-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AG8Z6tgHNorcOaGvr5XOBjohV+0l3XCCVb8OuPeSzpfF5/E1aL0hFJq5PIxM/h5m 4Vw7uZoAm4TIZbka31Vc8g== 0001027574-99-000008.txt : 19990518 0001027574-99-000008.hdr.sgml : 19990518 ACCESSION NUMBER: 0001027574-99-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OUTSOURCING SOLUTIONS INC CENTRAL INDEX KEY: 0001027574 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 582197161 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-16867 FILM NUMBER: 99625276 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAYCO AMERICAN CORP CENTRAL INDEX KEY: 0000076741 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-CONSUMER CREDIT REPORTING, COLLECTION AGENCIES [7320] IRS NUMBER: 391133219 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-05589 FILM NUMBER: 99625277 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CFC SERVICES CORP CENTRAL INDEX KEY: 0001029300 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 133866487 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-16867-01 FILM NUMBER: 99625278 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: A M MILLER & ASSOCIATES INC CENTRAL INDEX KEY: 0001029301 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 133866487 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-16867-02 FILM NUMBER: 99625279 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONTINENTAL ALLIANCE INC CENTRAL INDEX KEY: 0001029303 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 133866487 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-16867-03 FILM NUMBER: 99625280 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JENNIFER LOOMIS & ASSOCIATES INC CENTRAL INDEX KEY: 0001029387 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 953850888 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-16867-18 FILM NUMBER: 99625281 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: QUALINK INC CENTRAL INDEX KEY: 0001029389 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 953850888 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-16867-20 FILM NUMBER: 99625282 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PROFESSIONAL RECOVERIES INC CENTRAL INDEX KEY: 0001029390 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 953850888 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-16867-21 FILM NUMBER: 99625283 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PAYCO AMERICAN INTERNATIONAL CORP CENTRAL INDEX KEY: 0001029391 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 953850888 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-16867-22 FILM NUMBER: 99625284 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACCOUNT PORTFOLIOS GP INC CENTRAL INDEX KEY: 0001029715 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-16867-07 FILM NUMBER: 99625285 BUSINESS ADDRESS: STREET 1: 3300 NORTHEAST EXPRESSWAY STREET 2: BUILDING 1 STE M CITY: ATLANTA STATE: GA ZIP: 30341 BUSINESS PHONE: 7704514862 MAIL ADDRESS: STREET 1: 3300 NORTHEAST EXPRESSWAY STREET 2: BUILDING 1 STE M CITY: ATLANTA STATE: GA ZIP: 30341 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIED BOND & COLLECTION AGENCY INC CENTRAL INDEX KEY: 0001058618 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 223200628 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-16867-24 FILM NUMBER: 99625286 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN CHILD SUPPORT SERVICE BUREAU INC CENTRAL INDEX KEY: 0001058619 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 232807100 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-16867-25 FILM NUMBER: 99625287 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAPITAL CREDIT CORP CENTRAL INDEX KEY: 0001058620 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 232807100 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-16867-26 FILM NUMBER: 99625288 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UCO MBA CORP CENTRAL INDEX KEY: 0001058632 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 231704744 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-16867-37 FILM NUMBER: 99625289 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNION SPECIAL STEEL CASTING CORP CENTRAL INDEX KEY: 0001058633 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 251154811 STATE OF INCORPORATION: PA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-15867-38 FILM NUMBER: 99625290 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERACTIVE PERFORMANCE OF GEORGIA INC CENTRAL INDEX KEY: 0001067124 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 593487654 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-15867-41 FILM NUMBER: 99625291 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: C/O OUTSOURCING SOLUTIONS INC STREET 2: 390 SOUTH WOODS MILL RD STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTH SHORE AGENCY INC CENTRAL INDEX KEY: 0001067125 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 113399772 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-15867-42 FILM NUMBER: 99625292 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: C/O OUTSOURCING SOLUTIONS INC STREET 2: 390 SOUTH