<PAGE>


                                  RISK FACTORS

     BEFORE YOU INVEST IN OUR SECURITIES, YOU SHOULD BE AWARE THAT THERE ARE
VARIOUS RISKS ASSOCIATED WITH US AND, INCLUDING THE ONES LISTED BELOW. YOU
SHOULD CAREFULLY CONSIDER THESE RISK FACTORS, AS WELL AS THE OTHER INFORMATION
CONTAINED IN OUR FORM 10-Q AND OUR OTHER PERIODIC REPORTS AND DOCUMENTS FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION, IN EVALUATING PSINET AND OUR
BUSINESS.

WE HAVE SIGNIFICANT INDEBTEDNESS AND WE MAY NOT BE ABLE TO MEET OUR OBLIGATIONS

We are highly leveraged and have significant debt service requirements. As of
June 30, 1999, after giving pro forma effect to the issuance in July 1999 of
$1.2 billion aggregate principal amount of 11% senior notes, our total
indebtedness would have been $2.4 billion, representing 81% of total
capitalization. For the three and six months ended June 30, 1999, our
interest expense was $31.9 million and $61.5 million, respectively. After
giving pro forma effect to the 11% senior notes offering, our interest
expense for the three and six months ended June 30, 1999 would have been
$65.0 million and $127.7 million, respectively.

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, existing credit
facilities, capital lease financings and proceeds of future equity or debt
financings will be adequate to meet our presently anticipated future
requirements for working capital, capital expenditures and scheduled payments of
interest on our debt. 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, 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.

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. Although we have
experienced revenue growth on an annual basis with revenue increasing from $84.4
million in 1996 to $121.9 million in 1997 to $259.6 million in 1998 and $228.7
million for the first six months of 1999, we have incurred losses and
experienced negative EBITDA during 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





                                       1
<PAGE>


global network operations. We have incurred net losses available to common
shareholders of $55.1 million in 1996, $46.0 million in 1997, $264.9 million
in 1998 and $121.2 million for the first six months of 1999. We have incurred
negative EBITDA of $28.0 million, $21.2 million and $42.1 million for each of
the years ended December 31, 1996, 1997 and 1998, respectively, and had
positive EBITDA of $0.2 million for the three months ended June 30, 1999. At
June 30, 1999, we had an accumulated deficit of $548.8 million. We cannot
assure you that we will be able to achieve or sustain profitability or
sustain 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;

     -    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 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 WILL DEPEND ON THE CASH FLOWS OF OUR SUBSIDIARIES IN ORDER TO SATISFY OUR
DEBT OBLIGATIONS

We are an operating entity which also conducts a significant portion of our
business through our subsidiaries. Our operating cash flow and consequently our
ability to service our debt is therefore partially dependent upon our
subsidiaries' earnings and their distributions of those earnings to us. It may
also be dependent upon loans, advances or other payments of funds to us by those
subsidiaries. Our subsidiaries are separate legal entities and have no
obligation, contingent or otherwise, to pay any amount due pursuant to our
senior notes 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' indebtedness, applicable laws and
other factors.

WE MAY NOT BE ABLE TO FUND THE EXPANSION WE WILL NEED TO REMAIN COMPETITIVE

In order to maintain our competitive position and continue to meet the
increasing demands for service quality, availability and competitive pricing, we
expect to make significant capital expenditures. At June 30, 1999, we were
obligated to make future payments that total $73.9 million for acquisitions of
global fiber-based telecommunications bandwidth, including indefeasible rights
of use or other rights. We also expect that there will be additional costs, such
as connectivity and equipment charges, in connection with taking full advantage
of such acquired bandwidth and indefeasible rights of use. We currently believe
that our capital expenditures in 1999 will be greater than those in 1998 and
that as a result of our completion of the offering of the 11% senior notes and
recent equity offerings, we will accelerate our capital expenditures. This may
occur as we continue to execute our expansion strategy in the 20 largest global
telecommunications markets and beyond.

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 and other factors. We also believe that
working capital generated from the use of acquired bandwidth, together with
other existing working capital from existing credit facilities, from capital
lease financings, from the proceeds of our recent debt and equity offerings
and from proceeds of 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

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<PAGE>

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 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.

