Exhibit 99.2
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Waiver Solicitation Statement Dated June 5, 2000
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PSINet Inc.
SOLICITATION OF WAIVER OF COVENANT COMPLIANCE
FOR CERTAIN ACQUIRED INDEBTEDNESS
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10% SENIOR NOTES DUE 2005
CUSIP 74437C AB 7
($600,000,000 principal amount outstanding)
11 1/2% SENIOR NOTES DUE 2008
CUSIP 74437C AD 3
($350,000,000 principal amount outstanding)
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We are soliciting (the "Solicitation") waiver letters (the "Waivers")
from holders of record (the "Holders") at the close of business on June 2, 2000
(the "Record Date") of our 10% Senior Notes due 2005 and our 11 1/2% Senior
Notes due 2008 (collectively, the "Notes") waiving our compliance with the debt
incurrence covenants contained in the indentures governing the Notes
(collectively, the "Indentures") to the extent that such covenants would
prohibit us from incurring indebtedness of Metamor Worldwide, Inc. ("Metamor")
represented by its outstanding $227 million principal face amount of 2.94%
Convertible Subordinated Notes due 2004 (the "Metamor Notes") upon our
acquisition of Metamor. We are not soliciting waiver letters from the holders of
our other issues of outstanding notes because the debt incurrence covenants in
the indentures governing those notes do not prohibit us from incurring the
indebtedness represented by the Metamor Notes in connection with the Metamor
acquisition.
Our purpose in making the Solicitation is to enable us to take
advantage of the attractive interest rate and features of the Metamor Notes and
to allow us to otherwise utilize our cash for the execution of our business
plan. If we do not obtain Waivers from the Holders of a majority in principal
amount of each issue of the Notes (the "Requisite Waivers"), Metamor will cause
the Metamor Notes to be satisfied and discharged in connection with the closing
of the Metamor acquisition so as to satisfy our covenants under the Indentures.
The Solicitation is being made on the terms and subject to the
conditions set forth in this Waiver Solicitation Statement and in the applicable
accompanying Waiver. If the Requisite Waivers are obtained and we complete the
Metamor acquisition without satisfying or discharging Metamor's indebtedness, we
will make a payment (a "Waiver Payment") to Holders whose Waivers are accepted
in the Solicitation:
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WAIVER PAYMENT
FOR EACH $1,000 PRINCIPAL AMOUNT OF: THE WAIVING HOLDER WILL RECEIVE:
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10% Senior Notes............................$5.00 in cash
11 1/2% Senior Notes........................$5.00 in caSH
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THE SOLICITATION WILL EXPIRE AT 1:00 P.M., NEW YORK CITY TIME, ON JUNE
13, 2000 (THE "EXPIRATION DATE"). WE DO NOT INTEND TO EXTEND THE SOLICITATION.
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Waivers may be revoked by the Holders of Notes at any time prior to the
time that we receive and accept the Requisite Waivers and will automatically be
revoked if the Requisite Waivers are not obtained prior to the Expiration Date.
If the Requisite Waivers are obtained and accepted, each Holder of Notes will be
bound by the waiver of our covenant compliance whether or not such Holder
delivered its Waiver.
The Financial Advisor for the Solicitation is:
Donaldson, Lufkin & Jenrette
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TABLE OF CONTENTS
PAGE
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Summary.......................................................................3
The Company................................................................3
Background, Purposes and Effects of Waiver Solicitation....................3
Terms Of The Waiver Solicitation...........................................4
Solicitation Considerations...................................................6
Background, Purposes and Effects of the Waiver Solicitation...................7
Background.................................................................7
Purposes...................................................................7
Effects....................................................................7
Terms of the Waiver Solicitation.............................................10
General...................................................................10
Waiver Payments...........................................................10
Record Date...............................................................10
How to Waive Compliance...................................................10
Expiration Date; Amendment................................................11
Revocation of Waivers.....................................................11
Effective Date of the Waivers.............................................12
Conditions................................................................12
Financial Advisor, Tabulation Agent and Depositary
and Information Agent.................................................12
Fees and Expenses.........................................................12
Certain Federal Income Tax Consequences......................................13
Where You Can Find More Information..........................................14
Documents Incorporated by Reference..........................................15
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SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere or incorporated by reference in this Waiver
Solicitation Statement. Capitalized terms used but not defined herein have the
meanings assigned to them in the Indentures.
THE COMPANY
PSINet Inc. is a leading global provider of Internet and eCommerce
solutions to businesses. With our worldwide fiber network and related optronic
equipment, multiple Internet and eCommerce hosting centers, full suite of
Internet access and eCommerce products, extensive global distribution network
and global brand name recognition, we have become an Internet Super Carrier or
ISC. We offer a robust suite of products that enable our customers to utilize
the Internet around the globe for mission critical applications carried over a
worldwide fiber optic network that is capable of transmission speeds in excess
of three terabits per second. We provide Internet connectivity and Web hosting
services to approximately 100,000 corporate customers in 28 countries. Including
our Internet service provider (ISP), carrier, small office/home office (SOHO)
and consumer businesses, we serve over 2.0 million end users around the world.
We serve approximately 90 of the 100 largest metropolitan statistical areas in
the U.S. and have a presence in the 20 largest telecommunications markets
globally.
Our services and products include dedicated, dial-up and digital
subscriber line (DSL) Internet access services connections, Web hosting and
collocation services, transaction network services, virtual private networks
(VPNs), eCommerce solutions, voice-over-Internet protocol (IP), e-mail and
managed security services. We also provide wholesale and private label network
connectivity and related services to other ISPs and telecommunications carriers
to further utilize our network capacity. We currently operate eight Internet and
eCommerce hosting centers with an aggregate of 250,000 square feet in North
America, Europe and Asia and plan to open sixteen more hosting centers having
more than 1,750,000 additional square feet.
