OUTSOURCING SOLUTIONS INC.
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CONSENT SOLICITATION STATEMENT
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Relating to its 11% Senior Subordinated Notes due November 1, 2006
CUSIP No. 690132AC9
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Outsourcing Solutions Inc., a Delaware corporation (the "Company"), is
hereby soliciting consents (the "Consents"), on the terms and subject to the
conditions set forth in this Consent Solicitation Statement (as it may be
supplemented or amended from time to time, the "Consent Statement") and the
related Consent Form (as it may be supplemented or amended from time to time,
the "Consent Form" and together with the Consent Statement, the "Solicitation")
from holders (each, a "Holder" and, collectively, the "Holders") of at least a
majority of the aggregate principal amount of its outstanding 11% Senior
Subordinated Notes due November 1, 2006 (the "Notes") issued pursuant to the
Indenture, dated November 6, 1996 (the "Indenture"), among the Company, the
subsidiary guarantors named therein (collectively, the "Guarantors") and
Wilmington Trust Company, as trustee (the "Trustee"), to the waiver of: (i) the
Company's obligations under Section 4.15 of the Indenture, including its
obligation to make a Change of Control Offer in connection with the
recapitalization of the Company (the "Recapitalization") by an investor group
led by an affiliate of Madison Dearborn Partners, Inc. ("MDP"); and (ii) the
failure by the Company to comply with certain technical requirements relating to
the qualification and operation of its financing subsidiary, OSI Funding Corp.
("OSI Funding"), as an Unrestricted Subsidiary under the Indenture and any and
all consequences arising therefrom under the Indenture (collectively, the
"Waivers").
The Company is offering to pay to each Holder who provides its Consent
at or prior to 5:00 p.m., New York City time, on the Expiration Date (as defined
below) a payment of $100 per $1,000 of principal amount of Notes (the "Consent
Payment"). The Company will not be obligated to make any Consent Payment in
respect of any Consents not provided at or prior to 5:00 p.m., New York City
time, on the Expiration Date. Subject to the consummation of the
Recapitalization, the Consent Payment will be made on the Consent Payment Date
(as defined below). Capitalized terms used in this Consent Statement and not
otherwise defined herein have the meanings ascribed to them in the Indenture.
In order to receive the Consent Payment, Holders of Notes must provide
their Consents (and not have revoked such Consents) at or prior to 5:00 p.m.,
New York City time, on November 19, 1999 (the "Expiration Date"), unless
extended by the Company in its sole discretion. The Company reserves the right
to extend the Solicitation on a daily basis until 5:00 p.m., New York City time,
on the date on which the Requisite Consents (as defined below) have been
obtained. Consents may be revoked at any time prior to the date on which the
Company receives the Requisite Consents.
MDP's obligation to complete the Recapitalization is expressly
conditioned upon the Company receiving the Requisite Consents to the Waivers.
See "The Recapitalization - Conditions."
See "Certain Considerations" for a discussion of certain factors that
should be considered in evaluating the Solicitation.
The Solicitation Agent for the Solicitation is:
Donaldson, Lufkin & Jenrette
November 9, 1999
Any Holder desiring to give its Consent should either (i) complete and
sign the Consent Form (or a facsimile thereof) in accordance with the
instructions in the Consent Form and mail or deliver it to MacKenzie Partners,
Inc., the information and tabulation agent (the "Information Agent") or (ii)
request such Holder's broker, dealer, commercial bank, trust company or other
nominee to effect the transaction for such Holder. A Holder who has Notes
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact that entity if such Holder desires to give its
Consent. A Letter of Instruction is contained in the solicitation materials
provided along with this Consent Statement which may be used by a beneficial
owner to instruct the record Holder to deliver Consents.
In the event that the Solicitation is withdrawn or otherwise not
completed, the Consent Payment will not be paid or become payable to Holders of
the Notes who have validly delivered their Consents in connection with the
Solicitation. The Solicitation may be abandoned or terminated by the Company at
any time prior to the Consent Payment Date for any reason. The record date for
purposes of the Solicitation is November 5, 1999 (the "Record Date").
If Consents are received from registered Holders of at least a majority
of the aggregate principal amount of the outstanding Notes as of the Record
Date, such Consents will apply to all Notes issued under the Indenture and each
Holder of such Notes will be bound by such Consents regardless of whether such
Holder executed a Consent.
NEITHER THE COMPANY NOR DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION (THE "SOLICITATION AGENT") MAKES ANY RECOMMENDATION AS TO WHETHER OR
NOT HOLDERS SHOULD PROVIDE THEIR CONSENTS IN RESPONSE TO THE SOLICITATION.
Any questions regarding the Solicitation should be directed to the
Solicitation Agent. Requests for additional copies of this Consent Statement and
the Consent Form may be directed to the Information Agent. Beneficial owners may
also contact their broker, dealer, commercial bank or trust company for
assistance concerning the Solicitation.
THIS SOLICITATION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION (THE "COMMISSION") NOR HAS THE COMMISSION PASSED UPON
THE FAIRNESS OR MERITS OF SUCH SOLICITATION NOR UPON THE ACCURACY OR ADEQUACY OF
THE INFORMATION CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS CONSENT
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
FORWARD LOOKING STATEMENTS
This Consent Statement (including the documents incorporated or deemed
incorporated by reference herein) includes "forward-looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act") and Section 21E of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). All statements other than statements of historical
fact provided or incorporated by reference herein are forward looking statements
and may contain information about financial results, economic conditions, trends
and known uncertainties. The forward-looking statements contained or
incorporated by reference herein are subject to certain risks and uncertainties
that could cause actual results to differ materially from those reflected in the
forward-looking statements. Factors that might cause such a difference include,
but are not limited to: (i) general economic or business conditions affecting
the account receivables management services industry, either nationally or
regionally, being less favorable than expected; (ii) expected synergies,
economies of scale and cost savings from recent acquisitions by the Company not
being fully realized or realized within the expected time frames; (iii) costs or
operational difficulties related to integrating the operations of recently
acquired companies with the Company's operations being greater than expected;
(iv) increased competition in the accounts receivable management services
industry; (v) implementation of or changes in the laws, regulations or policies
governing the accounts receivable management industry that could negatively
affect such industry; (vi) changes in general economic conditions in the United
States; (vii) the other factors discussed under the caption "Certain
Considerations" included elsewhere in this Consent Statement; and (viii) factors
discussed from time to time in the Company's public filings, including the
Annual Report on Form 10-K for the year ended December 31, 1998. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
reflect management's analysis, judgment, belief or expectations only as of the
date hereof. Neither the Company nor the Solicitation Agent undertakes any
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof. In addition to the disclosure
contained herein, readers should carefully review any disclosure of risks and
uncertainties contained in other documents the Company files or has filed from
time to time with the Commission pursuant to the Exchange Act. See "Additional
Information; Incorporation of Certain Information by Reference."
TABLE OF CONTENTS
Page
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SUMMARY .................................................................. 1
BACKGROUND OF THE SOLICITATION............................................ 3
Outsourcing Solutions Inc......................................... 3
Purpose of the Solicitation....................................... 3
Source of Funds for Consent Payments.............................. 3
THE RECAPITALIZATION...................................................... 4
General........................................................... 4
Sources and Uses.................................................. 5
Conditions........................................................ 5
Indemnification................................................... 6
Termination....................................................... 6
Ancillary Agreements.............................................. 6
The Purchaser..................................................... 7
Management........................................................ 7
New Senior Credit Facility........................................ 8
THE SOLICITATION.......................................................... 11
Purpose of the Solicitation....................................... 11
Consent Payment................................................... 13
Requisite Consents; Record Date; Effective Date;
Expiration Date................................................ 13
Waiver; Extensions; Amendments.................................... 13
Consent Procedures................................................ 14
Withdrawal Rights................................................. 16
Fees and Expenses................................................. 16
Information, Tabulation and Paying Agents......................... 17
CAPITALIZATION............................................................ 18
UNAUDITED PRO FORMA FINANCIAL DATA........................................ 19
CERTAIN CONSIDERATIONS.................................................... 24
Substantial Leverage; Ability to Service Debt..................... 24
Additional Borrowings Available................................... 25
Substantial Restrictions and Covenants............................ 25
Subordination; Asset Encumbrances................................. 25
Control by Principal Stockholder.................................. 26
Holding Company Structure......................................... 26
Competition....................................................... 26
Impact of Governmental Regulation................................. 27
Litigation........................................................ 27
Dependence on Key Management...................................... 27
Environmental Liabilities......................................... 27
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS............................ 28
Tax Considerations for Consenting Holders......................... 28
Tax Considerations for Non-Consenting Holders..................... 28
Backup Withholding................................................ 28
ADDITIONAL INFORMATION;
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE.................... 29
MISCELLANEOUS............................................................. 30
ANNEX I .................................................................. A-1
ANNEX II.................................................................. A-3
ANNEX III................................................................. A-4
SUMMARY
For your convenience, the Solicitation is summarized below. The
following summary is not intended to be complete and is qualified in its
entirety by reference to the more detailed information included or incorporated
by reference in this Consent Statement. Holders of the Notes are urged to read
carefully this Consent Statement and the documents incorporated by reference in
their entirety. Each of the capitalized terms used in this summary and not
defined herein has the meaning set forth elsewhere in this Consent Statement.
The Solicitation
The Solicitation and The Company is soliciting the Consents from
Consent Payment...... the Holders of the Notes with respect to the
Waivers. The Company is offering to pay to
each Holder who validly consents to (and does
not revoke such Consent) the Waivers prior to
5:00 p.m., New York City time, on the
Expiration Date, the Consent Payment for such
Notes. The Consent Payment will be made on
the date of the closing of the
Recapitalization (the "Consent Payment
Date"). The Company's obligation to make the
Consent Payment is expressly conditioned upon,
and subject to, the closing of the
Recapitalization.
Purpose of the The purpose of the Solicitation is to obtain
Solicitation....... the Requisite Consents to the waiver of: (i)
the Company's obligations under Section 4.15
of the Indenture, including its obligation to
make a Change of Control Offer in connection
with the Recapitalization and (ii) the failure
by the Company to comply with certain
technical requirements relating to the
qualification and operation of its financing
subsidiary, OSI Funding, as an Unrestricted
Subsidiary under the Indenture and any and all
consequences arising therefrom under the
Indenture.
Requisite Consents.... The duly executed (and not revoked) Consents
of the registered Holders of a majority of the
outstanding aggregate principal amount of the
Notes as of the Record Date (as defined) will
be required to effect the Waivers under the
Indenture governing the Notes (the "Requisite
Consents").
Effective Date ....... The Consents shall become effective
immediately upon the Company receiving the
Requisite Consents and certifying to the
Trustee that such Requisite Consents have been
received (the "Effective Date"). The Consents
shall cease to be effective in the event that
the Solicitation is abandoned or terminated by
the Company for any reason prior to the
Consent Payment Date.
Expiration Date....... The Expiration Date shall be November 19,
1999. The Company will not be obligated to
accept any Consents received after the
Expiration Date. The Company reserves the
right to extend the Solicitation on a daily
basis until 5:00 p.m., New York City time, on
the date on which the Requisite Consents have
been received.
Withdrawal Rights..... Consents may be revoked at any time prior to
the Effective Date by following the procedures
described herein.
Record Date........... Date The Record Date for purposes of the
Solicitation is the close of business on
November 5, 1999. Only Holders of Notes as of
the Record Date may execute Consentsand receive
the Consent Payment.
Waiver; Extensions; The Company expressly reserves the right, in
Amendments.......... its sole discretion, subject to applicable
law, at any time or from time to time, to
waive any conditions to the Solicitation,
extend the Expiration Date or amend the terms
of the Solicitation or terminate the
Solicitation before the Consent Payment Date
whether or not the Requisite Consents have
been received.
Brokerage Commissions. No brokerage commissions are payable by the
Holders of the Notes to the Solicitation
Agent, the Information Agent, the Company or
the Paying Agent (as defined below).
Solicitation Agent.... Donaldson, Lufkin & Jenrette Securities
Corporation.
Information and
Tabulation Agent.... MacKenzie Partners, Inc.
Paying Agent.......... U.S. Bank Trust National Association (the
"Paying Agent").
Further Information... Additional copies of this Consent Statement
may be obtained by contacting the Information
Agent or the Solicitation Agent at their
respective telephone numbers and addresses set
forth on the back cover of this Consent
Statement. Copies of the other documents
incorporated by reference herein may be
obtained as described below under "Additional
Information; Incorporation of Certain
Information by Reference."
See "Certain Considerations" beginning on page 24 for a discussion of certain
factors that should be considered in evaluating the Solicitation.
BACKGROUND OF THE SOLICITATION
Outsourcing Solutions Inc.
The Company is one of the largest providers of accounts receivable
management services in the United States with revenues of $497.8 million for the
twelve months ended June 30, 1999 (the "LTM Period"). The Company believes that
it differentiates itself from its competitors by providing a full range of
accounts receivable management services on a national basis that allows its
customers to outsource the management of the entire credit cycle. The Company's
breadth of services across all stages of the credit cycle allows it to
cross-sell services to existing customers as well as to expand its customer base
by providing specific services to potential customers in targeted industries.
These services include contingent fee services, portfolio purchasing services
and outsourcing services, which accounted for approximately 72%, 17%, and 11% of
revenues for the LTM Period, respectively.
Contingent fee services involve collecting on delinquent consumer
accounts for a fixed percentage of realized collections or a fixed fee
per account.
Portfolio purchasing services involve acquiring portfolios of
non-performing consumer receivables from credit grantors, servicing
such portfolios and retaining all amounts collected.
Outsourcing services include contract management of accounts
receivable, billing and teleservicing.
The customer base for the accounts receivable management industry is
dominated by credit grantors in four end-markets: banks, health care, utilities,
and telecommunications. Other significant sources of account placements include
retail companies, and student loan and other governmental agencies. The
Company's customers include a full range of local, regional and national credit
grantors such as American Express, AT&T, Citigroup, First USA, Sony, Time
Warner, US West, Bally's, New Jersey Department of Treasury and various student
loan guaranty agencies including the California Student Aid Commission, the
Great Lakes Higher Education Corporation and USA Group Guaranty Services Inc. No
customer of the Company accounted for more than 5% of the Company's revenues in
1998.
The Company was formed in 1995 by McCown De Leeuw & Co., Inc., a private
equity investment firm, to acquire Account Portfolios, Inc., one of the largest
purchasers and servicers of non-performing accounts receivables portfolios.
Since the Company's formation it has completed six additional acquisitions and
has established itself as a leading industry consolidator. The Company has
experienced significant growth in its business through internal growth and
acquisitions, with its revenues increasing from $29.6 million in 1995 to $497.8
million in the LTM Period.
Purpose of the Solicitation
The purpose of the Solicitation is to obtain the Requisite Consents to
the waiver of: (i) the Company's obligations under Section 4.15 of the
Indenture, including its obligation to make a Change of Control Offer in
connection with the Recapitalization and (ii) the failure by the Company to
comply with certain technical requirements relating to the qualification and
operation of its financing subsidiary, OSI Funding, as an Unrestricted
Subsidiary under the Indenture and any and all consequences arising therefrom
under the Indenture. See "The Solicitation - Purpose of the Solicitation."
Source of Funds for Consent Payments
The funds necessary to pay the Consent Payments will come out of the
proceeds being raised to finance the Recapitalization. See "The Recapitalization
- - Sources and Uses."
THE RECAPITALIZATION
General
The Recapitalization will be effected pursuant to the Stock Subscription
and Redemption Agreement, dated as of October 8, 1999 (the "Purchase
Agreement"), between the Company, certain of its existing stockholders (the
"Stockholders"), warrantholders (the "Warrantholders") and optionholders (the
"Optionholders" and, collectively with the Stockholders and Warrantholders, the
"Equityholders"), and Madison Dearborn Capital Partners III, L.P. (the
"Purchaser"), a private equity investment fund.
The Recapitalization will be effected under the terms of the Purchase
Agreement as follows:
Certain new investors, which may include the Purchaser, will purchase
from the Company 100,000 units for an aggregate purchase price of
$100.0 million. Each unit will consist of one share of 14% Senior
Mandatorily Redeemable Preferred Stock (the "Preferred Stock") and a
number of shares of Common Stock that, together with all other shares
of Common Stock issued with the units, represents 8.7% of the fully
diluted common equity of the Company as of the date of the closing of
the Recapitalization (the "Closing").
