may be adversely affected.
Moreover, any failure or delay on the part of our network providers to deliver
bandwidth to us or to provide operations, maintenance and other services with
respect to such bandwidth in a timely or adequate fashion could adversely affect
us.
In the case of hardware suppliers, although we attempt to maintain a
minimum of two vendors for each required product, we are not always able to do
so. Some components that we use to provide our networking services are
currently supplied by only one source. We have from time to time experienced
delays in the receipt of hardware components and telecommunications facilities,
including delays in delivery of Primary Rate Interface telecommunications
facilities, which connect our dial-up customers to our network. A failure by a
supplier to deliver quality products on a timely basis, or the inability to
develop alternative sources if and as required, could result in delays which
could adversely affect our business.
Recent legislative and regulatory actions may affect the prices that we are
charged by the regional bell operating companies and other bandwidth carriers,
which could adversely affect our business.
The terms of our financing arrangements may restrict our operations
Our financing arrangements with our equipment lessors are secured by some
of our assets and stock of some of our subsidiaries. These financing
arrangements require that we satisfy many financial covenants. Our ability to
satisfy these financial covenants may be affected by events beyond our control.
As a result, we cannot assure you that we will be able to continue to satisfy
such covenants. Some of our debt and equipment lease financing arrangements
also currently prohibit us from paying dividends and repurchasing our capital
stock without consent. Our failure to comply with covenants and restrictions in
these financing arrangements could lead to a default under the terms of these
agreements. In the event of a default under these financing arrangements, our
lenders would be entitled to accelerate the outstanding indebtedness and
foreclose upon any assets securing that indebtedness. Lenders would also be
entitled to be repaid from the proceeds of the liquidation of those assets
before the assets would be available for distribution to the holders of our
securities, including holders of the Series D preferred stock. In addition, the
collateral security arrangements may adversely affect our ability to obtain
additional borrowings.
Not all of our systems have been confirmed year 2000 compliant
Prior to entering the year 2000, or Y2K, we developed detailed plans for
implementing, testing and completing any necessary modifications to our key
computer systems and equipment with embedded chips to ensure that they were Y2K
compliant. We also developed a test bed of our U.S. internal systems to
implement and complete testing of the requisite minor changes and
-25-
<PAGE>
completed an inventory of our internal systems that we use outside of the United
States to determine the status of their Y2K compliance. Now that we have entered
the year 2000, we have tested our key computer systems and to date, we have not
encountered any material Y2K related disruptions or failures of our systems or
services, nor have we been notified of any disruptions or failures in the
systems of any of our third parties with whom we deal. There is an ongoing risk
that Y2K related problems could still occur and we will continue to evaluate
these risks. However, we believe that the Y2K issue will not pose any
significant operational problems for us.
If we become subject to provisions of the Investment Company Act, our business
operations may be restricted
We have significant amounts of cash and, pending our utilization of all the
net proceeds from our offering of the initial notes, will have an even greater
amount of cash invested in short term investment grade and government
securities, which investments could conceivably subject us to the provisions of
the Investment Company Act of 1940. We do not propose to engage in investment
activities in a manner or to an extent which would require us to register as an
investment company under the Investment Act of 1940. The Investment Company Act
of 1940 permits a company to avoid becoming subject to it for a period of up to
one year despite the holding of investment securities in excess of such amount
if, among other things, its board of directors has adopted a resolution which
states that it is not the company's intention to become an investment company.
Our Board of Directors has adopted such a resolution that would become effective
in the event we are deemed to fall within the definition of an investment
company. If we were to be determined to be an investment company, our business
would be adversely affected.
We are subject to competitive pressures that may adversely impact us
The market for Internet connectivity and related services is extremely
competitive. Our current and prospective competitors include national, regional
and local ISPs, long distance and local exchange telecommunications companies,
cable television and direct broadcast satellite providers, wireless
communications providers and on-line service providers. While we believe that
our network, products and customer service distinguish us from our competitors,
some of these competitors have greater market presence, brand recognition, and
financial, technical and personnel resources.
Technology trends and evolving industry standards could result in our
competitors developing or obtaining access to bandwidth and technologies that
carry more information faster than our bandwidth and technology and,
consequently, render our bandwidth or technology obsolete
Our products and services are targeted toward users of the Internet, which
has experienced rapid growth. The market for Internet access and related
services is characterized by rapidly changing technology, evolving industry
standards, changes in customer needs and frequent new product and service
introductions. Our future success will depend, in part, on our ability to
effectively use and develop leading technologies.
-26-
<PAGE>
We cannot assure you that we will be successful in responding to changing
technology or market trends. In addition, services or technologies developed by
others may render our services or technologies uncompetitive or obsolete.
Furthermore, changes to our services in response to market demand may require
the adoption of new technologies that could likewise render many of our assets
technologically uncompetitive or obsolete. As we accept bandwidth from our
various existing global network suppliers or acquire bandwidth or equipment from
other suppliers that may better meet our needs than existing bandwidth or
equipment, many of our assets could be determined to be obsolete or excess. The
disposition of obsolete or excess assets could have a material adverse effect on
our business, financial condition and results of operations.
Even if we do respond successfully to technological advances and emerging
industry standards, the integration of new technology may require substantial
time and expense, and we cannot assure you that we will succeed in adapting our
network infrastructure in a timely and cost-effective manner.
We may be liable for information disseminated through our network
The law relating to liability of ISPs for information carried on or
disseminated through their networks is not completely settled. A number of
lawsuits have sought to impose such liability for defamatory speech,
infringement of copyrighted materials and other claims. A U.S. Supreme Court
case held that an ISP was protected by a provision of the Communications Decency
Act from liability for material posted on its system, but this case may not be
applicable in other factual circumstances. Other courts have held that online
service providers and ISPs may, under some circumstances, be subject to damages
for copying or distributing copyrighted materials. However, in an effort to
protect certain qualified ISPs, the Digital Millennium Copyright Act was signed
into law in October 1998. Under certain circumstances, this Act may provide
qualified ISPs with a "safe harbor" from liability for copyright infringement.
We may not qualify. In 1998, the Child Online Protection Act was enacted,
requiring limitations on access to pornography and other material deemed
"harmful to minors." This legislation has been attacked in court as a violation
of the First Amendment. We are unable to predict the outcome of this case at
this time. The imposition upon ISPs or Web server hosts of potential liability
for materials carried on or disseminated through their systems could require us
to implement measures to reduce our exposure to such liability. Such measures
may require that we spend substantial resources or discontinue some product or
service offerings. Any of these actions could have a material adverse effect on
our business, operating results and financial condition.
The regulation and liability of ISPs regarding information disseminated
through their networks also is undergoing a process of development in other
countries. For example, a recent court decision in England held an ISP liable
for certain allegedly indecent content carried through its network under factual
circumstances in which the ISP had been notified by the complainant about the
offending message which the ISP had failed to delete when asked to do so by the
complainant. Decisions, laws, regulations and other activities regarding
regulation and content liability may significantly affect the development and
profitability of companies offering on-line and Internet access services,
including us.
One particular area of uncertainty in this regard results from the entry
into effect of European Union Directive 95/46/EC on the protection of
individuals with regard to the
-27-
<PAGE>
processing of personal data and on the free movement of such data. The EU
Directive imposes obligations in connection with the protection of personal data
collected or processed by third parties. Under some circumstances, we may be
regarded as subject to the EU Directive's requirements. The United States and
the European Union currently are negotiating the application of the EU Directive
to U.S. companies.
FCC and foreign telecommunications regulations may limit the services we can
offer
Our activities are subject to varying degrees of federal, state and local
regulation. The FCC exercises jurisdiction over all facilities of, and services
offered by, telecommunications carriers to the extent that they involve the
provision, origination or termination of jurisdictionally interstate or
international communications. The state regulatory commissions retain
jurisdiction over the same facilities and services to the extent they involve
origination or termination of jurisdictionally intrastate communications.
Our Internet operations are not currently subject to direct regulation by
the FCC or any other governmental agency, other than regulations applicable to
businesses generally. However, the FCC has indicated that some services offered
over the Internet, such as phone-to-phone Internet protocol telephony, may be
functionally indistinguishable from traditional telecommunications service
offerings and their non-regulated status may have to be re-examined. We are
unable to predict what regulations may be adopted in the future, or to what
extent existing laws and regulations may be found applicable, or the impact of
any new or existing laws may have on our business. We cannot assure you that new
laws or regulations relating to Internet services, or existing laws found to
apply to them, will not have a material adverse effect on us. Although the FCC
has decided not to allow local telephone companies to impose per-minute access
charges on Internet service providers, and that decision has been upheld by the
reviewing court, further regulatory and legislative consideration of this issue
is likely. In addition, some telephone companies are seeking relief through
state regulatory agencies. Such rules, if adopted, would affect our costs of
serving dial-up customers and could have a material adverse effect on our
business, financial condition and results of operations.
In addition to our Internet activities, we have recently focused attention
on acquiring telecommunications assets and facilities, which is a regulated
activity. Our wholly-owned subsidiary, PSINetworks Company, has received an
international Section 214 authorization from the FCC and a Type I facilities
license from the Japanese telecommunications regulatory activity to provide
global facilities-based and global resale telecommunications services. Our
wholly-owned subsidiary, PSINet Telecom UK Limited, has received an
international facilities license from DTI and OFTEL, the responsible
telecommunications regulatory bodies in the United Kingdom. Currently, the FCC
and OFTEL do not closely regulate the charges or practices of non-dominant
carriers, such as our subsidiaries. Nevertheless, these regulatory agencies have
the power to impose more stringent regulatory requirements on us and to change
our regulatory classification, which may adversely affect our business.
Our subsidiaries have also received competitive local exchange carrier, or
CLEC, certification in New York, Virginia, Colorado, California, Texas and
Maryland. We are considering the financial, regulatory and operational
implications of becoming a competitive local exchange carrier in other states.
As a provider of domestic basic telecommunications
-28-
<PAGE>
services, particularly competitive local exchange services, we could become
subject to further regulation by the FCC and/or another regulatory agency,
including state and local entities.
An important issue for CLECs is the right to receive reciprocal
compensation for the transport and termination of Internet traffic. Most states
have required incumbent local exchange carriers to pay competitive local
exchange carriers reciprocal compensation. In October 1998, the FCC determined
that dedicated Digital Subscriber Line service is an interstate service and
properly tariffed at the interstate level. In February 1999, the FCC concluded
that at least a substantial portion of dial-up ISP traffic is jurisdictionally
interstate. The FCC also concluded that its jurisdictional decision does not
alter the exemption from access charges currently enjoyed by ISPs. The FCC
established a proceeding to consider an appropriate compensation mechanism for
interstate Internet traffic. Pending the adoption of that mechanism, the FCC saw
no reason to interfere with existing interconnection agreements and reciprocal
compensation arrangements. The FCC order has been appealed, briefing was in
September 1999, and oral arguments are expected to be heard in early 2000. In
light of the FCC's order, state commissions that previously addressed this issue
and required reciprocal compensation to be paid for ISP traffic may reconsider
and may modify their prior rulings. Several incumbent local exchange carriers
are seeking to overturn prior orders, or seek refunds of, or authority to
escrow, payments that they claim are inconsistent with the FCCs' February 1999
order. In response to these and other challenges, some state commissions have
opened inquiries as to the appropriate compensation mechanisms in the context of
ISP traffic. Of the state commissions that have considered the issue since the
FCC's February 1999 order, the majority of these states has upheld the
requirement to pay reciprocal compensation for ISP traffic. We cannot assure you
that any future court, state regulatory or FCC decision on this matter will
favor our position. An unfavorable result may have an adverse impact on our
potential future revenues as a CLEC, as well as increasing our costs for PRIs
generally.
If we experience system failure or shutdown, we may not be able to deliver
services
Our success depends upon our ability to deliver reliable, high-speed access
to the Internet and upon the ability and willingness of our telecommunications
providers to deliver reliable, high-speed telecommunications service through
their networks. Our network, and other networks providing services to us, are
vulnerable to damage or cessation of operations from fire, earthquakes, severe
storms, power loss, telecommunications failures and similar events, particularly
if such events occur within a high traffic location of the network. We have
designed our network to minimize the risk of such system failure, for instance,
with redundant circuits among POPs to allow traffic rerouting. In addition, we
perform lab and field testing before integrating new and emerging technology
into the network, and we engage in capacity planning. Nonetheless, we cannot
assure you that we will not experience failures or shutdowns relating to
individual POPs or even catastrophic failure of the entire network.
We carry business personal property insurance at both scheduled locations
and unscheduled locations to protect us against losses due to property damage
and business interruption. Such coverage, however, may not be adequate or
available to compensate us for all losses that may occur. In addition, we
generally attempt to limit our liability to customers arising out of network
failures by contractually disclaiming all such liability. In respect of many
services, we have also contractually limited liability to a usage credit based
upon the amount of
-29-
<PAGE>
time that the system was not operational. We cannot assure you, however, that
such limitations will be enforceable. In any event, significant or prolonged
system failures or shutdowns could damage our reputation and result in the loss
of customers.
Although we have implemented network security measures, our network may be
susceptible to viruses, break-ins or disruptions
We have implemented many network security measures, such as limiting
physical and network access to our routers. Nonetheless, our network's
infrastructure is potentially vulnerable to computer viruses, break-ins and
similar disruptive problems that could lead to interruptions in service to our
customers. Third parties could also potentially jeopardize the security of
confidential information stored in the computer systems of our customers. Any
one of these disruptions could deter potential customers, result in loss of
customer confidence and adversely affect our existing customer relationships.
We also cannot assure you that we will not experience failures or shutdowns
relating to individual POPs or even catastrophic failure of the entire network,
whether because of an "act of God" or otherwise.
These disruptions may also result in claims against us or liability on our
part. Such claims, regardless of their ultimate outcome, could result in costly
litigation and could have an adverse effect on us or our reputation or on our
ability to attract and retain customers for our products.
Asserting and defending intellectual property rights may adversely impact
results of operations regardless of the outcome
Competitors increasingly assert intellectual property infringement claims
against each other. The success of our business depends on out ability to
successfully defend our intellectual property. These types of claims may have a
material adverse impact on us regardless of whether or not we are successful.
From time to time, we have received claims that we have infringed rights of
others. If a competitor were successful bringing a claim against us, our
business might suffer. We cannot assure you that we will be successful
defending or asserting our intellectual property rights.
In order to compete effectively we need to continually develop new products and
services that gain market acceptance and keep the confidence of our customers
We have introduced new enterprise service offerings, including value-added,
IP-based enterprise communication services and DSL-based Internet access
services. The failure of these services, particularly DSL-based services, to
gain market acceptance in a timely manner could have an adverse effect on us.
To the extend that new or enhanced services are introduced and are not reliable,
or there are quality or compatibility problems, it could negatively impact
market acceptance of such services and adversely affect our ability to attract
or retain customers and subscribers. Our services may contain undetected errors
or defects that could result in additional development or remediation costs and
loss of credibility with our customers and subscribers.
Additionally, if we are unable to meet customer demand for network
capacity, our network could become congested during peak periods. Congestion
could adversely affect the quality of service we are perceived to provide.
Conversely, due to the high fixed cost nature of
-30-
<PAGE>
our infrastructure, if our network is under-utilized, it could adversely affect
our ability to provide cost-efficient services. Our failure to match network
capacity to demand could have an adverse effect on us.
We may not have the ability to raise the funds necessary to finance the change
of control offer which may be required by the indenture
Upon the occurrence of a change of control (as defined in the indenture
governing the notes), we would be required to make an offer to purchase any or
all of the notes, our 11 1/2% senior notes, our 11% senior notes and our 10%
senior notes at the prices stated in the respective indentures governing such
securities. However, our ability to repurchase such securities upon a change of
control may be limited by the terms of our then existing contractual obligations
and those of our subsidiaries. In addition, we may not have adequate financial
resources to effect such a purchase, and we cannot assure you that we would be
able to obtain such resources through a refinancing of such securities to be
purchased or otherwise. If we fail to repurchase all of such securities tendered
for purchase upon the occurrence of a change of control, such failure will
constitute an event of default under the respective indentures governing such
securities.
With respect to the sale of assets referred to in the definition of change
of control, the phrase "all or substantially all" as used in such definition
varies according to the facts and circumstances of the subject transaction, has
no clearly established meaning under the relevant law and is subject to judicial
interpretation. Accordingly, in some circumstances there may be a degree of
uncertainty in ascertaining whether a particular transaction would involve a
disposition of "all or substantially all" of the assets of a person. It may,
therefore, be unclear whether a change of control has occurred and whether such
securities are subject to an offer to purchase.
The change of control provision may not necessarily afford the holders of
the notes protection in the event of a highly leveraged transaction, including a
reorganization, restructuring, merger or other similar transaction involving us
that may adversely affect the holders of the notes, because such transactions
may not involve a shift in voting power or beneficial ownership or, even if they
do, may not involve a shift of the magnitude required under the definition of
change control to trigger such provisions. Except as described under
"Description of Notes--Change of Control," the indenture governing the notes
will not contain provisions that permit the holders thereof to require us to
repurchase or redeem the notes in the event of a takeover, recapitalization or
similar transaction.
You may find it difficult to sell your notes
The initial dollar notes are currently eligible for trading in the PORTAL
Market, the National Association of Securities Dealers' screen-based automated
market for trading of securities eligible for resale under Rule 144A, but
currently, there is no public market for the initial euro notes or the exchange
notes. We have applied to list the initial euro notes on the Luxembourg Stock
Exchange, but we cannot assure you that the initial euro notes will be admitted
for listing on the Luxembourg Stock Exchange. Except for the listing of the
euro notes on the Luxembourg Stock Exchange, we do not intend to apply for
listing of the notes on any securities exchange or on any automated dealer
quotation system. Although the initial purchasers of the initial notes have
informed us that they intend to make a market in the notes,
-31-
<PAGE>
they are not obligated to do so and may discontinue any such market at any time
without notice. In addition, such market making activity may be limited during
the exchange offer or during an offering under a shelf registration statement
should we decide to file one. As a result, we can make no assurance to you as to
the development or liquidity of any market for the notes, your ability to sell
the notes, or the price at which you may be able to sell the notes. Future
trading prices of the notes will depend on many factors, including, among other
things, prevailing interest rates, our operating results and the market for
similar securities. Historically, the market for securities similar to the
notes, including non-investment grade debt, has been subject to disruptions that
have caused substantial volatility in the prices of such securities. We cannot
assure you that, if a market develops, it will not be subject to similar
disruptions. Any such disruptions may have an adverse effect on the holders of
the notes.
We will retain a significant amount of discretionary authority over the use of
net proceeds of the initial notes offering
We will retain a significant amount of discretion over the application of
the net proceeds of our offering of the initial notes. Because of the number and
variability of factors that determine our use of the net proceeds of the initial
notes offering, we cannot assure you that such applications will not vary
substantially from our current intentions. Pending such utilization, we intend
to invest the net proceeds of the initial notes offering in short-term U.S.
investment grade and government securities. See "Use of Proceeds."
Fraudulent transfer statutes may limit your rights as a noteholder
Federal or state fraudulent transfer laws permit a court, if it makes
certain findings, to:
. avoid all or a portion of our obligations under the notes to you;
. subordinate our obligations under the notes to you to our other
existing and future indebtedness, entitling other creditors to be paid
in full before any payment is made on the notes; and
. take other action detrimental to you, including, in some
circumstances, invalidating the notes.
. If a court were to take any of those actions, we cannot assure you
that you would ever be repaid.
. Under federal and state fraudulent transfer laws, in order to take any
of those actions, courts will typically need to find that, at the time
the notes were issued, we:
. issued the notes with the intent of hindering, delaying or defrauding
current or future creditors;
. received less than fair consideration or reasonably equivalent value
for incurring the indebtedness represented by the notes and were
insolvent or were rendered insolvent by reason of the issuance of the
notes;
. were engaged, or about to engage, in a business or transaction for
which our assets were unreasonably small; or
-32-
<PAGE>
. intended to incur, or believed (or should have believed) we would
incur, debts beyond our ability to pay as such debts mature (as all of
the foregoing terms are defined in or interpreted under such
fraudulent transfer statutes).
Different jurisdictions define "insolvency" differently. However, we
generally would be considered insolvent at the time we incurred the indebtedness
constituting the notes if (1) the fair market value (or fair saleable value) of
our assets is less than the amount required to pay our total existing debts and
liabilities (including the probable liability related to contingent liabilities)
as they become absolute or matured or (2) we were incurring debts beyond our
ability to pay as such debts mature. We cannot assure you as to what standard a
court would apply in order to determine whether we were "insolvent" as of the
date the notes were issued, and we cannot assure you that, regardless of the
method of valuation, a court would not determine that we were insolvent on that
date. Nor can we assure you that a court would not determine, regardless of
whether we were insolvent on the date the notes were issued, that the payments
constituted fraudulent transfers on another ground.
Certain considerations relating to book-entry interests
Unless and until notes in definitive registered form ("Definitive
Registered Notes") are issued in exchange for notes held in the form of book-
entry interests by The Depository Trust Company, in the case of the dollar
notes, and by Euroclear or Cedelbank, in the case of the euro notes, owners of
book-entry interests in the notes will not be considered owners or holders of
notes. The Depository Trust Company (or its nominee) will be the sole holder of
the global notes representing the dollar notes, and Kredietbank S.A.
Luxembourgeoise (or its nominee), as common depositary for the euro notes, will
be the sole holder of the global notes representing the euro notes. After
payment to the relevant depositary, we will have no responsibility for the
relevant depositary to make such payments to the owners of book-entry interests.
Accordingly, if you own a book-entry interest, you must rely on the procedures
of The Depository Trust Company, Euroclear or Cedelbank, as applicable, and if
you are not a participant in The Depository Trust Company, Euroclear or
Cedelbank, as applicable, on the procedures of the participant through which you
own your interest, to exercise any rights and obligations of a holder under the
indenture. See "Description of Book-Entry System."
Unlike the holders of the notes themselves, owners of book-entry interests
will not have the direct right to act upon our solicitations for consents or
requests for waivers or other actions from holders of the notes. Instead, if you
own a book-entry interest, you will be permitted to act only to the extent you
have received appropriate proxies to do so from The Depository Trust Company,
Euroclear or Cedelbank, as applicable. We cannot assure you that procedures
implemented for the granting of such proxies will be sufficient to enable you to
vote on any requested actions on a timely basis.
Similarly, upon the occurrence of an event of default under the indenture
for the notes, unless and until Definitive Registered Notes are issued in
respect of all book-entry interests, if you own a book-entry interest, you will
be restricted to acting through The Depository Trust Company, Euroclear or
Cedelbank, as applicable. We cannot assure you that the procedures to be
implemented through The Depository Trust Company, Euroclear or Cedelbank, as
applicable,
-33-
<PAGE>
will be adequate to ensure the timely exercise of remedies under the notes. See
"Description of Book-Entry System."
If you fail to exchange your notes or follow the procedure for tendering, your
notes will continue to be restricted
Issuance of exchange notes in exchange for the initial notes pursuant to
the exchange offer will only be made following the prior satisfaction of the
procedures and conditions set forth in "The Exchange Offer--Procedures for
Tendering Initial Notes." Such procedures and conditions include timely receipt
by the exchange agent (as defined) of such initial notes, and of a properly
completed and duly executed applicable letter of transmittal. Initial notes
that are not tendered or are tendered but not accepted will, following the
consummation of the exchange offer, continue to be restricted securities under
the Securities Act of 1933 and may not be offered or sold except pursuant to any
exemption from, or in a transaction not subject to, the Securities Act of 1933
and applicable state securities law.
Forward-looking statements
Some of the information contained in this prospectus may contain forward-
looking statements. Such statements can be identified by the use of forward-
looking terminology such as "believes," "expects," "may," "will," "should," or
"anticipates" or similar words, or by discussions of strategy that involve risks
and uncertainties. These statements may discuss our future expectations or
contain projections of our results of operations or financial condition or
expected benefits to us resulting from acquisitions or transactions. We cannot
assure that the future results indicated, whether expressed or implied, will be
achieved. The risk factors noted in this section and other factors noted
throughout this prospectus, including risks and uncertainties, could cause our
actual results to differ materially from those contained in any forward-looking
statement.
-34-
<PAGE>
USE OF PROCEEDS
We will not receive any cash proceeds from the exchange offer. In
consideration for issuing the exchange notes in exchange for the initial notes,
we will receive initial notes in like principal amount. We will cancel all
initial notes surrendered in exchange for the exchange notes.
The net proceeds of the offering of the initial notes, after deducting
discounts and commissions of the initial purchasers and our expenses, were
approximately $736.2 million, using an exchange rate of Euro 0.9692 to U.S.
$1.00, as of November 23, 1999. Gross proceeds from the offering of the initial
dollar notes and initial euro notes were $600.0 million and $154.8 million,
respectively assuming such exchange rate.
We intend to use the net proceeds from the initial notes offering to
finance capital expenditures, including the acquisition of additional
telecommunications bandwidth and related facilities and equipment and the
construction of Internet and eCommerce hosting centers, in furtherance of our
goal of becoming one of the top three providers of Internet access services and
related communications services and products in each of the 20 largest global
telecommunications markets. We also intend to use part of the net proceeds for
general corporate purposes. In addition, as described below, we expect to use a
portion of the net proceeds to make strategic investments in or acquisitions of
complementary businesses or assets. For a discussion of our "Management
Discussion and Analysis of Financial Condition and Results of Operations-
Liquidity and Capital Resources", refer to our Form 8-K dated January 26, 2000,
which was filed February 8, 2000.
We expect to use a portion of the net proceeds from the initial notes
offering for possible future investments, acquisitions or strategic alliances in
businesses or assets that are related or complementary to our existing business.
As a key part of our growth strategy, we periodically evaluate investment,
acquisition and strategic alliance candidates. We are currently evaluating
several acquisition candidates, including several subject to non-binding letters
of intent. However, we cannot assure you that we will successfully complete any
such acquisitions currently being contemplated. For a discussion of our
"Business-Acquisitions", refer to our Form 8-K dated January 26, 2000, which was
filed February 8, 2000.
We currently intend to allocate substantial proceeds to each of the
foregoing uses. However, the precise allocation of funds among these uses will
depend on future commercial, technological, regulatory and other developments in
or affecting our business, the competitive climate in which we operate and the
emergence of future opportunities. Because of the number and variability of
factors that determine our use of the net proceeds of the initial notes
offering, we cannot assure you that our application of the net proceeds will not
vary substantially from our current intentions. Pending these uses, we intend to
invest the net proceeds of the initial notes offering in short-term U.S.
investment grade and government securities.
-35-
<PAGE>
THE EXCHANGE OFFER
The following discussion sets forth or summarizes the material terms of the
exchange offer, including those set forth in the letter of transmittals
distributed with this prospectus. This summary is qualified in its entirety by
reference to the full text of the documents underlying the exchange offer,
including the indenture and the registration rights agreement governing the
notes, which are exhibits to the exchange offer registration statement of which
this prospectus is a part.
Registration Rights
The initial notes were sold by us to Donaldson, Lufkin & Jenrette
International, Bear Stearns International Limited, Merrill Lynch International
and Morgan Stanley & Co. International Limited, as initial purchasers, on
December 2, 1999 pursuant to an Offering Memorandum dated November 24, 1999
relating to $600,000,000 principal amount of 10 1/2% Senior Notes due 2006 and
Euro 150,000,000 principal amount of 10 1/2% Senior Notes due 2006. The initial
notes were then subsequently resold to qualified institutional buyers pursuant
to Rule 144A and Regulation S under the Securities Act of 1933. In connection
with the initial notes offering, we entered into a registration rights agreement
dated as of December 2, 1999.
The registration rights agreement requires, among other things, that we:
. file with the Securities and Exchange Commission by February 15, 2000 a
registration statement under the Securities Act of 1933 with respect to an
issue of exchange notes of PSINet identical in all material respects to the
initial notes, other than transfer restrictions under the Securities Act of
1933, the registration rights under the registration rights agreement and
the requirement, under certain circumstances, to pay liquidated damages
with respect to the initial notes;
. use our best efforts to cause such exchange offer registration
statement to become effective under the Securities Act of 1933 by May
1, 2000;
. upon the effectiveness of such exchange offer registration statement,
commence the exchange offer and keep the exchange offer open for a
period of not less than 20 business days; and
. use our best efforts to cause the exchange offer to be consummated
within 30 business days after the effective date.
The exchange offer would allow holders of the initial notes the
opportunity, with certain exceptions, to exchange their initial notes for a like
principal amount of exchange notes, which would be issued without a restrictive
legend and may generally be reoffered and resold by the holders without
restrictions or limitations under the Securities Act of 1933, subject to the
terms and conditions enunciated by the staff of the Securities and Exchange
Commission, which is often referred to as the Staff, in the Morgan Stanley No-
Action Letter (Morgan Stanley and Co., Inc. (available June 5, 1991)) and the
----------------------------
Exxon Capital No-Action Letter (Exxon Capital Holdings Corporation (available
----------------------------------
May 13, 1988)), as interpreted in the Securities and Exchange Commission's
letter to Shearman & Sterling (available July 2, 1993), and similar no-action
-------------------
letters. However, holders of the initial notes are not entitled to rely on the
position of the Staff in
-36-
<PAGE>
the no-action letters referred to above and, in the absence of an exemption
therefrom, must comply with the registration and prospectus delivery
requirements of the Securities Act of 1933 in connection with the resale of the
exchange notes, if such holder:
. is an "affiliate" of PSINet within the meaning of Rule 405 under the
Securities Act of 1933,
. does not acquire the exchange notes in the ordinary course of
business,
. tenders in the exchange offer with the intention to participate, or
for the purpose of participating, in a distribution of the exchange
notes, or
. is a broker-dealer which acquired such initial notes directly from
PSINet.
Each broker-dealer that receives exchange notes for its own account in
exchange for initial notes, where such initial notes were acquired by such
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 such exchange notes. See "Plan of Distribution." We have
agreed to include in this prospectus information necessary to allow such broker-
dealers to exchange such initial notes pursuant to the exchange offer and to
satisfy the prospectus delivery requirements in connection with resales of
exchange notes received by such broker-dealer in the exchange offer. We have
also agreed to maintain the effectiveness of the exchange offer registration
statement for such purposes for one year.
In addition, we agreed, pursuant to the registration rights agreement, to
file a shelf registration statement pursuant to Rule 415 under the Securities
Act of 1933, registering for resale:
. any initial notes held by persons who are not permitted by law or any
policy of the Securities and Exchange Commission to participate in the
exchange offer and who satisfy certain other conditions,
. any exchange notes acquired in the exchange offer by any holder who
must comply with the prospectus delivery requirements of the
Securities Act of 1933 in connection with the resales of such exchange
notes if this prospectus is not appropriate or available for such
resales by such holder, or
. any initial notes held by a broker-dealer which were acquired directly
from PSINet or one of its affiliates.
To participate in such a shelf registration, any such holder of notes must
so notify PSINet within 10 business days following consummation of the exchange
offer and provide to PSINet the information requested by PSINet within 10
business days of such request. We have agreed to file with the Securities and
Exchange Commission such a shelf registration statement no later than 30 days
after the earlier of:
(1) the date on which we determine that the exchange offer is not permitted
by applicable law, or
-37-
<PAGE>
(2) the date on which we receive the notice from the holder as specified
above, and to use our best efforts to cause such shelf registration statement to
become effective under the Securities Act of 1933 as soon as practicable but in
no event later than 60 days after the filing of the shelf registration statement
or such longer period, not to exceed 150 days after the filing of the shelf
registration statement, as may be necessary to avoid conflicts with existing
contractual obligations of PSINet. In addition, we agreed to use our best
efforts to keep such shelf registration statement continually effective,
supplemented and amended for a period of at least two years following the
closing date of the initial offering of the initial notes, or such shorter
period as will terminate when all initial notes covered by such shelf
registration statement have been sold pursuant thereto.
Registration Defaults; Liquidated Damages
If the applicable registration statement or amendment is not timely filed
or declared effective or thereafter ceases to be effective or fails to be usable
for its intended purpose without being succeeded immediately by a post-effective
amendment that cures such failure and is itself immediately declared effective,
or if the exchange offer has not been consummated on or prior to the 30th
business day after the effective date, we have agreed to pay liquidated damages
to each holder of initial notes affected thereby in an amount equal to 0.25% per
annum per Euro 1,000 or $1,000 in principal amount, as the case may be, of notes
held by such holder with respect to the first 90-day period immediately
following the occurrence of such default. The amount of such liquidated damages
will increase by an additional 0.25% per annum per Euro 1,000 or $1,000 in
principal amount, as the case may be, of initial notes for each subsequent 90-
day period until all such defaults have been cured, up to a maximum amount of
liquidated damages of 1.50% per annum per Euro 1,000 or $1,000 in principal
amount, as the case may be, of initial notes, provided that we shall in no event
be required to pay liquidated damages for more than one default at any given
time. Following the cure of any default, the payment of liquidated damages in
respect of the notes will cease. Notwithstanding the fact that any initial
notes for which liquidated damages are due cease to be restricted securities
within the meaning of the Securities Act of 1933, all of our obligations to pay
liquidated damages with respect to such securities outstanding prior to the time
such initial notes ceased to be restricted securities shall survive until such
time as such obligations shall have been satisfied in full.
Except as set forth above, this prospectus may not be used for any offer to
resell, resale or other transfer of exchange notes.
Except as set forth above, after consummation of the exchange offer,
holders of notes have no registration or exchange rights under the registration
rights agreement. See "--Consequences of Failure to Exchange."
Expiration Date; Extensions; Amendments
The term "expiration date" shall mean 5:00 p.m., New York City time (10:00
p.m., London time), on ________, 2000, unless PSINet, in its sole discretion,
extends the exchange offer, in which case the term "expiration date" shall mean
the latest date and time to which the exchange offer is extended.
-38-
<PAGE>
To extend the exchange offer, we will notify the exchange agent of any
extension by oral or written notice, followed by a public announcement thereof
no later than 9:00 a.m., New York City time (2:00 p.m., London time), on the
next business day after the previously scheduled expiration date. In no event
will the expiration date be extended to a date more than 30 business days after
effectiveness of the exchange offer registration statement.
We reserve the right, in our reasonable judgment:
(1) to delay accepting any initial notes, to extend the exchange offer or
to terminate the exchange offer if any of the conditions set forth below
under "--Conditions" shall not have been satisfied, by giving oral or
written notice of such delay, extension or termination to the exchange
agent, or
(2) to amend the terms of the exchange offer in any manner.
Any such delay in acceptance, extension, termination or amendment will be
followed as promptly as practicable by a public announcement thereof.
Terms of the Exchange Offer
Upon the terms and subject to the conditions set forth in this prospectus
and in the letters of transmittal, we will accept any and all initial notes
validly tendered and not withdrawn prior to 5:00 p.m., New York City time (10:00
p.m., London time) on the expiration date. We will issue $1,000 or Euro 1,000,
as applicable, principal amount of exchange notes in exchange for each $1,000 or
Euro 1,000, as applicable, principal amount of outstanding initial notes
accepted in the exchange offer. Holders of the initial notes may tender some or
all of their initial notes pursuant to the exchange offer; however, initial
notes may be tendered only in integral multiples of $1,000 or Euro 1,000, as
applicable. The exchange notes will evidence the same debt as the initial notes
and will be entitled to the benefits of the indenture. The form and terms of
the exchange notes are substantially the same as the form and terms of the
initial notes, except that:
. the exchange notes have been registered under the Securities Act of
1933 and thus will not bear legends restricting their transfer,
and
. holders of the exchange notes generally will not be entitled to
certain rights under the registration rights agreements or liquidated
damages, which rights generally will terminate upon consummation of
the exchange offer.
Holders of initial notes do not have any appraisal or dissenters' rights
under the New York Business Corporation Law or the indenture in connection with
the exchange offer. We intend to conduct the exchange offer in accordance with
the applicable requirements of the Securities Exchange Act of 1934 and the rules
and regulations of the Securities and Exchange Commission thereunder, including
Rule 14e-1.
We shall be deemed to have accepted validly tendered initial notes when, as
and if we have given oral or written notice thereof to the exchange agent. The
exchange agent will act as agent for the tendering holders pursuant to the
exchange agent agreement for the purpose of receiving the exchange notes from
us.
-39-
<PAGE>
If any tendered initial notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, the certificates for any such unaccepted initial notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the expiration date.
Holders who tender their initial notes in the exchange offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the letter of transmittal, transfer taxes with respect to the exchange of
initial notes pursuant to the exchange offer. We will pay all charges and
expenses, other than transfer taxes in certain circumstances, in connection with
the exchange offer. See "--Fees and Expenses."
Interest on Exchange Notes
Each exchange note will bear interest from the most recent date to which
interest has been paid or duly provided for on the initial note surrendered in
exchange for such exchange note or, if no such interest has been paid or duly
provided for on such initial note, from December 2, 1999, the date of issuance
of the initial notes. Holders of the initial notes whose initial notes are
accepted for exchange will not receive accrued interest on such initial notes
for any period from and after the last interest payment date to which interest
has been paid or duly provided for on such initial notes prior to the original
issue date of the exchange notes or, if no such interest has been paid or duly
provided for, will not receive any accrued interest on such initial notes, and
will be deemed to have waived the right to receive any interest on such initial
notes accrued from and after such interest payment date or, if no such interest
has been paid or duly provided for, from and after December 2, 1999. Interest
on the notes will be payable semi-annually on June 1 and December 1 of each
year, commencing June 1, 2000.
Procedures for Tendering Initial Notes
Only holders of initial notes may tender such initial notes in the exchange
offer. To tender in the exchange offer, a holder must complete, sign and date
the applicable letter of transmittal, or a facsimile thereof, have the
signatures thereon guaranteed if required by the applicable letter of
transmittal, and mail or otherwise deliver such letter of transmittal or such
facsimile, together with the initial notes and any other required documents, to
the exchange agent so as to be received by the exchange agent at the address set
forth below prior to 5:00 p.m., New York City time (10:00 p.m., London time), on
the expiration date. Delivery of the initial dollar notes may be made by book-
entry transfer of such initial dollar notes into the exchange agent's account at
The Depository Trust Company, or DTC, and delivery of the initial euro notes may
be made by book-entry transfer of such initial euro notes into the account of
Kredietbank S.A. Luxembourgeoise, the common depositary for the euro notes (the
"common depositary") at Euroclear or Cedelbank, as applicable, in either case in
accordance with the procedures described below under "--Book-Entry Delivery
Procedures" and "--Tender of Initial Notes Held Through Book-Entry Transfer
Facilities." Confirmation of such book-entry transfer must be received by the
exchange agent prior to the expiration date.
By executing a letter of transmittal or delivering notes by book-entry
transfer, each holder will make to PSINet the representation set forth below in
the second paragraph under the heading "--Resale of Exchange Notes."
-40-
<PAGE>
The tender by a holder and the acceptance thereof by PSINet will constitute
an agreement between such holder and PSINet in accordance with the terms and
subject to the conditions set forth herein and in the applicable letter of
transmittal.
The method of delivery of initial notes and the applicable letter of
transmittal and all other required documents to the exchange agent is at the
election and risk of the holder. Instead of delivery by mail, it is recommended
that holders use an overnight or hand delivery service. In all cases,
sufficient time should be allowed to assure delivery to the exchange agent
before the expiration date. No letter of transmittal or notes should be sent to
PSINet. Holders may request their respective brokers, dealers, commercial
banks, trust companies or nominees to effect the above transactions for such
holders.
Any beneficial owner whose initial notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender should contact the registered holder promptly and instruct such
registered holder to tender on such beneficial owner's behalf.
Signatures on a letter of transmittal or a notice of withdrawal, as the
case may be, must be guaranteed by an "eligible institution" (as defined below)
unless the initial notes tendered pursuant thereto:
(1) are signed by the registered holder, unless such holder has completed
the box entitled "Special Exchange Instructions" or "Special Delivery
Instructions" on the applicable letter of transmittal, or
(2) are tendered for the account of an eligible institution.
In the event that signatures on a letter of transmittal or a notice of
withdrawal, as the case may be, are required to be guaranteed, such guarantee
must be by a member firm of a registered national securities exchange or of the
National Association of Securities Dealers, Inc., a commercial bank or trust
company having an office or correspondent in the United States, or an "eligible
guarantor institution" within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934, which we refer to as an eligible institution.
If a letter of transmittal is signed by a person other than the registered
holder of any initial notes listed therein, such initial notes must be endorsed
or accompanied by a properly completed bond power, signed by such registered
holder as such registered holder's name appears on such initial notes, with the
signature thereon guaranteed by an eligible institution.
If a letter of transmittal or any initial notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by PSINet, evidence
satisfactory to PSINet of their authority to so act must be submitted with such
letter of transmittal.
All questions as to the validity, form, eligibility, including time of
receipt, acceptance of tendered initial notes and withdrawal of tendered initial
notes will be determined by PSINet in its sole discretion, which determination
will be final and binding. PSINet reserves the absolute right
-41-
<PAGE>
to reject any and all initial notes not properly tendered or any initial notes
PSINet's acceptance of which would, in the opinion of counsel for PSINet, be
unlawful. PSINet also reserves the right to waive any defects, irregularities or
conditions of tender as to particular initial notes. PSINet's interpretation of
the terms and conditions of the exchange offer, including the instructions in
the letters of transmittal, will be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of initial
notes must be cured within such time as PSINet shall determine. Although PSINet
intends to notify holders of initial notes of defects or irregularities with
respect to tenders of initial notes, none of PSINet, the exchange agent, the
common depositary or any other person shall incur any liability for failure to
give such notification. Tenders of initial notes will not be deemed to have been
made until such defects or irregularities have been cured or waived. Any initial
notes received by the exchange agent that are not properly tendered and as to
which the defects or irregularities have not been cured or waived will be
returned by the exchange agent to the tendering holders, unless otherwise
provided in the applicable letter of transmittal, as soon as practicable
following the expiration date.
Book-Entry Delivery Procedures
Beginning promptly after the date of this prospectus, the exchange agent
will maintain an account with respect to the initial dollar notes at DTC and the
common depositary will maintain an account with respect to the initial euro
notes at each of Euroclear and Cedelbank (DTC, Euroclear and Cedelbank are
collectively referred to as the "Book-Entry Transfer Facilities" and,
individually, as a "Book-Entry Transfer Facility") for purposes of the exchange
offer. Any financial institution that is a participant in the applicable Book-
Entry Transfer Facility's systems may make book-entry delivery of the initial
notes by causing the applicable Book-Entry Transfer Facility to transfer such
initial notes into the exchange agent's account, in the case of book-entry
delivery of initial dollar notes, or into the common depositary's account (on
behalf of the exchange agent), in the case of book-entry delivery of initial
euro notes, at the applicable Book-Entry Transfer Facility in accordance with
such Book-Entry Transfer Facility's procedures for such transfer. Timely book-
entry delivery of initial notes pursuant to the exchange offer, however,
requires receipt of a confirmation of a book-entry transfer, which we refer to
as a Book-Entry Confirmation, prior to the expiration date. In addition, the
applicable letter of transmittal or a manually signed facsimile thereof,
together with any required signature guarantees and any other required
documents, or an "agent's message" (as defined below) in connection with a book-
entry transfer, must, in any case, be delivered or transmitted to and received
by the exchange agent (or, in the case of book-entry transfer of the initial
euro notes, by the common depositary on behalf of the exchange agent) at the
exchange agent's address set forth on the cover page of such letter of
transmittal prior to the expiration date. If the foregoing documents cannot be
delivered prior to the expiration date, the guaranteed delivery procedure
described below must be complied with. Tender will not be deemed made until such
documents or agent's message, as applicable, are received by the exchange agent
(or, in the case of book-entry transfer of the initial euro notes, by the common
depositary on behalf of the exchange agent). Delivery of documents to any of the
Book-Entry Transfer Facilities or the common depositary does not constitute
delivery to the exchange agent.
-42-
<PAGE>
Tender of Initial Notes Held Through Book-Entry Transfer Facilities
The exchange agent, the common depositary and each of the Book-Entry
Transfer Facilities have confirmed that the exchange offer is eligible for each
Book-Entry Transfer Facilities' automated tender offer program. Accordingly,
participants in the applicable Book-Entry Transfer Facility's automated tender
offer program may, in lieu of physically completing and signing the applicable
letter of transmittal and delivering it to the exchange agent, electronically
transmit their acceptance of the exchange offer by causing such Book-Entry
Transfer Facility to transfer initial dollar notes to the exchange agent and
initial euro notes to the common depositary (on behalf of the exchange agent) in
accordance with such Book-Entry Transfer Facility's automated tender offer
program procedures for transfer. Such Book-Entry Transfer Facility will then
send an agent's message to the exchange agent, in the case of book-entry
transfer of the initial dollar notes, or to the common depositary (which will
then forward such agent's message to the exchange agent), in the case of book-
entry transfer of the initial euro notes.
The term "agent's message" means a message transmitted by a Book-Entry
Transfer Facility, received by the exchange agent, in the case of book-entry
transfer of the initial dollar notes, or by the common depositary (which will
then forward such message to the exchange agent), in the case of book-entry
transfer of the initial euro notes, and in either case forming part of the Book-
Entry Confirmation, which states that such Book-Entry Transfer Facility has
received an expressed acknowledgment from a participant in such Book-Entry
Transfer Facility's automated tender offer program that is tendering initial
notes which are the subject of such Book-Entry Confirmation, that such
participant has received and agrees to be bound by the terms of the applicable
letter of transmittal or, in the case of an agent's message relating to
guaranteed delivery, that such participant has received and agrees to be bound
by the applicable notice of guaranteed delivery, and that PSINet may enforce
such agreement against such participant.
Guaranteed Delivery Procedures
Holders who wish to tender their initial notes but
(1) whose initial notes are not immediately available,
(2) who cannot deliver their initial notes, the applicable letter of
transmittal or any other required documents to the exchange agent, or
(3) who cannot complete the procedures for book-entry transfer, prior to
the expiration date,
may effect a tender if:
(a) the tender is made through an eligible institution;
(b) prior to the expiration date, the exchange agent receives from such
eligible institution a properly completed and duly executed notice of guaranteed
delivery by facsimile transmission, mail or hand delivery setting forth the name
and address of the holder, the certificate number(s) of such initial notes and
the principal amount of initial notes tendered, stating that the tender is being
made
-43-
<PAGE>
thereby and guaranteeing that, within three Nasdaq Stock Market National Market
System trading days after the expiration date, the applicable letter of
transmittal or facsimile thereof, together with the certificate(s) representing
the initial notes or a Book-Entry Confirmation transfer of such initial notes
into the exchange agent's account at the applicable Book-Entry Transfer Facility
and all other documents required by the applicable letter of transmittal, will
be deposited by the eligible institution with the exchange agent; and
(c) such properly completed and executed letter of transmittal or facsimile
thereof, as well as the certificate(s) representing all tendered initial notes
in proper form for transfer or a Book-Entry Confirmation transfer of such
initial notes into the exchange agent's account, in the case of the book-entry
transfer of initial dollar notes, or into the common depositary's account (on
behalf of the exchange agent), in the case of book-entry transfer of initial
euro notes, at the applicable Book-Entry Transfer Facility and all other
documents required by the letter of transmittal, are received by the exchange
agent within three Nasdaq Stock Market National Market System trading days after
the expiration date.
Upon request to the exchange agent, a notice of guaranteed delivery will be
sent to holders who wish to tender their initial notes according to the
guaranteed delivery procedures set forth above.
Withdrawals of Tenders
Except as otherwise provided herein, tenders of initial notes may be
withdrawn at any time prior to 5:00 p.m., New York City time (10:00 p.m., London
time), on the expiration date.
To withdraw a tender of initial notes in the exchange offer, a written or
facsimile transmission notice of withdrawal must be received by the exchange
agent at the address set forth herein prior to 5:00 p.m., New York City time
(10:00 p.m., London time), on the expiration date. Any such notice of
withdrawal must:
. specify the name of the person having deposited the initial notes to be
withdrawn, which we refer to as the depositor,
. identify the initial notes to be withdrawn, including the certificate
number(s) and principal amount of such initial notes, or, in the case of
initial notes transferred by book-entry transfer, the name and number of
the account at the applicable Book-Entry Transfer Facility to be
credited,
. be signed by the holder in the same manner as the original signature on
the letter of transmittal by which such initial notes were tendered,
including any required signature guarantees, or be accompanied by
documents of transfer sufficient to have the trustee under the indenture
register the transfer of such initial notes into the name of the person
withdrawing the tender, and
. specify the name in which any such initial notes are to be registered,
if different from that of the depositor.
-44-
<PAGE>
All questions as to the validity, form and eligibility, including time of
receipt, of such notices will be determined by PSINet, whose determination shall
be final and binding on all parties. Any initial notes so withdrawn will be
deemed not to have been validly tendered for purposes of the exchange offer and
no exchange notes will be issued with respect thereto unless the initial notes
so withdrawn are validly retendered. Any initial notes which have been tendered
but which are not accepted for exchange will be returned to such holder without
cost to such holder as soon as practicable after withdrawal, rejection of tender
or termination of the exchange offer. Properly withdrawn initial notes may be
retendered by following one of the procedures described above under "--
Procedures for Tendering Initial Notes" at any time prior to the expiration
date.
Conditions
Notwithstanding any other term of the exchange offer, PSINet shall not be
required to accept for exchange any initial notes, and may terminate or amend
the exchange offer as provided herein before the acceptance of such initial
notes, if:
(a) in the opinion of counsel to PSINet, the exchange offer or any part
thereof contemplated herein violates any applicable law or interpretation of the
Staff;
(b) any action or proceeding shall have been instituted or threatened in
any court or by any governmental agency which might materially impair the
ability of PSINet to proceed with the exchange offer or any material adverse
development shall have occurred in any such action or proceeding with respect to
PSINet;
(c) any governmental approval has not been obtained, which approval PSINet
shall deem necessary for the consummation of the exchange offer as contemplated
hereby;
(d) any cessation of trading on The Nasdaq Stock Market or any exchange,
or any banking moratorium, shall have occurred, as a result of which PSINet is
unable to proceed with the exchange offer; or
(e) a stop order shall have been issued by the Securities and Exchange
Commission or any state securities authority suspending the effectiveness of the
exchange offer registration statement or proceedings shall have been initiated
or, to the knowledge of PSINet, threatened for that purpose.
If PSINet determines in its reasonable judgment that any of the foregoing
conditions are not satisfied, PSINet may:
(1) refuse to accept any initial notes and return all tendered initial
notes to the tendering holders,
(2) extend the exchange offer and retain all initial notes tendered prior
to the expiration of the exchange offer, subject, however, to the rights of
holders to withdraw such initial notes (see "--Withdrawals of Tenders"), or
-45-
<PAGE>
(3) waive such unsatisfied conditions with respect to the exchange offer
and accept all properly tendered initial notes which have not been withdrawn.
Exchange Agent
Wilmington Trust Company will act as exchange agent for the exchange offer
with respect to the initial notes.
Questions and requests for assistance, requests for additional copies of
this prospectus or of the letter of transmittal for the initial notes and
requests for copies of the notice of guaranteed delivery should be directed to
the exchange agent, addressed as follows:
By registered or certified mail or overnight courier:
Attn: Kristin Long
Wilmington Trust Company
Corporate Trust Operations
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890-0001
By facsimile (for eligible institutions only): (302) 651-1079
Confirm by telephone: (302) 651-1562
Kristin Long
Fees and Expenses
The expenses of soliciting initial notes for exchange will be borne by
PSINet. The principal solicitation is being made by mail. However, additional
solicitation may be made by telephone, facsimile or in person by officers and
regular employees of PSINet.
PSINet will pay the exchange agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith and pay other registration expenses, including fees and
expenses of the trustee under the indenture, filing fees, blue sky fees and
printing and distribution expenses.
PSINet will pay all transfer taxes, if any, applicable to the exchange of
the initial notes pursuant to the exchange offer. If, however, certificates
representing the exchange notes or the initial 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 initial notes
tendered, or if tendered initial 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 the initial notes pursuant to
the exchange offer, then the amount of any such transfer taxes, whether imposed
on the registered holder or any other person, will be payable by the tendering
holder.
-46-
<PAGE>
Accounting Treatment
The exchange notes will be recorded at the same carrying value as the
initial notes, which is the aggregate principal amount of the initial notes, as
reflected in PSINet's accounting records on the date of exchange. Accordingly,
no gain or loss for accounting purposes will be recognized in connection with
the exchange offer. The expenses of the initial notes offerings and the
exchange offer will be amortized over the term of the exchange notes.
Resale of Exchange Notes
PSINet is making the exchange offer in reliance on the position of the
Staff's Exxon Capital no-action letter, Morgan Stanley no-action letter,
Shearman & Sterling no-action letter, and other interpretive letters addressed
to third parties in other transactions; however, PSINet has not sought its own
interpretive letter addressing such matters and there can be no assurance that
the Staff would make a similar determination with respect to the exchange offer
as it has in such interpretive letters to third parties. Based on these
interpretations by the Staff, and subject to the two immediately following
sentences, PSINet believes that exchange notes issued pursuant to this exchange
offer in exchange for initial notes may be offered for resale, resold and
otherwise transferred by holders of such exchange notes, other than such a
holder who is a broker-dealer, without further compliance with the registration
and prospectus delivery requirements of the Securities Act of 1933, provided
that such exchange notes are acquired in the ordinary course of such holder's
business and that such holder is not participating, and has no arrangement or
understanding with any person to participate, in a distribution within the
meaning of the Securities Act of 1933 of such exchange notes. Notwithstanding
the above, any holder of initial notes may be subject to separate restrictions
if it:
. is an "affiliate" of PSINet within the meaning of Rule 405 under the
Securities Act of 1933,
. does not acquire such exchange notes in the ordinary course of its
business,
. intends to participate in the exchange offer for the purpose of
distributing exchange notes, or
. is a broker-dealer who purchased such initial notes directly from
PSINet.
Holders of initial notes falling into any of the categories above:
. will not be able to rely on the interpretations of the Staff set forth
in the above-mentioned interpretive letters,
. will not be permitted or entitled to tender such initial notes in the
exchange offer, and
. must comply with the registration and prospectus delivery requirements
of the Securities Act of 1933 in connection with any sale or other
transfer of such initial notes unless such sale is made pursuant to an
exemption from such requirements.
In addition, as described below, if any broker-dealer holds initial notes
acquired for its own account, which we refer to as a Participating Broker-
Dealer, then such Participating Broker-Dealer may be deemed a statutory
"underwriter" within the meaning of the Securities Act
-47-
<PAGE>
of 1933 and must deliver a prospectus meeting the requirements of the Securities
Act of 1933 in connection with any resales of such exchange notes.
As a condition to its participation in the exchange offer, each holder of
initial notes, including, without limitation, any holder who is a Participating
Broker-Dealer, shall furnish, upon the request of PSINet, prior to the
consummation of the exchange offer, a written representation to PSINet contained
in the applicable letter of transmittal to the effect that:
. it is not an affiliate of PSINet,
. any exchange notes to be received by it are being acquired in the
ordinary course of its business, and
. it is not engaged in, and does not intend to engage in, and has no
arrangement or understanding with any person to participate in, a
distribution within the meaning of the Securities Act of 1933 of such
exchange notes.
Each broker-dealer that receives exchange notes for its own account
pursuant to the exchange offer must acknowledge that it acquired the initial
notes for its own account as a result of market-making activities or other
trading activities and not directly from PSINet, and must agree that it will
deliver a prospectus meeting the requirements of the Securities Act of 1933 in
connection with any resale of such exchange notes. The letters of transmittal
state that by so acknowledging and by delivering a prospectus, such a
Participating Broker-Dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act of 1933. Based on the
position taken by the Staff in the interpretive letters referred to above,
PSINet believes that Participating Broker-Dealers may fulfill their prospectus
delivery requirements with respect to the exchange notes received upon exchange
of such initial notes with a prospectus meeting the requirements of the
Securities Act of 1933, which may be the prospectus prepared for an exchange
offer so long as it contains a description of the plan of distribution with
respect to the resale of such exchange notes. Accordingly, this prospectus, as
it may be amended or supplemented from time to time, may be used by a
Participating Broker-Dealer during the period referred to below in connection
with resales of exchange notes received in exchange for initial notes where such
initial notes were acquired by such Participating Broker-Dealer for its own
account as a result of market-making or other trading activities.
Subject to certain provisions set forth in the registration rights
agreement, PSINet shall use its best efforts to keep the exchange offer
registration statement continuously effective, supplemented and amended to the
extent necessary to ensure that it is available for sales of exchange notes by
Participating Broker-Dealers, and to ensure that the exchange offer registration
statement conforms with the requirements of the Securities Act of 1933 and the
policies, rules and regulations of the Securities and Exchange Commission as
announced from time to time, for a period of one year from the consummation of
the exchange offer or such shorter period as will terminate when all initial
notes covered by the exchange offer registration statement have been sold
pursuant thereto. See "Plan of Distribution." Any Participating Broker-Dealer
who is an affiliate of PSINet may not rely on such interpretive letters and must
comply with the registration and prospectus delivery requirements of the
Securities Act of 1933 in connection with any resale transaction.
-48-
<PAGE>
Each holder of initial notes and each initial purchaser who is required to
deliver a prospectus in connection with sales or market making activities, by
acquisition of an initial note, agrees that, upon receipt of notice from PSINet
that:
(1) the issuance by the Securities and Exchange Commission of any stop
order suspending the effectiveness of the exchange offer registration
statement under the Securities Act of 1933 or of the suspension by any
state securities commission of the qualification of the initial notes
from offering or sale in any jurisdiction, or the initiation of any
proceeding for any of the preceding purposes, or
(2) the existence of any fact or the happening of any event that makes any
statement of a material fact made in the exchange offer registration
statement or this prospectus, or any amendment or supplement thereto or
any document incorporated by reference herein untrue, or that requires
the making of any additions or changes in the exchange offer
registration statement or this prospectus in order to make the
statements herein, in light of the circumstances under which they were
made, not misleading, which we refer to as a Suspension Notice,
such holder or person shall discontinue disposition of the initial notes
pursuant to this prospectus until such holder or person has received copies of
the supplemented or amended prospectus or such holder or person is advised in
writing by PSINet that use of the prospectus may be resumed and has received
copies of any additional or supplemental filings that are incorporated by
reference in the prospectus, which we refer to as the Recommencement Date.
In addition, each holder or person will be deemed to have agreed that it
will either:
(1) destroy any prospectuses, other than permanent file copies, then in
such holder or person's possession which have been replaced by PSINet
with more recently dated prospectuses, or
(2) deliver to PSINet, at PSINet's expense, all copies, other than
permanent file copies, then in such holder's or person's possession of
the prospectus covering such initial notes that was current at the time
of receipt of the Suspension Notice.
PSINet shall extend the time period regarding the effectiveness of the exchange
offer registration statement by a number of days equal to the number of days in
the period from and including the date of delivery of the Suspension Notice to
the date of delivery of the Recommencement Date.
Consequences of Failure to Exchange
Any initial notes tendered and exchanged in the exchange offer will reduce
the aggregate principal amount of initial notes outstanding. Following the
consummation of the exchange offer, holders who did not tender their initial
notes generally will not have any further registration rights under the
registration rights agreement, and such initial notes will continue to be
subject to certain restrictions on transfer. Accordingly, the liquidity of the
market for such initial notes could be adversely affected. The initial notes are
currently eligible for sale pursuant to Rule 144A through PORTAL. We have
applied to list the initial euro notes and the euro exchange notes for listing
on the Luxembourg Stock Exchange, but we cannot assure you that they will be
listed on the Luxembourg Stock Exchange. Because PSINet anticipates that most
holders will elect to exchange such initial notes for exchange notes pursuant to
the exchange offer due to the absence
-49-
<PAGE>
of restrictions on the resale of exchange notes, except for applicable
restrictions on any holder of exchange notes who is an affiliate of PSINet or is
a broker-dealer which acquired the initial notes directly from PSINet, under the
Securities Act of 1933, PSINet anticipates that the liquidity of the market for
any initial notes remaining after the consummation of the exchange offer may be
substantially limited.
As a result of the making of this exchange offer, subject to limited
exceptions, PSINet will have fulfilled its obligations under the registration
rights agreement, and holders who do not tender their initial notes, except for
instances involving the initial purchasers or holders of initial notes who are
not eligible to participate in the exchange offer, will not have any further
registration rights under the registration rights agreement or otherwise or
rights to receive liquidated damages for failure to register. Accordingly, any
holder that does not exchange its initial notes for exchange notes will continue
to hold the untendered initial notes and will be entitled to all the rights and
subject to all the limitations applicable thereto under the indenture, except to
the extent that such rights or limitations, by their terms, terminate or cease
to have further effectiveness as a result of the exchange offer.
The initial notes that are not exchanged for exchange notes pursuant to the
exchange offer will remain restricted securities within the meaning of the
Securities Act of 1933. Accordingly, such initial notes may be resold only:
. to PSINet or any of its subsidiaries,
. inside the United States to a qualified institutional buyer in
compliance with Rule 144A under the Securities Act of 1933,
. inside the United States to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act of
1933), an "accredited investor" that, prior to such transfer, furnishes
or has furnished on its behalf by a U.S. broker-dealer to the trustee
under the indenture a signed letter containing certain representations
and agreements relating to the restrictions on transfer of the notes,
the form of which letter can be obtained from such trustee,
. outside the United States in compliance with Rule 904 under the
Securities Act of 1933,
. pursuant to the exemption from registration provided by Rule 144 under
the Securities Act of 1933, if available, or
. pursuant to an effective registration statement under the Securities Act
of 1933.
Each accredited investor that is not a qualified institutional buyer and
that is an original purchaser of any of the initial notes from the initial
purchasers will be required to sign a letter confirming that such person is an
accredited investor under the Securities Act of 1933 and that such person
acknowledges the transfer restrictions summarized herein.
Other
Participation in the exchange offer is voluntary and holders of initial
notes should carefully consider whether to accept the offer to exchange their
initial notes. Holders of initial
-50-
<PAGE>
notes are urged to consult their financial and tax advisors in making their own
decision on what action to take with respect to the exchange offer. PSINet may
in the future seek to acquire untendered initial notes in open market or
privately negotiated transactions, through subsequent exchange offers or
otherwise. PSINet has no present plans to acquire any initial notes that are not
tendered in the exchange offer or to file a registration statement to permit
resales of any untendered initial notes.
-51-
<PAGE>
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
General
The following is a summary of certain United States federal income tax
consequences relevant in the opinion of Nixon Peabody LLP, counsel to PSINet, to
the exchange of the initial notes for the exchange notes pursuant to the
exchange offer and the purchase, ownership and disposition of the notes, but
does not purport to be a complete analysis of all potential tax effects. This
summary is based upon the Internal Revenue Code of 1986, as amended, which is
often referred to as the Code, existing and proposed regulations thereunder,
published rulings and court decisions, all as in effect and existing on the date
hereof and all of which are subject to change at any time, which change may be
retroactive. Such counsel has relied upon representations by PSINet and its
officers with respect to factual matters for purposes of this summary. This
summary is not binding on the Internal Revenue Service or on the courts, and no
ruling will be requested from the Internal Revenue Service on any issues
described below. We cannot assure that the Internal Revenue Service will not
take a different position concerning the matters discussed below and that such
positions of the Internal Revenue Service would not be sustained.