WE FACE RISKS ASSOCIATED WITH ACQUISITIONS AND STRATEGIC ALLIANCES AND
INVESTMENTS RELATING TO DIFFICULTIES IN INTEGRATING COMBINED OPERATIONS,
INCURRENCE OF ADDITIONAL DEBT TO FINANCE ACQUISITIONS AND OPERATIONS OF ACQUIRED
BUSINESSES, POTENTIAL DISRUPTION OF OPERATIONS AND RELATED NEGATIVE IMPACT ON
EARNINGS, AND INCURRENCE OF SUBSTANTIAL EXPENSES THAT COULD ADVERSELY AFFECT OUR
FINANCIAL CONDITION

Growth through acquisitions represents a principal component of our business
strategy. Over the 22 months ended July 31, 1999, we acquired 32 ISPs primarily
in 14 of the 20 largest global telecommunications markets. We expect to continue
to acquire assets and businesses principally relating to or complementary to our
current operations. We may also seek to develop strategic alliances and
investments (including venture capital investments) both domestically and
internationally. Any such future acquisitions or strategic alliances and
investments would be accompanied by the risks commonly encountered in
acquisitions, strategic alliances or investments. Such risks include, among
other things:

     -    the difficulty of integrating the operations and personnel of the
          companies, particularly in non-U.S. markets;

     -    the potential disruption of our ongoing business;

     -    the inability of management to maximize our financial and strategic
          position by the successful incorporation of licensed or acquired
          technology and rights into our service offerings; and

     -    the inability to maintain uniform standards, controls, procedures and
          policies and the impairment of relationships with employees and
          customers as a result of changes in management.

We cannot assure you that we will be successful in overcoming these risks or any
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, we cannot assure you that our integration of acquired companies'
operations will be successfully accomplished. Our inability to improve the
operating performance of acquired companies' businesses or to integrate
successfully the operations of acquired companies could have a material adverse
effect on our business, financial condition and results of operations. In
addition, as we proceed with acquisitions in which the consideration consists of
cash, a substantial portion of our available cash will be used to consummate
such acquisitions.

As with each of our recent acquisitions, 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 such acquisitions, could have a material
adverse effect on our business, financial condition and results of operations
and could cause substantial fluctuations in our quarterly and yearly operating
results. Furthermore, in connection with acquisitions or strategic alliances, we
could incur substantial expenses, including the expenses of integrating the
business of the acquired company or the strategic alliance with our existing
business.


                                       3
<PAGE>


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 financial
and other 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.

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 approximately 600 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 the first half of 1999 and plan to
continue to do so. We anticipate that our Carrier and Internet Service Provider
Services business unit, as well as other business growth, may require continued
enhancements to and expansion of 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. The following risks, associated with our growth, could
have a material adverse effect on our business, results of operations and
financial condition:

     -    our inability to continue to upgrade our networking systems or our
          operating and financial control systems;

     -    our inability to recruit and hire necessary personnel or to
          successfully integrate new personnel into our operations;

     -    our inability to successfully integrate the operations of acquired
          companies or to manage our growth effectively; or

     -    our inability to adequately respond to the emergence of unexpected
          expansion difficulties.


WE FACE RISKS ASSOCIATED WITH OUR ACQUISITIONS OF BANDWIDTH FROM NETWORK
SUPPLIERS, INCLUDING OUR STRATEGIC ALLIANCE WITH IXC COMMUNICATIONS INC.,
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 BUILDOUT 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 telecommunications bandwidth from our various global network
suppliers, including our strategic alliance with IXC Communications Inc., 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 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


                                       4
<PAGE>


     -    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 FINANCIAL CONDITION MAY BE
ADVERSELY AFFECTED

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 51% of revenue in
the second quarter of 1999. By comparison, our non-U.S. operations comprised 31%
of revenue in the second quarter of 1998 and 40% for all of 1998. 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 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. In addition to the
uncertainty as to our ability to continue to expand our international presence,
there are risks inherent in doing business on an international level. Such risks
include:

     -    unexpected changes in or delays resulting from 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;

     -    the introduction of free ISP services for consumer customers;

     -    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.

We cannot assure you that such factors will not have an adverse effect on our
future international operations and, consequently, on our business, financial
condition and results of operations. In addition, we cannot assure you that laws
or administrative practice relating to taxation, foreign exchange, foreign
ownership or other matters of countries within which we operate will not change.
Any such change could have a material adverse effect on our business, financial
condition and results of operations.