The Purchaser and certain other investors will purchase Common Stock
from the Company for an aggregate purchase price ranging from $195
million to $215 million, depending upon several factors, including the
Company's revolver availability at the Closing and the transaction
fees and expenses of the Recapitalization payable by the Company or
the Purchaser. The total number of shares of Common Stock issued to
the Purchaser will represent approximately 78.0% of the fully diluted
common equity of the Company as of the Closing.
At the Closing, the Company will redeem all of its outstanding
preferred stock. Certain existing stockholders will retain a portion
of their shares of Common Stock (the "Rollover Shares"), such that the
Rollover Shares will represent approximately 6.3% of the fully diluted
common equity of the Company as of the Closing. All other shares of
Common Stock (including those issued upon the conversion of all the
Company's outstanding warrants) will be redeemed by the Company at the
Closing (the "Redemption Shares"). Each Optionholder will elect
whether to retain some or all of their options to purchase Common
Stock or to have them cashed out at the Closing.
The aggregate consideration for the Redemption Shares will be $790
million, plus or minus a working capital adjustment, and minus the sum
of the Company's debt at Closing, the value of the Rollover Shares,
certain fees and expenses of the Company, and amounts paid or payable
by the Company with respect to change of control payments to certain
employees pursuant to existing employment agreements.
All outstanding borrowings and obligations under the Company's existing
credit agreement will be replaced and refinanced by a new $475.0 million senior
credit facility (the "New Senior Credit Facility") at the Closing. The New
Senior Credit Facility will consist of (i) a six-year non-amortizing $75.0
million revolving credit facility (approximately $4.0 million of which is
expected to be drawn at Closing) and (ii) a $400.0 million term loan facility,
which will be comprised of a $125.0 million six-year amortizing term loan A
facility and a $275.0 million six and one half-year amortizing term loan B
facility. See "- New Senior Credit Facility."
Sources and Uses
The following table sets forth the expected sources and uses of funds
(dollars in millions) in connection with the Recapitalization, assuming the
Recapitalization occurred on June 30, 1999. The actual amounts of such sources
and uses may differ upon consummation of the Recapitalization and such
differences may be material.
Sources of Funds Amount Uses of Funds Amount
- --------------------- ---------- ------------------- ------------
Notes................. $ 100.0 Refinance Existing
Senior Credit Facility... $ 415.5
New Senior
Credit Facility: Assumption of the Notes... 100.0
Term Loans......... 400.0 Redemption of Capital
Stock................. 249.7
Revolving Credit
Loans........... 4.0 Rollover Shares........... 15.8
Preferred Stock ...... 100.0 Fees and Expenses......... 24.2
Common Equity
Investment.......... 195.4 Consent Payments ......... 10.0
Rollover Shares ...... 15.8 Other Indebtedness ....... 5.5
Other Indebtedness ... 5.5
--------- ----------
Total Sources ..... $ 820.7 Total Uses.......... $ 820.7
========= ==========
Conditions
The Purchase Agreement contains customary conditions to the Closing,
including that: (i) the representations and warranties of the parties are true
and correct; (ii) the parties have performed all requirements specified in the
Purchase Agreement; (iii) no preliminary injunction, decree or other order
exists that would prohibit the consummation of the transaction; (iv) no statute,
rule, regulation, executive order, decree or order of any kind exists that would
prohibit the consummation of the transaction; (v) the parties have executed a
stockholders agreement; (vi) the parties have delivered the requested
certificates; and (vii) the parties have delivered the requested opinions of
counsel.
The Purchaser's obligation to complete the Recapitalization is subject
to certain other conditions, including that: (i) no material adverse change has
occurred; (ii) all necessary third party consents have been obtained; (iii) the
Advisory Services Agreement, dated September 21, 1995, by and between OSI
Holdings Corp. and MDC Management Company III, L.P. has been assigned to
Purchaser; (iv) certain conditions to the financing of the Recapitalization have
been satisfied including, among others, that Purchaser has obtained from the
Holders, and the Trustee has taken all necessary actions with respect to, all
waivers, consents and amendments necessary to (a) waive the failure by the
Company to comply with certain technical requirements relating to the
qualification and operation of OSI Funding as an Unrestricted Subsidiary under
the Indenture and any and all consequences arising therefrom under the
Indenture, and (b) have the Holders waive the Company's obligation to make a
Change of Control Offer or to make a Change of Control Payment, in each case on
terms and conditions Purchaser and the Company each deem satisfactory; (v)
Purchaser has received the resignations, effective as of the Closing, of each
non-employee director and officer of the Company and its subsidiaries other than
those whom the Purchaser has specified in writing at least five business days
prior to the Closing; (vi) the Company has obtained the vote of stockholders
holding more than 75% of the voting power of all of the outstanding stock of the
Company approving payments the Company has made or is or may be obligated to
make that would be "parachute payments" (within the meaning of Internal Revenue
Code ss. 280G(b)) so that any such payments either will not be excess parachute
payments or will be exempt from treatment as a parachute payment under Code ss.
280G(b); (vii) the Company's preferred stock has been exchanged and the
Company's nonvoting common stock has been converted as specified in the Purchase
Agreement; (viii) the Company has neither received notification of the
termination of its business relationship with its major customers nor
experienced any material adverse change in the Company's contracts with its
major customers; (ix) the stock to be redeemed has been delivered; and (x) an
escrow agreement related to a potential working capital adjustment has been
entered into.
Indemnification
From and after the Closing, the Company must and the Purchaser must
cause the Company to maintain in effect in the Certificate of Incorporation of
the Company the provisions with respect to indemnification set forth in Article
Eight of the Certificate of Incorporation of the Company as in effect at the
Closing. Such provisions may not be amended, repealed, or otherwise modified for
a period of six (6) years from the Closing in any manner that would adversely
affect the rights thereunder of individuals (or their estates) who at the date
of the Purchase Agreement and/or as of the Closing are or were directors,
officers, employees or agents of the Company or its Subsidiaries, unless such
modification is required by law.
Termination
The Purchase Agreement may be terminated and the Recapitalization
abandoned, at any time prior to the Closing:
1. by mutual consent of the Company and the Purchaser;
2. by the Company or the Purchaser if the Recapitalization has not
been completed on or before December 31, 1999 (or such later date
as may be agreed to in writing by the Company and the Purchaser),
by reason of the failure of any condition to the consummation of
the Recapitalization which must be fulfilled to its satisfaction,
provided that no party may terminate the Purchase Agreement if
such failure has been caused primarily by such party's material
breach of the Purchase Agreement;
3. by either the Company or the Purchaser if (i) there are any
inaccuracies, misrepresentations or breaches of the breaching
party's representations or warranties in the Purchase Agreement,
such that the nonbreaching party's obligation to effect the
Recapitalization cannot be met, or (ii) the breaching party has
breached or failed to perform in all material respects any of its
material covenants or agreements contained within the Purchase
Agreement as to which notice has been given to the breaching
party and the breaching party has failed to cure or otherwise
resolve to the reasonable satisfaction of the nonbreaching party
within 15 days after receipt of such notice; or
4. by the Company or the Purchaser if a court of competent
jurisdiction or other governmental body has issued an order,
decree or ruling or taken any other action restraining, enjoining
or otherwise prohibiting the transactions contemplated by the
Purchase Agreement and such order, decree, ruling or other action
has become final and nonappealable.
In the event of the termination of the Purchase Agreement by the
Purchaser or the Company, written notice will be given to the other party or
parties specifying the provision pursuant to which such termination is made, and
the Purchase Agreement will become void and have no effect, and there will be no
liability on the part of any party except under certain sections that survive
any termination of the Purchase Agreement.
Ancillary Agreements
Simultaneous with the Closing, an escrow agreement (the "Escrow
Agreement") and a stockholders agreement (the "Stockholders Agreement") will be
entered into. The Escrow Agreement will be among McCown De Leeuw & Co., Inc., as
the seller's representative for the Equityholders, and an escrow agent to be
identified by McCown De Leeuw & Co., Inc., as Escrow Agent (the "Escrow Agent").
The Purchase Agreement provides for adjustments to the redemption price payable
for the Redemption Shares depending on Company's closing date working capital,
and that as a result of such adjustments certain payments may be required to be
made. To facilitate such payments, the Purchase Agreement provides for the
deposit into escrow of $5.0 million otherwise payable at the Closing to the
Equityholders. The Stockholders Agreement will be among the Company, the
Purchaser and certain Equityholders and will provide for, among other things,
(i) the composition of the Company's Board of Directors (the "Board"); (ii)
certain "drag along" and "tag along" rights among the parties thereto and (iii)
certain restrictions on the ability of the Equityholders to transfer their
shares of Common Stock.
The Purchaser
MDP is one of the largest and most experienced private equity investment
firms in the United States. MDP's principals manage Madison Dearborn Capital
Partners III, L.P. ("MDCPIII"), a $2.2 billion investment fund raised in 1999,
Madison Dearborn Capital Partners II, L.P. ("MDCPII"), a $925.0 million
investment fund raised in 1996, and Madison Dearborn Capital Partners, L.P.
("MDCP"), a $550.0 million investment fund raised in 1993. Previously, MDP's
principals built a $2.0 billion management buyout and venture capital portfolio
at First Chicago Corporation. MDP focuses on management and venture capital
transactions and a wide range of other private equity investments, including
growth equity financings, recapitalizations and acquisition-oriented financing
transactions. MDP focuses on investments in several specific industries,
including financial services, communications, natural resources, consumer,
health care and industrial. MDP's long-standing investment philosophy is to
invest in companies that have outstanding management teams and the potential for
significant long-term equity appreciation.
Management
Board of Directors. Pursuant to the Stockholders Agreement, the
authorized number of directors on the Board following the Recapitalization will
be established at such number as will be determined from time to time in the
sole discretion of MDCPIII. The Stockholders Agreement provides that the
following individuals will be elected to the Board: (i) one individual
designated by MDCPIII who is a member of the Company's management, provided that
until the first annual meeting of the Company's stockholders, Timothy G. Beffa
will serve as such Management Director; and (ii) other individuals designated by
MDCPIII, who will initially be Paul R. Wood, Timothy M. Hurd and two other
persons to be specified by MDCPIII; provided that MDCPIII may authorize one or
more other persons to designate one or more additional individuals to be elected
to the Board on such terms and conditions as the Purchaser will determine in its
sole discretion.
A brief description of each person who will serve on the Board following
the Recapitalization is set forth below:
Paul R. Wood. Mr. Wood has served as a principal of MDCPIII, MDCPII and
MDCP since their respective formations in March 1999, June 1996 and January
1993, and as a Vice President or Managing Director of MDP, their indirect
general partner. Prior to that time, Mr. Wood served as Vice President of First
Chicago Venture Capital, which comprised the private equity investment
activities of First Chicago Corporation, the holding company parent of First
National Bank of Chicago. Mr. Wood serves on the board of directors of Hines
Horticulture, Inc., Eldorado Bancshares Inc., Woods Equipment Company and a
number of private companies.
Timothy M.Hurd. Mr. Hurd has served as a principal of MDCPIII and MDCPII
since their respective formations in March 1999 and June 1996, and as a Director
of MDP, their indirect general partner. Mr. Hurd joined MDP in 1996 following
his graduation from Harvard Business School. From 1992 to 1994, Mr. Hurd was
employed by Goldman, Sachs & Co. Mr. Hurd also serves on the board of directors
of Woods Equipment Company.
Timothy G. Beffa. Mr. Beffa has served as President, Chief Executive
Officer and a Director of the Company since August 1996. From August 1995 until
August 1996, Mr. Beffa served as president and chief operating officer of DIMAC
Corporation and DIMAC DIRECT Inc. and a director of DIMAC DIRECT Inc. From 1989
until August 1995, Mr. Beffa served as a vice president of DIMAC Corporation and
as senior vice president and chief financial officer of DIMAC DIRECT Inc. Prior
to joining the Company, Mr. Beffa was vice president of administration and
controller for the Internal Division of Pet Incorporated, a food and consumer
products company, where he previously had been manager of financial analysis.
Mr. Beffa currently serves as a director of DIMAC Holdings, Inc. and DIMAC
Corporation.
Executive Officers. All of the current non-director executive officers
of the Company and its subsidiaries will continue to serve in such capacities
following the Recapitalization on substantially the same terms and conditions
other than those whom the Purchaser shall have specified in writing at least
five business days prior to the Closing.
New Senior Credit Facility
DLJ Capital Funding, Inc. has issued a commitment letter to MDCPIII
under which it has committed, subject to the terms and conditions set forth
therein, to provide senior secured facilities to the Company under the New
Senior Credit Facility. The New Senior Credit Facility will consist of (i) a
six-year non-amortizing $75.0 million revolving credit facility (the "Revolving
Facility") and (ii) a $400.0 million term loan facility (the "Term Facility"),
which will be comprised of a $125.0 million six-year amortizing term loan A
facility (the "Term A Facility") and a $275.0 million six and one half-year
amortizing term loan B facility (the "Term B Facility"). Set forth below is a
brief description of the material terms of the New Senior Credit Facility.
Definitive documents relating to the New Senior Credit Facility are still being
negotiated and thus the terms set forth herein are subject to change.
Repayment
The Term A Facility and Term B. Facility mature in quarterly
installments, resulting in aggregate annual amortization payments as a
percentage of the initial principal amount as follows:
Year after Closing Annual Amortization
----------------------------- ------------------------------
(In percentage of the initial
principal amount)
Term A Facility Term B Facility*
--------------- ----------------
1............................... 0.0% 1.0%
2............................... 5.0% 1.0%
3............................... 10.0% 1.0%
4............................... 20.0% 1.0%
5............................... 25.0% 1.0%
6............................... 40.0% 94.5%
* With respect to the Term B Facility, aggregate annual amortization
payments as a percentage of the initial principal amount are 1.0% for
years 1-5.5 and 94.5% for year 6.5.
Guarantees; Security
The New Senior Credit Facility will be secured by a first-priority,
perfected lien on: (i) substantially all property and assets (tangible and
intangible) of the Company and its present and future domestic subsidiaries
(excluding OSI Funding), including all capital stock of all direct and indirect
subsidiaries of the Company (excluding OSI Funding); provided, however, that no
more than 65% of the equity interests of non-U.S. subsidiaries of the Company
will be required to be pledged as security; (ii) 100% of the capital stock of
the Company; and (iii) all intercompany indebtedness in favor of the Company and
its domestic subsidiaries (excluding OSI Funding).
Interest
At the Company's option, the interest rates per annum applicable to the
Revolving Facility, Term A Facility and Term B Facility will bear interest at
the Administrative Agent's alternate base rate or reserve-adjusted LIBO rate
plus, in each case, the applicable margins set forth below:
Applicable Margins
-----------------------------------------
Alternate Base Rate LIBO Rate
------------------- ---------
Revolving Facility............... 2.25% 3.25%
Term A Facility.................. 2.25% 3.25%
Term B Facility.................. 2.75% 3.75%
Commencing after the first two full fiscal quarters after the Closing,
the applicable margin to be used in calculating the interest rates under the
Revolving Facility and Term A Facility will be based upon the ratio of the
Company's total debt to EBITDA (the "Leverage Ratio") as follows:
Applicable Margins
-----------------------------------------------
Leverage Ratio Alternate Base Rate LIBO Rate
-------------- ------------------- ---------
>4.0x 2.25% 3.25%
-
>3.5x 1.75% 2.75%
-
>2.75x 1.25% 2.25%
-
<2.25x 0.75% 1.75%
Interest periods for the LIBO rate will be, at the Company's option,
one, two, three or six months. Interest for the LIBO rate loans will be payable
on the last business day of the applicable interest period thereof (or, if
earlier, each third month following the commencement of such interest period).
Interest on the alternative base rate loans will be payable monthly in arrears.
Prepayments
The Company is permitted to voluntarily prepay its obligations under the
New Senior Credit Facility without penalty (exclusive of customary LIBO rate
breakage costs). Obligations under the New Senior Credit Facility are subject to
customary, mandatory prepayments including, without limitation, with (i) 100% of
net cash proceeds from the issuance of debt securities and sales of assets
(subject to certain exceptions), (ii) 50% of net cash proceeds from the issuance
of equity securities (subject to the exceptions and the maintenance of a
specified leverage ratio) and (iii) 50% of excess cash flow proceeds (subject to
maintaining a specified leverage ratio).