This summary applies only to those persons who are the initial holders of
notes, who acquired the notes for cash and who hold notes as capital assets. It
does not address the tax consequences to taxpayers who are subject to special
rules (such as financial institutions, tax-exempt organizations, insurance
companies, dealers in securities or foreign currency, taxpayers holding notes as
part of a "straddle," "hedge" or "conversion" transaction, or that have a
"functional currency" other than the U.S. Dollar, and, except as discussed below
under "--Certain U.S. Federal Income Tax Considerations for Non-U.S. Holders,"
persons who are not "U.S. Holders"). A "U.S. Holder" means a beneficial owner of
a note who purchased the notes pursuant to this offering that is for U.S.
federal income tax purposes:
. a citizen or resident of the United States,
. a corporation, partnership or other entity created or organized in or
under the laws of the United States or any political subdivision
thereof,
. an estate the income of which is subject to U.S. federal income taxation
regardless of its source, or
. a trust if (A) a court within the United States is able to exercise
primary supervision over the administration of the trust and (B) one or
more U.S. fiduciaries have the authority to control all substantial
decisions of the trust.
The following discussion is for general information only. Each holder of a
note is strongly urged to consult with its own tax advisors to determine the
impact of such holder's personal tax situation on the anticipated tax
consequences, including the tax consequences under state, local, foreign or
other tax laws, of the acquisition, ownership and disposition of the notes.
-52-
<PAGE>
Interest
The stated interest on the notes generally will be taxable to a U.S. Holder
as ordinary income at the time that it is paid or accrued, in accordance with
the holder's method of accounting for federal income tax purposes.
Interest paid on a 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 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 euro note.
Exchange of Initial Notes for Exchange Notes
Pursuant to this prospectus, PSINet is offering to effect a registered
exchange offer for the initial notes, through which holders would be entitled to
exchange the initial notes for exchange notes that would be substantially
identical in all material respects to the initial notes, except that the
exchange notes would be registered and therefore would not be subject to
transfer restrictions. Alternatively, PSINet may file a shelf registration
statement with respect to the notes which, if effective, would have the effect
of eliminating transfer restrictions on the notes, thereby permitting their
resale. Neither participation in this exchange offer nor the filing of a shelf
registration statement as described above should result in a taxable exchange to
PSINet or any holder of a note. No taxable exchange should occur or should be
deemed to occur because there would be no material alteration in the terms of
the notes and any modification of the terms of the notes resulting from such an
action would be by operation of the original terms of the notes pursuant to a
unilateral act by PSINet. As a result, counsel to PSINet is of the opinion that
there should be no U.S. federal income tax consequences to holders electing to
exchange initial notes for exchange notes. If, however, such transaction were
treated as an "exchange" for U.S. federal income tax purposes, the transaction
should constitute a recapitalization for U.S. federal income tax purposes. Under
the rules applicable to recapitalizations, counsel to PSINet is of the opinion
that holders electing to exchange initial notes for exchange notes should not
recognize any gain or loss upon such exchange.
-53-
<PAGE>
Liquidated Damages
If, within the applicable period after the original issuance of the initial
notes, PSINet has not filed an exchange offer registration statement or a shelf
registration statement with respect to the initial notes, as the case may be, or
if PSINet otherwise defaults with respect to its obligations under the
registration rights agreements, liquidated damages shall become payable in cash
with respect to the applicable initial notes. See "The Exchange Offer--
Registration Defaults; Liquidated Damages." Although the characterization of
such liquidated damages is uncertain, liquidated damages probably would
constitute contingent interest, which generally is not includible in income
before it is fixed or paid. If liquidated damages become fixed or paid, they
should be included in the holder's gross income in accordance with the holder's
method of accounting for federal income tax purposes.
According to regulations under the Code, the possibility of a change in the
interest rate will not affect the amount of interest income recognized by a U.S.
Holder if the likelihood of the change, as of the date the notes are issued, is
remote. PSINet believes that the likelihood of a change in the interest rate on
the notes is remote and does not intend to treat the possibility of a change in
the interest rate as affecting the yield to maturity of any note. If, as
anticipated, the issue price of the notes equals their stated principal amount,
and the likelihood of a change in the interest rate is remote, the notes will
not be issued with original issue discount.
Sale, Exchange and Redemption of Notes
A sale, exchange or redemption of a note will result in taxable gain or
loss equal to the difference between the amount of cash or other property
received and the U.S. Holder's adjusted tax basis in the note. A U.S. Holder's
adjusted tax basis for determining gain or loss on the sale or other disposition
of a note will initially equal the cost of the note to such holder and will be
decreased by the amount of any principal payments received by such holder. Gain
or loss upon a sale, exchange, or redemption of a note will be capital gain or
loss if the note is held as a capital asset. With respect to individual U.S.
Holders, if the note is held for more than 12 months, the maximum rate of tax on
any capital gain is 20%. The distinction between capital gain or loss and
ordinary income or loss is also relevant for purposes of, among other things,
limitations on the deductibility of capital losses.
The cost of a 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 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 Euro received on the sale, exchange or retirement of a
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 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 the 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 euro note will generally equal the
U.S. Dollar cost of the euro note.
-54-
<PAGE>
Exchange gain or loss recognized by a U.S. Holder will generally be treated as
ordinary income or loss.
Any gain realized by a U.S. Holder on the sale, exchange or redemption of a
note generally will be treated as U.S. source income for U.S. foreign tax credit
purposes. Generally a loss realized upon such a sale, exchange, redemption or
other disposition of a note will be allocated to U.S. source income.
Certain U.S. Federal Income Tax Considerations for Non-U.S. Holders
The following summary describes certain United States federal income and
estate tax consequences of the ownership of notes as of the date hereof by any
holder who is a beneficial owner of a note but is not a "U.S. Holder," which
we refer to as a Non-U.S. Holder.
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) generally no withholding of United States federal income tax will be
required with respect to payment by PSINet or any paying agent of principal or
interest on a note owned by a Non-U.S. Holder, provided
(1) that the beneficial owner does not actually or constructively own 10%
or more of the total combined voting power of all classes of stock of
PSINet entitled to vote within the meaning of section 871(h)(3) of the Code
and the regulations thereunder,
(2) the beneficial owner is not a "controlled foreign corporation" (as
defined in Section 957 of the Code) that is related directly, indirectly or
constructively to PSINet through stock ownership, and
(3) the beneficial owner satisfies the statement requirement (described
generally below) set forth in section 871(h) and section 881(c) of the Code
and the regulations thereunder;
(b) generally no withholding of United States federal income tax will be
required with respect to any gain or income realized by a Non-U.S. Holder upon
the sale, exchange or retirement of a note; and
(c) a note beneficially owned by an individual who at the time of death is
a Non-U.S. Holder generally will not be includible in the individual's gross
estate for the purposes of the United States federal estate tax as a result of
such individual's death, provided that such individual does not at the time of
death actually or constructively own 10% or more of the total combined voting
power of all classes of stock of PSINet entitled to vote within the meaning of
section 871(h)(3) of the Code and provided that the interest payments with
respect to such note will not have been, if received at the time of such
individual's death, effectively connected with the conduct of a United States
trade or business by such individual.
To satisfy the requirement referred to in (a)(3) above, the beneficial
owner of such note, or a financial institution holding the note on behalf of
such owner, must provide, in accordance
-55-
<PAGE>
with specified procedures, PSINet or a paying agent of PSINet with a statement
to the effect that the beneficial owner is not a U.S. person. Pursuant to
current temporary Regulations, these requirements will be met if:
(1) the beneficial owner provides the payor his name and address, and
certifies, under penalties of perjury, that he is not a U.S. person, which
certification may be made on an Internal Revenue Service Form W-8 or
successor or substitute form; or
(2) a financial institution that holds customers' securities in the
ordinary course of its trade or business and holds the note on behalf of
the beneficial owner certifies, under penalties of perjury, that such
statement has been received by it or by another financial institution
acting on behalf of the Non-U.S. Holder, and furnishes a paying agent with
a copy thereof.
Regulations recently issued by the Internal Revenue Service, which will be
effective for payments made after December 31, 2000, subject to certain
transition rules, make modifications to the certification procedures applicable
to Non-U.S. Holders. In general, these regulations unify certain certification
procedures and forms and clarify and modify reliance standards. A Non-U.S.
Holder should consult its own tax advisor regarding the effect of the new
Regulations.
If a Non-U.S. Holder cannot satisfy the requirements of the "portfolio
interest" exception described in (a) above, payments of interest made to Non-
U.S. Holders will generally be subject to a 30% withholding tax, or such lower
rate as may be specified by an applicable income tax treaty, unless the
beneficial owner of the note provides PSINet or its paying agent, as the case
may be, with a properly executed:
(1) Internal Revenue Service Form 1001 or successor form claiming an
exemption from withholding under the benefit of a tax treaty, or
(2) Internal Revenue Service Form 4224 or successor form stating that
interest paid on the note is not subject to withholding tax because it is
effectively connected with the beneficial owner's conduct of a trade or
business in the United States.
If a Non-U.S. Holder is engaged in a trade or business in the United States
and interest on the note is effectively connected with the conduct of such trade
or business, the Non-U.S. Holder, although exempt from the withholding tax
discussed above, will generally be subject to United States federal income tax
on such interest on a net income basis in the same manner as if it were a United
States person. In addition, if such holder is a foreign corporation, it may be
subject to a branch profits tax equal to 30% of its effectively connected
earnings and profits for the taxable year, or such lower rate as may be
specified by an applicable income tax treaty, subject to adjustments.
Any gain or income realized upon the sale, exchange or retirement of a note
generally will not be subject to United States federal income tax unless:
(1) such gain or income is effectively connected with a trade or business
in the United States of the Non-U.S. Holder, or
-56-
<PAGE>
(2) in the case of a Non-U.S. Holder who is a nonresident alien individual,
such holder is present in the United States for 183 days or more in the
taxable year of such sale, exchange or retirement, and certain other
conditions are met.
Information Reporting and Backup Withholding
The "backup" withholding and information reporting requirements may apply
to certain payments of principal and interest on a note and to certain payment
of proceeds from the sale or retirement of a note. PSINet, its agent, a broker,
the Trustee or any paying agent, as the case may be, is required to withhold tax
from any payment that is subject to backup withholding at a rate of 31% of such
payment if the holder fails to furnish his taxpayer identification number,
social security number or employer identification number, or to certify that
such holder is not subject to backup withholding rules. Certain holders
including, among others, all corporations, are not subject to the backup
withholding and reporting requirements.
Under current Treasury Regulations, backup withholding and information
reporting do not apply to payments made by PSINet or any agent thereof, in its
capacity as such, to a holder of a note who has provided the required
certification under penalties of perjury that it is not a U.S. Holder as set
forth in the third paragraph under "Certain U.S. Federal Income Tax
Considerations for Non-U.S. Holder" or has otherwise established an exemption,
provided that neither PSINet nor such agent has actual knowledge that the holder
is a U.S. Holder or that the conditions of any other exemption are not in fact
satisfied. Payments of the proceeds from the sale by a holder who is not a U.S.
Holder of a note made to or through a foreign office of a broker will not be
subject to U.S. information reporting or backup withholding, except that if the
broker is a U.S. person, a controlled foreign corporation for U.S. tax purposes
or a foreign person 50% or more of whose gross income is effectively connected
with a United States trade or business for a specified three-year period, U.S.
information reporting may apply to such payments.
Payments of the proceeds from the sale of a note to or through the United
States office of a broker is subject to U.S. information reporting and backup
withholding unless the holder or beneficial owner certifies as to its non-U.S.
status or otherwise establishes an exemption from U.S. information reporting and
backup withholding.
In October 1997, Regulations were issued which alter the foregoing rules in
certain respects and which generally will apply to any payments in respect of a
note or proceeds from the sale of a note that are made after December 31, 2000.
Among other things, such regulations expand the number of foreign intermediaries
that are potentially subject to information reporting and address certain
documentary evidence requirements relating to exemption from the general backup
withholding requirements. Holders of the notes should consult their tax advisors
concerning possible application of the final regulations to any payments made on
or with respect to the notes.
Any amounts withheld under the backup withholding rules from a payment to a
holder may be claimed as a credit against such holder's United States federal
income tax liability.
-57-
<PAGE>
CAPITALIZATION
The following table sets forth our cash, cash equivalents, short-term
investments and marketable securities, restricted cash and short-term
investments and capitalization as of September 30, 1999 on:
(1) an actual basis.
(2) a pro forma basis, which adjusts the actual amounts to give effect to the
following as if each had occurred on September 30, 1999:
. Our acquisition of TNI on November 23, 1999. We paid shareholders of TNI
aggregate consideration of approximately $340.8 million of cash and 7.6
million shares of our common stock (15.2 million shares after giving
effect to our common stock split). We also assumed options to acquire
approximately 463,000 shares of TNI common stock, which at the time we
entered into the definitive agreement were exercisable into an equal
number of shares of our common stock (or twice the number of shares
after giving effect to our common stock split). Additionally, we repaid
outstanding principal and interest under TNI's revolving credit facility
in the amount of $52.1 million;
. Our offering of the initial notes for net proceeds of approximately
$736.2 million; and
. Our February 2000 offering of 7% Series D cumulative convertible
preferred stock and the application of the $738.8 million of related
estimated net proceeds (excluding amounts paid by the initial purchasers
into the deposit account).
This table should be read in conjunction with the section entitled "Use of
Proceeds" and our consolidated financial statements and notes thereto and other
financial and operating data included or incorporated by reference in this
prospectus.
-58-
<PAGE>
This table does not give effect to our two-for-one stock split to holders
of record on January 28, 2000, which will be effected on February 11, 2000 in
the form of a stock dividend.
<TABLE>
<CAPTION>
September 30, 1999
-------------------
Actual Pro Forma
------ ----------
(In millions of U.S. dollars)
<S> <C> <C>
Cash, cash equivalents, short-term investments and marketable
securities.................................................................... $1,573.3 $2,672.0
======== ========
Restricted cash and short-term investments..................................... $ 137.5 $ 137.5
======== ========
Current portion of long-term debt.............................................. $ 89.5 $ 89.6
-------- --------
Long-term debt:
10% Senior Notes.............................................................. 600.0 600.0
11 1/2% Senior Notes (plus unamortized premium of $2,725)..................... 352.7 352.7
11% Senior Notes (euro 150,000)(1)............................................ 160.3 160.3
11% Senior Notes.............................................................. 1,050.0 1,050.0
10 1/2% Senior Notes.......................................................... -- 600.0
10 1/2% Senior Notes (euro 150,000)(2)........................................ -- 154.8
Notes payable................................................................. 30.8 30.8
Capital lease obligations..................................................... 209.0 209.1
-------- --------
Total long-term debt.......................................................... 2,402.8 3,157.7
-------- --------
</TABLE>
(1) Assuming an exchange rate of euro 0.9360 to $1.00 as of September 30, 1999.
(2) Assuming an exchange rate of euro 0.9692 to $1.00 as of November 23, 1999.
-59-
<PAGE>
<TABLE>
<CAPTION>
September 30, 1999
------------------
Actual Pro Forma
------- ----------
(In millions of U.S. dollars)
<S> <C> <C>
Shareholders' equity:
Preferred stock, $.01 par value; 30,000,000 shares authorized
Preferred stock, Series A, 1,000,000 shares designated and no
shares issued and outstanding actual and pro forma....................... -- --
Convertible preferred stock, Series C, 9,200,000 shares designated,
issued and outstanding actual and pro forma.............................. 368.8 368.8
Convertible preferred stock, Series D, no shares designated, issued or
outstanding, actual; 16,500,000 shares designated, issued and outstanding,
pro forma................................................................ -- 738.8
Common stock, $.01 par value; 500,000,000 authorized 64,973,873
shares outstanding, actual; 72,573,873 shares outstanding, pro forma (3).. 0.7 0.7
Capital in excess of par value.............................................. 825.9 1,185.1
Accumulated deficit......................................................... (638.0) (722.0)
Treasury stock, 99,556 shares, at cost...................................... (2.0) (2.0)
Accumulated other comprehensive income...................................... 54.0 54.0
Bandwidth asset to be delivered under IXC agreement......................... (122.9) (122.9)
-------- --------
Total shareholders' equity................................................. 486.5 1,500.5
-------- --------
Total capitalization....................................................... $2,978.8 $4,747.8
======== ========
</TABLE>
- ----------------------
(3) Authorized shares effective as of November 1999.
-60-
<PAGE>
SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA
(In millions of U.S. dollars, except per share, ratio and operating data)
The following table sets forth for the periods indicated our selected
consolidated financial and operating data. The consolidated balance sheet data,
consolidated statement of operations data and cash flow data as of and for the
years ended December 31, 1994, 1995, 1996, 1997 and 1998 have been derived from
our consolidated financial statements, which have been audited by
PricewaterhouseCoopers LLP, independent accountants, and as of September 30,
1999 and for the nine months ended September 30, 1998 and 1999, have been
derived from our unaudited consolidated financial statements. In 1998 and during
the nine months ended September 30, 1999, we acquired a significant number of
businesses, issued a significant amount of debt and equity and incurred a non-
recurring arbitration charge. In 1996 and 1997, we sold our individual
subscriber accounts and certain related assets and also sold our software
subsidiary. These transactions affect the comparability of our financial
position, results of operations and cash flows for those years. The results of
operations for the nine month period ended September 30, 1999 may not be
indicative of the results for the entire year ending December 31, 1999. In the
opinion of our management, our unaudited financial statements for the nine month
periods ended September 30, 1998 and 1999 contain all adjustments (consisting of
normal recurring adjustments) necessary for a fair presentation of our financial
position as of such dates and our results of operations for such periods.
The following selected consolidated financial and operating data should be
read in conjunction with the sections entitled "Summary Consolidated Financial
and Operating Data," and "Use of Proceeds" and our more detailed consolidated
financial statements and notes thereto and other financial and operating data
included or incorporated by reference in this prospectus.
The basic and diluted loss per share (after stock split) presented below
gives effect to a two-for-one stock split of our common stock, to be effected by
means of a stock dividend, to holders of record of our common stock as of the
close of business on January 28, 2000, which will be effected on February 11,
2000. The effect is being presented as additional information in our statement
of operations data for all periods presented.
-61-
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------
1994 1995 1996 1997 1998
-------- -------- --------- -------- ---------
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue........................................................ $ 15.2 $ 38.7 $ 84.4 $ 121.9 $ 259.6
Other income, net.............................................. -- -- 5.4 -- --
------- ------- ------- ------- -------
15.2 38.7 89.8 121.9 259.6
Operating costs and expenses:
Data communications and operations............................ 9.5 32.1 70.1 94.4 199.4
Sales and marketing........................................... 3.6 23.9 27.1 25.8 57.0
General and administrative.................................... 3.6 10.6 20.7 23.0 45.3
Depreciation and amortization................................. 3.2 14.8 28.0 28.3 63.4
Charge for acquired in-process research and development....... -- -- -- -- 70.8
Intangible asset write-down................................... -- 9.9 -- -- --
------- ------- ------- ------- -------
Total operating costs and expenses............................ 19.9 91.3 145.9 171.5 435.9
------- ------- ------- ------- -------
Loss from operations........................................... (4.7) (52.6) (56.1) (49.6) (176.3)
Interest expense............................................... (0.7) (2.0) (5.0) (5.4) (63.9)
Non-recurring arbitration charge............................... -- -- -- -- (49.0)
Loss before income taxes....................................... (5.3) (53.2) (55.3) (46.1) (262.7)
Income tax benefit............................................. -- -- (0.2) (0.5) (0.9)
Net loss....................................................... (5.3) (53.2) (55.1) (45.6) (261.8)
Return to preferred shareholders............................... -- -- -- (0.4) (3.1)
Net loss available to common shareholders...................... $ (5.3) $ (53.2) $ (55.1) $ (46.0) $(264.9)
======= ======= ======= ======= =======
Basic and diluted loss per share............................... $ (0.42) $ (2.01) $ (1.40) $ (1.14) $ (5.32)
======= ======= ======= ======= =======
Shares used in computing basic and diluted loss per share (in
thousands).................................................... 12,805 26,485 39,378 40,306 49,806
======= ======= ======= ======= =======
Basic and diluted loss per share (after stock split)........... $ (0.21) $ (1.01) $ (0.70) $ (0.57) $ (2.66)
======= ======= ======= ======= =======
Shares used in computing basic and diluted loss per share
(after stock split, in thousands)............................. 25,610 52,970 78,756 80,612 99,612
======= ======= ======= ======= =======
<CAPTION>
Nine Months Ended
September 30,
--------------------
1998 1999
--------- ---------
<C> <C>
Statement of Operations Data:
Revenue........................................................ $ 165.7 $ 369.3
Other income net............................................... -- --
------- --------
165.7 369.3
Operating costs and expenses:
Data communications and operations............................ 130.5 261.3
Sales and marketing........................................... 37.9 68.1
General and administrative.................................... 29.4 47.3
Depreciation and amortization................................. 37.0 102.8
Charge for acquired in-process research and development....... 40.4 --
Intangible asset write-down................................... -- --
------- --------
Total operating costs and expenses............................ 275.2 479.5
------- --------
Loss from operations........................................... (109.5) (110.2)
Interest expense............................................... (38.2) (120.8)
Non-recurring arbitration charge............................... -- --
Loss before income taxes....................................... (130.0) (199.9)
Income tax benefit............................................. 0.1 (0.7)
Net loss....................................................... (130.1) (199.2)
Return to preferred shareholders............................... (2.3) (11.2)
Net loss available to common shareholders...................... $(132.4) $ (210.4)
======= ========
Basic and diluted loss per share............................... $ (2.70) $ (3.50)
======= ========
Shares used in computing basic and diluted loss per share (in
thousands).................................................... 49,120 60,105
======= ========
Basic and diluted loss per share (after stock split)........... $ (1.35) $ (1.75)
======= ========
Shares used in computing basic and diluted loss per share
(after stock split, in thousands)............................. 98,240 120,210
======= ========
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
---------------------------------------------- --------------------
1994 1995 1996 1997 1998 1998 1999
------- ------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Other Financial Data:
EBITDA (as defined)......................................... $ (1.5) $(27.9) $ (28.0) $ (21.2) $ (42.1) $ (32.1) $ (7.4)
Capital expenditures........................................ 5.0 45.2 38.4 50.1 303.6 130.9 380.8
Ratio of earnings to combined fixed charges and preferred
dividends (deficiency of earnings to combined fixed
charges and preferred dividends)........................... (5.3) (53.0) (54.4) (46.5) (266.6) (132.3) (214.1)
Cash Flow Data:
Cash flows used in operating activities..................... $ (1.1) $(30.1) $ (32.5) $ (15.6) $ (87.6) $ (76.9) $ (203.5)
Cash flows used in investing activities..................... (1.9) (22.0) (7.9) (15.6) (783.9) (326.0) (1,241.1)
Cash flows provided by (used in) financing activities....... 4.5 151.4 (10.5) 12.6 874.2 654.2 1,878.5
Operating Data:
Number of POPs.............................................. 82 241 350 350 500 500 700
Number of business customer accounts........................ 4,220 8,200 17,800 26,400 54,700 46,700 79,900
</TABLE>
-62-
<PAGE>
<TABLE>
<CAPTION>
December 31,
----------------------------------------- September 30,
1994 1995 1996 1997 1998 1999
------ ------ ------ ------ --------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents, short-term investments and
marketable securities................................ $ 3.4 $102.7 $ 56.4 $ 33.3 $ 322.5 $1,573.3
Restricted cash and short-term investments............ -- -- 0.9 20.7 162.5 137.5
Total assets.......................................... 17.1 201.8 177.1 186.2 1,284.2 3,299.5
Current portion of debt............................... 3.4 16.6 26.9 39.6 60.0 89.5
Long-term debt, less current portion.................. 4.4 24.1 26.9 33.8 1,064.6 2,402.8
Total liabilities..................................... 11.7 58.6 87.3 112.8 1,404.4 2,813.0
Mandatorily redeemable preferred and common stock..... 13.6 -- -- -- -- --
Shareholders' equity (deficit)........................ (8.3) 143.2 89.8 73.4 (120.2) 486.5
</TABLE>
-63-
<PAGE>
DESCRIPTION OF NOTES
The initial notes were issued under an Indenture dated as of December 2,
1999, which we refer to as the Indenture, between PSINet and Wilmington Trust
Company, as trustee, which we refer to as the Trustee. A copy of the Indenture
will be made available to holders of the notes upon request to PSINet, the
Trustee or a paying agent.
The following summaries of the material provisions of the notes, the
Indenture and the registration rights agreement do not purport to be complete.
Where reference is made to particular provisions of the Indenture and the
registration rights agreement, those provisions, including the definitions of
certain terms, are qualified in their entirety by reference to all of the
provisions of the Indenture and those terms made a part of the Indenture and the
registration rights agreement by the Trust Indenture Act of 1939. The initial
notes have not been registered under the Securities Act of 1933 and are subject
to certain transfer restrictions. For definitions of certain capitalized terms
used in the following summary, see "--Certain Definitions" and "Exchange Offer;
Registration Rights; Liquidated Damages."
General
The notes:
. will mature on December 1, 2006 and be payable at 100.0% of the
principal amount thereof, and
. will bear interest at the rates set forth on the cover page of this
offering memorandum from December 2, 1999 or from the most recent
interest payment date to which interest has been paid, payable
semiannually on June 1 and December 1 in each year, commencing June 1,
2000, to the Person in whose name the note is registered at the close of
business on the May 15 or November 15 immediately preceding such
interest payment date, with interest computed on the basis of a 360-day
year comprised of twelve 30-day months.
The Indenture will limit the aggregate principal amount of euro notes and
dollar notes that we may issue under its terms to Euro 150,000,000 and
$600,000,000, respectively.
Principal of and interest on the euro notes will be payable in euros, and
the euro notes will be exchangeable and transferable, at the corporate trust
office or agency of the Euro Paying Agents (as defined below) maintained in the
City of New York, which initially will be the corporate trust office of
Wilmington Trust Company, and in Luxembourg, which initially will be the
corporate trust office of Kredietbank S.A. Luxembourgeoise, for such purposes.
Principal of and interest on the dollar notes will be payable in U.S. Dollars,
and the dollar notes will be exchangeable and transferable, at the corporate
trust office or agency of the Dollar Paying Agents (as defined below) maintained
in the City of New York, which initially will be the corporate trust office of
Wilmington Trust Company and in Luxembourg, which initially will be the
corporate trust office of Kredietbank S.A. Luxembourgeoise, for such purposes.
The notes will be issued only in fully registered form without coupons, in
denominations of Euro 1,000 or $1,000, as applicable, principal amount and any
integral multiple thereof. No
-64-
<PAGE>
service charge will be made for any registration of transfer, exchange or
redemption of notes, except in certain circumstances for any tax or other
governmental charge that may be imposed in connection therewith.
Application has been made for listing of the initial euro notes and the
euro exchange notes on the Luxembourg Stock Exchange, although we cannot assure
you that the initial euro notes and the euro exchange notes will be admitted for
listing or, if they are listed, that the listing will be granted by the
completion of the exchange offer.
Any reference in this "Description of the Notes" to U.S. Dollars, U.S. $ or
$ shall mean, to the extent the context requires, the United States Dollar
Equivalent thereof.
The euro notes and the dollar notes will generally be treated for purposes
of the indenture as a single series of securities ranking pari passu with each
other. Certain actions taken on a "pro rata" basis under the indenture will be
taken in the manner described below.
The aggregate principal amount, or any portion thereof, of the notes, at
any date of determination, shall be the sum of (1) the United States Dollar
Equivalent at such date of determination, of the principal amount, or portion
thereof, as the case may be, of the euro notes and (2) the principal amount, or
portion thereof, as the case may be, of the dollar notes, at such date of
determination. With respect to any matter requiring consent, waiver, approval or
other action of the holders of a specified percentage of the principal amount of
the notes, such percentage shall be calculated, on the relevant date of
determination, by dividing (a) the principal amount, as of such date, of notes
the holders of which have so consented by (b) the aggregate principal amount, as
of such date, of the notes then outstanding, in each case, as determined in
accordance with the preceding sentence. To the extent that the indenture
provides for action to be taken on a "pro rata" basis, such determination shall
be made on the basis of the relative outstanding principal amounts of the euro
notes and the dollar notes as of the time of such determination.
Redemption
The notes are not redeemable by us at any time.
Sinking Fund
The notes will not be entitled to the benefit of any sinking fund.
Change of Control
If a Change of Control shall occur at any time, then each holder shall have
the right to require that PSINet purchase all such holder's notes in whole or in
part in integral multiples of Euro 1,000 or $1,000, as applicable, at a purchase
price, which we refer to as the Change of Control Purchase Price, in cash, in an
amount equal to 101% of the principal amount of such notes or portion thereof,
plus accrued and unpaid interest, if any, to the date of purchase, which we
refer to as the Change of Control Purchase Date, pursuant to the offer described
below, which we refer to as the Change of Control Offer, and in accordance with
the other procedures set forth in the Indenture.
-65-
<PAGE>
Within 30 days of any Change of Control, PSINet shall notify the Trustee of
such Change of Control and give notice, as described in the subsection entitled
"--Notices," of such Change of Control to each holder of notes stating that:
. a Change of Control has occurred and the date of such event, the
circumstances and relevant facts regarding such Change of Control,
. the purchase price and the purchase date, which shall be fixed by PSINet
on a business day no earlier than 30 days nor later than 60 days from
the date such notice is mailed, or such later date as is necessary to
comply with requirements under the Securities Exchange Act of 1934 or
any securities exchange on which the notes are listed,
. any note not tendered will continue to accrue interest,
. unless PSINet defaults in the payment of the Change of Control Purchase
Price, any notes accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control
Purchase Date, and
. certain other procedures that a holder must follow to accept a Change of
Control Offer or to withdraw such acceptance.
If a Change of Control Offer is made, there can be no assurance that PSINet
will have sufficient funds or financial resources necessary to pay the Change of
Control Purchase Price for all of the notes that might be delivered by holders
seeking to accept the Change of Control Offer. PSINet's credit facility
prohibits PSINet from repurchasing notes upon a Change of Control unless it has
paid all amounts outstanding under the credit facility prior thereto. See "Risk
Factors--We may not have the ability to raise funds necessary to finance the
change of control offer which may be required by the indenture." The failure of
PSINet to make or consummate the Change of Control Offer or pay the Change of
Control Purchase Price when due will give the Trustee and the note holders the
rights described under "Events of Default."
The term "all or substantially all" as used in the definition of "Change of
Control" has not been definitively interpreted under New York law, which is the
governing law of the Indenture, to represent a specific quantitative test. As a
consequence, in the event the holders elected to exercise their rights under the
Indenture and PSINet elected to contest such election, there could be no
assurance as to how a court interpreting New York law would interpret the
phrase.
The existence of a holder's right to require PSINet to repurchase such
holder's notes upon a Change of Control may deter a third party from acquiring
PSINet in a transaction which constitutes a Change of Control.
PSINet will comply with the applicable tender offer rules, including Rule
14e-1 under the Securities Exchange Act of 1934, and any other applicable
securities laws or regulations, including those regulations imposed by any
securities exchange on which the notes may be listed, in connection with a
Change of Control Offer.
-66-
<PAGE>
Cancellation
All notes surrendered for payment, purchase, redemption, registration of
transfer or exchange will be delivered to the Trustee and, if not already
canceled, will be promptly canceled by it. PSINet and any guarantor may at any
time deliver to the Trustee for cancellation any notes previously authenticated
and delivered hereunder which PSINet or the guarantor may have acquired, and all
notes so delivered will be promptly canceled by the Trustee. All canceled notes
held by the Trustee will, at the option of the Trustee, be returned to PSINet or
destroyed.
Ranking
The notes:
. are senior, unsecured obligations of PSINet,
. rank pari passu in right of payment with each other and with all other
existing and future unsecured and unsubordinated indebtedness of PSINet
(which includes our 10% senior notes, our 11% senior notes and our 11 1/2%
senior notes) and senior in right of payment to all existing and future
Subordinated Indebtedness of PSINet,
. are effectively subordinated to secured indebtedness of PSINet to the extent
of the value of the assets securing such indebtedness,
. are also structurally subordinated to the claims of creditors of PSINet's
subsidiaries and to the interests of holders of preferred stock, if any, of
such subsidiaries, and
. are not be entitled to any security and will not be entitled to the benefit
of any guarantees except under the limited circumstances described under "--
Certain Covenants--Limitation on Issuances of Guarantees of Indebtedness."
As of September 30, 1999, on a pro forma basis after giving effect to the
initial notes offering, and the application of the net proceeds therefrom and
our acquisition of TNI, there would have been approximately $329.3 million of
total secured indebtedness (including secured indebtedness of PSINet's
subsidiaries) outstanding to which holders of notes would have been effectively
subordinated in right of payment and approximately $163.4 million of other
liabilities of PSINet's subsidiaries, including trade payables and accrued
liabilities, to which noteholders would have been structurally subordinated.
No Gross Up
All payments of principal and interest by PSINet on the notes will be made
without withholding or deductions for, or on account of, any present or future
taxes, duties, assessments or governmental charges of whatever nature imposed or
levied by or on behalf of the United States or any political subdivision thereof
or any authority therein or thereof having power to tax unless the withholding
or deduction of such taxes, duties, assessments or governmental charges is
required by law. If any such withholding or deduction is required, PSINet will
not be obligated to pay any additional amounts in respect of such withholding or
deduction.
-67-
<PAGE>
Certain Covenants
The Indenture contains, among others, the following covenants:
Limitation on Indebtedness. (a) PSINet will not, and will not cause or
permit any Subsidiary to, directly or indirectly, Incur any Indebtedness, other
than the notes; provided, however, that PSINet may Incur Indebtedness, and
PSINet or any Subsidiary may Incur Acquired Indebtedness, if, at the time of
such Incurrence, the Debt to Annualized Operating Cash Flow Ratio would be less
than or equal to 6.0 to 1.0 prior to April 1, 2001, or less than or equal to 5.5
to 1.0 on or after April 1, 2001.
(b) The preceding limitations of paragraph (a) of this covenant will not
apply to any of the following, each of which shall be given independent effect:
(1) the Incurrence by PSINet or any of its Subsidiaries of Indebtedness
incurred for the purpose of financing all or any part of the (A) purchase
price, cost of design, development, acquisition, construction or
improvement of real or personal property, including, without limitation
indefeasible rights of use or similar rights, tangible or intangible, used
or to be used in connection with the Telecommunications Business, provided
that such Indebtedness, exclusive of the interest portion of such
Indebtedness and reasonable costs of financing, does not exceed the lesser
of Fair Market Value or the purchase price and related costs of design,
development, acquisition, construction or improvement of such assets or
property at the time of such Incurrence or (B) purchase price or
acquisition of Capital Stock of a Person engaged in the Telecommunications
Business;
(2) the Incurrence by PSINet or any of its Subsidiaries of any Indebtedness,
and any refinancings (as defined) of such Indebtedness, so long as the
aggregate principal amount of such Indebtedness shall not exceed $100
million at any one time outstanding;
(3) the Incurrence by PSINet of Indebtedness in an aggregate principal amount
not to exceed two times the sum of the Net Cash Proceeds received by
PSINet after April 13, 1998 in connection with any Public Equity Offerings
or sale of Capital Stock to any Strategic Investor, other than from the
issuance of Disqualified Stock in any case, but only to the extent that
such Net Cash Proceeds have not been used pursuant to clause (b)(3) or
clause (c)(7) of "--Limitation on Restricted Payments" described below;
provided that such Indebtedness does not mature prior to the Stated
Maturity of the notes or has an Average Life to Stated Maturity at least
equal to the notes;
(4) the Incurrence by PSINet or any Subsidiary of any Indebtedness entered
into in the ordinary course of business:
. pursuant to Interest Rate Agreements entered into to protect PSINet or any
Subsidiary against fluctuations in interest rates in respect of Indebtedness
of PSINet or any Subsidiary as long as the notional principal amount of such
Interest Rate Agreements does not exceed the aggregate principal amount of
such Indebtedness then outstanding;
. under any Currency Hedging Arrangements entered into to protect PSINet or any
Subsidiary against fluctuations in the value of any currency; or
. under any Commodity Price Protection Agreements entered into to protect
PSINet or any Subsidiary against fluctuations in the price of any commodity;
-68-
<PAGE>
(5) the Incurrence by PSINet or any of its Subsidiaries of Indebtedness in
respect of bid, performance or advance payment bonds, standby letters
of credit and appeal or surety bonds entered into in the ordinary
course of business and not in connection with the borrowing of money;
(6) Indebtedness outstanding under the notes or the Indenture, Guarantees
of the notes issued under the Indenture or other Indebtedness existing
on the date of the Indenture, other than Indebtedness described in
clause (8) below;
(7) the Incurrence of:
. Indebtedness of any Subsidiary owed to and held by PSINet or another
Subsidiary; and
. Indebtedness of PSINet owed to and held by any Subsidiary or represented by
a guarantee of Indebtedness of any Subsidiary which Indebtedness such
Subsidiary is otherwise permitted to Incur under the Indenture;
provided that upon either (A) the transfer or other disposition by a Subsidiary
or PSINet of any Indebtedness so permitted to a Person other than PSINet or a
Subsidiary or (B) the issuance, sale, transfer or other disposition of Capital
Stock, including by amalgamation, consolidation or merger, of a Subsidiary, such
that upon such sale, transfer or other disposition such Subsidiary would no
longer meet the definition of a Subsidiary, to a Person other than PSINet or a
Subsidiary, the provisions of this clause (7) shall no longer be applicable to
such Indebtedness and such Indebtedness shall be deemed to have been Incurred at
the time of such issue, sale, transfer or other disposition;
(8) Indebtedness incurred by PSINet or any Subsidiary under a Permitted
Credit Facility or Debt Securities, provided that the aggregate
principal amount at any time outstanding under this clause (8)
(including any amounts pursuant to this clause (8) that may be, or
have been, refinanced pursuant to this or any other clause or
provision) does not exceed $350 million; and
(9) any amendments, supplements, modifications, deferrals, renewals,
extensions, substitutions, refundings, refinancings or replacements
(collectively, a "refinancing" ) of any Indebtedness described in
clauses (1), (2), (3), (6), (7) and (8) above, and this clause (9),
including any successive refinancings so long as the borrower under
such refinancing is PSINet or, if not, PSINet, the same as the
borrower or its successor of the Indebtedness being refinanced and the
aggregate principal amount of Indebtedness and accrued interest
represented thereby, or the accreted value thereof as of the date of
refinancing, is not increased by such refinancing, plus the lesser of:
(A) the stated amount of any premium or other payment required to be
paid in connection with such a refinancing pursuant to the terms
of the Indebtedness being refinanced, or
(B) the amount of premium or other payment actually paid at such time
to refinance the Indebtedness,
plus, in either case, the amount of expenses of PSINet or such
borrower incurred in connection with such refinancing,
and, in the case of any refinancing of Indebtedness that is
Subordinated Indebtedness, such new Indebtedness is made subordinated
to the notes at least to the same extent as the Indebtedness being
refinanced and such refinancing does not reduce the Average Life to
Stated Maturity or the Stated Maturity of such Subordinated
Indebtedness.
-69-
<PAGE>
(c) For purposes of determining any particular amount of Indebtedness under
this covenant, Guarantees, Liens or obligations with respect to letters of
credit supporting Indebtedness otherwise included in the determination of such
particular amount shall not be included; provided, however, that the foregoing
shall not in any way be deemed to limit the provisions of "--Limitations on
Issuances of Guarantees of Indebtedness."
(d) For purposes of determining compliance with this covenant, in the event
that an item of Indebtedness may be Incurred through paragraph (a) of this
covenant or by meeting the criteria of one or more of the types of Indebtedness
described in paragraph (b) of this covenant (or the definitions of the terms
used therein), PSINet, in its sole discretion, may:
. classify such item of Indebtedness under and comply with either of such
paragraphs (or any of such definitions), as applicable;
. classify and divide such item of Indebtedness into more than one of such
paragraphs (or definitions), as applicable; and
. elect to comply with such paragraphs (or definitions), as applicable, in
any order.
Limitation on Restricted Payments. (a) PSINet will not, and will not permit
any Subsidiary to, directly or indirectly:
(1) declare or pay any dividend on, or make any distribution on any shares of
PSINet's Capital Stock, other than dividends or distributions solely in
shares of its Qualified Capital Stock or in options, warrants or other
rights to acquire shares of such Qualified Capital Stock;
(2) purchase, redeem or otherwise acquire or retire for value, directly or
indirectly, PSINet's Capital Stock or any Capital Stock of any Affiliate of
PSINet, other than Capital Stock of any Wholly Owned Subsidiary of PSINet,
or options, warrants or other rights to acquire such Capital Stock;
(3) make any principal payment on, or repurchase, redeem, defease, retire or
otherwise acquire for value, prior to any scheduled principal payment,
sinking fund payment or maturity, any Subordinated Indebtedness;
(4) declare or pay any dividend or distribution on any Capital Stock of any
Subsidiary to any Person, other than
(A) to PSINet or any of its Wholly Owned Subsidiaries, or
(B) to all holders of any class, series or the same type of Capital Stock of
such Subsidiary on a pro rata basis; provided that in the case of this
clause (B), such dividend or distribution shall not constitute
Indebtedness or Disqualified Stock; or
(5) make any Investment in any Person, other than any Permitted Investments (any
of the preceding actions described in clauses (1) through (5), other than
any such action that is a Permitted Payment (as defined below),
collectively, "Restricted Payments" ). The amount of any such Restricted
Payment, if other than cash, shall be as determined, in good faith, by the
Board of Directors of PSINet, whose determination shall be conclusive and
evidenced by a board resolution.
-70-
<PAGE>
(b) The preceding limitations of paragraph (a) of this covenant will not apply
if:
(1) immediately before and immediately after giving effect to such proposed
Restricted Payment on a pro forma basis, no Default or Event of Default
shall have occurred and be continuing;
(2) immediately before and immediately after giving effect to such Restricted
Payment on a pro forma basis, PSINet could incur $1.00 of additional
Indebtedness, other than Permitted Indebtedness, under paragraph (a) of
the provisions described under "--Limitation on Indebtedness;" and
(3) after giving effect to the proposed Restricted Payment, the aggregate
amount of all such Restricted Payments declared or made after April 13,
1998, does not exceed the sum of:
(A) the Cumulative Operating Cash Flow determined at the time of such
Restricted Payment, less 150% of cumulative Consolidated Interest
Expense determined for the period (treated as one accounting period)
commencing on April 13, 1998 and ending on the last day of the most
recent fiscal quarter immediately preceding the date of such Restricted
Payment for which consolidated financial information of PSINet is
required to be available; plus
(B) the aggregate Net Cash Proceeds received after April 13, 1998 by PSINet
from the issuance or sale, other than to any of its Subsidiaries, of
our Qualified Capital Stock of PSINet or any options, warrants or
rights to purchase such our Qualified Capital Stock of PSINet, except
to the extent such proceeds are used to purchase, redeem or otherwise
retire Capital Stock or Subordinated Indebtedness as set forth in
clause (2) or (3) of paragraph (c) below; plus
(C) the aggregate Net Cash Proceeds received after April 13, 1998 by
PSINet, other than from any of its Subsidiaries, upon the exercise of
any options, warrants or rights to purchase Qualified Capital Stock of
PSINet; plus
(D) the aggregate Net Cash Proceeds received after April 13, 1998 by PSINet
from the conversion or exchange, if any, of debt securities or
Redeemable Capital Stock of PSINet or its subsidiaries into or for
Qualified Capital Stock of PSINet plus, to the extent such debt
securities or Redeemable Capital Stock were issued after April 13,
1998, the aggregate of Net Cash Proceeds from their original issuance;
plus
(E) in the case of the disposition or repayment of any Investment
constituting a Restricted Payment, an amount equal to the lesser of (x)
the cash return of capital with respect to such Investment, less the
cost of disposition and taxes, if any, and (y) the initial amount of
such Investment.
(c) Notwithstanding the foregoing, and in the case of clauses (2) through (6)
below, so long as there is no Default or Event of Default continuing, the
limitations of paragraph (a) of this covenant will not prohibit the following
actions (each of clauses (1) through (10) below being referred to as a
"Permitted Payment" ):
(1) the payment of any dividend within 60 days after the date of declaration
thereof, if at such date of declaration such payment was permitted by the
provisions of paragraph (b) of this covenant and such payment shall have
been deemed to have been paid on such date of declaration;
(2) the repurchase, redemption, or other acquisition or retirement for value
of any shares of any class of Capital Stock of PSINet in exchange for,
including any such exchange
-71-
<PAGE>
pursuant to the exercise of a conversion right or privilege in connection
with which cash is paid in lieu of the issuance of fractional shares or
scrip, or out of the Net Cash Proceeds of a substantially concurrent
issuance and sale for cash, other than to a Subsidiary, of other shares of
Qualified Capital Stock of PSINet; provided that the Net Cash Proceeds
from the issuance of such shares of Qualified Capital Stock are excluded
from clause (3)(B) of paragraph (b) of this covenant;
(3) the repurchase, redemption, defeasance, retirement or acquisition for
value or payment of principal of any Subordinated Indebtedness or
Redeemable Capital Stock in exchange for, or in an amount not in excess of
the Net Cash Proceeds of, a substantially concurrent issuance and sale for
cash, other than to any Subsidiary, of any Qualified Capital Stock of
PSINet, provided that the Net Cash Proceeds from the issuance of such
shares of Qualified Capital Stock are excluded from clause (3)(B) of
paragraph (b) of this covenant;
(4) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of principal of any Subordinated
Indebtedness, other than Redeemable Capital Stock, through the
substantially concurrent issuance of new Subordinated Indebtedness of
PSINet, provided that any such new Subordinated Indebtedness:
. shall be in a principal amount that does not exceed the principal amount and
accrued interest thereon so refinanced or the accreted value thereof as of
the date of refinancing, or, if such Subordinated Indebtedness provides for
an amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration thereof, then such lesser amount as of the date
of determination, plus the lesser of:
(A) the stated amount of any premium or other payment required to be
paid in connection with such a refinancing pursuant to the terms of
the Indebtedness being refinanced, or
(B) the amount of premium or other payment actually paid at such time to
refinance the Indebtedness,
plus, in either case, the amount of expenses of PSINet incurred in
connection with such refinancing,
. has an Average Life to Stated Maturity greater than the remaining Average
Life to Stated Maturity of the notes,
. has a Stated Maturity for its final scheduled principal payment later than
the Stated Maturity for the final scheduled principal payment of the notes,
and
. is expressly subordinated in right of payment to the notes at least to the
same extent as the Subordinated Indebtedness to be refinanced;
(5) the repurchase, redemption, defeasance, retirement, refinancing,
acquisition for value or payment of any Redeemable Capital Stock through
the substantially concurrent issuance of new Redeemable Capital Stock of
PSINet, provided that any such new Redeemable Capital Stock:
. shall have an aggregate liquidation preference that does not exceed the
aggregate liquidation preference of the amount so refinanced,
-72-
<PAGE>
. has an Average Life to Stated Maturity greater than the remaining Average
Life to Stated Maturity of the notes, and
. has a Stated Maturity later than the Stated Maturity for the final
scheduled principal payment of the notes;
(6) the repurchase of shares of, or options to purchase shares of, common
stock of PSINet or any of its Subsidiaries from employees, officers,
consultants or directors or any former employees, officers,
consultants or directors of PSINet or any of its Subsidiaries, or
permitted transferees of such employees, officers, consultants or
directors or former employees, officers, consultants or directors,
pursuant to the terms of the agreements, including employment
agreements, or plans, or amendments thereto, or other arrangements or
transactions approved by the Board of Directors under which such
individuals purchase or sell or are granted the option to purchase or
sell, shares of such common stock; provided, however, that the
aggregate amount of such repurchases in any calendar year shall not
exceed $1 million and $3 million in the aggregate pursuant to this
clause (6);
(7) Investments in any Person engaged principally in the
Telecommunications Business on the date of such Investments; provided
that the aggregate amount of any such Investments made pursuant to
this clause (7) does not exceed the sum of:
(A) the amount of the Net Cash Proceeds received by PSINet after
April 13, 1998 as a capital contribution or from the sale of its
Capital Stock, other than Disqualified Stock, to a Person who is
not a Subsidiary of PSINet, except to the extent that such Net
Cash Proceeds are used to Incur Indebtedness pursuant to clause
(3) of paragraph (b) under the covenant described above under "--
Limitation on Indebtedness" or to make Restricted Payments
pursuant to clause (3) of paragraph (b), or clauses (2), (3) or
(4) of this paragraph (c), of this "Limitation on Restricted
Payments" covenant, plus
(B) the net reduction in Investments made pursuant to this clause (7)
resulting from distributions on or repayments of such Investments
or from the Net Cash Proceeds from the sale of any such
Investments, except in each case to the extent any such payments
or proceeds are included in the calculation of Consolidated Net
Income, or from such Person becoming a Wholly Owned Subsidiary
(valued in each case as provided in the definition of "Permitted
Investments");
(8) the payment or declaration of any dividend or the making of any
distribution on or the redemption of rights or any securities issued
pursuant to the Company Rights Agreement;
(9) the payment of cash in lieu of the issuance of fractional shares
pursuant to any agreement, warrant or option and any repurchase or
other acquisition of fractional shares from time to time; and
(10) the acquisition of Capital Stock of PSINet by PSINet in connection
with the cashless exercise of any options, warrants or similar rights
issued by PSINet on or prior to January 1, 1998.
In determining the amount of Restricted Payments permissible under
this covenant, amounts expended pursuant to clauses (1), (6), (7), (8) and (9)
shall be included, without duplication, as Restricted Payments and shall not be
deemed a Permitted Payment for purposes of the calculation required by paragraph
(b) of this covenant.
-73-
<PAGE>
Limitation on Transactions with Affiliates. PSINet will not, and will
not permit any of its Subsidiaries to, directly or indirectly, enter into any
transaction or series of related transactions, including, without limitation,
the sale, purchase, exchange or lease of assets, property or services, with or
for the benefit of any Affiliate of PSINet, other than PSINet or a Wholly Owned
Subsidiary, unless such transaction or series of related transactions is entered
into in good faith and in writing and:
(a) such transaction or series of related transactions is on terms that
are no less favorable to PSINet or such Subsidiary, as the case may
be, than those that would be reasonably expected to be available in
a comparable transaction in arm's-length dealings with an unrelated
third party;
(b) with respect to any transaction or series of related transactions
involving aggregate value in excess of $5 million, PSINet delivers
an officers' certificate to the Trustee certifying that such
transaction or series of related transactions complies with clause
(a) above; and
(c) with respect to any transaction or series of related transactions
involving aggregate value in excess of $10 million, either:
(A) such transaction or series of related transactions has been
approved by a majority of the Disinterested Directors of
PSINet, or in the event there is only one Disinterested
Director, by such Disinterested Director, or
(B) PSINet delivers to the Trustee a written opinion of an
investment banking firm of national standing or other
recognized independent expert with experience appraising the
terms and conditions of the type of transaction or series of
related transactions for which an opinion is required stating
that the transactions or series of related transactions is
fair to PSINet or such Subsidiary from a financial point of
view;
provided, however, that this covenant shall not apply to:
(1) compensation, severance and employee benefit arrangements with any
officer, director or employee of PSINet, including under any stock
option or stock incentive plans, in the ordinary course of business;
(2) any transaction solely between or among PSINet and/or any
Subsidiaries, if such transaction does not otherwise violate the terms
of the Indenture;
(3) any transaction otherwise permitted by the terms of the section of the
Indenture described under "--Limitations on Restricted Payments";
(4) the execution and delivery of or payments made under any tax sharing
agreement between or among any of PSINet and any Subsidiary;
(5) licensing or sublicensing of use of any intellectual property by
PSINet or any Subsidiary to PSINet, any other Subsidiary of PSINet or
to any Permitted Joint Venture; provided that the licensor shall
continue to have access to such intellectual property to the extent
necessary for the conduct of its business and, in the case of any
Permitted Joint Venture,
-74-
<PAGE>
that the terms of any such arrangement are fair and reasonable to
PSINet or any such Subsidiary as determined in good faith by the Board
of Directors;
(6) arrangements between PSINet and any Subsidiary of PSINet for the
purpose of providing services or employees to PSINet or such
Subsidiary; and
(7) transactions undertaken pursuant to the IXC Agreement and other
agreements entered into in connection therewith and in effect on or
after April 13, 1998, or as such other agreements may be amended, from
time to time, to the extent that any such amendment has been
determined by the Board of Directors, in good faith, not to adversely
affect the holders of notes.
Limitation on Liens. PSINet will not, and will not permit any Subsidiary
to, directly or indirectly, create, incur or affirm any Lien of any kind upon
any property or assets, including any intercompany notes, of PSINet or any
Subsidiary owned on April 13, 1998 or acquired after April 13, 1998, or any
income or profits therefrom, unless the notes are directly secured equally and
ratably with, or, in the case of Subordinated Indebtedness, prior or senior
thereto with the same relative priority as the notes shall have with respect to
such Subordinated Indebtedness, the obligation or liability secured by such Lien
except for any Permitted Liens.
Limitation on Sale of Assets. (a) PSINet will not, and will not permit any
of its Subsidiaries to, directly or indirectly, consummate an Asset Sale unless:
(1) at least 75% of the consideration from such Asset Sale is received in
cash or other comparable consideration as described below; and
(2) PSINet or such Subsidiary receives consideration at the time of such
Asset Sale at least equal to the Fair Market Value of the shares or
assets subject to such Asset Sale, as determined by the Board of
Directors of PSINet and evidenced in a board resolution.
The following types of consideration shall be deemed "comparable
consideration" for the purposes of this covenant:
. Cash Equivalents,
. Liabilities, contingent or otherwise, of PSINet or a Subsidiary assumed by
the transferee or its designee such that PSINet or such Subsidiary has no
further liability therefor, and
. any securities, notes or other obligations received by PSINet or any such
Subsidiary from such transferee that, within 60 days after receipt, are
converted by PSINet or such Subsidiary into cash.
(b) PSINet or a Subsidiary may, within 365 days of the Asset Sale, invest the
Net Cash Proceeds thereof in Telecommunications Assets or to repay any Pari
Passu Indebtedness of PSINet or any Subsidiary, including the repurchase of
notes. The amount of such Net Cash Proceeds not used or invested within 365 days
of the Asset Sale as set forth in this paragraph constitutes "Excess Proceeds."
(c) When the aggregate amount of Excess Proceeds exceeds $10 million, PSINet
will apply the Excess Proceeds to the repayment of the notes and any other Pari
Passu Indebtedness outstanding with similar provisions requiring PSINet to make
an offer to purchase such Indebtedness with the proceeds from any Asset Sale as
follows:
(A) PSINet will make an offer to purchase (an "Offer") from all Holders, on
a pro rata basis, in accordance with the procedures set forth in the
Indenture in the maximum principal
-75-
<PAGE>
amount (expressed as a multiple of 1,000 or $1,000, as applicable) of
notes that may be purchased out of an amount (the "Note Amount") equal
to the product of such Excess Proceeds multiplied by a fraction, the
numerator of which is the outstanding principal amount of the notes, and
the denominator of which is the sum of the outstanding principal amount
of the notes and such Pari Passu Indebtedness, subject to proration in
the event such amount is less than the aggregate Offered Price (as
defined herein) of all notes tendered; and
(B) to the extent required by such Pari Passu Indebtedness to permanently
reduce the principal amount of such Pari Passu Indebtedness, PSINet will
make an offer to purchase or otherwise repurchase or redeem Pari Passu
Indebtedness (a "Pari Passu Offer") in an amount (the "Pari Passu Debt
Amount") equal to the excess of the Excess Proceeds over the Note
Amount; provided that in no event will PSINet be required to make a Pari
Passu Offer in a Pari Passu Debt Amount exceeding the principal amount of
such Pari Passu Indebtedness plus the amount of any premium required to
be paid to repurchase such Pari Passu Indebtedness.
The offer price for the notes will be payable in cash in an amount equal to
100% of the principal amount of the notes plus accrued and unpaid interest, to
the date (the "Offer Date") such Offer is consummated (the "Offered Price"), in
accordance with the procedures set forth in the Indenture. To the extent that
the aggregate Offered Price of the notes tendered pursuant to the Offer is less
than the Note Amount relating thereto or the aggregate amount of Pari Passu
Indebtedness that is purchased in a Pari Passu Offer is less than the Pari Passu
Debt Amount, PSINet will use any remaining Excess Proceeds for general corporate
purposes. If the aggregate principal amount of notes and Pari Passu Indebtedness
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the notes to be purchased on a pro rata basis. Upon the
completion of the purchase of all the notes tendered pursuant to an Offer and
the completion of a Pari Passu Offer, the amount of Excess Proceeds, if any,
shall be reset at zero.
(d) The Indenture provides that, if PSINet becomes obligated to make an Offer
pursuant to paragraph (c) above, the notes and the Pari Passu Indebtedness shall
be purchased by PSINet, at the option of the holders thereof, in whole or in
part in integral multiples of 1,000 or $1,000, as the case may be, on a date
that is not earlier than 30 days and not later than 60 days from the date the
notice of the Offer is given to holders, or such later date as may be necessary
for PSINet to comply with the requirements under the Securities Exchange Act of
1934.
(e) The Indenture provides that PSINet will comply with the applicable tender
offer rules, including Rule 14e-1 under the Securities Exchange Act of 1934, and
any other applicable securities laws or regulations, including those regulations
that may be imposed by any securities exchange on which the notes may be listed,
in connection with an Offer.
Limitation on Issuances of Guarantees of Indebtedness. (a) PSINet will
not permit any Subsidiary, directly or indirectly, to guarantee, assume or in
any other manner become liable with respect to any Pari Passu Indebtedness or
Subordinated Indebtedness of PSINet unless such Subsidiary simultaneously
executes and delivers a supplemental indenture to the Indenture providing for a
Guarantee of the notes on the same terms as the guarantee of such Indebtedness
except that:
(A) such guarantee need not be secured unless required pursuant to
"-- Limitation on Liens," and
(B) if such Indebtedness is by its terms expressly subordinated to the
notes, any such assumption, guarantee or other liability of such
Subsidiary with respect to such
-76-
<PAGE>
Indebtedness shall be subordinated to such Subsidiary's Guarantee of
the notes at least to the same extent as such Indebtedness is
subordinated to the notes;
provided that this paragraph shall not apply to any guarantee or assumption of
liability of Indebtedness permitted under the Indenture as described in clauses
(1), (2), (4), (5), (7) and (8) of paragraph (b) of "--Limitation on
Indebtedness."
(b) Notwithstanding the foregoing, any Guarantee by a Subsidiary of the
notes shall provide by its terms that it, and all Liens securing the same, shall
be automatically and unconditionally released and discharged upon any sale,
exchange or transfer, to any Person not an Affiliate of PSINet, of all of
PSINet's Capital Stock in, or all or substantially all the assets of, such
Subsidiary, which transaction is in compliance with the terms of the Indenture
and such Subsidiary is released from its guarantees of other Indebtedness of
PSINet or any Subsidiaries.
Limitation on Sale and Leaseback Transactions. PSINet will not, and will
not permit any Subsidiary of PSINet to, directly or indirectly, enter into any
Sale-Leaseback Transaction with respect to any property or assets, whether now
owned or hereafter acquired, unless:
(a) the sale or transfer of such property or assets to be leased is
treated as an Asset Sale and complies with the "--Limitation on Sale of Assets"
covenant; and
(b) PSINet or such Subsidiary would be entitled under the "--Limitation on
Indebtedness" covenant to incur any Indebtedness, with the lease obligations
being treated as Indebtedness for purposes of ascertaining compliance with this
covenant unless such lease is properly classified as an operating lease under
GAAP, in respect of such sale and leaseback transaction.
The foregoing restriction does not apply to any Sale-Leaseback Transaction
if:
(1) the lease is for a period, including renewal rights, not in excess of
three years;
(2) the transaction is solely between PSINet and any Wholly Owned
Subsidiary or any Wholly Owned Subsidiary and any other Wholly Owned
Subsidiary; and
(3) the transaction is consummated within 180 days of the acquisition by
PSINet or its Subsidiary of the property or assets subject to such
sale-leaseback or entered into within 180 days after the purchase or
substantial completion of the construction of such property or assets
or 270 days in the event that the only condition delaying such
consummation is the receipt of applicable regulatory approvals.
Limitation on Issuance and Sale of Subsidiary Capital Stock. PSINet
will not permit:
(a) any Subsidiary of PSINet to issue any Capital Stock, except for:
(1) Capital Stock issued or sold to, held by or transferred to
PSINet or a Wholly Owned Subsidiary, or
(2) Capital Stock issued by a Person prior to the time such Person
becomes a Subsidiary, such Person merges with or into a Subsidiary, or a
Subsidiary merges with or into such Person;
provided that such Capital Stock was not issued or incurred by such Person in
anticipation of the type of transaction contemplated by clause (2), excluding
for purposes of this proviso, shares of Capital Stock issued in connection with
customary accelerated vesting provisions contained in option or similar plans or
agreements which are accelerated as a result of a change of control of
-77-
<PAGE>
such Person and which option or similar plans or agreements were not adopted or
implemented solely in anticipation of or in connection with such transaction; or
(b) any Person, other than PSINet or a Wholly Owned Subsidiary, to acquire
Capital Stock of any Subsidiary from PSINet or any Subsidiary;
except, in the case of each of paragraph (a) or (b):
. upon the acquisition of all the outstanding Capital Stock of such
Subsidiary in accordance with the terms of the Indenture,
. if, immediately after giving effect to such issuance or sale, such
Subsidiary would no longer constitute a Subsidiary, and any Investment in
such Person remaining after giving effect to such issuance or sale would
have been permitted to be made under "--Limitations on Restricted Payments"
if made on the date of such issuance or sale,
. issuances of director's qualifying shares, or sales to foreign nationals of
shares of Capital Stock of foreign Subsidiaries, to the extent required by
applicable law or to maintain the limited liability status of such foreign
Subsidiaries, or
. issuances or sales of common stock of a Subsidiary;
provided that PSINet or such Subsidiary applies the Net Cash Proceeds, if any,
in a manner which does not violate the provisions of the Indenture to the extent
applicable, excluding for purposes of this proviso, shares of Capital Stock
issued in connection with customary accelerated vesting provisions contained in
option or similar plans or agreements which are accelerated as a result of a
change of control of such Person and which option or similar plans or agreements
were not adopted or implemented solely in anticipation of or in connection with
such transaction.