BACKGROUND, PURPOSES AND EFFECTS OF WAIVER SOLICITATION
BACKGROUND
On March 21, 2000, we entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Metamor pursuant to which our wholly owned subsidiary
will merge with and into Metamor (the "Merger") and Metamor will become our
wholly owned subsidiary. Please refer to the Joint Proxy Statement/Prospectus
incorporated by reference in this Waiver Solicitation Statement (the "Proxy
Statement") for a more complete description of the Merger and the Merger
Agreement. Immediately prior to the Merger, Metamor will have outstanding $227
million face amount of its 2.94% Convertible Subordinated Notes due 2004.
Under the Indentures, we will be deemed to incur all of the outstanding
indebtedness of Metamor at the time of the Merger. This indebtedness will be
characterized as "Acquired Indebtedness" for purposes of the Indentures unless
it is redeemed, defeased, retired or otherwise repaid at the time of or
substantially contemporaneously with the Merger. Section 10.08 of each of the
Indentures contains covenants restricting our ability to incur indebtedness (the
"Debt Incurrence Covenants"). Specifically, the Debt Incurrence Covenants
generally prohibit us from incurring Acquired Indebtedness. The debt incurrence
covenants in the indentures governing our outstanding issues of notes other than
the Notes do not prohibit us from incurring the indebtedness represented by the
Metamor Notes in connection with the Metamor acquisition. Consequently, we are
not soliciting waiver letters from the holders of such other issues of notes.
PURPOSES
In order to comply with the Debt Incurrence Covenants, the Merger
Agreement contemplates that we may provide Metamor with the cash necessary to
satisfy and discharge the Metamor Notes and other Metamor indebtedness
immediately prior to the Merger to prevent such indebtedness from being incurred
by us as a result of the Merger. We are soliciting the Waivers because we
believe it would be advantageous for us to allow the Metamor Notes to remain
outstanding following the Merger. Doing so will enable us to take advantage of
the attractive
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interest rate and features of the Metamor Notes and permit us to otherwise
utilize our cash for the execution of our business plan. The coupon rate of the
Metamor Notes is 2.94% and their current yield to maturity is 6.81%. In the
event that we do not obtain the Requisite Waivers, Metamor will need to deposit
approximately $204.5 million with The Bank of New York in its capacity as
trustee (the "Metamor Trustee") under the Indenture governing the Metamor Notes
(the "Metamor Indenture") prior to the Merger to cause the Metamor Notes to be
satisfied and discharged as contemplated by the Merger Agreement.
EFFECTS
Section 10.21 of each of the Indentures excepts compliance with certain
covenants, including the Debt Incurrence Covenants, in any particular instance
if the Holders of a majority of the aggregate outstanding principal amount of
the Notes waive our compliance with the applicable covenant(s) in such instance.
Our Solicitation is for a one-time waiver of our compliance with the Debt
Incurrence Covenants as they relate to the Metamor Notes. If the Requisite
Waivers are obtained, we will be permitted to incur the indebtedness represented
by the Metamor Notes as a result of the Merger without causing a default under
the Debt Incurrence Covenants. The Waivers will not cause any amendment to
either the Debt Incurrence Covenants or the Indentures or permit us to incur any
indebtedness other than the Metamor Notes that we are not allowed to incur by
the Debt Incurrence Covenants.
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TERMS OF THE WAIVER SOLICITATION
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The Solicitation........................... We are soliciting Waivers of our compliance with the Debt
Incurrence Covenants contained in the Indentures to the extent that
such covenants would prohibit our incurrence of the indebtedness
represented by the Metamor Notes upon the completion of the Merger.
The Waiver Payments........................ A cash payment of $5.00 for each $1,000 principal amount of Notes
for which a Waiver has been accepted, payable following the closing
of the Merger if the Requisite Waivers are obtained and the Metamor
Notes are not satisfied and discharged in connection with the
Merger. See "Terms of the Waiver Solicitation-- Conditions."
Expiration Date............................ 1:00 p.m., New York City time, on June 13, 2000. We do not intend
to extend the Solicitation.
Conditions................................. We will accept Waivers only if the Requisite Waivers are obtained.
We will pay the Waiver Payments only if the Requisite Waivers are
obtained, the Merger is consummated and the Metamor Notes are not
satisfied and discharged in connection with the Merger.
Holders.................................... The term "Holder" means (1) any person in whose name Notes are
registered on our books at the close of business on June 2, 2000
(the "Record Date"), or (2) any other person who is a proxy or
attorney-in-fact of such registered holder who is authorized to
take action with respect to the Notes held by such registered
holder.
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How to Waive Compliance.................... A Holder desiring to waive our compliance with the Debt Incurrence
Covenants should either (1) complete and sign the applicable
Waiver, or a facsimile thereof, have the signature thereon, and on
any proxy or power of attorney delivered therewith, Medallion
signature guaranteed, and mail or otherwise deliver the Waiver, or
such facsimile, together with a duly executed proxy or power of
attorney if the holder was not a registered holder as of the Record
Date, and any other required documents to the Tabulation Agent and
Depositary at its address set forth on the back cover page of this
Waiver Solicitation Statement, or (2) request its broker, dealer,
commercial bank, trust company or other nominee to effect the
Waiver on its behalf.