Conditions; Covenants; Events of Default
The effectiveness of the New Senior Credit Facility will be subject to
customary conditions.
The New Senior Credit Facility will contain customary covenants
restricting the Company's ability, and the ability of its subsidiaries to (with
limited exceptions), among other things: (i) incur debt, (ii) subject the
Company's assets to liens or other encumbrances, (iii) incur contingent
liabilities, (iv) enter into sale/lease-back transactions, (v) pay dividends or
similar distributions, (vi) sell assets other than in the ordinary course of
business, (vii) merge or consolidate, (viii) enter into transactions with
affiliates, (ix) make investments or capital expenditures in excess of specified
levels and (x) refinance, defease, repurchase or prepay subordinated debt. In
addition, the New Senior Credit Facility will require the Company to meet
certain financial performance tests, including: (i) a maximum leverage ratio,
(ii) a minimum interest coverage ratio, (iii) a minimum fixed charge ratio and
(iv) a minimum EBITDA.
The New Senior Credit Facility will contain events of default customary
for a recapitalization, including, among others, a default under the New Senior
Credit Facility upon a change in control and defaults in other agreements.
THE SOLICITATION
Purpose of the Solicitation
Change of Control. The Company is soliciting Consents to the waiver of
the Company's obligations under Section 4.15 of the Indenture, including its
obligation to make a Change of Control Offer in connection with the
Recapitalization. Under the Indenture, a Change of Control is defined to
include, among other things, the acquisition by any Person or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (other than
Principals and Related Parties) of a direct or indirect interest in more than
35% of the voting power of the voting stock of the Company by way of merger or
consolidation or otherwise. Absent a waiver of the Company's obligations under
Section 4.15, the Purchaser's acquisition of approximately 78.0% of the
Company's fully diluted common equity in connection with the Recapitalization
will constitute a Change of Control under the Indenture. Section 4.15 of the
Indenture and all related defined terms are set forth in their entirety on Annex
I attached hereto.
Upon receipt by the Company of the Requisite Consents, the Consents
being solicited hereby will become effective and the Company will not be
obligated to make a Change of Control Offer or Change of Control Payment under
Section 4.15 of the Indenture in connection with the Recapitalization to any
Holder of Notes regardless of whether such Holder executed a Consent. The waiver
being solicited hereby with respect to the Change of Control relates only to the
Company's obligations under Section 4.15 of the Indenture in connection with the
Recapitalization and will not serve to waive any future rights the Holders may
have under Section 4.15 of the Indenture, or to amend, alter or otherwise modify
any of the terms of the Indenture, including Section 4.15 thereof.
Unrestricted Subsidiary Designation. The Consents will also serve to
waive the failure by the Company to comply with certain technical requirements
relating to the qualification and operation of its finance subsidiary, OSI
Funding, as an Unrestricted Subsidiary under the Indenture and any and all
consequences arising therefrom under the Indenture.
In September 1998, the Company formed OSI Funding as a qualifying
special-purpose finance company for use in helping to fund its portfolio
purchasing business. Since its formation, OSI Funding has been a
nonconsolidated, bankruptcy-remote, wholly owned subsidiary of the Company. In
connection with its formation, OSI Funding entered into a revolving warehouse
financing arrangement for up to $100.0 million of funding capacity for the
purchase of loans and accounts receivable portfolios, approximately $35.0
million of which is currently utilized. A majority of all receivables portfolios
purchased by the Company or its subsidiaries are now sold to OSI Funding
utilizing such financing arrangement. Such transactions with OSI Funding are
required to be on the same economic terms as those by which the Company or its
subsidiaries initially purchases the receivables portfolio from third party
credit grantors. A subsidiary of the Company, through a servicing agreement with
OSI Funding, provides certain administrative and collection services on a
contingent fee basis. Through OSI Funding, the Company is able to fund the
purchase of portfolios on an off-balance sheet basis, thereby substantially
increasing the Company's available cash flow for servicing its debt. The
Company's initial investment in OSI Funding was $2.5 million, and the Company
has made investments in OSI Funding aggregating $5.0 million, inclusive of the
initial investment.
Since the formation of OSI Funding, the Company has treated OSI Funding
as an Unrestricted Subsidiary under the Indenture. Unlike a Restricted
Subsidiary, which is required to guarantee payment of the Notes and generally is
subject to the covenant restrictions under the Indenture, an Unrestricted
Subsidiary is not required to guarantee payment of the Notes and, for the most
part, is not subject to such covenant restrictions. Under the Indenture, a
Subsidiary is deemed to be a Restricted Subsidiary unless it otherwise qualifies
as an Unrestricted Subsidiary.
In order for a Subsidiary to qualify as an Unrestricted Subsidiary, the
following conditions must be satisfied: (i) the Subsidiary must be designated as
an Unrestricted Subsidiary by the Company's Board of Directors pursuant to a
Board Resolution and a certified copy of such Board Resolution, together with an
Officer's Certificate certifying that such designation complied with the
applicable conditions and was in accordance with the provisions under the
Indenture relating to Restricted Payments, must be filed with the Trustee under
the Indenture; (ii) the Subsidiary has no Indebtedness other than Non-Recourse
Debt; (iii) the Subsidiary is not a party to any agreement, contract,
arrangement or understanding with the Company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company; (iv) the Subsidiary must be a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation (a) to subscribe for additional Equity Interests or (b)
to maintain or preserve such Person's financial condition or cause such Person
to achieve any specified levels of operating results; (v) the Subsidiary has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries; (vi) the
Subsidiary has at least one director on its board directors that is not a
director or executive officer of the Company or any of its Restricted
Subsidiaries; and (vii) the Subsidiary has at least one executive officer that
is not a director or executive officer of the Company or any of its Restricted
Subsidiaries. The definition of an Unrestricted Subsidiary is set forth in its
entirety on Annex II attached hereto.
It has recently come to the attention of the Company that, at the time
of formation of OSI Funding, the Company failed to take certain ministerial
actions to satisfy the technical requirements under the Indenture for the
designation of OSI Funding as an Unrestricted Subsidiary, despite the fact that
it could have been designated as such at that time. Namely, the Company did not
satisfy items (i) and (vii) set forth above at the time of formation of OSI
Funding, and the Company's obligation under the terms of OSI Funding's financing
arrangements to purchase an additional $2.5 million of equity in OSI Funding if
certain borrowing thresholds were exceeded by OSI Funding conflicted with item
(iv)(a) set forth above. The Company has since made this additional equity
investment in OSI Funding and currently does not have any obligation to purchase
or subscribe for additional equity interests in OSI Funding. But for these
deficiencies, OSI Funding would have otherwise satisfied the requirements for
qualification as an Unrestricted Subsidiary under the Indenture at the time of
its formation. Had OSI Funding been properly designated an Unrestricted
Subsidiary from the time of its formation, the Company's investments in OSI
Funding would have been Permitted Investments under the Indenture.
If OSI Funding were not to be treated as having been an Unrestricted
Subsidiary since its formation, the Company and OSI Funding would not be in
compliance with certain restrictive covenants of the Indenture. If it were
determined that the Company was not in compliance with the Indenture, the
Trustee or the Holders of 25% of the aggregate principal amount of the Notes
could notify the Company to comply with such restrictive covenants under the
Indenture, and, if the Company failed to so comply within the applicable grace
period, could declare the Notes to be immediately due and payable. In such
event, the aggregate principal amount of the Notes plus accrued and unpaid
interest thereon to the date of payment would, subject to the subordination
provisions of the Indenture, then be due and payable.
While the Company believes that its failure to properly qualify and
operate OSI Funding as an Unrestricted Subsidiary under the Indenture is a
technicality and that substantively OSI Funding should be treated as qualifying
as an Unrestricted Subsidiary since its formation, in order to remove any doubt
as to the status of OSI Funding as an Unrestricted Subsidiary for the benefit of
the Purchaser, the Company is seeking the waiver of its failure to properly
qualify and operate OSI Funding as an Unrestricted Subsidiary and any and all
consequences arising therefrom. Subject to the effectiveness of the Consents,
OSI Funding will be treated as having been duly designated as an Unrestricted
Subsidiary since its formation. Such actions will thereby cure any asserted
failure by the Company and OSI Funding to be in compliance with the provisions
of the Indenture arising as a result of the Company not having properly
qualified and operated OSI Funding as an Unrestricted Subsidiary and any and all
consequences arising therefrom.
Section 4.11 of the Indenture requires that the Company deliver to the
Trustee an opinion from an accounting, appraisal or investment banking firm of
national standing as to the fairness to the Holders of the Notes of any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million (a "Fairness Opinion").
Section 4.11 of the Indenture is set forth in its entirety on Annex III attached
hereto. The execution of the servicing agreement between the Company and OSI
Funding in connection with the formation of OSI Funding and the transactions
undertaken pursuant thereto from time to time thereafter were Affiliate
Transactions involving aggregate consideration in excess of $5.0 million. In
addition, on four occasions the sale of receivables portfolios by the Company to
OSI Funding involved aggregate consideration in excess of $5.0 million. As a
result, the Company was required in connection with the servicing agreement and
such sales to obtain Fairness Opinions. Although the Company did not obtain
Fairness Opinions at such times, it has since retained an appraisal firm of
national standing to provide such Fairness Opinions. The Company believes the
appraisal firm will be able to provide it with the Fairness Opinions. The
Company expects to receive such Fairness Opinions prior to the completion of the
Recapitalization. Upon receipt of Fairness Opinions with respect to the
transactions referred to above, the Company will have satisfied the requirements
of Section 4.11 of the Indenture with respect to any potential noncompliance
arising out of those transactions.
The Waivers constitute a single proposal with respect to the Indenture
and a consenting Holder must Consent to the Waivers as an entirety and may not
consent selectively with respect to the Waivers.
If the Consents are received from registered Holders of at least a
majority of the aggregate principal amount of the outstanding Notes, such
Consents will apply to all Notes issued under the Indenture and each Holder of
such Notes will be bound by such Consents regardless of whether such Holder
executed a Consent.
Consent Payment
The Consent Payment is an amount in cash equal to $100 for each $1,000
of principal amount of Notes as to which the Consents have been validly
delivered and not validly revoked at or prior to 5:00 p.m., New York City time,
on the Expiration Date. The Company will pay the Consent Payment on the Consent
Payment Date, subject to the Company's right to abandon or terminate the
Solicitation, in its sole discretion, prior to the Consent Payment Date. In
addition, the Company's obligation to make the Consent Payment is expressly
conditioned upon, and subject to, the Closing. In the event that the
Solicitation is withdrawn or otherwise not completed, the Consent Payment will
not be paid or become payable to Holders of the Notes who have validly delivered
their Consents in connection with the Solicitation. In all cases, payment of the
Consent Payment shall constitute consideration with respect to the tender of
Consents and will be made only after timely receipt by the Information Agent and
acceptance by the Company of (i) the properly completed and duly executed
Consents and (ii) any other documents required by the Consent.
The Consent Payments will be deposited by the Company with the Paying
Agent, which will act as agent for the consenting Holders for purposes of
receiving payment from the Company and transmitting payments to the consenting
Holders on the Consent Payment Date.
Requisite Consents; Record Date; Effective Date; Expiration Date
To effect the Waivers, the registered holders of at least a majority of
the aggregate principal amount of the Notes outstanding under the Indenture as
of the Record Date must tender their Consents thereto. Notwithstanding the
foregoing, for purposes of determining whether the Requisite Consents have been
delivered by the Holders, Notes held by the Company, any Guarantor or any of
their respective affiliates will be disregarded.
The Record Date for purposes of the Solicitation is the close of
business on November 5, 1999. Only Holders of Notes as of the Record Date may
execute Consents and receive the Consent Payment.
The Consents shall become effective immediately upon the Company
receiving the Requisite Consents and certifying to the Trustee that such
Requisite Consents have been received. The Consents shall cease to be effective,
and no Consent Payment will be made in respect thereof, in the event that the
Solicitation is abandoned or terminated by the Company for any reason prior to
the Consent Payment Date.
The Expiration Date shall be November 19, 1999. The Company will not be
obligated to accept any Consents received after the Expiration Date. The Company
reserves the right to extend the Solicitation on a daily basis until 5:00 p.m.,
New York City time, on the date on which the Requisite Consents have been
received.
Waiver; Extensions; Amendments
The Company expressly reserves the right, in its sole discretion,
subject to applicable law at any time or from time to time, to:
1. abandon or terminate the Solicitation for any reason at any time
prior to the Consent Payment Date, not accept any Consents before
the Consent Payment Date whether or not the Requisite Consents
have been received by such date, or postpone the acceptance of
any Consents or delay the Consent Payment for Consents accepted;
2. waive any condition to the Solicitation and accept all Consents
previously delivered pursuant to the Solicitation;
3. extend the Expiration Date of the Solicitation and retain all
Consents tendered pursuant thereto, subject to the withdrawal
rights of Holders; and
4. amend the Solicitation in any respect until the Consents that are
the subject thereof are delivered.
If the Company extends the Solicitation or if, for any reason, the acceptance of
the Consents is delayed or if the Company is unable to accept the Consents or
pay the Consent Payment pursuant to the Solicitation, then the Information Agent
may retain the delivered Consents which have not been previously withdrawn on
behalf of the Company, and such Consents may not be withdrawn except to the
extent consenting Holders are entitled to withdrawal rights.
Any extension, termination or amendment of the Solicitation may be made
by giving written or oral notice thereof to the Information Agent, which will be
followed as promptly as practicable by a public announcement thereof. In the
case of an extension, a public announcement will be issued prior to 9:00 a.m.,
New York City time, on the next business day after the previously scheduled
Expiration Date of the Solicitation subject to such extension. Without limiting
the manner in which the Company may choose to make any public announcement, the
Company shall have no obligation to publish, advertise or otherwise communicate
any such public announcement other than by making a release to the Dow Jones
News Service or otherwise as required by law. All Consents provided pursuant to
the Solicitation prior to any extension and not subsequently withdrawn will
remain subject to the Solicitation.
The terms of any extension or amendment of the Solicitation may vary
from the original Solicitation. There can be no assurance that the Company will
exercise its right to extend, terminate or amend the Consent Statement. If the
Company amends the terms of the Solicitation, such amendment will apply to all
Consents delivered pursuant thereto regardless of when or in what order such
Consents were delivered. The Company does not presently intend to change the
terms of the Solicitation, including the amount of the Consent Payment.
If the Company makes a material change in the terms of the Solicitation
or the information concerning the Solicitation or waives any condition of the
Solicitation that results in a material change to the circumstances of the
Solicitation, the Company will disseminate additional Solicitations and
solicitation material if and to the extent required by applicable law and will
extend the Solicitation if and to the extent required in order to permit the
Holders subject to the Solicitation adequate time to consider such materials. If
the Company decides, in its sole discretion, to increase or decrease the Consent
Payment, the Company will, to the extent required by applicable law, cause the
Solicitation to be extended, if necessary so that the Solicitation remains open
at least until the expiration of three business days from the date that such
notice is first published, sent or given by the Company. For purposes of this
paragraph, "business day" has the meaning set forth in Rule 14d-1(c)(6) under
the Exchange Act. In addition, with respect to any other material change in the
Solicitation or the information concerning the Solicitation, the minium period
during which the Solicitation must remain open following such material change
depends upon the facts and circumstances including, the relative materiality of
such terms or information.
Consent Procedures
The Notes are currently on deposit with The Depository Trust Company
("DTC") and are registered in the name of DTC's nominee, Cede & Co., as nominee
holder of the Notes. Cede & Co. will execute an omnibus proxy which will
authorize its participants (each, a "Participant") to consent with respect to
the Notes owned by it and held in the name of Cede & Co. as specified on the DTC
position listing of Cede & Co., as of the Record Date, with respect to the
Notes. The term "Holder" as used in this Consent Statement means (i) each person
(a) in whose name the Notes are registered as of the Record Date; or (b) whose
name appears on a securities position listing of DTC as the holder of an
interest in the Notes as of the Record Date and whom DTC has authorized to
consent to the Waivers and (ii) any other person who has been authorized by
proxy or in any other manner acceptable to the Company to vote Notes on behalf
of the registered Holder thereof.