Limitation on Dividends and Other Payment Restrictions Affecting
Subsidiaries. PSINet will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Subsidiary to:
(a) pay dividends or make any other distribution on its Capital Stock;
(b) pay any Indebtedness owed to PSINet or any other Subsidiary;
(c) make any Investment in PSINet or any other Subsidiary; or
(d) transfer any of its properties or assets to PSINet or any other
Subsidiary, except for:
(1) any encumbrance or restriction, with respect to a Subsidiary that was
not a Subsidiary of PSINet on April 13, 1998, in existence at the time
such Person becomes a Subsidiary of PSINet and not incurred in
connection with, or in contemplation of, such Person becoming a
Subsidiary;
(2) encumbrances or restrictions (A) by reason of applicable law, (B)
under the Indenture, or (C) in any agreement, instrument or indenture
governing or relating to Indebtedness in respect of any Permitted
Credit Facility;
-78-
<PAGE>
(3) customary non-assignment provisions of any contract or lease of any
Subsidiary entered into in the ordinary course of business;
(4) encumbrances or restrictions imposed pursuant to Indebtedness or
contracts entered into in connection with Permitted Liens, but solely
to the extent such encumbrances or restrictions affect only the
property or assets subject to such Permitted Lien;
(5) any encumbrance or restriction imposed pursuant to contracts for the
sale of assets with respect to the assets to be sold pursuant to such
contract; and
(6) any encumbrance or restriction existing under any agreement that
extends, renews, refunds, refinances or replaces the agreements
containing the encumbrances or restrictions in the foregoing clauses
(1) through (5), or in this clause (6), provided that the terms and
conditions of any such encumbrances or restrictions are no more
restrictive in any material respect than those under or pursuant to
the agreement evidencing the Indebtedness so extended, renewed,
refinanced or replaced.
Limitations on Unrestricted Subsidiaries. PSINet will not make, and will
not permit its Subsidiaries to make, any Investment in Unrestricted Subsidiaries
if, at the time thereof, the aggregate amount of such Investments would exceed
the amount of Restricted Payments then permitted to be made pursuant to the "--
Limitation on Restricted Payments" covenant. Any Investments in Unrestricted
Subsidiaries permitted to be made pursuant to this covenant will be treated as a
Restricted Payment in calculating the amount of Restricted Payments made by
PSINet.
Provision of Financial Statements. After the earlier to occur of the
consummation of the exchange offer and the 150th calendar day following the date
of original issue of the notes, whether or not PSINet is subject to Section
13(a) or 15(d) of the Securities Exchange Act of 1934, PSINet will, to the
extent permitted under the Securities and Exchange Act of 1934, file with the
Securities and Exchange Commission the annual reports, quarterly reports and
other documents which PSINet would have been required to file with the
Securities and Exchange Commission pursuant to Sections 13(a) or 15(d) if PSINet
were so subject, such documents to be filed with the Securities and Exchange
Commission on or prior to the date (the "Required Filing Date") by which PSINet
would have been required so to file such documents if PSINet were so subject.
PSINet will also in any event:
(1) within 15 days of each Required Filing Date, transmit by mail to all
holders, as their names and addresses appear in the security register,
without cost to such holders, and file with the Trustee and paying
agents copies (which shall be available to holders upon request to any
of PSINet, the Trustee or a paying agent) of the annual reports,
quarterly reports and other documents which PSINet would have been
required to file with the Securities and Exchange Commission pursuant
to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934 if
PSINet were subject to either of such Sections; and
(2) if filing such documents by us with the Securities and Exchange
Commission is not permitted under the Securities Exchange Act of 1934,
promptly upon written request and payment of the reasonable cost of
duplication and delivery, supply copies of such documents to any
prospective holder at PSINet's cost. If any Guarantor's financial
-79-
<PAGE>
statements would be required to be included in the financial
statements filed or delivered pursuant to the Indenture if PSINet were
subject to Section 13(a) or 15(d) of the Securities Exchange Act of
1934, PSINet shall include such Guarantor's financial statements in
any filing or delivery pursuant to the Indenture. The Indenture also
provides that, so long as any of the notes remain outstanding, PSINet
will make available to any prospective purchaser of notes or
beneficial owner of notes in connection with any sale thereof the
information required by Rule 144A(d)(4) under the Securities Act of
1933, until the earlier of such time as PSINet has completed its offer
to exchange the notes for securities identical in all material
respects which have been registered under the Securities Act or such
time as the holders thereof have disposed of such notes pursuant to an
effective registration statement under the Securities Act of 1933.
Limitation on Business. PSINet will not, and will not permit any of the
Subsidiaries to, engage in a business which is not substantially a
Telecommunications Business.
Consolidation, Merger or Sale of Assets
PSINet will not, in a single transaction or through a series of related
transactions, consolidate with or merge with or into any other Person or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of its properties and assets to any Person or group of affiliated Persons, or
permit any of its Subsidiaries to enter into any such transaction or series of
related transactions if such transaction or series of related transactions, in
the aggregate, would result in a sale, assignment, conveyance, transfer, lease
or disposition of all or substantially all of the properties and assets of
PSINet and its Subsidiaries on a Consolidated basis to any other Person or group
of affiliated Persons, unless at the time and after giving effect thereto:
(1) either PSINet will be the continuing corporation, in the case of a
consolidation or merger involving PSINet, or the Person, if other than PSINet,
formed by such consolidation or into which PSINet are merged or the Person which
acquires by sale, assignment, conveyance, transfer, lease or disposition all or
substantially all of the properties and assets of PSINet and its Subsidiaries on
a Consolidated basis (the "Surviving Entity") will be a corporation duly
organized and validly existing under the laws of the United States of America,
any state thereof or the District of Columbia and such Person expressly assumes,
by a supplemental indenture, in a form reasonably satisfactory to the Trustee,
all the obligations of PSINet under the notes, the Indenture and the
registration rights agreement, as the case may be, and the notes, the Indenture
and the registration rights agreement will remain in full force and effect as so
supplemented;
(2) immediately after giving effect to such transaction on a pro forma
basis, and treating any Indebtedness not previously an obligation of PSINet or
any of its Subsidiaries which becomes the obligation of PSINet or any of its
Subsidiaries as a result of such transaction as having been incurred at the time
of such transaction, no Default or Event of Default will have occurred and be
continuing;
(3) immediately after giving effect to such transaction on a pro forma
basis, PSINet, or the Surviving Entity if PSINet is not the continuing obligor
under the Indenture, could incur $1.00 of additional Indebtedness, other than
Permitted Indebtedness, under paragraph (a) of the provisions of "--Certain
Covenants--Limitation on Indebtedness;"
-80-
<PAGE>
(4) at the time of the transaction, each Guarantor, if any, unless it is
the other party to the transactions described above, will have by supplemental
indenture confirmed that its Guarantee shall apply to such Person's obligations
under the Indenture and the notes; and
(5) at the time of the transaction PSINet or the Surviving Entity will
have delivered, or caused to be delivered, to the Trustee, in form and substance
reasonably satisfactory to the Trustee, an officers' certificate and an opinion
of counsel, each to the effect that such consolidation, merger, sale,
assignment, conveyance, transfer, lease or other transaction and the
supplemental indenture in respect thereof comply with the Indenture.
Notwithstanding the foregoing, PSINet may merge or consolidate with any
Wholly Owned Subsidiaries and into any Person in a transaction designed solely
for the purpose of effecting a change in the jurisdiction of incorporation of
PSINet within the United States of America.
In the event of any transaction, other than a lease, described in and
complying with the conditions listed in the immediately preceding paragraph in
which PSINet is not the Surviving Person, such Surviving Person shall succeed
to, and be substituted for, and exercise every right and power of, PSINet, and
PSINet shall be discharged from all obligations and covenants under the
indenture, the notes and the registration rights agreements.
Events of Default
An Event of Default will occur under the Indenture if:
(1) there shall be a default in the payment of any interest on any note
when it becomes due and payable, and such default shall continue for a period of
30 days;
(2) there shall be a default in the payment of the principal of or
premium, if any, on any note at its Maturity, upon acceleration, optional or
mandatory redemption, required repurchase or otherwise;
(3) (a) there shall be a default in the performance, or breach, of any
covenant or agreement of PSINet or any Guarantor under the Indenture, the
registration rights agreements or any Guarantee, other than a default in the
performance, or breach, of a covenant or agreement which is specifically dealt
with in clause (1), (2) or in clause (b), (c) or (d) of this clause (3), and
such default or breach shall continue for a period of 30 days after written
notice has been given, by certified mail, (A) to PSINet by the Trustee or (B) to
PSINet and the Trustee by the holders of at least 25% in aggregate principal
amount of the outstanding notes;
(b) there shall be a default in the performance or breach of the
provisions described in "--Consolidation, Merger or Sale of Assets";
(c) PSINet shall have failed to make or consummate an Offer in accordance
with the provision described in "--Certain Covenants--Limitation on Sale of
Assets"; or
(d) PSINet shall have failed to make or consummate a Change of Control
Offer in accordance with the provisions of "--Change of Control";
-81-
<PAGE>
(4) (a) any default by PSINet or any Subsidiary in the payment of the
principal, premium, if any, or interest has occurred with respect to amounts in
excess of $10 million under any agreement, indenture or instrument evidencing
Indebtedness when the same shall become due and payable in full and such default
shall have continued after any applicable grace period and shall not have been
cured or waived and, if not already matured at its final maturity in accordance
with its terms, the holder of such Indebtedness shall have the right to
accelerate such Indebtedness; or
(b) any event of default as defined in any agreement, indenture or
instrument of PSINet evidencing Indebtedness in excess of $10 million shall have
occurred and the Indebtedness thereunder, if not already matured at its final
maturity in accordance with its terms, shall have been accelerated;
(5) any Guarantee shall for any reason cease to be, or shall for any
reason be asserted in writing by any Guarantor or PSINet not to be, in full
force and effect and enforceable in accordance with its terms, except to the
extent contemplated by the Indenture and any such Guarantee;
(6) one or more judgments or orders for the payment of money in excess of
$10 million, either individually or in the aggregate, shall be rendered against
PSINet and not paid unless covered by financially sound third-party insurers, or
any Subsidiary or any of their respective properties and is not discharged and
for which there shall have been a period of 60 consecutive days during which a
stay of enforcement of such judgment or order, by reason of an appeal or
otherwise, shall not be in effect;
(7) any holder or holders of at least $10 million in aggregate principal
amount of Indebtedness of PSINet or any Subsidiary after a default under such
Indebtedness shall notify the Trustee of its commencement of proceedings to
foreclose on any assets of PSINet or any Subsidiary that have been pledged to or
for the benefit of such holder or holders to secure such Indebtedness or shall
commence proceedings, or take any action, including by way of set-off, to retain
in satisfaction of such Indebtedness or to collect on, seize, dispose of or
apply in satisfaction of Indebtedness, assets of PSINet or any Subsidiary
including funds on deposit or held pursuant to lock-box and other similar
arrangements;
(8) there shall have been the entry by a court of competent jurisdiction
of (a) a decree or order for relief in respect of PSINet or any Significant
Subsidiary in an involuntary case or proceeding under any applicable Bankruptcy
Law or (b) a decree or order adjudging PSINet or any Significant Subsidiary
bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or
composition of or in respect of PSINet or any Significant Subsidiary under any
applicable federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of PSINet
or any Significant Subsidiary or of any substantial part of their respective
properties, or ordering the winding up or liquidation of their respective
affairs, and any such decree or order for relief shall continue to be in effect,
or any such other decree or order shall be unstayed and in effect, for a period
of 60 consecutive days; or
-82-
<PAGE>
(9) (a) PSINet or any Significant Subsidiary commences a voluntary case or
proceeding under any applicable Bankruptcy Law or any other case or proceeding
to be adjudicated bankrupt or insolvent,
(b) PSINet or any Significant Subsidiary consents to the entry of a decree
or order for relief in respect of PSINet or such Significant Subsidiary in an
involuntary case or proceeding under any applicable Bankruptcy Law or to the
commencement of any bankruptcy or insolvency case or proceeding against it,
(c) PSINet or any Significant Subsidiary files a petition or answer or
consent seeking reorganization or relief under any applicable federal or state
law,
(d) PSINet or any Significant Subsidiary (A) consents to the filing of
such petition or the appointment of, or taking possession by, a custodian,
receiver, liquidator, assignee, trustee, sequestrator or similar official of
PSINet or such Significant Subsidiary or of any substantial part of PSINet's
Consolidated properties, (B) makes an assignment for the benefit of creditors or
(C) admits in writing its inability to pay its debts generally as they become
due, or
(e) PSINet or any Significant Subsidiary takes any corporate action in
furtherance of any such actions in this paragraph (9).
If an Event of Default, other than as specified in clauses (8) and (9) of
the prior paragraph with respect to PSINet, shall occur and be continuing with
respect to the Indenture, the Trustee or the holders of not less than 25% in
aggregate principal amount of the notes then outstanding may, and the Trustee at
the request of such holders shall, declare all unpaid principal of, premium, if
any, and accrued interest on all notes to be due and payable, by a notice in
writing to PSINet and to the Trustee if given by the holders, and upon any such
declaration, such principal and interest shall become due and payable
immediately. If an Event of Default specified in clause (8) or (9) of the prior
paragraph occurs with respect to PSINet and is continuing, then all the notes
shall ipso facto become and be due and payable immediately in an amount equal to
the principal amount of the notes, together with accrued and unpaid interest, to
the date the notes become due and payable, without any declaration or other act
on the part of the Trustee or any holder. Thereupon, the Trustee may, at its
discretion, proceed to protect and enforce the rights of the holders by
appropriate judicial proceedings.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of notes then outstanding by written
notice to PSINet and the Trustee, may rescind and annul such declaration and its
consequences if:
(a) PSINet has paid or deposited with the Trustee sums (in euros and U.S.
Dollars) sufficient to pay
. all sums paid or advanced by the Trustee under the Indenture and the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel,
. all overdue interest on all notes then outstanding,
-83-
<PAGE>
. the principal of any notes then outstanding which have become due otherwise
than by such declaration of acceleration and interest thereon at the rate
borne by the notes, and
. to the extent that payment of such interest is lawful, interest upon overdue
interest at the rate borne by the notes; and
(b) all Events of Default, other than the non-payment of principal of the
notes which have become due solely by such declaration of acceleration, have
been cured or waived as provided in the Indenture. No such rescission shall
affect any subsequent default or impair any right consequent thereon.
The holders of not less than a majority in aggregate principal amount of
the notes then outstanding may on behalf of the holders of all outstanding notes
waive any past default under the Indenture and its consequences, except a
default in the payment of the principal of or interest on any note or in respect
of a covenant or provision which under the Indenture cannot be modified or
amended without the consent of the holder of each note affected by such
modification or amendment.
PSINet is also required to notify the Trustee within 30 days of the
occurrence of any Default unless such Default shall have been cured. PSINet is
required to deliver to the Trustee, on or before a date not more than 60 days
after the end of each fiscal quarter and not more than 120 days after the end of
each fiscal year, a written statement as to compliance with the Indenture,
including whether or not any Default has occurred that is not cured.
The Trust Indenture Act of 1939 contains limitations on the rights of the
Trustee, should it become a creditor of PSINet or any Guarantor, if any, to
obtain payment of claims in certain cases or to realize on certain property
received by it in respect of any such claims, as security or otherwise. The
Trustee is permitted to engage in other transactions, provided that if it
acquires any conflicting interest it must eliminate such conflict upon the
occurrence of an Event of Default or resign.
Defeasance or Covenant Defeasance of Indenture
PSINet may, at its option and at any time, elect to have the obligations of
PSINet, any Guarantor and any other obligor upon the notes discharged with
respect to the outstanding notes ("defeasance"). Such defeasance means that
PSINet, any such Guarantor and any other obligor under the Indenture shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding notes, except for:
(1) the rights of holders of such outstanding notes to receive payments in
respect of the principal of, premium, if any, and interest on such notes when
such payments are due,
(2) PSINet obligations with respect to the notes 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
(4) the defeasance provisions of the Indenture.
-84-
<PAGE>
In addition, PSINet may, at its option and at any time, elect to have the
obligations of PSINet and any Guarantor released with respect to certain
covenants that are described in the Indenture ("covenant defeasance") and
thereafter any omission to comply with such obligations shall not constitute a
Default or an Event of Default with respect to the notes. In the event covenant
defeasance occurs, certain events, not including non-payment, bankruptcy and
insolvency events, described under "Events of Default" will no longer constitute
an Event of Default with respect to the notes.
Satisfaction and Discharge
The Indenture will be discharged and will cease to be of further effect,
except as to surviving rights of registration of transfer or exchange of the
notes as expressly provided for in the Indenture, as to all outstanding notes
under the Indenture when:
(a) either (1) all such notes theretofore authenticated and delivered,
except lost, stolen or destroyed notes which have been replaced or
paid or notes whose payment has been deposited in trust or segregated
and held in trust by PSINet and thereafter repaid to PSINet or
discharged from such trust as provided for in the Indenture, have been
delivered to the Trustee for cancellation or (2) all notes not
theretofore delivered to the Trustee for cancellation:
. have become due and payable, or
. will become due and payable at their Stated Maturity within one
year;
and PSINet or any Guarantor has irrevocably deposited or caused to be deposited
with the Trustee as trust funds in trust (1) in the case of the euro notes, an
amount in euros or Government Securities of the United Kingdom, the Federal
Republic of Germany or the Republic of France denominated in euros and (2) in
the case of the dollar notes, an amount in United States dollars or United
States Government Securities, in each case sufficient to pay and discharge the
entire indebtedness on such notes, as applicable, not previously delivered to
the Trustee for cancellation, including principal of and accrued interest at
such Maturity, Stated Maturity or redemption date;
(b) PSINet or any Guarantor has paid or caused to be paid all other sums
payable under the Indenture by PSINet and any Guarantor; and
(c) PSINet has delivered to the Trustee an officers' certificate and an
opinion of independent counsel each stating that (1) all conditions
precedent under the Indenture relating to the satisfaction and
discharge of such Indenture have been complied with and (2) such
satisfaction and discharge will not result in a breach or violation
of, or constitute a default under, the Indenture or any other material
agreement or instrument to which PSINet, any Guarantor or any
Subsidiary is a party or by which PSINet, any Guarantor or any
Subsidiary is bound.
Modifications and Amendments
Modifications and amendments of the Indenture may be made by PSINet, each
Guarantor, if any, and the Trustee with the consent of the holders of at least a
majority in aggregate principal amount of the notes then outstanding; provided,
however, that no such
-85-
<PAGE>
modification or amendment may, without the consent of the holder of each
outstanding note affected thereby:
(1) change the Stated Maturity of the principal of, or any installment of
interest on, or waive a default in the payment of the principal, or
interest on, any such note or reduce the principal amount thereof or
the rate of interest thereon or change the coin or currency in which
the principal of any such note or any premium or the interest thereon
is payable, or impair the right to institute suit for the enforcement
of any such payment after the Stated Maturity thereof;
(2) amend, change or modify the obligation of PSINet to make and consummate
an Offer to such holder with respect to any Asset Sale or Asset Sales
in accordance with "--Certain Covenants--Limitation on Sale of Assets"
or the obligation of PSINet to make and consummate a Change of Control
Offer in the event of a Change of Control in accordance with "--Change
of Control," including, in each case, amending, changing or modifying
any definitions relating thereto;
(3) reduce the percentage in principal amount of such outstanding notes,
the consent of whose Holders is required for any such supplemental
indenture, or the consent of whose holders is required for any waiver
or compliance with certain provisions of the Indenture;
(4) modify any of the provisions relating to supplemental indentures
requiring the consent of holders or relating to the waiver of past
defaults or relating to the waiver of certain covenants, except to
increase the percentage of such outstanding notes required for such
actions or to provide that certain other provisions of the Indenture
cannot be modified or waived without the consent of the holder of each
such Note affected thereby;
(5) except as otherwise permitted under "--Consolidation, Merger or Sale of
Assets," consent to the assignment or transfer by PSINet or any
Guarantor of any of its rights and obligations under the Indenture; or
(6) amend or modify any of the provisions of the Indenture in any manner
which subordinates the notes issued thereunder in right of payment to
any other Indebtedness of PSINet or which subordinates any Guarantee in
right of payment to any other Indebtedness of the Guarantor issuing any
such Guarantee.
Notwithstanding the foregoing, without the consent of any holders of the
notes, PSINet, any Guarantor and the Trustee may modify or amend the Indenture
or any Guarantee:
(a) to evidence the succession of another Person to PSINet or a Guarantor,
and the assumption by any such successor of the covenants of PSINet or
such Guarantor in the Indenture, the notes, the Registration Rights
Agreement and in any Guarantee in accordance with "--Consolidation,
Merger or Sale of Assets";
(b) to add to the covenants of PSINet, any Guarantor or any other obligor
upon the notes for the benefit of the holders or to surrender any
right or power conferred upon
-86-
<PAGE>
PSINet or any Guarantor or any other obligor upon the notes, as
applicable, in the Indenture, in the notes or in any Guarantee;
(c) to cure any ambiguity, or to correct or supplement any provision in
the Indenture, the notes or any Guarantee which may be defective or
inconsistent with any other provision in the Indenture, the notes or
any Guarantee or make any other provisions with respect to matters or
questions arising under the Indenture, the notes or any Guarantee;
provided that, in each case, such provisions shall not adversely
affect the interest of the holders of the notes;
(d) to comply with the requirements of the Securities and Exchange
Commission in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act of 1939;
(e) to add a Guarantor under the Indenture;
(f) to evidence and provide the acceptance of the appointment of a
successor Trustee under the Indenture; or
(g) to mortgage, pledge, hypothecate or grant a security interest in favor
of the Trustee for the benefit of the holders as additional security
for the payment and performance of PSINet and any Guarantor's
obligations under the Indenture, in any property, or assets, including
any of which are required to be mortgaged, pledged or hypothecated, or
in which a security interest is required to be granted to the Trustee
pursuant to the Indenture or otherwise.
The holders of a majority in aggregate principal amount of the notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
Governing Law
The Indenture, the notes and any Guarantee will be governed by, and
construed in accordance with, the internal laws of the State of New York,
without giving effect to the conflicts of law principles thereof.
Concerning the Trustee
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of PSINet 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
as Trustee with such conflict or resign as Trustee.
The holders of a majority in principal amount of the then outstanding notes
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 Indenture provides that in case an Event of Default
occurs, which has not been cured, the Trustee will be required, in the
-87-
<PAGE>
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 Indenture 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.
Certain Definitions
"Acquired Indebtedness" means Indebtedness of a Person:
(1) existing at the time such Person becomes a Subsidiary; or
(2) assumed in connection with the acquisition of assets from, or merger
or consolidation with or into, such Person, in each case, other than
Indebtedness incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary or such acquisition, as the case may be;
provided that Indebtedness of such Person which is redeemed, defeased, retired
or otherwise repaid at the time of, or substantially contemporaneously with, the
consummation of the transactions by which such Person becomes a Subsidiary or
such asset acquisition shall not constitute Acquired Indebtedness.
"Acquired Person" means, with respect to any specified Person, any other
Person which merges with or into or becomes a Subsidiary of such specified
Person.
"Acquisition" means:
(1) any capital contribution by means of transfers of cash or other
property to others or payments for property or services for the
account or use of others, or otherwise, by PSINet or any Subsidiary to
any other Person, or any acquisition or purchase of Capital Stock of
any other Person by PSINet or any Subsidiary, in either case pursuant
to which such Person shall become a Subsidiary or shall be
consolidated, merged with or into PSINet or any Subsidiary; or
(2) any acquisition by PSINet or any Subsidiary of the assets of any
Person which constitute substantially all of an operating unit or line
of business of such Person or which is otherwise outside of the
ordinary course of business of PSINet or such Subsidiary.
"Affiliate" means, with respect to any specified Person, any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through ownership of voting securities, by contract or otherwise; and
the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition, including, without limitation, by way of merger, consolidation or
sale and leaseback transaction (collectively, a "transfer"), directly or
indirectly, in one or a series of related transactions, of:
-88-
<PAGE>
(1) any Capital Stock of any Subsidiary;
(2) all or substantially all of the properties and assets of any division
or line of business of PSINet or its Subsidiaries; or
(3) any other properties or assets of PSINet or any Subsidiary other than
in the ordinary course of business. For the purposes of this
definition, the term "Asset Sale" shall not include any transfer of
properties and assets:
(A) that is governed by the provisions described under "--
Consolidation, Merger or Sale of Assets,"
(B) that is by PSINet to any Wholly Owned Subsidiary or by any Wholly
Owned Subsidiary to PSINet or any other Wholly Owned Subsidiary
in a manner which does not violate the terms of the Indenture,
(C) that is of obsolete equipment in the ordinary course of business,
(D) the Fair Market Value of which in the aggregate does not exceed
$5 million in any transaction or series of related transactions,
(E) that is made in accordance with the provisions described under
"-- Certain Covenants--Limitations on Restricted Payments,
(F) which constitutes the granting of any Permitted Lien, and
(G) that is transferred in exchange for Telecommunications Assets;
provided, that if the Fair Market Value of the assets to be
transferred by PSINet or such Subsidiary under this clause (G),
plus the Fair Market Value of any other consideration paid or
credited by PSINet or such Subsidiary exceeds $10 million, such
transaction shall require approval of the Board of Directors of
PSINet.
"Average Life to Stated Maturity" means, as of the date of determination
with respect to any Indebtedness, the quotient obtained by dividing:
(1) the sum of the products of (a) the number of years from the date of
determination to the date or dates of each successive scheduled
principal payment of such Indebtedness multiplied by (b) the amount of
each such principal payment by
(2) the sum of all such principal payments.
"Bankruptcy Law" means Title 11, United States Bankruptcy Code of 1978, as
amended, or any similar United States federal or state law relating to
bankruptcy, insolvency, receivership, winding up, liquidation, reorganization or
relief of debtors or any amendment to, succession to or change in any such law.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions or trust companies in The City
of New York, in
-89-
<PAGE>
Luxembourg or in the city in which the Corporate Trust Office of the Trustee is
located are authorized or obligated by law, regulation or executive order to be
closed.
"Capital Lease Obligation" of any Person means any obligation of such
Person and its subsidiaries on a Consolidated basis under any capital lease of
real or personal property which, in accordance with GAAP, has been recorded as a
capital lease obligation.
"Capital Stock" (1) with respect to any Person that is a corporation, any
and all shares, interests, participations or other equivalents, however
designated and whether or not voting, of corporate stock, including each class
of common stock and preferred stock of such Person and (2) with respect to any
Person that is not a corporation, any and all partnership, membership or other
equity interests of such Person.
"Cash Equivalents" means:
(1) any evidence of Indebtedness, maturing not more than one year after
the date of acquisition, (A) issued by the United States of America,
or an instrumentality or agency thereof, and guaranteed fully as to
principal, premium, if any, and interest by the United States of
America or (B) which is denominated in euros and is issued by the
Federal Republic of Germany, the Federal Republic of France or the
United Kingdom, or any instrumentality or agency thereof, and
guaranteed fully as to principal, premium, if any, and interest by the
issuing government;
(2) any certificate of deposit, maturing not more than one year after the
date of acquisition, issued by, or time deposit of, (A) a commercial
banking institution that is a member of the Federal Reserve System or
(B) a bank or trust company organized under the laws of any member of
the European Union whose long-term debt is rated "A-" or higher
according to S&P or "A-3" or higher according to Moody's, and in the
case of clause (A) and (B), such banking institution, bank or trust
company also has (i) combined capital and surplus and undivided
profits of not less than $500 million, and (ii) short term debt with a
rating, at the time as of which any investment therein is made, of
"P-1" or higher according to Moody's Investors Service, Inc.
("Moody's") or any successor rating agency or "A-1" or higher
according to Standard & Poor's Corporation ("S&P") or any successor
rating agency;
(3) commercial paper, maturing not more than 270 days after the date of
acquisition, issued by a bank or corporation, other than an Affiliate
or Subsidiary of PSINet, 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 and which is organized under the laws
of (A) the United States of America or (B) any member of the European
Union provided that such member's long-term debt is rated "A-" or
higher according to S&P or "A-3" or higher according to Moody's; and
(4) any money market accounts or funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (1), (2)
or (3).
"Change of Control" means the occurrence of any of the following events:
-90-
<PAGE>
(1) any "person" or "group" (as such terms are used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
Person shall be deemed to have beneficial ownership of all shares that
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time), directly or indirectly,
of more than 50% of the total outstanding Voting Stock of PSINet;
(2) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of PSINet,
together with any new directors whose election to such board or whose
nomination for election by the stockholders of PSINet was approved by a
vote of a majority of the directors then still in office who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute a majority of such Board of Directors then in
office;
(3) PSINet consolidates with or merges with or into any Person or conveys,
transfers or leases all or substantially all of its assets to any
Person, or any corporation consolidates with or merges into or with
PSINet in any such event pursuant to a transaction in which the
outstanding Voting Stock of PSINet is changed into or exchanged for
cash, securities or other property, other than any such transaction
where the outstanding Voting Stock of PSINet is not changed or
exchanged at all, except to the extent necessary to reflect a change in
the jurisdiction of incorporation of PSINet or where no "person" or
"group" owns, immediately after such transaction, directly or
indirectly, more than 50% of the total outstanding Voting Stock of the
surviving corporation; or
(4) PSINet is liquidated or dissolved or adopts a plan of liquidation or
dissolution other than in a transaction which complies with the
provisions described under "--Consolidation, Merger or Sale of Assets."
The good faith determination of the Board, based upon the advice of
outside counsel, of the beneficial ownership of securities of PSINet
within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act
shall be conclusive, absent contrary controlling judicial precedent or
contrary written interpretation published by the Commission.
"Commodity Price Protection Agreement" means any forward contract,
commodity swap, commodity option or other similar financial agreement or
arrangement relating to, or the value which is dependent upon, fluctuations in
commodity prices.
"Company Rights Agreement" means the Rights Agreement, dated as of May 8,
1996, between PSINet and First Chicago Trust Company of New York, as in effect
on the date of the Indenture (or as amended, from time to time, to the extent
that such amendment has been determined by the Board of Directors, in good
faith, not to adversely affect the holders of the notes).
"Consolidated" means consolidated in accordance with GAAP.
-91-
<PAGE>
"Consolidated Income Tax Expense" of any Person means, for any period, the
provision for federal, state, local and foreign income taxes of such Person and
its Consolidated subsidiaries for such period as determined in accordance with
GAAP.
"Consolidated Interest Expense" of any Person means, without duplication,
for any period, the sum of:
(a) the interest expense of such Person and its subsidiaries for such
period, on a Consolidated basis in accordance with GAAP, including,
without limitation:
(1) amortization of debt discount,
(2) the net costs associated with Interest Rate Agreements, Currency
Hedging Agreements and Commodity Price Protection Agreements,
including amortization of discounts,
(3) the interest portion of any deferred payment obligation, and
(4) accrued interest; plus
(b) (1) the interest component of the Capital Lease Obligations paid,
accrued and/or scheduled to be paid or accrued by such Person and its
subsidiaries during such period and (2) all capitalized interest of
such Person and its subsidiaries; plus
(c) the interest expense actually paid by such Person under any Guaranteed
Debt of such Person and any subsidiary to the extent not included under
clause (a)(4) above; plus
(d) the aggregate amount for such period of cash or non-cash dividends on
any Redeemable Capital Stock or Preferred Stock of PSINet and its
Subsidiaries, in each case as determined on a Consolidated basis in
accordance with GAAP.
"Consolidated Net Income" means, with respect to any period, the net income
of PSINet and any Subsidiary for such period determined on a consolidated basis
in accordance with GAAP, adjusted, to the extent included in calculating such
net income, by excluding, without duplication:
(a) all extraordinary gains or losses for such period;
(b) all gains or losses from the sales or other dispositions of assets out
of the ordinary course of business, net of taxes, fees and expenses
relating to the transaction giving rise thereto, for such period;
(c) that portion of such net income derived from or in respect of
investments in Persons other than Subsidiaries, except to the extent
actually received in cash by PSINet or any Subsidiary, subject, in the
case of any Subsidiary, to the provisions of clause (f) of this
definition;
-92-
<PAGE>
(d) the portion of such net income (or loss) allocable to minority
interests in any Person, other than a Subsidiary, for such period,
except to the extent PSINet's allocation portion of such Person's net
income for such period is actually received in cash by PSINet or any
Subsidiary, subject, in the case of any Subsidiary, to the provisions
of clause (f) of this definition;
(e) the net income (or loss) of any other Person combined with PSINet or
any Subsidiary on a "pooling of interests" basis attributable to any
period prior to the date of combination; and
(f) the net income of any Subsidiary to the extent that the declaration of
dividends or similar distributions by that Subsidiary of that income is
not at the time, regardless of any waiver, permitted, directly or
indirectly, by operation of the terms of its charter or any agreement,
instrument, judgment, decree, order, statute, rule or governmental
regulations applicable to that Subsidiary or its Capital Stock holders.
"Consolidated Operating Cash Flow" means, with respect to any period,
Consolidated Net Income for such period increased, without duplication, to the
extent deducted in calculating such Consolidated Net Income, by:
(a) Consolidated Income Tax Expense for such period;
(b) Consolidated Interest Expense for such period; and
(c) depreciation, amortization and any other non-cash items for such
period, other than any non-cash item which requires the accrual of, or
a reserve for, cash charges for any future period, of PSINet and any
Subsidiary, including, without limitation, amortization of capitalized
debt issuance costs for such period;
all of the foregoing determined on a consolidated basis in accordance with GAAP
minus non-cash items to the extent they increase Consolidated Net Income,
including the partial or entire reversal of reserves taken in prior periods, for
such period.
"Cumulative Operating Cash Flow" means, as at any date of determination,
the positive cumulative Consolidated Operating Cash Flow realized during the
period commencing on April 13, 1998 and ending on the last day of the most
recent fiscal quarter immediately preceding the date of determination for which
consolidated financial information of PSINet is available or, if such cumulative
Consolidated Operating Cash Flow for such period is negative, the negative
amount by which cumulative Consolidated Operating Cash Flow is less than zero.
"Currency Hedging Arrangements" means one or more of the following
agreements which shall be entered into by one or more financial institutions:
foreign exchange contracts, currency swap agreements or other similar agreements
or arrangements designed to protect against the fluctuations in currency values.
"Debt Securities" means any debt securities issued by PSINet in a public
offering or private placement.
-93-
<PAGE>
"Debt to Annualized Operating Cash Flow Ratio" means the ratio of:
(a) the Total Consolidated Indebtedness as of the date of calculation (the
"Determination Date" ) to
(b) four times the Consolidated Operating Cash Flow for the latest fiscal
quarter for which financial information is available immediately
preceding such Determination Date (the "Measurement Period").
For purposes of calculating Consolidated Operating Cash Flow for the
Measurement Period immediately prior to the relevant Determination Date:
(1) any Person that is a Subsidiary on the Determination Date, or would
become a Subsidiary on such Determination Date in connection with the
transaction that requires the determination of such Consolidated
Operating Cash Flow, will be deemed to have been a Subsidiary at all
times during such Measurement Period,
(2) any Person that is not a Subsidiary on such Determination Date, or
would cease to be a Subsidiary on such Determination Date in connection
with the transaction that requires the determination of such
Consolidated Operating Cash Flow, will be deemed not to have been a
Subsidiary at any time during such Measurement Period, and
(3) if PSINet or any Subsidiary shall have in any manner acquired through
an Acquisition or the commencement of activities constituting such
operating business, or disposed of by an Asset Sale or the termination
or discontinuance of activities constituting such operating business,
any operating business during such Measurement Period or after the end
of such period and on or prior to such Determination Date, such
calculation will be made on a pro forma basis in accordance with GAAP
as if, in the case of an Acquisition or the commencement of activities
constituting such operating business, all such transactions had been
consummated prior to the first day of such Measurement Period (it being
understood that in calculating Consolidated Operating Cash Flow, the
exclusions set forth in clauses (a) through (f) of the definition of
Consolidated Net Income shall apply to an Acquired Person as if it were
a Subsidiary).
"Default" means any event which is, or after notice or passage of any time
or both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of related transactions, a member of the Board of Directors of PSINet who does
not have any material direct or indirect financial interest in or with respect
to such transaction or series of related transactions.
"Disqualified Stock" means, with respect to any person, any Capital Stock
which, by its terms or by the terms of any security into which it is convertible
or for which it is exchangeable, or upon the happening of any event, matures or
becomes mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise, or becomes exchangeable for Indebtedness at the option of
-94-
<PAGE>
the holder thereof, or becomes redeemable at the option of the holder thereof,
in whole or in part, on or prior to the final maturity date of the notes;
provided such Capital Stock shall only constitute Disqualified Stock to
the extent it so matures or becomes so redeemable or exchangeable on or
prior to the final maturity date of the notes;
provided, further, that any Capital Stock that would not constitute
Disqualified Stock but for provisions thereof giving holders thereof the
right to require such person to repurchase or redeem such Capital Stock
upon the occurrence of an "asset sale" or "change of control" occurring
prior to the final maturity date of the notes shall not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of
such Capital Stock than the provisions contained in "Limitation on Sale of
Assets" and "Change of Control" described above and such Capital Stock
specifically provides that such person will not repurchase or redeem any
such stock pursuant to such provision prior to PSINet's repurchase of such
notes as are required to be repurchased pursuant to the "Limitation on Sale
of Assets" and "Change of Control" provisions described above.
"Fair Market Value" means, with respect to any asset or property, the sale
value that would be reasonably expected to be obtained in an arm's-length
transaction between an informed and willing seller under no compulsion to sell
and an informed and willing buyer under no compulsion to buy. Fair Market Value
shall be determined by the Board of Directors of PSINet acting in good faith and
shall be evidenced by a resolution of the Board of Directors.
"Guarantee" means the guarantee by any Guarantor of PSINet's Indenture
Obligations.
"Guaranteed Debt" of any Person means, without duplication, all
Indebtedness of any other Person guaranteed directly or indirectly in any manner
by such Person, or in effect guaranteed directly or indirectly by such Person
through an agreement:
(1) to pay or purchase such Indebtedness or to advance or supply funds for
the payment or purchase of such Indebtedness,
(2) to purchase, sell or lease, as lessee or lessor, property, or to
purchase or sell services, primarily for the purpose of enabling the
debtor to make payment of such Indebtedness or to assure the holder of
such Indebtedness against loss,
(3) to supply funds to, or in any other manner invest in, the debtor,
including any agreement to pay for property or services without
requiring that such property be received or such services be rendered,
(4) to maintain working capital or equity capital of the debtor, or
otherwise to maintain the net worth, solvency or other financial
condition of the debtor, or
(5) otherwise to assure a creditor against loss;
-95-
<PAGE>
provided that the term "guarantee" shall not include endorsements for collection
or deposit, in either case in the ordinary course of business.
"Guarantor" means any Subsidiary which is required after the date of the
Indenture to execute a guarantee of the notes pursuant to the "Limitation on
Issuance of Guarantees of Indebtedness" covenant until a successor replaces such
party pursuant to the applicable provisions of the Indenture and, thereafter,
shall mean such successor.
"Incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur, including by conversion, exchange or otherwise,
assume, guarantee or otherwise become liable in respect of such Indebtedness or
other obligation or the recording, as required pursuant to GAAP or otherwise, of
any such Indebtedness or other obligation on the balance sheet of such Person
(and "Incurrence," "Incurred" and "Incurring" shall have meanings correlative to
the foregoing). Indebtedness of a Person existing at the time such Person
becomes a Subsidiary or is merged or consolidated with or into PSINet or any
Subsidiary shall be deemed to be Incurred at such time.
"Indebtedness" means, with respect to any Person, without duplication:
(1) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, excluding any trade payables
and other accrued current liabilities arising in the ordinary course of
business,
(2) all obligations of such Person evidenced by bonds, notes, debentures
or other similar instruments,
(3) all indebtedness created or arising under any conditional sale or other
title retention agreement with respect to property acquired by such
Person, unless the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or
sale of such property, but excluding trade payables arising in the
ordinary course of business,
(4) all obligations under Interest Rate Agreements, Currency Hedging
Agreements or Commodity Price Protection Agreements of such Person,
(5) all Capital Lease Obligations of such Person,
(6) Indebtedness referred to in clauses (1) through (5) above of other
Persons and all dividends of other Persons, the payment of which is
guaranteed by such Person or which is otherwise secured by, or for
which the holder of such Indebtedness has an existing right, contingent
or otherwise, to be secured by, any Lien, upon or with respect to
property, including, without limitation, accounts and contract rights,
owned by such Person, even though such Person has not directly assumed
or become liable for the payment of such Indebtedness,
(7) all Redeemable Capital Stock issued by such Person valued at the
greater of its voluntary or involuntary maximum fixed repurchase price
plus accrued and unpaid dividends, and
-96-
<PAGE>
(8) any refinancing of any liability of the types referred to in clauses
(1) through (7) above. For purposes hereof, the "maximum fixed
repurchase price" of any Redeemable Capital Stock which does not have a
fixed repurchase price shall be calculated in accordance with the terms
of such Redeemable Capital Stock as if such Redeemable Capital Stock
were purchased on any date on which Indebtedness shall be required to
be determined pursuant to the Indenture, and if such price is based
upon, or measured by, the Fair Market Value of such Redeemable Capital
Stock, such Fair Market Value to be determined in good faith by the
Board of Directors of the issuer of such Redeemable Capital Stock. In
no event shall "Indebtedness" include any trade payable or other
current liabilities arising in the ordinary course of business. The
amount of any item of Indebtedness shall be the amount of such
Indebtedness properly classified as a liability on a balance sheet
prepared in accordance with GAAP.
"Indenture Obligations" means the obligations of PSINet and any other
obligor under the Indenture or under the notes, including any Guarantor, to pay
principal of and interest when due and payable, and all other amounts due or to
become due under or in connection with the Indenture, the notes and the
performance of all other obligations to the Trustee and the holders under the
Indenture and the notes, according to the respective terms thereof.
"Interest Rate Agreements" means one or more of the following agreements
which shall be entered into by one or more financial institutions: interest rate
protection agreements, including, without limitation, interest rate swaps, caps,
floors, collars and similar agreements, and/or other types of interest rate
hedging agreements from time to time.
"Investment" means, with respect to any Person, directly or indirectly, any
advance, loan, including guarantees, or other extension of credit or capital
contribution to by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others, or any
purchase, acquisition or ownership by such Person of any Capital Stock, bonds,
notes, debentures or other securities issued or owned by any other Person and
all other items that would be classified as investments on a balance sheet
prepared in accordance with GAAP.
"IXC" means IXC Internet Services, Inc., a Delaware corporation, and any
successors or assigns under the IXC Agreement.
"IXC Agreement" means the IRU and Stock Purchase Agreement, dated as of
July 22, 1997, between PSINet and IXC, as amended, pursuant to which PSINet
acquired from IXC 20-year noncancellable indefeasible rights of use, as in
effect on the date of the Indenture, or as further amended, from time to time,
to the extent that such amendment has been determined by the Board of Directors,
in good faith, not to adversely affect the holders of notes.
"Lien" means any mortgage or deed of trust, pledge, lien (statutory or
otherwise), security interest, hypothecation, or other encumbrance upon or with
respect to any property of any kind, real or personal, movable or immovable, now
owned or hereafter acquired. A Person shall be deemed to own subject to a Lien
any property which such Person has acquired or holds
-97-
<PAGE>
subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement, other than:
(1) any lease properly classified as an operating lease under GAAP,
(2) intellectual property licensing arrangements, or
(3) cancellation or termination rights or provisions contained in
agreements governing any indefeasible rights of use or similar property
rights which do not materially impair the use of the property or
interest which is the subject of such cancellation or termination
rights or provisions.
"Liquidated Damages" has the meaning provided in section 5 of the
registration rights agreement.
"Maturity" means, when used with respect to the notes, the date on which
the principal of the notes becomes due and payable as therein provided or as
provided in the Indenture, whether at Stated Maturity, the Offer Date or the
redemption date and whether by declaration of acceleration, Offer in respect of
Excess Proceeds, Change of Control Offer in respect of a Change of Control or
otherwise.
"Net Cash Proceeds" means:
(a) with respect to any Asset Sale by any Person, the proceeds thereof,
without duplication in respect of all Asset Sales, in the form of cash
or Cash Equivalents including payments in respect of deferred payment
obligations when received in the form of, or stock or other assets when
disposed of for, cash or Cash Equivalents, except to the extent that
such obligations are financed or sold with recourse to PSINet or any
Wholly Owned Subsidiary, net of
brokerage commissions and other fees and expenses, including fees and expenses
of counsel and investment bankers, related to such Asset Sale,
provisions for all taxes payable as a result of such Asset Sale,
payments made to retire Indebtedness where payment of such Indebtedness is
secured by the assets or properties the subject of such Asset Sale,
amounts required to be paid to any Person, other than PSINet or any Subsidiary,
owning a beneficial interest in the assets subject to the Asset Sale, and
. amounts contractually required to be deposited into escrow or
similar trust arrangements and other appropriate amounts to be
provided by PSINet or any Subsidiary, as the case may be, as a
reserve, in accordance with GAAP, against, any liabilities
associated with such Asset Sale and retained by PSINet or any
Subsidiary, as the case may be, after such Asset Sale, including,
without limitation, pension and other post-employment benefit
liabilities, liabilities related to environmental matters and
liabilities under any indemnification obligations associated with
such Asset Sale or reimbursement obligations related to letters
of credit issued against liabilities associated therewith, all as
reflected in an officers'
-98-
<PAGE>
certificate delivered to the Trustee, which amounts shall become
Net Cash Proceeds only at such time as they are released from
escrow or such trust arrangements or otherwise cease to be
reserved or subject to other obligations to third parties; and
(b) with respect to any issuance or sale of Capital Stock or options,
warrants or rights to purchase Capital Stock, or debt securities or
Capital Stock that have been converted into or exchanged for Capital
Stock as referred to under "--Certain Covenants--Limitation on
Restricted Payments," the proceeds of such issuance or sale in the form
of cash or Cash Equivalents including payments in respect of deferred
payment obligations when received in the form of, or stock or other
assets when disposed of for, cash or Cash Equivalents, except to the
extent that such obligations are financed or sold with recourse to
PSINet or any Subsidiary, net of attorney's fees, accountant's fees and
brokerage, consultation, underwriting and other fees and expenses
actually incurred in connection with such issuance or sale or
conversion, in the case of debt securities or Capital Stock that have
been converted, and net of taxes paid or payable as a result thereof.
"Pari Passu Indebtedness" means:
(1) any Indebtedness of PSINet that is pari passu in right of payment to
the notes; and
(2) with respect to any Guarantee, Indebtedness which ranks pari passu in
right of payment to such Guarantee.
"Permitted Credit Facility" means any unsubordinated commercial term loan
and/or revolving credit facility entered into principally with commercial banks
and/or other financial institutions typically party to commercial loan
agreements and any refinancing thereof.
"Permitted Investment" means:
(1) Investments in any Wholly Owned Subsidiary or any Person which, as a
result of, or in connection with, such Investment, (a) becomes a Wholly
Owned Subsidiary or (b) is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to, or is
liquidated into, PSINet or any Wholly Owned Subsidiary;
(2) Indebtedness of PSINet or a Subsidiary described under clauses (4) and
(7) of paragraph (b) under "--Certain Covenants--Limitation on
Indebtedness";
(3) Investments in any of the notes;
(4) Investments in Cash Equivalents;
(5) Investments acquired by PSINet or any Subsidiary in connection with an
Asset Sale permitted under "--Certain Covenants--Limitation on Sale of
Assets" to the extent such Investments are non-cash proceeds as
permitted under such covenant;
-99-
<PAGE>
(6) Investments in existence or contractually committed to on or after
April 13, 1998 and any extension, modification or renewal of any such
Investment that does not increase the amount of such Investment;
(7) guarantees of Indebtedness of a Wholly Owned Subsidiary given by
PSINet or another Wholly Owned Subsidiary and guarantees of
Indebtedness of PSINet given by any Subsidiary, in each case, not
otherwise in violation of the terms of the Indenture;
(8) advances to employees or officers of PSINet in the ordinary course of
business so long as the aggregate amount of such advances shall not
exceed $2 million outstanding at any one time;
(9) any Investment in PSINet by any Subsidiary of PSINet; provided, that
any such Investment in the form of Indebtedness shall be Subordinated
Indebtedness;
(10) accounts receivable created or acquired in the ordinary course of
business of PSINet or any Subsidiary and Investments arising from
transactions by PSINet or any Subsidiary with trade creditors or
customers in the ordinary course of business, including any such
Investment received pursuant to any plan of reorganization or similar
arrangement pursuant to the bankruptcy or insolvency of such trade
creditors or customers or otherwise in settlement of a claim;
(11) loans in the ordinary course of business to employees, officers or
directors of PSINet or a Subsidiary to purchase Capital Stock of
PSINet pursuant to the terms of stock benefit plans;
(12) Investments the consideration of which is Capital Stock of PSINet;
(13) Investments in or acquisitions of Capital Stock or other obligations,
property or securities of Persons, other than Affiliates, received in
the bankruptcy or reorganization of or by such Person or otherwise
taken in settlement or satisfaction of claims, disputes or judgments,
and, in each case, extensions, modifications and renewals thereof;
(14) Investments in prepaid expenses, negotiable instruments held for
collection, and lease, utility and workers' compensation, performance
and other similar deposits;
(15) Investments, not to exceed, in the aggregate, $100 million at any one
time outstanding, made to obtain noncancellable indefeasible rights of
use to, or capacity in, fiber-based bandwidth or similar network
bandwidth, related equipment and/or other Telecommunications Assets in
the ordinary course of PSINet's business or in the Capital Stock of a
Person engaged in a Telecommunications Business; and
(16) any other Investments in an aggregate amount not to exceed $50 million
at any one time outstanding.
-100-
<PAGE>
In connection with any assets or property contributed or transferred to any
Person as an Investment, such property and assets shall be equal to the Fair
Market Value, as determined by PSINet's Board of Directors at the time of such
Investment.
"Permitted Joint Venture" means a corporation, partnership or other Person
engaged in a Telecommunications Business over which PSINet has, directly or
indirectly, the power to direct the policies, management and affairs in all
material respects.
"Permitted Lien" means:
(a) any Lien existing as of the date of the Indenture;
(b) any Lien arising by reason of:
(1) any judgment, decree or order of any court, so long as such Lien is
adequately bonded and any appropriate legal proceedings which may
have been duly 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,
(2) taxes not yet delinquent or which are being contested in good
faith,
(3) security for payment of workers' compensation or other insurance or
arising under workers' compensation laws or similar legislation,
(4) good faith deposits in connection with bids, tenders, leases,
contracts, other than contracts evidencing Indebtedness,
(5) zoning restrictions, easements, licenses, reservations, title
defects, rights of others for rights of way, utilities, sewers,
electric lines, telephone or telegraph lines, and other similar
purposes, provisions, covenants, conditions, waivers, restrictions
on the use of property or irregularities of title and, with respect
to leasehold interests, mortgages, obligations, liens and other
encumbrances incurred, created, assumed or permitted to exist and
arising by, through or under a landlord or owner of the leased
property, with or without consent of the lessee, none of which
materially impairs the use of any parcel of property material to
the operation of the business of PSINet or any Subsidiary or the
value of such property for the purpose of such business,
(6) deposits to secure public or statutory obligations, or in lieu of
surety or appeal bonds, or
(7) operation of law in favor of landlords, carriers, warehousemen,
bankers, mechanics, materialmen, laborers, employees or suppliers,
incurred in the ordinary course of business for sums which are not
yet delinquent or are being contested in good faith by negotiations
or by appropriate proceedings which suspend the collection thereof;
-101-
<PAGE>
(c) any Lien to secure the performance bids, trade contracts, leases,
including, without limitation, statutory and common law landlord's
liens, statutory obligations, surety and appeal bonds, letters of
credit and other obligations of a like nature and incurred in the
ordinary course of business of PSINet or any Subsidiary;
(d) any Lien securing obligations in connection with Indebtedness permitted
under that section of the Indenture described in clause (1) of
paragraph (b) of "--Certain Covenants--Limitation on Indebtedness"
which attaches within 180 days of the incurrence of such Indebtedness
or the date of delivery of such property or asset, whichever occurs
later; provided that such Liens only extend to such acquired, developed
or constructed property and any accessories, accessions, additions,
replacements and proceeds thereof;
(e) any Lien arising from judgments, decrees or attachments in
circumstances not constituting an Event of Default;
(f) any Lien securing obligations in connection with Indebtedness permitted
under that section of the Indenture described in clauses (2), (4) or
(8) of paragraph (b) of "--Limitation on Indebtedness;"
(g) any Lien in favor of PSINet or any Wholly Owned Subsidiary;
(h) any Lien securing obligations in connection with Acquired Indebtedness;
provided that any such Lien does not extend to or cover any property or
assets of PSINet or any of its Subsidiaries other than the property or
assets of the Acquired Person covered thereby or the property assets so
acquired;
(i) any Lien in favor of the Trustee for the benefit of the Holders or the
Trustee arising under the provisions in the Indenture;
(j) any Lien encumbering deposits made to secure obligations arising from
statutory, regulatory, contractual or warranty requirements of PSINet
or any Subsidiary if and to the extent arising in the ordinary course
of business, including rights of offset and set-off;
(k) any Lien in favor of customs or revenue authorities to secure payment
of customs duties in connection with the importation of goods in the
ordinary course of business;
(l) leases, subleases, licenses or other similar rights granted to third
Persons not interfering with the ordinary course of business of PSINet
or its Subsidiaries;
(m) any Lien securing reimbursement obligations with respect to letters of
credit that encumber documents and other property relating to such
letters of credit; and
(n) any Lien securing any refinancing, in whole or in part, of any
obligation or Indebtedness described in the foregoing clauses (a)
through (m), other than clause (e), so long as no additional collateral
is granted as security thereby.
-102-
<PAGE>
"Preferred Stock" means, with respect to any Person, any Capital Stock of
any class or classes (however designated) which is preferred as to the payment
of dividends or distributions, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such Person, over the
Capital Stock of any other class in such Person.
"Public Equity Offering" means an underwritten offering of Capital Stock,
other than Disqualified Stock, of PSINet with gross proceeds to PSINet of at
least $25 million pursuant to a registration statement that has been declared
effective by the Securities and Exchange Commission pursuant to the Securities
Act of 1933, other than a registration statement on Form S-8 or otherwise
relating to equity securities issuable under any employee benefit plan of
PSINet.
"Purchase Money Obligation" means any Indebtedness secured by a Lien on
assets related to the business of PSINet and any additions, replacements,
modifications and accessions thereto, which are purchased by PSINet at any time
after the notes are issued; provided that:
(1) the security agreement or conditional sales or other title retention
contract pursuant to which the Lien on such assets is created, which we
refer to collectively as a Purchase Money Security Agreement, shall be
entered into within 180 days after the purchase or substantial
completion of the construction of such assets and shall at all times be
confined solely to the assets so purchased or acquired, any additions,
replacements, modifications and accessions thereto and any proceeds and
products therefrom;
(2) at no time shall the aggregate principal amount of the outstanding
Indebtedness secured thereby be increased, except in connection with
the purchase of additions and accessions thereto and except in respect
of fees and other obligations in respect of such Indebtedness; and
(3) (A) the aggregate outstanding principal amount of Indebtedness secured
thereby, determined on a per asset basis in the case of any additions
and accessions, shall not at the time such Purchase Money Security
Agreement are entered into exceed 100% of the purchase price to PSINet
of the assets subject thereto or (B) the Indebtedness secured thereby
shall be with recourse solely to the assets so purchased or acquired,
any additions, replacements, modifications and accessions thereto and
any proceeds and products therefrom.
"Qualified Capital Stock" of any Person means any and all Capital Stock of
such Person other than Redeemable Capital Stock.
"Redeemable Capital Stock" means any Capital Stock that, either by its
terms or by the terms of any security into which it is convertible or
exchangeable or otherwise, is or upon the happening of an event or passage of
time would be, required to be redeemed prior to the Stated Maturity of the
principal of the notes or is redeemable at the option of the holder thereof at
any time prior to such Stated Maturity, or is convertible into or exchangeable
for debt securities at any time prior to such Stated Maturity at the option of
the holder thereof.
"Registration Default" has the meaning provided in Section 5 of the
registration rights agreement.
-103-
<PAGE>
"Sale and Leaseback Transaction" means any transaction or series of related
transactions pursuant to which PSINet or a Subsidiary sells or transfers any
property or asset in connection with the leasing, or the resale against
installment payments, of such property or asset to the seller or transferor.
"Shelf Registration Statement" means a shelf registration statement
pursuant to Rule 415 under the Securities Act of 1933.
"Stated Maturity" means, when used with respect to any Indebtedness or any
installment of interest thereon, the dates specified in such Indebtedness as the
fixed date on which the principal of such Indebtedness or such installment of
interest, as the case may be, is due and payable.
"Strategic Investor" means any Person which is, or a controlled Affiliate
of any Person which is or a controlled Affiliate of which is, engaged
principally in the Telecommunications Business and which has a Total Market
Capitalization of at least $500 million.
"Subordinated Indebtedness" means Indebtedness of PSINet or a Guarantor
expressly subordinated by its terms in right of payment to the notes or the
Guarantee of such Guarantor, as the case may be.
"subsidiary" means, with respect to any Person, a corporation, association
or other business entity (1) of which outstanding Capital Stock having at least
the majority of the votes entitled to be cast in the election of directors is
owned, directly or indirectly, by such Person and/or any one or more
subsidiaries of such Person, or (2) of which at least a majority of voting
interest is owned, directly or indirectly, by such Person and/or one or more
subsidiaries of such Person.
"Subsidiary" means any subsidiary of PSINet other than an Unrestricted
Subsidiary.
"Telecommunications Assets" means all assets, including Capital Stock,
rights, contractual or otherwise, and properties, real or personal, whether
tangible or intangible, used or intended for use in connection with a
Telecommunications Business.
"Telecommunications Business" means, when used in reference to any Person,
that such Person is engaged primarily in:
(1) the business of transmitting, or providing services relating to the
transmission of, voice, video or data through owned or leased
transmission facilities,
(2) the business of creating, developing or marketing communications
related network equipment or services or computer-based information or
(3) businesses reasonably related thereto, which determination shall, in
any such case, be made in good faith by the Board of Directors.
"Total Consolidated Indebtedness" means, as at any date of determination,
an amount equal to the aggregate amount of all Indebtedness of PSINet and any
Subsidiary, on a
-104-
<PAGE>
Consolidated basis in accordance with GAAP, outstanding as of such date of
determination, after giving effect to any Incurrence of Indebtedness and the
application of the proceeds therefrom giving rise to such determination.
"Total Market Capitalization" of any Person means, as of any day of
determination, the sum of:
(a) the consolidated Indebtedness of such Person and any Subsidiaries on
such day; plus
(b) the product of
(1) the aggregate number of outstanding shares of common stock of
such Person on such day, which shall not include any options or
warrants on, or securities convertible or exchangeable into,
shares of Common Stock of such Person, and
(2) the average closing price of such common stock over the 10
consecutive Trading Days ending not earlier than 10 Trading Days
immediately prior to such date of determination; plus
(c) the liquidation value of any outstanding shares of preferred stock of
such Person on such day.
If no such closing price exists with respect to shares of any such class,
the value of such shares for purposes of clause (b) of the preceding sentence
shall be determined by the Board in good faith and evidenced by a resolution of
the Board filed with the Trustee. Notwithstanding the foregoing, unless the
Person's Common Stock is listed on any national securities exchange or on The
Nasdaq National Market, the "Total Market Capitalization" of the Person shall
mean, as of any day of determination, the enterprise value, without duplication,
of the Person and any subsidiaries, including the fair market value of their
debt and equity, as determined by an independent banking firm of national
standing with experience in such valuations and evidenced by a written opinion
in customary form filed with the Trustee; provided that for purposes of any such
determination, the enterprise value of the Person shall be calculated as if the
Person were a publicly held corporation without a controlling stockholder. For
purposes of any such determination, such banking firm's written opinion may
state that such fair market value is no less than a specified amount and such
opinion may be as of a date no earlier than 90 days prior to the date of such
determination.
"Trading Day" with respect to a securities exchange or automated quotation
system means a day on which such exchange or system is open for a full day of
trading.
"Trustee" means Wilmington Trust Company, until a successor trustee shall
have become such pursuant to the applicable provisions of the Indenture, and
thereafter "Trustee" shall mean such successor trustee.
"United States Dollar Equivalent" means, with respect to any monetary
amount in a currency other than the U.S. Dollar, at or as of any time for the
determination thereof, the amount of U.S. Dollars obtained by converting such
foreign currency involved in such computation into U.S. Dollars at the spot rate
for the purchase of U.S. Dollars with the applicable
-105-
<PAGE>
foreign currency as quoted by Reuters (or, if Reuters ceases to provide such
spot quotations, by such other service as is providing such spot quotations, as
selected by PSINet) at approximately 11:00 a.m. (New York City time) on the date
not more than two business days prior to such determination. For purposes of
determining whether any Indebtedness can be incurred, any Investment can be made
or any transaction described in the "Limitation on Transactions with Affiliates"
covenant can be undertaken, which we refer to as a Tested Transaction, the
United States Dollar Equivalent of such Indebtedness, Investment or transaction
described in the "Limitation or Transaction with Affiliates" covenant shall be
determined as of the date incurred, made or undertaken and, in each case, no
subsequent change in the United States Dollar Equivalent shall cause such Tested
Transaction to have been incurred, made or undertaken in violation of the
Indenture.
"Unrestricted Subsidiary" means:
(1) any of our subsidiaries that at the time of determination shall be an
Unrestricted Subsidiary, as designated by our Board of Directors, as
provided below; and
(2) any subsidiary of an Unrestricted Subsidiary.
The Board of Directors of PSINet may designate any subsidiary of PSINet,
including any newly acquired or newly formed Subsidiary, to be an Unrestricted
Subsidiary if all of the following conditions apply:
(a) neither PSINet nor any of its Subsidiaries provides credit support for
Indebtedness of such subsidiary, including any undertaking, agreement
or instrument evidencing such Indebtedness;
(b) such subsidiary is not liable, directly or indirectly, with respect to
any Indebtedness other than Unrestricted Subsidiary Indebtedness;
(c) any Investment in such subsidiary made as a result of designating such
subsidiary an Unrestricted Subsidiary shall not violate the provisions
of the "--Certain Covenants--Limitation on Unrestricted Subsidiaries"
covenant and such Unrestricted Subsidiary is not party to any
agreement, contract, arrangement or understanding at such time with
PSINet or any Subsidiary of PSINet unless the terms of any such
agreement, contract, arrangement or understanding are no less
favorable to PSINet or such Subsidiary than those that might be
obtained at the time from Persons who are not Affiliates of PSINet;
and
(d) such Unrestricted Subsidiary does not own any Capital Stock in any
Subsidiary of PSINet which is not simultaneously being designated an
Unrestricted Subsidiary.