Special Procedures for
Beneficial Holders....................... Any beneficial holder whose Notes are registered in the name of its
broker, dealer, commercial bank, trust company or other nominee and
who wishes to waive our compliance with the Debt Incurrence
Covenants should contact such registered holder promptly and
instruct such registered holder to effect the Waiver on its
behalf. If such beneficial holder wishes to effect the Waiver on
its own behalf, such beneficial holder must obtain a proxy or power
of attorney from the registered holder as of the Record Date
authorizing the beneficial holder to take action with respect to
the Notes on behalf of such registered holder. See "Terms of the
Waiver Solicitation-- How to Waive Compliance."
Withdrawal Rights and
Revocation............................... Waivers with respect to the Notes may be revoked by the Holders at
any time prior to the date that we have received and accepted the
Requisite Waivers, but may not be revoked thereafter. We
anticipate that this will occur immediately after the Expiration
Date. Any Holder who revokes a Waiver will not receive a Waiver
Payment unless such Waiver is redelivered prior to the Expiration
Date. See "The Solicitation-- Revocation of Waivers."
Certain Tax Considerations................. The waiver of our compliance with the Debt Incurrence Covenants
should not constitute a taxable event for Holders of Notes for
federal income tax purposes. Although it is not free from doubt,
Holders receiving a Waiver Payment will likely be required to
include such Waiver Payment in ordinary income for federal income
tax purposes. See "Certain Federal Income Tax Consequences."
Financial Advisor.......................... Donaldson, Lufkin & Jenrette is serving as exclusive Financial
Advisor in connection with the Solicitation.
Tabulation Agent and Depositary............ Wilmington Trust Company is serving as Tabulation Agent and
Depositary in connection with the Solicitation.
Information Agent.......................... MacKenzie Partners, Inc. is serving as Information Agent in
connection with the Solicitation.
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SOLICITATION CONSIDERATIONS
In addition to the Waiver Payment of $5.00 per $1,000 principal amount
being offered to Holders of the Notes who waive compliance, the Holders should
consider the following factors in determining whether to deliver Waivers:
RISK FACTORS RELATING TO THE WAIVER SOLICITATION
FRAUDULENT TRANSFER AND PREFERENCE CONSIDERATIONS
Federal or state fraudulent transfer laws permit a court, if it makes
certain findings, to avoid all or a portion of our obligations under the Waiver
Payments to you; require you to turn over to us, or to a fund for the benefit of
our creditors or to our judgment creditors, as the case may be, all or a portion
of the Waiver Payments; and take other action detrimental to you, including, in
some circumstances, invalidating the Waiver Payments. If a court were to take
any of those actions, we cannot assure you that you would ever be repaid.
Under federal and state fraudulent transfer laws, in order to take any
of those actions, courts will typically need to find that, at the time the
Waiver Payments were made, we paid the Waiver Payments with the intent of
hindering, delaying or defrauding current or future creditors; received less
than fair consideration or reasonably equivalent value for the Waiver Payments
and were insolvent or rendered insolvent by reason of the Waiver Payments; were
engaged, or about to engage, in a business or transaction for which our assets
were unreasonably small; or intended to incur, or believed (or should have
believed) we would incur, debts beyond our ability to pay as such debts mature
(as all of the foregoing terms are defined in or interpreted under applicable
bankruptcy and fraudulent transfer statutes).
RANKING OF NOTES
The Notes and our other debt obligations will be effectively
subordinated to the payment of the indebtedness of our subsidiaries, including,
if the holders of the Notes grant the Requisite Waivers pursuant to the
Solicitation, the $227 million aggregate principal amount of Metamor Notes.
However, the holders of the Metamor Notes will have a claim only against the
assets of Metamor, including capital stock of Metamor subsidiaries, rather than
against our assets generally.
RISK FACTORS RELATING TO PSINET
Holders are urged to read the risk factors relating to the Merger and
to our business in general contained in the Proxy Statement incorporated by
reference in this Waiver Solicitation Statement.
RISK FACTORS RELATING TO METAMOR
Holders are also urged to read the risk factors relating to Metamor's
business contained in Metamor's Annual Report on Form 10-K for the fiscal year
ended December 31, 1999 which are incorporated by reference in this Waiver
Solicitation Statement. After the merger, these risk factors will apply to the
combined entity. To the extent that our business and the business of Metamor are
subject to similar risks, we may be more susceptible to such risks after the
Merger than either we or Metamor would be as a separate company.
FORWARD-LOOKING STATEMENTS
Some of the information contained in this Waiver Solicitation Statement
may contain forward-looking statements. Such statements can be identified by the
use of forward-looking terminology such as "believes," "expects," "may," "will,"
"should," or "anticipates" or similar words, or by discussions of strategy that
involve risks and uncertainties. These statements may discuss our future
expectations or contain projections of our results of operations or financial
condition or expected benefits to us resulting from acquisitions or
transactions. We cannot assure you that the future results indicated, whether
expressed or implied, will be achieved. The risk factors noted in this section
and other factors noted throughout this Waiver Solicitation Statement, including
risks and uncertainties, could cause our actual results to differ materially
from those contained in any forward-looking statement.
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BACKGROUND, PURPOSES AND EFFECTS OF THE WAIVER SOLICITATION
BACKGROUND
On March 21, 2000, we entered into the Merger Agreement with Metamor
pursuant to which our wholly owned subsidiary will merge with and into Metamor
and Metamor will become our wholly owned subsidiary. Please refer to the Proxy
Statement for a more complete description of the Merger and the Merger
Agreement. Immediately prior to the Merger, Metamor will have outstanding $227
million face amount of its 2.94% Convertible Subordinated Notes due 2004.