WOODS MILL RD STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ACCELERATED BUREAU OF COLLECTIONS INC CENTRAL INDEX KEY: 0001067126 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 841438860 STATE OF INCORPORATION: CO FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 333-15867-43 FILM NUMBER: 99625293 BUSINESS ADDRESS: STREET 1: 390 SOUTH WOODS MILL RD STREET 2: STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 BUSINESS PHONE: 3145760022 MAIL ADDRESS: STREET 1: C/O OUTSOURCING SOLUTIONS INC STREET 2: 390 SOUTH WOODS MILL RD STE 350 CITY: CHESTERFIELD STATE: MO ZIP: 63017 10-Q 1 1999 1ST QUARTER 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1999 ------------------------------------------------- OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ----------------------- -------------------- Commission File Number 333-16867 ------------------------- Outsourcing Solutions Inc. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 58-2197161 - ------------------------------------ --------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 390 South Woods Mill Road, Suite 350 Chesterfield, Missouri 63017 - ---------------------------------------- -------------------------------------- (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (314) 576-0022 Indicate by checkmark whether the registrant: (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --------- --------- Indicate the number of shares outstanding of each of the issuer's classes of common stock as of the latest practicable date. Outstanding at Class March 31, 1999 - ------------------------------------------ -------------- Voting common stock 3,477,126.01 Class A convertible nonvoting common stock 391,740.58 Class B convertible nonvoting common stock 400,000.00 Class C convertible nonvoting common stock 1,040,000.00 ------------ 5,308,866.59 ============ Transitional Small Disclosure (check one): Yes [ ] No [ X ] ------- ---- ---- PAGE 2 OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES TABLE OF CONTENTS Part I. Financial Information Page ---- Item 1. Financial Statements Condensed Consolidated Balance Sheets March 31, 1999 (unaudited) and December 31, 1998............. 3 Condensed Consolidated Statements of Operations for the three months ended March 31, 1999 and 1998 (unaudited)....... 4 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 1999 and 1998 (unaudited)....... 5 Notes to Condensed Consolidated Financial Statements (unaudited).................................................. 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................... 9 Item 3. Quantitative and Qualitative Disclosures About Market Risk... 12 Part II. Other Information............................................ 13 PAGE 3 OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands except share and per share amounts - --------------------------------------------------------------------------------
March 31, December 31, 1999 1998 Unaudited Audited --------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 12,414 $ 8,814 Cash and cash equivalents held for clients 29,518 22,372 Current portion of purchased loans and accounts receivable portfolios 33,418 35,057 Accounts receivable - trade, less allowance for doubtful receivables of $1,002 and $1,309 46,724 40,724 Other current assets 9,445 8,777 -------- -------- Total current assets 131,519 115,744 PURCHASED LOANS AND ACCOUNTS RECEIVABLE PORTFOLIOS 13,217 20,436 PROPERTY AND EQUIPMENT, net 39,850 40,317 INTANGIBLE ASSETS, net 421,620 425,597 DEFERRED FINANCING COSTS, net 13,060 13,573 OTHER ASSETS 2,785 2,824 -------- -------- TOTAL $622,051 $618,491 ======== ======== LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES: Accounts payable - trade $ 9,242 $ 7,355 Collections due to clients 29,518 22,372 Accrued salaries, wages and benefits 14,976 13,274 Other current liabilities 54,022 55,071 Current portion of long-term debt 17,882 16,877 -------- -------- Total current liabilities 125,640 114,949 LONG-TERM DEBT 507,600 511,271 OTHER LONG-TERM LIABILITIES 21,911 22,303 STOCKHOLDERS' DEFICIT: 8% nonvoting cumulative redeemable exchangeable 13,159 12,167 preferred stock; authorized 1,250,000 shares, 1,052,745.42 and 973,322.32 shares, respectively, issued and outstanding, at liquidation value of $12.50 per share Voting common stock; $.01 par value; authorized 35 35 7,500,000 shares, 3,477,126.01 shares issued and outstanding Class A convertible nonvoting common stock; $.01 4 4 par value; authorized 7,500,000 shares, 391,740.58 shares issued and outstanding Class B convertible nonvoting common stock; $.01 4 4 par value; authorized 500,000 shares, 400,000 shares issued and outstanding Class C convertible nonvoting common stock; $.01 10 10 par value; authorized 1,500,000 shares, 1,040,000 shares issued and outstanding Paid-in capital 66,958 66,958 Retained deficit (113,270) (109,210) -------- -------- Total stockholders' deficit (33,100) (30,032) -------- -------- TOTAL $622,051 $618,491 ======== ======== The accompanying notes are an integral part of the unaudited condensed consolidated financial statements.