Any such designation by the Board of Directors of PSINet shall be evidenced
to the Trustee by filing with the Trustee a board resolution giving effect to
such designation and an officers' certificate certifying that such designation
complies with the foregoing conditions and shall be deemed a Restricted Payment
on the date of designation in an amount equal to the greater of (A) the net book
value of such Investment or (B) the fair market value of such
-106-
<PAGE>
Investment as determined in good faith by PSINet's Board of Directors. The Board
of Directors of PSINet may designate any Unrestricted Subsidiary as a
Subsidiary; provided that:
. immediately after giving effect to such designation, PSINet could incur $1.00
of additional Indebtedness, other than Permitted Indebtedness, pursuant to
the restrictions under "--Certain Covenants, Limitation on Indebtedness" ;
and
. all Indebtedness of such Subsidiary shall be deemed to be incurred on the
date such Unrestricted Subsidiary becomes a Subsidiary.
"Unrestricted Subsidiary Indebtedness" of any Unrestricted Subsidiary means
Indebtedness of such Unrestricted Subsidiary:
(1) as to which neither PSINet nor any Subsidiary is directly or
indirectly liable, by virtue of PSINet or any such Subsidiary being
the primary obligor on, guarantor of, or otherwise liable in any
respect to, such Indebtedness, except Guaranteed Debt of PSINet or any
Subsidiary to any Affiliate, in which case, unless the incurrence of
such Guaranteed Debt resulted in a Restricted Payment at the time of
incurrence, PSINet shall be deemed to have made a Restricted Payment
equal to the principal amount of any such Indebtedness to the extent
guaranteed at the time such Affiliate is designated an Unrestricted
Subsidiary, and
(2) which, upon the occurrence of a default with respect thereto, does not
result in, or permit any holder of any Indebtedness of PSINet or any
Subsidiary to declare, a default on such Indebtedness of PSINet or any
Subsidiary or cause the payment thereof to be accelerated or payable
prior to its Stated Maturity.
"Voting Stock" means Capital Stock of the class or classes pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the Board of Directors, managers
or trustees of a corporation, irrespective of whether or not at the time Capital
Stock of any other class or classes shall have or might have voting power by
reason of the happening of any contingency.
"Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of which
is owned by PSINet or another Wholly Owned Subsidiary. For the purposes of this
definition, any director qualifying shares or investments by foreign nationals
mandated by, or required to maintain its limited liability status under,
applicable law shall be disregarded in determining the ownership of a
Subsidiary.
Paying Agents and Registrar for the Notes
We will maintain one or more paying agents and transfer agents for the euro
notes (1) in Luxembourg, for as long as the euro notes are outstanding, and (2)
in the Borough of Manhattan, City of New York, each of which we refer to as a
Euro Paying Agent and a Euro Transfer Agent, respectively. The initial Euro
Paying Agents and Euro Transfer Agents are Wilmington Trust Company in New York
and, as agent for Wilmington Trust Company in Luxembourg, Kredietbank S.A.
Luxembourgeoise.
-107-
<PAGE>
We will maintain one or more paying agents and transfer agents for the
dollar notes (1) in Luxembourg, for so long as the dollar notes are outstanding,
and (2) in the Borough of Manhattan, City of New York, each of which we refer to
as a Dollar Paying Agent and a Dollar Transfer Agent, respectively, and together
with the Euro Paying Agents and the Euro Transfer Agents, the Paying Agents and
the Transfer Agents, respectively. The initial Dollar Paying Agents are
Wilmington Trust Company in New York and, as agent for Wilmington Trust Company
in Luxembourg, Kredietbank S.A. Luxembourgeoise.
We will also maintain a registrar for the euro notes and a registrar for
the dollar notes, each of which we refer to as a Registrar, with offices or
agents in the Borough of Manhattan, City of New York. The initial Registrar for
the dollar notes is Wilmington Trust Company in New York. The initial Registrar
for the euro notes is Wilmington Trust Company in New York. The Registrar will
maintain a register reflecting ownership of the relevant Definitive Registered
Notes outstanding from time to time.
In any case where any interest payment date, maturity or stated maturity of
any note shall not be a Business Day, then payment of interest or principal need
not be made on such date, but may be made on the next succeeding Business Day
with the same force and effect as if made on such interest payment date, or at
the maturity of stated maturity and no interest shall accrue with respect to
such payment for the period from and after such interest payment date, maturity
or stated maturity, as the case may be, to the next succeeding Business Day.
We reserve the right at any time to vary or terminate the appointment of
any Paying Agent, Registrar, Transfer Agent or other agent and/or to appoint
additional or other Paying Agents, Registrars, Transfer Agents or other agents
and/or to appoint additional or other Paying Agents, Registrars, Transfer Agents
without prior notice to the holders.
Notices
All notices to holders of the notes shall be deemed to have been duly given
upon (1) the mailing by first-class mail, postage prepaid, of such notices to
registered holders of the notes at their registered addresses as recorded in the
registers; and (2) publication in a leading daily newspaper with general
circulation in Luxembourg or, if the euro notes are not listed on the Luxembourg
Stock Exchange and not practicable, in a leading daily English-language
newspaper having general circulation in Europe previously approved by the
Trustee. Any notice referred to in (2) above shall be deemed to have been given
on the date of such publication or, if published more than once or on different
dates, on the first date on which publication is made in the manner required in
the newspaper or in one of the newspapers referred to above. For notes which are
represented by global certificates held on behalf of Euroclear or Cedelbank,
notices may be given by delivery of the relevant notices to Euroclear or
Cedelbank for communication in substitution for the aforesaid publication. If,
and for so long as, any euro notes are listed on the Luxembourg Stock Exchange
and the rules and regulations of the Luxembourg Stock Exchange so require, any
such notice shall also be published in a leading daily newspaper of general
circulation in Luxembourg. Such publication is expected to be the Luxembourger
Wort.
-108-
<PAGE>
Form of Notes
The notes issued on the closing date of the initial notes offering were
issued in the form of Global Notes. Initial dollar notes were, and exchange
notes will be, issued in denominations of $1,000 principal amount and integral
multiples thereof. Initial euro notes were, and exchange euro notes will be
issued in denominations of Euro 1,000 principal amount and integral multiples
thereof.
Euro notes sold within the United States to qualified institutional buyers
will initially be represented by one Global Note, which we refer to as the Euro
U.S. Global Note, and euro notes sold outside the United States pursuant to
Regulation S under the Securities Act will initially be represented by one
Global Note, which we refer to as the Euro International Global Note and,
together with the Euro U.S. Global Note, the Euro Global Notes. On December 2,
1999, the closing date of the initial notes offering, the Euro Global Notes were
deposited with a common depositary for Euroclear and Cedelbank, or its nominee.
Investors may hold their interests in the Euro Global Notes directly through
Euroclear or Cedelbank or indirectly through organizations which are
participants in Euroclear or Cedelbank. Euro Book-Entry Interests will be shown
on, and transfers thereof will be effected only through, records maintained in
book-entry form by Euroclear and Cedelbank and their participants.
Dollar notes sold within the United States to qualified institutional
buyers will initially be represented by one or more Global Notes, which we refer
to as the Dollar U.S. Global Note, and dollar notes sold outside the United
States pursuant to Regulation S under the Securities Act will initially be
represented by one or more Global Notes, which we refer to as the Dollar
International Global Note and, together with the Dollar U.S. Global Note, the
Dollar Global Notes. On December 2, 1999, the closing date of the initial notes
offering, Dollar Global Notes were deposited with the Trustee as custodian for
DTC, which together with Euroclear and Cedelbank, we refer to as the
Depositaries, and registered in the name of Cede & Co., as nominee of DTC. Prior
to January 11, 2000, the 40th day after the later of the commencement of the
offering and the issue date of the notes, interests in the Dollar International
Global Note may be held only through Euroclear or Cedelbank. Investors may hold
their interests in the Dollar International Global Notes directly through
Euroclear or Cedelbank, or indirectly through organizations which are
participants in such systems. Euroclear and Cedelbank will hold such interests
in the Dollar International Global Note in their respective names on the books
of DTC on behalf of their participants. Beginning January 11, 2000, 40 days
after the later of the commencement of the offering and the issue date of the
initial notes (but not earlier), ownership interests in the Dollar International
Global Notes may also be held through organizations other than Cedelbank or
Euroclear that are participants in DTC. Dollar Book-Entry Interests will be
shown on, and transfers thereof will be effected only through, records
maintained in book-entry form by DTC and its participants.
The Book-Entry Interests will not be held in definitive form. Instead, DTC,
Euroclear and/or Cedelbank will credit on their respective book-entry
registration and transfer systems a participant's account with the interest
beneficially owned by such participant. The laws of some jurisdictions,
including certain states of the United States, may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. The foregoing limitations may impair the ability to own, transfer or
pledge Book-Entry Interests. In addition, while the notes are in global form,
holders of Book-Entry Interests will not be considered the owners or "holders"
of notes for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee under the Indenture.
-109-
<PAGE>
Under the terms of the Indenture, owners of Euro Book-Entry Interests will
receive Definitive Registered Notes:
(1) if either Euroclear or Cedelbank notifies us that it is unwilling or
unable to continue to act as depositary and a successor depositary is
not appointed by us within 120 days;
(2) if Euroclear or Cedelbank so request following an Event of Default
under the Indenture;
(3) in whole (but not in part) at any time if we in our sole discretion
determine that the Euro Global Notes should be exchanged for
Definitive Registered Notes; or
(4) the owner of a Euro Book-Entry Interest requests such exchange in
writing delivered through either Euroclear or Cedelbank following an
Event of Default under the Indenture.
Euroclear has advised us, with regard to the Euro Book-Entry Interests,
that its current practice, upon receipt of any request by an owner of a Book-
Entry Interest for Definitive Registered Notes, is to make a request to us that
all owners of Book-Entry Interests receive Definitive Registered Notes.
Under the terms of the Indenture, owners of Dollar Book-Entry Interests
will receive Definitive Registered Notes:
(1) if DTC notifies us that it is unwilling or unable to continue to act
as depositary or ceases to be a clearing agency registered under the
Exchange Act and, in either case, a successor depositary is not
appointed by the Issuer within 120 days;
(2) if DTC so requests following an Event of Default under the Indenture;
(3) in whole (but not in part) at any time if we in our sole discretion
determine that the Global Notes should be exchanged for Definitive
Registered Notes; or
(4) the owner of a Dollar Book-Entry Interest requests such exchange in
writing delivered through DTC (including following an Event of Default
under the Indenture).
In such an event, the Registrar for the notes will issue notes in
definitive registered form, which we refer to as Definitive Registered Notes,
registered in the name or names and issued in any approved denominations,
requested by or on behalf of DTC, Euroclear and/or Cedelbank, as applicable (in
accordance with their respective customary procedures and based upon directions
received from participants reflecting the beneficial ownership of Book-Entry
Interests) and will bear a restrictive legend, unless that legend is not
required by the indenture or applicable law. Principal of, premium, if any, and
interest on any Definitive Registered Notes will be payable at the corporate
trust office or agency of the relevant Paying Agent, maintained in New York City
or Luxembourg for such purpose, provided that payment of interest may be made at
our option by check mailed to addresses of persons entitled thereto as shown on
the note register.
-110-
<PAGE>
Payments of principal on any Definitive Registered Notes will be made
against presentation and surrender (or, in the case of a partial payment,
endorsement) of such notes at the office of the relevant Paying Agent. Payments
in respect of dollar notes will be made by U.S. dollar check drawn on, or by
transfer from a U.S. dollar account maintained by us, and payments in respect of
euro notes will be made by Euro check drawn on, or by transfer from a Euro
account maintained by us.
If Definitive Registered Notes are issued and such notes are listed on the
Luxembourg Stock Exchange, transfers of such notes will have to be cleared
through a clearing system or a method approved by the rules and regulations of
the Luxembourg Stock Exchange in order to continue to be listed on the
Luxembourg Stock Exchange.
To the extent permitted by law, we, the Trustee and the Registrar shall be
entitled to treat the holder of any note as the absolute owner thereof.
We will not impose any fees or other charges in respect of the notes;
however, holders of the Book-Entry Interests may incur fees normally payable in
respect of the maintenance and operation of accounts in DTC, Euroclear and/or
Cedelbank.
None of us, the guarantors, if any, the Trustee or the Registrar will have
any responsibility or liability for any aspect of the records relating to or
payments made on account of Book-Entry Interests or for maintaining, supervising
or reviewing any records of DTC, Euroclear or Cedelbank relating to the notes.
Transfer and Exchange
The Global Notes may be transferred only to a successor to the relevant
Depositary.
Book-Entry Interests will be subject to certain restrictions on transfer
and certification requirements. After the notes have been registered under the
Securities Act, all certification requirements with respect to the exchange
notes will cease.
All transfers of Book-Entry Interests between participants in DTC,
participants in Euroclear or participants in Cedelbank will be effected by DTC,
Euroclear or Cedelbank pursuant to customary procedures and subject to the
applicable rules and procedures established by DTC, Euroclear or Cedelbank and
their respective participants. See "Description of Book-Entry System."
Subject to the foregoing, a Book-Entry Interest in one of the Global Notes
may be transferred to a person who takes delivery thereof in the form of a Book-
Entry Interest in another of the Global Notes by means of an instruction
originated through DTC, Euroclear or Cedelbank, as applicable. Any Book-Entry
Interest that is so transferred will, upon transfer, cease to be a Book-Entry
Interest in the first-mentioned Global Note and become a Book-Entry Interest in
the other Global Note and will thereafter be subject to all transfer
restrictions, if any, and other procedures applicable to Book-Entry Interests in
such other Global Note for as long as it remains such a Book-Entry Interest. In
connection with such transfer, appropriate adjustments will be made to reflect a
decrease in the principal amount at maturity of the first-mentioned
-111-
<PAGE>
Global Note and a corresponding increase in the principal amount at maturity of
the other Global Note, as applicable. Prior to the 40th day after the later of
the commencement of the offering and the issue date of the notes, an interest in
one of the Global Notes may not be transferred to a person who takes delivery
thereof in the form of an interest in another Global Note.
Book-Entry Interests in a Global Note may be exchanged by the holder
thereof for Definitive Registered Notes in denominations of Euro 1,000 or $1,000
principal amount and integral multiples thereof upon receipt by the Registrar of
instructions relating thereto and any certificates and other documentation
required by the indenture. It is expected that such instructions will be based
upon directions received by DTC, Euroclear or Cedelbank, as applicable, from the
participant which owns the relevant Book-Entry Interests. Definitive Registered
Notes issued in exchange for a Book-Entry Interest will, except as set forth in
the indenture or as otherwise determined by us in compliance with applicable
law, be subject to restrictions and will have a legend.
Subject to such restrictions on the initial notes, euro notes issued as
Definitive Registered Notes may be transferred, upon surrender for registration
of transfer of such note at the office or agency maintained for such purpose in
New York City or Luxembourg, in whole or in part, in denominations of Euro 1,000
in principal amount or integral multiples thereof and dollar notes issued as
Definitive Registered Notes may be transferred, upon surrender for registration
of transfer of such note at the office or agency maintained for such purpose in
New York City or Luxembourg, in whole or in part, in denominations of $1,000 in
principal amount or integral multiples thereof to persons who take delivery
thereof in the form of Definitive Registered Notes or in the form of Book-Entry
Interests in a Global Note. In the case of a transfer of only a portion of a
Definitive Registered Note, a new Definitive Registered Note will be issued to
the transferee in respect of the principal amount of the portion so transferred
and a further new Definitive Registered Note in respect of the balance of the
principal amount not so transferred shall be issued to the transferor, in each
case at the office or agency maintained for such purpose in New York City or
Luxembourg. In connection with any transfer of notes, the indenture will require
the transferor to, among other things, furnish appropriate endorsements and
transfer documents, to furnish certain certificates and to pay any taxes, duties
and governmental charges in connection with such transfer.
Notwithstanding the foregoing, we are not required to register the transfer
of any Definitive Registered Notes:
(1) for a period of 15 calendar days prior to any date fixed for the
redemption of the notes;
(2) for a period of 15 calendar days immediately prior to the date fixed
for selection of notes to be redeemed in part;
(3) for a period beginning on the record date with respect to any interest
payment date and ending at the close of business on such interest
payment date; or
(4) which the holder has tendered (and not withdrawn) for repurchase in
connection with a Change of Control Offer or an Excess Proceeds Offer.
Any such transfer will be made without charge to the holder, other than any
taxes, duties and governmental charges payable in connection with such transfer.
-112-
<PAGE>
Replacement of Notes
If any mutilated note is surrendered to the Trustee, or we and the Trustee
receive evidence to our satisfaction of the destruction, loss or theft of any
note, application can be made to any Transfer Agent at its office or agency in
New York City or Luxembourg to replace that note, which must be accompanied by
delivery to us, each guarantor, if any, and the Trustee of such security or
indemnity as may be required by any of such parties. Upon the issuance of any
replacement note, we may require the payment of a sum sufficient to pay all
documentary, stamp or similar issue or transfer taxes or other governmental
charges that may be imposed in relation thereto and any other expenses
(including the fees and expenses of the Trustee) connected therewith.
-113-
<PAGE>
DESCRIPTION OF CERTAIN INDEBTEDNESS
The following summaries of our existing indebtedness do not purport to be
complete and are qualified in their entirety by reference to the provisions of
the various agreements and indentures related thereto, copies of which have been
filed with the SEC and to which reference is hereby made. See "Where You Can
Find More Information."
10% Senior Notes
We have outstanding $600.0 million aggregate principal amount of our 10%
Senior Notes due 2005. The 10% senior notes are senior unsecured obligations
ranking equivalent in right of payment to all our existing and future unsecured
and unsubordinated indebtedness and senior in right of payment to all our
existing and future subordinated indebtedness. The 10% senior notes were issued
under an Indenture dated as of April 13, 1998 between us and Wilmington Trust
Company, as trustee.
The 10% senior notes will mature on February 15, 2005. Interest on the 10%
senior notes is payable semi-annually on August 15 and February 15 of each year,
commencing August 15, 1998. The 10% senior notes are redeemable at our option,
in whole or in part, at any time on or after February 15 of 2002, 2003 and 2004
at 105%, 102.5% and 100% of the principal amount thereof, respectively, in each
case, plus accrued and unpaid interest to the date of redemption. In addition,
on or prior to February 15, 2001, we may redeem up to 35% of the original
aggregate principal amount of the 10% senior notes at a redemption price of 110%
of the principal amount thereof, plus accrued and unpaid interest to the date of
redemption, with the net cash proceeds of certain public equity offerings or the
sale of stock to one or more strategic investors, provided that at least 65% of
the original aggregate principal amount of the 10% senior notes remains
outstanding immediately after such redemption. Upon the occurrence of a "change
of control" (as defined in the 10% senior notes indenture), we will be required
to make an offer to purchase all of the 10% senior notes at a purchase price
equal to 101% of the principal amount thereof, plus accrued and unpaid interest,
if any, to the date of repurchase. We may not have sufficient funds or the
financial resources necessary to satisfy our obligations to repurchase the 10%
senior notes upon a change of control.
The 10% senior notes indenture contains certain financial covenants with
which we must comply, including the following matters:
(1) limitation on our payment of cash dividends, repurchase of
capital stock, payment of principal on subordinated indebtedness and making
of certain investments, unless after giving effect to each such payment,
repurchase or investment, certain operating cash flow coverage tests are
met, excluding certain permitted payments and investments;
(2) limitation on our and our subsidiaries' incurrence of additional
indebtedness, unless at the time of such incurrence, our ratio of debt to
annualized operating cash flow would be less than or equal to 6.0 to 1.0
prior to April 1, 2001 and less than or equal to 5.5 to 1.0 on or after
April 1, 2001, excluding certain permitted incurrences of debt;
-114-
<PAGE>
(3) limitation on our and our subsidiaries' incurrence of liens,
unless the 10% senior notes are secured equally and ratably with the
obligation or liability secured by such lien, excluding certain permitted
liens;
(4) limitation on the ability of any of our subsidiaries to create or
otherwise cause to exist any encumbrance or restriction on the payment of
dividends or other distributions on its capital stock, payment of
indebtedness owed to us or any of our other subsidiaries, making of
investments in us or any other of our subsidiaries, or transfer of any
properties or assets to us or any of our other subsidiaries, excluding
permitted encumbrances and restrictions;
(5) limitation on certain mergers, consolidations and sales of assets
by us or our subsidiaries;
(6) limitation on certain transactions with our affiliates;
(7) limitation on the ability of any or our subsidiaries to guarantee
or otherwise become liable with respect to any of our indebtedness unless
such subsidiary provides for a guarantee of the 10% senior notes on the
same terms as the guarantee of such indebtedness;
(8) limitation on certain sale and leaseback transactions by us or
our subsidiaries;
(9) limitation on certain issuances and sales of capital stock of our
subsidiaries; and
(10) limitation on the ability of us or our subsidiaries to engage in
any business not substantially related to a telecommunications business.
The events of default under the 10% senior notes indenture include various
events of default customary for such type of agreement, including, among others,
the failure to pay principal and interest when due on the 10% senior notes,
cross-defaults on other indebtedness for borrowed monies in excess of $10
million, which indebtedness would therefore include certain judgments or orders
for payment of money in excess of $10 million, and certain events of bankruptcy,
insolvency and reorganization.
11% Senior Notes
We have outstanding approximately $1.2 billion aggregate principal amount
of our 11% senior notes due 2009, consisting of $1.05 billion aggregate
principal amount of 11% senior notes due 2009 and Euro 150 million aggregate
principal amount of 11% senior notes due 2009, assuming an exchange rate of Euro
0.9692 to U.S. $1.00 as of November 23, 1999. The 11% senior notes are our
senior unsecured obligations ranking equivalent in right of payment to all our
existing and future unsecured and unsubordinated indebtedness and senior in
right of payment to all our existing and future subordinated indebtedness. The
11% senior notes were issued under an indenture dated as of July 23, 1999
between us and Wilmington Trust Company, as Trustee.
-115-
<PAGE>
The 11% senior notes will mature on August 1, 2009. Interest on the 11%
senior notes is payable semi-annually on February 1 and August 1 of each year,
commencing February 1, 2000. The 11% senior notes are redeemable at our option,
in whole or in part, at any time after August 1, 2004, 2005, 2006 and 2007 at
105.500%, 103.667%, 101.833% and 100% of the principal amount thereof,
respectively, in each case, plus accrued and unpaid interest to the date of
redemption. In addition, on or prior to August 1, 2002, we may redeem up to 35%
of the original aggregate principal amount of the 11% senior notes at a
redemption price of 111.000% of the principal amount thereof, plus accrued and
unpaid interest to the date of redemption, with the net cash proceeds of certain
public equity offerings or the sale of stock to one or more strategic investors;
provided that at least 65% of the original aggregate principal amount of each of
the euro notes and the dollar notes remains outstanding immediately after such
redemption. Upon the occurrence of a change of control (as defined in the 11%
senior notes indenture), we will be required to make an offer to purchase all of
the 11% senior notes at a purchase price equal to 101% of the principal amount
thereof, plus accrued and unpaid interest, if any, to the date of repurchase. We
may not have sufficient funds or the financial resources necessary to satisfy
our obligations to repurchase the 11% senior notes upon a change of control.
The 11% senior notes indenture contains certain financial covenants with
which we must comply which are substantially identical to those contained in the
indentures governing our other senior notes. These financial covenants are
described above under "--10% Senior Notes."
The events of default under the 11% senior notes are substantially
identical to those contained in the indentures governing our other senior notes
and are described above under "--10% Senior Notes."
11 1/2% Senior Notes
We have outstanding $350.0 million aggregate principal amount of our 11
1/2% senior notes due 2008. The 11 1/2% senior notes are our senior unsecured
obligations ranking equivalent in right of payment to all our existing and
future unsecured and unsubordinated indebtedness and senior in right of payment
to all our existing and future subordinated indebtedness. The 11 1/2% senior
notes were issued under an Indenture dated as of November 3, 1998, as amended,
between us and Wilmington Trust Company, as Trustee.
The 11 1/2% senior notes will mature on November 1, 2008. Interest on the
11 1/2% senior notes is payable semi-annually on May 1 and November 1 of each
year, commencing May 1, 1999. The 11 1/2% senior notes are redeemable at our
option, in whole or in part, at any time on or after November 1 of 2003, 2004,
2005 and 2006 at 105.70%, 103.833%, 101.917% and 100% of the principal amount
thereof, respectively, in each case, plus accrued and unpaid interest to the
date of redemption. In addition, on or prior to November 1, 2001, we may redeem
up to 35% of the original aggregate principal amount of the 11 1/2% senior notes
at a redemption price of 111.5% of the principal amount thereof, plus accrued
and unpaid interest to the date of redemption, with the net cash proceeds of
certain public equity offerings or the sale of stock to one or more strategic
investors, provided that at least 65% of the original aggregate principal amount
of the 11 1/2% senior notes remains outstanding immediately after such
redemption. Upon the occurrence of a change of control (as defined in the 11
1/2% senior notes indenture), we will be required to make an offer to purchase
all of the 11 1/2% senior notes at a purchase price equal to
-116-
<PAGE>
101% of the principal amount thereof, plus accrued and unpaid interest, if any,
to the date of repurchase. We may not have sufficient funds or the financial
resources necessary to satisfy our obligations to repurchase the 11 1/2% senior
notes upon a change of control.
The 11 1/2% senior notes indenture contains certain financial covenants
with which we must comply, which are substantially identical to those contained
in the indenture governing our 10% senior notes described above under "--10%
Senior Notes."
The events of default under the 11 1/2% senior notes indenture are
substantially identical to those contained in the indenture governing our 10%
senior notes described above under "--10% Senior Notes."
-117-
<PAGE>
DESCRIPTION OF BOOK-ENTRY SYSTEM
General
On December 2, 1999, the closing date of the initial notes offering, two
Global Notes representing the euro notes were deposited with a common depositary
for Euroclear and Cedelbank, or its nominee. Thereafter, Euro Book-Entry
Interests therein will be shown on, and transfers thereof will be effected only
through, records maintained in book-entry form by Euroclear and Cedelbank and
their participants. On December 2, 1999, the closing date of the initial notes
offering, four Global Notes representing the dollar notes were deposited with
the Trustee, as custodian for DTC. Thereafter, Dollar Book-Entry Interests
therein will be shown on, and transfers thereof will be effected only through,
records maintained in book-entry form by DTC and its participants.
Book-Entry Interests will not be held in definitive form. Instead, DTC,
Euroclear and/or Cedelbank will credit on their respective book-entry
registration and transfer systems a participant's account with the interest
beneficially owned by such participant. The laws of some jurisdictions,
including certain states of the United States, may require that certain
purchasers of securities take physical delivery of such securities in definitive
form. The foregoing limitations may impair the ability to own, transfer or
pledge Book-Entry Interests. In addition, while the notes are in global form,
holders of Book-Entry Interests will not be considered the owners or "Holders"
of notes for any purpose.
So long as the notes are held in global form, DTC (or its nominee), in the
case of the dollar notes, and the common depositary (or its nominee), in the
case of the euro notes, will be considered the sole holders of Global Notes for
all purposes under the Indenture. In addition, participants must rely on the
procedures of DTC, Euroclear and Cedelbank and indirect participants must rely
on the procedures of the participants through which they own Book-Entry
Interests to exercise any rights of holders under the Indenture.
None of us, the Trustee, the exchange agent or the Registrar will have any
responsibility or be liable for any aspect of the records relating to the Book-
Entry Interests.
Definitive Registered Notes
Under the terms of the Indenture, owners of Euro Book-Entry Interests will
receive Definitive Registered Notes:
(1) if either Euroclear or Cedelbank notifies us that it is unwilling or
unable to continue to act as depositary and a successor depositary is not
appointed by the Issuer within 120 days;
(2) if Euroclear or Cedelbank so request following an Event of Default
under the Indenture;
(3) in whole (but not in part) at any time if we in our sole discretion
determine that the Global Notes should be exchanged for Definitive Registered
Notes; or
-118-
<PAGE>
(4) the owner of a Euro Book-Entry Interest requests such exchange in
writing delivered through either Euroclear or Cedelbank following an Event of
Default under the Indenture.
Euroclear has advised us, with regard to the Euro Book-Entry Interests,
that its current practice, upon receipt of any request by an owner of a Book-
Entry Interest for Definitive Registered Notes, is to make a request to us that
all owners of Book-Entry Interests receive Definitive Registered Notes.
Under the terms of the Indenture, owners of Dollar Book-Entry Interests
will receive Definitive Registered Notes:
(1) if DTC notifies us that it is unwilling or unable to continue to act
as depositary or ceases to be a clearing agency registered under the
Exchange Act and, in either case, a successor depositary is not
appointed by the Issuer within 120 days;
(2) if DTC so requests following an Event of Default under the Indenture;
(3) in whole (but not in part) at any time if we in our sole discretion
determines that the Global Notes should be exchanged for Definitive
Registered Notes; or
(4) the owner of a Dollar Book-Entry Interest requests such exchange in
writing delivered through DTC (including following an Event of Default
under the Indenture).
In such an event, the Registrar will issue Definitive Registered Notes in
the name or names and issued in any approved denominations, requested by or on
behalf of DTC, Euroclear and/or Cedelbank, as applicable (in accordance with
their respective customary procedures and based upon directions received from
participants reflecting the beneficial ownership of Book-Entry Interests), and
such Definitive Registered Notes will bear a restrictive legend, unless that
legend is not required by the Indenture or applicable law.
If Definitive Registered Notes are issued and such notes are listed on the
Luxembourg Stock Exchange, transfers of such notes will have to be cleared
through a clearing system or a method approved by the rules and regulations of
the Luxembourg Stock Exchange in order to continue to be listed on the
Luxembourg Stock Exchange.
Redemption of Global Notes
In the event any Global Note (or any portion thereof) is redeemed, the
relevant Depositary will redeem an equal amount of the Book-Entry Interests in
such Global Note from the amount received by it in respect of the redemption of
such Global Note. The redemption price payable in connection with the redemption
of such Book-Entry Interests will be equal to the amount received by the
relevant Depositary in connection with the redemption of such Global Note (or
any portion thereof). We understand that under existing practices of DTC,
Euroclear and Cedelbank, if fewer than all of the notes are to be redeemed at
any time, DTC, Euroclear and Cedelbank will credit their respective
participants' accounts on a proportionate basis (with adjustments to prevent
fractions) or by lot or on such other basis as they deem fair and appropriate;
provided, however, that no Euro Book-Entry Interest of less than 1,000 principal
-119-
<PAGE>
amount or Dollar Book-Entry Interest of less than $1,000 principal amount may be
redeemed in part.
Payments on Global Notes
Payments of any amounts owing in respect of the Global Notes (including
principal, premium, if any, interest and Liquidated Damages, if any) will be
made by us in euros, in the case of Euro Global Notes, and U.S. Dollars, in the
case of the Dollar Global Notes, to the relevant Paying Agent. The relevant
Paying Agent will, in turn, make payments to DTC or the common depositary for
Euroclear and Cedelbank, as applicable, which will distribute such payments to
participants in accordance with its procedures.
Under the terms of the Indenture, we and the Trustee will treat the
registered holder of the Global Notes (e.g., DTC (or its nominee) and the common
depositary (or its nominee)) as the owner thereof for the purpose of receiving
payments and for all other purposes. Consequently, none of us, the Trustee or
any agent of ours or the Trustee has or will have any responsibility or
liability for:
(1) any aspect of the records of DTC, Euroclear, Cedelbank or any
participant or indirect participant relating to or payments made on
account of a Book-Entry Interest or for maintaining, supervising or
reviewing any of the records of DTC, Euroclear, Cedelbank or any
participant or indirect participant relating to our payments made on
account of a Book-Entry Interest; or
(2) DTC, Euroclear, Cedelbank or any participant or indirect participant.
Payments by participants to owners of Book-Entry Interests held through
participants are the responsibility of such participants, as is now the case
with securities held for the accounts of customers registered in "street name."
Action by Owners of Book-Entry Interests
DTC, Euroclear and Cedelbank have advised us that they will take any action
permitted to be taken by a holder of notes (including the presentation of notes
for exchange as described above) only at the direction of one or more
participants to whose account the Book-Entry Interests in the Global Notes are
credited and only in respect of such portion of the aggregate principal amount
of notes as to which such participant or participants has or have given such
direction. The relevant Depositary will not exercise any discretion in the
granting of consents, waivers or the taking of any other action in respect of
the Global Notes. However, if there is an Event of Default under the notes, each
of DTC, Euroclear and Cedelbank reserve the right to exchange the Global Notes
for Definitive Registered Notes in certificated form, and to distribute such
notes to its participants.
Transfers
The Global Notes will bear a restrictive legend. Book-Entry Interests in
the Global Notes will be subject to restrictions on transfer.
-120-
<PAGE>
Book-Entry Interests in the Euro U.S. Global Note and the Dollar U.S.
Global Note (the "Restricted Book-Entry Interests" ) may be transferred to a
person who takes delivery in the form of Book-Entry Interests in the Euro
International Global Note or the Dollar International Global Note (the
"International Book-Entry Interests"), respectively, only upon delivery by the
transferor of a written certification (in the form provided in the Indenture) to
the effect that such transfer is being made in accordance with Regulation S
under the Securities Act. Prior to 40 days after the date of initial issuance of
the notes, ownership of International Book-Entry Interests will be limited to
persons that have accounts with Euroclear or Cedelbank or persons who hold
interests through Euroclear or Cedelbank, and any sale or transfer of such
interest to United States persons shall not be permitted during such period
unless such resale or transfer is made to a non-U.S. person or pursuant to Rule
144A. Subject to the foregoing, International Book-Entry Interests may be
transferred to a person who takes delivery in the form of Restricted Book-Entry
Interests only upon delivery by the transferor of a written certification (in
the form provided in the Indenture) to the effect that such transfer is being
made to a person who the transferor reasonably believes is a "qualified
institutional buyer" within the meaning of Rule 144A in a transaction meeting
the requirements of Rule 144A or otherwise in accordance with transfer
restrictions, and in accordance with any applicable securities laws of any state
of the United States or any other jurisdiction.
Subject to the foregoing, Book-Entry Interests may be transferred and
exchanged as described under "Description of Notes--Transfer and Discharge." Any
Book-Entry Interest in one of the Global Notes that is transferred to a person
who takes delivery in the form of a Book-Entry Interest in the other Global Note
will, upon transfer, cease to be a Book-Entry Interest in the first-mentioned
Global Note and become a Book-Entry Interest in the other Global Note, and
accordingly will thereafter be subject to all transfer restrictions, if any, and
other procedures applicable to Book-Entry Interests in such other Global Note
for as long as it retains such a Book-Entry Interest.
Definitive Registered Notes may be transferred and exchanged for Book-Entry
Interests in a Global Note only as described under "Description of the Notes--
Transfer and Discharge" and, if required, only after the transferor first
delivers to the Trustee a written certificate (in the form provided in the
Indenture) to the effect that such transfer will comply with the appropriate
transfer restrictions applicable to such notes.
Information Concerning DTC, Euroclear and Cedelbank
We understand as follows with respect to DTC, Euroclear and Cedelbank:
DTC is a limited purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York 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 of its participants and to facilitate the
clearance and settlement of transactions among its participants in such
securities through electronic book-entry changes in accounts of the
participants, thereby eliminating the need for physical movement of securities
certificates. DTC participants include securities brokers and dealers (including
the Initial Purchasers), banks, trust companies, clearing corporations and
-121-
<PAGE>
certain other organizations, some of whom (and/or their representatives) own
DTC. Access to the DTC book-entry system is also available to others, such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Because DTC can only act on behalf of participants, who in turn act on
behalf of indirect participants and certain banks, the ability of an owner of a
Book-Entry Interest to pledge such interest to persons or entities that do not
participate in the DTC system, or otherwise take actions in respect of such
interest, may be limited by the lack of a definitive certificate for such
interest. The laws of some states require that certain persons take physical
delivery of securities in definitive form. Consequently, the ability to transfer
Book-Entry Interests to such persons may be limited. In addition, beneficial
owners of Book-Entry Interests through the DTC system will receive distributions
attributable to the Global Notes only through DTC participants.
Euroclear and Cedelbank hold securities for participating organizations and
facilitate the clearance and settlement of securities transactions between their
respective participants through electronic book-entry changes in accounts of
such participants. Euroclear and Cedelbank provide to their participants, among
other things, services for safekeeping, administration, clearance and settlement
of internationally traded securities and securities lending and borrowing.
Euroclear and Cedelbank interface with domestic securities markets. Euroclear
and Cedelbank participants are financial institutions such as underwriters,
securities brokers and dealers, banks, trust companies and certain other
organizations. Indirect access to Euroclear or Cedelbank is also available to
others such as banks, brokers, dealers and trust companies that clear through or
maintain a custodian relationship with a Euroclear or Cedelbank participant,
either directly or indirectly.
Global Clearance and Settlement Under the Book-Entry System
Initial Settlement
Initial settlement for the dollar notes will be made in U.S. Dollars.
Initial settlement for the euro notes will be made in Euros.
Book-Entry Interests owned through DTC (other than through accounts at
Euroclear or Cedelbank) will follow the settlement applicable to United States
corporate debt obligations. The securities custody accounts of investors will be
credited with their holdings against payment in same-day funds on the settlement
date.
Book-Entry Interests owned through Euroclear or Cedelbank accounts will
follow the settlement procedures applicable to conventional eurobonds in
registered form. Book-Entry Interests will be credited to the securities custody
accounts of Euroclear and Cedelbank holders on the business day following the
settlement date against payment for value on the settlement date.
-122-
<PAGE>
Secondary Market Trading
The Dollar Book-Entry Interests will trade in DTC's Same-Day Funds
Settlement System, and secondary market trading activity in such Book-Entry
Interests will therefor settle in same-day funds. The Euro Book-Entry Interests
will trade through participants of Euroclear or Cedelbank, and will settle in
same-day funds.
Since the purchase determines the place of delivery, it is important to
establish at the time of trading of any Book-Entry Interests where both the
purchaser's and seller's accounts are located to ensure that settlement can be
made on the desired dates.
-123-
<PAGE>
PLAN OF DISTRIBUTION
This prospectus, as it may be amended or supplemented from time to time,
may be used by Participating Broker-Dealers in connection with resales of
exchange notes received in exchange for initial notes where such initial notes
were acquired as a result of market-making activities or other trading
activities. Each Participating Broker-Dealer that receives exchange notes for
its own account pursuant to the exchange offer must acknowledge that it will
deliver a prospectus in connection with any resale of such exchange notes. We
have agreed that under certain circumstances, we shall use our best efforts to
keep the exchange offer registration statement continuously effective,
supplemented and amended to the extent necessary to ensure that it is available
for sales of exchange notes by Participating Broker-Dealers, and to ensure that
the exchange offer registration statement conforms with the requirements of the
Securities Act of 1933 and the policies, rules and regulations of the Securities
and Exchange Commission as announced from time to time, for a period of one year
from the consummation of the exchange offer or such shorter period as will
terminate when all restricted securities covered by the exchange offer
registration statement have been sold pursuant thereto.
We will not receive any proceeds from any sale of exchange notes by broker-
dealers. Exchange notes received by broker-dealers for their own account
pursuant to 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 exchange notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such 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 any such broker-
dealer or the purchasers of any such exchange notes. Any Participating Broker-
Dealer that acquired initial notes as a result of market making activities or
other trading activities and who resells exchange notes that were received by it
pursuant to the exchange offer and any broker or dealer that participates in a
distribution of such exchange notes may be deemed to be an "underwriter" within
the meaning of the Securities Act of 1933 and any profit on any such resale of
exchange notes and any commission or concessions received by any such persons
may be deemed to be underwriting compensation under the Securities Act of 1933.
The letter of transmittal states that, by acknowledging that it will deliver and
by delivering a prospectus, a Participating Broker-Dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act of
1933.
DOCUMENTS INCORPORATED BY REFERENCE
We are incorporating by reference in this prospectus the following
documents which we have filed with the Securities and Exchange Commission:
1. Our annual report on Form 10-K for our fiscal year ended December 31,
1998. This report contains:
. audited consolidated balance sheets, and notes thereto, for us and
our subsidiaries as of December 31, 1998 and 1997
-124-
<PAGE>
. related consolidated statements of operations, of changes in
shareholders' equity and of cash flows, and notes thereto, for the
years ended December 31, 1998, 1997 and 1996
2. Our quarterly reports on Form 10-Q for the quarters ended:
. March 31, 1999
. June 30, 1999
. September 30, 1999
3. Our current reports on Form 8-K dated:
. August 20, 1997
. April 27, 1999
. May 7, 1999
. July 6, 1999
. July 16, 1999
. August 22, 1999
. August 22, 1999
. November 5, 1999
. November 17, 1999
. November 23, 1999
. November 23, 1999
. November 24, 1999
. January 10, 2000
. January 16, 2000
. January 24, 2000
. January 26, 2000
. January 27, 2000
4. Our registration statement on Form 8-A dated April 7, 1995, as amended
(registration no. 0-25812).
5. Our registration statement on Form 8-A dated June 4, 1996, as amended
(registration no. 0-25812).
We are also incorporating by reference in this prospectus all reports and
other documents that we file after the date of this prospectus pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, prior
to the termination of the offering of securities under this prospectus. These
reports and documents will be incorporated by reference in and considered to be
a part of this prospectus as of the date of filing of such reports and
documents.
-125-
<PAGE>
Any statement contained in this prospectus or in a document which is
incorporated by reference herein will be modified or superseded for purposes of
this prospectus to the extent that a statement in any document that we file
after the date of this prospectus that also is incorporated by reference herein
modifies or supersedes such prior statement. Any such statement so modified or
superseded will not, except as so modified or superseded, constitute a part of
this prospectus.
This prospectus incorporates by reference documents which are not presented
in this prospectus or delivered to you with it. You may request, and we will
send to you, without charge, copies of these documents (other than exhibits to
these documents, which we will send to you for a reasonable fee). Requests
should be directed to the Office of the Secretary, PSINet Inc., 510 Huntmar Park
Drive, Herndon, Virginia 20170 (telephone (703) 904-4100). In order to assure
timely delivery of the requested materials before the expiration of the exchange
offer, any request should be made prior to ___________, 2000.
TNI
We are incorporating by reference in this prospectus the following
documents which have been filed by TNI with the Securities and Exchange
Commission:
1. The following financial statements contained in TNI's annual report on
Form 10-K for the fiscal year ended December 31, 1998:
. audited consolidated balance sheets for TNI and its subsidiaries as
of December 31, 1998 and 1997
. related audited consolidated statements of operations, of changes
in shareholders' equity and of cash flows for the years ended
December 31, 1996, 1997 and 1998
. notes to those financial statements
2. The following financial statements contained in TNI's quarterly report
on Form 10-Q for the quarter ended September 30, 1999:
. consolidated balance sheets for TNI and its subsidiaries, audited
as of December 31, 1998 and unaudited as of September 30, 1999
. related unaudited consolidated statements of operations for the
three and nine months ended September 30, 1999 and the related
unaudited consolidated statement of cash flows for the nine months
ended September 30, 1999
. notes to those financial statements
LEGAL MATTERS
The validity of the exchange notes offered hereby will be passed upon for
us by Nixon Peabody LLP, New York, New York. Certain attorneys with Nixon
Peabody LLP currently own in the aggregate less than one percent of our common
stock.
-126-
<PAGE>
EXPERTS
The consolidated financial statements of PSINet Inc. incorporated in this
prospectus by reference to PSINet's Annual Report on Form 10-K for the year
ended December 31, 1998, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
The financial statements of Transaction Network Services, Inc. ("TNI") as
of December 31, 1998 and 1997 and for each of the three years in the period
ended December 31, 1998 are incorporated by reference in this prospectus from
our Current Report on Form 8-K dated November 23, 1999, which incorporates by
reference such financial statements from TNI's Annual Report on Form 10-K for
the year ended December 31, 1998. Such financial statements have been audited by
Arthur Andersen LLP, independent public accountants, as stated in their report
incorporated by reference in our November 23, 1999 Form 8-K and incorporated by
reference herein in reliance upon the authority of such firm as experts in
giving said reports.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy materials that we have file with
the SEC, including the registration statement, at the following SEC public
reference room:
Judiciary Plaza
450 Fifth Street, N.W.
Room 1024
Washington, DC 20549
You can also obtain copies of filed documents, at prescribed rates, by mail
from the Public Reference Section of the SEC at its Judiciary Plaza location,
listed above, or by telephone at 1-800-SEC-0330 or electronically through the
SEC's Web Site at http://www.sec.gov.
Our common stock is listed on the Nasdaq Stock Market's National Market
under the symbol "PSIX," and our SEC filings can also be read and obtained at
the following Nasdaq address:
The Nasdaq Stock Market
Reports Section
1735 K Street, N.W.
Washington, D.C. 20006
We furnish our stockholders with annual reports containing our audited
financial statements and with proxy material for our annual meetings complying
with the proxy requirements of the Securities Exchange Act of 1934.
-127-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under Sections 721 through 725 of the Business Corporation Law of the State
of New York (the "BCL"), the Registrant has broad powers to indemnify its
directors, officers and other employees. These sections (i) provide that the
statutory indemnification and advancement of expenses provision of the BCL are
not exclusive, provided that no indemnification may be made to or on behalf of
any director or officer if a judgment or other final adjudication adverse to the
director or officer establishes that his acts were committed in bad faith or
were the result of active and deliberate dishonesty and were material to the
cause of action as adjudicated, or that he personally gained in fact a financial
profit or other advantage to which he was not legally entitled, (ii) establish
procedures for indemnification and advancement of expenses that may be contained
in the certificate of incorporation or by-laws, or, when authorized by either of
the foregoing, set forth in a resolution of the shareholders or directors of an
agreement providing for indemnification and advancement of expenses, (iii) apply
a single standard for statutory indemnification for third-party and derivative
suits by providing that indemnification is available if the director or officer
acted in good faith, for a purpose which he reasonably believed to be in the
best interests of the corporation, and, in criminal actions, had no reasonable
cause to believe that his conduct was unlawful and (iv) permit the advancement
of litigation expenses upon receipt of an undertaking to repay such advance if
the director or officer is ultimately determined not to be entitled to
indemnification or to the extent the expenses advanced exceed the
indemnification to which the director or officer is entitled. Section 726 of the
BCL permits the purchase of insurance to indemnify a corporation or its officers
and directors to the extent permitted.
As permitted by Section 721 of the BCL, the Registrant's By-laws provide
that the Registrant shall indemnify its officers and directors, as such, to the
fullest extent permitted by applicable law, and that expenses reasonably
incurred by any such officer or director in connection with a threatened or
actual action or proceeding shall be advanced or promptly reimbursed by the
Registrant in advance of the final disposition of such action or proceeding upon
receipt of an undertaking by or on behalf of such officer or director to repay
such amount if and to the extent that it is ultimately determined that such
officer or director is not entitled to indemnification.
Article EIGHTH of the Registrant's Certificate of Incorporation provides
that no director of the Registrant shall be held personally liable to the
Registrant or its shareholders for damages for any breach of duty in his
capacity as a director occurring after authorization of such Article EIGHTH by
the shareholders unless a judgment or other final adjudication adverse to him
establishes that (1) his acts or omissions were in bad faith or involved
intentional misconduct or a knowing violation of law, or (2) he personally
gained in fact a financial profit or other advantage to which he was not legally
entitled, or (3) his acts violated section 719 of the BCL. The Registrant has
entered into Indemnity Agreements with its directors and certain key officers
pursuant to which the Registrant generally is obligated to indemnify its
directors and such
II-1
<PAGE>
officers to the full extent permitted by the BCL as described above. PSINet also
has purchased directors' and officers' liability insurance.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The following is a list of all exhibits filed as part of this Registration
Statement.
2.1 Agreement and Plan of Merger, dated August 22, 1999,
among PSINet, PSINet Shelf I Inc. and Transaction
Network Services, Inc.
2.2 Amendment No. 1, dated October 14, 1999, to Agreement
and Plan of Merger dated August 22, 1999, among
PSINet, PSINet Shelf I Inc. and Transaction Network
Services, Inc.
3.1 Restated Certificate of Incorporation dated November
9, 1999.
3.2 Certificate of Correction of Restated Certificate of
Incorporation dated as of December 2, 1999.
3.3 Certificate of Amendment of Certificate of Incorporation dated as
of January 31, 2000.
3.4 Amended and Restated By-laws of PSINet.
4.1 Form of 10% Senior Notes due 2005.
4.2 Indenture dated as of April 13, 1998 between PSINet
and Wilmington Trust Company, as trustee.
4.3 Form of 11 1/2% Senior Notes due 2008.
4.4 Indenture dated as of November 3, 1998 between PSINet
and Wilmington Trust Company, as trustee.
4.5 First Supplemental Indenture dated as of November 12,
1998 between PSINet and Wilmington Trust Company, as
trustee.
4.6 Form of unregistered Dollar-denominated 11% Senior
Notes due 2009.
4.7 Form of unregistered Euro-denominated 11% Senior Notes
due 2009.
4.8 Form of registered 11% Senior Notes due 2009.
4.9 Indenture dated as of July 23, 1999 between PSINet and
Wilmington Trust Company, as Trustee.
4.10 Form of Common Stock Certificate.
II-2
<PAGE>
4.11 Form of Common Stock Certificate (name change).
4.12 Form of 6 3/4% Series C Cumulative Convertible
Preferred Stock Certificate.
4.13 Article Fourth of the Restated Certificate of
Incorporation of the Company.
4.14 Article I of the Amended and Restated By-laws of
PSINet, as amended.
4.15 Form of Rights Agreement, dated as of May 8, 1996,
between PSINet and First Chicago Trust Company of New
York, as Rights Agent, which includes as Exhibit A--
Certificate of Amendment; Exhibit B--Form of Rights
Certificate; and Exhibit C--Summary of Rights to
Purchase Shares of Preferred Stock.
4.16 Amendment No. 1, dated as of July 21, 1997, to Rights
Agreement, dated as of May 8, 1996, between PSINet and
First Chicago Trust Company of New York, as Rights
Agent.
4.17 Amendment No. 2, dated as of July 31, 1997, to Rights
Agreement, dated as of May 8, 1996, between PSINet and
First Chicago Trust Company of New York, as Rights
Agent.
4.18 Amendment No. 3, dated as of November 5, 1999, to
Rights Agreement, dated as of May 8, 1996, between
PSINet and First Chicago Trust Company of New York.
4.19 Deposit Agreement dated as of May 4, 1999 between
PSINet and Wilmington Trust Company, as deposit agent.
4.20 Form of unregistered Dollar-denominated 10 1/2% Senior
Notes due 2006.
4.21 Form of unregistered Euro-denominated 10 1/2% Senior
Notes due 2006.
4.22 Form of registered 10 1/2% Senior Notes due 2006.
4.23 Indenture dated as of December 2, 1999 between PSINet
and Wilmington Trust Company, as Trustee.
4.24 Form of 7% Series D Cumulative Convertible Preferred
Stock.
II-3
<PAGE>
4.25 Deposit Agreement dated as of February 1, 2000 between
PSINet and Wilmington Trust Company, as deposit agent.
4.26 First Amendment to Deposit Agreement dated as of February 7, 2000,
between PSINet and Wilmington Trust Company, as deposit agent.
5 Opinion of Nixon Peabody LLP.
7 Opinion of Nixon Peabody LLP regarding tax matters
(contained in Exhibit 5).
10.1 Lease Agreement dated July 1, 1990 between PSINet and
Rensselaer Polytechnic Institute, amended by Lease,
Renewal Agreement dated as of July 1, 1993, Letter
Agreement, dated November 14, 1994 and Letter
Agreement dated February 1, 1995.
10.2 Lease Agreement dated February 8, 1995 between PSINet
and Rensselaer Polytechnic Institute.
10.3 Amendment to Lease Agreement dated July 1, 1995
between PSINet and Rensselaer Polytechnic Institute.
10.4 Lease Agreement dated as of April 30, 1993 by and
between Vingarden Limited Partnership and PSINet.
10.5 Lease Agreement dated April 1995 by and between Brit
Limited Partnership.
10.6 Sublease dated September 20, 1995 by and between The
Medical Sciences Research Institute and PSINet and
Lease Agreement dated October 6, 1993 by and between
Vingarden Associates Limited Partnership and The
Medical Sciences Research Institute.
10.7 Lease Agreement dated October 31, 1995 between Oakfern
Properties Limited and PSINet.
10.8 Amendment to Deed of 460 Spring Park Technology Center
dated as of June 12, 1997 between JBG/Spring Park
Limited Partnership and PSINet.
10.9 Sublease Agreement dated as of June 2, 1997 between
Lucas Industries, Inc. and PSINet and Office Lease
Agreement between 3B Limited Partnership and Lucas
Industries Inc. dated as of September 12, 1989.
10.10 Sublease Agreement dated January 22, 1998 between
PSINet and Unisys Corporation, as amended.
II-4
<PAGE>
10.11 Lease Agreement dated February 20, 1998 between PSINet
and CarrAmerica Realty Corporation.
10.12 Lease Agreement dated October 1994 between PSINet and
Cascade Communications, Inc.
10.13 Master Lease Agreement dated July 19, 1994 between
PSINet and Technology Credit Corporation.
10.14 Lease Agreement dated as of July 9, 1993 between
Applied Telecommunications Technologies, Inc. and
PSINet.
10.15 Lease Agreement dated as of February 10, 1994 between
Applied Telecommunications Technologies, Inc. and
PSINet.
10.16 Lease Agreement dated as of March 14, 1994 between
Applied Telecommunications Technologies, Inc. and
PSINet.
10.17 Lease Agreement dated as of June 9, 1994 between
Applied Telecommunications Technologies, Inc. and
PSINet.
10.18 Lease Agreement dated as of September 21, 1994 between
Applied Telecommunications Technologies, Inc. and
PSINet.
10.19 Master Equipment Lease Agreement dated as of June 23,
1995 between PSINet and Forsythe/McArthur Associates,
Inc. ("FMA").
10.20 Master Lease Line Commitment Agreement dated as of
June 23, 1995 between PSINet and FMA.
10.21 Amendment Agreement dated as of August 1, 1995 between
PSINet and Technology Credit Corporation.
10.22 Master Equipment Lease Agreement No. 620-0004602-000
dated November 1995 between PSINet and Siemens Credit
Corporation.
10.23 Amendment to Master Lease Agreement No. 1753 dated
January 26, 1996 between PSINet and Technology Credit
Corporation.
10.24 Master Equipment Lease Agreement dated December 15,
1995 between PSINet and Financing for Science
International, Inc.
10.25 Security Agreement dated as of March 20, 1996 between
PSINet and USL Capital Corporation.
II-5
<PAGE>
10.26 Master Software/Equipment Lease Agreement dated as of
September 20, 1996 between PSINet and LPI Software
Funding Group, Inc.
10.27 Master Lease Agreement dated as of January 27, 1997
between Cascade Communications Corp. and PSINet.
10.28 Master Equipment/Software Rental Agreement dated as of
September 11, 1997 between PSINet and Earthlink
Network, Inc. and Change Order Amendment Master
Equipment dated as of September 22, 1997.
10.29 Equipment lease dated as of June 30, 1997 between
Royal Bank of Canada and PSINet Limited.
10.30 Master Lease Agreement dated as of October 10, 1997
between Cisco Systems Capital Corporation and PSINet.
10.31 Master Lease Agreement No. A212 dated as of October
30, 1997 between 3Com Credit Corporation and PSINet,
as amended.
10.32 Master Lease of Personal Property No. 3402, dated
December 12, 1997 between PSINet and Charter
Financial, Inc., as amended.
*10.33 Executive Stock Option Plan of PSINet.
*10.34 Executive Stock Incentive Plan of PSINet, as amended.
*10.35 Directors Stock Incentive Plan of PSINet, as amended.
*10.36 Strategic Stock Incentive Plan of PSINet, as amended.
*10.37 1996 Performance Bonus Plan of PSINet.
*10.38 InterCon Systems Corporation 1992 Incentive Stock Plan.
*10.39 InterCon Systems Corporation 1994 Stock Option Plan.
*10.40 Software Ventures Corporation 1994 Stock Option Plan.
*10.41 Employment Agreement dated February 9, 1996 between
PSINet and Mary-Ann Carolan.
*10.42 Employment Agreement dated February 13, 1996 between
PSINet and Mitchell Levinn.
II-6
<PAGE>
*10.43 Employment Agreement dated October 9, 1996 between
PSINet and Richard R. Frizalone.
*10.44 Employment Agreement dated February 12, 1997 between
PSINet and David L. Hudson.
*10.45 Employment Agreement dated July 1, 1997 between PSINet
and Michael Malesardi.
*10.46 Employment Agreement dated August 2, 1997 between
PSINet and Anthony Aveta.
*10.47 Employment Agreement dated August 4, 1997 between
PSINet and Harry Hobbs.
*10.48 Employment Agreement dated January 8, 1998 between
PSINet and William Cripe.
*10.49 Employment Agreement dated January 18, 1998 between
PSINet and Kathleen B. Horne .
*10.50 Employment Agreement dated February 16, 1998 between
PSINet and John Muleta.
*10.51 Employment Agreement dated October 16, 1998 between
PSINet and Harold S. Wills.
*10.52 Employment Agreement dated October 16, 1998 between
PSINet and Edward D. Postal.
*10.53 Employment Agreement dated October 16, 1998 between
PSINet and David N. Kunkel.
*10.54 Employment Agreement dated as of October 1, 1999
between PSINet and William L. Schrader.
*10.55 Employment Agreement dated as of October 1, 1999
between PSINet and Harold S. Wills.
*10.56 Employment Agreement dated as of October 1, 1999
between PSINet and Edward D. Postal.
10.57 Form of Indemnification Agreement.
10.58 Registration Rights Agreement dated as of June 16,
1995 among PSINet and Stockholders of InterCon Systems
Corporation.
II-7
<PAGE>
10.59 Registration Rights Agreement dated as of July 11,
1995 among PSINet and Stockholders of Software
Ventures Corporation.
10.60 Registration Rights Agreement dated as of November 11,
1997 between PSINet and the purchasers of Series B 8%
Convertible Preferred Stock.
10.61 Registration Rights Agreement dated as of February 25,
1998 between PSINet and IXC Internet Services, Inc.
10.62 Guarantee Agreement dated September 29, 1998 among
each of the subsidiaries of PSINet party thereto and
The Chase Manhattan Bank.
10.63 Pledge Agreement dated September 29, 1998 among
PSINet, each subsidiary of PSINet party thereto and
The Chase Manhattan Bank.
10.64 Security Agreement dated September 29, 1998 among
PSINet, each subsidiary of PSINet party thereto and
The Chase Manhattan Bank.
10.65 Warrant to purchase up to 25,000 shares of the Series
B Preferred of PSINet, at an exercise price of $1.60
per share, registered in the name of William H.
Baumer.
10.66 Warrant to purchase up to 25,000 shares of the Series
B Preferred of PSINet, at an exercise price of $1.60
per share, registered in the name of William H.
Baumer.
10.67 Stock Acquisition Agreement, dated as of February 1,
1997, between Ascend Communications, Inc., a Delaware
corporation, and PSINet, a New York corporation, with
respect to all outstanding capital stock of InterCon
Systems Corporation, a Delaware corporation and a
wholly-owned subsidiary of PSINet.
10.68 Asset Purchase Agreement dated as of June 28, 1996
between PSINet and MindSpring Enterprises, Inc.
10.69 Amendment No. 1 to Asset Purchase Agreement and
Network Services Agreement entered into as of June 28,
1996 by and between PSINet and MindSpring Enterprises,
Inc.
II-8
<PAGE>
10.70 Amendment No. 2 to Asset Purchase Agreement entered
into as of September 1, 1996 by and between PSINet and
MindSpring Enterprises, Inc.
10.71 Amendment No. 3 to Asset Purchase Agreement and
Amendment No. 1 to Convertible Note entered into as of
January 24, 1997 by and between PSINet and MindSpring
Enterprises, Inc.
10.72 Amendment No. 2 to Network Services Agreement entered
into as of January 1, 1997 by and between PSINet and
MindSpring Enterprises, Inc.
10.73 IRU and Stock Purchase Agreement dated as of July 22,
1997 between IXC Internet Services, Inc. and PSINet.
10.74 First Amendment to IRU and Stock Purchase Agreement
dated as of July 22, 1997 between IXC Internet
Services, Inc. and PSINet.
10.75 Second Amendment to IRU and Stock Purchase Agreement
dated as of July 22, 1997 between IXC Internet
Services, Inc. and PSINet.
10.76 Joint Marketing and Services Agreement dated as of
July 22, 1997 between IXC Internet Services Inc. and
PSINet.
10.77 Stock Purchase Agreement dated as of November 11, 1997
between PSINet and the Purchasers of Series B 8%
Convertible Preferred Stock.
10.78 Agreement dated as of November 10, 1997 between iSTAR
internet inc. and PSINet.
10.79 Pre-Acquisition Agreement between PSINet and iSTAR
internet inc., dated December 23, 1997.
10.80 Security Agreement and Assignment dated as of February
25, 1998 between PSINet and IXC Internet Services,
Inc.
10.81 Collocation and Interconnection Agreement between
PSINet and IXC Internet Services, Inc.
10.82 Escrow Agreement, dated as of April 13, 1998, among
Wilmington Trust Company (as escrow agent and trustee)
and PSINet.
II-9
<PAGE>
10.83 Registration Rights Agreement dated as of April 13,
1998 among PSINet and Donaldson, Lufkin & Jenrette
Securities Corporation, Merrill Lynch, Pierce, Fenner
& Smith Incorporated, and Chase Securities Inc.
10.84 First Amendment to Sublease dated as of March 23, 1998
between Unisys Corporation and PSINet.
10.85 Share Purchase Agreement dated as of October 1, 1998
among PSINet Japan Inc., a subsidiary of PSINet, Tokyo
Internet Corporation and Secom Co., Ltd.
10.86 Registration Rights Agreement dated as of November 3,
1998 among PSINet and Donaldson, Lufkin & Jenrette
Securities Corporation, Chase Securities, Inc. and
Morgan Stanley & Co. Incorporated.
*10.87 Employment Agreement dated June 17, 1998 between
PSINet and William A. Opet.
*10.88 Employment Agreement dated July 2, 1998 between PSINet
and Robert D. Leahy.
*10.89 Employment Agreement dated September 1, 1998 between
PSINet and Chi H. Kwan.
*10.90 Employment Agreement dated September 8, 1998 between
PSINet and James A. Haid.
*10.91 Employment Agreement dated September 30, 1998 between
PSINet and Sandy L. Blaisdell.
*10.92 Employment Agreement dated October 12, 1998 between
PSINet and Geoffrey E. Axton.
*10.93 Employment Agreement dated October 14, 1998 between
PSINet and Edward Arnold Davis.
10.94 Registration Rights Agreement, dated as of November
13, 1998, among PSINet and Donaldson, Lufkin &
Jenrette Securities Corporation, Chase Securities Inc.
and Morgan Stanley & Co. Incorporated.
*10.95 Amendment to Employment Agreement dated October 1,
1998 between PSINet and Harry Hobbs.
*10.96 Employment Agreement dated November 2, 1998 between
PSINet and David J. Kramer.
II-10
<PAGE>
*10.97 Employment Agreement dated November 6, 1998 between
PSINet and John Walpuck.
*10.98 Employment Agreement dated November 12, 1998
between PSINet and Lawrence Winkler.