Under the Indentures, we will be deemed to incur all of the outstanding
indebtedness of Metamor at the time of the Merger. This indebtedness will be
characterized as "Acquired Indebtedness" for purposes of the Indentures unless
it is redeemed, defeased, retired or otherwise repaid at the time of or
substantially contemporaneously with the Merger. The Debt Incurrence Covenants
contained in Section 10.08 of each of the Indentures restrict our ability to
incur indebtedness. Specifically, they generally prohibit us from incurring
Acquired Indebtedness.
We have other issues of outstanding notes with respect to which we are
not soliciting waivers. The indentures relating to such notes differ from the
Indentures in that they permit us to incur Acquired Indebtedness under the
circumstances presented by the Merger. Waivers under such indentures are
therefore unnecessary.
PURPOSES
In order to comply with the Debt Incurrence Covenants in the
Indentures, the Merger Agreement contemplates that we will provide Metamor with
the cash necessary to satisfy and discharge Metamor's indebtedness immediately
prior to the Merger to prevent Metamor's indebtedness from being incurred by us
as a result of the Merger. In accordance with the terms of the Metamor
Indenture, the amount of cash necessary to redeem the Metamor Notes on August
18, 2000 (the first date on which the Metamor Notes could be redeemed), or such
other date as we and Metamor may agree, would be deposited with the Metamor
Trustee and other actions would be taken to cause the Metamor Indenture to be
satisfied and discharged immediately prior to the Merger and the Metamor Notes
to be redeemed on the selected redemption date. The Merger Agreement
contemplates that Metamor's other indebtedness would be paid or otherwise
satisfied prior to the Merger as well. These actions are permitted to be taken
under the Indentures.
We are soliciting the Waivers because we believe it would be
advantageous for us to allow the Metamor Notes to remain outstanding following
the Merger. Doing so will enable us to take advantage of the attractive interest
rate and features of the Metamor Notes and permit us to otherwise utilize our
cash for the execution of our business plan. The coupon rate of the Metamor
Notes is 2.94% and their current yield to maturity is 6.81%. In addition, the
Metamor Notes are subordinated in right of payment to Metamor's senior
indebtedness (as defined in the Metamor Indenture) and the Metamor Indenture
contains very few covenants that would restrict Metamor's operations. In the
event that we do not obtain the Requisite Waivers, Metamor will need to deposit
approximately $204.5 million with the Metamor Trustee prior to the Merger to
cause the Metamor Notes to be satisfied and discharged as contemplated by the
Merger Agreement. Whether or not the Metamor Notes are satisfied and discharged
prior to the Merger, we may decide not to cause all or a portion of Metamor's
other indebtedness to be paid or satisfied prior to the Merger and may elect to
incur such indebtedness pursuant to a limited exception to Acquired Indebtedness
in the Indentures.
EFFECTS
GENERALLY
Section 10.21 of each of the Indentures excepts compliance with certain
covenants, including the Debt Incurrence Covenants, in any particular instance
if the Holders of a majority of the aggregate outstanding principal amount of
the Notes waive our compliance with the applicable covenant(s) in such instance.
Our Solicitation is for a one-time waiver of our compliance with the Debt
Incurrence Covenants in connection with the Metamor
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transaction. If the Requisite Waivers are obtained, we will be permitted to
incur the indebtedness represented by the Metamor Notes without causing a
default under the Debt Incurrence Covenants. The form of Waiver also provides
that the incurrence of indebtedness evidenced by the Metamor Notes will not
reduce amounts otherwise available for the incurrence of permitted indebtedness
(as defined in the Indenture), such as limited amounts of indebtedness that may
be incurred under certain circumstances. The Waivers will not cause any
amendment to either the Debt Incurrence Covenants or the Indentures or permit us
to incur any indebtedness other than the Metamor Notes that we are not allowed
to incur by the Debt Incurrence Covenants.
RESULTS OF NOT CAUSING THE METAMOR NOTES TO BE SATISFIED AND DISCHARGED PRIOR
TO THE MERGER
If the Requisite Waivers are obtained and the Merger is consummated
without the Metamor Notes being satisfied and discharged, then the Metamor Notes
will remain outstanding following the Merger and the obligations and rights of
Metamor and the holders of the Metamor Notes will be governed by the Metamor
Indenture. Under the Metamor Indenture, we will not be obligated to assume the
Metamor Notes or Metamor's payment obligations under the Metamor Indenture;
however, we will be required to enter into a supplemental indenture which, among
other things, obligates us to issue shares of our common stock, $.01 par value
per share, upon the conversion of the Metamor Notes by the holders thereof. Such
supplemental indenture will be required whether or not the Metamor Indenture is
satisfied and discharged in connection with the Merger. While we will not be
obligated to pay the Metamor Notes, the holders of the Notes and our other debt
obligations will be effectively subordinated to the holders of the Metamor Notes
because Metamor is not obligated to pay our Notes or other debt obligations and
Metamor's ability to make distributions to us will be subject to the rights of
Metamor's creditors, including the holders of the Metamor Notes. See
"Solicitation Considerations -- Risk Factors Relating to the Waiver Solicitation
-- Ranking of Notes."
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SUMMARY OF THE TERMS OF THE METAMOR NOTES
A summary of the Metamor Notes follows. This summary is qualified in
its entirety by the complete description of the Metamor Notes contained in the
Metamor Indenture, which is incorporated herein by reference.
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Principal Amount......................... $227 million aggregate principal amount at maturity of 2.94%
Convertible Subordinated Notes due 2004.