Pursuant to Section 9.04 of the Indenture, a Consent with respect to all
or a portion of a Note is a continuing Consent with respect to such Note or
portion of a Note notwithstanding a subsequent transfer of ownership of such
Note. Consents may be revoked prior to the Effective Date, only by the Holder
granting such Consent (or a duly authorized proxy of such person) by following
the procedures set forth herein. Such revocation shall terminate the previously
delivered Consent with respect to such Note unless a new Consent is given prior
to the Expiration Date by following the procedure set forth herein.
Giving a Consent will not affect the right of a Holder to sell or
transfer the Notes, and such Consent shall be binding upon a subsequent holder
of the Notes.
The Company is requesting that any and all of the Holders execute the
Consent Form accompanying this Consent Statement. The Consent Form must be
executed by the Holder in the same manner as the Holder's name appears in the
register maintained by the Trustee or on a DTC securities position listing
reflecting such Holder as an owner of such Notes. If the Notes are held in more
than one name, as reflected therein, such Consent Form must be executed by each
such Holder. If the Consent Form 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 should submit with the Consent Form appropriate
evidence of authority to execute the Consent Form. If the Notes owned by a
Holder are held in different names, as reflected in such register or on such
securities position listing, separate Consent Forms must be executed covering
all such Notes. If applicable, the Consent Form should set forth the DTC
participant number relating to the Notes with respect to which a Consent is
given. In addition, if the Consent Form relates to less than the total principal
amount of the Notes at maturity held in the name of such Holder, the Holder must
list the principal amounts of the Notes at maturity to which the Consent Form
relates. Otherwise, the Consent Form will be deemed to relate to the total
principal amount of the Notes at maturity held in the name of such Holder.
Any beneficial owner whose Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
Consent should promptly contact the person in whose name its Notes are
registered and instruct such registered Holder to Consent on its behalf. A
Letter of Instruction is contained in the solicitation materials provided along
with this Consent Statement which may be used by a beneficial owner to instruct
the record Holder to deliver Consents. If a beneficial owner wishes to Consent
on its own behalf, it must, prior to completing and executing the Consent,
either make appropriate arrangements to register ownership of the Notes in its
name or obtain a properly completed bond power from the registered Holder. The
transfer of registered ownership may take considerable time.
All questions as to the validity, form, eligibility (including time of
receipt) and the acceptance of Consents will be resolved by the Company, in its
sole discretion, whose determination shall be binding. The Company reserves the
absolute right to reject all Consents that are not in proper form or the
acceptance of which could, in the opinion of its counsel, be unlawful. The
Company also reserves the right to waive any irregularities or conditions of
delivery as to particular Consents, including the requirement that Consents must
be delivered prior to the Expiration Date in order to receive the Consent
Payment. Unless waived, any irregularities in connection with the deliveries
must be cured within such time as the Company determines. None of the Company,
the Solicitation Agent, the Information Agent, the Paying Agent and any other
person will be under any duty to give notification of any such irregularities or
waiver. Deliveries of such Consents will not be deemed to have been properly
made until such irregularities have been cured or waived. The interpretation of
the Company of the terms and conditions of this Solicitation shall be binding.
Consents to the Waivers, to be effective, must be properly executed and
received by the Company prior to the Expiration Date. The method of delivery of
all documents, including the fully executed Consent Form, is at the election and
risk of the Holder. Each Holder wishing to consent to the Waivers must complete,
sign and date the Consent Form accompanying this Consent Statement (or a
facsimile thereof) in accordance with the instructions set forth herein and
therein and hand deliver, send by overnight courier or send by facsimile
transmission, to the Information Agent as follows:
By Mail, Overnight Courier or Hand:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, NY 10010
Attention: Simon Coope
By Facsimile:
(212) 929-0061
Confirm by Telephone:
(212) 929-5500 (Call Collect)
(800) 322-2885 (Toll Free)
HOLDERS WHO WISH TO CONSENT SHOULD HAND DELIVER, SEND BY OVERNIGHT
COURIER OR SEND BY FACSIMILE TRANSMISSION, THEIR PROPERLY COMPLETED AND EXECUTED
CONSENT FORM TO THE INFORMATION AGENT IN ACCORDANCE WITH THE INSTRUCTIONS SET
FORTH HEREIN AND THEREIN. HOWEVER, THE COMPANY RESERVES THE RIGHT TO ACCEPT ANY
CONSENT RECEIVED BY IT OR THE INFORMATION AGENT. IN NO EVENT SHOULD A HOLDER
TENDER OR DELIVER NOTES.
Withdrawal Rights
Consents may be revoked at any time prior to the Effective Date. Each
properly completed and executed Consent will be counted, notwithstanding any
transfer of the Notes to which such Consent relates, unless the procedure for
revoking Consents described below has been complied with. Consents may only be
revoked by the Holder granting such Consent (or a duly authorized proxy of such
Holder). For a revocation of Consents to be effective prior to the Effective
Date a written notice must be received by the Information Agent at its address
set forth above or on the back cover of this Consent Statement. Any such notice
of revocation must (i) specify the name of the person having executed the
Consent being revoked, (ii) identify the aggregate principal amount of the Notes
held by such person, and (iii) be signed by the Holder in the same manner as the
original signature on the Consent or be accompanied by a bond power, and a
properly completed irrevocable proxy, in each case in the name of the person
revoking the Consent, in a satisfactory form as determined by the Company in its
sole discretion, duly executed by the registered Holder. A purported notice of
revocation which lacks any of the required information or is dispatched to any
other address will not be an effective withdrawal of a Consent previously made.
Revocation of Consents can only be accomplished in accordance with the
foregoing procedures.
Any permitted revocation of Consents may not be rescinded; and any
Consents so withdrawn will thereafter be deemed not validly tendered for
purposes of the Consent Payment; provided, however, that revoked Consents may
again be tendered by following the procedures for tendering at or prior to the
Expiration Date.
All questions as to the validity (including time of receipt) of notices
of revocation will be determined by the Company, in its sole discretion, whose
determination will be final and binding. None of the Company, the Solicitation
Agent, the Information Agent, the Paying Agent and any other person will be
under any duty to give notification of any defects or irregularities in any
notice of revocation, or shall incur any liability for failure to give any such
notification.
Fees and Expenses
In addition to the fees and expenses payable to the Solicitation Agent,
the Company will pay the Paying Agent reasonable and customary fees for its
services (and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith), and will pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by them
in forwarding copies of this Solicitation and related documents to the
beneficial owners of the Notes and in handling or forwarding their Consents.
Information, Tabulation and Paying Agents
The Information and Tabulation Agent for the Solicitation is MacKenzie
Partners, Inc. All deliveries, correspondence and questions sent or presented to
the Information Agent relating to the Solicitation should be directed to the
address or telephone number set forth on the back cover of this Consent
Statement. The Company will pay the Information Agent reasonable and customary
compensation for its services in connection with the Solicitation, plus
reimbursement for reasonable out-of-pocket expenses. The Company will indemnify
the Information Agent against certain liabilities and expenses in connection
therewith, including liabilities under the federal securities laws.
U.S. Bank Trust National Association is acting as the Paying Agent for
the Company in connection with the Solicitation. The Company will pay the Paying
Agent reasonable and customary compensation for such services, plus
reimbursement for reasonable out-of-pocket expenses.
Brokers, dealers, commercial banks and trust companies will be
reimbursed by the Company for customary mailing and handling expenses incurred
by them in forwarding material to their customers. The Company will not pay any
fees or commissions to any broker, dealer or other person (other than the
Information Agent) in connection with the Solicitation.
CAPITALIZATION
The following table sets forth the Company's unaudited capitalization as
of June 30, 1999, on an actual basis and a pro forma basis giving effect to the
Recapitalization and related financing transactions as if they occurred on such
date. The information in the following table should be read in conjunction with
the "Unaudited Pro Forma Financial Data" included elsewhere in this Consent
Statement.
Unaudited
-------------------------
As of
June 30, 1999
-------------------------
Actual Pro Forma
------ ---------
(dollars in millions)
Debt:
Existing Senior Credit Facility $ 415.5 $ -
New Senior Credit Facility:(1)
Revolving Credit Facility - 4.0
Term A Facility - 125.0
Term B Facility - 275.0
Notes 100.0 100.0
Other indebtedness 5.5 5.5
------------ -------------
Total debt $ 521.0 $ 509.5
Preferred Stock - 100.0
Stockholders' deficit(2) (36.1) (123.3)
------------ -------------
Total capitalization $ 484.9 $ 486.2
============ =============
(1) The New Senior Credit Facility will provide for revolving credit
borrowings of up to $75.0 million, $4.0 million of which the Company
expects to borrow at Closing.
(2) See "Unaudited Pro Forma Consolidated Balance Sheet."
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma financial data (the "Unaudited Pro
Forma Financial Data") of the Company have been derived by the application of
pro forma adjustments to the historical financial statements of the Company for
the periods indicated. The adjustments are described in the accompanying notes.
The Unaudited Pro Forma Statement of Operations for the year ended
December 31, 1998 and the six month period ended June 30, 1999 gives effect to
the Recapitalization and related financing transactions, as if such transactions
had occurred at the beginning of the earliest period presented. The Unaudited
Pro Forma Balance Sheet as of June 30, 1999 gives effect to the Recapitalization
and related financing transactions as if such transactions occurred on such
date. The Unaudited Pro Forma Financial Data do not give effect to any other
transactions except those discussed in the accompanying notes. The Unaudited Pro
Forma Financial Data are provided for informational purposes only and do not
purport to represent the results of operations or financial position of the
Company had the Recapitalization and related financing transactions in fact
occurred on such dates nor do they purport to be indicative of the financial
position or results of operations as of any future date or any future period.
The Unaudited Pro Forma Financial Data and accompanying notes should be
read in conjunction with the financial statements and accompanying notes thereto
and the other financial information incorporated by reference herein.
OUTSOURCING SOLUTIONS INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
As of June 30, 1999
-----------------------------------
Historical Adjustments Pro Forma
---------- ----------- ---------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents - operating $ 6,889 $ 6,889
Cash and cash equivalents held for clients 25,206 25,206
Current portion of purchase loans and
accounts receivable portfolios 30,202 30,202
Accounts receivable - trade, 45,165 45,165
Other current assets 9,209 9,209
TOTAL CURRENT ASSETS 116,671 116,671
PURCHASED LOANS AND ACCOUNTS RECEIVABLE
PORTFOLIOS 8,902 8,902
PROPERTY AND EQUIPMENT, net 40,111 40,111
DEFERRED FEES 12,307 $1,316(1) 13,623
INTANGIBLE ASSETS, net 418,452 418,452
OTHER 2,778 2,778
TOTAL ASSETS $599,221 $ 1,316 $600,537
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $8,036 8,036
Accounts payable - clients 25,206 25,206
Accrued salaries and wages 13,190 13,190
Current maturities of notes payable 18,749 $(15,304)(2) 3,445
Other current liabilities 46,171 46,171
TOTAL CURRENT LIABILITIES 111,352 96,048
(15,304)
NOTES PAYABLE, NET OF CURRENT PORTION
Term debt 370,700 26,550(2) 397,250
Revolver 26,700 (22,700)(2) 4,000
11% Senior Subordinated Notes 100,000 100,000
Other notes payable 4,818 4,818
OTHER LONG-TERM LIABILITIES 21,743 21,743
TOTAL LIABILITIES 635,313 (11,454) 623,859
REDEEMABLE PREFERRED STOCK $ - $100,000(3) $100,000
STOCKHOLDERS' EQUITY:
Common stock and additional paid in capital $ 80,170 $(65,796)(4) $ 14,374
Accumulated deficit (116,262) (21,434)(4) (137,696)
Total Stockholders' Deficit (36,092) (87,230) (123,322)
TOTAL LIABILITIES, PREFERRED $599,221 $ 1,316 $600,537
STOCK AND STOCKHOLDERS' EQUITY
See related Notes to the Unaudited Pro Forma Consolidated Balance Sheet.
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(Dollars in Thousands)
1. Reflects deferred debt issuance costs relating to the New Senior Credit
Facility and deferred costs relating to the Consents from Holders of the
Notes of $12,750, net of write-off of existing deferred financing costs of
$11,434.
2. Reflects revolving credit and term loan borrowings and the repayment of
existing debt as follows:
Current portion of long term debt borrowings under
the New Senior Credit Facility based
on scheduled repayments $ 2,750
Retirement of existing OSI term loans (18,054)
----------------
Net Adjustment $ (15,304)
================
Long term portion of term loan borrowings under the
New Senior Credit Facility based
on scheduled repayments $ 397,250
Retirement of existing OSI term loans (370,700)
----------------
Net Adjustment $ 26,550
================
Initial draw of revolving credit notes under the
New Senior Credit Facility $ 4,000
Retirement of existing OSI revolving credit notes (26,700)
----------------
Net Adjustment $ 22,700)
================
3. Reflects the issuance of the Preferred Stock.
4. Reflects the following relating to the Recapitalization:
Equity Purchase Price $ (265,482)
Common Equity Investment 211,186
Equity related transaction expenses (11,500)
----------------
Net Adjustment $ (65,796)
================
Consent Payment $ (10,000)
Write-off of deferred financing costs (11,434)
----------------
Total Adjustment $ (21,434)
================
OUTSOURCING SOLUTIONS INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS(3)
(Dollars in Thousands)
Year Ended December 31, 1998
-----------------------------------------
Historical Adjustments Pro Forma
---------- ----------- ---------
REVENUES $ 479,400 $ 479,400
EXPENSES:
Salaries and benefits 230,114 230,114
Service fees and other
operating and administrative
expenses 140,888 140,888
Amortization of purchased
loans and accounts receivable
portfolios 50,703 50,703
Amortization of goodwill and
other intangibles 15,725 15,725
Depreciation expense 14,282 14,282
--------- --------
Total expenses 451,712 451,712
--------- --------
OPERATING INCOME 27,688 27,68
INTEREST EXPENSE - Net 50,627 $ 1,955(1) 52,582
--------- -------- --------
LOSS BEFORE INCOME TAXES AND
MINORITY INTEREST (22,939) (1,955) (24,894)
PROVISION FOR INCOME TAXES 830 -(2) 830
MINORITY INTEREST 572 572
--------- -------- --------
NET LOSS $ (24,341) $ (1,955) $ (26,296)
========= ======== ========
Six months Ended June 30, 1999
-----------------------------------------
Historical Adjustments Pro Forma
---------- ----------- ---------
REVENUES $ 257,076 $ 257,076
EXPENSES:
Salaries and benefits 122,162 122,162
Service fees and other
operating and administrative
expenses 79,894 79,894
Amortization of purchased
loans and accounts receivable
portfolios 20,477 20,477
Amortization of goodwill and
other intangibles 8,204 8,204
Depreciation expense 7,225 7,225
--------- --------
Total expenses 237,962 237,962
--------- --------
OPERATING INCOME 19,114 19,114
INTEREST EXPENSE - Net 25,209 $ 1,183(1) 26,392
--------- -------- --------
LOSS BEFORE INCOME TAXES AND
MINORITY INTEREST (6,171) (1,183) (7,278)
PROVISION FOR INCOME TAXES 375 -(2) 375
MINORITY INTEREST - -
--------- -------- --------
NET LOSS $ (6,546) $ (1,183) $ (7,729)
========= ======== ========
See related Notes to the Unaudited Pro Forma Consolidated
Statement of Operations.
NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(Dollars in Thousands)
1. Adjustments to interest expense based on the pro forma capitalization of
the Company are summarized in the table below:
Year Ended Six Months
December 31, Ended June 30,
1998 1999
------------ --------------
Interest expense on Notes $ 11,000.0 $ 5,500.0
Interest expense on term loans under
the New Senior Credit Facility(A) 38,745.0 19,372.5
Commitment fee for the revolving credit
facility under the New Senior Credit
Facility(B) 355.0 177.5
Amortization of debt issuance costs related
to the Recapitalization(C) 1,961.5 980.8
Elimination of historical interest expense
(including amortization of debt (50,106.7) (24,848.0)
issuance costs)
--------------- --------------
$ 1,954.8 $ 1,182.8
=============== ==============
-----------------------------
(A) The New Senior Credit Facility will consist of the (i) Revolving
Facility and (ii) Term Facility, which will be comprised of the
Term A Facility and the Term B Facility. The Revolving Facility
and the Term A Facility will bear interest, at the Company's
option, at the Administrative Agent's alternate base rate plus
2.25% or reserve-adjusted LIBO rate, plus 3.25%. The Term B
Facility will bear interest, at the Company's option, at the
Administrative Agent's alternate base rate plus 2.75% or the
reserve-adjusted LIBO rate plus 3.75%.