*10.99 Employment Agreement dated May 24, 1999 between
PSINet and Thomas A. Leach.
*10.100 Employment Agreement dated May 24, 1999 between
PSINet and James F. Cragg.
*10.101 Employment Agreement dated May 27, 1999 between
PSINet and Philippe J. Kuperman.
10.102 Master Lease Agreement between PSINet and
Technology Credit Corporation No. 1788 dated June
20, 1998.
10.103 Master Lease Agreement between PSINet and
Technology Credit Corporation No. 1789 dated June
20, 1998.
10.104 Master Loan and Security Agreement No. 3963 between
PSINet and Charter Financial Inc. dated September
28, 1998.
10.105 Lease Agreement dated July 8, 1998 between
Ballymore Properties Limited and Cordoba Holdings
Limited and Thomas Charles Cembrinck.
10.106 Registration Rights Agreement, dated as of July 23,
1999, among PSINet and Donaldson Lufkin & Jenrette
International, Bear Stearns International Limited
and Chase Manhattan International Limited.
10.107 Registration Rights Agreement, dated as of December
2, 1999, among PSINet and Donaldson, Lufkin &
Jenrette International, Bear Stearns International
Limited, Merrill Lynch International and Morgan
Stanley & Co. International Limited.
10.108 Registration Rights Agreement, dated as of February
1, 2000, among PSINet and Donaldson, Lufkin &
Jenrette Securities Corporation, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Morgan Stanley
& Co., Incorporated, Bear Stearns & Co. Inc., Chase
Securities Inc. and BancBoston Robertson Stephens
Inc.
10.109 Amendment No. 1 to Registration Rights Agreement dated
February 7, 2000 to Registration Rights Agreement dated
as of February 1, 2000 among Donaldson, Lufkin & Jenrette
Securities Corporation, Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co., Inc.,
Bear, Stearns & Co. Inc., BankBoston Robertson Stephens and Chase
Securities Inc.
12 Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.
II-11
<PAGE>
21 Significant subsidiaries of PSINet.
23.1 Consent of Nixon Peabody LLP (contained in Exhibit
5).
23.2 Consent of PricewaterhouseCoopers LLP.
23.3 Consent of Arthur Andersen LLP.
24 Power of Attorney.
25 Statement of Eligibility on Form T-1 of Wilmington
Trust Company.
99.1 Letter of Transmittal for Dollar Notes.
99.2 Letter of Transmittal for Euro Notes.
99.3 Form of Notice of Guaranteed Delivery for Dollar
Notes.
99.4 Form of Notice of Guaranteed Delivery for Euro
Notes.
* Indicates a management contract or compensatory plan or
arrangement required to be filed as an Exhibit pursuant to
Item 14(a)(3).
FINANCIAL STATEMENTS AND SCHEDULES:
Financial Statements and Financial Statement Schedules:
Incorporated by reference in this registration statement from
PSINet's Annual Report on Form 10-K for the year ended
December 31, 1998.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act of 1933, as
amended (the "Act") 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.
II-12
<PAGE>
(b) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the
most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered)
and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more
than 20 percent change in the maximum aggregate offering price
set forth in the "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the
registration statement or any material change to such
information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) of this
-------- -------
section do not apply if the registration statement is on Form S-3,
Form S-8 or Form F-3, and the information required to be included in a
post-effective amendment by those paragraphs is contained in periodic
reports filed with or furnished to the SEC by the registrant pursuant
to Section 13 or 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(4) If the registrant is a foreign private issuer, to file a post-
effective amendment to the registration statement to include any
financial statements required by (S) 210.3-19 of this chapter at the
start of any delayed offering or throughout a continuous offering.
Financial statements and information otherwise required by Section
10(a)(3) of the Act need not be furnished, provided that the
--------
registrant
II-13
<PAGE>
includes in the prospectus, by means of a post-effective amendment,
financial statements required pursuant to this paragraph (a)(4) and
other information necessary to ensure that all other information in
the prospectus is at least as current as the date of those financial
statements. Notwithstanding the foregoing, with respect to
registration statements on Form F-3, a post-effective amendment need
not be filed to include financial statements and information required
by Section 10(a)(3) of the Act or (S)210.3-19 of this chapter if such
financial statements and information are contained in periodic reports
filed with or furnished to the SEC by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference on the Form F-3.
(c) The undersigned Registrant hereby undertakes:
(1) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual
report to security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the requirements of
Rule 14a-3 or Rule 14c-3 under the Securities and Exchange Act of
1934; and, where interim financial information required to be
presented by Article 3 of regulation S-X are not set forth in the
prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that
is specifically incorporated by reference in the prospectus to provide
such interim information.
(2) 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. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through
the date of responding to the request.
II-14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Herndon, Commonwealth of Virginia on February 8, 2000.
PSINet Inc.
By: /s/ William L. Schrader
--------------------------
William L. Schrader, Chairman
and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints William L. Schrader, Harold S. Wills,
David N. Kunkel, Edward D. Postal, Michael J. Malesardi, Lawrence Winkler and
Kathleen B. Horne, and each or any of them, his true and lawful attorney-in-fact
and agent, with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign any registration
statement filed pursuant to Rule 462(b) under the Securities Act of 1933 and any
and all amendments (including post-effective amendments) to this registration
statement and to any registration statement filed pursuant to Rule 462(b), and
to file same, with all exhibits thereto and, other documents in connection
therewith, with the Commission, granting unto each said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or either of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ William L. Schrader Chairman, Chief Executive February 8, 2000
- --------------------------------- Officer and Director (Principal
William L. Schrader Executive Officer)
/s/ Harold S. Wills President, Chief Operating February 8, 2000
- --------------------------------- Officer and Director
Harold S. Wills
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ David N. Kunkel Executive Vice President, Vice February 8, 2000
- --------------------------------- Chairman and Director
David N. Kunkel
/s/ Edward D. Postal Executive Vice President and Chief February 8, 2000
- --------------------------------- Financial Officer (Principal
Edward D. Postal Financial Officer)
/s/ Michael J. Malesardi Vice President and Controller February 8, 2000
- --------------------------------- (Principal Accounting Officer)
Michael J. Malesardi
/s/ William H. Baumer Director February 8, 2000
- ---------------------------------
William H. Baumer
Director February 8, 2000
- ---------------------------------
Ralph J. Swett
Director February 8, 2000
- ---------------------------------
Ian P. Sharp
</TABLE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------------ ---------------------------------------------------- ------------------------------------------------
<S> <C> <C>
2.1 Agreement and Plan of Merger, dated August 22, Incorporated by reference from Exhibit 2.1 to
1999, among PSINet, PSINet Shelf I Inc. and PSINet's Current Report on Form 8-K dated
Transaction Network Services, Inc. August 24, 1999 located under Securities and
Exchange Commission File No. 0-25812
2.2 Amendment No. 1, dated October 14, 1999, to Incorporated by reference from Annex 1 to
Agreement and Plan of Merger dated August 22, 1999, Amendment No. 1 to PSINet's Registration
among PSINet, PSINet Shelf I Inc. and Transaction Statement on Form S-4 field on October 19, 1999
Network Services, Inc. located under Securities and Exchange
Commission File No. 333-88325.
3.1 Restated Certificate of Incorporation dated Incorporated by reference from Exhibit 3.1 to
November 9, 1999 PSINet's Current Report on Form 8-K dated
November 23, 1999, located under Securities and
Exchange Commission File No. 0-25812 ("November
23, 1999 8-K")
3.2 Certificate of Correction of Restated Certificate Incorporated by reference from Exhibit 3.1 to
of Incorporation dated as of December 2, 1999 PSINet's Current Report on Form 8-K dated
November 24, 1999, located under Securities and
Exchange Commission File No. 0-25812 ("November
24, 1999 8-K")
3.3 Certificate of Amendment of Certificate of Filed herewith
Incorporation dated as of January 31, 2000
3.4 Amended and Restated By-laws of PSINet Incorporated by reference from Exhibit 3.8 to
PSINet's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 located
under the Securities and Exchange Commission
File No. 0-25812 ("1998 Form 10-K")
4.1 Form of 10% Senior Notes due 2005 Incorporated by reference from Exhibit 4.1 to
PSINet's Current Report on Form 8-K dated April
22, 1998 located under Securities and Exchange
Commission File No. 0-25812 ("April 22, 1998
8-K")
4.2 Indenture dated as of April 13, 1998 between PSINet Incorporated by reference from Exhibit 4.2 to
and Wilmington Trust Company, as Trustee the April 22, 1998 8-K
4.3 Form of 11 1/2% Senior Notes due 2008 Incorporated by reference from PSINet's
Registration Statement on Form S-4 declared
effective on February 16, 1999 located under
Securities and Exchange Commission File No.
333-68385
4.4 Indenture dated as of November 3, 1998 between Incorporated by reference from Exhibit 4.1 to
PSINet and Wilmington Trust Company, as trustee the November 10, 1998 8-K
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------------ ---------------------------------------------------- ------------------------------------------------
<S> <C> <C>
4.5 First Supplemental Indenture dated as of November Incorporated by reference from Exhibit 4.1 to
12, 1998 between PSINet and Wilmington Trust PSINet's Quarterly Report on Form 10-Q for the
Company, as trustee quarter ended September 30, 1998 located under
Securities and Exchange Commission File No.
0-25812 ("September 1998 10-Q")
4.6 Form of unregistered Dollar-denominated Incorporated by reference from Exhibit 4.6 to
11% Senior Notes due 2009 PSINet's Registration Statement on Form S-4
filed on August 6, 1999 located under
Securities and Exchange Commission File No.
333-84721 ("August 1999 Registration Statement")
4.7 Form of unregistered Euro-denominated Incorporated by Reference from Exhibit 4.7 to
11% Senior Notes due 2009 August 1999 Registration Statement
4.8 Form of registered 11% Senior Notes due 2009 Incorporated by Reference from Exhibit 4.8 to
August 1999 Registration Statement
4.9 Indenture dated as of July 23, 1999 between PSINet Incorporated by Reference from Exhibit 4.9 to
and Wilmington Trust Company, as Trustee August 1999 Registration Statement
4.10 Form of Common Stock Certificate Incorporated by reference from Exhibit 4.1 to
the May 1995 Registration Statement
4.11 Form of Common Stock Certificate (name change) Incorporated by reference from Exhibit 4.1A to
PSINet's Registration Statement on Form S-1
declared effective on December 14, 1995 located
under Securities and Exchange Commission File
No. 33-99610 ("December 1995 Registration
Statement")
4.12 Form of 6 3/4% Series C Cumulative Convertible Incorporated by reference from Exhibit 4.1 to
Preferred Stock Certificate the May 7, 1999 8-K
4.13 Article Fourth of the Restated Certificate of See Exhibit 3.1
Incorporation of the Company
4.14 Article I of the Amended and Restated By-laws of See Exhibit 3.9
PSINet, as amended
4.15 Form of Rights Agreement, dated as of May 8, 1996, Incorporated by reference from Exhibit 1 to
between PSINet and First Chicago Trust Company of PSINet's Registration Statement on Form 8-A
New York, as Rights Agent, which includes as dated June 3, 1996 located under Securities and
Exhibit A - Certificate of Amendment; Exhibit B - Exchange Commission File No. 0-25812
Form of Rights Certificate; and Exhibit C - Summary
of Rights to Purchase Shares of Preferred Stock
4.16 Amendment No. 1, dated as of July 21, 1997, to Incorporated by reference from Exhibit 4.1.1 to
Rights Agreement, dated as of May 8, 1996, between PSINet's Current Report on Form 8-K dated
PSINet and First Chicago Trust Company of New York, August 1, 1997 located under Securities and
as Rights Agent. Exchange Commission File No. 0-25812
</TABLE>
-2-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------------ ---------------------------------------------------- ------------------------------------------------
<S> <C> <C>
4.17 Amendment No. 2, dated as of July 31, 1997, to Incorporated by reference from Exhibit 4.1.2 to
Rights Agreement, dated as of May 8, 1996, between PSINet's Current Report on Form 8-K dated
PSINet and First Chicago Trust Company of New York, August 20, 1997 located under Securities and
as Rights Agent. Exchange Commission File No. 0-25812
4.18 Amendment No. 3, dated as of November 5, 1999, to Incorporated by reference from Exhibit 4 to
Rights Agreement, dated as of May 8, 1996, between PSINet's Registration Statement on Form 8/A
PSINet and First Chicago Trust Company of New York filed on November 5, 1999
4.19 Deposit Agreement dated as of May 4, 1999 between Incorporated by reference from Exhibit 4.2 to
PSINet and Wilmington Trust Company, as deposit the May 7, 1999 8-K
agent
4.20 Form of unregistered Dollar-denominated 10 1/2% Incorporated by reference from Exhibit 4.2 to
Senior Notes due 2006 PSINet's November 24 1999 8-K
4.21 Form of unregistered Euro-denominated 10 1/2% Incorporated by reference from Exhibit 4.3 to
Senior Notes due 2006 PSINet's November 24, 1999 8-K
4.22 Form of registered 10 1/2% Senior Notes due 2006 *
4.23 Indenture dated as of December 2, 1999 between Incorporated by reference from Exhibit 4.1 to
PSINet and Wilmington Trust Company, as Trustee PSINet's November 24, 1999 8-K
4.24 Form of 7% Series D Cumulative Convertible *
Preferred Stock
4.25 Deposit Agreement dated as of February 1, 2000 *
between PSINet and Wilmington Trust Company, as
deposit agent
4.26 First Amendment to Deposit Agreement dated as of *
February 7, 2000, between PSINet and Wilmington
Trust Company, as deposit agent
5 Opinion of Nixon Peabody LLP Filed herewith
10.1 Lease Agreement dated July 1, 1990 between PSINet Incorporated by reference from Exhibit 10.1 to
and Rensselaer Polytechnic Institute, amended by the May 1995 Registration Statement
Lease Renewal Agreement dated as of July 1, 1993,
Letter Agreement dated November 14, 1994 and Letter
Agreement dated February 1, 1995
10.2 Lease Agreement dated February 8, 1995 between Incorporated by reference from Exhibit 10.2 to
PSINet and Rensselaer Polytechnic Institute the May 1995 Registration Statement
10.3 Amendment to Lease Agreement dated July 1, 1995 Incorporated by reference from Exhibit 10.2A to
between PSINet and Rensselaer Polytechnic Institute the December 1995 Registration Statement
10.4 Lease Agreement dated as of April 30, 1993 by and Incorporated by reference from Exhibit 10.3 to
between Vingarden Limited Partnership and PSINet the May 1995 Registration Statement
</TABLE>
-3-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------------ ---------------------------------------------------- ------------------------------------------------
<S> <C> <C>
10.5 Lease Agreement dated April 1995 by and between Incorporated by reference from by Exhibit 10.3A
Brit Limited Partnership and PSINet to the December 1995 Registration Statement
10.6 Sublease dated September 20, 1995 by and between Incorporated by reference from Exhibit 10.3B to
The Medical Sciences Research Institute and PSINet the December 1995 Registration Statement
and Lease Agreement dated October 6, 1993 by and
between Vingarden Associates Limited Partnership
and The Medical Sciences Research Institute
10.7 Lease Agreement dated October 31, 1995 between Incorporated by reference from Exhibit 10.4A to
Oakfern Properties Limited and PSINet the December 1995 Registration Statement
10.8 Amendment to Deed of 460 Spring Park Technology Incorporated by reference from Exhibit 10.1 to
Center dated as of June 12, 1997 between JBG/ the September 1997 Form 10-Q
Spring Park Limited Partnership and PSINet
10.9 Sublease Agreement dated as of June 2, 1997 between Incorporated by reference from Exhibit 10.2 to
Lucas Industries, Inc. and PSINet and Office Lease the September 1997 10-Q
Agreement between 3B Limited Partnership and Lucas
Industries Inc. dated as of September 12, 1989
10.10 Sublease Agreement dated January 22, 1998 between Incorporated by reference from Exhibit 10.9 to
PSINet and Unisys Corporation, as amended the 1997 Form 10-K
10.11 Lease Agreement dated February 20, 1998 between Incorporated by reference from Exhibit 10.11 to
PSINet and CarrAmerica Realty Corporation the 1997 Form 10-K
10.12 Lease Agreement dated October 1994 between PSINet Incorporated by reference from Exhibit 10.4 to
and Cascade Communications, Inc. the May 1995 Registration Statement
10.13 Master Lease Agreement dated July 19, 1994 between Incorporated by reference from Exhibit 10.5 to
PSINet and Technology Credit Corporation the May 1995 Registration Statement
10.14 Lease Agreement dated as of July 9, 1993 between Incorporated by reference from Exhibit 10.6 to
Applied Telecommunications Technologies, Inc. and the May 1995 Registration Statement
PSINet
10.15 Lease Agreement dated as of February 10, 1994 Incorporated by reference from Exhibit 10.7F to
between Applied Telecommunications Technologies, the December 1995 Registration Statement
Inc. and PSINet
10.16 Lease Agreement dated as of March 14, 1994 between Incorporated by reference from Exhibit 10.7G to
Applied Telecommunications Technologies, Inc. and the December 1995 Registration Statement
PSINet
10.17 Lease Agreement dated as of June 9, 1994 between Incorporated by reference from Exhibit 10.7H to
Applied Telecommunications Technologies, Inc. and the December 1995 Registration Statement
PSINet
</TABLE>
-4-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------------ ---------------------------------------------------- ------------------------------------------------
<S> <C> <C>
10.18 Lease Agreement dated as of September 21, 1994 Incorporated by reference from Exhibit 10.7 to
between Applied Telecommunications Technologies, the May 1995 Registration Statement
Inc. and PSINet
10.19 Master Equipment Lease Agreement dated as of June Incorporated by reference from Exhibit 10.1 to
23, 1995 between PSINet and Forsythe/McArthur the September 1995 10-Q
Associates, Inc. ("FMA")
10.20 Master Lease Line Commitment Agreement dated as of Incorporated by reference from Exhibit 10.2 to
June 23, 1995 between PSINet and FMA the September 1995 10-Q
10.21 Amendment Agreement dated as of August 1, 1995 Incorporated by reference from Exhibit 10.8 to
between PSINet and Technology Credit Corporation the September 1995 10-Q
10.22 Master Equipment Lease Agreement No. Incorporated by reference from Exhibit 10.44A
620-0004602-000 dated November 1995 between PSINet to the December 1995 Registration Statement
and Siemens Credit Corporation
10.23 Amendment to Master Lease Agreement No. 1753 dated Incorporated by reference from Exhibit 10.77 to
January 26, 1996 between PSINet and Technology PSINet's Annual Report on Form 10-K for the
Credit Corporation fiscal year ended December 31, 1995 located
under the Securities and Exchange Commission
File No. 0-25812 ("1995 Form 10-K")
10.24 Master Equipment Lease Agreement dated December 15, Incorporated by reference from Exhibit 10.78 to
1995 between PSINet and Financing for Science the 1995 Form 10-K
International, Inc.
10.25 Security Agreement dated as of March 20, 1996 Incorporated by reference from Exhibit 10.79 to
between PSINet and USL Capital Corporation the 1995 Form 10-K
10.26 Master Software/Equipment Lease Agreement dated as Incorporated by reference from Exhibit 10.4 to
of September 20, 1996 between PSINet and LPI PSINet's Quarterly Report on Form 10-Q for the
Software Funding Group, Inc. quarter ended September 30, 1996 located under
Securities and Exchange Commission File No.
0-25812 ("September 1996 10-Q")
10.27 Master Lease Agreement dated as of January 27, 1997 Incorporated by reference from Exhibit 10.77 to
between Cascade Communications Corp. PSINet's Annual Report on Form 10-K for the
and PSINet fiscal year ended December 31, 1996 located
under Securities and Exchange Commission File
No. O-25812 ("1996 Form 10-K")
10.28 Master Equipment/Software Rental Agreement dated as Incorporated by reference from Exhibit 10.3 to
of September 11, 1997 between PSINet and Earthlink the September 1997 10-Q
Network, Inc. and Change Order Amendment Master
Equipment dated as of September 22, 1997
</TABLE>
-5-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------------ ---------------------------------------------------- ------------------------------------------------
<S> <C> <C>
10.29 Equipment lease dated as of June 30, 1997 between Incorporated by reference from Exhibit 10.4 to
Royal Bank of Canada and PSINet Limited the September 1997 10-Q
10.30 Master Lease Agreement dated as Incorporated by reference from Exhibit 10.4 to
Of October 10, 1997 between Cisco Systems Capital the September 1997 Form 10-Q
Corporation and PSINet
10.31 Master Lease Agreement No. A212 between 3Com Credit Incorporated by reference from dated as of
Corporation and PSINet, as amended October 30, 1997 Exhibit 10.31 to the 1997 Form
10-K
10.32 Master Lease of Personal Property No. 3402, dated Incorporated by reference from Exhibit 10.32 to
December 12, 1997 between PSINet and Charter the 1997 Form 10-K
Financial, Inc., as amended
10.33* Executive Stock Option Plan of Incorporated by reference from Exhibit 10.10 to
PSINet the May 1995 Registration Statement
10.34* Executive Stock Incentive Plan of PSINet, as amended Incorporated by reference from Exhibit 10.12 to
the December 1995 Registration Statement
10.35* Directors Stock Incentive Plan of PSINet, as amended Incorporated by reference from Exhibit 10.13 to
the December 1995 Registration Statement
10.36* Strategic Stock Incentive Plan of PSINet Incorporated by reference from Exhibit 10 to
the June 1995 10-Q
10.37* 1996 Performance Bonus Plan of PSINet Incorporated by reference from Exhibit 10.25 to
the 1996 Form 10- K
10.38* InterCon Systems Corporation 1992 Incentive Stock Incorporated by reference from Exhibit 99.1 to
Plan PSINet's Registration Statement on Form S-8
which became effective on October 18, 1995
located under Securities Exchange Commission
File No. 33-98316 ("S-8 No. 16")
10.39* InterCon Systems Corporation 1994 Stock Option Plan Incorporated by reference from Exhibit 99.2 to
the S-8 No. 16
10.40* Software Ventures Corporation 1994 Stock Option Plan Incorporated by reference from Exhibit 99 to
PSINet's Registration Statement on Form S-8
which became effective on October 18, 1995
located under Securities and Exchange
Commission File No. 33-98314
10.41* Employment Agreement dated February 9, 1996 between Incorporated by reference from Exhibit 10.42 to
PSINet and Mary-Ann Carolan the 1995 Form 10-K
10.42* Employment Agreement dated February 13, 1996 Incorporated by reference from Exhibit 10.19 to
between PSINet and Mitchell Levinn the 1995 10-K
10.43* Employment Agreement dated October 9, 1996 between Incorporated by reference from Exhibit 10.3 to
PSINet and Richard R. the September 1996 10-Q
Frizalone
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------------ ---------------------------------------------------- ------------------------------------------------
<S> <C> <C>
10.44* Employment Agreement dated February 12, 1997 Incorporated by reference from Exhibit 10.78 to
between PSINet and David L. Hudson the 1996 Form 10-K
10.45* Employment Agreement dated July 1, 1997 between Incorporated by reference from Exhibit 10.5 to
PSINet and Michael Malesardi the September 1997 10-Q
10.46* Employment Agreement dated August 2, 1997 between Incorporated by reference from Exhibit 10.6 to
PSINet and Anthony Aveta the September 1997 10-Q
10.47* Employment Agreement dated August 4, 1997 between Incorporated by reference from Exhibit 10.7 to
PSINet and Harry Hobbs the September 1997 10-Q
10.48* Employment Agreement dated January 8, 1998 between Incorporated by reference from Exhibit 10.52 to
PSINet and William Cripe the 1997 Form 10-K
10.49* Employment Agreement dated January 18, 1998 between Incorporated by reference from Exhibit 10.53 to
PSINet and Kathleen B. Horne the 1997 Form 10-K
10.50* Employment Agreement dated February 16, 1998 Incorporated by reference from Exhibit 10.54 to
between PSINet and John Muleta the 1997 Form 10-K
10.51* Employment Agreement dated October 16, 1998, 1996 Incorporated by reference from Exhibit 10.57 to
between PSINet and Harold S. Wills the 1998 Form 10-K
10.52* Employment Agreement dated October 16, 1998 between Incorporated by reference from Exhibit 10.58 to
PSINet and Edward D. Postal the 1998 Form 10-K
10.53 Employment Agreement dated October 16, 1998 between Incorporated by reference from Exhibit 10.59 to
PSINet and David N. Kunkel the 1998 Form 10-K
10.54 Employee Agreement dated as of October 1, 1999 Incorporated by reference from Exhibit 10.1 to
between PSINet and William L. Schrader PSINet's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1999 located under
Securities and Exchange Commission File No.
0-25812 ("September 1999 10-Q")
10.55 Employment Agreement dated as of October 1, 1999 Incorporated by reference from Exhibit 10.2 to
between PSINet and Harold S. Wills PSINet's September 1999 10-Q
10.56 Employment Agreement dated as of October 1, 1999 Incorporated by reference from Exhibit 10.3 to
between PSINet and Edward D. Postal PSINet's September 1999 10-Q")
10.57 Form of Indemnification Agreement Incorporated by reference from Exhibit 10.21 to
the May 1995 Registration Statement
10.58 Registration Rights Agreement dated as of June 16, Incorporated by reference from Exhibit 10.39 to
1995 among PSINet and Stockholders of InterCon the December 1995 Registration Statement
Systems Corporation
10.59 Registration Rights Agreement dated as of July 11, Incorporated by reference from Exhibit 10.40
1995 among PSINet and Stockholders of Software to the December 1995 Registration Statement
Ventures Corporation
</TABLE>
-7-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------------ ---------------------------------------------------- ------------------------------------------------
<S> <C> <C>
10.60 Registration Rights Agreement dated as of November Incorporated by reference from Exhibit 10.10 to
11, 1997 between PSINet and the purchasers of the September 1997 10-Q
Series B 8% Convertible Preferred Stock
10.61 Registration Rights Agreement dated as of February Incorporated by reference from Exhibit 10.62 to
25, 1998 between PSINet and IXC Internet Services, the 1997 Form 10-K
Inc.
10.62 Guarantee Agreement dated September 29, 1998 among Incorporated by reference from Exhibit 2.3 to
each of the subsidiaries of PSINet party thereto the October 16, 1998 8-K
and The Chase Manhattan Bank
10.63 Pledge Agreement dated September 29, 1998 among Incorporated by reference from Exhibit 2.4 to
PSINet, each subsidiary of PSINet party thereto and the October 16, 1998 8-K
The Chase Manhattan Bank
10.64 Security Agreement dated September 29, 1998 among Incorporated by reference from Exhibit 2.5 to
PSINet, each subsidiary of PSINet party thereto and the October 16, 1998 8-K
The Chase Manhattan Bank
10.65 Warrant to purchase up to 25,000 shares of the Incorporated by reference from Exhibit 10.39 to
Series B Preferred of PSINet, at an exercise price the May 1995 Registration Statement
of $1.60 per share, registered in the name of
William H. Baumer
10.66 Warrant to purchase up to 25,000 shares of the Incorporated by reference from Exhibit 10.40 to
Series B Preferred of PSINet, at an exercise price the May 1995 Registration Statement
of $1.60 per share, registered in the name of
William H. Baumer
10.67 Stock Acquisition Agreement, dated as of February Incorporated by reference from Exhibit 2 to
1, 1997, between Ascend Communications, Inc. and PSINet's Current Report on Form 8-K dated
PSINet with respect to all outstanding capital February 14, 1997 located under Securities and
stock of InterCon Systems Corporation, a Delaware Exchange Commission File No. 0-25812
corporation and a wholly-owned subsidiary of PSINet
10.68 Asset Purchase Agreement dated as of June 28, 1996 Incorporated by reference from Exhibit 2 to the
between PSINet and MindSpring Enterprises, Inc. June 1996 10-Q
10.69 Amendment No. 1 to Asset Purchase Agreement and Incorporated by reference from Exhibit 2 to the
Network Services Agreement entered into as of June September 1996 10-Q
28, 1996 by and between PSINet and MindSpring
Enterprises, Inc.
10.70 Amendment No. 2 to Asset Purchase Agreement entered Incorporated by reference from Exhibit 10.8 to
into as of September 1, 1996 by and between PSINet the September 1996 10-Q
and MindSpring Enterprises, Inc.
</TABLE>
-8-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------------ ---------------------------------------------------- ------------------------------------------------
<S> <C> <C>
10.71 Amendment No. 3 to Asset Purchase Agreement and Incorporated by reference from Exhibit 10.74 to
Amendment No. 1 to Convertible Note entered into the 1996 Form 10-K
as of January 24, 1997 by and between PSINet and
MindSpring Enterprises, Inc.
10.72 Amendment No. 2 to Network Services Agreement Incorporated by reference from Exhibit 10.75 to
entered in as of January 1, 1997 by and between the 1996 Form 10-K
PSINet and MindSpring Enterprises, Inc.
10.73 IRU and Stock Purchase Agreement dated as of July Incorporated by reference from Exhibit 2.1 to
22, 1997 between IXC Internet Services, Inc. and the June 1997 10-Q
PSINet
10.74 First Amendment to IRU and Stock Purchase Agreement Incorporated by reference from Exhibit A to
dated as of July 22, 1997 between IXC Internet PSINet's December 1997 Proxy Statement
Services, Inc. and PSINet
10.75 Second Amendment to IRU and Stock Purchase Incorporated by reference from Exhibit A to the
Agreement dated as of July 22, 1997 between IXC December 1997 Proxy Statement
Internet Services, Inc. and PSINet
10.76 Joint Marketing and Services Agreement dated as of Incorporated by reference from Exhibit 10.1 to
July 22, 1997 between IXC Internet Services, Inc. PSINet's Quarterly Report on Form 10-Q for the
and PSINet quarter ended June 30, 1997 located under
Securities and Exchange Commission File no.
0-25812
10.77 Stock Purchase Agreement dated as of November 11, Incorporated by reference from Exhibit 10.9 to
1997 between PSINet and the Purchasers of its the September 1997 10-Q
Series B 8% Convertible Preferred Stock
10.78 Agreement dated as of November 10, 1997 between Incorporated by reference from Exhibit 2 to the
iSTAR internet inc. and PSINet September 1997 10-Q
10.79 Pre-Acquisition Agreement between PSINet and iSTAR Incorporated by reference from Exhibit 10.1 to
internet inc., dated December 23, 1997 the January 7, 1998 8-K
10.80 Security Agreement and Assignment dated as of Incorporated by reference from Exhibit 10.95 to
February 25, 1998 between PSINet and IXC Internet the 1997 Form 10-K
Services, Inc.
10.81 Collocation and Interconnection Agreement between Incorporated by reference from Exhibit 10.96 to
PSINet and IXC Internet Services, Inc. the 1997 Form 10-K
10.82 Escrow Agreement, dated as of April 13, 1998, Incorporated by reference from Exhibit 10.2 to
among Wilmington Trust Company (as escrow agent and the April 22, 1998 8-K
trustee) and PSINet.
10.83 Registration Rights Agreement dated as of April 13, Incorporated by reference from Exhibit 10.1 to
1998 among PSINet and Donaldson, Lufkin & Jenrette the April 22, 1998 8-K
Securities Corporation, Merrill Lynch, Pierce,
Fenner & Smith Incorporated, and Chase Securities,
Inc.
</TABLE>
-9-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------------ ---------------------------------------------------- ------------------------------------------------
<S> <C> <C>
10.84 First Amendment to Sublease dated as of March 23, Incorporated by reference from Exhibit 10.99 to
1998 between Unisys Corporation and PSINet PSINet's Registration Statement on Form S-4
declared effective on May 7, 1998 located under
the Securities and Exchange Commission File No.
333-51491 ("May 1998
Registration Statement")
10.85 Share Purchase Agreement dated as of October 1, Incorporated by reference from Exhibit 2.1 to
1998 among PSINet Japan Inc., a subsidiary of the October 16, 1998 8-K
PSINet, Tokyo Internet Corporation and Secom Co.,
Ltd.
10.86 Registration Rights Agreement dated as of November Incorporated by reference from Exhibit 10.1 to
3, 1998 among PSINet and Donaldson, Lufkin and the November 10, 1998 8-K
Jenrette Securities Corporation, Chase Securities,
Inc. and Morgan Stanley & Co. Incorporated
10.87* Employment Agreement dated June 17, 1998 between Incorporated by reference from Exhibit 10.1 to
PSINet and William A. Opet PSINet's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1998 located under
Securities and Exchange Commission File No.
0-25812 ("June 1998 10-Q")
10.88* Employment Agreement dated July 2, 1998 between Incorporated by reference from Exhibit 10.2 to
PSINet and Robert D. Leahy the June 1998 10-Q
10.89* Employment Agreement dated September 1, 1998 Incorporated by reference from Exhibit 10.8 to
between PSINet and Chi H. Kwan the September 1998 10-Q
10.90* Employment Agreement dated September 8, 1998 Incorporated by reference from Exhibit 10.5 to
between PSINet and James A. Haid the September 1998 10-Q
10.91* Employment Agreement dated September 30, 1998 Incorporated by reference from Exhibit 10.3 to
between PSINet and Sandy L. Blaisdell the September 1998 10-Q
10.92* Employment Agreement dated October 12, 1998 between Incorporated by reference from Exhibit 10.2 to
PSINet and Geoffrey E. Axton the September 1998 10-Q
10.93* Employment Agreement dated October 14, 1998 between Incorporated by reference from Exhibit 10.4 to
PSINet and Edward Arnold Davis the September 1998 10-Q
10.94 Registration Rights Agreement, dated as of November Incorporated by reference from Exhibit 4.3 to
13, 1998, among PSINet and Donaldson Lufkin & the September 1998 10-Q
Jenrette Securities Corporation, Chase Securities
Inc. and Morgan Stanley & Co. Incorporated
10.95* Amendment to Employment Agreement dated October 1, Incorporated by reference from Exhibit 10.6 to
1998 between PSINet and Harry Hobbs the September 1998 10-Q
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------------ ---------------------------------------------------- ------------------------------------------------
<S> <C> <C>
10.96* Employment Agreement dated November 2, 1998 between Incorporated by reference from Exhibit 10.7 to
PSINet and David J. Kramer the September 1998 10-Q
10.97* Employment Agreement dated November 6, 1998 between Incorporated by reference from Exhibit 10.9 to
PSINet and John Walpuck the September 1998 10-Q
10.98* Employment Agreement dated November 12, 1998 Incorporated by reference from Exhibit 10.10 to
between PSINet and Lawrence Winkler the September 1998 10-Q
10.99* Employment Agreement dated May 24, 1999 between Incorporated by reference from Exhibit 10.99 to
PSINet and Thomas A. Leach PSINet's August 1999 Registration Statement
10.100* Employment Agreement dated May 24, 1999 between Incorporated by reference from Exhibit 10.100
PSINet and James F. Cragg to PSINet's August 1999 Registration Statement
10.101* Employment Agreement dated May 24, 1999 between Incorporated by reference from Exhibit 10.101
PSINet and Philippe J. Kuperman to PSINet's August 1999 Registration Statement
10.102 Master Lease Agreement between PSINet and Incorporated by reference from Exhibit 10.11 to
Technology Credit Corporation No. 1788 dated June the September 1998 10-Q
20, 1998
10.103 Master Lease Agreement between PSINet and Incorporated by reference from Exhibit 10.12 to
Technology Credit Corporation No. 1789 dated June the September 1998 10-Q
20, 1998
10.104 Master Loan and Security Agreement No. 3963 between Incorporated by reference from Exhibit 10.13 to
PSINet and Charter Financial Inc. dated September the September 1998 10-Q
28, 1998
10.105 Lease Agreement dated July 8, 1998 between Incorporated by reference from Exhibit 10.2 to
Ballymore Properties Limited and Cordoba Holdings the April 27, 1999 8-K
Limited and Thomas Charles Cembrinck
10.106 Registration Rights Agreement, dated as of July 23, Incorporated by reference from Exhibit
1999, among PSINet and Donaldson Lufkin & Jenrette
International, Bear Stearns International Limited
and Chase Manhattan International Limited
10.107 Registration Rights Agreement, dated as of December Incorporated by reference from Exhibit 10.1 to
2, 1999, among PSINet and Donaldson Luftkin & PSINet's November 24, 1999 8-K
Jenrette International, Bear Stearns International
Limited, Merrill Lynch International and Morgan
Stanley & Co. International Limited
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------------ ---------------------------------------------------- ------------------------------------------------
<S> <C> <C>
10.108 Registration Rights Agreement, dated as of February *
1, 2000, among PSINet and Donaldson Lufkin &
Jenrette Securities Corporation, Merrill Lynch &
Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Inc., Bear
Stearns & Co. Inc., BancBoston Robertson Stephens
and Chase Securities Inc.
10.109 Amendment No. 1 to Registration Rights Agreement *
dated February 7, 2000 to Registration Rights
Agreement dated as of February 1, 2000 among
Donaldson, Lufkin & Jenrette Securities
Corporation, Merrill Lynch & Co., Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Morgan Stanley
& Co., Inc., Bear, Stearns & Co. Inc., BankBoston
Robertson Stephens and Chase Securities Inc.
12 Computation of Ratio of Earnings to Combined
Fixed Charges and Preferred Stock Dividends Filed herewith
21 Significant subsidiaries of PSINet Incorporated by reference from Exhibit 21 to
the 1998 Form 10-K
23.1 Consent of Nixon Peabody LLP Contained in Exhibit 5
23.2 Consent of PricewaterhouseCoopers LLP Filed herewith
23.3 Consent of Arthur Andersen LLP Filed herewith
24 Power of Attorney Included in the signature page to this
registration statement
25 Statement of Eligibility on Form T-1 of Wilmington Filed herewith
Trust Company
99.1 Letter of Transmittal for Dollar Notes Filed herewith
</TABLE>
-12-
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION LOCATION
- ------------ ---------------------------------------------------- ------------------------------------------------
<S> <C> <C>
99.2 Letter of Transmittal for Euro Notes Filed herewith
99.3 Form of Notice of Guaranteed Delivery for Dollar Filed herewith
Notes
99.4 Form of Notice of Guaranteed Delivery for Euro Notes Filed herewith
</TABLE>
- ---------------
* Indicates a management contract or compensatory plan or arrangement required
to be filed as an Exhibit pursuant to Item 14(a)(3).
-13-
<PAGE>
Exhibit 3.3
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
PSINET, INC.
Under Section 805 of the Business Corporation Law
FILED BY:
Nixon Peabody LLP
437 Madison Avenue
New York, New York 10022
<PAGE>
CERTIFICATE OF AMENDMENT
OF THE
CERTIFICATE OF INCORPORATION
OF
PSINET INC.
Under Section 805 of the Business Corporation Law
The undersigned, being the Executive Vice President and Chief
Financial Officer of PSINet Inc. (the "Corporation"), in order to amend the
Corporation's Certificate of Incorporation, does hereby certify that:
FIRST: The name of the Corporation is PSINet Inc.
SECOND: The Certificate of Incorporation of the Corporation
was filed by the Department of State of the State of New York on October 21,
1988 under the name Graphic Specialty Finishers, Inc.
THIRD: The Certificate of Incorporation is hereby amended to
effect the following amendment authorized by the Business Corporation Law to
amend Paragraph FOURTH, relating to the aggregate number of shares which the
Corporation shall have authority to issue, to add a provision stating the
number, designation, relative rights, preferences and limitations of a new
series of Preferred Stock, as fixed by the Board of Directors of the
Corporation, which shall be designated as 7% Series D Cumulative Convertible
Preferred Stock, par value $.01 per share, and to set forth in full the text of
such provision.
FOURTH: Paragraph FOURTH is hereby amended to add the
following at the end of such Paragraph FOURTH:
7% Series D Cumulative Convertible Preferred Stock
The Corporation is hereby authorized to establish a series of
Preferred Stock of the Corporation of the designation and number of shares, and
having the relative rights, preferences and limitations thereof (in addition to
the provisions set forth in this Certificate of Incorporation which are
applicable to all classes and series of Preferred Stock) as set forth in the
following Sections 1 through 13.
<PAGE>
Section 1. Designation, Amount and Par Value. The series of preferred
stock shall be designated as the 7% Series D Cumulative Convertible Preferred
Stock (the "Series D Preferred Stock"), and the number of shares so designated
shall be 16,500,000 (each registered holder of shares of Series D Preferred
Stock, a "Holder" and together with all other Holders, the "Holders"). Each
share of Series D Preferred Stock shall have a par value of $.01 per share. As
used in this Section 1 and the immediately following Sections 2 through 13, all
references to a "Section" or "Sections" shall be to any one or more of this
Section 1 and such Sections 2 through 13, as appropriate, and not to any other
provision of this Certificate of Incorporation.
Section 2. Dividends.
2.1. Holders of Series D Preferred Stock will be entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, dividends on the Series D Preferred Stock at a rate
per annum equal to 7% of the Liquidation Preference per share.
(a) All dividends will be cumulative, whether or not earned or
declared and payable quarterly out of assets legally available therefor, on
February 15, May 15, August 15 and November 15 of each year, commencing May 15,
2001 (each such date being referred to herein as a "Dividend Payment Date").
Dividends on the Series D Preferred Stock will accrue from February 15, 2001 (or
earlier if the Deposit Account is terminated, in which event dividends will
accrue from the last Deposit Payment Date (as defined in the Deposit
Agreement)). Each distribution in the form of a dividend shall be payable in
arrears to Holders of record as they appear on the stock books of the
Corporation on each record date as established by the Board of Directors of the
Corporation (the "Dividend Payment Record Date") not more than 60 nor less than
ten days preceding a Dividend Payment Date.
(i) Dividends payable on the Series D Preferred Stock
for each full dividend period will be computed by dividing the annual
dividend rate by four. Dividends payable on the Series D Preferred
Stock for any period less than a full dividend period will be computed
on the basis of a 360-day year consisting of twelve 30-day months.
(ii) The Series D Preferred Stock will not be
entitled to any dividend, whether payable in cash, property or
securities, in excess of the full accumulated and unpaid dividends.
(iii) No interest, or sum of money in lieu of
interest, will be payable in respect of any accumulated and unpaid
dividends.
(b) Dividends, to the extent declared by the Corporation's
Board of Directors, may, at the option of the Corporation, be paid in cash, by
delivery of fully paid and nonassessable shares of Common Stock, or a
combination thereof (subject, in each case, to applicable law). If the
Corporation elects to pay dividends in shares of Common Stock, the number of
shares of Common Stock to be distributed will be calculated by dividing the
dividend payment by (a) if on the date of such payment a registration statement
covering the shares of common stock so issued
2
<PAGE>
is effective, 97% of the Market Value of the common stock on the record date and
(b) if on the date of such payment a registration statement covering the shares
of common stock is not effective, 93% of the Market Value of the common stock on
the record date.
2.2.(a) Subject to this Section 2.2, no dividends may be
declared or paid or funds set apart for the payment of dividends on any Parity
Securities for any period, unless:
(i) full cumulative dividends on the Series D
Preferred Stock shall have been or contemporaneously are declared and
paid in full through the immediately preceding Dividend Payment Date;
and
(ii) if the dividend on the Parity Securities is
declared as payable in cash, a sum in cash is set apart for the next
succeeding payment on the Series D Preferred Stock at the next
succeeding Dividend Payment Date.
If full dividends are not so paid, the Series D Preferred
Stock will share dividends pro rata with any Parity Securities.
(b) No dividends may be paid or set apart for payment on
Parity Securities or Junior Securities, except dividends:
(i) on Junior Securities payable in additional
shares of Junior Securities; and
(ii) on Parity Securities payable in additional
shares of Parity Securities or Junior Securities;
provided, however, that, notwithstanding the provisions of Sections 2.2(a)(ii),
2.2(b)(i) and 2.2(b)(ii), whether or not full dividends have been or will be
paid on the shares of the Series D Preferred Stock, the Corporation shall be
entitled to declare and pay cash dividends on Parity Securities and Junior
Securities to the extent that:
(1) the funds for such cash dividend
payments are derived, directly or indirectly, from the
proceeds of an offering of Parity Securities or Junior
Securities with respect to which such cash dividends are to be
paid (or a concurrent offering of related securities); and
(2) provided that in connection with such
offering it is disclosed to the purchasers of such Parity
Securities or Junior Securities, as the case may be, in an
offering memorandum, prospectus, or similar communication,
that a portion of the proceeds thereof may be used for the
payment of cash dividends on such securities (any transaction
in which the Corporation obtains the right to make cash
dividend payments on Parity Securities or Junior Securities
pursuant to clauses 2.2(b)(1) and 2.2(b)(2) being referred to
as a "Self-Funding Event").
3
<PAGE>
(c) No Junior Securities or Parity Securities may be
purchased, redeemed or otherwise acquired for any consideration nor may funds be
set apart for payment with respect thereto if full cumulative and unpaid
dividends have not been paid or declared on the Series D Preferred Stock through
the immediately preceding Dividend Payment Date terminating on or prior to the
date of such purchase, redemption or acquisition or contemporaneously paid or
declared a sum sufficient for payment thereof set apart for such payment;
provided that, notwithstanding the foregoing:
(i) cash dividends may be paid on Parity
Securities and Junior Securities to the extent permitted by Section 2.2(b); and
(ii) the Corporation may purchase, redeem or
otherwise acquire for consideration or set aside funds for those
purposes with respect to any Parity Securities or Junior Securities by
conversion into or exchange for or out of the net proceeds of the
substantially concurrent sale (other than to a Subsidiary of the
Corporation) of other Parity Securities or Junior Securities, as the
case may be, of the Corporation.
(d) Notwithstanding the foregoing, if full dividends have not
been declared and paid or set apart on the Series D Preferred Stock and any
other Parity Securities, dividends may be declared and paid on the Series D
Preferred Stock and such other Parity Securities so long as the dividends are
declared and paid pro rata so that the amounts of dividends declared per share
on the Series D Preferred Stock and such other Parity Securities will in all
cases bear to each other the same ratio that accrued and unpaid dividends per
share on the shares of the Series D Preferred Stock and such other Parity
Securities bear to each other; provided, that if such dividends are paid in cash
on the other Parity Securities, dividends will also be paid in cash on the
Series D Preferred Stock.
(e) (i) Except as provided in Clause (ii) of this Section
2.2(e), the Holders of shares of the Series D Preferred Stock at the
close of business on a Dividend Payment Record Date will be entitled to
receive the dividend payment on those shares on the corresponding
Dividend Payment Date notwithstanding the subsequent conversion thereof
or the Corporation's default in payment of the dividend due on that
Dividend Payment Date.
(ii) Holders of shares called for redemption on a
Redemption Date which falls between the Dividend Payment Record Date
and the Dividend Payment Date will be entitled to receive such dividend
on such Redemption Date and will not be entitled to such payment
pursuant to Clause (i) hereof.
(iii) Except as provided in Clauses (i) and (ii) of
this Section 2.2(e), the Corporation shall make no payment or allowance
for unpaid dividends, whether or not in arrears, on converted shares or
for dividends on the shares of Common Stock issued upon conversion.
4
<PAGE>
3. Ranking.
3.1. The Series D Preferred Stock will, with respect to
dividend distributions and distributions upon the liquidation, winding-up or
dissolution of the Corporation, will rank ratably with the 6 3/4 % Series C
Cumulative Convertible Preferred Stock (the "Series C Preferred Stock") and will
rank:
(a) senior to all classes of Common Stock and to each
series of preferred stock existing on the date of this Certificate of
Amendment (other than Series C Preferred Stock) and each other class of
capital stock or series of preferred stock issued by the Corporation,
which is established after the date of this Certificate of Amendment,
the terms of which do not expressly provide that such class or series
will rank senior to or on a parity with the Series D Preferred Stock as
to dividend distributions and distributions upon the liquidation,
winding-up or dissolution of the Corporation (collectively referred to
as the "Junior Securities");
(b) subject to certain conditions, on a parity with
any class of capital stock or series of preferred stock issued by the
Corporation, which is established after the date of this Certificate of
Amendment by the Board of Directors, the terms of which expressly
provide that such class or series will rank on a parity with the Series
D Preferred Stock as to dividend distributions and distributions upon
the liquidation, winding-up or dissolution of the Corporation
(collectively referred to as the "Parity Securities"); and
(c) subject to certain conditions, junior to each
class of capital stock or series of preferred stock issued by the
Corporation, which is established after the date of this Certificate of
Amendment by the Board of Directors, the terms of which expressly
provide that such class or series will rank senior to the Series D
Preferred Stock as to dividend distributions and distributions upon
liquidation, winding-up or dissolution of the Corporation (collectively
referred to as the "Senior Securities").
3.2. Except as otherwise provided herein (including, without
limitation, Section 8.3 hereof), the Corporation is entitled to amend its
Certificate of Incorporation to authorize one or more additional series of
preferred stock, file certificates of amendment to its Certificate of
Incorporation, and issue without restriction, from time to time, any series of
Junior Securities, Parity Securities or Senior Securities.
4. Conversion.
5
<PAGE>
4.1.(a) Each Holder of Series D Preferred Stock shall have the
right, at its option, at any time after February 15, 2000 and from time to time
to convert, subject to the terms and provisions of this Section 4, any or all of
such Holder's shares of Series D Preferred Stock into shares of Common Stock. In
such case, the shares of Series D Preferred Stock shall be converted into such
number of fully paid and nonassessable shares of Common Stock (subject to
Section 630 of the Business Corporation Law) as is equal, subject to Section
4.6, to the product of the number of shares of Series D Preferred Stock being so
converted multiplied by the quotient of (i) the Liquidation Preference divided
by (ii) the Conversion Price then in effect, except that with respect to any
share which shall be called for redemption such right shall terminate at the
close of business on the second Business Day preceding the Redemption Date
unless the Corporation shall default in making the payment due upon redemption
thereof.
(b) The conversion right of a Holder of Series D Preferred
Stock shall be exercised by the Holder by the surrender of the certificates
representing shares to be converted to the Transfer Agent accompanied by the
Conversion Notice.
(i) Immediately prior to the close of business on the
Conversion Date, each converting Holder of Series D Preferred Stock
shall be deemed to be the Holder of record of Common Stock issuable
upon conversion of such Holder's Series D Preferred Stock
notwithstanding that the share register of the Corporation shall then
be closed or that certificates representing such Common Stock shall not
then be actually delivered to such person.
(ii) Upon notice from the Corporation, each Holder of
Series D Preferred Stock so converted shall promptly surrender to the
Transfer Agent certificates representing the shares so converted (if
not previously delivered), duly endorsed in blank or accompanied by
proper instruments of transfer.
(iii) On any Conversion Date, all rights with respect
to the shares of Series D Preferred Stock so converted, including the
rights, if any, to receive notices, will terminate, except the rights
of Holders thereof to:
(1) receive certificates for the number of
shares of Common Stock into which such shares of Series D
Preferred Stock have been converted;
(2) the payment in cash or shares of Common
Stock or a combination thereof (subject, in each such case, to
applicable law) of any accumulated and unpaid dividends
accrued thereon pursuant to and subject to the terms of
Section 4.2 hereof; and
(3) exercise the rights to which they
are entitled as Holders of Common Stock.
6
<PAGE>
(c) If the Conversion Date shall not be a Business Day, then
such conversion right shall be deemed exercised on the next Business Day.
4.2. When shares of Series D Preferred Stock are converted
pursuant to this Section 4, all accumulated and unpaid dividends (if declared)
on the Series D Preferred Stock so converted to (and not including) the
Conversion Date may, at the Corporation's option, be paid,
(a) in cash;
(b) in a number of fully paid and nonassessable
shares of Common Stock equal to the quotient of (i) the amount of
accumulated and unpaid dividends payable to the Holders of Series D
Preferred Stock hereunder, divided by (ii)(a) if on the date of such
payment a registration statement covering the shares of common stock so
issued is effective, 97% of the Market Value for the common stock on
the Conversion Date, and (b) if on the date of such payment a
registration statement covering the shares of common stock is not
effective, 93% of the Market Value of the of the common stock on the
Conversion Date; or
(c) a combination thereof (subject, in the case
of each of clauses (a), (b) and (c), to applicable law).
4.3. The Conversion Price shall be subject to adjustment if
any Conversion Price Adjustment Event described in Section 4.3(a) occurs. The
adjustment will be accomplished from time to time as described in Section
4.3(b).
(a) In case the Corporation shall at any time or from time to
time after the Issuance Date:
(i) make a redemption payment or pay a dividend (or
other distribution) payable in shares of Common Stock to all holders of
any class of Capital Stock of the Corporation (other than (A) the
issuance of shares of Common Stock in connection with the payment in
redemption for, of dividends on, or the conversion of the Series D
Preferred Stock or any one or more series of Parity Securities
(including, without limitation, the Series C Preferred Stock) or the
issuance of shares of Common Stock pursuant to the Deposit Agreement or
a deposit agreement created for the benefit of holders of any one or
more series of Parity Securities (including, without limitation, the
Series C Preferred Stock), or (B) to holders of Series D Preferred
Stock or any one or more series of Parity Securities (including,
without limitation, the Series C Preferred Stock), based upon the
number of shares of Common Stock into which such series of Preferred
Stock is then convertible);
(ii) make any issuance to all holders of shares of
Common Stock of rights, options or warrants entitling them to subscribe
for or purchase shares of Common Stock or securities convertible into
or exchangeable for shares of Common Stock at less
7
<PAGE>
than Market Value as of the date of conversion or exchange; provided,
however, that no adjustment shall be made with respect to such a
distribution to the extent the Holders of shares of Series D Preferred
Stock would be entitled to receive such rights, options or warrants
upon conversion at any time of shares of Series D Preferred Stock into
Common Stock; and provided, further, that if such rights, options or
warrants are only exercisable upon the occurrence of certain
triggering events, then the Conversion Price will not be adjusted
until such triggering events occur;
(iii) make any subdivision, combination or
reclassification of any class of Common Stock;
(iv) make any distribution consisting exclusively of
cash (excluding any cash distributed upon a merger or consolidation to
which Section 4.3(a)(vi) applies) to all holders of shares of any class
of Common Stock (which distribution is not also being made to the
Holders of the Series D Preferred Stock based on the number of shares
of Common Stock into which the Series D Preferred Stock is then
convertible unless the Common Stock does not share pro rata in such
distribution) in an aggregate amount that, combined together with (1)
all other such all cash distributions made within the then-preceding 12
months in respect of which no adjustment has been made and (2) any cash
and the fair market value of other consideration paid or payable in
respect of any tender offer by the Corporation or any of its
Subsidiaries for shares of any class of Common Stock concluded within
the then-preceding 12-months in respect of which no adjustment has been
made, exceeds 15% of the Corporation's Market Capitalization on the
record date of such distribution;
(v) complete a tender or exchange offer made by the
Corporation or any of its Subsidiaries for shares of any class of
Common Stock that involves an aggregate consideration that, together
with (1) any cash and other consideration payable in a tender or
exchange offer by the Corporation or any of its Subsidiaries for shares
of any class of Common Stock expiring within the then-preceding
12-months in respect of which no adjustment has been made and (2) the
aggregate amount of any such all-cash distributions referred to in (iv)
above to all holders of shares of any class of Common Stock within the
then-preceding 12-months in respect of which no adjustments have been
made, exceeds 15% of the Corporation's Market Capitalization just prior
to the expiration of such tender offer; or
(vi) make a distribution to all holders of any class
of Common Stock (which distribution is not also being made to the
holders of the Series D Preferred Stock based on the number of shares
of Common Stock into which the Series D Preferred Stock is then
convertible unless the Common Stock does not share pro rata in such
distribution) consisting of evidences of indebtedness, shares of
capital stock other than Common Stock or assets, including securities,
but excluding those dividends, rights, options, warrants and
distributions referred to in clauses (i) through (v) above (other than
in connection with a
8
<PAGE>
merger effected solely to reflect a change in the jurisdiction of
incorporation of the Corporation).
(b) If any Conversion Price Adjustment Event occurs, the
Corporation will calculate the adjustment to the Conversion Price as follows for
each specific event. In the following descriptions, the variables have the
following definitions:
"C" equals the total number of shares of Series D
Preferred Stock outstanding at the time of the Conversion Price
Adjustment Event;
"U" equals the number of shares of Common Stock
underlying rights, options, or warrants issued to all holders of Common
Stock pursuant to Section 4.3(a)(ii) entitling such holders to
subscribe for or purchase shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock issued in
the Conversion Price Adjustment Event;
"X" equals the total number of shares of Common Stock
outstanding immediately prior to the Conversion Price Adjustment Event
(not including unexercised options, warrants or rights);
"Y" equals the total number of shares of Common Stock
outstanding immediately after the Conversion Price Adjustment Event
(not including unexercised options, warrants or rights);
"Z" equals the total number of shares of Common Stock
outstanding at the time of the Conversion Price Adjustment Event;
"Cash" equals any distribution consisting exclusively
of cash (excluding any cash distributed upon a merger or consolidation
to which Section 4.5 applies) to all holders of shares of Common Stock
in an aggregate amount that, combined together with (1) all other such
all-cash distributions made within the then-preceding 12-months in
respect of which no adjustment has been made and (2) any cash and the
fair market value of other consideration paid or payable in respect of
any tender offer by the Corporation or any of its Subsidiaries for
shares of any class of Common Stock concluded within the then-preceding
12-months in respect of which no adjustment has been made pursuant to
Section 4.3(a)(iv);
"ExP" equals the exercise price or other
consideration to be paid by the holder upon the exercise of or
conversion of "U";
"MC" equals market capitalization;
"MV" equals market value per share of the Common
Stock as of the date of conversion or exchange of "U";
9
<PAGE>
"#Sh" equals the number of shares of Common Stock
receiving the distribution contemplated in Section 4.3(a)(vi) or
subject to the tender offer contemplated in Section 4.3(a)(v);
"TOff" equals the aggregate consideration that,
together with (1) any cash and other consideration payable in a tender
or exchange offer by the Corporation or any of its Subsidiaries for
shares of Common Stock expiring within the then-preceding 12-months in
respect of which no adjustment has been made and (2) the aggregate
amount of any such all-cash distributions referred to in section
4.3(a)(iv) to all holders of shares of Common Stock within the
then-preceding 12-months in respect of which no adjustments have been
made;
"TOff/S" equals the tender offer price per share;
"TPur" equals the number of shares purchased in the
tender offer;
"Value" equals the aggregate fair market value of the
distribution described in Section 4.3(a)(vi), as determined in good
faith by the Board of Directors of the Corporation;
"CP" equals the Conversion Price immediately prior to
the Conversion Price Adjustment Event;
"ACP" equals the Conversion Price immediately after
the Conversion Price Adjustment Event;
(i) In the case of a Conversion Price Adjustment
Event described in Sections 4.3(a)(i) or 4.3(a)(iii), the Conversion
Price in effect immediately before such event shall be adjusted
pursuant to the following formula: X/Y multiplied by CP=ACP.
(ii) In the case of a Conversion Price Event
described in Section 4.3(a)(ii), the Conversion Price in effect
immediately before such event shall be adjusted pursuant to the
following formula: X/(X+U((MV-ExP)/MV)) multiplied by CP=ACP. If any
options, warrants or other rights of the nature described in Section
4.3(a)(ii) ("Rights") expire without exercise or conversion, the
Conversion Price will be readjusted to the Conversion Price which would
otherwise be in effect had the adjustment made upon the issuance of
such Rights been made on the basis of delivery of only the number of
shares of Common Stock actually delivered upon the exercise or
conversion of such Rights.
(iii) In the case of a Conversion Price Adjustment
Event described in Section 4.3(a)(iv), the Conversion Price in effect
immediately before such event shall be adjusted pursuant to the
following formula: CP-((Cash-15%MC)/C)=ACP. There will
10
<PAGE>
be no adjustment to the Conversion Price pursuant to
Clause 4.3(a)(iv) if (Cash-15% MC) is less than or equal to zero.
(iv) In the case of a Conversion Price Adjustment
Event described in Section 4.3(a)(v), and if the tender offer price or
exchange offer price per share is greater than Market Value, the
Conversion Price in effect immediately before such event shall be
adjusted pursuant to the following formula: CP-((TPur multiplied by
(TOff/S-MV))/(#SH-TPur))=ACP. There will be no adjustment to the
Conversion Price pursuant to Clause 4.3(a)(v) if TOff/S is less than or
equal to Market Value or if TPur multiplied by TOff/S is less than 15%
MC.
(v) In the case of a Conversion Price Adjustment
Event described in Section 4.3(a)(vi), the Conversion Price in effect
immediately before such event shall be adjusted pursuant to the
following formula: CP-(Value/#SH)=ACP.
An adjustment made pursuant to this Section 4.3 shall become effective: (x) in
the case of a Conversion Price Adjustment Event described in Section 4.3(a)(i),
(ii), (iv) or (vi), immediately following the close of business on the record
date for the determination of holders of Common Stock entitled to participate in
such event, provided, however, that the adjustment made pursuant to this Section
4.3 in respect of a Special Share Distribution shall be made on February 15,
2000; or (y) in the case of a Conversion Price Adjustment Event described in
Section 4.3(a)(iii), the close of business on the day upon which such corporate
action becomes effective; or (z) in the case of a Conversion Price Adjustment
Event described in Section 4.3(a)(v), the close of business on the day of the
completion of such tender offer or exchange offer.
(c) Notwithstanding anything herein to the contrary, no
adjustment under this Section 4.3 need be made to the Conversion Price unless
such adjustment would require an increase or decrease of at least 1% of the
Conversion Price then in effect. Any lesser adjustment shall be carried forward
and shall be made at the time, if ever, of and together with the next subsequent
adjustment required pursuant to this Section 4.3, which, together with any
adjustment or adjustments so carried forward, shall amount to an increase or
decrease of at least 1% of such Conversion Price.
(d) Notwithstanding anything to the contrary contained in this
Certificate of Amendment, no Conversion Price adjustment will be made as a
result of the issuance of Common Stock on conversion of or in payment of a
dividend on the Series D Preferred Stock or pursuant to the Deposit Agreement.
(e) Each event requiring adjustment to the Conversion Price
shall require only a single adjustment even though more than one of the
adjustment clauses set forth in Section 4.3(a), Section 4.4 or Section 4.5 may
be applicable to such event.
(f) If the Corporation shall take a record of the holders of
any class of its Capital Stock for the purpose of entitling them to receive a
dividend or other distribution or shall
11
<PAGE>
take any other action which would otherwise constitute a Conversion Price
Adjustment Event, and shall thereafter and before the distribution to
stockholders thereof legally abandon its plan to pay or deliver such dividend or
distribution or abandon such other action, then thereafter no adjustment in the
Conversion Price then in effect shall be required by reason of the taking of
such record or such other action.
(g) Upon any increase or decrease in the Conversion Price,
then, and in each such case, the Corporation promptly shall deliver to each
registered Holder of Series D Preferred Stock a certificate signed by an
authorized officer of the Corporation, setting forth in reasonable detail the
event requiring the adjustment and the method by which such adjustment was
calculated and specifying the increased or decreased Conversion Price then in
effect following such adjustment.