Issue price.............................. 83.991% plus accrued interest, if any, from the date of issuance.
Interest................................. 2.94% per annum on the principal amount at maturity, payable
semiannually in arrears in cash on February 15 and August 15 of each
year, commencing February 15, 1998.
Yield to Maturity of Metamor Notes....... The original yield to maturity of the Metamor Notes was 5.75% per
annum (computed on a semi-annual bond equivalent basis giving effect
both to accretion of original issue discount and to accrual of
interest) calculated from August 15, 1997. The current yield to
maturity of the Metamor Notes is 6.81%.
Conversion............................... Each Metamor Note is convertible, at the option of the holder, at any
time after 90 days following the latest date of original issuance
thereof through maturity, unless previously redeemed or otherwise
purchased by Metamor, into Metamor's common stock at the conversion
rate of 23.7397 shares per $1,000 principal amount at maturity of the
Metamor Notes. The conversion rate will not be adjusted for accreted
original issue discount or accrued interest, but will be subject to
adjustment upon the occurrence of certain events affecting Metamor's
common stock. Upon conversion, the holder will not receive any cash
payment representing accreted original issue discount or accrued
interest; such accreted original issue discount and accrued interest
will be deemed paid by the Metamor common stock received on
conversion.
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Following the Merger, each Metamor Note will be convertible into 21.3657
shares of our common stock, par value $.01 per share, per $1,000 principal
amount at maturity of the Metamor Notes.
Subordination............................ The Metamor Notes are subordinated to all existing and future senior
indebtedness (as defined in the Metamor Indenture) of Metamor and are
pari passu with Metamor's indebtedness that is not senior
indebtedness. The Metamor Notes are also effectively subordinated to
all indebtedness and liabilities of subsidiaries of Metamor. The
Metamor Indenture does not prohibit or limit the incurrence of
additional senior indebtedness by Metamor.
Original Issue Discount.................. The Metamor Notes were issued at an original issue discount for
federal income tax purposes of $160.09 per $1,000 principal amount
at maturity of the Metamor Notes.
Sinking Fund............................. None.
Redemption by Metamor.................... The Metamor Notes are not redeemable by Metamor prior to August 18,
2000. Subject to the foregoing, the Metamor Notes will be redeemable,
in whole or in part, at any time on at least 30 days notice at the
option of Metamor at fixed redemption prices plus accrued and unpaid
interest. Although the Metamor Notes cannot be redeemed prior to
August 18, 2000, the Metamor Indenture can be satisfied and
discharged (except for certain ministerial provisions) if the Metamor
Notes are redeemable within one year, Metamor takes actions necessary
to cause the Metamor Notes to be redeemed and deposits the redemption
price with the Metamor Trustee, and Metamor takes certain other
actions. The redemption price of the Metamor Notes if the Metamor
Notes are redeemed on August 18, 2000 is $901.02 per $1,000 principal
amount at maturity of the Metamor Notes.
Fundamental Change....................... Upon the occurrence of any fundamental change in Metamor (as defined
in the Metamor Indenture) occurring prior to the maturity of the
Metamor Notes, each holder shall have the right, at such holder's
option, to require Metamor to purchase all or any part (provided that
the principal amount at maturity is $1,000 or an integral multiple
thereof) of such holder's Metamor Notes at declining redemption
prices, subject to adjustment in certain events, together with
accrued and unpaid interest thereon to the date of purchase. Neither
the acquisition of Metamor by PSINet nor any future acquisition of
PSINet, all or substantially all of the consideration for which
consists of common stock listed on a United States national
securities exchange or the Nasdaq National Stock Market, will
constitute a fundamental change.
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TERMS OF THE WAIVER SOLICITATION
GENERAL
In order for our compliance with the Debt Incurrence Covenants to be
waived, we must receive Waivers of Holders of a majority of the aggregate
principal amount of each issue of the Notes, in each case excluding Notes owned
by us or our affiliates. As of the Record Date, June 2, 2000, $600 million
principal amount of our 10% Senior Notes due 2005 and $350 million principal
amount of our 11 1/2% Senior Notes due 2008 were issued and outstanding.
The term "Holder" means (1) any person in whose name Notes are
registered on our books on the close of business on the Record Date, or (2) any
other person who is a proxy or attorney-in-fact of such registered holder who is
authorized to take action with respect to the Notes held by such registered
holder.
The delivery of a Waiver to our compliance with the Debt Incurrence
Covenants will not affect a Holder's right to sell or transfer the Notes.
WAIVER PAYMENT
Following the Merger, we will pay each Holder of the Notes whose
Waivers have been accepted in the Solicitation, a Waiver Payment equal to $5.00
for each $1,000 principal amount of Notes for which a Waiver has been accepted.
Our payment of the Waiver Payments is conditioned upon receipt and acceptance of
the Requisite Waivers of Holders of each issue of Notes and the closing of the
Merger without the satisfaction and discharge of the Metamor Notes in connection
with the Merger. See "-- Conditions" below.
RECORD DATE
This Waiver Solicitation Statement and the Waivers are being sent to
all persons who were Holders of record at the close of business on the Record
Date, June 2, 2000. The close of business on such date has been fixed as the
Record Date for the determination of Holders entitled to give Waivers pursuant
to the Solicitation.
HOW TO WAIVE COMPLIANCE
All Waivers that are properly completed, signed and delivered to the
Tabulation Agent and Depositary prior to the Expiration Date and not revoked
prior to our acceptance of the Waivers will be accepted. Forms of Waiver are
being mailed to all Holders with this Waiver Solicitation Statement. Because we
will simultaneously solicit Waivers with respect to two separate issues of
Notes, Waiver forms will be color-coded for each issue as follows:
o YELLOW for the 10% Senior Notes; and
o BLUE for the 11 1/2 % Senior Notes.