In particular, we have also recently made significant investments in Japan,
which has been experiencing a severe economic recession. Other countries in
which we operate may also experience economic difficulties and uncertainties.
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 six months ended June 30, 1999,
40% and 51%, respectively, of our revenue was derived from operations outside
the United States and at June 30, 1999, 30% of our assets were 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


                                       5
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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, 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. Wills, our President and Chief Operating Officer, and
Edward D. Postal, our Senior Vice President and Chief Financial Officer. We have
employment agreements with Messrs. Wills and Postal. 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.

WE DEPEND ON SUPPLIERS AND COULD BE AFFECTED BY CHANGES IN SUPPLIERS OR DELAYS
IN DELIVERY OF THEIR PRODUCTS AND SERVICES

We have few long-term contracts with our suppliers. We are dependent on third
party suppliers for our leased-line connections or bandwidth. Some of these
suppliers are or may become competitors of ours, and such suppliers 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.

We are also dependent on third party suppliers of hardware components. Although
we attempt to maintain a minimum of two vendors for each required product, some
components used by us in providing our networking services are currently
acquired or available from 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 PRI telecommunications facilities,
which connect 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 have
a material adverse effect on us. Our remedies against suppliers who fail to
deliver products on a timely basis are limited by contractual liability
limitations contained in supply agreements and purchase orders and, in many
cases, by practical considerations relating to our desire to maintain good
relationships with the suppliers. As our suppliers revise and upgrade their
equipment technology, we may encounter difficulties in integrating the new
technology into our network.

Many of the vendors from whom we purchase telecommunications bandwidth,
including the regional Bell operating companies, competitive local exchange
carriers and other local exchange carriers, currently are subject to tariff
controls and other price constraints which in the future may be changed. In
addition, recently enacted legislation will produce changes in the market for
telecommunications services. These changes may affect the prices which we are
charged by the regional Bell operating companies and other carriers, which could
have a material adverse effect on our business, financial condition and results
of operations. Moreover, we are subject to the effects of other potential
regulatory actions which, if taken, could increase the cost of our
telecommunications bandwidth through, for example, the imposition of access
charges.

THE TERMS OF OUR FINANCING ARRANGEMENTS MAY RESTRICT OUR OPERATIONS

Our financing arrangements are secured by substantially all 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 and, as a result, we
cannot assure you that we will be able to continue to satisfy such covenants.
These financing arrangements also currently prohibit us from paying dividends
and repurchasing our capital stock without the lender's consent. Our failure to
comply with the covenants and restrictions in these financing arrangements could
lead to a default under the terms of these



                                       6
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agreements. In the event of a default under the financing arrangements, our
lenders would be entitled to accelerate the indebtedness outstanding thereunder
and foreclose upon the assets securing such indebtedness. They 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. In addition, the collateral security arrangements under our existing
financing arrangements may adversely affect our ability to obtain additional
borrowings.

OUR FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED IF OUR SYSTEMS AND THOSE OF
OUR SUPPLIERS FAIL BECAUSE OF YEAR 2000 PROBLEMS

The commonly referred to Year 2000 or Y2K problem results from the fact that
many existing computer programs and systems use only two digits to identify the
year in the date field. These programs were designed and developed without
considering the impact of a change in the century designation. If not corrected,
computer applications that use a two-digit format could fail or create erroneous
results in any computer calculation or other processing involving the Year 2000
or a later date. We have identified two main areas of Y2K risk:

     1.   Internal computer systems or embedded chips could be disrupted or
          fail, causing an interruption or decrease in productivity in our
          operations; and

     2.   Computer systems or embedded chips of third parties including, without
          limitation, financial institutions, suppliers, vendors, landlords,
          customers, international suppliers of telecommunications services and
          others, could be disrupted or fail, causing an interruption or
          decrease in our ability to continue our operations.