(h) The Corporation reserves the right to make such reductions
in the Conversion Price in addition to those required in the foregoing
provisions as it considers to be advisable in order that any event treated for
Federal income tax purposes as a dividend of stock or stock rights will not be
taxable to the recipients. In the event the Corporation elects to make such a
reduction in the Conversion Price, the Corporation will comply with the
requirements of Rule 14e-1 under the Exchange Act, and any other securities laws
and regulations thereunder if and to the extent that such laws and regulations
are applicable in connection with the reduction of the Conversion Price.
4.4. In the event that, after the Issuance Date, the
Corporation distributes rights or warrants (other than those referred to in
Section 4.3(a)(ii)) pro rata to all holders of shares of Common Stock, so long
as any such rights or warrants have not expired or been redeemed by the
Corporation, the Holder of any Series D Preferred Stock surrendered for
conversion will be entitled to receive upon such conversion, in addition to the
shares of Common Stock then issuable upon such conversion (the "Conversion
Shares"), a number of rights or warrants to be determined as follows:
(a) if such conversion occurs on or prior to the date
for the distribution to the holders of rights or warrants of separate
certificates evidencing such rights or warrants (the "Distribution
Date"), the same number of rights or warrants to which a holder of a
number of shares of Common Stock equal to the number of Conversion
Shares is entitled at the time of such conversion in accordance with
the terms and provisions applicable to the rights or warrants; and
(b) if such conversion occurs after such Distribution
Date, the same number of rights or warrants to which a holder of the
number of shares of Common Stock into which such Series D Preferred
Stock was convertible immediately prior to such Distribution Date would
have been entitled on such Distribution Date in accordance with the
terms and provisions of and applicable to the rights or warrants.
12
<PAGE>
In the event the Holders of the Series D Preferred Stock are not entitled to
receive such rights or warrants pursuant to Section 4.4(a) or 4.4(b), the
Conversion Price will be subject to adjustment upon any declaration or
distribution of such rights or warrants pursuant to and subject to the terms of
Section 4.3(b)(ii), above.
4.5.(a) In case of:
(i) any capital reorganization or reclassification or
similar change (to which Section 4.3(a) does not apply) of outstanding
shares of Common Stock (other than a change in par value, or from par
value to no par value, or from no par value to par value); or
(ii) any consolidation or merger of the Corporation with
or into another Person (other than a consolidation or merger in which
the Corporation is the resulting or surviving Person and which does not
result in any reclassification or change of outstanding Common Stock or
in connection with a merger effectuated solely to reflect a change in
the jurisdiction of incorporation of the Corporation; provided that any
such reincorporation merger does not also result in a reclassification
or change of Common Stock such that the Common Stock that holders of
Series D Preferred Stock would have received had they converted prior
to such merger is different from shares of Common Stock received by the
holders of Common Stock in such reincorporation merger); or
(iii) any sale, transfer or other disposition to
another Person of all or substantially all of the assets of the
Corporation (other than the sale, transfer, assignment or distribution
of shares of capital stock or assets to a Subsidiary) computed on a
consolidated basis (any of the events described in Section 4.5(a) being
referred to in this Section 4.5 as a "Transaction"),
then the adjustment described in Section 4.5(b) will be made.
(b) Each share of Series D Preferred Stock then outstanding
shall, without the consent of any Holder of Series D Preferred Stock (except as
expressly required by applicable law), become convertible only into the kind and
amount of shares of stock or other securities (of the Corporation or another
issuer), cash or other property receivable upon such Transaction by a holder of
the number of shares of Common Stock into which such share of Series D Preferred
Stock could have been converted immediately prior to such Transaction after
giving effect to any adjustment event.
(c) The provisions of this Section 4.5 and any equivalent
thereof in any such certificate similarly shall apply to successive
Transactions. The provisions of this Section 4.5 shall be the sole right of
Holders of Series D Preferred Stock in connection with any Transaction and,
except as expressly provided by applicable law and Section 8.3, such Holders
shall have no separate vote thereon.
13
<PAGE>
4.6. In the case of any distribution by the Corporation to its
stockholders of substantially all of its assets, each Holder of Series D
Preferred Stock will participate pro rata in such distribution based on the
number of shares of Common Stock into which such Holders' shares of Series D
Preferred Stock would have been convertible immediately prior to such
distribution.
4.7. If, as a result of any Conversion Price Adjustment Event,
a Holder of the Series D Preferred Stock becomes entitled to receive upon
conversion shares of two or more classes of Capital Stock, the Corporation shall
determine the reasonable allocation of the adjusted Conversion Price between the
classes of Capital Stock. After such allocation, the Conversion Price of each
class of Capital Stock shall thereafter be subject to adjustment on terms
comparable to the Series D Preferred Stock in this Article 4.
4.8. The Corporation shall at all times reserve and keep
available for issuance upon the conversion of the Series D Preferred Stock, such
number of its authorized but unissued shares of Common Stock as will from time
to time be sufficient to permit the conversion of all outstanding shares of
Series D Preferred Stock, and shall take all action required to increase the
authorized number of shares of Common Stock if at any time there shall be
insufficient authorized but unissued shares of Common Stock to permit such
reservation or to permit the conversion of all outstanding shares of Series D
Preferred Stock.
4.9. The issuance or delivery of certificates for Common Stock
upon the conversion of shares of Series D Preferred Stock shall be made without
charge to the converting Holder of shares of Series D Preferred Stock for such
certificates or for any documentary stamp or similar tax in respect of the
issuance or delivery of such certificates or the securities represented thereby,
and such certificates shall be issued or delivered in the respective names of,
or in such names as may be directed by, the Holders of the shares of Series D
Preferred Stock converted; provided, however, that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate in a name other than that
of the Holder of the shares of Series D Preferred Stock converted, and the
Corporation shall not be required to issue or deliver such certificate unless or
until the Person or Persons requesting the issuance or delivery thereof shall
have paid to the Corporation the amount of such tax or shall have established to
the reasonable satisfaction of the Corporation that such tax has been paid.
14
<PAGE>
5. Optional Redemption.
5.1.(a) The Corporation may, at its option and to the extent
permitted by applicable law, redeem the Series D Preferred Stock at a Redemption
Price equal to premium of 105.50% of the Liquidation Preference (plus any
accumulated and unpaid dividends, if any, whether or not declared, to the
Redemption Date (the "Provisional Redemption Date")) on or after August 15, 2001
but prior to February 15, 2003 (the "Provisional Redemption"), if the Trading
Price of the Series D Preferred Stock equals or exceeds $160.40 per share for 20
Trading Days within any 30 Trading Day period. If the Deposit Account has been
terminated, and the Corporation then undertakes a Provisional Redemption,
holders of Series D Preferred Stock that the Corporation calls for redemption,
will, in addition to the payments required by the second preceding sentence,
also receive a payment (the "Additional Payment") in an amount equal to the
present value of the aggregate value of the dividends that would thereafter have
been payable on the Series D Preferred Stock (whether or not declared) from the
Provisional Redemption Date to February 15, 2003 (the "Additional Period"). The
present value will be calculated using the bond equivalent yield on U.S.
Treasury notes or bills having a term nearest in length to that of the
Additional Period as of the day immediately preceding the date on which a notice
of Provisional Redemption is mailed. If the Deposit Account has been terminated,
the Corporation will be obligated to make the Additional Payment on all Series D
Preferred Stock that it has called for Provisional Redemption, whether or not
those shares of Series D Preferred Stock are converted into shares of Common
Stock prior to the Provisional Redemption Date.
Except as provided in the immediately preceding paragraph, the
Corporation may not redeem the Series D Preferred Stock prior to February 15,
2003.
(b) Beginning on February 15, 2003, the Series D
Preferred Stock may be redeemed, during the twelve-month periods commencing on
February 15 of the years indicated below, at the following Redemption Prices per
share, plus in each case all accumulated and unpaid dividends (whether or not
declared) to the Redemption Date:
Redemption Premium
Year Per Share
- ---- ---------
2003......................................... 104.000%
2004......................................... 103.000%
2005......................................... 102.000%
2006......................................... 101.000%
2007 and thereafter.......................... 100.000%
(c) The Corporation may effect any redemption (whether
pursuant to Section 5.1(a) or 5.1(b) in whole or in part, at the option of the
Corporation, in cash, by delivery of fully
15
<PAGE>
paid and nonassessable shares of Common Stock or a combination thereof (subject,
in each case, to applicable law), upon not less than 20 days' notice nor more
than 60 days' notice delivered to holders of Series D Preferred Stock
(d) In the event that fewer than all the outstanding shares of
the Series D Preferred Stock are to be redeemed, the shares to be redeemed will
be determined pro rata or by lot, except that the Corporation may redeem such
shares held by any Holder of fewer than 100 shares (or shares held by Holders
who would hold fewer than 100 shares as a result of such redemption), as may be
determined by the Corporation.
(e) If the Corporation elects to pay the Redemption Price in
respect of any shares of Series D Preferred Stock in shares of Common Stock, the
number of shares of Common Stock to be distributed in respect of such shares of
Series D Preferred Stock will be calculated by dividing the aggregate Redemption
Price in respect of such shares of Series D Preferred Stock payable to any
Holder by 97% of the Market Value of the Common Stock as of the Redemption
Notice Date. In order for the Corporation to exercise the option by paying the
Redemption Price in shares of Common Stock, a shelf registration statement must
be effective between and including the Redemption Notice Date and the Redemption
Date. The Market Value of the Common Stock will be calculated based on the
average of the daily closing price for the five consecutive trading days ending
one trading day prior to the Redemption Date.
(f) From and after the applicable Redemption Date (unless the
Corporation shall be in default of payment of the Redemption Price), dividends
on the shares of the Series D Preferred Stock to be redeemed on such Redemption
Date shall cease to accumulate, such shares shall no longer be deemed to be
outstanding, and all rights of the Holders thereof as stockholders of the
Corporation (except the right to receive the Redemption Price) will cease.
5.2. If any dividends on the Series D Preferred Stock are
in arrears, no shares of the Series D Preferred Stock will be redeemed.
5.3. In the event the Corporation shall elect to redeem shares
of the Series D Preferred Stock pursuant to Section 5.1 hereof, the Corporation
must provide the Holders with the Redemption Notice as described in Section
5.1(a) or 5.1(b), as applicable, and:
(a) (i) On or before any Redemption Date, each Holder of
shares of Series D Preferred Stock to be redeemed shall surrender the
certificate or certificates representing such shares of Series D
Preferred Stock (properly endorsed or assigned for transfer, if the
Corporation shall so require and the Redemption Notice shall so state),
to the Corporation or the Redemption Agent (if appointed) in the manner
and at the place designated in the Redemption Notice.
(ii) On the first Business Day following the
Redemption Date, the Corporation or the Redemption Agent, as
applicable, shall pay or deliver to the Holder, whose name appears on
such certificate or certificates as the registered owner thereof, the
16
<PAGE>
full Redemption Price due such Holder in cash, in fully paid and
nonassessable shares of Common Stock or in a combination thereof
(subject, in each case, to applicable law).
(iii) The shares represented by each certificate to
be surrendered shall be automatically (and without any further action
of the Corporation or the Holder) canceled as of the Redemption Date
whether or not certificates for such shares are returned to the
Corporation and returned to the status of authorized but unissued
shares of preferred stock of no series.
(iv) If fewer than all the shares represented by any
such certificate are to be redeemed, a new certificate shall be issued
representing the unredeemed shares, without costs to the Holder,
together with the amount of cash, if any, in lieu of fractional shares
to the extent the Corporation is legally and contractually entitled to
pay cash for said fractional shares. If the Corporation is not entitled
to pay cash for fractional shares, it shall pay cash to the Holder for
the fractional shares when it becomes legally and contractually able to
pay such cash.
(b) If a Redemption Notice shall have been given as provided
in Section 5.1, dividends on the shares of Series D Preferred Stock so called
for redemption shall cease to accrue, such shares shall no longer be deemed to
be outstanding, and all rights of the Holders thereof as stockholders of the
Corporation with respect to shares so called for redemption (except for the
right to receive from the Corporation the Redemption Price (plus accumulated and
unpaid dividends, (whether or not declared), if any, to the Redemption Date or
the right, if any, to receive payments from the Deposit Account)) shall cease
(excluding any right to receive the dividend payment on shares called for
redemption where the Redemption Date falls between the Dividend Payment Record
Date and the Dividend Payment Date) either (i) from and after the Redemption
Date (unless the Corporation shall default in the payment of the Redemption
Price, in which case such rights shall not terminate at such time and date) or
(ii) if the Corporation shall so elect and state in the Redemption Notice, from
and after the time and date (which date shall be the Redemption Date or an
earlier date not less than 20 days after the date of mailing of the Redemption
Notice) on which the Corporation shall irrevocably deposit in trust for the
Holders of the shares to be redeemed with a designated Redemption Agent as
paying agent sufficient to pay at the office of such paying agent, on the
Redemption Date, the Redemption Price (plus accumulated and unpaid dividends, if
any, to the Redemption Date). Any money or shares of Common Stock so deposited
with such Redemption Agent which shall not be required for such redemption shall
be returned to the Corporation forthwith. Subject to applicable escheat laws,
any moneys or shares of Common Stock so set aside by the Corporation and
unclaimed at the end of one year from the Redemption Date shall revert to the
general funds of the Corporation, after which reversion the Holders of such
shares so called for redemption shall look only to the general funds of the
Corporation for the payment of the Redemption Price (plus accumulated and unpaid
dividends (whether or not declared), if any, to the Redemption Date) without
interest. Any interest accrued on funds held by the Redemption Agent shall be
paid to the Corporation from time to time.
17
<PAGE>
(c) If any Holder whose shares of Series D Preferred Stock are
called for redemption pursuant to this Article 5 fails to surrender the
certificate representing such shares (or fails to arrange for the appropriate
book-entry transfer if a global certificate has been issued), such Holder shall
not be entitled to receive payment of the Redemption Price until the certificate
has been surrendered for cancellation or the appropriate book-entry transfer is
made. Such Holder will not be entitled to receive any interest on the Redemption
Price.
6. Change of Control.
6.1.(a) Notwithstanding Section 4, in the event of a Change of
Control, Holders shall, if the Market Value at such time is less than the
Conversion Price, have a one time option, upon not less than 30 days' notice nor
more than 60 days' notice, to convert all of their outstanding shares of Series
D Preferred Stock into shares of Common Stock at an adjusted Conversion Price
equal to the greater of:
(i) the Market Value as of the Change of Control date; and
(ii) $57.96.
(b) In lieu of issuing the shares of Common Stock issuable
upon conversion in the event of a Change of Control, the Corporation may, at its
option, make a cash payment equal to the Market Value of such Common Stock
otherwise issuable.
6.2. The foregoing provision is not waivable by the Corporation.
7. Liquidation Preference.
7.1. Upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, Holders of the Series D Preferred
Stock will be entitled to be paid, out of assets of the Corporation available
for distribution, the Liquidation Preference per share plus an amount in cash
equal to all accumulated and unpaid dividends thereon to the date fixed for
liquidation, dissolution or winding-up (including an amount equal to a prorated
dividend for the period from the last dividend payment date to the date fixed
for liquidation, dissolution or winding-up), before any distribution is made on
any Junior Securities, including, without limitation, the Common Stock.
7.2. If, upon any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, the amounts payable with respect
to the Series D Preferred Stock and all other Parity Securities are not paid in
full, the Holders of the Series D Preferred Stock and the Parity Securities will
share equally and ratably in any distribution of assets of the Corporation in
proportion to the full distributable amounts to which they are entitled.
7.3. After payment of the full amount of the Liquidation
Preference and accumulated and unpaid dividends to which they are entitled, the
Holders of shares of the Series D
18
<PAGE>
Preferred Stock will not be entitled to any further participation in any
distribution of assets of the Corporation or have any right or claim to any of
the Corporation's remaining assets.
7.4. Neither the sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all of the property or business of the Corporation (other than in
connection with the dissolution, liquidation or winding up of its business) nor
the merger or consolidation of the Corporation with or into any other
corporation will be deemed to be a dissolution, liquidation, or winding-up,
voluntary or involuntary, of the Corporation.
8. Voting Rights.
8.1. Holders of the Series D Preferred Stock have no
voting rights except as provided by law or as set forth herein.
8.2. If dividends on the Series D Preferred Stock are in
arrears and unpaid for six quarterly periods, the Holders of the Series D
Preferred Stock voting separately as a class with the shares of any other
preferred stock or preference securities having similar voting rights
(including, without limitation, Holders of Series C Preferred Stock) will be
entitled at the next regular or special meeting of stockholders of the
Corporation to elect two directors of the Corporation. Such voting rights will
continue only until such time as the dividend arrearage on the Series D
Preferred Stock has been paid in full.
8.3. The affirmative vote or consent of the Holders of at
least 66-2/3% of the outstanding Series D Preferred Stock will be required for:
(a) the issuance of any class of Senior Securities or
security convertible into Senior Securities or evidencing a right to
purchase any shares or any class or series of Senior Securities; and
(b) amendments to the Corporation's Certificate of
Incorporation that would affect adversely the rights of Holders of the
Series D Preferred Stock; provided, however, that any issuance of
shares of Parity Securities, including the issuance of additional
shares of Series D Preferred Stock, will not, by itself, be deemed to
adversely affect the rights of holders of the Series D Preferred Stock.
In all such cases each share of Series D Preferred Stock shall be entitled to
one vote.
8.4. Notwithstanding any provision hereof to the contrary
(including, without limitation, Section 8.3),
(a) the creation, authorization or issuance of
any shares of Junior Securities, Parity Securities or Senior Securities; or
19
<PAGE>
(b) an increase or decrease in the amount of
authorized capital stock of any class, including any preferred stock
(other than, with respect to an increase, Series D Preferred Stock),
shall not in either case, require the consent of the Holders of the Series D
Preferred Stock unless otherwise required by applicable law and shall not be
deemed to affect adversely the rights, preferences, privileges or voting rights
of Holders of shares of the Series D Preferred Stock.
9. No Personal Liability of Directors, Officers, Employees,
Incorporators and Stockholders.
9.1. Subject to applicable law, no director, officer,
employee, incorporator or stockholder of the Corporation or any of its
Affiliates, as such, shall have any liability for any obligations of the
Corporation and any of its Affiliates under the Series D Preferred Stock or this
Certificate of Incorporation or for any claim based on, in respect of, or by
reason of, such obligations or their creation. To the extent permitted by
applicable law, each Holder of the Series D Preferred Stock waives and releases
all such liability. The waiver and release are part of the consideration for
issuance of the Series D Preferred Stock.
10. Amendment, Supplement and Waiver.
10.1. Unless otherwise expressly required by applicable law,
without the consent of any Holder of the Series D Preferred Stock, the
Corporation may amend or supplement this Certificate of Amendment to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Series D
Preferred Stock in addition to or in place of certificated Series D Preferred
Stock, to provide for the assumption of the Corporation's obligations to Holders
of the Series D Preferred Stock in the case of a merger or consolidation, to
make any change that would provide any additional rights or benefits to the
Holders of the Series D Preferred Stock or that does not adversely affect the
legal rights of any such Holder under this Certificate of Incorporation.
11. Certain Definitions.
Set forth below are certain defined terms used in Sections 1
through 13 of this Certificate of Amendment.
11.1. "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" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), 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 no individual, other than a director of the Corporation
or an officer of the Corporation with a policy making function, shall be deemed
an Affiliate of the Corporation or any of its Subsidiaries, solely by reason of
such individual's
20
<PAGE>
employment, position or responsibilities by or with respect to the Corporation
or any of its Subsidiaries.
11.2. "Business Day" means any day other than a Legal
Holiday.
11.3. "Capital Stock" means any and all shares of corporate
stock whether common or preferred.
11.4. "Change of Control" means: (a) the first day any
"person" or "group" as such terms are used in Sections 13(d) and 14(d) of the
Exchange Act, is or becomes a "beneficial owner" (as defined in Rules 13d-3 and
13d-5 under the Exchange Act, except that a person will be deemed to have
beneficial ownership of all shares that such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of time)
directly or indirectly, of more than 50% of the Corporation's outstanding Common
Stock; (b) the first day, during any period of two consecutive years, on which a
majority of the members of the Board of Directors of the Company are not
Continuing Directors; (c) any transaction or series of transactions, pursuant to
which the Corporation consolidates with or merges with or into any person, or
conveys, transfers or leases all or substantially all, computed on a
consolidated basis, of its assets to any Person, or any corporation consolidates
with or merges into or with the Corporation, in any such event pursuant to a
transaction in which the Corporation's outstanding Common Stock is changed into
or exchanged for cash, securities or other property, other than any such
transaction where the Corporation's Common Stock is not changed or exchanged at
all, except to the extent necessary to reflect a change in the jurisdiction of
incorporation of the Corporation or where no "person" or "group" owns,
immediately after such transaction, directly or indirectly, more than 50% of the
total outstanding voting stock of the surviving corporation; or (d) the
Corporation is liquidated or dissolved or adopts a plan of liquidation or
dissolution. The good faith determination of the Corporation's Board of
Directors or a duly authorized committee thereof, based upon the advice of
outside counsel, of the beneficial ownership of securities of the Corporation
within the meaning of Rules 13d-3 and 13d-5 under the Exchange Act will be
conclusive, absent contrary controlling precedent or contrary written
interpretation published by the SEC.
11.5. "Common Stock" means the common stock, $.01 par value
per share of the Corporation.
11.6. "Corporation" means PSINet Inc., a New York
corporation, and any successor thereof.
11.7. "Continuing Director" means, as of any date of
determination, any member of the Board of Directors of the Corporation: (a) who
was a member of such Board of Directors two years prior to such date; or (b)
whose nomination for election or election to such Board of Directors was
approved by an affirmative vote of a majority of the directors then still in
office who were members of such Board two years prior to such date or whose
nomination for election or election was previously so approved.
21
<PAGE>
11.8. The "Conversion Date" shall be the date the Transfer
Agent receives the Conversion Notice.
11.9. The "Conversion Notice" is written notice from the
Holder to the Corporation stating that the Holder elects to convert all or a
portion of the shares of Series D Preferred Stock represented by certificates
delivered to the Transfer Agent contemporaneously, which notice shall contain
reference to the date to effect conversion, the number of shares of Series D
Preferred Stock to be converted, the number of shares of Common Stock to be
issued and the Conversion Price, and otherwise be in the form agreed to the by
the Corporation.
11.10. The "Conversion Price" shall initially be $106.93,
subject to adjustment as set forth in Section 4.3.
11.11. "Conversion Price Adjustment Events" are any of those
events specified in Section 4.3(a).
11.12. "Deposit Account" means that certain deposit account
established pursuant to the Deposit Agreement.
11.13. "Deposit Agreement" means the Deposit Agreement, with
respect to the Series D Preferred Stock, between the Corporation and Wilmington
Trust Corporation.
11.14. "Dividend Payment Date" is as defined in Section 2.1,
above.
11.15. "Dividend Payment Record Date" is as defined in
Section 2.1, above.
11.16. "Exchange Act" means the Securities Exchange Act of
1934, as amended.
11.17. "Holder" means a Person in whose name shares of
Capital Stock is registered.
22
<PAGE>
11.18. "Issuance Date" means the date on which the Series D
Preferred Stock is originally issued under this Certificate of Amendment.
11.19. "Junior Security" is as defined in Section 3.1.
11.20. "Legal Holiday" means a Saturday, a Sunday or a day on
which banking institutions in the City of New York or at a place payment is to
be received are authorized by law, regulation or executive order to remain
closed. If a payment date is a Legal Holiday at a place of payment, payment may
be made at that place on the next succeeding day that is not a Legal Holiday,
and no interest shall accrue for the intervening period.
11.21. "Liquidation Preference" means $50.00 per share of
Series D Preferred Stock.
11.22. "Market Capitalization" means the product of the
then-current Market Value times the total number of shares of Common Stock then
outstanding.
11.23. "Market Value" means, as of any date, the average of
the daily closing price for the five consecutive trading days ending on such
date. The closing price for each day shall be the last sales price or in case no
such reported sales take place on such day, the average of the last reported bid
and asked price, in either case, on the principal national securities exchange
on which the shares of Common Stock are admitted to trading or listed, or if not
listed or admitted to trading on such exchange, the representative closing bid
price as reported by the Nasdaq National Market, or other similar organization
if the Nasdaq National Market is no longer reporting such information, or if not
so available, the fair market price as determined, in good faith, by the Board
of Directors of the Corporation.
11.24. "Officer" means, with respect to any Person, the
Chairman of the Board, the Vice Chairman of the Board, the Chief Executive
Officer, the President, the Chief Operating Officer, the Chief Financial
Officer, the Treasurer, any Assistant Treasurer, Controller, Secretary or any
Vice-President of such Person.
11.25. "Parity Security" is as defined in Section 3.1.
11.26. "Person" means any individual, corporation,
partnership, joint venture, association, joint-stock corporation, trust, limited
liability company or unincorporated organization.
11.27. "Redemption Agent" means that Person, if any, appointed
by the Corporation to hold funds deposited by the Corporation in trust to pay to
the Holders of shares to be redeemed.
23
<PAGE>
11.28. "Redemption Date" means that certain date set forth in
the Redemption Notice on which date the redemption of the Series D Preferred
Stock is completed.
11.29. "Redemption Notice" means that notice to be given by
the Corporation to the Holders notifying the Holders as to the redemption, in
whole or in part, of the Series D Preferred Stock pursuant to Section 4 hereof.
The Redemption Notice shall include the following information: (i) the
Redemption Date and the time of day on such date; (ii) the total number of
shares of Series D Preferred Stock to be redeemed and, if fewer than all the
shares held by such Holder are to be redeemed, the number of such shares to be
redeemed from such Holder; (iii) the Redemption Price (whether to be paid in
cash or shares of Common Stock); (iv) the place or places where certificates for
such shares are to be surrendered for payment of the Redemption Price and
delivery of certificates representing shares of Common Stock (if the Corporation
so chooses); (v) that dividends on the shares to be redeemed will cease to
accrue on such Redemption Date unless the Corporation defaults in the payment of
the Redemption Price; and (vi) the name of any bank or trust Corporation, if
any, performing the duties of Redemption Agent.
11.30. "Redemption Notice Date" means the date the
Redemption Notice is first mailed or delivered to any Holder.
11.31. "Redemption Price" means that price established for
redemption of the Series D Preferred Stock established in Section 5.1 hereof.
11.32. "SEC" means the Securities and Exchange Commission.
11.33. "Securities Act" means the Securities Act of 1933,
as amended.
11.34. "Self Funding Event" is as defined in Section 2.2.
11.35. "Series D Preferred Stock" means the Series D Preferred
Stock authorized in this Article FOURTH.
11.36. "Senior Securities" is as defined in Section 3.1.
11.37. "Special Share Distribution" shall mean the two-for-one
stock split, payable as a share distribution, to holders of record of Common
Stock as of January 28, 2000.
11.38. "Subsidiary" means, with respect to any Person, any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
trustees thereof is at the time owned or controlled, directly or indirectly, by
such person or one or more of the other Subsidiaries of such Person or a
combination thereof.
24
<PAGE>
11.39. "Trading Day" means any day on which the Series D
Preferred Stock is traded on the Nasdaq National Market or any other exchange on
which the Series D Preferred Stock is, at the time, principally traded or
quoted.
11.40. "Trading Price" means, on any specified Trading Day,
the last reported sales price of the Series D Preferred Stock on the Nasdaq
National Market or any other exchange on which the Series D Preferred Stock is,
at the time, principally traded or quoted.
25
<PAGE>
11.41. The "Transfer Agent" shall be as established pursuant
to Article 12 hereof.
12. Transfer Agent and Registrar.
The duly appointed Transfer Agent and registrar for the Series
D Preferred Stock shall initially be First Chicago Trust Company, a division of
Equiserve. The Corporation may, in its sole discretion, remove the Transfer
Agent in accordance with the agreement between the Corporation and the Transfer
Agent; provided that the Corporation shall appoint a successor transfer agent
who shall accept such appointment prior to the effectiveness of such removal.
13. Other Provisions.
13.1. With respect to any notice to a Holder of shares of the
Series D Preferred Stock required to be provided hereunder, neither failure to
mail such notice, nor any defect therein or in the mailing thereof, to any
particular Holder shall affect the sufficiency of the notice or the validity of
the proceedings referred to in such notice with respect to the other Holders or
affect the legality or validity of any distribution, rights, warrant,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or, except as otherwise expressly provided by
applicable law, the vote upon any such action. Any notice which was mailed in
the manner herein provided shall be conclusively presumed to have been duly
given whether or not the Holder receives the notice.
13.2. Shares of Series D Preferred Stock issued and reacquired
will be retired and canceled promptly after reacquisition thereof and, upon
compliance with the applicable law, will have the status of authorized but
unissued shares of preferred stock of the Corporation undesignated as to series
and may with any and all other authorized but unissued shares of preferred stock
of the Corporation be designated or redesignated and issued or reissued, as the
case may be, as part of any series of preferred stock of the Corporation.
13.3. In the Corporation's discretion, no fractional shares of
Common Stock or securities representing fractional shares of Common Stock will
be issued upon conversion, redemption, or as dividends payable on the Series D
Preferred Stock. Any fractional interest in a share of Common Stock resulting
from conversion, redemption, or dividend payment will be paid in cash based on
the last reported sale price of the Common Stock on the Nasdaq National Market
(or any national securities exchange or authorized quotation system on which the
Common Stock is then listed) at the close of business on the trading day next
preceding the date of conversion redemption or Dividend Payment Date, as
applicable or such later time as the Corporation is legally and contractually
able to pay for such fractional shares.
13.4. All notices periods referred to herein shall commence on
the date of the mailing of the applicable notice.
26
<PAGE>
13.5. Notwithstanding any provision of this Article FOURTH to
the contrary, the nonassessability of each share of Series D Preferred Stock and
each share of Common Stock issuable in respect thereof shall be subject to
Section 630 of the Business Corporation Law.
FIFTH: No shares of the Corporation's 7% Series D Cumulative
Convertible Preferred Stock have been issued as of the date hereof. The
foregoing amendments to the Certificate of Incorporation were authorized by the
affirmative vote of a majority of the members of the Board of Directors of the
Corporation or a duly authorized committee thereof at a meeting duly called and
held on January 26, 2000.
27
<PAGE>
IN WITNESS WHEREOF, the undersigned has signed this
Certificate of Amendment on this 31st day of January 2000.
/s/ EDWARD D. POSTAL
--------------------
Edward D. Postal, Executive Vice President
and Chief Financial Officer
28
<PAGE>
Exhibit 5
NIXON PEABODY LLP
437 Madison Avenue
New York, New York 10022
February 8, 2000
PSINet Inc.
510 Huntmar Park Drive
Herndon, Virginia 20170
Ladies and Gentlemen:
We have acted as counsel to PSINet Inc., a New York corporation (the
"Company"), in connection with the preparation of a Registration Statement on
Form S-4 (the "Registration Statement") to be filed by the Company on or about
February 8, 2000 with the Securities and Exchange Commission (the "Commission")
under the Securities Act of 1933, as amended (the "Act"), relating to the offer
by the Company (the "Exchange Offer") of $600,000,000 aggregate principal amount
and Euro 150,000,000 aggregate principal amount of the Company's new 10 1/2%
Senior Notes Due 2006, which will be registered under the Act (collectively, the
"Exchange Notes"), to be issued under the Indenture dated as of December 2, 1999
(the "Indenture"), by and between the Company and Wilmington Trust Company, as
trustee (the "Trustee"), in exchange for a like principal amount of the
Company's outstanding dollar-denominated and euro-denominated 10 1/2% Senior
Notes Due 2006, which have not been registered under the Act (collectively, the
"Initial Notes" and, together with the Exchange Notes, the "Notes"), as
contemplated by the Registration Rights Agreement dated as of December 2, 1999
(the "Registration Rights Agreement") by and among the Company and Donaldson,
Lufkin & Jenrette International, Bear Stearns International Limited, Merrill
Lynch International and Morgan Stanley & Co. International Limited.
In connection with the foregoing, we have examined the Registration
Statement and the preliminary prospectus contained in the Registration Statement
(the "Preliminary Prospectus"), the Indenture, the Registration Rights Agreement
and the form of Exchange Notes set forth in the Indenture and the form of
Statement of Eligibility and Qualification on Form T-1 of the Trustee filed as
an exhibit to the Registration Statement. We have also examined originals or
copies, certified or otherwise identified to our satisfaction, of such corporate
records, certificates and other documents and have made such investigations of
law as we have deemed necessary or appropriate as a basis for the opinions
expressed below.
As to questions of fact material to our opinions expressed herein, we
have, when relevant facts were not independently established, relied upon
certificates of, and information received from, the Company, the Trustee and/or
representatives of the Company and/or the Trustee. We
<PAGE>
PSINet Inc.
February 8, 2000
Page 2
have made no independent investigation of the facts stated in such certificates
or as to any information received from the Company, the Trustee and/or
representatives of the Company and/or the Trustee and do not opine as to the
accuracy of such factual matters. We also have relied, without investigation,
upon certificates and other documents from, and conversations with, public
officials.
In rendering the following opinions, we have assumed, without
investigation, the authenticity of any document or other instrument submitted to
us as an original, the conformity to the originals of any document or other
instrument submitted to us as a copy, the genuineness of all signatures on such
originals or copies, and the legal capacity of natural persons who executed any
such document or instrument at the time of execution thereof. We assume also
that the Exchange Notes have been or will be duly and validly authenticated.
Additionally, we have assumed, but not independently verified, that the factual
matters set forth in the statements made in the Registration Statement,
including, without limitation, those matters set forth and statements made in
the Prospectus under the caption "Certain U.S. Federal Income Tax
Considerations", are true and correct and we have relied upon such factual
matters and statements in rendering the opinion expressed herein.
Members of our firm involved in the preparation of this opinion are
licensed to practice law in the State of New York and we do not purport to be
experts on, or to express any opinion herein concerning, the laws of any other
jurisdiction other than the law of the State of New York and the federal law of
the United States of America.
Based upon and subject to the foregoing and the other qualifications
and limitations contained herein, we are of the opinion that:
1. After (a) the Commission shall have entered an appropriate order
declaring effective the Registration Statement, as amended, and (b) the Exchange
Notes have, if required, been duly qualified or registered, as the case may be,
for sale under applicable state and foreign securities laws, and duly issued,
executed, authenticated and delivered by each of the Company and the Trustee
upon consummation of the Exchange Offer against receipt of the Initial Notes
surrendered in exchange therefor in accordance with the terms of the Exchange
Offer and the Indenture, the Exchange Notes will be valid and binding
obligations of, and enforceable against, the Company in accordance with their
terms, except as limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium, liquidation and other similar laws relating to or
affecting creditors' rights generally and by general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law), including, without limitation, principles of commercial
reasonableness and materiality and an implied covenant of good faith and fair
dealing.
2. The opinions referred to as the opinions of counsel in the
Preliminary Prospectus under the caption "Certain U.S. Federal Income Tax
Considerations", are our opinions, insofar as they are statements of United
States federal income tax law or conclusions with respect to United States
federal income tax law. Our opinions are based upon existing United States
federal income tax law and present interpretations thereof. We can give no
assurance that such opinions
<PAGE>
PSINet Inc.
February 8, 2000
Page 3
will continue to be our opinions if existing United States federal income tax
laws, or the interpretations thereof, are changed or modified hereafter.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name as it appears under the
captions "Certain U.S. Federal Income Tax Considerations" and "Legal Matters" in
the Preliminary Prospectus.
We wish to advise you that certain attorneys with Nixon Peabody LLP
own certain shares of the Company's Common Stock and that we represent the
Trustee from time to time on certain matters.
Very truly yours,
/s/ Nixon Peabody LLP
<PAGE>
Exhibit 12
PSINet Inc.
<TABLE>
<CAPTION>
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(in millions)
December 31,
- --------------------------------------------------------------------------------------------
1994 1995 1996 1997 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Loss before income taxes $ (5.3) $ (53.2) $ (55.3) $ (46.1) $ (262.7)
Equity in loss of affiliate 0.0 0.2 0.8 - -
Interest expense 0.7 2.0 5.0 5.4 63.9
Interest portion of rental expense 0.2 0.7 1.2 1.7 4.2
------------------------------------------------------
Earnings/(loss) $ (4.3) $ (50.3) $ (48.2) $ (39.1) $ (194.6)
============================================================================================
Fixed charges:
Interest expenses 0.7 2.0 5.0 5.4 63.9
Capitalized interest 0.8
Interest portion of rental expense 0.2 0.7 1.2 1.7 4.2
------------------------------------------------------
Total fixed charges 1.0 2.7 6.2 7.0 68.9
Preferred stock dividend requirement - - - 0.4 3.1
------------------------------------------------------
Total fixed charges and preferred
dividends $ 1.0 $ 2.7 $ 6.2 $ 7.4 $ 71.9
============================================================================================
Ratio of earnings to combined fixed charges
and preferred dividends - - - - -
Deficiency of earnings to cover combined
fixed charges and preferred dividends $(5.3) $ (53.0) $(54.4) $(46.5) $ (266.6)
============================================================================================
</TABLE>
PSINet Inc.
<TABLE>
<CAPTION>
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(in millions)
September 30,
- -------------------------------------------------------------------------------
Actual
-----------------------
1998 1999
---- ----
<S> <C> <C>
Loss before income taxes $ (130.0) $ (199.9)
Equity in loss of affiliate - -
Interest expense 38.2 120.8
Interest portion of rental expense 2.6 5.4
-------------------------
Earnings/(loss) $ (89.2) $ (73.7)
===============================================================================
Fixed charges:
Interest expenses 38.2 120.8
Capitalized interest 3.0
Interest portion of rental expense 2.6 5.4
-------------------------
Total fixed charges 40.8 129.2
Preferred stock dividend requirement 2.3 11.2
-------------------------
Total fixed charges and preferred
dividends $ 43.1 $ 140.4
===============================================================================
Ratio of earnings to combined fixed charges
and preferred dividends - -
-------------------------
Deficiency of earnings to cover combined fixed
charges and preferred dividends $(132.3) $ (214.1)
===============================================================================
</TABLE>
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this
Registration Statement on Form S-4 of PSINet Inc. of our report dated March 9,
1999, except as to Note 11, which is as of March 25, 1999, relating to the
consolidated financial statements and financial statement schedule appearing in
PSINet Inc's Annual Report on Form 10-K for the year ended December 31, 1998. We
also consent to the references to us under the headings "Experts" and "Selected
Consolidated Financial and Operating Data" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
- ---------------------------------
Washington, D.C.
February 4, 2000
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in PSINet's Inc.'s Registration Statement on Form S-4
of our reports dated February 10, 1999, included in Transaction Network
Services, Inc.'s Form 10-K for the fiscal year ended December 31, 1998, which is
incorporated by reference in PSINet Inc.'s Current Report on Form 8-K dated
November 23, 1999 as filed on December 1, 1999, and all references to our firm
included in this Registration Statement.
/s/ Arthur Andersen LLP
-----------------------------
Vienna, Virginia
February 4, 2000
<PAGE>
Exhibit 25
Registration No.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) _____
WILMINGTON TRUST COMPANY
(Exact name of trustee as specified in its charter)
Delaware 51-0055023
(State of incorporation) (I.R.S. employer identification no.)
Rodney Square North
1100 North Market Street
Wilmington, Delaware 19890
(Address of principal executive offices)
Cynthia L. Corliss
Vice President and Trust Counsel
Wilmington Trust Company
Rodney Square North
Wilmington, Delaware 19890
(302) 651-8516
(Name, address and telephone number of agent for service)
PSINET INC.
(Exact name of obligor as specified in its charter)
New York 16-1353600
(State of incorporation) (I.R.S. employer identification no.)
510 Huntmar Park Drive
Herndon, Virginia 20170
(Address of principal executive offices) (Zip Code)
10 1/2% Senior Notes Due 2006
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 1. GENERAL INFORMATION.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to
which it is subject.
Federal Deposit Insurance Co. State Bank Commissioner
Five Penn Center Dover, Delaware
Suite #2901
Philadelphia, PA
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
If the obligor is an affiliate of the trustee, describe each
affiliation:
Based upon an examination of the books and records of the trustee and
upon information furnished by the obligor, the obligor is not an
affiliate of the trustee.
ITEM 3. LIST OF EXHIBITS.
List below all exhibits filed as part of this Statement of
Eligibility and Qualification.
A. Copy of the Charter of Wilmington Trust Company, which includes the
certificate of authority of Wilmington Trust Company to commence
business and the authorization of Wilmington Trust Company to
exercise corporate trust powers.
B. Copy of By-Laws of Wilmington Trust Company.
C. Consent of Wilmington Trust Company required by Section 321(b) of
Trust Indenture Act.
D. Copy of most recent Report of Condition of Wilmington Trust
Company.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, Wilmington Trust Company, a corporation organized and
existing under the laws of Delaware, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Wilmington and State of Delaware on the 8th day
of February, 2000.
WILMINGTON TRUST COMPANY
[SEAL]
Attest: /s/ Charlotte Paglia By: /s/ Bruce L. Bisson
--------------------------- --------------------------
Assistant Secretary Name: Bruce L. Bisson
Title: Vice President
2
<PAGE>
EXHIBIT A
AMENDED CHARTER
Wilmington Trust Company
Wilmington, Delaware
As existing on May 9, 1987
<PAGE>
Amended Charter
or
Act of Incorporation
of
Wilmington Trust Company
Wilmington Trust Company, originally incorporated by an Act of the General
Assembly of the State of Delaware, entitled "An Act to Incorporate the Delaware
Guarantee and Trust Company", approved March 2, A.D. 1901, and the name of which
company was changed to "Wilmington Trust Company" by an amendment filed in the
Office of the Secretary of State on March 18, A.D. 1903, and the Charter or Act
of Incorporation of which company has been from time to time amended and changed
by merger agreements pursuant to the corporation law for state banks and trust
companies of the State of Delaware, does hereby alter and amend its Charter or
Act of Incorporation so that the same as so altered and amended shall in its
entirety read as follows:
First: - The name of this corporation is Wilmington Trust Company.
Second: - The location of its principal office in the State of Delaware is
at Rodney Square North, in the City of Wilmington, County of New Castle;
the name of its resident agent is Wilmington Trust Company whose address
is Rodney Square North, in said City. In addition to such principal
office, the said corporation maintains and operates branch offices in the
City of Newark, New Castle County, Delaware, the Town of Newport, New
Castle County, Delaware, at Claymont, New Castle County, Delaware, at
Greenville, New Castle County Delaware, and at Milford Cross Roads, New
Castle County, Delaware, and shall be empowered to open, maintain and
operate branch offices at Ninth and Shipley Streets, 418 Delaware Avenue,
2120 Market Street, and 3605 Market Street, all in the City of Wilmington,
New Castle County, Delaware, and such other branch offices or places of
business as may be authorized from time to time by the agency or agencies
of the government of the State of Delaware empowered to confer such
authority.
Third: - (a) The nature of the business and the objects and purposes
proposed to be transacted, promoted or carried on by this Corporation are
to do any or all of the things herein mentioned as fully and to the same
extent as natural persons might or could do and in any part of the world,
viz.:
(1) To sue and be sued, complain and defend in any Court of law or
equity
<PAGE>
and to make and use a common seal, and alter the seal at pleasure, to
hold, purchase, convey, mortgage or otherwise deal in real and personal
estate and property, and to appoint such officers and agents as the
business of the Corporation shall require, to make by-laws not
inconsistent with the Constitution or laws of the United States or of this
State, to discount bills, notes or other evidences of debt, to receive
deposits of money, or securities for money, to buy gold and silver bullion
and foreign coins, to buy and sell bills of exchange, and generally to
use, exercise and enjoy all the powers, rights, privileges and franchises
incident to a corporation which are proper or necessary for the
transaction of the business of the Corporation hereby created .
(2) To insure titles to real and personal property, or any estate or
interests therein, and to guarantee the holder of such property, real or
personal, against any claim or claims, adverse to his interest therein,
and to prepare and give certificates of title for any lands or premises in
the State of Delaware, or elsewhere.
(3) To act as factor, agent, broker or attorney in the receipt,
collection, custody, investment and management of funds, and the purchase,
sale, management and disposal of property of all descriptions, and to
prepare and execute all papers which may be necessary or proper in such
business.
(4) To prepare and draw agreements, contracts, deeds, leases,
conveyances, mortgages, bonds and legal papers of every description, and
to carry on the business of conveyancing in all its branches.
(5) To receive upon deposit for safekeeping money, jewelry, plate,
deeds, bonds and any and all other personal property of every sort and
kind, from executors, administrators, guardians, public officers, courts,
receivers, assignees, trustees, and from all fiduciaries, and from all
other persons and individuals, and from all corporations whether state,
municipal, corporate or private, and to rent boxes, safes, vaults and
other receptacles for such property.
(6) To act as agent or otherwise for the purpose of registering,
issuing, certificating, countersigning, transferring or underwriting the
stock, bonds or other obligations of any corporation, association, state
or municipality, and may receive and manage any sinking fund therefor on
such terms as may be agreed upon between the two parties, and in like
manner may act as Treasurer of any corporation or municipality.
2
<PAGE>
(7) To act as Trustee under any deed of trust, mortgage, bond or
other instrument issued by any state, municipality, body politic,
corporation, association or person, either alone or in conjunction with
any other person or persons, corporation or corporations.
(8) To guarantee the validity, performance or effect of any contract
or agreement, and the fidelity of persons holding places of responsibility
or trust; to become surety for any person, or persons, for the faithful
performance of any trust, office, duty, contract or agreement, either by
itself or in conjunction with any other person, or persons, corporation,
or corporations, or in like manner become surety upon any bond,
recognizance, obligation, judgment, suit, order, or decree to be entered
in any court of record within the State of Delaware or elsewhere, or which
may now or hereafter be required by any law, judge, officer or court in
the State of Delaware or elsewhere.
(9) To act by any and every method of appointment as trustee,
trustee in bankruptcy, receiver, assignee, assignee in bankruptcy,
executor, administrator, guardian, bailee, or in any other trust capacity
in the receiving, holding, managing, and disposing of any and all estates
and property, real, personal or mixed, and to be appointed as such
trustee, trustee in bankruptcy, receiver, assignee, assignee in
bankruptcy, executor, administrator, guardian or bailee by any persons,
corporations, court, officer, or authority, in the State of Delaware or
elsewhere; and whenever this Corporation is so appointed by any person,
corporation, court, officer or authority such trustee, trustee in
bankruptcy, receiver, assignee, assignee in bankruptcy, executor,
administrator, guardian, bailee, or in any other trust capacity, it shall
not be required to give bond with surety, but its capital stock shall be
taken and held as security for the performance of the duties devolving
upon it by such appointment.
(10) And for its care, management and trouble, and the exercise of
any of its powers hereby given, or for the performance of any of the
duties which it may undertake or be called upon to perform, or for the
assumption of any responsibility the said Corporation may be entitled to
receive a proper compensation.
(11) To purchase, receive, hold and own bonds, mortgages,
debentures, shares of capital stock, and other securities, obligations,
contracts and evidences of indebtedness, of any private, public or
municipal corporation within and without the State of Delaware, or of the
Government of the United States, or of any state, territory, colony, or
possession thereof, or of any
3
<PAGE>
foreign government or country; to receive, collect, receipt for, and
dispose of interest, dividends and income upon and from any of the bonds,
mortgages, debentures, notes, shares of capital stock, securities,
obligations, contracts, evidences of indebtedness and other property held
and owned by it, and to exercise in respect of all such bonds, mortgages,
debentures, notes, shares of capital stock, securities, obligations,
contracts, evidences of indebtedness and other property, any and all the
rights, powers and privileges of individual owners thereof, including the
right to vote thereon; to invest and deal in and with any of the moneys of
the Corporation upon such securities and in such manner as it may think
fit and proper, and from time to time to vary or realize such investments;
to issue bonds and secure the same by pledges or deeds of trust or
mortgages of or upon the whole or any part of the property held or owned
by the Corporation, and to sell and pledge such bonds, as and when the
Board of Directors shall determine, and in the promotion of its said
corporate business of investment and to the extent authorized by law, to
lease, purchase, hold, sell, assign, transfer, pledge, mortgage and convey
real and personal property of any name and nature and any estate or
interest therein.
(b) In furtherance of, and not in limitation, of the powers conferred by
the laws of the State of Delaware, it is hereby expressly provided that
the said Corporation shall also have the following powers:
(1) To do any or all of the things herein set forth, to the same
extent as natural persons might or could do, and in any part of the world.
(2) To acquire the good will, rights, property and franchises and to
undertake the whole or any part of the assets and liabilities of any
person, firm, association or corporation, and to pay for the same in cash,
stock of this Corporation, bonds or otherwise; to hold or in any manner to
dispose of the whole or any part of the property so purchased; to conduct
in any lawful manner the whole or any part of any business so acquired,
and to exercise all the powers necessary or convenient in and about the
conduct and management of such business.
(3) To take, hold, own, deal in, mortgage or otherwise lien, and to
lease, sell, exchange, transfer, or in any manner whatever dispose of
property, real, personal or mixed, wherever situated.
(4) To enter into, make, perform and carry out contracts of every
kind with any person, firm, association or corporation, and, without limit
as to amount, to draw, make, accept, endorse, discount, execute and issue
promissory notes,
4
<PAGE>
drafts, bills of exchange, warrants, bonds, debentures, and other
negotiable or transferable instruments.
(5) To have one or more offices, to carry on all or any of its
operations and businesses, without restriction to the same extent as
natural persons might or could do, to purchase or otherwise acquire, to
hold, own, to mortgage, sell, convey or otherwise dispose of, real and
personal property, of every class and description, in any State, District,
Territory or Colony of the United States, and in any foreign country or
place.
(6) It is the intention that the objects, purposes and powers
specified and clauses contained in this paragraph shall (except where
otherwise expressed in said paragraph) be nowise limited or restricted by
reference to or inference from the terms of any other clause of this or
any other paragraph in this charter, but that the objects, purposes and
powers specified in each of the clauses of this paragraph shall be
regarded as independent objects, purposes and powers.
Fourth: - (a) The total number of shares of all classes of stock which
the Corporation shall have authority to issue is forty-one million
(41,000,000) shares, consisting of:
(1) One million (1,000,000) shares of Preferred stock, par value
$10.00 per share (hereinafter referred to as "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value
$1.00 per share (hereinafter referred to as "Common Stock").
(b) Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of
Directors each of said series to be distinctly designated. All shares of
any one series of Preferred Stock shall be alike in every particular,
except that there may be different dates from which dividends, if any,
thereon shall be cumulative, if made cumulative. The voting powers and
the preferences and relative, participating, optional and other special
rights of each such series, and the qualifications, limitations or
restrictions thereof, if any, may differ from those of any and all other
series at any time outstanding; and, subject to the provisions of
subparagraph 1 of Paragraph (c) of this Article Fourth, the Board of
Directors of the Corporation is hereby expressly granted authority to fix
by resolution or resolutions adopted prior to the issuance of any shares
of a particular series of Preferred Stock, the voting powers and the
designations, preferences and relative, optional and other special rights,
and the qualifications, limitations and
5
<PAGE>
restrictions of such series, including, but without limiting the
generality of the foregoing, the following:
(1) The distinctive designation of, and the number of shares of
Preferred Stock which shall constitute such series, which number may
be increased (except where otherwise provided by the Board of
Directors) or decreased (but not below the number of shares thereof
then outstanding) from time to time by like action of the Board of
Directors;
(2) The rate and times at which, and the terms and conditions on
which, dividends, if any, on Preferred Stock of such series shall be
paid, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes, or
series of the same or other class of stock and whether such dividends
shall be cumulative or non-cumulative;
(3) The right, if any, of the holders of Preferred Stock of such
series to convert the same into or exchange the same for, shares of
any other class or classes or of any series of the same or any other
class or classes of stock of the Corporation and the terms and
conditions of such conversion or exchange;
(4) Whether or not Preferred Stock of such series shall be subject to
redemption, and the redemption price or prices and the time or times
at which, and the terms and conditions on which, Preferred Stock of
such series may be redeemed.
(5) The rights, if any, of the holders of Preferred Stock of such
series upon the voluntary or involuntary liquidation, merger,
consolidation, distribution or sale of assets, dissolution or
winding-up, of the Corporation.
(6) The terms of the sinking fund or redemption or purchase account,
if any, to be provided for the Preferred Stock of such series; and
(7) The voting powers, if any, of the holders of such series of
Preferred Stock which may, without limiting the generality of the
foregoing include the right, voting as a series or by itself or
together with other series of Preferred Stock or all series of
Preferred Stock as a class, to elect one or more directors of the
Corporation if there shall have been a default in the payment of
dividends on any one or more series of Preferred Stock or under such
circumstances and on such conditions as the Board of Directors may
determine.
(c) (1) After the requirements with respect to preferential dividends on
the Preferred
6
<PAGE>
Stock (fixed in accordance with the provisions of section (b) of this
Article Fourth), if any, shall have been met and after the Corporation
shall have complied with all the requirements, if any, with respect to the
setting aside of sums as sinking funds or redemption or purchase accounts
(fixed in accordance with the provisions of section (b) of this Article
Fourth), and subject further to any conditions which may be fixed in
accordance with the provisions of section (b) of this Article Fourth, then
and not otherwise the holders of Common Stock shall be entitled to receive
such dividends as may be declared from time to time by the Board of
Directors.
(2) After distribution in full of the preferential amount, if any,
(fixed in accordance with the provisions of section (b) of this
Article Fourth), to be distributed to the holders of Preferred Stock
in the event of voluntary or involuntary liquidation, distribution
or sale of assets, dissolution or winding-up, of the Corporation,
the holders of the Common Stock shall be entitled to receive all of
the remaining assets of the Corporation, tangible and intangible, of
whatever kind available for distribution to stockholders ratably in
proportion to the number of shares of Common Stock held by them
respectively.
(3) Except as may otherwise be required by law or by the
provisions of such resolution or resolutions as may be adopted by
the Board of Directors pursuant to section (b) of this Article
Fourth, each holder of Common Stock shall have one vote in respect
of each share of Common Stock held on all matters voted upon by the
stockholders.
(d) No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or
series of stock or of other securities of the Corporation shall have any
preemptive right to purchase or subscribe for any unissued stock of any
class or series or any additional shares of any class or series to be
issued by reason of any increase of the authorized capital stock of the
Corporation of any class or series, or bonds, certificates of
indebtedness, debentures or other securities convertible into or
exchangeable for stock of the Corporation of any class or series, or
carrying any right to purchase stock of any class or series, but any such
unissued stock, additional authorized issue of shares of any class or
series of stock or securities convertible into or exchangeable for stock,
or carrying any right to purchase stock, may be issued and disposed of
pursuant to resolution of the Board of Directors to such persons, firms,
corporations or associations, whether such holders or others, and upon
such terms as may be deemed advisable by the Board of Directors in the
exercise of its sole discretion.
(e) The relative powers, preferences and rights of each series of
Preferred Stock in relation to the relative powers, preferences and rights
of each other series of
7
<PAGE>
Preferred Stock shall, in each case, be as fixed from time to time by the
Board of Directors in the resolution or resolutions adopted pursuant to
authority granted in section (b) of this Article Fourth and the consent,
by class or series vote or otherwise, of the holders of such of the series
of Preferred Stock as are from time to time outstanding shall not be
required for the issuance by the Board of Directors of any other series of
Preferred Stock whether or not the powers, preferences and rights of such
other series shall be fixed by the Board of Directors as senior to, or on
a parity with, the powers, preferences and rights of such outstanding
series, or any of them; provided, however, that the Board of Directors may
provide in the resolution or resolutions as to any series of Preferred
Stock adopted pursuant to section (b) of this Article Fourth that the
consent of the holders of a majority (or such greater proportion as shall
be therein fixed) of the outstanding shares of such series voting thereon
shall be required for the issuance of any or all other series of Preferred
Stock.
(f) Subject to the provisions of section (e), shares of any series of
Preferred Stock may be issued from time to time as the Board of Directors
of the Corporation shall determine and on such terms and for such
consideration as shall be fixed by the Board of Directors.
(g) Shares of Common Stock may be issued from time to time as the Board
of Directors of the Corporation shall determine and on such terms and for
such consideration as shall be fixed by the Board of Directors.
(h) The authorized amount of shares of Common Stock and of Preferred
Stock may, without a class or series vote, be increased or decreased from
time to time by the affirmative vote of the holders of a majority of the
stock of the Corporation entitled to vote thereon.
Fifth: - (a) The business and affairs of the Corporation shall be
conducted and managed by a Board of Directors. The number of directors
constituting the entire Board shall be not less than five nor more than
twenty-five as fixed from time to time by vote of a majority of the whole
Board, provided, however, that the number of directors shall not be
reduced so as to shorten the term of any director at the time in office,
and provided further, that the number of directors constituting the whole
Board shall be twenty-four until otherwise fixed by a majority of the
whole Board.
(b) The Board of Directors shall be divided into three classes, as nearly
equal in number as the then total number of directors constituting the
whole Board permits, with the term of office of one class expiring each
year. At the annual meeting of stockholders in 1982, directors of the
first class shall be elected to hold office for a
8
<PAGE>
term expiring at the next succeeding annual meeting, directors of the
second class shall be elected to hold office for a term expiring at the
second succeeding annual meeting and directors of the third class shall be
elected to hold office for a term expiring at the third succeeding annual
meeting. Any vacancies in the Board of Directors for any reason, and any
newly created directorships resulting from any increase in the directors,
may be filled by the Board of Directors, acting by a majority of the
directors then in office, although less than a quorum, and any directors
so chosen shall hold office until the next annual election of directors.
At such election, the stockholders shall elect a successor to such
director to hold office until the next election of the class for which
such director shall have been chosen and until his successor shall be
elected and qualified. No decrease in the number of directors shall
shorten the term of any incumbent director.
(c) Notwithstanding any other provisions of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and notwithstanding the
fact that some lesser percentage may be specified by law, this Charter or
Act of Incorporation or the By-Laws of the Corporation), any director or
the entire Board of Directors of the Corporation may be removed at any
time without cause, but only by the affirmative vote of the holders of
two-thirds or more of the outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) cast at a meeting of the
stockholders called for that purpose.
(d) Nominations for the election of directors may be made by the Board of
Directors or by any stockholder entitled to vote for the election of
directors. Such nominations shall be made by notice in writing, delivered
or mailed by first class United States mail, postage prepaid, to the
Secretary of the Corporation not less than 14 days nor more than 50 days
prior to any meeting of the stockholders called for the election of
directors; provided, however, that if less than 21 days' notice of the
meeting is given to stockholders, such written notice shall be delivered
or mailed, as prescribed, to the Secretary of the Corporation not later
than the close of the seventh day following the day on which notice of the
meeting was mailed to stockholders. Notice of nominations which are
proposed by the Board of Directors shall be given by the Chairman on
behalf of the Board.
(e) Each notice under subsection (d) shall set forth (i) the name, age,
business address and, if known, residence address of each nominee proposed
in such notice, (ii) the principal occupation or employment of such
nominee and (iii) the number of shares of stock of the Corporation which
are beneficially owned by each such nominee.
9
<PAGE>
(f) The Chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with
the foregoing procedure, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall be disregarded.
(g) No action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without a
meeting, and the power of stockholders to consent in writing, without a
meeting, to the taking of any action is specifically denied.
Sixth: - The Directors shall choose such officers, agent and servants as
may be provided in the By-Laws as they may from time to time find
necessary or proper.
Seventh: - The Corporation hereby created is hereby given the same powers,
rights and privileges as may be conferred upon corporations organized
under the Act entitled "An Act Providing a General Corporation Law",
approved March 10, 1899, as from time to time amended.
Eighth: - This Act shall be deemed and taken to be a private Act.
Ninth: - This Corporation is to have perpetual existence.
Tenth: - The Board of Directors, by resolution passed by a majority of the
whole Board, may designate any of their number to constitute an Executive
Committee, which Committee, to the extent provided in said resolution, or
in the By-Laws of the Company, shall have and may exercise all of the
powers of the Board of Directors in the management of the business and
affairs of the Corporation, and shall have power to authorize the seal of
the Corporation to be affixed to all papers which may require it.
Eleventh: - The private property of the stockholders shall not be liable
for the payment of corporate debts to any extent whatever.
Twelfth: - The Corporation may transact business in any part of the world.
Thirteenth: - The Board of Directors of the Corporation is expressly
authorized to make, alter or repeal the By-Laws of the Corporation by a
vote of the majority of the entire Board. The stockholders may make,
alter or repeal any By-Law whether or not adopted by them, provided
however, that any such additional By-Laws, alterations or repeal may be
adopted only by the affirmative vote of the holders of two-thirds or more
of the outstanding shares of capital stock of the Corporation
10
<PAGE>
entitled to vote generally in the election of directors (considered for
this purpose as one class).
Fourteenth: - Meetings of the Directors may be held outside
of the State of Delaware at such places as may be from time to time
designated by the Board, and the Directors may keep the books of the
Company outside of the State of Delaware at such places as may be from
time to time designated by them.
Fifteenth: - (a) (1) In addition to any affirmative vote required by law,
and except as otherwise expressly provided in sections (b) and (c) of this
Article Fifteenth:
(A) any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with or into (i) any Interested Stockholder
(as hereinafter defined) or (ii) any other corporation (whether or
not itself an Interested Stockholder), which, after such merger or
consolidation, would be an Affiliate (as hereinafter defined) of an
Interested Stockholder, or
(B) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of related transactions)
to or with any Interested Stockholder or any Affiliate of any
Interested Stockholder of any assets of the Corporation or any
Subsidiary having an aggregate fair market value of $1,000,000 or
more, or
(C) the issuance or transfer by the Corporation or any Subsidiary (in
one transaction or a series of related transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Stockholder or any Affiliate of any Interested Stockholder in
exchange for cash, securities or other property (or a combination
thereof) having an aggregate fair market value of $1,000,000 or more,
or
(D) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation, or
(E) any reclassification of securities (including any reverse stock
split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any
similar transaction (whether or not with or into or otherwise
involving an Interested Stockholder) which has the effect, directly
or indirectly, of increasing the proportionate share of the
outstanding shares of any class of equity or convertible securities
of the Corporation or any Subsidiary which is directly or indirectly
owned by any Interested Stockholder, or any Affiliate of any
Interested Stockholder,
11
<PAGE>
shall require the affirmative vote of the holders of at least two-thirds of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, considered for the purpose of this
Article Fifteenth as one class ("Voting Shares"). Such affirmative vote shall
be required notwithstanding the fact that no vote may be required, or that some
lesser percentage may be specified, by law or in any agreement with any national
securities exchange or otherwise.
(2) The term "business combination" as used in this Article
Fifteenth shall mean any transaction which is referred to
any one or more of clauses (A) through (E) of paragraph 1 of
the section (a).
(b) The provisions of section (a) of this Article Fifteenth shall
not be applicable to any particular business combination and such
business combination shall require only such affirmative vote as is
required by law and any other provisions of the Charter or Act of
Incorporation of By-Laws if such business combination has been
approved by a majority of the whole Board.