Holders who desire to waive our compliance with the Debt Incurrence
Covenants should so indicate by:
(1) completing the applicable Waiver;
(2) signing and dating the applicable Waiver; and
(3) mailing or delivering the applicable Waiver to the Tabulation
Agent and Depositary at the address listed on the back cover
page of this Waiver Solicitation Statement, in accordance with
the instructions contained in the Waiver.
If the Waiver is properly completed and signed, the Holder will be
deemed to have waived our compliance with the Debt Incurrence Covenants.
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Waivers by the registered Holder(s) must be executed in exactly the
same manner as the name(s) appear(s) on the Notes. If Notes to which a Waiver
relates are held of record by two or more joint Holders, all such Holders must
sign the Waiver. If a signature is by a trustee, executor, administrator,
guardian, proxy, attorney-in-fact, officer of a corporation or other record
Holder acting in a fiduciary or representative capacity, such person should so
indicate when signing and must submit proper evidence satisfactory to us of such
person's authority so to act. If Notes are registered in different names,
separate Waivers must be executed covering each form of registration. If a
Waiver is executed by a person other than the record Holder, then it must be
accompanied by a proxy or power of attorney duly executed by the record Holder,
with, unless such record Holder is an Eligible Institution, the signature
Medallion guaranteed by a firm which is a member of a registered national
securities exchange or member of the National Association of Securities Dealers,
Inc., or by a commercial bank or trust company having an office in the United
States (each of which firms is referred to herein as an "Eligible Institution"),
confirming the right of the signatory to the Waiver to execute such Waiver on
behalf of the record holder.
THE WAIVER SHOULD NOT BE SENT TO US. A HOLDER MUST COMPLETE, SIGN, DATE
AND DELIVER THE WAIVER (OR PHOTOCOPY THEREOF) FOR SUCH HOLDER'S NOTES TO THE
TABULATION AGENT AND DEPOSITARY. SUCH WAIVER MAY BE DELIVERED TO THE TABULATION
AGENT AND DEPOSITARY BY HAND, MAIL OR OVERNIGHT COURIER. IN NO EVENT SHOULD A
HOLDER TENDER OR DELIVER CERTIFICATES EVIDENCING SUCH HOLDER'S NOTES.
An Eligible Institution may deliver its Waiver to the Tabulation Agent
and Depositary by facsimile transmittal. We reserve the right to receive Waivers
by any other reasonable means or in any form that reasonably evidences the
giving of the waiver.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of the Waivers will be determined by us in our sole
discretion, which determination will be final and binding. We reserve the right
to reject any and all Waivers not validly given or any Waivers our acceptance of
which would, in our opinion or the opinion of or our counsel, be unlawful. We
also reserve the right to waive any defects or irregularities or conditions of
the Solicitation or any Waivers. The interpretation of the terms and conditions
of the Solicitation (including the Waivers and the instructions thereto) by us
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with deliveries of Waivers must be cured within
such time as we shall determine. Neither we, the Financial Advisor, the
Information Agent, the Tabulation Agent and Depositary nor any other person
shall be under any duty to give notification of defects or irregularities with
respect to deliveries of Waivers, nor shall any of them incur any liability for
failure to give such notification.
EXPIRATION DATE; AMENDMENT
The term "Expiration Date" means 1:00 p.m. New York City time, on June
13, 2000. We do not intend to extend the Expiration Date.
PSINet reserves the right to delay accepting any Waivers or to
terminate the Solicitation, and to accept Waivers not previously accepted by
giving oral or written notice of such delay, termination or acceptance to the
Tabulation Agent and Depositary; or to amend the terms of the Solicitation in
any manner. If the Solicitation is amended in a manner that we determine
constitutes a material adverse change to the Holders, we will promptly disclose
such amendment in a public announcement.
Without limiting the manner in which we may choose to make a public
announcement of any amendment or termination of the Solicitation, we will have
no obligation to publish, advertise or otherwise communicate any such public
announcement, other than by making a timely release to the Dow Jones News
Service and complying with any applicable notice provisions of the Indentures.
REVOCATION OF WAIVERS
Waivers may be revoked by the Holders at any time prior to the date we
have received the Requisite Waivers and have accepted them. We anticipate that
this will occur immediately after the Expiration Date. All properly completed
and executed Waivers received by the Tabulation Agent and Depositary will be
counted,
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notwithstanding any transfer of Notes to which such Waivers relate, unless the
Tabulation Agent and Depositary receives from a Holder a properly completed and
duly executed notice of revocation or a changed Waiver bearing a date later than
the date of the prior Waiver at any time prior to the date that we have received
and accepted the Requisite Waivers. Pursuant to Section 1.05(c) of the
Indenture, a Waiver shall bind the Holder and every subsequent holder of Notes
or portion of Notes that evidences the same debt as the consenting Holder's
Notes even if notation of the Waiver is not made on such Note. However, any such
Holder, or a subsequent Holder, may revoke the Waiver as to Notes or portion of
Notes if the Tabulation Agent and Depositary receives notice of revocation
before the date we have received and accepted the Requisite Waivers. Therefore,
a transfer of Notes after the Record Date must be accompanied by a duly executed
proxy or power of attorney if the subsequent transferee is to have revocation
rights.