We have 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 are Y2K compliant. We have engaged a third party
consultant to perform an assessment of our U.S. internal systems (e.g.,
accounting, billing, customer support and network operations) to determine the
status of their Y2K compliance. The assessment of these systems has been
completed and, while some minor changes are necessary, we believe that no
material changes or modifications to our internal systems are required to
achieve Y2K compliance. Our U.S. chief information officer has developed a test
bed of our U.S. internal systems to implement and complete testing of the
requisite minor changes. We anticipate that our U.S. internal systems will be
Y2K ready by September 30, 1999. We are in the process of completing an
inventory of our internal systems that we use outside of the United States to
determine the status of their Y2K compliance. Each international office has
plans in place to test, upgrade or, if necessary, replace components of its
internal systems to ensure they are Y2K compliant. We anticipate that our
international operations will be Y2K compliant during the fourth quarter of
1999. To help ensure that our network operations and services to our customers
are not interrupted due to the Y2K problem, we have established a network
operations team that meets weekly to examine our network on a worldwide basis.
This team of operational staff have conducted inventories of our network
equipment (software and hardware) and have found no material Y2K compliance
issues. We believe that all equipment currently being purchased for use in the
PSINet network is Y2K compliant. Any existing equipment that is not Y2K
compliant is planned to be made Y2K compliant through minor changes to the
software or hardware or, in limited instances, replacement of the equipment. We
anticipate that our network will be Y2K compliant by September 30, 1999. In
addition to administering the implementation of necessary upgrades for Y2K
compliance, our network team is developing a contingency plan to address any
potential problems that may occur with our network as we enter the year 2000. We
believe that, as a result of our detailed assessment and completed
modifications, the Y2K issue will not pose significant operational problems for
us. However, if the requisite modifications and conversions are not made, or not
completed in a timely fashion, it is possible that the Y2K problem could have a
material impact on our operations.

Our cost of addressing Y2K issues has been minor to date, less than 5% of our
information technology and network operations budgets, but this amount may
increase if additional outside consultants or personnel resources are required
or if important operational equipment must be remediated or replaced. Our
estimated total costs related to Y2K issues for 1999 is not expected to exceed
$2.0 million. These costs include equipment, consulting fees, software and
hardware upgrades, testing, remediation and, in limited instances, replacement
of equipment. The risk that Y2K issues could present to us include, without
limitation, disruption, delay or cessation of operations, including operations
that are subject to regulatory compliance. In each case,


                                       7
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the correction of the problem could result in substantial expense and disruption
or delay of our operations. The total cost of Y2K assessments and remediation is
funded through cash on hand and available from other sources and we are
expensing these costs, as appropriate. The financial impact of making all
required systems changes or other remediation efforts cannot be known precisely,
but it is not expected to be material to our financial position, results of
operations, or cash flows. We have not canceled any principal information
technology projects as a result of our Y2K effort, although we have rescheduled
some internal tasks to accommodate this effort.

In addition, we have identified, prioritized and are communicating with our
suppliers, vendors, customers, lenders and other material third parties to
determine their Y2K status and any probable impact on us. To date, our inquiries
have not revealed any significant Y2K noncompliance issue affecting our material
third parties. We will continue to monitor and evaluate our long-term
relationships with our material third parties based on their responses to our
inquiries and on information learned from other sources. If any of our material
third parties are not Y2K ready and their non-compliance causes a material
disruption to any of their respective businesses, our business could be
materially adversely affected. Disruptions could include, among other things:

     -    the failure of a material third party's business;

     -    a financial institution's inability to take and transfer funds;

     -    an interruption in delivery of supplies from vendors;

     -    a loss of voice and data connections;

     -    a loss of power to our facilities; and

     -    other interruptions in the normal course of our operations, the nature
          and extent of which we cannot foresee.

We will continue to evaluate the nature of these risks, but at this time we
are unable to determine the probability that any such risk will occur, or if
it does occur, what the nature, length or other effects, if any, of such a
risk may have on us. If any of our material third parties experience
significant failures in their computer systems or operations due to Y2K
non-compliance, it could affect our ability to process transactions or
otherwise engage in similar normal business activities. For example, while we
expect our internal systems, U.S. and non-U.S., to be Y2K ready in stages
during 1999, we and our customers who communicate internationally will be
dependent upon the Y2K-readiness of many non-U.S. providers of
telecommunication services and their vendors and suppliers. If these
providers and others are not Y2K ready, we and our customers will not be able
to send and receive data and other electronic transmissions, which would have
a material adverse effect on our revenues and business and that of our
customers. While many of these risks are outside our control, we have
identified and contacted our critical third party vendors and suppliers and
are establishing contingency plans to remedy any potential interruption to
our operations.