(c) For the purposes of this Article Fifteenth:
(1) A "person" shall mean any individual firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean, in respect of any business
combination, any person (other than the Corporation or any Subsidiary) who
or which as of the record date for the determination of stockholders
entitled to notice of and to vote on such business combination, or
immediately prior to the consummation of any such transaction:
(A) is the beneficial owner, directly or indirectly, of more than
10% of the Voting Shares, or
(B) is an Affiliate of the Corporation and at any time within two
years prior thereto was the beneficial owner, directly or
indirectly, of not less than 10% of the then outstanding voting
Shares, or
(C) is an assignee of or has otherwise succeeded in any share of
capital stock of the Corporation which were at any time within two
years prior thereto beneficially owned by any Interested
Stockholder, and such assignment or succession shall have occurred
in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities
Act of 1933.
12
<PAGE>
(3) A person shall be the "beneficial owner" of any Voting Shares:
(A) which such person or any of its Affiliates and Associates (as
hereafter defined) beneficially own, directly or indirectly, or
(B) which such person or any of its Affiliates or Associates has
(i) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement,
arrangement or understanding, or
(C) which are beneficially owned, directly or indirectly, by any
other person with which such first mentioned person or any of its
Affiliates or Associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of any shares of capital stock of the Corporation.
(4) The outstanding Voting Shares shall include shares deemed owned
through application of paragraph (3) above but shall not include any other
Voting Shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options or otherwise.
(5) "Affiliate" and "Associate" shall have the respective meanings given
those terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as in effect on December 31, 1981.
(6) "Subsidiary" shall mean any corporation of which a majority of any
class of equity security (as defined in Rule 3a11-1 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect in
December 31, 1981) is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Investment
Stockholder set forth in paragraph (2) of this section (c), the term
"Subsidiary" shall mean only a corporation of which a majority of each
class of equity security is owned, directly or indirectly, by the
Corporation.
(d) majority of the directors shall have the power and duty to
determine for the purposes of this Article Fifteenth on the basis
of information known to them, (1) the number of Voting Shares
beneficially owned by any person (2) whether a person is an
Affiliate or Associate of another, (3) whether a person has an
agreement, arrangement or understanding with another as to the
matters referred to in paragraph (3) of section (c), or (4) whether
the assets subject to
13
<PAGE>
any business combination or the consideration received for the
issuance or transfer of securities by the Corporation, or any
Subsidiary has an aggregate fair market value of $1,000,000 or
more.
(e) Nothing contained in this Article Fifteenth shall be construed
to relieve any Interested Stockholder from any fiduciary obligation
imposed by law.
Sixteenth: Notwithstanding any other provision of this Charter or Act of
Incorporation or the By-Laws of the Corporation (and in addition to any
other vote that may be required by law, this Charter or Act of
Incorporation by the By-Laws), the affirmative vote of the holders of at
least two-thirds of the outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class) shall be required to amend,
alter or repeal any provision of Articles Fifth, Thirteenth, Fifteenth or
Sixteenth of this Charter or Act of Incorporation.
Seventeenth: (a) a Director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a Director, except to the extent such exemption from
liability or limitation thereof is not permitted under the Delaware
General Corporation Laws as the same exists or may hereafter be amended.
(b) Any repeal or modification of the foregoing paragraph shall
not adversely affect any right or protection of a Director of the
Corporation existing hereunder with respect to any act or omission
occurring prior to the time of such repeal or modification."
14
<PAGE>
EXHIBIT B
BY-LAWS
WILMINGTON TRUST COMPANY
WILMINGTON, DELAWARE
As existing on January 16, 1997
<PAGE>
BY-LAWS OF WILMINGTON TRUST COMPANY
ARTICLE I
Stockholders' Meetings
Section 1. The Annual Meeting of Stockholders shall be held on the third
Thursday in April each year at the principal office at the Company or at such
other date, time, or place as may be designated by resolution by the Board of
Directors.
Section 2. Special meetings of all stockholders may be called at any time
by the Board of Directors, the Chairman of the Board or the President.
Section 3. Notice of all meetings of the stockholders shall be given by
mailing to each stockholder at least ten (10) days before said meeting, at his
last known address, a written or printed notice fixing the time and place of
such meeting.
Section 4. A majority in the amount of the capital stock of the Company
issued and outstanding on the record date, as herein determined, shall
constitute a quorum at all meetings of stockholders for the transaction of any
business, but the holders of a small number of shares may adjourn, from time to
time, without further notice, until a quorum is secured. At each annual or
special meeting of stockholders, each stockholder shall be entitled to one vote,
either in person or by proxy, for each shares of stock registered in the
stockholder's name on the books of the Company on the record date for any such
meeting as determined herein.
ARTICLE II
Directors
Section 1. The number and classification of the Board of Directors shall
be as set forth in the Charter of the Bank.
Section 2. No person who has attained the age of seventy-two (72) years
shall be nominated for election to the Board of Directors of the Company,
provided, however, that this limitation shall not apply to any person who was
serving as director of the Company on September 16, 1971.
Section 3. The class of Directors so elected shall hold office for three
years or until their successors are elected and qualified.
Section 4. The affairs and business of the Company shall be managed and
conducted by the Board of Directors.
<PAGE>
Section 5. The Board of Directors shall meet at the principal office of
the Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Board of
Directors or the President.
Section 6. Special meetings of the Board of Directors may be called at
any time by the Chairman of the Board of Directors or by the President, and
shall be called upon the written request of a majority of the directors.
Section 7. A majority of the directors elected and qualified shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Board of Directors.
Section 8. Written notice shall be sent by mail to each director of any
special meeting of the Board of Directors, and of any change in the time or
place of any regular meeting, stating the time and place of such meeting, which
shall be mailed not less than two days before the time of holding such meeting.
Section 9. In the event of the death, resignation, removal, inability to
act, or disqualification of any director, the Board of Directors, although less
than a quorum, shall have the right to elect the successor who shall hold office
for the remainder of the full term of the class of directors in which the
vacancy occurred, and until such director's successor shall have been duly
elected and qualified.
Section 10. The Board of Directors at its first meeting after its
election by the stockholders shall appoint an Executive Committee, a Trust
Committee, an Audit Committee and a Compensation Committee, and shall elect from
its own members a Chairman of the Board of Directors and a President who may be
the same person. The Board of Directors shall also elect at such meeting a
Secretary and a Treasurer, who may be the same person, may appoint at any time
such other committees and elect or appoint such other officers as it may deem
advisable. The Board of Directors may also elect at such meeting one or more
Associate Directors.
Section 11. The Board of Directors may at any time remove, with or
without cause, any member of any Committee appointed by it or any associate
director or officer elected by it and may appoint or elect his successor.
Section 12. The Board of Directors may designate an officer to be in
charge of such of the departments or division of the Company as it may deem
advisable.
<PAGE>
ARTICLE III
Committees
Section 1. Executive Committee
(A) The Executive Committee shall be composed of not more than nine
members who shall be selected by the Board of Directors from its own members and
who shall hold office during the pleasure of the Board.
(B) The Executive Committee shall have all the powers of the Board of
Directors when it is not in session to transact all business for and in behalf
of the Company that may be brought before it.
(C) The Executive Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members, or at the call of the Chairman of the Executive
Committee or at the call of the Chairman of the Board of Directors. The
majority of its members shall be necessary to constitute a quorum for the
transaction of business. Special meetings of the Executive Committee may be
held at any time when a quorum is present.
(D) Minutes of each meeting of the Executive Committee shall be kept
and submitted to the Board of Directors at its next meeting.
(E) The Executive Committee shall advise and superintend all
investments that may be made of the funds of the Company, and shall direct the
disposal of the same, in accordance with such rules and regulations as the Board
of Directors from time to time make.
(F) In the event of a state of disaster of sufficient severity to
prevent the conduct and management of the affairs and business of the Company by
its directors and officers as contemplated by these By-Laws any two available
members of the Executive Committee as constituted immediately prior to such
disaster shall constitute a quorum of that Committee for the full conduct and
management of the affairs and business of the Company in accordance with the
provisions of Article III of these By-Laws; and if less than three members of
the Trust Committee is constituted immediately prior to such disaster shall be
available for the transaction of its business, such Executive Committee shall
also be empowered to exercise all of the powers reserved to the Trust Committee
under Article III Section 2 hereof. In the event of the unavailability, at such
time, of a minimum of two members of such Executive Committee, any three
available directors shall constitute the Executive Committee for the full
conduct and management of the affairs and business of the Company in accordance
with the foregoing provisions of this Section. This By-Law shall be subject to
implementation by Resolutions of the Board of Directors presently existing or
hereafter passed from time to time
3
<PAGE>
for that purpose, and any provisions of these By-Laws (other than this Section)
and any resolutions which are contrary to the provisions of this Section or to
the provisions of any such implementary Resolutions shall be suspended during
such a disaster period until it shall be determined by any interim Executive
Committee acting under this section that it shall be to the advantage of the
Company to resume the conduct and management of its affairs and business under
all of the other provisions of these By-Laws.
Section 2. Trust Committee
(A) The Trust Committee shall be composed of not more than thirteen
members who shall be selected by the Board of Directors, a majority of whom
shall be members of the Board of Directors and who shall hold office during the
pleasure of the Board.
(B) The Trust Committee shall have general supervision over the Trust
Department and the investment of trust funds, in all matters, however, being
subject to the approval of the Board of Directors.
(C) The Trust Committee shall meet at the principal office of the
Company or elsewhere in its discretion at such times to be determined by a
majority of its members or at the call of its chairman. A majority of its
members shall be necessary to constitute a quorum for the transaction of
business.
(D) Minutes of each meeting of the Trust Committee shall be kept
and promptly submitted to the Board of Directors.
(E) The Trust Committee shall have the power to appoint Committees
and/or designate officers or employees of the Company to whom supervision over
the investment of trust funds may be delegated when the Trust Committee is not
in session.
Section 3. Audit Committee
(A) The Audit Committee shall be composed of five members who shall
be selected by the Board of Directors from its own members, none of whom shall
be an officer of the Company, and shall hold office at the pleasure of the
Board.
(B) The Audit Committee shall have general supervision over the Audit
Division in all matters however subject to the approval of the Board of
Directors; it shall consider all matters brought to its attention by the officer
in charge of the Audit Division, review all reports of examination of the
Company made by any governmental agency or such independent auditor employed for
that purpose, and make such recommendations to the Board of Directors with
respect thereto or with respect to any other matters pertaining to auditing the
4
<PAGE>
Company as it shall deem desirable.
(C) The Audit Committee shall meet whenever and wherever the majority
of its members shall deem it to be proper for the transaction of its business,
and a majority of its Committee shall constitute a quorum.
Section 4. Compensation Committee
(A) The Compensation Committee shall be composed of not more than
five (5) members who shall be selected by the Board of Directors from its own
members who are not officers of the Company and who shall hold office during the
pleasure of the Board.
(B) The Compensation Committee shall in general advise upon all
matters of policy concerning the Company brought to its attention by the
management and from time to time review the management of the Company, major
organizational matters, including salaries and employee benefits and
specifically shall administer the Executive Incentive Compensation Plan.
(C) Meetings of the Compensation Committee may be called at any time
by the Chairman of the Compensation Committee, the Chairman of the Board of
Directors, or the President of the Company.
Section 5. Associate Directors
(A) Any person who has served as a director may be elected by the
Board of Directors as an associate director, to serve during the pleasure of the
Board.
(B) An associate director shall be entitled to attend all directors
meetings and participate in the discussion of all matters brought to the Board,
with the exception that he would have no right to vote. An associate director
will be eligible for appointment to Committees of the Company, with the
exception of the Executive Committee, Audit Committee and Compensation
Committee, which must be comprised solely of active directors.
Section 6. Absence or Disqualification of Any Member of a Committee
(A) In the absence or disqualification of any member of any Committee
created under Article III of the By-Laws of this Company, the member or members
thereof present at any meeting and not disqualified from voting, whether or not
he or they constitute a quorum, may unanimously appoint another member of the
Board of Directors to act at the meeting in the place of any such absence or
disqualified member.
5
<PAGE>
ARTICLE IV
Officers
Section 1. The Chairman of the Board of Directors shall preside at all
meetings of the Board and shall have such further authority and powers and shall
perform such duties as the Board of Directors may from time to time confer and
direct. He shall also exercise such powers and perform such duties as may from
time to time be agreed upon between himself and the President of the Company.
Section 2. The Vice Chairman of the Board. The Vice Chairman of the
-------------------------------
Board of Directors shall preside at all meetings of the Board of Directors at
which the Chairman of the Board shall not be present and shall have such further
authority and powers and shall perform such duties as the Board of Directors or
the Chairman of the Board may from time to time confer and direct.
Section 3. The President shall have the powers and duties pertaining to
the office of the President conferred or imposed upon him by statute or assigned
to him by the Board of Directors in the absence of the Chairman of the Board the
President shall have the powers and duties of the Chairman of the Board.
Section 4. The Chairman of the Board of Directors or the President as
designated by the Board of Directors, shall carry into effect all legal
directions of the Executive Committee and of the Board of Directors, and shall
at all times exercise general supervision over the interest, affairs and
operations of the Company and perform all duties incident to his office.
Section 5. There may be one or more Vice Presidents, however denominated
by the Board of Directors, who may at any time perform all the duties of the
Chairman of the Board of Directors and/or the President and such other powers
and duties as may from time to time be assigned to them by the Board of
Directors, the Executive Committee, the Chairman of the Board or the President
and by the officer in charge of the department or division to which they are
assigned.
Section 6. The Secretary shall attend to the giving of notice of meetings
of the stockholders and the Board of Directors, as well as the Committees
thereof, to the keeping of accurate minutes of all such meetings and to
recording the same in the minute books of the Company. In addition to the other
notice requirements of these By-Laws and as may be practicable under the
circumstances, all such notices shall be in writing and mailed well in advance
of the scheduled date of any other meeting. He shall have custody of the
corporate seal and shall affix the same to any documents requiring such
corporate seal and to attest the same.
6
<PAGE>
Section 7. The Treasurer shall have general supervision over all assets
and liabilities of the Company. He shall be custodian of and responsible for
all monies, funds and valuables of the Company and for the keeping of proper
records of the evidence of property or indebtedness and of all the transactions
of the Company. He shall have general supervision of the expenditures of the
Company and shall report to the Board of Directors at each regular meeting of
the condition of the Company, and perform such other duties as may be assigned
to him from time to time by the Board of Directors of the Executive Committee.
Section 8. There may be a Controller who shall exercise general
supervision over the internal operations of the Company, including accounting,
and shall render to the Board of Directors at appropriate times a report
relating to the general condition and internal operations of the Company.
There may be one or more subordinate accounting or controller officers
however denominated, who may perform the duties of the Controller and such
duties as may be prescribed by the Controller.
Section 9. The officer designated by the Board of Directors to be in
charge of the Audit Division of the Company with such title as the Board of
Directors shall prescribe, shall report to and be directly responsible only to
the Board of Directors.
There shall be an Auditor and there may be one or more Audit Officers,
however denominated, who may perform all the duties of the Auditor and such
duties as may be prescribed by the officer in charge of the Audit Division.
Section 10. There may be one or more officers, subordinate in rank to all
Vice Presidents with such functional titles as shall be determined from time to
time by the Board of Directors, who shall ex officio hold the office Assistant
Secretary of this Company and who may perform such duties as may be prescribed
by the officer in charge of the department or division to whom they are
assigned.
Section 11. The powers and duties of all other officers of the Company
shall be those usually pertaining to their respective offices, subject to the
direction of the Board of Directors, the Executive Committee, Chairman of the
Board of Directors or the President and the officer in charge of the department
or division to which they are assigned.
ARTICLE V
Stock and Stock Certificates
Section 1. Shares of stock shall be transferrable on the books of the
Company and a
7
<PAGE>
transfer book shall be kept in which all transfers of stock shall be recorded.
Section 2. Certificate of stock shall bear the signature of the President
or any Vice President, however denominated by the Board of Directors and
countersigned by the Secretary or Treasurer or an Assistant Secretary, and the
seal of the corporation shall be engraved thereon. Each certificate shall
recite that the stock represented thereby is transferrable only upon the books
of the Company by the holder thereof or his attorney, upon surrender of the
certificate properly endorsed. Any certificate of stock surrendered to the
Company shall be cancelled at the time of transfer, and before a new certificate
or certificates shall be issued in lieu thereof. Duplicate certificates of
stock shall be issued only upon giving such security as may be satisfactory to
the Board of Directors or the Executive Committee.
Section 3. The Board of Directors of the Company is authorized to fix in
advance a record date for the determination of the stockholders entitled to
notice of, and to vote at, any meeting of stockholders and any adjournment
thereof, or entitled to receive payment of any dividend, or to any allotment or
rights, or to exercise any rights in respect of any change, conversion or
exchange of capital stock, or in connection with obtaining the consent of
stockholders for any purpose, which record date shall not be more than 60 nor
less than 10 days proceeding the date of any meeting of stockholders or the date
for the payment of any dividend, or the date for the allotment of rights, or the
date when any change or conversion or exchange of capital stock shall go into
effect, or a date in connection with obtaining such consent.
ARTICLE VI
Seal
Section 1. The corporate seal of the Company shall be in the following
form:
Between two concentric circles the words
"Wilmington Trust Company" within the inner
circle the words "Wilmington, Delaware."
ARTICLE VII
Fiscal Year
Section 1. The fiscal year of the Company shall be the calendar year.
8
<PAGE>
ARTICLE VIII
Execution of Instruments of the Company
Section 1. The Chairman of the Board, the President or any Vice
President, however denominated by the Board of Directors, shall have full power
and authority to enter into, make, sign, execute, acknowledge and/or deliver and
the Secretary or any Assistant Secretary shall have full power and authority to
attest and affix the corporate seal of the Company to any and all deeds,
conveyances, assignments, releases, contracts, agreements, bonds, notes,
mortgages and all other instruments incident to the business of this Company or
in acting as executor, administrator, guardian, trustee, agent or in any other
fiduciary or representative capacity by any and every method of appointment or
by whatever person, corporation, court officer or authority in the State of
Delaware, or elsewhere, without any specific authority, ratification, approval
or confirmation by the Board of Directors or the Executive Committee, and any
and all such instruments shall have the same force and validity as though
expressly authorized by the Board of Directors and/or the Executive Committee.
ARTICLE IX
Compensation of Directors and Members of Committees
Section 1. Directors and associate directors of the Company, other than
salaried officers of the Company, shall be paid such reasonable honoraria or
fees for attending meetings of the Board of Directors as the Board of Directors
may from time to time determine. Directors and associate directors who serve as
members of committees, other than salaried employees of the Company, shall be
paid such reasonable honoraria or fees for services as members of committees as
the Board of Directors shall from time to time determine and directors and
associate directors may be employed by the Company for such special services as
the Board of Directors may from time to time determine and shall be paid for
such special services so performed reasonable compensation as may be determined
by the Board of Directors.
ARTICLE X
Indemnification
Section 1. (A) The Corporation shall indemnify and hold harmless, to the
fullest extent permitted by applicable law as it presently exists or may
hereafter be amended, any person who was or is made or is threatened to be made
a party or is otherwise involved in any action, suit or proceeding, whether
civil, criminal, administrative or investigative (a "proceeding") by reason of
the fact that he, or a person for whom he is the legal representative, is or was
a director, officer, employee or agent of the Corporation or is or was
9
<PAGE>
serving at the request of the Corporation as a director, officer, employee,
fiduciary or agent of another corporation or of a partnership, joint venture,
trust, enterprise or non-profit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
reasonably incurred by such person. The Corporation shall indemnify a person in
connection with a proceeding initiated by such person only if the proceeding was
authorized by the Board of Directors of the Corporation.
(B) The Corporation shall pay the expenses incurred in defending any
proceeding in advance of its final disposition, provided, however, that the
-------- -------
payment of expenses incurred by a Director officer in his capacity as a Director
or officer in advance of the final disposition of the proceeding shall be made
only upon receipt of an undertaking by the Director or officer to repay all
amounts advanced if it should be ultimately determined that the Director or
officer is not entitled to be indemnified under this Article or otherwise.
(C) If a claim for indemnification or payment of expenses, under this
Article X is not paid in full within ninety days after a written claim therefor
has been received by the Corporation the claimant may file suit to recover the
unpaid amount of such claim and, if successful in whole or in part, shall be
entitled to be paid the expense of prosecuting such claim. In any such action
the Corporation shall have the burden of proving that the claimant was not
entitled to the requested indemnification of payment of expenses under
applicable law.
(D) The rights conferred on any person by this Article X shall not be
exclusive of any other rights which such person may have or hereafter acquire
under any statute, provision of the Charter or Act of Incorporation, these By-
Laws, agreement, vote of stockholders or disinterested Directors or otherwise.
(E) Any repeal or modification of the foregoing provisions of this
Article X shall not adversely affect any right or protection hereunder of any
person in respect of any act or omission occurring prior to the time of such
repeal or modification.
ARTICLE XI
Amendments to the By-Laws
Section 1. These By-Laws may be altered, amended or repealed, in whole or
in part, and any new By-Law or By-Laws adopted at any regular or special meeting
of the Board of Directors by a vote of the majority of all the members of the
Board of Directors then in office.
10
<PAGE>
EXHIBIT C
Section 321(b) Consent
Pursuant to Section 321(b) of the Trust Indenture Act of 1939, as amended,
Wilmington Trust Company hereby consents that reports of examinations by
Federal, State, Territorial or District authorities may be furnished by such
authorities to the Securities and Exchange Commission upon requests therefor.
WILMINGTON TRUST COMPANY
Dated: February 8, 2000 By: /s/ Bruce L. Bisson
---------------------------------------
Name: Bruce L. Bisson
Title: Vice President
<PAGE>
EXHIBIT D
NOTICE
This form is intended to assist state nonmember banks and
savings banks with state publication requirements. It has not
been approved by any state banking authorities. Refer to your
appropriate state banking authorities for your state publication
requirements.
R E P O R T O F C O N D I T I O N
Consolidating domestic subsidiaries of the
WILMINGTON TRUST COMPANY of WILMINGTON
- -------------------------------------------- -----------------------------
Name of Bank City
in the State of DELAWARE, at the close of business on September 30, 1999.
--------
<TABLE>
<CAPTION>
ASSETS
Thousands of dollars
<S> <C>
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coins................. 182,666
Interest-bearing balances........................................... 0
Held-to-maturity securities....................................................... 34,128
Available-for-sale securities.....................................................1,644,067
Federal funds sold and securities purchased under agreements to resell............ 259,962
Loans and lease financing receivables:
Loans and leases, net of unearned income..........4,251,934
LESS: Allowance for loan and lease losses........ 71,014
LESS: Allocated transfer risk reserve............. 0
Loans and leases, net of unearned income, allowance, and reserve....4,180,920
Assets held in trading accounts................................................... 0
Premises and fixed assets (including capitalized leases).......................... 138,196
Other real estate owned........................................................... 976
Investments in unconsolidated subsidiaries and associated companies............... 1,452
Customers' liability to this bank on acceptances outstanding...................... 0
Intangible assets................................................................. 5,092
Other assets...................................................................... 142,444
Total assets......................................................................6,589,903
</TABLE>
CONTINUED ON NEXT PAGE
<PAGE>
<TABLE>
LIABILITIES
<S> <C>
Deposits:
In domestic offices...........................................................4,886,770
Noninterest-bearing . . . . . . . . 1,084,581
Interest-bearing................... 3,802,189
Federal funds purchased and Securities sold under agreements to repurchase.... 387,343
Demand notes issued to the U.S. Treasury...................................... 69,491
Trading liabilities (from Schedule RC-D)...................................... 0
Other borrowed money:......................................................... ///////
With original maturity of one year or less....................... 655,000
With original maturity of more than one year..................... 43,000
Bank's liability on acceptances executed and outstanding...................... 0
Subordinated notes and debentures............................................. 0
Other liabilities (from Schedule RC-G)........................................ 84,722
Total liabilities.............................................................6,126,326
EQUITY CAPITAL
Perpetual preferred stock and related surplus................................. 0
Common Stock.................................................................. 500
Surplus (exclude all surplus related to preferred stock)...................... 62,118
Undivided profits and capital reserves........................................ 417,321
Net unrealized holding gains (losses) on available-for-sale securities........ (16,362)
Total equity capital.......................................................... 463,577
Total liabilities, limited-life preferred stock, and equity capital...........6,589,903
</TABLE>
2
<PAGE>
Exhibit 99.1
Letter of Transmittal for Dollar Notes
PSINET INC.
Offer To Exchange Its
New Dollar-Denominated 10 1/2% Senior Notes Due 2006,
Which Have Been Registered Under The Securities Act of 1933,
For Any And All Of Its Outstanding Unregistered Dollar-Denominated
10 1/2% Senior Notes Due 2006
Pursuant To The Prospectus
Dated ________ ___, 2000
- --------------------------------------------------------------------------------
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME (10:00 P.M.,
LONDON TIME), ON [_________ , 2000], UNLESS EXTENDED (THE "EXPIRATION DATE").
TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME (10:00 P.M.,
LONDON TIME), ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
If you desire to accept the Exchange Offer (as defined below), this Letter
of Transmittal should be completed, signed, and submitted to:
WILMINGTON TRUST COMPANY, as Exchange Agent
<TABLE>
<S> <C>
By Registered or Certified Mail By Hand:
or Overnight Courier:
Wilmington Trust Company Wilmington Trust Company
Attn: Kristin Long Attn: Corporate Trust Operations
Corporate Trust Operations c/o Harris Trust Co. of New York as Agent
1100 North Market Street 88 Pine Street, 19/th/ Floor
Rodney Square North Wall Street Plaza
Wilmington, DE 19890-0001 New York, New York 10005
</TABLE>
By Facsimile:
(For Eligible Institutions Only)
Wilmington Trust Company
(302) 651-1079
Confirm by telephone:
(302) 651-1562
Kristin Long
Delivery of this Letter of Transmittal to an address other than as set
forth above or transmission of this Letter of Transmittal via facsimile to a
number other than as set forth above does not constitute a valid delivery.
The instructions contained herein should be read carefully before this
Letter of Transmittal is completed.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
<PAGE>
This Letter of Transmittal is to be completed by holders of Initial Notes
(as defined below) either if Initial Notes are to be forwarded herewith or if
tenders of Initial Notes are to be made by book-entry transfer to an account
maintained by the Exchange Agent (as defined below) at The Depository Trust
Company ("DTC") pursuant to the procedures set forth in "The Exchange Offer--
Procedures for Tendering Initial Notes" in the Prospectus and an "agent's
message" (as defined below) is not delivered. Tenders by book-entry transfer
may also be made by delivering an agent's message in lieu of this Letter of
Transmittal.
Holders of Initial Notes whose certificates (the "Certificates") for such
Initial Notes are not immediately available or who cannot deliver their
Certificates and all other required documents to the Exchange Agent on or prior
to the Expiration Date (as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Initial
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Procedures for Tendering Initial Notes" in the Prospectus. See
Instruction 1 hereto. Delivery of documents to DTC does not constitute delivery
to the Exchange Agent.
Ladies and Gentlemen:
The undersigned hereby tenders to PSINet Inc., a New York corporation (the
"Company"), the principal amount of the Company's outstanding $600,000,000
aggregate principal amount 10 1/2% Senior Notes due 2006 (the "Initial Notes")
described in Box 1 below, in exchange for a like principal amount of the
Company's new 10 1/2% Senior Notes due 2006 (the "Exchange Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), upon the terms and subject to the conditions set forth in the Prospectus
dated ________ ___, 2000 (as the same may be amended or supplemented from time
to time, the "Prospectus"), receipt of which is acknowledged, and in this Letter
of Transmittal (which, together with the Prospectus, constitutes the "Exchange
Offer").
Subject to, and effective upon, the acceptance for exchange of all or any
portion of the Initial Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Initial Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
Wilmington Trust Company as Exchange Agent (the "Exchange Agent") as its agent
and attorney-in-fact (with full knowledge that the Exchange Agent is also acting
as agent of the Company in connection with the Exchange Offer) with respect to
the tendered Initial Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest),
subject only to the right of withdrawal described in the Prospectus, to (1)
deliver Certificates for Initial Notes to the Company together with all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company, upon receipt by the Exchange Agent, as the undersigned's agent, of
the Exchange Notes to be issued in exchange for such Initial Notes, (2) present
Certificates for such Initial Notes for transfer, and to transfer the Initial
Notes on the books of the Company, and (3) receive for the account of the
Company all benefits and otherwise exercise all rights of beneficial ownership
of such Initial Notes, all in accordance with the terms and conditions of the
Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, sell, assign and transfer the
Initial Notes tendered hereby and that, when the same are accepted for exchange,
the Company will acquire good, marketable and unencumbered title thereto, free
and clear of all liens, restrictions, charges and encumbrances, and that the
Initial Notes tendered hereby are not subject to any adverse claims or proxies.
The undersigned will, upon request, execute and deliver any additional documents
deemed by the Company or the Exchange Agent to be necessary or desirable to
complete the exchange, assignment and transfer of the Initial Notes tendered
hereby, and the undersigned will comply with its obligations under the
Registration Rights Agreement dated as of December 2, 1999 (the "Registration
Rights Agreement") by and among the Company and Donaldson, Lufkin & Jenrette
-2-
<PAGE>
International, Bear Stearns International Limited, Merrill Lynch International
and Morgan Stanley & Co. International Limited. The undersigned has read and
agrees to all of the terms of the Exchange Offer.
The name(s) and address(es) of the registered holder(s) of the Initial
Notes tendered hereby should be printed in Box 1 below, if they are not already
set forth therein, as they appear on the Certificates representing such Initial
Notes. The Certificate number(s) and the aggregate principal amount of Initial
Notes that the undersigned wishes to tender should also be indicated in Box 1
below.
If any tendered Initial Notes are not exchanged pursuant to the Exchange
Offer for any reason, or if Certificates are submitted for more Initial Notes
than are tendered or accepted for exchange, Certificates for such nonexchanged
or nontendered Initial Notes will be returned (or, in the case of Initial Notes
tendered by book-entry transfer, such Initial Notes will be credited to an
account maintained at DTC), without expense to the tendering holder, promptly
following the expiration or termination of the Exchange Offer.
The undersigned understands that tenders of Initial Notes pursuant to any
one of the procedures described under "The Exchange Offer--Procedures for
Tendering Initial Notes" in the Prospectus and in the instructions hereto will,
upon the Company's acceptance for exchange of such tendered Initial Notes,
constitute a binding agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Exchange Offer.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer-Conditions." The undersigned
recognizes that as a result of these conditions (which may be waived by the
Company, in whole or in part, in the reasonable discretion of the Company), as
more particularly set forth in the Prospectus, the Company may not be required
to exchange any of the Initial Notes tendered hereby and, in such event, the
Initial Notes not exchanged will be returned to the undersigned at the address
shown in Box 1.
Unless otherwise indicated herein in the box entitled "Special Exchange
Instructions" below (Box 7), the undersigned hereby directs that the Exchange
Notes be issued in the name(s) of the undersigned or, in the case of a book-
entry transfer of Initial Notes, that such Exchange Notes be credited to the
account indicated below maintained at DTC. If applicable, substitute
Certificates representing Initial Notes not exchanged or not accepted for
exchange will be issued to the undersigned or, in the case of a book-entry
transfer of Initial Notes, will be credited to the account indicated below
maintained at DTC. Similarly, unless otherwise indicated herein in the box
entitled "Special Delivery Instructions" below (Box 8), the undersigned hereby
directs that the Exchange Notes be delivered to the undersigned at the address
shown below the undersigned's signature.
THE EXCHANGE OFFER IS NOT BEING MADE TO ANY BROKER-DEALER WHO PURCHASED
INITIAL NOTES DIRECTLY FROM THE COMPANY FOR RESALE PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT OR ANY PERSON THAT IS AN "AFFILIATE" OF THE COMPANY WITHIN
THE MEANING OF RULE 405 UNDER THE SECURITIES ACT. THE UNDERSIGNED UNDERSTANDS
AND AGREES THAT THE COMPANY RESERVES THE RIGHT NOT TO ACCEPT TENDERED INITIAL
NOTES FROM ANY TENDERING HOLDER IF THE COMPANY DETERMINES, IN ITS REASONABLE
DISCRETION, THAT SUCH ACCEPTANCE COULD RESULT IN A VIOLATION OF APPLICABLE
SECURITIES LAWS.
By tendering Initial Notes and executing this Letter of Transmittal or
delivering an agent's message in lieu of this Letter of Transmittal, the
undersigned hereby represents and agrees that (i) the undersigned is not an
"affiliate" of the Company (within the meaning of Rule 405 under the Securities
Act), (ii) any Exchange Notes to be received by the undersigned are being
acquired in the ordinary course of its business, (iii) the undersigned has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of Exchange Notes to be received in
the Exchange Offer, and (iv) if the undersigned is not a broker-dealer, the
undersigned is not engaged in, and does not intend to engage
-3-
<PAGE>
in, a distribution (within the meaning of the Securities Act) of such Exchange
Notes. By tendering Initial Notes pursuant to the Exchange Offer and executing
this Letter of Transmittal or delivering Initial Notes by book-entry transfer, a
holder of Initial Notes that is a broker-dealer additionally represents and
agrees, consistent with certain interpretive letters issued by the staff of the
Division of Corporation Finance of the Securities and Exchange Commission to
third parties described under "The Exchange Offer--Registration Rights" in the
Prospectus, that such Initial Notes were acquired by such broker-dealer for its
own account as a result of market-making activities or other trading activities
(such a broker-dealer tendering Initial Notes is herein referred to as a
"Participating Broker-Dealer") and it will deliver the Prospectus (as amended or
supplemented from time to time) meeting the requirements of the Securities Act
in connection with any resale of such Exchange Notes (provided that, by so
acknowledging and by delivering a Prospectus, such Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act).
The Company has agreed that, subject to the provisions of the Registration
Rights Agreement, the Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of Exchange Notes received in exchange for Initial Notes, where such Initial
Notes were acquired by such Participating Broker-Dealer for its own account as a
result of market-making activities or other trading activities, for a period
ending one year after the Expiration Date or, if earlier, when all such Exchange
Notes have been disposed of by such Participating Broker-Dealer. In that
regard, each Participating Broker-Dealer, by tendering such Initial Notes and
executing this Letter of Transmittal or delivering an agent's message in lieu of
this Letter of Transmittal, agrees to notify the Company prior to using the
Prospectus in connection with the sale or transfer of Exchange Notes and
acknowledges and agrees that, upon receipt of notice from the Company of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in the Prospectus untrue in any material
respect or which causes the Prospectus to omit to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading or of the occurrence of
certain other events specified in the Registration Rights Agreement, such
Participating Broker-Dealer will suspend the sale of Exchange Notes pursuant to
the Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to the Participating Broker-Dealer or the Company has
given notice that the sale of the Exchange Notes may be resumed, as the case may
be.
EACH PARTICIPATING BROKER-DEALER SHOULD CHECK THE BOX HEREIN UNDER THE
CAPTION "PARTICIPATING BROKER-DEALER" (BOX 5 HEREOF) IN ORDER TO RECEIVE
ADDITIONAL COPIES OF THE PROSPECTUS, AND ANY AMENDMENTS AND SUPPLEMENTS THERETO,
FOR USE IN CONNECTION WITH RESALES OF THE EXCHANGE NOTES, AS WELL AS ANY NOTICES
FROM THE COMPANY TO SUSPEND AND RESUME USE OF THE PROSPECTUS. BY TENDERING ITS
INITIAL NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL OR DELIVERING AN AGENT'S
MESSAGE IN LIEU OF THIS LETTER OF TRANSMITTAL, EACH PARTICIPATING BROKER-DEALER
AGREES TO USE ITS REASONABLE BEST EFFORTS TO NOTIFY THE COMPANY OR THE EXCHANGE
AGENT WHEN IT HAS SOLD ALL OF ITS EXCHANGE NOTES. IF NO PARTICIPATING BROKER-
DEALERS CHECK SUCH BOX, OR IF ALL PARTICIPATING BROKER-DEALERS WHO HAVE CHECKED
SUCH BOX SUBSEQUENTLY NOTIFY THE COMPANY OR THE EXCHANGE AGENT THAT ALL THEIR
EXCHANGE NOTES HAVE BEEN SOLD, THE COMPANY WILL NOT BE REQUIRED TO MAINTAIN THE
EFFECTIVENESS OF THE EXCHANGE OFFER REGISTRATION STATEMENT OR TO UPDATE THE
PROSPECTUS AND WILL NOT PROVIDE ANY HOLDERS WITH ANY NOTICES TO SUSPEND OR
RESUME USE OF THE PROSPECTUS.
Each Exchange Note will bear interest from the most recent date on which
interest has been paid or duly provided for on the Initial Note surrendered in
exchange for such Exchange Note or, if no such interest has been paid or duly
provided for on such Initial Note, from December 2, 1999, the date of issuance
of the
-4-
<PAGE>
Initial Notes. Holders of Initial Notes whose Initial Notes are accepted for
exchange will not receive accrued interest on such Initial Notes for any period
from and after the last Interest Payment Date to which interest has been paid or
duly provided for on such Initial Notes prior to the original issue date of the
Exchange Notes or, if no such interest has been paid or duly provided for, will
not receive any accrued interest on such Initial Notes, and will be deemed to
have waived the right to receive any interest on such Initial Notes accrued from
and after such Interest Payment Date or, if no such interest has been paid or
duly provided for, from and after December 2, 1999.
The undersigned understands that the delivery and surrender of the Initial
Notes is not effective, and the risk of loss of the Initial Notes does not pass
to the Exchange Agent, until receipt by the Exchange Agent of this Letter of
Transmittal, or a manually signed facsimile hereof, properly completed and duly
executed, with any required signature guarantees, together with all accompanying
evidences of authority and any other required documents in form satisfactory to
the Company. All questions as to form of all documents and the validity
(including time of receipt) and acceptance of tenders and withdrawals of Initial
Notes will be determined by the Company, in its sole discretion, which
determination shall be final and binding.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except
pursuant to the withdrawal rights as set forth in the Prospectus, this tender is
irrevocable.
Please read this entire Letter of Transmittal carefully before completing
the boxes below and follow the instructions included herewith.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS OF INITIAL NOTES
BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY JURISDICTION IN WHICH THE
MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT BE IN COMPLIANCE WITH THE
LAWS OF SUCH JURISDICTION.
Your bank or broker can assist you in completing this form. The
instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent, whose address and telephone number appear on
the front cover of this Letter of Transmittal. See Instruction 8 below.
-5-
<PAGE>
All Tendering Holders Complete This Box 1:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF INITIAL NOTES TENDERED
(See Instructions 3 and 4 Below)
- ------------------------------------------------------------------------------------------------------------------------
If Blank, Please Print Certificate Number(s) of Aggregate Principal Amount Aggregate Principal
Name(s) And Address(es) Initial Notes Represented By Certificates* Amount of Initial Notes
Of Registered Holder(s), Being Tendered**
Exactly As Name(s)
Appear(s) On Initial Note
Certificate(s)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------
Total
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders (see below).
** The minimum permitted tender is $1,000 in principal amount. All
tenders must be in integral multiples of $1,000 in principal amount. The
aggregate principal amount of all Initial Notes Certificates identified in this
Box 1, or delivered to the Exchange Agent herewith, shall be deemed tendered
unless a lesser number is specified in this column. See Instruction 4.
- --------------------------------------------------------------------------------
BOX 2
BOOK-ENTRY TRANSFER
(See Instruction 1 Below)
[_] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT AT DTC AND COMPLETE THE
FOLLOWING:
Name of Tendering Institution __________________________________________________
DTC Account Number _____________________________________________________________
Transaction Code Number ________________________________________________________
- --------------------------------------------------------------------------------
Holders of Initial Notes may tender Initial Notes by book-entry transfer by
crediting the Initial Notes to the Exchange Agent's account at the DTC in
accordance with the DTC's automated tender offer program and by complying with
applicable automated tender offer program procedures with respect to the
Exchange Offer. DTC participants that are accepting the Exchange Offer should
transmit their acceptance to DTC, which will edit and verify the acceptance and
execute a book-entry delivery to the Exchange
-6-
<PAGE>
Agent's account at DTC. DTC will then send a computer-generated message (an
"agent's message") to the Exchange Agent for its acceptance in which the holder
of the Initial Notes acknowledges and agrees to be bound by the terms of, and
makes the representations and warranties contained in, this Letter of
Transmittal, and the DTC participant confirms on behalf of itself and the
beneficial owners of such Initial Notes all provisions of this Letter of
Transmittal (including any representations and warranties) applicable to it and
such beneficial owner as fully as if it had completed the information required
herein and executed and transmitted this Letter of Transmittal to the Exchange
Agent. Delivery of the agent's message by DTC will satisfy the terms of the
Exchange Offer as to execution and delivery of a Letter of Transmittal by the
participant identified in the agent's message. DTC participants may also accept
the Exchange Offer by submitting a Notice of Guaranteed Delivery through DTC's
automated tender offer program.
-7-
<PAGE>
- --------------------------------------------------------------------------------
BOX 3
NOTICE OF GUARANTEED DELIVERY
(See Instruction 1 Below)
[_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED INITIAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT (OR DELIVERED THROUGH THE AUTOMATED TENDER OFFER
PROGRAM TO) THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)____________________________________________________
Window Ticket Number (if any)___________________________________________________
Date of Execution of Notice of Guaranteed Delivery______________________________
Name of Institution which Guaranteed Delivery___________________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution___________________________________________________
DTC Account Number______________________________________________________________
Transaction Code Number_________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX 4
RETURN OF NON-EXCHANGED INITIAL NOTES
TENDERED BY BOOK-ENTRY TRANSFER
(See Instructions 4 and 6 Below)
[_] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED INITIAL
NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE.
- --------------------------------------------------------------------------------
-8-
<PAGE>
- --------------------------------------------------------------------------------
BOX 5
PARTICIPATING BROKER-DEALER
[_] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE INITIAL NOTES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE TEN ADDITIONAL COPIES OF THE
PROSPECTUS AND TEN COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO, AS WELL AS
ANY NOTICES FROM THE COMPANY TO SUSPEND AND RESUME USE OF THE PROSPECTUS. BY
TENDERING ITS INITIAL NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL OR
DELIVERING AN AGENT'S MESSAGE IN LIEU OF THIS LETTER OF TRANSMITTAL, EACH
PARTICIPATING BROKER-DEALER AGREES TO USE ITS REASONABLE BEST EFFORTS TO NOTIFY
THE COMPANY OR THE EXCHANGE AGENT WHEN IT HAS SOLD ALL OF ITS EXCHANGE NOTES.
(IF NO PARTICIPATING BROKER-DEALERS CHECK THIS BOX, OR IF ALL PARTICIPATING
BROKER-DEALERS WHO HAVE CHECKED THIS BOX SUBSEQUENTLY NOTIFY THE COMPANY OR THE
EXCHANGE AGENT THAT ALL THEIR EXCHANGE NOTES HAVE BEEN SOLD, THE COMPANY WILL
NOT BE REQUIRED TO MAINTAIN THE EFFECTIVENESS OF THE EXCHANGE OFFER REGISTRATION
STATEMENT OR TO UPDATE THE PROSPECTUS AND WILL NOT PROVIDE ANY NOTICES TO ANY
HOLDERS TO SUSPEND OR RESUME USE OF THE PROSPECTUS).
PROVIDE THE NAME OF THE INDIVIDUAL WHO SHOULD RECEIVE, ON BEHALF OF THE HOLDER,
ADDITIONAL COPIES OF THE PROSPECTUS, AND AMENDMENTS AND SUPPLEMENTS THERETO, AND
ANY NOTICES TO SUSPEND AND RESUME USE OF THE PROSPECTUS.
Name:__________________________________________________________________
Address:_______________________________________________________________
Telephone No.:_________________________________________________________
Facsimile No.:_________________________________________________________
- --------------------------------------------------------------------------------
-9-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
BOX 6
TENDERING HOLDER SIGNATURE
(See Instructions 1 and 5)
In Addition, Complete Substitute Form W-9
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
X _________________________________________________ Signature Guarantee
X _________________________________________________ (If required by Instruction 5)
(Signature of registered holder(s) or Authorized
Signatory(ies)) Authorized Signature
Note: The above lines must be signed by the registered
holder(s) of Initial Notes as their name(s) appear(s) X__________________________________________________________
on the Initial Notes or by person(s) authorized to
become registered holder(s) (evidence of which Name:______________________________________________________
authorization must be transmitted with this Letter of (please print)
Transmittal). If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer, or Title:_____________________________________________________
other person acting in a fiduciary or representative
capacity, such person must set forth his or her full Name of Firm:______________________________________________
title below. See Instruction 5. (Must be an Eligible Institution as defined
in Instruction 1)
Name(s): __________________________________________
Address:__________________________________________________
__________________________________________
__________________________________________ __________________________________________________
Capacity:__________________________________________ __________________________________________________
(include Zip Code)
__________________________________________
Street Address:____________________________________ Area Code and Telephone Number:
____________________________________ __________________________________________________
____________________________________ Dated: __________________________________________________
(Include Zip Code)
Area Code and Telephone Number:
____________________________________
Tax Identification or Social Security Number:
____________________________________
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------- ----------------------------------------------------------
BOX 7 BOX 8
SPECIAL EXCHANGE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5 and 6 Below) (See Instructions 1, 5 and 6 Below)
<S> <C>
To be completed ONLY if Certificates for the Initial To be completed ONLY if Certificates for the Initial
Notes not exchanged and/or Certificates for the Notes not exchanged and/or Certificates for the
Exchange Notes are to be issued in the name of Exchange Notes are to be sent to someone other than the
someone other than the registered holder of the registered holder of the Initial Notes whose name(s)
Initial Notes whose name(s) appear(s) above. appear(s) above, or to such registered holder(s) at an
address other than that shown above.
Name:__________________________________________________ Name:_____________________________________________________
(Please Print) (Please Print)
Address:_______________________________________________ Address:__________________________________________________
_______________________________________________ __________________________________________________
(Include Zip Code) (Include Zip Code)
_______________________________________________________ __________________________________________________________
(Tax Identification or Social Security Number) (Tax Identification or Social Security Number)
- ------------------------------------------------------- ----------------------------------------------------------
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
BOX 9
- ----------------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: WILMINGTON TRUST COMPANY
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
SUBSTITUTE Name (if joint names, list first and circle the name of the person or entity whose number you
enter in Part 1 below. See instructions if your name has changed)
_____________________________________________________________________________________________
Form W-9 Address
_____________________________________________________________________________________________
City, State and Zip Code
_____________________________________________________________________________________________
Department of the Treasury List account number(s) here (optional)
Internal Revenue Service
----------------------------------------------------------------------------------------------
Part 1 - PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION NUMBER Social Security Number or
("TIN") IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING TIN
BELOW.
----------------------------------------------------------------------------------------------
Part 2 - Check the box if you are NOT subject to backup withholding under the provisions of
section 3406(a)(1)(C) of the Internal Revenue Code because (1) you have not been notified that
you are subject to backup withholding as a result of failure to report all interest or
dividends or (2) the Internal Revenue Service has notified you that you are no longer subject
to backup withholding.
Not subject to withholding [_]
- ----------------------------------------------------------------------------------------------------------------------------------
Payor's Request for TIN CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT Part 3 --
THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT, AND
COMPLETE.
Signature: ________________________________ Date: ___________ Awaiting TIN [_]
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW
THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON
SUBSTITUTE FORM W - 9" FOR ADDITIONAL DETAILS.
-12-
<PAGE>
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all payments made to me on account of the Exchange Notes shall be retained
until I provide a taxpayer identification number to the Exchange Agent and that,
if I do not provide my taxpayer identification number within 60 days, such
retained amounts shall be remitted to the Internal Revenue Service as backup
withholding and 31% of all reportable payments made to me thereafter will be
withheld and remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
Signature:______________________________________________________________________
Date:___________________________________________________________________________
- --------------------------------------------------------------------------------
-13-
<PAGE>
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
GENERAL
Please do not send Certificates for Initial Notes directly to the Company.
Your Initial Note Certificates, together with your signed and completed Letter
of Transmittal and any required supporting documents, should be mailed in the
enclosed addressed envelope, or otherwise delivered, to the Exchange Agent, at
either of the addresses indicated on the first page hereof. The method of
delivery of Certificates, this Letter of Transmittal and all other required
documents is at the option and sole risk of the tendering holder and the
delivery will be deemed made only when actually received by the Exchange Agent.
If delivery is by mail, registered mail with return receipt requested, properly
insured, or overnight delivery service is recommended. In all cases, sufficient
time should be allowed to ensure timely delivery.
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES
This Letter of Transmittal is to be completed by holders of Initial Notes
(which term, for purposes of the Exchange Offer, includes any participant in DTC
whose name appears on a security position listing as the holder of such Initial
Notes) if either (a) Certificates for such Initial Notes are to be forwarded
herewith or (b) tenders are to be made pursuant to the procedures for tender by
book-entry transfer set forth in "The Exchange Offer--Procedures for Tendering
Initial Notes" in the Prospectus, and an agent's message is not delivered.
Tenders by book-entry transfer may also be made by delivering an agent's message
in lieu of this Letter of Transmittal. The term "agent's message" means a
message, transmitted by DTC to and received by the Exchange Agent and forming a
part of a book-entry confirmation, which states that DTC has received an
express acknowledgement from the tendering Participant, which acknowledgement
states that such Participant has received and agrees to be bound by, and makes
the representations and warranties contained in, this Letter of Transmittal and
that the Company may enforce this Letter of Transmittal against such
Participant. Certificates representing the tendered Initial Notes, or timely
confirmation of a book-entry transfer of such Initial Notes into the Exchange
Agent's account at DTC, as well as a properly completed and duly executed copy
of this Letter of Transmittal, or a facsimile hereof (or, in the case of a book-
entry transfer, an agent's message), a substitute Form W-9, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein on or prior to 5:00 p.m., New
York City time (10:00 p.m., London time), on the Expiration Date, or the
tendering holder must comply with the guaranteed delivery procedures set forth
below. Initial Notes may be tendered in whole or in part in the principal
amount of $1,000 and integral multiples of $1,000.
Holders who wish to tender their Initial Notes and (1) whose Initial Notes
are not immediately available or (2) who cannot deliver their Initial Notes,
this Letter of Transmittal and all other required documents to the Exchange
Agent on or prior to the Expiration Date or (3) who cannot complete the
procedures for delivery by book-entry transfer on a timely basis, may tender
their Initial Notes by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in
"The Exchange Offer--Procedures for Tendering Initial Notes" in the Prospectus
and by completing Box 3 hereof. Pursuant to such procedures: (1) such tender
must be made by or through an Eligible Institution (as defined below); (2) a
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by the Company, must be received by the
Exchange Agent on or prior to the Expiration Date; and (3) the Certificates (or
a book-entry confirmation (as defined in the Prospectus)) representing all
tendered Initial Notes of such holder, in proper form for transfer, together
with a Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees (or, in the case of a book-
entry transfer, an agent's message) and any other
-14-
<PAGE>
documents required by this Letter of Transmittal, must be received by the
Exchange Agent within three Nasdaq Stock Market National Market System trading
days after the date of execution of such Notice of Guaranteed Delivery, all as
provided in "The Exchange Offer--Procedures for Tendering Initial Notes" in the
Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent, and must include a guarantee by an
Eligible Institution in the form set forth in such Notice. For Initial Notes to
be properly tendered pursuant to the guaranteed delivery procedure, the Exchange
Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration
Date. As used herein, "Eligible Institution" means a firm or other entity
identified in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor
institution," including (as such terms are defined therein) (1) a bank; (2) a
broker, dealer, municipal securities broker or dealer or government securities
broker or dealer; (3) a credit union; (4) a national securities exchange,
registered securities association or clearing agency; or (5) a savings
association that is a participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchange Medallion Program.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof) or delivering an agent's message in lieu of this Letter of
Transmittal, waives any right to receive any notice of the acceptance of such
tender.
2. GUARANTEE OF SIGNATURES
No signature guarantee on this Letter of Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder (which
term, for purposes of this document, shall include any participant in DTC whose
name appears on a security position listing as the owner of the Initial Notes)
of Initial Notes tendered herewith, unless such holder(s) has (have) completed
either the box entitled "Special Exchange Instructions" (Box 7) or the box
entitled "Special Delivery Instructions" (Box 8) above; or
(ii) such Initial Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, an Eligible Institution must guarantee the signature(s)
in Box 6 on this Letter of Transmittal. See Instruction 5.
3. INADEQUATE SPACE
If the space provided in the box captioned "Description of Initial Notes"
is inadequate, the Certificate number(s) and/or the principal amount of Initial
Notes and any other required information should be listed on a separate, signed
schedule and attached to this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS
Tenders of Initial Notes will be accepted only in the principal amount of
$1,000 and integral multiples thereof. If less than all the Initial Notes
evidenced by any Certificate submitted are to be tendered, fill in the principal
amount of Initial Notes which are to be tendered in Box 1 under the column
"Aggregate Principal Amount of Initial Notes Being Tendered." In such case, new
Certificate(s) for the remainder of the Initial Notes that were evidenced by the
Initial Notes Certificate(s) will be sent to the holder of the Initial Notes,
promptly after the Expiration Date. All Initial Notes represented by
Certificates delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Initial Notes may be
withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective, a written or facsimile transmission of
-15-
<PAGE>
such notice of withdrawal must be timely received by the Exchange Agent at its
address set forth above on or prior to the Expiration Date. Any such notice of
withdrawal must (1) specify the name of the person having deposited the Initial
Notes to be withdrawn (the "Depositor"), (2) identify the Initial Notes to be
withdrawn (including the Certificate number(s) and principal amount of such
Initial Notes, or, in the case of Initial Notes transferred by book-entry
transfer, the name and number of the account at DTC to be credited), (3) be
signed by the Initial Holder in the same manner as the original signature on the
Letter of Transmittal by which such Initial Notes were tendered (including any
required signature guarantees) or be accompanied by documents of transfer
sufficient to have the Trustee register the transfer of such Initial Notes into
the name of the person withdrawing the tender and (4) specify the name in which
any such Initial Notes are to be registered, if different from that of the
Depositor. All questions as to the validity, form and eligibility (including
time or receipt) of such notices will be determined by the Company, whose
determination shall be final and binding on all parties. If Initial Notes have
been tendered pursuant to the procedures for book-entry transfer set forth in
the Prospectus under "The Exchange Offer--Procedures for Tendering Initial
Notes," the notice of withdrawal must specify the name and number of the account
at DTC to be credited with the withdrawal of Initial Notes, in which case a
notice of withdrawal will be effective if delivered to the Exchange Agent by
written or facsimile transmission. Initial Notes properly withdrawn will not be
deemed validly tendered for purposes of the Exchange Offer. Withdrawals of
tenders of Initial Notes may not be rescinded, but such Initial Notes may be
retendered at any subsequent time on or prior to the Expiration Date by
following any of the procedures described in the Prospectus under "The Exchange
Offer--Procedures for Tendering Initial Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent nor any other person shall be under any duty to give any notification of
any irregularities in any notice of withdrawal or incur any liability for
failure to give such notification. Any Initial Notes which have been tendered
but which are withdrawn will be returned to the holder thereof without cost to
such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS
If this Letter of Transmittal is signed by the registered holder(s) of the
Initial Notes tendered hereby, the signature(s) must correspond with the name(s)
as written on the face of the Certificate(s) without alteration, addition or any
change whatsoever.
If any of the Initial Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Initial Notes are registered in different names on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by the Company, must
submit proper evidence satisfactory to the Company, in its sole discretion, of
such persons' authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Initial Notes listed and transmitted hereby, no endorsement(s) of Certificate(s)
or separate bond power(s) are required unless Exchange Notes are to be issued in
the name of a person other than the registered holder(s). However, if Exchange
Notes are to be issued in the name of a person other than the registered
holder(s), signature(s) on such Certificate(s) or bond power(s) must be
guaranteed by an Eligible Institution.
-16-
<PAGE>
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Initial Notes listed, the Certificates must be
endorsed or accompanied by appropriate bond powers, signed exactly as the name
or names of the registered owner(s) appear(s) on the Certificates, and also must
be accompanied by such opinions of counsel, certifications and other information
as the Company or the Trustee for the Initial Notes may require in accordance
with the restrictions on transfer applicable to the Initial Notes. Signatures on
such Certificates or bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS
If Exchange Notes are to be issued in the name of a person other than the
signer of this Letter of Transmittal, or if Exchange Notes are to be sent to
someone other than the signer of this Letter of Transmittal or to an address
other than that shown above, the appropriate boxes on this Letter of Transmittal
should be completed (Boxes 7 and 8). Certificates for Initial Notes not
exchanged will be returned by mail or, if tendered by book-entry transfer, by
crediting the account indicated above maintained at DTC. See Instruction 4.
7. DETERMINATION OF VALIDITY
The Company will determine, in its sole discretion, all questions as to the
form of documents, validity, eligibility (including time of receipt) and
acceptance for exchange of any tender of Initial Notes, which determination
shall be final and binding on all parties. The Company reserves the absolute
right to reject any and all tenders determined by it not to be in proper form or
the acceptance of which, or exchange for, may, in the view of counsel to the
Company, be unlawful. The Company also reserves the absolute right, subject to
applicable law, to waive any of the conditions of the Exchange Offer set forth
in the Prospectus under "The Exchange Offer--Conditions" or any conditions or
irregularity in any tender of Initial Notes of any particular holder whether or
not similar conditions or irregularities are waived in the case of other
holders.
The Company's interpretation of the terms and conditions of the Exchange
Offer (including this Letter of Transmittal and the instructions hereto) will be
final and binding. No tender of Initial Notes will be deemed to have been
validly made until all irregularities with respect to such tender have been
cured or waived. Neither the Company, any affiliates or assigns of the Company,
the Exchange Agent, nor any other person shall be under any duty to give
notification of any irregularities in tenders or incur any liability for failure
to give such notification.
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES
Questions and requests for assistance may be directed to the Exchange Agent
at its address and telephone number set forth on the front of this Letter of
Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed
Delivery and the Letter of Transmittal may be obtained from the Exchange Agent.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9
For U.S. Federal income tax purposes, holders are required, unless an
exemption applies, to provide the Exchange Agent with such holder's correct
taxpayer identification number ("TIN") on Substitute Form W-9 (Box 9 of this
Letter of Transmittal), and to certify, under penalty of perjury, that such
number is correct and that he or she is not subject to backup withholding. If
the Exchange Agent is not provided with the correct TIN, the Internal Revenue
Service (the "IRS") may subject the holder or other payee to a $50 penalty. In
addition, payments to such holders or other payees with respect to Initial Notes
exchanged pursuant to the Exchange Offer, or with respect to Exchange Notes
following the Exchange Offer, may be subject to 31% backup withholding.
-17-
<PAGE>
Part 3 of the Substitute Form W-9 (Box 9) may be checked if the tendering
holder has not been issued a TIN and has applied for a TIN or intends to apply
for a TIN in the near future. If Part 3 is checked, the holder or other payee
must also complete the Certificate of Awaiting Taxpayer Identification Number
following Substitute Form W-9 in order to avoid backup withholding.
Notwithstanding that Part 3 is checked and the Certificate of Awaiting Taxpayer
Identification Number is completed, the Exchange Agent will withhold 31% of all
payments made prior to the time a properly certified TIN is provided to the
Exchange Agent.
The holder is required to give the Exchange Agent the TIN (i.e., social
security number or employer identification number) of the registered owner of
the Initial Notes or of the last transferee appearing on the transfers attached
to, or endorsed on, the Initial Notes. If the Initial Notes are registered in
more than one name or are not in the name of the actual owner, consult the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional guidance on which number to report.
If the tendering holder is a nonresident alien or foreign entity not
subject to backup withholding, such holder must give the Company a completed
Form W-8, Certificate of Foreign Status. A copy of the Form W-8 may be obtained
from the Exchange Agent. Please consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather,
the U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. LOST, DESTROYED OR STOLEN CERTIFICATES
If any Certificate(s) representing Initial Notes have been lost, destroyed
or stolen, the holder should promptly notify the Exchange Agent. The holder will
then be instructed as to the steps that must be taken in order to replace the
Certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, destroyed or stolen
Certificate(s) have been completed.
11. SECURITY TRANSFER TAXES
Holders who tender their Initial Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith. If, however, Exchange Notes
are to be delivered to, or are to be issued in the name of, any person other
than the registered holder of the Initial Notes tendered, or if a transfer tax
is imposed for any reason other than the exchange of Initial Notes in connection
with the Exchange Offer, then the amount of any such tax (whether imposed on the
registered holder or any other persons) is payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such taxes will be
billed directly to such tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
-18-
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF OUTSTANDING DOLLAR-DENOMINATED
10 1/2% SENIOR NOTES DUE 2006
OF
PSINET INC.
The undersigned hereby acknowledges receipt of the Prospectus dated
________ ___, 2000 (the "Prospectus") of PSINet Inc., a New York corporation
(the "Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange $1,000 in principal amount of its Dollar-denominated 10 1/2%
Senior Notes due 2006, which have been registered under the Securities Act (the
"Exchange Notes"), for each $1,000 in principal amount of its outstanding
unregistered Dollar-denominated 10 1/2 % Senior Notes due 2006 (the "Initial
Notes"). Capitalized terms used but not defined herein have the meanings
ascribed to them in the Prospectus.
This will instruct you, the registered holder, as to the action to be taken
by you relating to the Exchange Offer with respect to the Initial Notes held by
you for the account of the undersigned.
The aggregate principal amount of the Initial Notes held by you for the
account of the undersigned is (fill in principal amount):
$______________.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] To TENDER the following Initial Notes held by you for the account of
the undersigned (insert principal amount of Initial Notes to be
tendered*, if any):
$______________.
* The minimum permitted tender is $1,000 in principal amount of
Initial Notes. All other tenders must be in integral multiples
of $1,000 of principal amount.
[_] NOT to TENDER any Initial Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Initial Notes held by you
for the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
Beneficial Owner (as defined in the Letter of Transmittal), including but not
limited to representations to the effect that (i) the undersigned's principal
residence is in the state of (fill in state)_________________________, (ii) the
undersigned is acquiring the Exchange Notes in the ordinary course of business
of the undersigned, (iii) the undersigned is not participating, does not intend
to participate, and has no arrangement or understanding with any person to
participate, in the distribution (within the meaning of the Securities Act) of
the Exchange Notes, (iv) except as otherwise disclosed in writing herewith, the
undersigned acknowledges that any person participating in the Exchange Offer
with the intention or for the purpose of distributing the Exchange Notes must
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale of the Exchange Notes
acquired by such person and cannot rely on the position of the Staff of the
Securities and Exchange Commission set forth in the no-action letters that are
discussed in the section of the Prospectus entitled "The Exchange Offer--Resale
of the Exchange Notes"; (b) to make such agreements, representations and
warranties on behalf of the undersigned, as set forth in the Letter of
Transmittal; and (c) to take such other action as may be necessary under the
Prospectus or the Letter of Transmittal to effect the valid tender of such
Initial Notes.