EFFECTIVE DATE OF THE WAIVERS
Upon receipt of the Requisite Waivers with respect to an issue of
Notes, PSINet may accept the Waivers by giving notice of such acceptance to the
Tabulation Agent and Depositary directing the Tabulation Agent and Depositary to
treat the Waivers as delivered to it in its capacity as Trustee under the
Indentures. Pursuant to Section 1.05(a) of the Indentures, the Waivers become
effective upon their delivery to the Trustee.
CONDITIONS
Our payment of Waiver Payments is conditioned upon receipt and
acceptance of the Requisite Waivers of Holders of each issue of Notes and the
closing of the Merger without the satisfaction and discharge of the Metamor
Notes in connection with the Merger. We reserve the right in our sole discretion
to amend or terminate the Solicitation at any time prior to our acceptance of
the Requisite Waivers. While we do not foresee facts or circumstances that would
cause us to do so, we reserve the right in our sole discretion to cause the
Metamor Notes to be satisfied and discharged in connection with the Merger even
though we have received and accepted the Requisite Waivers. In such event,
Waiver Payments will not be payable.
FINANCIAL ADVISOR, TABULATION AGENT AND DEPOSITARY AND INFORMATION AGENT
In connection with the Solicitation we have retained Donaldson, Lufkin
& Jenrette as our exclusive Financial Advisor, Wilmington Trust Company as the
Tabulation Agent and Depositary, and MacKenzie Partners, Inc. as the Information
Agent. Donaldson, Lufkin & Jenrette will receive a fee of $1 million for serving
as the Financial Advisor, which fee will become payable if and when the Waiver
Payments become payable. We will reimburse Donaldson, Lufkin & Jenrette for
reasonable out-of-pocket expenses and will indemnify it against certain
liabilities and expenses.
Wilmington Trust Company will receive a customary fee for serving as
Tabulation Agent and Depositary, plus additional processing fees based on the
number of Waivers received and similar matters. In addition, we will reimburse
Wilmington Trust Company for reasonable out-of-pocket expenses and will
indemnify it against certain liabilities and expenses.
MacKenzie Partners, Inc. will receive a fee, not to exceed $5,000, for
serving as information agent for the Solicitation. In addition, we will
reimburse MacKenzie Partners, Inc. for reasonable out-of-pocket expenses and
will indemnify it against certain liabilities and expenses.
FEES AND EXPENSES
We will pay the Trustee under each Indenture reasonable and customary
compensation for its services in connection with the Solicitation, plus
reimbursement for expenses.
Brokers, dealers, commercial banks, trust companies and other nominees
will be reimbursed by the Tabulation Agent and Depositary, by application of
funds provided by us, for customary mailing and handling expenses incurred by
them in forwarding material to their customers. We will pay all other fees and
expenses attributable to the Solicitation.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of federal income tax consequences is based on
the current provisions of the Internal Revenue Code of 1986, as amended,
applicable treasury regulations, judicial authority and administrative rulings
and practice. Legislative, judicial or administrative changes or interpretations
may be forthcoming that could alter or modify the statements and conclusions set
forth below. Any such changes or interpretations may or may not be retroactive
and could affect the tax consequences to Holders.
The tax treatment of a Holder of Notes may vary depending upon its
particular situation. Certain Holders of Notes, including insurance companies,
tax-exempt organizations, financial institutions or broker-dealers, and persons
who are not citizens or residents of the United States or who are foreign
corporations, foreign partnerships or foreign estates or trusts as to the United
States, may be subject to special rules not discussed below.
EFFECT OF WAIVERS
The waiver of our compliance with the Debt Incurrence Covenants should
not constitute a taxable event for waiving Holders for federal income tax
purposes, because the waiver should not be considered to materially change the
terms of the Notes as originally issued.
WAIVER PAYMENTS
Although it is not free from doubt, the Waiver Payments should be
treated as separate payments in the nature of fees for the Waivers. As a result,
Holders will likely be required to include the amount of any Waiver Payments
made to them in ordinary income for federal income tax purposes.
Alternatively, it is possible that Waiver Payments would be treated as
separate payments for certain rights of the Holders, and, thus, represent a
tax-free return of capital on the Notes. In that event, a Holder would not be
required to include any amount in taxable income, but would instead reduce its
tax basis in its Notes by the amount of the Waiver Payment made to it.
NON-WAIVING HOLDERS
There should be no federal income tax consequences to non-waiving
Holders of Notes as a result of the Solicitation or the waiver of our compliance
with the Debt Incurrence Covenants.
BACKUP WITHHOLDING
A Holder who receives a Waiver Payment may be subject to backup
withholding at the rate of 31% with respect to such Waiver Payment unless (1)
such Holder is a corporation or comes within certain other exempt categories
and, when required, demonstrates this fact, or (2) provides a correct taxpayer
identification number, certifies as to no loss of exemption from backup
withholding and otherwise complies with applicable requirements of the backup
withholding rules. A Holder who does not provide us with its correct taxpayer
identification number may be subject to penalties imposed by the Internal
Revenue Service. We will report to Holders and the Internal Revenue Service the
amounts of any "reportable payments" made with respect to the Notes.