After the first two full fiscal quarters after the consummation
of the Recapitalization, the applicable margin for the Revolving
Facility and the Term A Facility will be subject to change, as
set forth in the proposed terms of the New Senior Credit
Facility. The interestfor each of the pro forma periods has been
calculated based on the reserve-adjusted LIBO rate of 6.00% and
average drawn down balances based on scheduled payments.
(B) The assumed commitment fee on the unused portion of the
Revolving Facility is 0.5% per annum.
(C) Deferred financing costs of $12.75 million are amortized over
the life of the related debt ranging from six to six and
one-half years.
2. Provision for income taxes was not adjusted, as the effect of the pro forma
adjustments would have increased the Company's net operating loss carry
forwards.
3. The unaudited pro forma statement of operations excludes $10,000 of
Recapitalization and other special charges and the write-off of unamortized
financing costs of $11,434.
CERTAIN CONSIDERATIONS
The Holders should carefully consider the risks described below before
making an investment decision. The risks described below are not the only ones
facing the Company. Additional risks (i) incorporated by reference and (ii) not
presently known to the Company or that it currently deems immaterial may also
impair the Company's business operations.
Substantial Leverage; Ability to Service Debt
The Company's substantial indebtedness could adversely affect its
financial health and prevent it from fulfilling its obligations under the Notes.
The Company will incur a significant amount of indebtedness in connection with
the financing of the Recapitalization. The following charts will show certain
important credit statistics for the Company and are presented assuming that the
Company had completed the Recapitalization and related financing transactions as
of the date or at the beginning of the period specified below and applied the
net proceeds as intended:
At June 30, 1999
----------------
The Company (Dollars in thousands)
Total indebtedness.......................... $ 509,513
Preferred Stock............................. $ 100,000
Stockholders' deficit....................... $ 123,322
Fiscal Year Ended Six Months Ended
December 31, 1998 June 30, 1999
----------------- ----------------
Pro forma ratio of earnings to
fixed charges(1) 1.48x 1.66x
- --------------------------------
(1) In calculating the ratio of earnings to fixed charges, earnings consist
of income before income taxes plus fixed charges. Fixed charges consists of
interest expense (which includes amortization of deferred financing costs
and debt issuance costs) and one-third of rental expenses, deemed
representative of that portion of rental expense estimated to be
attributable to interest.
The ability of the Company to make scheduled payments of principal or
interest on, or to refinance, its indebtedness will depend on future
operating performance and cash flow, which are subject to prevailing
economic conditions, prevailing interest rate levels and financial,
competitive, business and other factors beyond its control. The degree to
which the Company is leveraged could have important consequences to holders
of the Notes, including the following:
1. the Company's ability to obtain additional financing for working capital,
capital expenditures, acquisitions, debt payments or general corporate
purposes may be impaired;
2. a substantial portion of the Company's cash flow from operations must be
dedicated to the payment of interest on the Notes, and interest on other
existing indebtedness, thereby reducing the funds available to the Company
for other purposes;
3. the agreements governing the Company's long-term indebtedness, including
the New Senior Credit Facility and the Indenture, contain certain
restrictive financial and operating covenants;
4. the indebtedness under the New Senior Credit Facility will be at variable
rates of interest, which will cause the Company to be vulnerable to
increases in interest rates:
5. the indebtedness outstanding under the New Senior Credit Facility will be
secured by all accounts receivable and general intangibles of the Company
and will become due prior to the time the principal on the Notes become
due;
6. the Company is substantially more leveraged than certain of its
competitors, which might place the Company at a competitive disadvantage
7. the Company may be hindered in its ability to adjust rapidly to changing
market conditions;
8. the Company's substantial degree of leverage and negative tangible net
worth may negatively affect certain suppliers' willingness to give the
Company favorable payment terms or customers' willingness to engage the
Company; and
9. the Company's substantial degree of leverage could make it more vulnerable
in the event of a downturn in general economic conditions or in its
business.
If operating cash flow of the Company is insufficient to meet its
operating expenses or to service its debt requirements as they become due, the
Company may be required to refinance a portion of the principal of the Notes
prior to their maturity. If the Company is unable to service its indebtedness,
it will be forced to take actions such as reducing or delaying capital
expenditures, selling assets, restructuring or refinancing their indebtedness or
seeking additional equity capital. There can be no assurance that any of these
remedies can be effected on satisfactory terms, if at all.
Additional Borrowings Available
Despite the Company's level of indebtedness immediately following the
Recapitalization, the Company will still be able to incur substantially more
debt. This could further exacerbate the risks described above. The terms of the
Indenture do not fully prohibit the Company or its subsidiaries from doing so.
Subject to customary maintenance covenants, the New Senior Credit Facility will
permit additional borrowings of approximately $71.0 million after completion of
the Recapitalization, and all of those borrowings would be secured. If new debt
is added to the Company's current debt levels, the related risks that the
Company now faces could intensify.
Substantial Restrictions and Covenants
The New Senior Credit Facility will contain, and the Indenture currently
contains, various covenants which limit the Company's management's discretion in
the operation of its business. The New Senior Credit Facility will contain, and
the Indenture currently contains, numerous restrictive covenants, including, but
not limited to, covenants that restrict the Company's ability to incur or
refinance indebtedness, pay dividends, create liens, sell assets, and engage in
certain mergers and acquisitions. In addition, the New Senior Credit Facility
will also require the Company to maintain financial ratios. The ability of the
Company to comply with the covenants and other terms of the New Senior Credit
Facility and the Indenture, to make cash payments with respect to the Notes, and
to satisfy its other respective debt obligations (including, without limitation,
borrowings and other obligations under the New Senior Credit Facility) will
depend on the future operating performance of the Company. In the event the
Company fails to comply with the various covenants contained in the New Senior
Credit Facility and the Indenture, it would be a default thereunder, and in any
such case, the maturity of substantially all of such long-term indebtedness
could be accelerated.
Subordination; Asset Encumbrances
The Notes are subordinated in right of payment to all existing and
future Senior Debt, including the principal of (and premium, if any) and
interest on and all other amounts due on or payable in connection with Senior
Debt. As of June 30, 1999, on a pro forma basis after giving effect to the
Recapitalization, there would have been outstanding approximately $404.0 million
of Senior Debt, $475.0 million of which would have been fully secured borrowings
under the New Senior Credit Facility. By reason of such subordination, in the
event of the bankruptcy, insolvency, liquidation, reorganization, dissolution or
other winding-up of the Company or upon a default in payment with respect to, or
the acceleration of, any Senior Debt, the holders of such Senior Debt and any
other creditors who are holders of Senior Debt and creditors of subsidiaries
that are not Guarantors must be paid in full before the Holders of the Notes may
be paid. If the Company incurs any additional pari passu debt, the holders of
such debt would be entitled to share ratably with the Holders of the Notes in
any proceeds distributed in connection with any bankruptcy, insolvency,
liquidation, reorganization, dissolution or other winding-up of the Company.
This may have the effect of reducing the amount of proceeds paid to Holders of
the Notes. In addition, no cash payments may be made with respect to the
principal of (and premium, if any) or interest on the Notes if a payment default
exists with respect to Senior Debt and, under certain circumstances, no payments
may be made with respect to the principal of (and premium, if any) or interest
on the Notes for a period of up to 179 days if a non-payment default exists with
respect to Senior Debt. In addition, the Indenture permits subsidiaries of the
Company to incur debt under certain circumstances. Any debt incurred by a
subsidiary of the Company that is not a Guarantor will be structurally senior to
the Notes.
The Company will be required to grant to the lenders under the New
Senior Credit Facility security interests in substantially all of the current
and future assets of the Company, including a pledge of all of the issued and
outstanding shares of capital stock of all of the Company's direct and indirect
domestic subsidiaries. In addition, the Guarantors will be required to grant to
such lenders security interests in all of the current and future assets of the
Guarantors. In the event of a default on secured indebtedness, including the
guarantees of the Guarantors under the New Senior Credit Facility (whether as a
result of the failure to comply with a payment or other covenant, a
cross-default, or otherwise), the parties granted such security interests will
have a prior secured claim on the capital stock of the Company and the assets of
the Company and the Guarantors. If such parties should attempt to foreclose on
their collateral, the Company's financial condition and the value of the Notes
would be materially adversely affected.
Control by Principal Stockholder
Upon completion of the Recapitalization, the Purchaser will own
approximately 78.0% of the fully diluted common equity of the Company.
Consequently, MDP, as the sole general partner of the Purchaser, will have the
ability to control the business and affairs of the Company by virtue of its
ability to elect a majority of the Company's Board and its voting power with
respect to actions requiring stockholder approval. In addition, upon
consummation of the Recapitalization, all directors serving on the Company's
Board will have been selected by MDP. Some decisions regarding the Company's
operations or financial structure may present conflicts of interest between MDP
and the Holders. For example, MDP may be willing to approve acquisitions,
divestitures or other transactions undertaken by the Company that MDP believes
could increase the value of its equity investment. These types of transactions,
however, could increase the financial risk to the Holders.
Holding Company Structure
The Company conducts substantially all of its business through
subsidiaries and has few operations of its own. The Company is dependent on the
cash flow of its subsidiaries and distribution thereof from its subsidiaries to
the Company in order to meet its debt service obligations. It is not expected
that the Company will have any significant assets other than the common stock of
its subsidiaries.
Competition
The Company is engaged in a highly fragmented and competitive industry.
The Company competes with many local, regional and national accounts receivable
management companies in the markets which it serves. Some of the Company's
principal competitors are less highly-leveraged than the Company and may have
greater financial and operating flexibility.
Impact of Governmental Regulation
Certain of the Company's operations are subject to compliance with the
federal Fair Debt Collection Practices Act (the "FDCPA") and comparable statutes
in many states. Under the FDCPA, a third-party collection company is restricted
in the methods it uses in contacting consumer debtors and eliciting payments
with respect to placed accounts. Requirements under state collection agency
statutes vary, with most requiring compliance similar to that required under the
FDCPA. In addition, most states and certain municipalities require collection
agencies to be licensed with the appropriate regulatory body before operating in
such jurisdictions. The Company believes that it is in substantial compliance
with the FDCPA and comparable state statutes and that it maintains licenses in
all jurisdictions in which its operations require it to be licensed. There can
be no assurance, however, that additional federal or state legislation will not
be enacted that would further restrict the methods used in collecting placed
accounts or require additional regulatory compliance.
Litigation
Due to the nature of certain of its operations, the Company is regularly
a defendant in various legal proceedings involving claims for damages, including
class actions under the FDCPA. The Company believes that such proceedings
constitute ordinary and routine litigation incidental to its business. The costs
associated with defending such lawsuits (including payments made in connection
with settlements and judgments) have not historically had a material adverse
effect on the Company's financial condition and operating results. There can be
no assurance that the costs associated with existing or future claims against
the Company will not have a material adverse effect on the Company's financial
condition and operating results.
Dependence on Key Management
The Company's success will continue to depend to a significant extent on
its executive and other key management personnel. Although the Company has
entered into employment agreements with certain of its executive officers, there
can be no assurance that the Company will be able to retain its executive
officers and key personnel or attract additional qualified management in the
future. In addition, the success of certain of the Company's acquisitions may
depend, in part, on the Company's ability to retain management personnel of the
acquired companies.
Environmental Liabilities
One of the Company's subsidiaries, the Union Corporation ("Union"), is a
party to several pending environmental proceedings involving the United States
Environmental Protection Agency and comparable state environmental agencies in
Indiana, Maryland, Massachusetts, New Jersey, Ohio, Pennsylvania, South Carolina
and Virginia. All of these matters relate to discontinued operations of inactive
subsidiaries of Union for which Union may be potentially liable. The Company has
established reserves which it believes to be adequate for the ultimate
settlement of these environmental proceedings. However, insufficient information
is available regarding the extent and scope of any remedial actions which may be
required to settle these proceedings. In addition, the costs of potential legal
and consulting fees are difficult to estimate. Accordingly, there can be no
assurance that the costs associated with settling these environmental
proceedings will not have a material adverse effect on the Company's financial
condition and operating results.
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain anticipated U.S.
federal income tax consequences of the Solicitation to the Holders of Notes.
This discussion is general in nature, and does not discuss all aspects of U.S.
federal income taxation that may be relevant to a particular Holder in light of
the Holder's particular circumstances, or to certain types of the Holders
subject to special treatment under U.S. federal income tax laws (such as
insurance companies, tax-exempt organizations, financial institutions, brokers,
dealers in securities, and taxpayers that are neither citizens nor residents of
the United States, or that are foreign corporations, foreign partnerships or
foreign estates or trusts). In addition, the discussion does not consider the
effect of any foreign, state, local or other tax laws, or any U.S. tax
considerations (e.g., estate or gift tax) other than U.S. federal income tax
considerations, that may be applicable to particular Holders. Further, this
summary assumes that the Holders hold their Notes as "capital assets"
(generally, property held for investment) within the meaning of Section 1221 of
the Internal Revenue Code of 1986, as amended (the "Code").
This summary is based on the Code and applicable Treasury Regulations,
rulings, administrative pronouncements and decisions as of the date hereof, all
of which are subject to change or differing interpretations at any time with
possible retroactive effect.
EACH HOLDER IS URGED TO CONSULT ITS OWN TAX ADVISOR TO DETERMINE THE
FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER TAX CONSEQUENCES TO IT OF THE
SOLICITATION.
Tax Considerations for Consenting Holders
The Company intends to treat the Consent Payments for U.S. federal
income tax purposes as a separate fee for consenting to the Waivers. As a
result, the Consent Payments will be taxable as ordinary income to the Holders.
Tax Considerations for Non-Consenting Holders
A Holder who does not Consent and therefore will not receive the Consent
Payment should not recognize any income, gain, or loss for U.S. federal income
tax purposes as a result of the Solicitation.
Backup Withholding
The receipt of the Consent Payment by a Holder who executes a Consent
may be subject to backup withholding at the rate of 31% with respect to such
payments unless such Holder (i) is a corporation or comes within certain exempt
categories and, when required, demonstrates this fact, or (ii) provides a
correct taxpayer identification number that certifies as to no loss of exemption
from backup withholding and otherwise complies with applicable requirements of
the backup withholding rules. Any amount withheld under these rules will be
credited against the Holder's U.S. federal income tax liability.
THE FOREGOING SUMMARY DOES NOT DISCUSS ALL ASPECTS OF U.S. FEDERAL
INCOME TAXATION THAT MAY BE RELEVANT TO PARTICULAR HOLDERS IN LIGHT OF THEIR
PARTICULAR CIRCUMSTANCES AND INCOME TAX SITUATIONS. HOLDERS SHOULD CONSULT THEIR
TAX ADVISORS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE SOLICITATION,
INCLUDING THE EFFECT OF ANY FEDERAL, STATE, LOCAL, FOREIGN OR OTHER LAWS.
ADDITIONAL INFORMATION;
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The Company is subject to the informational filing requirements of the
Exchange Act and, in accordance therewith, is required to file with the
Commission periodic reports and other information relating to its business,
financial condition and other matters. These reports and other informational
filings required by the Exchange Act should be available for inspection at the
public reference facilities maintained by the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W. Washington, D.C. 20549 and also should be
available for inspection and copying at the regional offices of the commission
located at Citicorp Center, 500 West Madison Street, Chicago, Illinois 60611 and
7 World Trade Center, 13th Floor, New York, New York 10048. The Commission
maintains a Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The Commission's Web site address is http://www.sec.gov. Copies of
such material may be obtained by mail, upon payment of the Commission's
customary fees, from the Commission's principal office at Judiciary Plaza, 450
Fifth Street, N.W., Washington D.C. 20549 (telephone number: 1-800-SEC-0330).
The Company's (i) Annual Report on Form 10-K for the year ended December
31, 1998 and (ii) Quarterly Reports on Form 10-Q for the quarters ended March
31, 1999 and June 30, 1999, each filed by the Company with the Commission, are
incorporated herein by reference and shall be deemed to be a part hereof.