SIGN HERE
Name of Beneficial Owner(s):____________________________________________________
Signature(s):___________________________________________________________________
Name(s) (please print):_________________________________________________________
Address:________________________________________________________________________
________________________________________________________________________________
Telephone Number:_______________________________________________________________
Taxpayer Identification or Social Security Number:______________________________
Date:___________________________________________________________________________
-19-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
A. TIN--The Taxpayer Identification Number for most individuals is their social
security number. Refer to the following chart to determine the appropriate
number:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY OR EMPLOYER
IDENTIFICATION NUMBER OF:
- ------------------------------------------------------------------------------------------------------------
<S> <C>
1 Individual The individual
2 Two or more individuals The actual owner of the account or, if combined
(joint account) funds, the first individual on the account (1)
3 Custodian account of a minor (Uniform Gift to The minor(2)
Minors Act)
4 a. Revocable savings trust (grantor is also trustee) The grantor-trustee(1)
b. So-called trust account that is not a legal or
valid trust under State law The actual owner(1)
5 Sole proprietorship
6 A valid trust, estate or pension trust The owner(3)
7 Corporate Legal entity(4)
8 Association, club, religious, charitable, The corporation
educational or other tax exempt organization The organization
9 Partnership
10 A broker or registered nominee The partnership
11 Account with the Department of Agriculture The broker or nominee
The public entity
- ------------------------------------------------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's name and social security
number.
(3) Show the individual's name. You may also enter your business name or "doing
business as" name. You may use either your Social Security number or your
employer identification number.
(4) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
B. EXEMPT PAYEES--The following lists exempt payees. If you are exempt, you must
nonetheless complete the form and provide your TIN in order to establish that
you are exempt. Check the box in Part 3 of the form, sign and date the form.
For this purpose, Exempt Payees include: (1) a corporation; (2) an
organization exempt from tax under section 501(a), or an individual retirement
plan (IRA) or a custodial account under section 403(b)(7); (3) the United States
or any of its agencies or instrumentalities; (4) a state, the District of
Columbia, a possession of the United States, or any of their political
subdivisions or instrumentalities; (5) a foreign government or any of its
political subdivisions, agencies or instrumentalities; (6) an international
organization or any of its agencies or instrumentalities; (7) a foreign central
bank of issue; (8) a dealer in securities or commodities required to register in
the U.S. or a possession of the U.S.; (9) a real estate investment trust; (10)
an entity or person registered at all times during the tax year under the
Investment
-20-
<PAGE>
Company Act of 1940; (11) a common trust fund operated by a bank under section
584(a); and (12) a financial institution.
C. OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, application for a Social Security Number, or Form SS-
4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
D. PRIVACY ACT NOTICE
Section 6109 requires most recipients of dividend, interest or other
payments to give taxpayer identification numbers to payers who must report the
payments to the IRS. The IRS uses the numbers for identification purposes.
Payers must be given the numbers whether or not payees are required to file
tax returns. Payers must generally withhold 31% of taxable interest, dividend
and certain other payments to a payee who does not furnish a taxpayer
identification number. Certain penalties may also apply.
E. PENALTIES
(1) Penalty for Failure to Furnish Taxpayer Identification Number. If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments. If you fail
to include any portion of an includable payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an under-
payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) Civil Penalty for False Information with Respect to Withholding. If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information. Falsifying certifications
or affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
-21-
<PAGE>
Exhibit 99.2
Letter of Transmittal for Euro Notes
PSINET INC.
Offer To Exchange Its
New Euro-Denominated 10 1/2% Senior Notes Due 2006,
Which Have Been Registered Under The Securities Act of 1933,
For Any And All Of Its Outstanding Unregistered Euro-Denominated
10 1/2% Senior Notes Due 2006
Pursuant To The Prospectus
Dated [________ ___, 2000]
- --------------------------------------------------------------------------------
THIS EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME (10:00 P.M.,
LONDON TIME), ON [_____________ , 2000], UNLESS EXTENDED (THE "EXPIRATION
DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO 5:00 P.M., NEW YORK CITY TIME (10:00
P.M., LONDON TIME), ON THE EXPIRATION DATE.
- --------------------------------------------------------------------------------
If you desire to accept the Exchange Offer (as defined below), this Letter
of Transmittal should be completed, signed, and submitted to:
WILMINGTON TRUST COMPANY, as Exchange Agent
<TABLE>
<S> <C>
By Registered or Certified Mail By Hand:
or Overnight Courier:
Wilmington Trust Company Wilmington Trust Company
Attn: Kristin Long Attn: Corporate Trust Operations
Corporate Trust Operations c/o Harris Trust Co. of New York as Agent
1100 North Market Street 88 Pine Street, 19/th/ Floor
Rodney Square North Wall Street Plaza
Wilmington, DE 19890-0001 New York, New York 10005
</TABLE>
By Facsimile:
(For Eligible Institutions Only)
Wilmington Trust Company
(302) 651-1079
Confirm by telephone:
(302) 651-1562
Kristin Long
Delivery of this Letter of Transmittal to an address other than as set
forth above or transmission of this Letter of Transmittal via facsimile to a
number other than as set forth above does not constitute a valid delivery.
The instructions contained herein should be read carefully before this
Letter of Transmittal is completed.
Capitalized terms used but not defined herein shall have the same meaning
given them in the Prospectus (as defined below).
-1-
<PAGE>
This Letter of Transmittal is to be completed by holders of Initial Notes
(as defined below) either if Initial Notes are to be forwarded herewith or if
tenders of Initial Notes are to be made by book-entry transfer to an account
maintained by Kredietbank S.A. Luxembourgeoise, the common depositary for the
Initial Notes (the "Common Depositary"), on behalf of the Exchange Agent (as
defined below) at Euroclear or Cedelbank, as applicable, pursuant to the
procedures set forth in "The Exchange Offer--Procedures for Tendering Initial
Notes" in the Prospectus and an "agent's message" (as defined below) is not
delivered. Tenders by book-entry transfer may also be made by delivering an
agent's message in lieu of this Letter of Transmittal.
Holders of Initial Notes whose certificates (the "Certificates") for such
Initial Notes are not immediately available or who cannot deliver their
Certificates and all other required documents to the Exchange Agent on or prior
to the Expiration Date (as defined in the Prospectus) or who cannot complete the
procedures for book-entry transfer on a timely basis, must tender their Initial
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Procedures for Tendering Initial Notes" in the Prospectus. See
Instruction 1 hereto. Delivery of documents to Euroclear, Cedelbank or the
Common Depositary does not constitute delivery to the Exchange Agent.
Ladies and Gentlemen:
The undersigned hereby tenders to PSINet Inc., a New York corporation (the
"Company"), the principal amount of the Company's outstanding Euro 150,000,000
aggregate principal amount 10 1/2% Senior Notes due 2006 (the "Initial Notes")
described in Box 1 below, in exchange for a like euro principal amount of the
Company's new 10 1/2% Senior Notes due 2006 (the "Exchange Notes"), which have
been registered under the Securities Act of 1933, as amended (the "Securities
Act"), upon the terms and subject to the conditions set forth in the Prospectus
dated ________ ___, 2000 (as the same may be amended or supplemented from time
to time, the "Prospectus"), receipt of which is acknowledged, and in this Letter
of Transmittal (which, together with the Prospectus, constitutes the "Exchange
Offer").
Subject to, and effective upon, the acceptance for exchange of all or any
portion of the Initial Notes tendered herewith in accordance with the terms and
conditions of the Exchange Offer (including, if the Exchange Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
undersigned hereby sells, assigns and transfers to or upon the order of the
Company all right, title and interest in and to such Initial Notes as are being
tendered herewith. The undersigned hereby irrevocably constitutes and appoints
Wilmington Trust Company as Exchange Agent (the "Exchange Agent") as its agent
and attorney-in-fact (with full knowledge that the Exchange Agent is also acting
as agent of the Company in connection with the Exchange Offer) with respect to
the tendered Initial Notes, with full power of substitution (such power of
attorney being deemed to be an irrevocable power coupled with an interest),
subject only to the right of withdrawal described in the Prospectus, to (1)
deliver Certificates for Initial Notes to the Company together with all
accompanying evidences of transfer and authenticity to, or upon the order of,
the Company, upon receipt by the Exchange Agent, as the undersigned's agent, of
the Exchange Notes to be issued in exchange for such Initial Notes, (2) present
Certificates for such Initial Notes for transfer, and to transfer the Initial
Notes on the books of the Company, and (3) receive for the account of the
Company all benefits and otherwise exercise all rights of beneficial ownership
of such Initial Notes, all in accordance with the terms and conditions of the
Exchange Offer.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, exchange, sell, assign and transfer the
Initial Notes tendered hereby and that, when the same are accepted for exchange,
the Company will acquire good, marketable and unencumbered title thereto, free
and clear of all liens, restrictions, charges and encumbrances, and that the
Initial Notes tendered hereby are not subject to any adverse claims or proxies.
The undersigned will, upon request, execute and deliver any additional documents
deemed by the Company or the Exchange Agent to be necessary or desirable to
-2-
<PAGE>
complete the exchange, assignment and transfer of the Initial Notes tendered
hereby, and the undersigned will comply with its obligations under the
Registration Rights Agreement dated as of December 2, 1999 (the "Registration
Rights Agreement") by and among the Company and Donaldson, Lufkin & Jenrette
International, Bear Stearns International Limited, Merrill Lynch International
and Morgan Stanley & Co. International Limited. The undersigned has read and
agrees to all of the terms of the Exchange Offer.
The name(s) and address(es) of the registered holder(s) of the Initial
Notes tendered hereby should be printed in Box 1 below, if they are not already
set forth therein, as they appear on the Certificates representing such Initial
Notes. The Certificate number(s) and the aggregate principal amount of Initial
Notes that the undersigned wishes to tender should also be indicated in Box 1
below.
If any tendered Initial Notes are not exchanged pursuant to the Exchange
Offer for any reason, or if Certificates are submitted for more Initial Notes
than are tendered or accepted for exchange, Certificates for such nonexchanged
or nontendered Initial Notes will be returned (or, in the case of Initial Notes
tendered by book-entry transfer, such Initial Notes will be credited to an
account maintained at Euroclear or Cedelbank, as applicable), without expense to
the tendering holder, promptly following the expiration or termination of the
Exchange Offer.
The undersigned understands that tenders of Initial Notes pursuant to any
one of the procedures described under "The Exchange Offer--Procedures for
Tendering Initial Notes" in the Prospectus and in the instructions hereto will,
upon the Company's acceptance for exchange of such tendered Initial Notes,
constitute a binding agreement between the undersigned and the Company upon the
terms and subject to the conditions of the Exchange Offer.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Exchange Offer-Conditions." The undersigned
recognizes that as a result of these conditions (which may be waived by the
Company, in whole or in part, in the reasonable discretion of the Company), as
more particularly set forth in the Prospectus, the Company may not be required
to exchange any of the Initial Notes tendered hereby and, in such event, the
Initial Notes not exchanged will be returned to the undersigned at the address
shown in Box 1.
Unless otherwise indicated herein in the box entitled "Special Exchange
Instructions" below (Box 7), the undersigned hereby directs that the Exchange
Notes be issued in the name(s) of the undersigned or, in the case of a book-
entry transfer of Initial Notes, that such Exchange Notes be credited to the
account indicated below maintained at Euroclear or Cedelbank, as applicable. If
applicable, substitute Certificates representing Initial Notes not exchanged or
not accepted for exchange will be issued to the undersigned or, in the case of a
book-entry transfer of Initial Notes, will be credited to the account indicated
below maintained at Euroclear or Cedelbank, as applicable. Similarly, unless
otherwise indicated herein in the box entitled "Special Delivery Instructions"
below (Box 8), the undersigned hereby directs that the Exchange Notes be
delivered to the undersigned at the address shown below the undersigned's
signature.
THE EXCHANGE OFFER IS NOT BEING MADE TO ANY BROKER-DEALER WHO PURCHASED
INITIAL NOTES DIRECTLY FROM THE COMPANY FOR RESALE PURSUANT TO RULE 144A UNDER
THE SECURITIES ACT OR ANY PERSON THAT IS AN "AFFILIATE" OF THE COMPANY WITHIN
THE MEANING OF RULE 405 UNDER THE SECURITIES ACT. THE UNDERSIGNED UNDERSTANDS
AND AGREES THAT THE COMPANY RESERVES THE RIGHT NOT TO ACCEPT TENDERED INITIAL
NOTES FROM ANY TENDERING HOLDER IF THE COMPANY DETERMINES, IN ITS REASONABLE
DISCRETION, THAT SUCH ACCEPTANCE COULD RESULT IN A VIOLATION OF APPLICABLE
SECURITIES LAWS.
-3-
<PAGE>
By tendering Initial Notes and executing this Letter of Transmittal or
delivering an agent's message in lieu of this Letter of Transmittal, the
undersigned hereby represents and agrees that (i) the undersigned is not an
"affiliate" of the Company (within the meaning of Rule 405 under the Securities
Act), (ii) any Exchange Notes to be received by the undersigned are being
acquired in the ordinary course of its business, (iii) the undersigned has no
arrangement or understanding with any person to participate in a distribution
(within the meaning of the Securities Act) of Exchange Notes to be received in
the Exchange Offer, and (iv) if the undersigned is not a broker-dealer, the
undersigned is not engaged in, and does not intend to engage in, a distribution
(within the meaning of the Securities Act) of such Exchange Notes. By tendering
Initial Notes pursuant to the Exchange Offer and executing this Letter of
Transmittal or delivering Initial Notes by book-entry transfer, a holder of
Initial Notes that is a broker-dealer additionally represents and agrees,
consistent with certain interpretive letters issued by the staff of the Division
of Corporation Finance of the Securities and Exchange Commission to third
parties described under "The Exchange Offer--Registration Rights" in the
Prospectus, that such Initial Notes were acquired by such broker-dealer for its
own account as a result of market-making activities or other trading activities
(such a broker-dealer tendering Initial Notes is herein referred to as a
"Participating Broker-Dealer") and it will deliver the Prospectus (as amended or
supplemented from time to time) meeting the requirements of the Securities Act
in connection with any resale of such Exchange Notes (provided that, by so
acknowledging and by delivering a Prospectus, such Participating Broker-Dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act).
The Company has agreed that, subject to the provisions of the Registration
Rights Agreement, the Prospectus, as it may be amended or supplemented from time
to time, may be used by a Participating Broker-Dealer in connection with resales
of Exchange Notes received in exchange for Initial Notes, where such Initial
Notes were acquired by such Participating Broker-Dealer for its own account as a
result of market-making activities or other trading activities, for a period
ending one year after the Expiration Date or, if earlier, when all such Exchange
Notes have been disposed of by such Participating Broker-Dealer. In that
regard, each Participating Broker-Dealer, by tendering such Initial Notes and
executing this Letter of Transmittal or delivering an agent's message in lieu of
this Letter of Transmittal, agrees to notify the Company prior to using the
Prospectus in connection with the sale or transfer of Exchange Notes and
acknowledges and agrees that, upon receipt of notice from the Company of the
occurrence of any event or the discovery of any fact which makes any statement
contained or incorporated by reference in the Prospectus untrue in any material
respect or which causes the Prospectus to omit to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which they were made, not misleading or of the occurrence of
certain other events specified in the Registration Rights Agreement, such
Participating Broker-Dealer will suspend the sale of Exchange Notes pursuant to
the Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to the Participating Broker-Dealer or the Company has
given notice that the sale of the Exchange Notes may be resumed, as the case may
be.
EACH PARTICIPATING BROKER-DEALER SHOULD CHECK THE BOX HEREIN UNDER THE
CAPTION "PARTICIPATING BROKER-DEALER" (BOX 5 HEREOF) IN ORDER TO RECEIVE
ADDITIONAL COPIES OF THE PROSPECTUS, AND ANY AMENDMENTS AND SUPPLEMENTS THERETO,
FOR USE IN CONNECTION WITH RESALES OF THE EXCHANGE NOTES, AS WELL AS ANY NOTICES
FROM THE COMPANY TO SUSPEND AND RESUME USE OF THE PROSPECTUS. BY TENDERING ITS
INITIAL NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL OR DELIVERING AN AGENT'S
MESSAGE IN LIEU OF THIS LETTER OF TRANSMITTAL, EACH PARTICIPATING BROKER-DEALER
AGREES TO USE ITS REASONABLE BEST EFFORTS TO NOTIFY THE COMPANY OR THE EXCHANGE
AGENT WHEN IT HAS SOLD ALL OF ITS EXCHANGE NOTES. IF NO PARTICIPATING BROKER-
DEALERS CHECK SUCH BOX, OR IF ALL PARTICIPATING BROKER-DEALERS WHO HAVE CHECKED
SUCH BOX
-4-
<PAGE>
SUBSEQUENTLY NOTIFY THE COMPANY OR THE EXCHANGE AGENT THAT ALL THEIR EXCHANGE
NOTES HAVE BEEN SOLD, THE COMPANY WILL NOT BE REQUIRED TO MAINTAIN THE
EFFECTIVENESS OF THE EXCHANGE OFFER REGISTRATION STATEMENT OR TO UPDATE THE
PROSPECTUS AND WILL NOT PROVIDE ANY HOLDERS WITH ANY NOTICES TO SUSPEND OR
RESUME USE OF THE PROSPECTUS.
Each Exchange Note will bear interest from the most recent date on which
interest has been paid or duly provided for on the Initial Note surrendered in
exchange for such Exchange Note or, if no such interest has been paid or duly
provided for on such Initial Note, from December 2, 1999, the date of issuance
of the Initial Notes. Holders of Initial Notes whose Initial Notes are accepted
for exchange will not receive accrued interest on such Initial Notes for any
period from and after the last Interest Payment Date to which interest has been
paid or duly provided for on such Initial Notes prior to the original issue date
of the Exchange Notes or, if no such interest has been paid or duly provided
for, will not receive any accrued interest on such Initial Notes, and will be
deemed to have waived the right to receive any interest on such Initial Notes
accrued from and after such Interest Payment Date or, if no such interest has
been paid or duly provided for, from and after December 2, 1999.
The undersigned understands that the delivery and surrender of the Initial
Notes is not effective, and the risk of loss of the Initial Notes does not pass
to the Exchange Agent, until receipt by the Exchange Agent of this Letter of
Transmittal, or a manually signed facsimile hereof, properly completed and duly
executed, with any required signature guarantees, together with all accompanying
evidences of authority and any other required documents in form satisfactory to
the Company. All questions as to form of all documents and the validity
(including time of receipt) and acceptance of tenders and withdrawals of Initial
Notes will be determined by the Company, in its sole discretion, which
determination shall be final and binding.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs,
executors, administrators, personal representatives, trustees in bankruptcy,
legal representatives, successors and assigns of the undersigned. Except
pursuant to the withdrawal rights as set forth in the Prospectus, this tender is
irrevocable.
Please read this entire Letter of Transmittal carefully before completing
the boxes below and follow the instructions included herewith.
THE EXCHANGE OFFER IS NOT BEING MADE TO (NOR WILL TENDERS OF INITIAL NOTES
BE ACCEPTED FROM OR ON BEHALF OF) HOLDERS IN ANY JURISDICTION IN WHICH THE
MAKING OR ACCEPTANCE OF THE EXCHANGE OFFER WOULD NOT BE IN COMPLIANCE WITH THE
LAWS OF SUCH JURISDICTION.
Your bank or broker can assist you in completing this form. The
instructions included with this Letter of Transmittal must be followed.
Questions and requests for assistance or for additional copies of the
Prospectus, this Letter of Transmittal and the Notice of Guaranteed Delivery may
be directed to the Exchange Agent, whose address and telephone number appear on
the front cover of this Letter of Transmittal. See Instruction 8 below.
-5-
<PAGE>
All Tendering Holders Complete This Box 1:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF INITIAL NOTES TENDERED
(See Instructions 3 and 4 Below)
- ---------------------------------------------------------------------------------------------------------------------
If Blank, Please Print Certificate Number(s) of Aggregate Principal Amount Aggregate Principal
Name(s) And Address(es) Initial Notes Represented By Certificates* Amount of Initial Notes
Of Registered Holder(s), Being Tendered**
Exactly As Name(s)
Appear(s) On Initial Note
Certificate(s)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Total
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders (see below).
** The minimum permitted tender is Euro 1,000 in principal amount. All
tenders must be in integral multiples of Euro 1,000 in principal amount. The
aggregate principal amount of all Initial Notes Certificates identified in this
Box 1, or delivered to the Exchange Agent herewith, shall be deemed tendered
unless a lesser number is specified in this column. See Instruction 4.
- --------------------------------------------------------------------------------
BOX 2
BOOK-ENTRY TRANSFER
(See Instruction 1 Below)
[_] CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER TO THE ACCOUNT MAINTAINED BY THE COMMON DEPOSITARY ON BEHALF OF THE
EXCHANGE AGENT AT EUROCLEAR OR CEDEL, AS APPLICABLE, AND COMPLETE THE FOLLOWING:
Name of Tendering Institution___________________________________________________
Euroclear or Cedelbank Account Number___________________________________________
Transaction Code Number_________________________________________________________
- --------------------------------------------------------------------------------
Holders of Initial Notes may tender Initial Notes by book-entry transfer by
crediting the Initial Notes to the Common Depositary's account (on behalf of the
Exchange Agent) at Euroclear or Cedelbank,
-6-
<PAGE>
as applicable, in accordance with Euroclear or Cedelbank's automated tender
offer program and by complying with applicable automated tender offer program
procedures with respect to the Exchange Offer. Euroclear or Cedelbank
participants that are accepting the Exchange Offer should transmit their
acceptance to Euroclear or Cedelbank, as applicable, which will edit and verify
the acceptance and execute a book-entry delivery to the Common Depositary's
account (on behalf of the Exchange Agent) at Euroclear or Cedelbank, as
applicable. Euroclear or Cedelbank, as applicable, will then send a computer-
generated message (an "agent's message") to the Common Depositary (which will
then forward such message to the Exchange Agent for its acceptance) in which the
holder of the Initial Notes acknowledges and agrees to be bound by the terms of,
and makes the representations and warranties contained in, this Letter of
Transmittal, and the Euroclear or Cedelbank participant confirms on behalf of
itself and the beneficial owners of such Initial Notes all provisions of this
Letter of Transmittal (including any representations and warranties) applicable
to it and such beneficial owner as fully as if it had completed the information
required herein and executed and transmitted this Letter of Transmittal to the
Exchange Agent. Delivery of the agent's message by Euroclear or Cedelbank, as
applicable, to the Common Depositary (for delivery to the Exchange Agent) will
satisfy the terms of the Exchange Offer as to execution and delivery of a Letter
of Transmittal by the participant identified in the agent's message. Euroclear
or Cedelbank participants may also accept the Exchange Offer by submitting a
Notice of Guaranteed Delivery through Euroclear's or Cedelbank's automated
tender offer program.
-7-
<PAGE>
- --------------------------------------------------------------------------------
BOX 3
NOTICE OF GUARANTEED DELIVERY
(See Instruction 1 Below)
[_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED INITIAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT (OR DELIVERED THROUGH THE AUTOMATED TENDER OFFER
PROGRAM) TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s)____________________________________________________
Window Ticket Number (if any)___________________________________________________
Date of Execution of Notice of Guaranteed Delivery______________________________
Name of Institution which Guaranteed Delivery___________________________________
If Guaranteed Delivery is to be made By Book-Entry Transfer:
Name of Tendering Institution___________________________________________________
Euroclear or Cedelbank Account Number___________________________________________
Transaction Code Number_________________________________________________________
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BOX 4
RETURN OF NON-EXCHANGED INITIAL NOTES
TENDERED BY BOOK-ENTRY TRANSFER
(See Instructions 4 and 6 Below)
[_] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED INITIAL
NOTES ARE TO BE RETURNED BY CREDITING THE EUROCLEAR OR CEDELBANK ACCOUNT NUMBER
SET FORTH ABOVE.
- --------------------------------------------------------------------------------
-8-
<PAGE>
- --------------------------------------------------------------------------------
BOX 5
PARTICIPATING BROKER-DEALER
[_] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE INITIAL NOTES FOR
ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE TEN ADDITIONAL COPIES OF THE
PROSPECTUS AND TEN COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO, AS WELL AS
ANY NOTICES FROM THE COMPANY TO SUSPEND AND RESUME USE OF THE PROSPECTUS. BY
TENDERING ITS INITIAL NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL OR
DELIVERING AN AGENT'S MESSAGE IN LIEU OF THIS LETTER OF TRANSMITTAL, EACH
PARTICIPATING BROKER-DEALER AGREES TO USE ITS REASONABLE BEST EFFORTS TO NOTIFY
THE COMPANY OR THE EXCHANGE AGENT WHEN IT HAS SOLD ALL OF ITS EXCHANGE NOTES.
(IF NO PARTICIPATING BROKER-DEALERS CHECK THIS BOX, OR IF ALL PARTICIPATING
BROKER-DEALERS WHO HAVE CHECKED THIS BOX SUBSEQUENTLY NOTIFY THE COMPANY OR THE
EXCHANGE AGENT THAT ALL THEIR EXCHANGE NOTES HAVE BEEN SOLD, THE COMPANY WILL
NOT BE REQUIRED TO MAINTAIN THE EFFECTIVENESS OF THE EXCHANGE OFFER REGISTRATION
STATEMENT OR TO UPDATE THE PROSPECTUS AND WILL NOT PROVIDE ANY NOTICES TO ANY
HOLDERS TO SUSPEND OR RESUME USE OF THE PROSPECTUS).
PROVIDE THE NAME OF THE INDIVIDUAL WHO SHOULD RECEIVE, ON BEHALF OF THE HOLDER,
ADDITIONAL COPIES OF THE PROSPECTUS, AND AMENDMENTS AND SUPPLEMENTS THERETO, AND
ANY NOTICES TO SUSPEND AND RESUME USE OF THE PROSPECTUS.
Name:________________________________________________________________
Address:_____________________________________________________________
Telephone No.:_______________________________________________________
Facsimile No.:_______________________________________________________
________________________________________________________________________________
-9-
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
BOX 6
TENDERING HOLDER SIGNATURE
(See Instructions 1 and 5)
In Addition, Complete Substitute Form W-9
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C>
X ________________________________________________ Signature Guarantee
(If required by Instruction 5)
X ________________________________________________
(Signature of registered holder(s) or Authorized Authorized Signature
Signatory(ies))
Note: The above lines must be signed by the registered X __________________________________________________________
holder(s) of Initial Notes as their name(s) appear(s)
on the Initial Notes or by person(s) authorized to Name: ______________________________________________________
become registered holder(s) (evidence of which (please print)
authorization must be transmitted with this Letter of
Transmittal). If signature is by a trustee, executor, Title: _____________________________________________________
administrator, guardian, attorney-in-fact, officer, or
other person acting in a fiduciary or representative Name of Firm: ______________________________________________
capacity, such person must set forth his or her full (Must be an Eligible Institution as defined
title below. See Instruction 5. in Instruction 1)
Name(s): _________________________________________
Address: ___________________________________________________
_________________________________________
___________________________________________________
_________________________________________
___________________________________________________
Capacity: _________________________________________ (include Zip Code)
_________________________________________ Area Code and Telephone Number:
Street Address: ____________________________________ ___________________________________________________
_________________________________________ Dated: ___________________________________________________
_________________________________________
(include Zip Code)
Area Code and Telephone Number:
___________________________________
Tax Identification or Social Security Number:
___________________________________
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
-10-
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------- --------------------------------------------------------
BOX 7 BOX 8
SPECIAL EXCHANGE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 5 and 6 Below) (See Instructions 1, 5 and 6 Below)
<S> <C>
To be completed ONLY if Certificates for the Initial To be completed ONLY if Certificates for the Initial
Notes not exchanged and/or Certificates for the Notes not exchanged and/or Certificates for the
Exchange Notes are to be issued in the name of Exchange Notes are to be sent to someone other than the
someone other than the registered holder of the registered holder of the Initial Notes whose name(s)
Initial Notes whose name(s) appear(s) above. appear(s) above, or to such registered holder(s) at an
address other than that shown above.
Name: _________________________________________________ Name: __________________________________________________
(Please Print) (Please Print)
Address: ______________________________________________ Address: ________________________________________________
______________________________________________ ________________________________________________________
(Include Zip Code) (Include Zip Code)
_______________________________________________________ ________________________________________________________
(Tax Identification or Social Security Number) (Tax Identification or Social Security Number)
- ------------------------------------------------------- --------------------------------------------------------
</TABLE>
-11-
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
BOX 9
- ----------------------------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: WILMINGTON TRUST COMPANY
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
SUBSTITUTE Name (if joint names, list first and circle the name of the person or entity whose number you
enter in Part 1 below. See instructions if your name has changed)
______________________________________________________________________________________________
Form W-9 Address
______________________________________________________________________________________________
City, State and Zip Code
______________________________________________________________________________________________
Department of the Treasury List account number(s) here (optional)
Internal Revenue Service
----------------------------------------------------------------------------------------------
Part 1 - PLEASE PROVIDE YOUR TAXPAYER IDENTIFICATION NUMBER Social Security Number or
("TIN") IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING TIN
BELOW.
----------------------------------------------------------------------------------------------
Part 2 - Check the box if you are NOT subject to backup withholding under the provisions of
section 3406(a)(1)(C) of the Internal Revenue Code because (1) you have not been notified that
you are subject to backup withholding as a result of failure to report all interest or dividends
or (2) the Internal Revenue Service has notified you that you are no longer subject to backup
withholding.
Not subject to withholding [_]
- -----------------------------------------------------------------------------------------------------------------------------------
Payor's Request for TIN CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT Part 3 --
THE INFORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT, AND
COMPLETE. Awaiting TIN[_]
Signature: ___________________________ Date: ___________
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE
REVIEW THE ENCLOSED "GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W - 9" FOR ADDITIONAL DETAILS.
-12-
<PAGE>
- -------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE
IF YOU CHECKED THE BOX IN PART 3 OF THE SUBSTITUTE FORM W-9
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all payments made to me on account of the Exchange Notes shall be retained
until I provide a taxpayer identification number to the Exchange Agent and that,
if I do not provide my taxpayer identification number within 60 days, such
retained amounts shall be remitted to the Internal Revenue Service as backup
withholding and 31% of all reportable payments made to me thereafter will be
withheld and remitted to the Internal Revenue Service until I provide a taxpayer
identification number.
Signature:____________________________________________________________________
Date:_________________________________________________________________________
- --------------------------------------------------------------------------------
-13-
<PAGE>
INSTRUCTIONS TO LETTER OF TRANSMITTAL
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
GENERAL
Please do not send Certificates for Initial Notes directly to the Company.
Your Initial Note Certificates, together with your signed and completed Letter
of Transmittal and any required supporting documents, should be mailed in the
enclosed addressed envelope, or otherwise delivered, to the Exchange Agent, at
either of the addresses indicated on the first page hereof. The method of
delivery of Certificates, this Letter of Transmittal and all other required
documents is at the option and sole risk of the tendering holder and the
delivery will be deemed made only when actually received by the Exchange Agent.
If delivery is by mail, registered mail with return receipt requested, properly
insured, or overnight delivery service is recommended. In all cases, sufficient
time should be allowed to ensure timely delivery.
1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES
This Letter of Transmittal is to be completed by holders of Initial Notes
(which term, for purposes of the Exchange Offer, includes any participant in
Euroclear or Cedelbank whose name appears on a security position listing as the
holder of such Initial Notes) if either (a) Certificates for such Initial Notes
are to be forwarded herewith or (b) tenders are to be made pursuant to the
procedures for tender by book-entry transfer set forth in "The Exchange Offer--
Procedures for Tendering Initial Notes" in the Prospectus, and an agent's
message is not delivered. Tenders by book-entry transfer may also be made by
delivering an agent's message in lieu of this Letter of Transmittal. The term
"agent's message" means a message, transmitted by Euroclear or Cedelbank, as
applicable, to and received by the Common Depositary (which will then forward
such message to the Exchange Agent) and forming a part of a book-entry
confirmation, which states that Euroclear or Cedelbank, as applicable, has
received an express acknowledgement from the tendering Participant, which
acknowledgement states that such Participant has received and agrees to be bound
by, and makes the representations and warranties contained in, this Letter of
Transmittal and that the Company may enforce this Letter of Transmittal against
such Participant. Certificates representing the tendered Initial Notes, or
timely confirmation of a book-entry transfer of such Initial Notes into the
Common Depositary's account (on behalf of the Exchange Agent) at Euroclear or
Cedelbank, as applicable, as well as a properly completed and duly executed copy
of this Letter of Transmittal, or a facsimile hereof (or, in the case of a book-
entry transfer, an agent's message), a substitute Form W-9, and any other
documents required by this Letter of Transmittal, must be received by the
Exchange Agent at its address set forth herein on or prior to 5:00 p.m., New
York City time (10:00 p.m., London time), on the Expiration Date, or the
tendering holder must comply with the guaranteed delivery procedures set forth
below. Initial Notes may be tendered in whole or in part in the principal
amount of Euro 1,000 and integral multiples of Euro 1,000.
Holders who wish to tender their Initial Notes and (1) whose Initial Notes
are not immediately available or (2) who cannot deliver their Initial Notes,
this Letter of Transmittal and all other required documents to the Exchange
Agent on or prior to the Expiration Date or (3) who cannot complete the
procedures for delivery by book-entry transfer on a timely basis, may tender
their Initial Notes by properly completing and duly executing a Notice of
Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in
"The Exchange Offer--Procedures for Tendering Initial Notes" in the Prospectus
and by completing Box 3 hereof. Pursuant to such procedures: (1) such tender
must be made by or through an Eligible Institution (as defined below); (2) a
properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form made available by the Company, must be received by the
Exchange
-14-
<PAGE>
Agent on or prior to the Expiration Date; and (3) the Certificates (or a book-
entry confirmation (as defined in the Prospectus)) representing all tendered
Initial Notes of such holder, in proper form for transfer, together with a
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees (or, in the case of a book-
entry transfer, an agent's message) and any other documents required by this
Letter of Transmittal, must be received by the Exchange Agent within three
Nasdaq Stock Market National Market System trading days after the date of
execution of such Notice of Guaranteed Delivery, all as provided in "The
Exchange Offer--Procedures for Tendering Initial Notes" in the Prospectus.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by facsimile or mail to the Exchange Agent, and, unless waived by the Company,
must include a guarantee by an Eligible Institution in the form set forth in
such Notice. For Initial Notes to be properly tendered pursuant to the
guaranteed delivery procedure, the Exchange Agent must receive a Notice of
Guaranteed Delivery on or prior to the Expiration Date. As used herein,
"Eligible Institution" means a firm or other entity identified in Rule 17Ad-15
under the Exchange Act as "an eligible guarantor institution," including (as
such terms are defined therein) (1) a bank; (2) a broker, dealer, municipal
securities broker or dealer or government securities broker or dealer; (3) a
credit union; (4) a national securities exchange, registered securities
association or clearing agency; or (5) a savings association that is a
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Signature Program or the Stock Exchange Medallion
Program.
The Company will not accept any alternative, conditional or contingent
tenders. Each tendering holder, by execution of a Letter of Transmittal (or
facsimile thereof) or delivering an agent's message in lieu of this Letter of
Transmittal, waives any right to receive any notice of the acceptance of such
tender.
2. GUARANTEE OF SIGNATURES
No signature guarantee on this Letter of Transmittal is required if:
(i) this Letter of Transmittal is signed by the registered holder (which
term, for purposes of this document, shall include any participant in Euroclear
or Cedelbank whose name appears on a security position listing as the owner of
the Initial Notes) of Initial Notes tendered herewith, unless such holder(s) has
(have) completed either the box entitled "Special Exchange Instructions" (Box 7)
or the box entitled "Special Delivery Instructions" (Box 8) above; or
(ii) such Initial Notes are tendered for the account of a firm that is an
Eligible Institution.
In all other cases, unless waived by the Company, an Eligible Institution
must guarantee the signature(s) in Box 6 on this Letter of Transmittal. See
Instruction 5.
3. INADEQUATE SPACE
If the space provided in the box captioned "Description of Initial Notes"
is inadequate, the Certificate number(s) and/or the principal amount of Initial
Notes and any other required information should be listed on a separate, signed
schedule and attached to this Letter of Transmittal.
4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS
Tenders of Initial Notes will be accepted only in the principal amount of
Euro 1,000 and integral multiples thereof. If less than all the Initial Notes
evidenced by any Certificate submitted are to be tendered, fill in the principal
amount of Initial Notes which are to be tendered in Box 1 under the column
"Aggregate
-15-
<PAGE>
Principal Amount of Initial Notes Being Tendered." In such case, new
Certificate(s) for the remainder of the Initial Notes that were evidenced by the
Initial Notes Certificate(s) will be sent to the holder of the Initial Notes,
promptly after the Expiration Date. All Initial Notes represented by
Certificates delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise indicated.
Except as otherwise provided herein, tenders of Initial Notes may be
withdrawn at any time on or prior to the Expiration Date. In order for a
withdrawal to be effective, a written or facsimile transmission of such notice
of withdrawal must be timely received by the Exchange Agent at its address set
forth above on or prior to the Expiration Date. Any such notice of withdrawal
must (1) specify the name of the person having deposited the Initial Notes to be
withdrawn (the "Depositor"), (2) identify the Initial Notes to be withdrawn
(including the Certificate number(s) and principal amount of such Initial Notes,
or, in the case of Initial Notes transferred by book-entry transfer, the name
and number of the account at Euroclear or Cedelbank, as applicable, to be
credited), (3) be signed by the Initial Holder in the same manner as the
original signature on the Letter of Transmittal by which such Initial Notes were
tendered (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee register the transfer of
such Initial Notes into the name of the person withdrawing the tender and (4)
specify the name in which any such Initial Notes are to be registered, if
different from that of the Depositor. All questions as to the validity, form
and eligibility (including time or receipt) of such notices will be determined
by the Company, whose determination shall be final and binding on all parties.
If Initial Notes have been tendered pursuant to the procedures for book-entry
transfer set forth in the Prospectus under "The Exchange Offer--Procedures for
Tendering Initial Notes," the notice of withdrawal must specify the name and
number of the account maintained at Euroclear or Cedelbank, as applicable, to be
credited with the withdrawal of Initial Notes, in which case a notice of
withdrawal will be effective if delivered to the Exchange Agent by written or
facsimile transmission. Initial Notes properly withdrawn will not be deemed
validly tendered for purposes of the Exchange Offer. Withdrawals of tenders of
Initial Notes may not be rescinded, but such Initial Notes may be retendered at
any subsequent time on or prior to the Expiration Date by following any of the
procedures described in the Prospectus under "The Exchange Offer--Procedures for
Tendering Initial Notes."
All questions as to the validity, form and eligibility (including time of
receipt) of such withdrawal notices will be determined by the Company, in its
sole discretion, whose determination shall be final and binding on all parties.
Neither the Company, any affiliates or assigns of the Company, the Exchange
Agent, the Common Depositary nor any other person shall be under any duty to
give any notification of any irregularities in any notice of withdrawal or incur
any liability for failure to give such notification. Any Initial Notes which
have been tendered but which are withdrawn will be returned to the holder
thereof without cost to such holder promptly after withdrawal.
5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS
If this Letter of Transmittal is signed by the registered holder(s) of the
Initial Notes tendered hereby, the signature(s) must correspond with the name(s)
as written on the face of the Certificate(s) without alteration, addition or any
change whatsoever.
If any of the Initial Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any tendered Initial Notes are registered in different names on several
Certificates, it will be necessary to complete, sign and submit as many separate
Letters of Transmittal (or facsimiles thereof) as there are different
registrations of Certificates.
-16-
<PAGE>
If this Letter of Transmittal or any Certificates or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and, unless waived by the Company, must
submit proper evidence satisfactory to the Company, in its sole discretion, of
such persons' authority to so act.
When this Letter of Transmittal is signed by the registered owner(s) of the
Initial Notes listed and transmitted hereby, no endorsement(s) of Certificate(s)
or separate bond power(s) are required unless Exchange Notes are to be issued in
the name of a person other than the registered holder(s). However, if Exchange
Notes are to be issued in the name of a person other than the registered
holder(s), signature(s) on such Certificate(s) or bond power(s) must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered owner(s) of the Initial Notes listed, the Certificates must be
endorsed or accompanied by appropriate bond powers, signed exactly as the name
or names of the registered owner(s) appear(s) on the Certificates, and also must
be accompanied by such opinions of counsel, certifications and other information
as the Company or the Trustee for the Initial Notes may require in accordance
with the restrictions on transfer applicable to the Initial Notes. Signatures on
such Certificates or bond powers must be guaranteed by an Eligible Institution.
6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS
If Exchange Notes are to be issued in the name of a person other than the
signer of this Letter of Transmittal, or if Exchange Notes are to be sent to
someone other than the signer of this Letter of Transmittal or to an address
other than that shown above, the appropriate boxes on this Letter of Transmittal
should be completed (Boxes 7 and 8). Certificates for Initial Notes not
exchanged will be returned by mail or, if tendered by book-entry transfer, by
crediting the account indicated above maintained at Euroclear or Cedelbank, as
applicable. See Instruction 4.
7. DETERMINATION OF VALIDITY
The Company will determine, in its sole discretion, all questions as to the
form of documents, validity, eligibility (including time of receipt) and
acceptance for exchange of any tender of Initial Notes, which determination
shall be final and binding on all parties. The Company reserves the absolute
right to reject any and all tenders determined by it not to be in proper form or
the acceptance of which, or exchange for, may, in the view of counsel to the
Company, be unlawful. The Company also reserves the absolute right, subject to
applicable law, to waive any of the conditions of the Exchange Offer set forth
in the Prospectus under "The Exchange Offer--Conditions" or any conditions or
irregularity in any tender of Initial Notes of any particular holder whether or
not similar conditions or irregularities are waived in the case of other
holders.
The Company's interpretation of the terms and conditions of the Exchange
Offer (including this Letter of Transmittal and the instructions hereto) will be
final and binding. No tender of Initial Notes will be deemed to have been
validly made until all irregularities with respect to such tender have been
cured or waived. Neither the Company, any affiliates or assigns of the Company,
the Exchange Agent, the Common Depositary nor any other person shall be under
any duty to give notification of any irregularities in tenders or incur any
liability for failure to give such notification.
-17-
<PAGE>
8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES
Questions and requests for assistance may be directed to the Exchange Agent
at its address and telephone number set forth on the front of this Letter of
Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed
Delivery and the Letter of Transmittal may be obtained from the Exchange Agent.
9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9
For U.S. Federal income tax purposes, holders are required, unless an
exemption applies, to provide the Exchange Agent with such holder's correct
taxpayer identification number ("TIN") on Substitute Form W-9 (Box 9 of this
Letter of Transmittal), and to certify, under penalty of perjury, that such
number is correct and that he or she is not subject to backup withholding. If
the Exchange Agent is not provided with the correct TIN, the Internal Revenue
Service (the "IRS") may subject the holder or other payee to a $50 penalty. In
addition, payments to such holders or other payees with respect to Initial Notes
exchanged pursuant to the Exchange Offer, or with respect to Exchange Notes
following the Exchange Offer, may be subject to 31% backup withholding.
Part 3 of the Substitute Form W-9 (Box 9) may be checked if the tendering
holder has not been issued a TIN and has applied for a TIN or intends to apply
for a TIN in the near future. If Part 3 is checked, the holder or other payee
must also complete the Certificate of Awaiting Taxpayer Identification Number
following Substitute Form W-9 in order to avoid backup withholding.
Notwithstanding that Part 3 is checked and the Certificate of Awaiting Taxpayer
Identification Number is completed, the Exchange Agent will withhold 31% of all
payments made prior to the time a properly certified TIN is provided to the
Exchange Agent.
The holder is required to give the Exchange Agent the TIN (i.e., social
security number or employer identification number) of the registered owner of
the Initial Notes or of the last transferee appearing on the transfers attached
to, or endorsed on, the Initial Notes. If the Initial Notes are registered in
more than one name or are not in the name of the actual owner, consult the
enclosed "Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9" for additional guidance on which number to report.
If the tendering holder is a nonresident alien or foreign entity not
subject to backup withholding, such holder must give the Company a completed
Form W-8, Certificate of Foreign Status. A copy of the Form W-8 may be obtained
from the Exchange Agent. Please consult the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
additional guidance on which holders are exempt from backup withholding.
Backup withholding is not an additional U.S. Federal income tax. Rather,
the U.S. Federal income tax liability of a person subject to backup withholding
will be reduced by the amount of tax withheld. If withholding results in an
overpayment of taxes, a refund may be obtained.
10. LOST, DESTROYED OR STOLEN CERTIFICATES
If any Certificate(s) representing Initial Notes have been lost, destroyed
or stolen, the holder should promptly notify the Exchange Agent. The holder will
then be instructed as to the steps that must be taken in order to replace the
Certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, destroyed or stolen
Certificate(s) have been completed.
-18-
<PAGE>
11. SECURITY TRANSFER TAXES
Holders who tender their Initial Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith. If, however, Exchange Notes
are to be delivered to, or are to be issued in the name of, any person other
than the registered holder of the Initial Notes tendered, or if a transfer tax
is imposed for any reason other than the exchange of Initial Notes in connection
with the Exchange Offer, then the amount of any such tax (whether imposed on the
registered holder or any other persons) is payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such taxes will be
billed directly to such tendering holder.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER
REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE
EXPIRATION DATE.
-19-
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
OF OUTSTANDING EURO-DENOMINATED
10 1/2% SENIOR NOTES DUE 2006
OF
PSINET INC.
The undersigned hereby acknowledges receipt of the Prospectus dated
________ ___, 2000 (the "Prospectus") of PSINet Inc., a New York corporation
(the "Company"), and the accompanying Letter of Transmittal (the "Letter of
Transmittal"), that together constitute the Company's offer (the "Exchange
Offer") to exchange Euro 1,000 in principal amount of its Euro-denominated 10
1/2 % Senior Notes due 2006, which have been registered under the Securities Act
(the "Exchange Notes"), for each Euro 1,000 in principal amount of its
outstanding unregistered Euro-denominated 10 1/2% Senior Notes due 2006 (the
"Initial Notes"). Capitalized terms used but not defined herein have the
meanings ascribed to them in the Prospectus.
This will instruct you, the registered holder, as to the action to be taken
by you relating to the Exchange Offer with respect to the Initial Notes held by
you for the account of the undersigned.
The aggregate principal amount of the Initial Notes held by you for the
account of the undersigned is (fill in principal amount):
Euro ____________________________.
With respect to the Exchange Offer, the undersigned hereby instructs you
(check appropriate box):
[_] To TENDER the following Initial Notes held by you for the account of
the undersigned (insert principal amount of Initial Notes to be
tendered*, if any):
Euro ____________________________.
* The minimum permitted tender is Euro 1,000 in principal amount of
Initial Notes. All other tenders must be in integral multiples
of Euro 1,000 of principal amount.
[_] NOT to TENDER any Initial Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Initial Notes held by you
for the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
Beneficial Owner (as defined in the Letter of Transmittal), including but not
limited to representations to the effect that (i) the undersigned's principal
residence is in the state of (fill in state)__________________________________
or the country of (fill in country)___________________________________ as
applicable, (ii) the undersigned is acquiring the Exchange Notes in the ordinary
course of business of the undersigned, (iii) the undersigned is not
participating, does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution (within the
meaning of the Securities Act) of the Exchange Notes, (iv) except as otherwise
disclosed in writing herewith, the undersigned acknowledges that any person
participating in the Exchange Offer with the intention or for the purpose of
distributing the Exchange Notes must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale of the Exchange Notes acquired by such person and cannot rely on the
position of the Staff of the Securities and Exchange Commission set forth in the
no-action letters that are discussed in the section of the Prospectus entitled
"The Exchange Offer--Resale of the Exchange Notes"; (b) to make such agreements,
representations and warranties on behalf of the undersigned, as set forth in the
Letter of Transmittal; and (c) to take such other action as may be necessary
under the Prospectus or the Letter of Transmittal to effect the valid tender of
such Initial Notes.
SIGN HERE
Name of Beneficial Owner(s):___________________________________________________
Signature(s):__________________________________________________________________
Name(s) (please print):________________________________________________________
Address:_______________________________________________________________________
_______________________________________________________________________________
Telephone Number:______________________________________________________________
Taxpayer Identification or Social Security Number:_____________________________
Date:__________________________________________________________________________
-20-
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
A. TIN--The Taxpayer Identification Number for most individuals is their social
security number. Refer to the following chart to determine the appropriate
number:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
FOR THIS TYPE OF ACCOUNT: GIVE THE SOCIAL SECURITY OR EMPLOYER
IDENTIFICATION NUMBER OF:
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
1. Individual The individual
2. Two or more individuals The actual owner of the account or, if combined
(joint account) funds, the first individual on the account (1)
3. Custodian account of a minor (Uniform Gift to Minors The minor(2)
Act)
4. a. Revocable savings trust (grantor is also trustee) The grantor-trustee(1)
b. So-called trust account that is not a legal or
valid trust under State law The actual owner(1)
5. Sole proprietorship
6. A valid trust, estate or pension trust The owner(3)
7. Corporate Legal entity(4)
8. Association, club, religious, charitable, The corporation
educational or other tax exempt organization The organization
9. Partnership
10. A broker or registered nominee The partnership
11. Account with the Department of Agriculture The broker or nominee
The public entity
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's name and social security
number.
(3) Show the individual's name. You may also enter your business name or "doing
business as" name. You may use either your Social Security number or your
employer identification number.
(4) List first and circle the name of the legal trust, estate or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
B. EXEMPT PAYEES--The following lists exempt payees. If you are exempt, you must
nonetheless complete the form and provide your TIN in order to establish that
you are exempt. Check the box in Part 3 of the form, sign and date the form.
For this purpose, Exempt Payees include: (1) a corporation; (2) an
organization exempt from tax under section 501(a), or an individual retirement
plan (IRA) or a custodial account under section 403(b)(7); (3) the United States
or any of its agencies or instrumentalities; (4) a state, the District of
Columbia, a possession of the United States, or any of their political
subdivisions or instrumentalities; (5) a foreign government or any of its
political subdivisions, agencies or instrumentalities; (6) an international
organization or any of its agencies or instrumentalities; (7) a foreign central
bank of issue; (8) a dealer in securities or commodities required to register in
the U.S. or a possession of the U.S.; (9) a real estate investment trust; (10)
an entity or person registered at all times during the tax year under the
Investment
-21-
<PAGE>
Company Act of 1940; (11) a common trust fund operated by a bank under section
584(a); and (12) a financial institution.
C. OBTAINING A NUMBER
If you do not have a taxpayer identification number or you do not know your
number, obtain Form SS-5, application for a Social Security Number, or Form SS-
4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
D. PRIVACY ACT NOTICE
Section 6109 requires most recipients of dividend, interest or other
payments to give taxpayer identification numbers to payers who must report the
payments to the IRS. The IRS uses the numbers for identification purposes.
Payers must be given the numbers whether or not payees are required to file
tax returns. Payers must generally withhold 31% of taxable interest, dividend
and certain other payments to a payee who does not furnish a taxpayer
identification number. Certain penalties may also apply.
E. PENALTIES
(1) Penalty for Failure to Furnish Taxpayer Identification Number. If you
fail to furnish your taxpayer identification number to a payer, you are subject
to a penalty of $50 for each such failure unless your failure is due to
reasonable cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments. If you fail
to include any portion of an includable payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an under-
payment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) Civil Penalty for False Information with Respect to Withholding. If
you make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information. Falsifying certifications
or affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE.
-22-
<PAGE>
Exhibit 99.3
Notice of Guaranteed Delivery
of Dollar-Denominated
10 1/2% Senior Notes Due 2006
of
PSINet Inc.
This form, or one substantially equivalent hereto, must be used by any
holder of outstanding Dollar-denominated 10 1/2% Senior Notes due 2006 (the
"Initial Notes") of PSINet Inc., a New York corporation (the "Company"), who
wishes to tender Initial Notes pursuant to the Company's Exchange Offer, as
defined in the prospectus dated ___________ ___, 2000 (the "Prospectus"), and
(1) whose Initial Notes are not immediately available or (2) who cannot deliver
such Initial Notes or any other documents required by the applicable Letter of
Transmittal on or before the Expiration Date (as defined in the Prospectus) or
(3) who cannot comply with the book-entry transfer procedure on a timely basis.
This form may be delivered by facsimile transmission, mail or hand delivery to
the Exchange Agent. See "The Exchange Offer--Guaranteed Delivery Procedures" in
the Prospectus.
PSINet Inc.
Notice of Guaranteed Delivery
WILMINGTON TRUST COMPANY, as Exchange Agent
<TABLE>
<S> <C> <C>
By Registered or Certified Mail By Hand:
or Overnight Courier:
Wilmington Trust Company Wilmington Trust Company
Attn: Kristin Long Attn: Corporate Trust Operations
Corporate Trust Operations c/o c/o Harris Trust Co. of New York as Agent
1100 North Market Street 88 Pine Street, 19/th/ Floor
Rodney Square North Wall Street Plaza
Wilmington, DE 19890-0001 New York, New York 10005
By Facsimile:
(For Eligible Institutions Only)
Wilmington Trust Company
(302) 651-1079
Confirm by telephone:
(302) 651-1562
Kristin Long
</TABLE>
Delivery of this notice of guaranteed delivery to an address other than as
set forth above or transmission via a facsimile number other than as set forth
above will not constitute a valid delivery.
Please read the accompanying instructions carefully.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Initial Notes specified below pursuant to the guaranteed delivery procedures set
forth under the caption "The Exchange Offer--Guaranteed Delivery Procedures" in
the Prospectus. By so tendering, the undersigned does hereby make, at and as of
the date hereof, the representations and warranties of a tendering holder of
Initial Notes set forth in the applicable Letter of Transmittal. The
undersigned hereby tenders the Initial Notes listed below:
CERTIFICATE NUMBERS PRINCIPAL AMOUNT TENDERED
(IF AVAILABLE)
____________________________ _________________________
____________________________ _________________________
____________________________ _________________________
All authority herein conferred or agreed to be conferred shall survive the
death, incapacity, or dissolution of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
If Initial Notes will be tendered by book-entry transfer:
Name of Tendering Institution:
________________________________ _____________________________
The Depository Trust Company _____________________________
Account No.: Signature(s)
________________________________ _____________________________
_____________________________
Name(s) (please print)
_____________________________
Street Address
_____________________________
City, State Zip Code
Date: _____________________ _____________________________
Area Code & Telephone No.
-2-
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in a Recognized Signature Guarantee
Medallion Program, guarantees deposit with the Exchange Agent of the applicable
Letter of Transmittal (or facsimile thereof), together with the Initial Notes
tendered hereby in proper form for transfer, or confirmation of the book-entry
transfer of such Initial Notes into the Exchange Agent's account at the
Depository Trust Company, pursuant to the procedure for book-entry transfer set
forth in the Prospectus, and any other required documents, all by 5:00 p.m., New
York City time (10:00 p.m., London time), on the third Nasdaq Stock Market
National Market System trading day following the Expiration Date (as defined in
the Prospectus).
________________________________ __________________________
Name of Firm Authorized Signature
________________________________ __________________________
Street Address Name (please print)
________________________________
City, State Zip Code
________________________________ Date: ____________________
Area Code & Telephone Number
DO NOT SEND CERTIFICATES FOR INITIAL NOTES WITH THIS FORM. ACTUAL SURRENDER OF
CERTIFICATES FOR INITIAL NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY,
A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL.
-3-
<PAGE>
INSTRUCTIONS
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at one of its addresses set forth on the cover hereof prior to
the Expiration Date. The method of delivery of this Notice of Guaranteed
Delivery and all other required documents to the Exchange Agent is at the
election and risk of the holder but, except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange Agent.
Instead of delivery by mail, it is recommended that holders use an overnight or
hand delivery service, properly insured. If such delivery is by mail, it is
recommended that the holder use properly insured, registered mail with return
receipt requested. For a full description of the guaranteed delivery
procedures, see the Prospectus under the caption "The Exchange Offer--Guaranteed
Delivery Procedures." In all cases, sufficient time should be allowed to assure
timely delivery. No Notice of Guaranteed Delivery should be sent to the
Company.
2. SIGNATURE ON THIS NOTICE OF GUARANTEED DELIVERY; GUARANTEE OF
SIGNATURES. If this Notice of Guaranteed Delivery is signed by the registered
holder(s) of the Initial Notes referred to herein, then the signature must
correspond with the name(s) as written on the face of the Initial Notes without
alteration, enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Initial Notes listed, this Notice of Guaranteed
Delivery must be accompanied by a properly completed bond power signed as the
name of the registered holder(s) appear(s) on the face of the Initial Notes
without alteration, enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and, unless waived by the Company, evidence satisfactory
to the Company of their authority so to act must be submitted with this Notice
of Guaranteed Delivery.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the Exchange Offer or the procedure for consenting and tendering as well as
requests for assistance or for additional copies of the Prospectus, the
applicable Letter of Transmittal and this Notice of Guaranteed Delivery, may be
directed to the Exchange Agent at the address set forth on the cover hereof or
to your broker, dealer, commercial bank or trust company.
-4-
<PAGE>
Exhibit 99.4
Notice of Guaranteed Delivery
of Euro-Denominated
10 1/2% Senior Notes Due 2006
of
PSINet Inc.
This form, or one substantially equivalent hereto, must be used by any
holder of outstanding Euro-denominated 10 1/2% Senior Notes due 2006 (the
"Initial Notes") of PSINet Inc., a New York corporation (the "Company"), who
wishes to tender Initial Notes pursuant to the Company's Exchange Offer, as
defined in the prospectus dated ___________ ___, 2000 (the "Prospectus"), and
(1) whose Initial Notes are not immediately available or (2) who cannot deliver
such Initial Notes or any other documents required by the applicable Letter of
Transmittal on or before the Expiration Date (as defined in the Prospectus) or
(3) who cannot comply with the book-entry transfer procedure on a timely basis.
This form may be delivered by facsimile transmission, mail or hand delivery to
the Exchange Agent. See "The Exchange Offer--Guaranteed Delivery Procedures" in
the Prospectus.
PSINet Inc.
Notice of Guaranteed Delivery
WILMINGTON TRUST COMPANY, as Exchange Agent
<TABLE>
<S> <C> <C>
By Registered or Certified Mail By Hand:
or Overnight Courier:
Wilmington Trust Company Wilmington Trust Company
Attn: Kristin Long Attn: Corporate Trust Operations
Corporate Trust Operations c/o Harris Trust Co. of New York as Agent
1100 North Market Street 88 Pine Street, 19/th/ Floor
Rodney Square North Wall Street Plaza
Wilmington, DE 19890-0001 New York, New York 10005
By Facsimile:
(For Eligible Institutions Only)
Wilmington Trust Company
(302) 651-1079
Confirm by telephone:
(302) 651-1562
Kristin Long
</TABLE>
Delivery of this notice of guaranteed delivery to an address other than as
set forth above or transmission via a facsimile number other than as set forth
above will not constitute a valid delivery.
Please read the accompanying instructions carefully.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company upon the terms and subject to
the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Initial Notes specified below pursuant to the guaranteed delivery procedures set
forth under the caption "The Exchange Offer--Guaranteed Delivery Procedures" in
the Prospectus. By so tendering, the undersigned does hereby make, at and as of
the date hereof, the representations and warranties of a tendering holder of
Initial Notes set forth in the applicable Letter of Transmittal. The
undersigned hereby tenders the Initial Notes listed below:
CERTIFICATE NUMBERS PRINCIPAL AMOUNT TENDERED
(IF AVAILABLE)
________________________________ _________________________
________________________________ _________________________
________________________________ _________________________
All authority herein conferred or agreed to be conferred shall survive the
death, incapacity, or dissolution of the undersigned and every obligation of the
undersigned hereunder shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned.
If Initial Notes will be tendered by book-entry transfer:
Name of Tendering Institution:
_______________________________________ ___________________________
Euroclear or Cedelbank ___________________________
Account No.: Signature(s)
___________________________
_______________________________________
___________________________
Name(s) (please print)
___________________________
Street Address
___________________________
City, State Zip Code
___________________________
Country
Date: _____________________ ___________________________
Area Code & Telephone No.
-2-
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a participant in a Recognized Signature Guarantee
Medallion Program, guarantees deposit with the Exchange Agent of the applicable
Letter of Transmittal (or facsimile thereof), together with the Initial Notes
tendered hereby in proper form for transfer, or confirmation of the book-entry
transfer of such Initial Notes into the Common Depositary's account (on behalf
of the Exchange Agent) at Euroclear or Cedelbank, as applicable, pursuant to the
procedure for book-entry transfer set forth in the Prospectus, and any other
required documents, all by 5:00 p.m., New York City time (10:00 p.m., London
time), on the third Nasdaq Stock Market National Market System trading day
following the Expiration Date (as defined in the Prospectus).
________________________________ ___________________________
Name of Firm Authorized Signature
________________________________ ___________________________
Street Address Name (please print)
________________________________
City, State Zip Code
________________________________
Country
________________________________ Date: _____________________
Area Code & Telephone Number
DO NOT SEND CERTIFICATES FOR INITIAL NOTES WITH THIS FORM. ACTUAL SURRENDER OF
CERTIFICATES FOR INITIAL NOTES MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY,
A COPY OF THE PREVIOUSLY EXECUTED LETTER OF TRANSMITTAL.
-3-
<PAGE>
INSTRUCTIONS
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at one of its addresses set forth on the cover hereof prior to
the Expiration Date. The method of delivery of this Notice of Guaranteed
Delivery and all other required documents to the Exchange Agent is at the
election and risk of the holder but, except as otherwise provided below, the
delivery will be deemed made only when actually received by the Exchange Agent.
Instead of delivery by mail, it is recommended that holders use an overnight or
hand delivery service, properly insured. If such delivery is by mail, it is
recommended that the holder use properly insured, registered mail with return
receipt requested. For a full description of the guaranteed delivery
procedures, see the Prospectus under the caption "The Exchange Offer--Guaranteed
Delivery Procedures." In all cases, sufficient time should be allowed to assure
timely delivery. No Notice of Guaranteed Delivery should be sent to the
Company.
2. SIGNATURE ON THIS NOTICE OF GUARANTEED DELIVERY; GUARANTEE OF
SIGNATURES. If this Notice of Guaranteed Delivery is signed by the registered
holder(s) of the Initial Notes referred to herein, then the signature must
correspond with the name(s) as written on the face of the Initial Notes without
alteration, enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Initial Notes listed, this Notice of Guaranteed
Delivery must be accompanied by a properly completed bond power signed as the
name of the registered holder(s) appear(s) on the face of the Initial Notes
without alteration, enlargement or any change whatsoever.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing and, unless waived by the Company, evidence satisfactory
to the Company of their authority so to act must be submitted with this Notice
of Guaranteed Delivery.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to
the Exchange Offer or the procedure for consenting and tendering as well as
requests for assistance or for additional copies of the Prospectus, the
applicable Letter of Transmittal and this Notice of Guaranteed Delivery, may be
directed to the Exchange Agent at the address set forth on the cover hereof or
to your broker, dealer, commercial bank or trust company.
-4-