While we believe that we are adequately addressing the Y2K issue, we can not
assure you that our Y2K compliance effort will prevent every potential
interruption or that the cost and liabilities associated with the Y2K issue will
not materially adversely impact our business, prospects, revenues or financial
position. We are uncertain as to our most reasonably likely worst case Y2K
scenario and have not yet completed a contingency plan to handle a worst case
scenario. We expect to have such contingency plan in place by September 30,
1999.

IF WE BECOME SUBJECT TO PROVISIONS OF THE INVESTMENT COMPANY ACT, OUR
BUSINESS OPERATIONS MAY BE RESTRICTED

We have significant amounts 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 places restrictions on the capital structure and
business activities of companies registered thereunder.

Accordingly, we will seek to limit our holding of "investment securities" (as
defined in such Act) to an amount which is less than 40% of the value of our
total assets as calculated pursuant to the Investment Company Act of 1940. The
Investment Company Act of 1940 permits a company to avoid becoming subject to
such Act for a period of up to one year despite the holding of investment
securities in excess of such amount if, among other


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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.
Application of the provisions of the Investment Company Act of 1940 would have a
material adverse effect on us.

WE FACE A HIGH LEVEL OF COMPETITION IN THE INTERNET SERVICES INDUSTRY

The market for Internet connectivity and related services is extremely
competitive. We anticipate that competition will continue to intensify as the
use of the Internet grows. The tremendous growth and potential market size of
the Internet access market has attracted many new start-ups as well as
established businesses from different industries.

Our current and prospective competitors include other national, regional and
local ISPs, long distance and local exchange telecommunications companies, cable
television, direct broadcast satellite, wireless communications providers and
on-line service providers. We believe that our network, products and customer
service distinguish us from these competitors. However, some of these
competitors have significantly greater market presence, brand recognition and
financial, technical and personnel resources than we do. We compete with all of
the major long distance companies, also known as interexchange carriers,
including AT&T, MCIWorldCom, Sprint and Cable & Wireless/IMCI, which also offer
Internet access services. The recent sweeping reforms in the federal regulation
of the telecommunications industry have created greater opportunities for local
exchange carriers, including the regional Bell operating companies, to enter the
Internet connectivity market. We believe that there is a move toward horizontal
integration through acquisitions of, joint ventures with, and the wholesale
purchase of connectivity from ISPs to address the Internet connectivity
requirements of the current business customers of long distance and local
carriers. The WorldCom/MFS/UUNet consolidation, the WorldCom/MCI merger, the
ICG/NETCOM merger, Cable & Wireless' purchase of the internetMCI assets, the
Intermedia/DIGEX merger, GTE's acquisition of BBN, Global Crossing's recently
announced plans to acquire Frontier Corp and Frontier's prior acquisition of
Global Center, Qwest Communication's recently announced plans to acquire US West
and AT&T's purchase of IBM's global communications network are indicative of
this trend. Accordingly, we expect to experience increased competition from the
traditional telecommunications carriers. Many of these telecommunications
carriers may have the ability to bundle Internet access with basic local and
long distance telecommunications services. This bundling of services may have an
adverse effect on our ability to compete effectively with the telecommunications
providers and may result in pricing pressure on us that could have a material
adverse effect on our business, financial condition and results of operations.

Many of the major cable companies have announced that they are exploring the
possibility of offering Internet connectivity, relying on the viability of cable
modems and economical upgrades to their networks. Several announcements also
have recently been made by other alternative service companies approaching the
Internet connectivity market with various wireless terrestrial and
satellite-based service technologies.

The predominant on-line service providers, including America Online and
Microsoft Network, have all entered the Internet access business by engineering
their current proprietary networks to include Internet access capabilities. We
compete to a lesser extent with these on-line service providers. However,
America Online's acquisition of Netscape Communications Corporation and related
strategic alliance with Sun Microsystems will enable it to offer a broader array
of Internet protocol-based services and products that could significantly
enhance its ability to appeal to the business marketplace and, as a result,
compete more directly with us.

Recently, there have been several announcements regarding the planned
deployment of broadband services for high speed Internet access by cable and
telephone companies. These services would include new technologies such as
cable modems and xDSL. These providers have initially targeted the
residential consumer. However, it is likely that their target markets will
expand to encompass business customers, which is our target market. This
expansion could adversely affect the pricing of our service offerings.
Moreover, there has recently been introduced a number of free ISP services,
particularly in non-U.S. markets, and some ISPs are offering free personal
computers to their subscribers. While these services have been offered
primarily to dial-up consumer customers, they could be extended to dial-up
business customers as well. These trends could have a material adverse effect
on our business, financial condition and results of operations.