THIS DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSIDERATIONS IS FOR
GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER OF
NOTES SHOULD CONSULT ITS OWN TAX ADVISOR AS TO THE PARTICULAR CONSEQUENCES OF
THE TRANSACTIONS DESCRIBED HEREIN AND THE CONTINUING OWNERSHIP OR DISPOSITION OF
THE NOTES INCLUDING THE APPLICATION AND EFFECT OF ANY FEDERAL, STATE, LOCAL OR
FOREIGN TAX LAWS OR PROPOSED CHANGES IN APPLICABLE LAWS.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any reports, statements or other information that we file with the
Securities and Exchange Commission at the Securities and Exchange Commission's
public reference room at the following location:
Public Reference Room
450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549
Please call the Securities and Exchange Commission at 1-800-SEC-0330
for further information on the public reference rooms. These Securities and
Exchange Commission filings are also available to the public from commercial
document retrieval services and at the Internet world wide web site maintained
by the Securities and Exchange Commission at "http://www.sec.gov." Reports,
proxy statements and other information pertaining to PSINet are also available
for inspection at the offices of The Nasdaq Stock Market, which is located at
1735 K Street, N.W., Washington, D.C. 20006.
We may "incorporate by reference" information into this Waiver
Solicitation Statement, which means that we can disclose important information
to you by referring you to other documents filed with the Securities and
Exchange Commission. The information incorporated by reference is considered
part of this Waiver Solicitation Statement, except for any information
superseded by information contained directly in this Waiver Solicitation
Statement or in later filed documents incorporated by reference in this Waiver
Solicitation Statement.
This Waiver Solicitation Statement incorporates by reference the
documents set forth below under the caption "Documents Incorporated by
Reference" that we have previously filed with the Securities and Exchange
Commission. These documents contain important business and financial information
about us that is not included in or delivered with this Waiver Solicitation
Statement.
We may already have sent you some of the documents incorporated by
reference, but you can obtain any of them through us, the Securities and
Exchange Commission or the Securities and Exchange Commission's Internet web
site as described above. Documents incorporated by reference are available from
us without charge, excluding all exhibits, except that if we have specifically
incorporated by reference an exhibit in this Waiver Solicitation Statement, the
exhibit will also be provided without charge. You may obtain documents
incorporated by reference in this Waiver Solicitation Statement by requesting
them in writing or by telephone from us at the following address:
PSINET INC.
44983 Knoll Square
Ashburn, Virginia 20147
Attention: Investor Relations
Telephone: (703) 726-1577
Facsimile: (703) 726-4261
email: [email protected]
You should rely only on the information contained or incorporated by
reference in this Waiver Solicitation Statement. We have not authorized anyone
to provide you with information that is different from what is contained in this
Waiver Solicitation Statement. This Waiver Solicitation Statement is dated June
5, 2000. You should not assume that the information contained in this Waiver
Solicitation Statement is accurate as of any date other than that date. Neither
the mailing of this Waiver Solicitation Statement to Holders nor the
Solicitation of Waivers creates any implication to the contrary.
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DOCUMENTS INCORPORATED BY REFERENCE
We are incorporating by reference in this Waiver Solicitation Statement
the following documents which we have filed with the Securities and Exchange
Commission:
(1) Annual report on Form 10-K for the fiscal year ended December
31, 1999. This report contains:
o audited consolidated balance sheets for PSINet and its
subsidiaries as of December 31, 1999 and 1998; and
o audited consolidated statements of operations, of
changes in shareholders' equity and of cash flows for the
years ended December 31, 1999, 1998 and 1997.
(2) Quarterly report on Form 10-Q for the quarter ended March 31,
2000
(3) Current reports on Form 8-K dated:
o January 10, 2000
o January 18, 2000
o January 26, 2000
o January 28, 2000
o February 9, 2000
o February 11, 2000
o March 22, 2000
(4) The Joint Proxy Statement/Prospectus contained in Amendment
No. 1 to the Registration Statement on Form S-4 (registration
no. 333-34802) filed with the Securities and Exchange
Commission on May 12, 2000.
We also incorporate by reference additional documents that we may file
with the Securities and Exchange Commission under Section 13(a),13(c), 14 or
15(d) of the Exchange Act between the date of this Waiver Solicitation Statement
and the Expiration Date. These include periodic reports, such as Annual Reports
on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as
well as proxy statements.
We are also incorporating by reference in this Waiver Solicitation
Statement the following documents which have been filed with the Securities and
Exchange Commission by Metamor:
(1) Exhibit 4.1 to Amendment No. 1 to Registration Statement on
Form S-3 dated July 23, 1997 (registration no. 333-31509).
(2) Risk Factor section included in Annual Report on Form 10-K for
the fiscal year ended December 31, 1999.
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PSINet Inc.
SOLICITATION OF WAIVER OF COVENANT COMPLIANCE
FOR CERTAIN ACQUIRED INDEBTEDNESS
-----------------
Questions concerning the terms of the Solicitation should be directed
to the Financial Advisor at the telephone number set forth below. Deliveries of
Waivers should be made to the Tabulation Agent and Depositary at the addresses
or facsimile numbers set forth below. Requests for additional copies of the
Waiver Solicitation Statement or a Waiver should be directed to the Information
Agent at the telephone numbers and address set forth below.
The Financial Advisor:
DONALDSON, LUFKIN & JENRETTE
277 Park Avenue
New York, New York 10172
Attention: Jeff Dorst
(212) 892-8474
(800) 334-1604
-----------------
<TABLE>
<CAPTION>
The Tabulation Agent and Depositary:
WILMINGTON TRUST COMPANY
<S> <C> <C>
By Hand/Overnight Courier: By Facsimile: By Mail:
1100 North Market Street (302) 651-1079 1100 North Market Street
Wilmington, Delaware 19890 (For Eligible Institutions only) Wilmington, Delaware 19890
Attention: Tammy Young, Attention: Tammy Young,
Corporate Trust Confirm by Telephone: Corporate Trust
Department (302) 651-1562 Department
Attention: Tammy Young
</TABLE>
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The Information Agent:
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(800) 322-2885 (toll free)
(212) 929-5500 (collect)