Any statement contained in a document listed above and incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Consent Statement to the extent that a statement
contained herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Consent Statement. In addition, all reports and
other documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date of this Consent Statement and
before the termination of the Solicitation shall be deemed to be incorporated by
reference herein and to be made a part hereof from the date of filing of such
reports and documents. Any statement contained in this Consent Statement or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Consent Statement to
the extent that a statement contained in any reports and other documents filed
by the Company pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
subsequent to the date of this Consent Statement modifies or supersedes such
statement.
The information related to the Company contained in this Solicitation
should be read in conjunction with the information contained in the documents
incorporated by reference.
The Company will provide without charge to each person to whom a copy of
this Consent Statement is delivered, upon the written or oral request of any
such person, a copy of any or all of the documents incorporated herein by
reference, other than exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Requests should be
directed to Eric R. Fencl, Vice President and General Counsel, Outsourcing
Solutions Inc., 390 South Woods Mill Road, Suite 350, Chesterfield, Missouri
63017. In order to insure timely delivery of documents prior to the Expiration
Date, any such requests should be made by November 15, 1999.
MISCELLANEOUS
No person has been authorized to give any information or make any
representation other than as contained in this Consent Statement and, if given
or made, such information or representation must not be relied upon as having
been authorized.
OUTSOURCING SOLUTIONS INC.
November 9, 1999
ANNEX I
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
shall have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described below (the "Change of Control Offer") at an offer price in
cash (the "Change of Control Payment") equal to 101% of the aggregate principal
amount thereof plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase. Within 30 days following a Change of Control,
the Company shall mail to each Holder of Notes at such Holder's registered
address a notice stating: (i) that an offer (an "Offer") is being made pursuant
to this Section 4.15 as a result of a Change of Control, the length of time the
Offer shall remain open, and the maximum aggregate principal amount of Notes
that will be accepted for payment pursuant to such Offer; (ii) the purchase
price, the amount of accrued and unpaid interest and Liquidated Damages, if any,
as of the purchase date, and the purchase date (which will be no earlier than 30
days or later than 60 days from the date such notice is mailed) (the "Change of
Control Payment Date"); (iii) the circumstances and material facts regarding
such Change of Control to the extent known to the Company (including, but not
limited to, information with respect to pro forma and historical financial
information after giving effect to such Change of Control and information
regarding the Person or Persons acquiring control); (iv) that any Note not
tendered will continue to accrue interest and Liquidated Damages, if any; (v)
that, unless the Company defaults in the payment of the Change of Control
Payment, all Notes accepted for payment pursuant to the Offer shall cease to
accrue interest and Liquidated Damages, if any, after the Change of Control
Payment Date; (vii) that Holders electing to have any Notes purchased pursuant
to an Offer will be required to surrender the Notes, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Notes completed, to
the Paying Agent at the address specified in the notice prior to the close of
business on the third Business Day preceding the Change of Control Payment Date;
(viii) that Holders shall be entitled to withdraw their election if the Paying
Agent receives, not later than the close of business on the second Business Day
preceding the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the principal
amount of Notes delivered for purchase, and a statement that such Holder is
withdrawing his election to have the Notes purchased; and (ix) that Holders
whose Notes are being purchased only in part shall be issued new Notes equal in
principal amount to the unpurchased portion of the Notes surrendered, which
unpurchased portion must be equal to $1,000 in principal amount or an integral
multiple thereof. The Company shall comply with the requirements of Rule 14e-1
under the Exchange Act and any other securities laws and regulations thereunder
to the extent such laws and regulations are applicable in connection with the
repurchase of Notes in connection with a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee for cancellation the Notes so accepted together with an Officer's
Certificate stating the aggregate principal amount of Notes or portions thereof
being purchased by the Company. The Paying Agent shall promptly mail to each
Holder of Notes so tendered the Change of Control Payment for such Notes, and
the Trustee shall promptly authenticate and mail (or cause to be transferred by
book entry) to each Holder a new Note equal in principal amount to any
unpurchased portion of the Notes surrendered, if any; provided that each such
new Note shall be in a principal amount of $1,000 or an integral multiple
thereof. The Company shall publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date. Any amounts remaining after the purchase of Notes pursuant to the Change
of Control Offer shall be returned by the Paying Agent to the Company.
(c) The Company shall not be required to make a Change of Control Offer
upon a Change of Control if a third party makes the Change of Control Offer in
the manner, at the times and otherwise in compliance with the requirements set
forth herein applicable to a Change of Control Offer made by the Company and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
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"Change of Control" means the occurrence of any of the following:
(i) the sale, lease or transfer, in one or a series of related
transactions (other than by merger or consolidation), of all or substantially
all of the assets of the Company and its Restricted Subsidiaries, taken as a
whole, to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) (other than the Principals or their Related parties);
(ii) the adoption of a plan relating to the liquidation or dissolution
of the Company;
(iii) the acquisition by any Person or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act) (other than the Principals and
their Related Parties) of a direct or indirect interest in more than 35% of the
voting power of the voting stock of the Company by way of merger or
consolidation of otherwise; or
(iv) a majority of the members of the Board of Directors of the
Company cease to be Continuing Directors.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors who (i) was a member of such Board of Directors
on the date of this Indenture or (ii) was nominated for election or elected to
such Board of Directors with, or whose election to such Board of Directors was
approved by, the affirmative vote of a majority of the Continuing Directors who
were members of such Board of Directors at the time of such nomination or
election.
"Principals" means each of the general partners of MDC Management
Company III, L.P., MDC Management Company IIIE, L.P. and MDC Management Company
IIIA, L.P. and any Person controlled by one or more of such general partners.
"Related Parties" means any Person controlled by the Principals,
including any partnership of which the Principals or their Affiliates is the
general partner.
ANNEX II
"Unrestricted Subsidiary" means (i) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary pursuant to a Board
Resolution; but only to the extent that such Subsidiary: (a) has no Indebtedness
other than Non-Recourse Debt; (b) is not party to any agreement, contract,
arrangement or understanding with the company or any Restricted Subsidiary of
the Company unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to the Company or such Restricted Subsidiary
than those that might be obtained at the time from Persons who are not
Affiliates of the Company; (c) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results; (d) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Company or any of its Restricted Subsidiaries; and (e) has at least one director
on its board of directors that is not a director or executive officer of the
Company or any of its Restricted Subsidiaries and has at least one executive
officer that is not a director or executive officer of the Company or any of its
Restricted Subsidiaries. Any such designation by the Board of Directors shall be
evidenced to the Trustee by filing with the Trustee a certified copy of the
Board Resolution giving effect to such designation and an Officer's Certificate
certifying that such designation complied with the foregoing conditions and was
permitted pursuant to and in accordance with the provisions set forth in Section
4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease
to be an Unrestricted Subsidiary for purposes of this Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date pursuant to and in accordance with the
provisions set forth in Section 4.09 hereof, the Company shall be in default of
such covenant). The board of Directors of the Company may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted to be incurred pursuant to and in accordance with the provisions
set forth in Section 4.09 hereof and (ii) no Default or Event of Default would
be in existence following such designation.
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"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender; and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness of the
Company or any of its Restricted Subsidiaries to declare a default on such other
Indebtedness or cause the payment thereof to be accelerated or payable prior to
its stated maturity; and (iii) as to which the lenders have been notified in
writing that they shall not have any recourse to the stock or assets of the
Company or any of its Restricted Subsidiaries.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not (i) an Unrestricted Subsidiary or (ii) a direct or indirect
Subsidiary of an Unrestricted Subsidiary; provided, however, that upon the
occurrence of any Unrestricted Subsidiary ceasing to be an Unrestricted
Subsidiary, such Subsidiary shall be included in the definition of Restricted
Subsidiary.
"Subsidiary" means, with respect to any Person, (i) 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 that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
ANNEX III
SECTION 4.11 TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any contract, agreement,
understanding, loan, advance or guarantee with, or for the benefit of, any
Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such
Affiliate Transaction is on terms that are no less favorable to the Company or
the relevant Restricted Subsidiary than those that might reasonably have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officer's Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of the Notes of such Affiliate Transaction from a financial point
of view issued by an accounting, appraisal or investment banking firm of
national standing.
The foregoing provisions shall not apply to the following: (i)
transactions between or among the Company and/or any of its Restricted
Subsidiaries; (ii) Restricted Payments or Permitted Investments permitted under
Section 4.07 hereof; (iii) the payment of reasonable and customary fees and
compensation to, and indemnity provided on behalf of, officers, directors,
employees or consultants of the Company or any Restricted Subsidiary of the
Company; (iv) the payment of fees in an aggregate amount not to exceed $750,000
in any twelve-month period pursuant to the Advisory Services Agreement; (v) any
other transactions pursuant to the Advisory Services Agreement or transactions
pursuant to the HBR Services Agreement, in each case, as in effect on the date
hereof; and (vi) the payment of fees and expenses as set forth under the caption
"Use of Proceeds" contained in the Offering Circular.
Facsimile copies of the Consent Form will be accepted. The Consent Form
and any other required documents should be sent by each Holder or his broker,
dealer, commercial bank, trust company or nominee to the Information Agent at
the address set forth below.
--------------------
The Information and Tabulation Agent for the Solicitation is:
--------------------
MACKENZIE PARTNERS, INC.
By Mail, Overnight Courier or Hand:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, NY 10010
Attention: Simon Coope
By Facsimile
(212) 929-0061
Confirm by telephone:
(212) 929-5500 (Call Collect)
(800) 322-2885 (Toll Free)
--------------------
Any questions or requests for assistance or additional copies of this
Consent Statement, the Consent Form and the Letter of Instruction may be
directed to the Information Agent at the telephone number and location listed
above. You may also contact your broker, dealer, commercial bank or trust
company for assistance concerning the Solicitation.
The Solicitation Agent for the Solicitation is:
Donaldson, Lufkin & Jenrette
277 Park Avenue
New York, New York 10172
Telephone Number: (212) 892-7707
Attention: Tom Pereira
LETTER OF INSTRUCTION
TO REGISTERED HOLDER
OF
OUTSOURCING SOLUTION INC.
11% Senior Subordinated Notes due November 1, 2006
CUSIP No. 690132AC9
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November 9, 1999
To Our Clients:
Outsourcing Solutions Inc., a Delaware corporation (the "Company"), is
hereby soliciting consents (the "Consents"), on the terms and subject to the
conditions set forth in the Consent Solicitation Statement (as it may be
supplemented or amended from time to time, the "Consent Statement") and the
related Consent Form (as it may be supplemented or amended from time to time,
the "Consent Form" and together with the Consent Statement, the "Solicitation")
from holders (each, a "Holder" and, collectively, the "Holders") of at least a
majority of the aggregate principal amount of its outstanding 11% Senior
Subordinated Notes due November 1, 2006 (the "Notes") issued pursuant to the
Indenture, dated November 6, 1996 (the "Indenture"), among the Company, the
subsidiary guarantors named therein and Wilmington Trust Company, as trustee, to
the waiver of: (i) the Company's obligations under Section 4.15 of the
Indenture, including its obligation to make a Change of Control Offer in
connection with the recapitalization of the Company (the "Recapitalization") by
an investor group led by an affiliate of Madison Dearborn Partners, Inc.
("MDP"); and (ii) the failure by the Company to comply with certain technical
requirements relating to the qualification and operation of its financing
subsidiary, OSI Funding Corp. ("OSI Funding"), as an Unrestricted Subsidiary
under the Indenture and any and all consequences arising therefrom under the
Indenture (collectively, the "Waivers"). Enclosed for your consideration are
copies of the Consent Statement and the Consent Form. All capitalized terms used
herein and not otherwise defined herein shall have the meanings ascribed to them
in the Solicitation.
IN ORDER TO RECEIVE THE CONSENT PAYMENT, HOLDERS OF NOTES MUST PROVIDE THEIR
CONSENTS (AND NOT HAVE REVOKED SUCH CONSENTS) AT OR PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON NOVEMBER 19, 1999 (THE "EXPIRATION DATE"). THE CONSENTS SHALL
BECOME EFFECTIVE IMMEDIATELY UPON THE COMPANY RECEIVING THE REQUISITE CONSENTS
(AS DEFINED) AND CERTIFYING TO THE TRUSTEE THAT SUCH REQUISITE CONSENTS HAVE
BEEN RECEIVED. THE COMPANY WILL NOT BE OBLIGATED TO ACCEPT ANY CONSENTS RECEIVED
AFTER THE EXPIRATION DATE. CONSENTS MAY BE REVOKED AT ANY TIME PRIOR TO THE
EFFECTIVE DATE OF THE CONSENTS.
The Company is offering to pay to each Holder who provides its Consent (and
has not revoked such Consent) at or prior to 5:00 p.m., New York City time, on
the Expiration Date, a payment of $100 per $1,000 of principal amount of Notes
(the "Consent Payment"). The Company will not be obligated to make any Consent
Payment in respect of any Consents not provided at or prior to 5:00 p.m., New
York City time, on the Expiration Date. The Consent Payment will be made on the
date of the closing of the Recapitalization (the "Consent Payment Date").
If Consents are received from registered Holders of at least a majority of
the aggregate principal amount of the outstanding Notes as of the Record Date
(the "Requisite Consents"), such Consents will apply to all Notes issued under
the Indenture and each Holder of such Notes will be bound by such Consents
regardless of whether such Holder executed a Consent.
MDP's obligation to complete the Recapitalization is expressly conditioned
upon, among other things, the Company receiving the Requisite Consents to the
Waivers.
This material relating to the Solicitation is being forwarded to you as the
beneficial owner of Notes carried by us for your account or benefit but not
registered in your name. Delivery of the Consents with respect to any Notes may
only be made by us as the registered Holder and pursuant to your instructions.
Accordingly, we request instructions as to whether you wish us to deliver the
Consents with respect to any or all of the Notes held by us for your account. We
urge you to read carefully the Consent Statement, the Consent Form and the other
materials provided herewith before instructing us to deliver the Consents with
respect to such Notes.
Consents may be revoked by written notice of revocation received by
MacKenzie Partners, Inc., the information and tabulation agent (the "Information
Agent") at any time at or prior to 5:00 p.m., New York City time, on the
Effective Date. Any permitted revocation of Consents may not be rescinded; and
any Consents so withdrawn will thereafter be deemed not validly tendered for
purposes of the Consent Payment; provided, however, that revoked Consents may
again be tendered by following the procedures for tendering prior to the
Expiration Date. No Consent Payment will be made in respect of any Consent which
is not provided at or prior to 5:00 p.m., New York City time, on the Expiration
Date.
Your attention is directed to the following:
1. If you desire to deliver the Consents with respect to any Notes and
receive the Consent Payment, we must receive your instructions in ample time to
permit us to submit the Consents on your behalf at or prior to 5:00 p.m., New
York City time, on the Expiration Date.
2. The Company's obligation to pay the Consent Payments for submitted
Consents is subject to consummation of the Recapitalization.
3. MDP's obligation to complete the Recapitalization is expressly
conditioned upon the Company receiving the Requisite Consents to the Waivers.
4. The Company expressly reserves the right, in its sole discretion, subject
to applicable law at any time or from time to time, to: (i) abandon or terminate
the Solicitation for any reason at any time prior to the Consent Payment Date,
not accept any Consents before the Consent Payment Date whether or not the
Requisite Consents have been received by such date, or postpone the acceptance
of any Consents or delay the Consent Payment for Consents accepted; (ii) waive
any condition to the Solicitation and accept all Consents previously delivered
pursuant to the Solicitation; (iii) extend the Expiration Date of the
Solicitation and retain all Consents tendered pursuant thereto, subject to the
withdrawal rights of Holders, and (iv) amend the Solicitation in any respect
until the Consents that are the subject thereof are delivered.
5. Obtaining the Requisite Consents will enable the Company to proceed with
the Recapitalization. If Consents are received from registered Holders of at
least a majority of the aggregate principal amount of the outstanding Notes as
of the Record Date, such Consents will apply to all Notes issued under the
Indenture and each Holder of such Notes will be bound by such Consents
regardless of whether such Holder executed a Consent.
If you wish to have us deliver your Consents pursuant to the Solicitation,
please so instruct us by completing, executing and returning to us the
instruction form that appears below. The accompanying Consent Form is furnished
to you for informational purposes only and may not be used by you to deliver the
Consents.