As a result of the increase in the number of competitors and the vertical and
horizontal integration in the industry, we currently encounter and expect to
continue to encounter significant pricing pressure and other



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competition. Advances in technology as well as changes in the marketplace and
the regulatory environment are constantly occurring, and we cannot predict the
effect that ongoing or future developments may have on us or on the pricing of
our products and services. Increased price or other competition could result in
erosion of our market share and could have a material adverse effect on our
business, financial condition and results of operations. We cannot assure you
that we will have the financial resources, technical expertise or marketing and
support capabilities to continue to compete successfully.

As we continue to expand our operations outside the United States, we will
encounter new competitors and competitive environments. In some cases, we will
be forced to compete with and buy services from government-owned or subsidized
telecommunications providers. Some of these providers may enjoy a monopoly on
telecommunications services essential to our business. We cannot assure you that
we will be able to purchase such services at a reasonable price or at all. In
addition to the risks associated with our previously described competitors,
foreign competitors may pose an even greater risk, as they may possess a better
understanding of their local markets and better working relationships with local
infrastructure providers and others. We cannot assure you that we can obtain
similar levels of local knowledge. Failure to obtain that knowledge could place
us at a significant competitive disadvantage.

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.

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 IXC and
our other 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 and infringement of
copyrighted materials. The U.S. Supreme Court has let stand a lower court ruling
which held that an ISP was protected by a provision of the Communications
Decency Act from liability for material posted on its system. However, the
findings in that particular case may not be applicable in other circumstances
with differing facts. 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 if the ISP does
not have knowledge of any transfer of potentially infringing material. We cannot
assure you that we would be protected by the terms, provisions and
interpretations of this Act. Provisions of the Communications Decency Act which
imposed criminal penalties for using an interactive computer service for
transmitting obscene or indecent communications have been found unconstitutional
by the U.S. Supreme Court. However, on October 21, 1998, new federal legislation
was enacted that requires 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


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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.

We carry errors and omissions insurance with a policy limit of $5.0 million,
subject to deductibles and exclusions. Such coverage may not be adequate or
available to compensate us for all liability that may be imposed. The imposition
of liability in excess of, or the unavailability of, such coverage could have a
material adverse effect on our business, financial condition and results of
operations.

The law relating to the regulation and liability of ISPs in relation to
information carried or disseminated 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 defamatory 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 processing of personal data and on the free movement of such
data ("EU Directive"). That 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 REGULATIONS MAY LIMIT THE SERVICES WE CAN OFFER

Consistent with our growth and acquisition strategy, we are now engaged in, or
will soon be engaged in, activities that subject us 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 recently 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 such
new or existing laws may have on our business. We can not 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 recently 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 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


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<PAGE>

York, Virginia, Colorado and Texas, and have applied for CLEC certification in
Maryland and California. 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 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 and briefing will be completed in
September 1999. 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 have
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 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 caused by our customers or other Internet users. Computer viruses,
break-ins or other problems caused by third parties could lead to interruptions,
delays or cessation in service to our customers. Furthermore, such inappropriate
use of the Internet by third parties could also potentially jeopardize the
security of confidential information stored in the computer systems of our
customers. This could, in turn, deter potential customers and adversely affect
our existing customer relationships. Security problems represent


                                       12
<PAGE>


an ongoing threat to public and private data networks. Attacks upon the security
of Internet sites and infrastructure continue to be reported to organizations
such as the CERT Coordination Center at Carnegie Mellon University, which
facilitates responses of the Internet community to computer security events.
Addressing problems caused by computer viruses, break-ins or other problems
caused by third parties could have a material adverse effect on us.

The security services that we offer in connection with our customers' networks
cannot assure complete protection from computer viruses, break-ins and other
disruptive problems. Although we attempt to limit contractually our liability in
such instances, the occurrence of such problems may 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 a material adverse effect on
our business or reputation or on our ability to attract and retain customers for
our products. Moreover, until more consumer reliance is placed on security
technologies available, the security and privacy concerns of existing and
potential customers may inhibit the growth of the Internet service industry and
our customer base and revenues.