IMPORTANT: The Consent Form (or a facsimile thereof) must be received by
the Information Agent at or prior to 5:00 p.m., New York City time, on the
Expiration Date in order for Holders to receive the Consent Payment.
INSTRUCTIONS
The undersigned acknowledge(s) receipt of your letter and the enclosed
material referred to therein relating to the Solicitation.
This will instruct you to deliver the undersigned's Consent with respect to
the principal amount of Notes indicated below, pursuant to the terms of and
conditions set forth in the Consent Statement November 9, 1999, and the Consent
Form.
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Consents are to be Principal Amount
given pursuant to the as to which
Solicitation Consents are
("Yes" or "No")* given in the Solicitation
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* Unless otherwise indicated, "yes" will be assumed. Holders who desire to
receive the Consent Payment are required to provide their Consents.
- --------------------------------------------------------------------------------
PLEASE SIGN HERE
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Signature(s)
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Name(s) (Please Print)
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Address
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Zip Code
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Area Code and Telephone No.
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Tax Identification or Social Security No.
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My Account Number With You
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Date
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CONSENT FORM
To Give Consent in Respect of
11% Senior Subordinated Notes due November 1, 2006
(CUISP No. 690132AC9)
of
OUTSOURCING SOLUTIONS INC.
Pursuant to the Consent Solicitation Statement, dated November 9, 1999
IN ORDER TO RECEIVE THE CONSENT PAYMENT, HOLDERS OF NOTES MUST PROVIDE THEIR
CONSENTS (AND NOT HAVE REVOKED SUCH CONSENTS) AT OR PRIOR TO 5:00 P.M., NEW YORK
CITY TIME, ON NOVEMBER 19, 1999 (THE "EXPIRATION DATE"). THE CONSENTS SHALL
BECOME EFFECTIVE IMMEDIATELY UPON THE COMPANY RECEIVING THE REQUISITE CONSENTS
(AS DEFINED) AND CERTIFYING TO THE TRUSTEE THAT SUCH REQUISITE CONSENTS HAVE
BEEN RECEIVED. THE COMPANY WILL NOT BE OBLIGATED TO ACCEPT ANY CONSENTS RECEIVED
AFTER THE EXPIRATION DATE. CONSENTS MAY BE REVOKED AT ANY TIME PRIOR TO THE
EFFECTIVE DATE OF THE CONSENTS.
The Information and Tabulation Agent for the Solicitation is:
MACKENZIE PARTNERS, INC.
By Mail, Overnight Courier or
Hand:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, NY 10010
Attention: Simon Coope
By Facsimile
(212) 929-0061
Confirm by telephone:
(212) 929-5500 (Call Collect)
(800) 322-2885 (Toll Free)
Delivery of this Consent Form to an address other than as set forth
above will not constitute a valid delivery.
The instructions contained herein and in the Consent Statement (as defined
below) should be read carefully before this Consent is completed.
By execution hereof, the undersigned acknowledges receipt of the Consent
Solicitation Statement dated November 9, 1999 (as the same may be amended from
time to time, the "Consent Statement") and this Consent Form and instructions
hereto (the "Consent Form"), which together constitute the Company's
solicitation (the "Solicitation") of consents (the "Consents") from holders
(each, a "Holder" and, collectively, the "Holders") of at least a majority of
the aggregate principal amount of the Company's outstanding 11% Senior
Subordinated Notes due November 1, 2006 (the "Notes") as of the Record Date
issued pursuant to the Indenture dated November 6, 1996 (the "Indenture"), among
the Company, the subsidiary guarantors named therein (collectively, the
"Guarantors") and Wilmington Trust Company, as trustee (the "Trustee"), to the
waiver of: (i) the Company's obligations under Section 4.15 of the Indenture,
including its obligation to make a Change of Control Offer in connection with
the recapitalization of the Company (the "Recapitalization") by an investor
group led by an affiliate of Madison Dearborn Partners, Inc. ("MDP"); and (ii)
the failure by the Company to comply with certain technical requirements
relating to the qualification and operation of its financing subsidiary, OSI
Funding Corp. ("OSI Funding"), as an Unrestricted Subsidiary under the Indenture
and any and all consequences arising therefrom under the Indenture
(collectively, the "Waivers").
The Company is offering to pay to each Holder who provides its Consent (and
has not revoked such Consent) at or prior to 5:00 p.m., New York City time, on
the Expiration Date a payment of $100 per $1,000 of principal amount of Notes
(the "Consent Payment"). The Company will not be obligated to make any Consent
Payment in respect of any Consents not provided at or prior to 5:00 p.m., New
York City time, on the Expiration Date. The Consent Payment will be made on the
date of the closing of the Recapitalization (the "Consent Payment Date").
Capitalized terms used in this Consent Form and not otherwise defined herein
have the meanings ascribed to them in the Consent Statement.
If Consents are received from registered Holders of at least a majority of
the aggregate principal amount of the outstanding Notes as of the Record Date
(the "Requisite Consents"), such Consents will apply to all Notes issued under
the Indenture and each Holder of such Notes will be bound by such Consents
regardless of whether such Holder executed a Consent.
MDP's obligation to complete the Recapitalization is expressly conditioned
upon, among other things, the Company receiving the Requisite Consents to the
Waivers.
Use this Consent Form only to provide your Consent pursuant to the
Solicitation.
The Notes are currently on deposit with the Depository Trust Company
("DTC") and are registered in the name of DTC's nominee, Cede & Co., as nominee
holder of the Notes. Cede & Co. will execute an omnibus proxy which will
authorize its participants (each, a "Participant") to consent with respect to
the Notes owned by it and held in the name of Cede & Co. as specified on the DTC
position listing of Cede & Co., as of the Record Date, with respect to the
Notes. The term "Holder" as used in this Consent Form means (i) each person (a)
in whose name the Notes are registered as of the Record Date; or (b) whose name
appears on a securities position listing of DTC as the holder of an interest in
the Notes as of the Record Date and whom DTC has authorized to consent to the
Waivers and (ii) any other person who has been authorized by proxy or in any
other manner acceptable to the Company to vote Notes on behalf of the registered
Holder thereof.
Pursuant to Section 9.04 of the Indenture, a Consent with respect to all or
a portion of a Note is a continuing Consent with respect to such Note or portion
of a Note notwithstanding a subsequent transfer of ownership of such Note.
Consents may be revoked prior to the date on which the Company receives the
Requisite Consents, only by the Holder granting such Consent (or a duly
authorized proxy of such person) by following the procedures set forth in the
Consent Statement. Such revocation shall terminate the previously delivered
Consent with respect to such Note unless a new Consent is given prior to the
Expiration Date by following the procedure set forth herein.
The Company is requesting that any and all of the Holders execute this
Consent Form. This Consent Form must be executed by the Holder in the same
manner as the Holder's name appears in the register maintained by the Trustee or
on a DTC securities position listing reflecting such Holder as an owner of such
Notes. If the Notes are held in more than one name, as reflected therein, such
Consent Form must be executed by each such Holder. If this Consent Form 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 should
submit with this Consent Form appropriate evidence of authority to execute this
Consent Form. If the Notes owned by a Holder are held in different names, as
reflected in such register or on such securities position listing, separate
Consent Forms must be executed covering all such Notes. If applicable, this
Consent Form should set forth the DTC participant number relating to the Notes
with respect to which a Consent is given. In addition, if this Consent Form
relates to less than the total principal amount of the Notes at maturity held in
the name of such Holder, the Holder must list the principal amounts of the Notes
at maturity to which this Consent Form relates. Otherwise, this Consent Form
will be deemed to relate to the total principal amount of the Notes at maturity
held in the name of such Holder.
Any beneficial owner whose Notes are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and who wishes to
Consent should promptly contact the person in whose name its Notes are
registered and instruct such registered Holder to Consent on its behalf. A
Letter of Instruction is contained in the Solicitation materials provided along
with the Consent Statement which may be used by a beneficial owner to instruct
the record Holder to deliver Consents. If a beneficial owner wishes to Consent
on its own behalf, it must, prior to completing and executing the Consent,
either make appropriate arrangements to register ownership of the Notes in its
name or obtain a properly completed bond power from the registered Holder. The
transfer of registered ownership may take considerable time.
All questions as to the validity, form, eligibility (including time of
receipt) and the acceptance of Consents will be resolved by the Company in its
sole discretion whose determination shall be binding. The Company reserves the
absolute right to reject all Consents that are not in proper form or the
acceptance of which could, in the opinion of its counsel, be unlawful. The
Company also reserves the right to waive any irregularities or conditions of
delivery as to particular Consents, including the requirement that Consents must
be delivered prior to the Expiration Date in order to receive the Consent
Payment. Unless waived, any irregularities in connection with the deliveries
must be cured within such time as the Company determines. None of the Company,
the Information Agent, the Solicitation Agent, the Paying Agent and any other
will be under any duty to give notification of any such irregularities or
waiver. Deliveries of such Consents will not be deemed to have been properly
made until such irregularities have been cured or waived. The interpretation of
the Company of the terms and conditions of this Solicitation shall be binding.
HOLDERS WHO WISH TO CONSENT SHOULD HAND DELIVER, SEND BY OVERNIGHT COURIER
OR SEND BY FACSIMILE TRANSMISSION, THEIR PROPERLY COMPLETED AND EXECUTED CONSENT
FORM TO THE INFORMATION AGENT IN ACCORDANCE WITH THE INSTRUCTIONS SET FORTH
HEREIN. HOWEVER, THE COMPANY RESERVES THE RIGHT TO ACCEPT ANY CONSENT RECEIVED
BY IT OR THE INFORMATION AGENT. IN NO EVENT SHOULD A HOLDER TENDER OR DELIVER
NOTES.
THE SOLICITATION IS NOT BEING MADE TO (NOR WILL NOTES PROVIDED BE ACCEPTED
FROM OR ON BEHALF OF) HOLDERS IN ANY JURISDICTION IN WHICH THE MAKING OR
ACCEPTANCE OF THE SOLICITATION WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION.
Delivery of documents to DTC does not constitute delivery to the
Information Agent.
The undersigned has completed, executed and delivered this Consent to
indicate the action the undersigned desires to take with respect to the
Solicitation.
Your bank or broker can assist you in completing this form. The instructions
included with this Consent Form must be followed. Questions and requests for
assistance or for additional copies of the Consent Statement and this Consent
Form may be directed to the Information Agent. See Instruction 9 below.
List below the Notes to which this Consent Form relates. If the space
provided below is inadequate, list the certificate numbers and principal amounts
on a separately executed schedule and affix the schedule to this Consent Form.
Consent Payments will only be made in payments of $100 per $1,000 of principal
amount of Notes.
- --------------------------------------------------------------------------------
DESCRIPTION OF NOTES
- ----------------------- -------------------- ---------------------- ------------
Name(s) and Principal
Address(es) of Aggregate Amount(s)
Registered Principal As To Which
Holder(s) Certificate Amount(s) Consents Are
(Please include DTC Number(s) Represented* Given in the
Number) Solicitation
- ----------------------- -------------------- ---------------------- ------------
- ----------------------- -------------------- ---------------------- ------------
- ----------------------- -------------------- ---------------------- ------------
- ----------------------- -------------------- ---------------------- ------------
- ----------------------- -------------------- ---------------------- ------------
- ----------------------- -------------------- ---------------------- ------------
TOTAL PRINCIPAL
AMOUNT OF NOTES
- ----------------------- -------------------- ---------------------- ------------
* Unless otherwise indicated in the column labeled "Principal Amount(s) As
To Which Consents Are Given in the Solicitation" and subject to the terms
and conditions of the Consent Statement, a Holder will be deemed to have
tendered the entire aggregate principal amount represented by the Notes
indicated in the column labeled "Aggregate Principal Amount(s)
Represented." See Instruction 3.
- --------------------------------------------------------------------------------
HOLDERS WHO WISH TO PROVIDE THEIR CONSENTS MUST COMPLETE THIS CONSENT FORM
IN ITS ENTIRETY. THE COMPANY WILL NOT BE OBLIGATED TO PAY THE CONSENT PAYMENT TO
HOLDERS OF NOTES WHO DELIVER THEIR CONSENTS AFTER THE EXPIRATION DATE.
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Solicitation, the
undersigned hereby provides its Consent.
Subject to, and effective upon, the acceptance of, and payment for, the
Consent provided with this Consent Form, the undersigned hereby (i) waives the
Company's obligations under Section 4.15 of the Indenture, including its
obligation to make a Change of Control Offer in connection with the
Recapitalization; and (ii) waives the failure by the Company to properly qualify
and operate its financing subsidiary, OSI Funding, as an Unrestricted Subsidiary
under the Indenture and any and all consequences arising therefrom under the
Indenture. The undersigned hereby irrevocably constitutes and appoints the
Information Agent the true and lawful agent and attorney-in-fact of the
undersigned (with full knowledge that the Information Agent also acts as the
agent of the Company) with respect to such Consents, with full power of
substitution and resubstitution (such power-of-attorney being deemed to be an
irrevocable power coupled with an interest) to deliver to the Company and the
Trustee this Consent Form as evidence of the undersigned's and as certification
that the Requisite Consents to the Waivers duly executed by Holders of such
Notes have been received, all in accordance with the terms and conditions of the
Solicitation.
The undersigned agrees and acknowledges that, by the execution and delivery
hereof, the undersigned makes and provides the written Consent to the Waivers as
permitted by Section 9.04 of the Indenture. The undersigned understands that any
Consent provided hereby shall remain in full force and effect until such Consent
is revoked in accordance with the procedures set forth in the Consent Statement
and this Consent Form, which procedures are hereby agreed to be applicable in
lieu of any and all other procedures for revocation set forth in the Indenture,
which are hereby waived. The undersigned understands that a revocation of such
Consent will not be effective after the Effective Date.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to give any Consent contained herein. The undersigned
will, upon request, execute and deliver any additional documents deemed by the
Information Agent or the Company to be necessary or desirable to perfect the
undersigned's Consent to the Waivers.
The undersigned understands that by providing its Consent pursuant to any of
the procedures described in the Consent Statement under the caption "The
Solicitation" and in the instructions hereto and acceptance thereof by the
Company will constitute a binding agreement between the undersigned and the
Company, upon the terms and subject to the conditions of the Solicitation.
For purposes of the Solicitation, the undersigned understands that the
Company will be deemed to have accepted validly delivered Consents (or
defectively delivered Consents with respect to which the Company has waived such
defect) if, as and when the Company gives oral, to be followed by written,
notice thereof to the Information Agent.
The undersigned understands that deliveries of Consents may be revoked by
written notice of revocation received by the Information Agent at any time at or
prior to 5:00 p.m., New York City time, on the Effective Date. Any permitted
revocation of Consents may not be rescinded; and any Consents so withdrawn will
thereafter be deemed not validly tendered for purposes of the Consent Payment;
provided, however, that revoked Consents may again be tendered by following the
procedures for tendering prior to the Expiration Date.
The undersigned understands that notice of revocation of a Consent, to be
effective, must (i) specify the name of the person having executed the Consent
being revoked, (ii) identify the aggregate principal amount of the Notes held by
such person, and (iii) be signed by the Holder in the same manner as the
original signature on the Consent or be accompanied by a bond power, and a
properly completed irrevocable proxy, in each case in the name of the person
revoking the Consent, in a satisfactory form as determined by the Company in its
sole discretion, duly executed by the registered Holder. A purported notice of
revocation that lacks any of the required information or is dispatched to any
other address will not be effective to revoke a Consent previously given.
The undersigned understands that, under certain circumstances and subject to
certain conditions of the Solicitation (each of which the Company may waive) set
forth in the Consent Statement, the Company may not be required to accept any of
the Consents delivered (including any Consents delivered after the Expiration
Date).
All authority conferred or agreed to be conferred by this Consent Form shall
survive the death or incapacity of the undersigned and every obligation of the
undersigned under this Consent Form shall be binding upon the undersigned's
heirs, personal representatives, executors, administrators, successors, assigns,
trustees in bankruptcy and other legal representatives.
Unless otherwise indicated herein under "Special Payment Instructions," the
undersigned hereby requests that any Consent Payments to be made in connection
with the Solicitation be issued to the order of the undersigned. Similarly,
unless otherwise indicated herein under "Special Delivery Instructions," the
undersigned hereby requests that any Consent Payments to be made in connection
with the Solicitation be delivered to the undersigned at the address(es) shown
below. In the event that the "Special Payment Instructions" box or the "Special
Delivery Instructions" box or both are completed, the undersigned hereby
requests that any Consent Payments to be made in connection with the
Solicitation be issued in the name(s) of, and be delivered to, the person(s) at
the address(es) so indicated. The undersigned recognizes that the Company has no
obligation pursuant to the "Special Payment Instructions" box or "Special
Delivery Instructions" box to make any Consent Payment if the Company does not
accept any of the Consents so delivered.
PLEASE SIGN HERE
(To Be Completed By All Consenting Holders of Notes)The completion,
execution and delivery of this Consent Form will be deemed to constitute a
Consent to the Waivers.
This Consent Form must be executed by the Holder in the same manner
as the Holder's name appears in the register maintained by the Trustee or
on a DTC securities position listing reflecting such Holder as an owner of
such Notes. If the Notes are held in more than one name, as reflected
therein, such Consent Form must be executed by each such Holder. If the
Consent Form 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 should submit with the Consent Form appropriate evidence of
authority to execute the Consent Form. See Instruction 4 below. If the
Notes owned by a Holder are held in different names, as reflected in such
register or on such securities position listing, separate Consent Forms
must be executed covering all such Notes. If applicable, the Consent Form
should set forth the DTC participant number relating to the Notes with
respect to which a Consent is given. In addition, if the Consent Form
relates to less than the total principal amount of the Notes at maturity
held in the name of such Holder, the Holder must list the principal
amounts of the Notes at maturity to which the Consent Form relates.
Otherwise, the Consent Form will be deemed to relate to the total
principal amount of the Notes at maturity held in the name of such Holder.
If the signature appearing below is not of the registered holder(s)
of the Notes, then the registered holder(s) must sign a valid proxy.
X
------------------------------------------------------------------------
X
------------------------------------------------------------------------
(Signature(s) of Holder(s) or Authorized Signatory)
Dated: November _____, 1999
Name(s):
----------------------------------------------------------------
----------------------------------------------------------------
(Please Print)
Capacity:
-----------------------------------------------------------------
Address:
------------------------------------------------------------------
------------------------------------------------------------------
(Including Zip Code)
Area Code and Telephone No.:
----------------------------------------------
COMPLETE SUBSTITUTE FORM W-9 HEREIN
SIGNATURE GUARANTEE (See Instruction 4 below)
Certain Signatures Must be Guaranteed by an Eligible Institution
- --------------------------------------------------------------------------------
(Name of Eligible Institution Guaranteeing Signature(s))
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Address (including zip code) and Telephone Number(including area code) of Firm)
- --------------------------------------------------------------------------------
(Authorized Signature)
- --------------------------------------------------------------------------------
(Printed Name)
- --------------------------------------------------------------------------------
(Title)
Dated: November___ , 1999
- -------------------------------------- -------------------------------------
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3, 4, 5 and 7) (See Instructions 3, 4, 5 and 7)
To be completed ONLY if the Consent To be completed ONLY if the Consent
Payments to be made are to be sent Payments to be made are to be sent
to someone other than the person to an address different from that
whose signature(s) appear(s) within shown in the box entitled "Description
this Consent Form. of Notes" within this Consent Form.
Name: Name:
------------------------------ --------------------------------
(Please Print) (Please Print)
Address: Address:
--------------------------- -----------------------------
(Please Print) (Please Print)
(Zip Code) (Zip Code)
Taxpayer Identification or Social Taxpayer Identification or Social
Security Number Security Number
(See Substitute Form W-9 herein) (See Substitute Form W-9 herein)
- -------------------------------------- -------------------------------------
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Solicitation
1. Delivery of this Consent Form. A properly completed and duly executed
copy (or facsimile) of this Consent Form, and any other documents required by
this Consent Form, must be received by the Information Agent at its address set
forth herein at or prior to 5:00 p.m., New York City time, on the Expiration
Date; provided, however, that the Company will not be obligated to make the
Consent Payment to Holders who tender their Consents after the Expiration Date.
The method of delivery of this Consent Form and all other required documents to
the Information Agent is at the election and risk of Holders. If such delivery
is by mail, it is suggested that Holders use properly insured registered mail,
return receipt requested, and that the mailing be made sufficiently in advance
of the Expiration Date to permit delivery to the Information Agent at or prior
to 5:00 p.m., New York City time, on such date. Except as otherwise provided
below, the delivery will be deemed made when actually received or confirmed by
the Information Agent. This Consent Form should be sent only to the Information
Agent and not to the Company, the Trustee, the Solicitation Agent or the Paying
Agent.
2. Revocation of Consents. Consents may be revoked at any time prior to
the Effective Date. For a revocation of Consents to be effective prior to the
Effective Date a written notice must be received by the Information Agent at its
address set forth above or on the back cover of this Consent Form. Any such
notice of revocation must (i) specify the name of the person having executed the
Consent being revoked, (ii) identify the aggregate principal amount of the Notes
held by such person, and (iii) be signed by the Holder in the same manner as the
original signature on the Consent or be accompanied by a bond power, and a
properly completed irrevocable proxy, in each case in the name of the person
revoking the Consent, in a satisfactory form as determined by the Company in its
sole discretion, duly executed by the registered Holder. A purported notice of
revocation which lacks any of the required information will not be an effective
withdraw of a Consent previously made. A purported notice of revocation that
lacks any of the required information or is dispatched to any other address will
not be effective to revoke a Consent previously given.
Revocation of Consents can only be accomplished in accordance with the
foregoing procedures.
Any permitted revocation of Consents may not be rescinded; and any
Consents so withdrawn will thereafter be deemed not validly tendered for
purposes of the Consent Payment; provided, however, that revoked Consents may
again be tendered by following the procedures for tendering at or prior to the
Expiration Date.
All questions as to the validity (including time of receipt) of notices of
withdrawal will be determined by the Company, it its sole discretion, whose
determination will be final and binding. None of the Company, the Information
Agent, the Solicitation Agent, the Paying Agent and any other person will be
under any duty to give notification of any defects or irregularities in any
notice of withdrawal, or shall incur any liability for failure to give any such
notification.
3. Partial Tenders and Consents. If the Consent Form relates to less than
the total principal amount of the Notes at maturity held in the name of the
Holder, such Holder must list the principal amounts of the Notes at maturity
held in the name of such holder in the last column of the box entitled
"Description of Notes" herein.
4. Signatures on this Consent and Letter of Transmittal, Bond Powers and
Endorsement Guarantee of Signatures. If this Consent Form is signed by the
registered Holder(s) of the Notes tendered hereby or with respect to which
Consent is given, the signature(s) must correspond with the name(s) as written
on the face of the certificate(s) without alteration, enlargement or any change
whatsoever. If this Consent Form is signed by a Participant in DTC whose name is
shown as the owner of the Notes tendered hereby, the signature must correspond
with the name shown on the security position listing as the owner of the Notes.
IF THIS CONSENT FORM IS EXECUTED BY A HOLDER OF NOTES WHO IS NOT THE
REGISTERED HOLDER, THEN THE REGISTERED HOLDER MUST SIGN A VALID PROXY, WITH THE
SIGNATURE OF SUCH REGISTERED HOLDER GUARANTEED BY AN ELIGIBLE INSTITUTION.
If any of the Notes are owned of record by two or more joint owners, all
such owners must sign this Consent Form. If any of the Notes are registered in
different names, it will be necessary to complete, sign and submit as many
separate copies of this Consent Form and any necessary accompanying documents as
there are different names in which the Notes are held.
[If this Consent Form is signed by an Acting Holder, and the Consent
Payment to be made in connection with the Solicitation is to be issued to the
order of the Acting Holder, then the Acting Holder need not provide a separate
bond power. In any other case (including if this Consent Form is not signed by
the Acting Holder), the Acting Holder must transmit a separate properly
completed bond power with this Consent Form (executed exactly as the name(s) of
the registered holder(s) appear(s) on such Notes, and, with respect to a
participant in DTC whose name appears on a security position listing as the
owner of Notes exactly as the name(s) of the participant(s) appear(s) on such
security position listing), with the signature on the endorsement or bond power
guaranteed by an Eligible Institution, unless such bond powers are executed by
an Eligible Institution.]
If this Consent Form 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 proper evidence satisfactory to the Company of their
authority to so act must be submitted with this Consent Form.
Signatures on bond powers and proxies and Consents provided in accordance
with this Instruction 4 by registered Holders not executing this Consent Form
must be guaranteed by an Eligible Institution.
No signature guarantee is required if: (i) this Consent Form is signed by
the registered holder(s) of the Notes tendered herewith (or by a Participant in
DTC whose name appears on a security position listing as the owner of Notes) and
the payments for the Consent Payments to be made are to be issued, directly to
such registered Holder(s) and the "Special Payment Instructions" box of this
Consent and Letter of Transmittal has not been completed; or (ii) such Consents
are delivered for the account of an Eligible Institution. In all other cases,
all signatures on Consent Forms must be guaranteed by an Eligible Institution.
5. Special Issuance and Special Delivery Instructions. Consenting Holders
should indicate in the applicable box or boxes the name and address to which
Consent Payments to be made are to be issued or sent, if different from the name
and address of the Holder signing this Consent Form. In the case of issuance in
a different name, the taxpayer identification or social security number of the
person named must also be indicated.
6. Taxpayer Identification Number. Each consenting Holder is required to
provide the Information Agent with the Holder's correct taxpayer identification
number ("TIN"), generally the Holder's social security or federal employer
identification number, on Substitute Form W-9, which is provided under
"Important Tax Information" below or, alternatively, to establish another basis
for exemption from backup withholding. A Holder must cross out item (2) in the
Certification box on Substitute Form W-9 if such Holder is subject to backup
withholding. Failure to provide the information on the form may subject the
tendering Holder to 31% federal income tax backup withholding on the payment,
including the Consent Payment, if any, made to the Holder or other payee with
respect to Consents delivered pursuant to the Solicitation. The box in Part 3 of
the form should be checked if the consenting 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
the box in Part 3 is checked and the Information Agent is not provided with a
TIN within 60 days thereafter, the Information Agent will withhold 31% from all
such payments with respect to the Consent Payment to be made until a TIN is
provided to the Information Agent.
7. Irregularities. All questions as to the form of all documents and the
validity (including time of receipt) and deliveries and revocations of Consents
will be determined by the Company, in its sole discretion, which determination
shall be final and binding. Alternative, conditional or contingent Consents will
not be considered valid. The Company reserves the absolute right to reject any
or all of Consents that are not in proper form or the acceptance of which would,
in the Company's opinion, be unlawful. The Company also reserves the right to
waive any defects, irregularities or conditions of delivery as to particular
Consents. The Company's interpretations of the terms and conditions of the
Solicitation (including the instructions in this Consent Form) will be final and
binding. Any defect or irregularity in connection with deliveries of Consents
must be cured within such time as the Company determines, unless waived by the
Company. A defective Consent may, in the sole discretion of the Company,
constitute a valid Consent and will be counted for purposes of determining
whether Requisite Consents have been obtained. None of the Company, the
Information Agent, the Solicitation Agent, the Paying Agent or any other person
will be under any duty to give notice of any defects or irregularities in
deliveries of Consents or will incur any liability to Holders for failure to
give any such notice.
8. Waiver of Conditions. The Company expressly reserves the absolute right,
in its sole discretion, to amend or waive any of the conditions to the
Solicitation in the case of any Consents delivered at any time and from time to
time.
9. Requests for Assistance or Additional Copies. Any questions or requests
for assistance or additional copies of this Consent Statement may be directed to
the Information Agent at the telephone number and location listed below. You may
also contact your broker, dealer, commercial bank or trust company for
assistance concerning this Solicitation.
IMPORTANT TAX INFORMATION
Under federal income tax laws, a Holder whose Consents are accepted for
payment is required to provide the Information Agent with such Holder's correct
TIN on Substitute Form W-9 below or otherwise establish a basis for exemption
from backup withholding. If such Holder is an individual, the TIN is his social
security number. If the Information Agent is not provided with the correct TIN,
a $50 penalty may be imposed by the Internal Revenue Service, and any Consent
Payment, made with respect to Consents provided pursuant to the Solicitation may
be subject to backup withholding. Failure to comply truthfully with the backup
withholding requirements also may result in the imposition of severe criminal
and/or civil fines and penalties.
Certain Holders (including, among others, all corporations and certain
foreign persons) are not subject to these backup withholding and reporting
requirements. Exempt Holders should furnish their TIN, write "Exempt" on the
face of the Substitute Form W-9, and sign, date and return the Substitute Form
W-9 to the Information Agent. A foreign person, including entities, may qualify
as an exempt recipient by submitting to the Information Agent a properly
completed Internal Revenue Service Form W-8, signed under penalties of perjury,
attesting to that Holder's foreign status. A Form W-8 can be obtained from the
Information Agent. See the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional instructions.
If backup withholding applies, the Information Agent is required to
withhold 31% of any payments made to the Holder or other payee. Backup
withholding is not an additional federal income tax; rather, the federal income
tax liability of persons subject to backup withholding is reduced by the amount
of tax withheld. If withholding results in an overpayment of taxes, a refund may
be obtained from the Internal Revenue Service.
Purpose of Substitute Form W-9
To prevent backup withholding on any Consent Payment, made with respect to
Consents provided pursuant to the Solicitation, the Holder is required to
provide the Information Agent with either (i) the Holder's correct TIN by
completing the form below, certifying that the TIN provided on Substitute Form
W-9 is correct (or that such Holder is awaiting a TIN) and that (A) the Holder
has not been notified by the Internal Revenue Service that the Holder is subject
to backup withholding as a result of failure to report all interest or dividends
or (B) the Internal Revenue Service has notified the Holder that the Holder is
no longer subject to backup withholding; or (ii) an adequate basis for
exemption.
What Number to Give the Information Agent
The Holder is required to give the Information Agent the TIN (e.g., social
security number or employer identification number) of the registered holder of
the Notes. If the Notes are held in more than one name or are not held 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.
- --------------------------------------------------------------------------------
Part 1--PLEASE PROVIDE YOUR TIN IN THE
BOX AT RIGHT AND CERTIFY BY SIGNING
SUBSTITUTE AND DATING BELOW.
------------------------------
Social Security Number
Form W-9 OR
------------------------------
Department of the Employer Identification Number
Treasury
Payer's Request for Taxpayer
Identification Number (TIN)
- --------------------------------------------------------------------------------
Part 2--Certification--Under the penalties of Part3--Awaiting TIN
perjury, I certify that: (1) The number shown on
this form is my correct Taxpayer Identification
Number (or I am waitingfor a number to be issued
to me) and Awaiting TIN
(2) I am not subject to backup withholding
either because I have not been notified by the
Internal Revenue Service ("IRS") that I am
subject to backup withholding as a result of
failure to report all interest or dividends, or
the IRS has notified me that I am no longer
subject to backup withholding.
- --------------------------------------------------------------------------------
Certificate Instructions--You must cross out
item (2) in Part 2 above if you have been
notified by the IRS that you are subject to
backup withholding because of underreporting
interest or dividends on your tax return.
However, if after being notified by the IRS that
you were subject to backup withholding you
received another notification from the IRS
stating that you are no longer subject to backup
withholding, do not cross out item (2).
SIGNATURE DATE , 1999
-------------------- ----------
- ------------------------------- ------------------------------------------------
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE
SOLICITATION. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE
FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU
CHECKED THE BOX IN PART 3 OF 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 (a) 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 (b)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number within 60 days, 31% of all
reportable payments made to me thereafter will be withheld until I provide a
number.
- -------------------------------- ------------------------------, 1999
Signature Date
The Information and Tabulation Agent for the Solicitation is:
MACKENZIE PARTNERS, INC.
By Mail, Overnight Courier or Hand:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, NY 10010
Attention: Simon Coope
By Facsimile:
(212) 929-0061
Confirm by telephone:
(212) 929-5500 (Call Collect)
(800) 322-2885 (Toll Free)
--------------------
Any questions or requests for assistance or additional copies of this
Consent Statement and the Consent Form may be directed to the Information Agent
at the telephone number and location listed above. You may also contact your
broker, dealer, commercial bank or trust company for assistance concerning the
Solicitation.
The Solicitation Agent for the Solicitation is:
Donaldson, Lufkin & Jenrette
277 Park Avenue
New York, New York 10172
Telephone Number: (212) 892-7707
Attention: Tom Pereira