RISK ASSOCIATED WITH DEPENDENCE ON TECHNOLOGY AND WITH PROPRIETARY RIGHTS

Our success and ability to compete is dependent in part upon our technology and
technical expertise and, to a lesser degree, on our proprietary rights. In order
to establish and protect our technology, we rely on a combination of copyright,
trademark and trade secret laws and contractual restrictions. Nevertheless, we
cannot assure you that such measures are adequate to protect our proprietary
technology. It may be possible for a third party to copy or otherwise obtain and
use our products or technology without authorization or to develop similar
technology independently. In addition, our products may be licensed or otherwise
utilized in foreign countries where laws may not protect our proprietary rights
to the same extent as do laws in the United States. It is our policy to require
employees and consultants and, when obtainable, suppliers to execute
confidentiality agreements upon the commencement of their relationships with us.
Nonetheless, we cannot assure you that these precautions will be adequate to
prevent misappropriation of our technology or that our competitors will not
independently develop technologies that are substantially equivalent or superior
to our technology.

In addition, we are also subject to the risk of adverse claims and litigation
alleging infringement by us of the intellectual property rights of others. From
time to time, we have received claims that we have infringed other parties'
proprietary rights. While we do not believe that we have infringed the
proprietary rights of other parties, we cannot assure you that third parties
will not assert infringement claims in the future with respect to our current or
future products. Such claims may require that we enter into license arrangements
or may result in protracted and costly litigation, regardless of the merits of
such claims. We cannot assure you that any necessary licenses will be available
or that, if available, such licenses can be obtained on commercially reasonable
terms.

We have recently introduced new enterprise service offerings, including
value-added, Internet protocol-based enterprise communication services and
xDSL-based Internet access services in limited areas. The failure of these
services to gain market acceptance in a timely manner or at all, or the failure
of xDSL-based services, in particular, to achieve significant market coverage
could have a material adverse effect on our business, financial condition and
results of operations. If we introduce new or enhanced services with
reliability, quality or compatibility problems, it could significantly delay or
hinder market acceptance of such services, which could adversely affect our
ability to attract new customers and subscribers. Our services may contain
undetected errors or defects when first introduced or as enhancements are
introduced. Despite testing by us or our customers, we cannot assure you that
errors will not be found in new services after commencement of commercial
deployment. Such errors could result in additional development costs, loss of or
delays in market acceptance, diversion of technical and other resources from our
other development efforts and the loss of credibility with our customers and
subscribers. Any such event could have a material adverse effect on our
business, financial condition and results of operations.

Additionally, if we are unable to match our network capacity to customer demand
for our services, our network could become congested during periods of peak
customer demand. Such congestion could adversely affect the quality of service
we are able to provide. Conversely, due to the high fixed cost nature of 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 a material adverse effect on our business,
financial condition or results of operations.


                                       13
<PAGE>


THE MARKET PRICE AND TRADING VOLUME OF OUR STOCK MAY BE VOLATILE

The market price and trading volume of our common stock and convertible
preferred stock has been and may continue to be highly volatile. Factors such as
variations in our revenue, earnings and cash flow and announcements of new
service offerings, technological innovations, strategic alliances and/or
acquisitions involving our competitors or price reductions by us, our
competitors or providers of alternative services could cause the market price of
our common stock and convertible preferred stock to fluctuate substantially. In
addition, the stock markets recently have experienced significant price and
volume fluctuations that particularly have affected technology-based companies
and resulted in changes in the market prices of the stocks of many companies
that have not been directly related to the operating performance of those
companies. Such broad market fluctuations have adversely affected and may
continue to adversely affect the market price of our common stock and
convertible preferred stock.

WE DO NOT ANTICIPATE THAT WE WILL PAY CASH DIVIDENDS ON OUR COMMON STOCK

We have never declared or paid any cash dividends on our common stock and do not
anticipate paying cash dividends on our common stock in the foreseeable future.
In addition, our debt securities and credit facility contain limitations on our
ability to declare and pay cash dividends.

FORWARD-LOOKING STATEMENTS

Some of the information contained in the periodic report with which this Exhibit
99.1 is filed 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 you that the future results
indicated, whether expressed or implied, will be achieved. The risk factors
noted in this section and other factors noted throughout the report with which
this Exhibit 99.1 is filed, including risks and uncertainties, could cause our
actual results to differ materially from those contained in any forward-looking
statement.

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