PAGE 4 OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (In thousands)
Three Months Ended March 31 ------------------- 1999 1998 REVENUES $129,247 $114,826 EXPENSES: Salaries and benefits 60,735 54,552 Service fees and other operating and 40,412 35,653 administrative expenses Amortization of loans and accounts receivable 11,300 9,040 purchased Amortization of goodwill and other intangibles 4,102 3,495 Depreciation expense 3,611 3,127 -------- -------- Total expenses 120,160 105,867 -------- -------- OPERATING INCOME 9,087 8,959 OTHER EXPENSE 76 - INTEREST EXPENSE - Net 12,565 11,224 -------- -------- LOSS BEFORE INCOME TAXES AND MINORITY INTEREST (3,554) (2,265) INCOME TAX BENEFIT - - MINORITY INTEREST - 572 -------- -------- NET LOSS (3,554) (2,837) PREFERRED STOCK DIVIDEND REQUIREMENTS 506 234 -------- -------- NET LOSS TO COMMON STOCKHOLDERS $ (4,060) $ (3,071) ======== ========
The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. PAGE 15 OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands except share amounts)
Three Months Ended March 31, -------------------- 1999 1998 OPERATING ACTIVITIES: Net loss $(3,554) $ (2,837) Adjustments to reconcile net loss to net cash from operating activities: Depreciation and amortization 8,461 7,286 Amortization of loans and accounts 11,300 9,040 receivable purchased Other 76 - Minority interest - 572 Change in assets and liabilities: Other current assets (6,856) (949) Accounts payable and other current liabilities 2,634 (4,309) ------- -------- Net cash from operating activities 12,061 8,803 ------- -------- INVESTING ACTIVITIES: Payments for acquisitions, net of cash acquired - (163,670) Purchase of loans and accounts receivable portfolios (2,442) (15,574) Acquisition of property and equipment (3,395) (2,856) Other 374 - ------- -------- Net cash from investing activities (5,463) (182,100) ------- -------- FINANCING ACTIVITIES: Proceeds from term loans - 225,469 Borrowings under revolving credit agreement 67,550 73,400 Repayments under revolving credit agreement (66,050) (87,000) Repayments of debt (4,263) (23,918) Deferred financing fees (235) (2,935) ------- -------- Net cash from financing activities (2,998) 185,016 ------- -------- NET INCREASE IN CASH AND CASH EQUIVALENTS 3,600 11,719 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 8,814 3,217 ------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $12,414 $ 14,936 ======= ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during period for interest $ 9,346 $ 3,319 ======= ======== Net cash (received) paid during period for taxes $ (89) $ 92 ======= ========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES - During the three months ended March 31, 1999 and 1998, the Company paid preferred stock dividends of $992 and $468, respectively, through the issuance of 79,423.10 shares and 37,435.47 shares of preferred stock, respectively. The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (In thousands) NOTE 1. BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 1999 are not necessarily indicative of the results that may be expected for the year ended December 31, 1999. For purposes of comparability, certain prior year amounts have been reclassified to conform to current quarter presentation. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto contained in the Company's Form 10-K for the year ended December 31, 1998. Comprehensive loss for the periods presented were equal to the Company's net loss as the Company had no comprehensive income (loss) items. NOTE 2. ACQUISITION On January 23, 1998, the Company acquired through a tender offer approximately 77% of the outstanding shares of The Union Corporation's ("Union") common stock for $31.50 per share. On March 31, 1998, the Company acquired the remaining outstanding shares of Union when Union merged with a wholly-owned subsidiary of the Company. The aggregate purchase price of the Union acquisition was approximately $220,000 including transaction costs of $10,900 and assumed liabilities. The Company financed the acquisition primarily with funds provided by the amended credit agreement. Union, through certain of its subsidiaries, furnishes a broad range of credit and receivables management outsourcing services as well as management and collection of accounts receivable. The acquisition was accounted for under the purchase method of accounting. The Company allocated the total purchase price including additional liabilities reserves to the fair value of the net assets acquired resulting in goodwill of approximately $219,000. The goodwill will be amortized over 30 years using the straight-line method. Union's consolidated operating results have been included in the Company's consolidated results since January 23, 1998, recognizing the minority interest through the completion date of the acquisition. The unaudited proforma consolidated financial data presented below provides pro forma effect of the Union acquisition as if such acquisition had occurred as of the beginning of each period presented. The unaudited results have been prepared for comparative purposes only and do not necessarily reflect the results of operations of the Company that actually would have occurred had the acquisition been consummated as of the beginning of each period presented, nor does the data give effect to any transactions other than the acquisition. For the three months Ended March 31, ------------------------- 1999 1998 Revenues $129,247 $122,180 ======== ======== Net loss $(3,554) $(3,958) ======= ======= NOTE 3. DEBT In January 1998, the Company finalized the Second Amended and Restated Credit Agreement for $466,663 (the "Agreement") with a group of banks to fund the Union acquisition and refinance existing outstanding indebtedness. The Agreement, as amended, consists of a $408,663 term loan facility and a $58,000 Revolving Credit Facility (the "Revolving Facility"). The term loan facility consists of a term loan of $59,187 ("Term Loan A"), a term loan of $124,476 ("Term Loan B") and a term loan of $225,000 ("Term Loan C"), which mature on October 15, 2001, 2003 and 2004, respectively. The Company is required to make quarterly principal repayments on each term loan. Term Loan A bears interest, at the Company's option, (a) at a base rate equal to the greater of the federal funds rate plus 0.5% or the lender's customary base rate plus 1.5% or (b) at the reserve adjusted Eurodollar rate plus 2.5%. Term Loan B and Term Loan C bear interest, at the Company's option, (a) at a base rate equal to the greater of the federal funds rate plus 0.5% or the lender's customary base rate, plus 2.0% or (b) at the reserve adjusted Eurodollar rate plus 3.0%. The Revolving Facility originally had a term of five years and is fully revolving until October 15, 2001. The Revolving Facility bears interest, at the Company's option, (a) at a base rate equal to the greater of the federal funds rate plus 0.5% or the lender's customary base rate plus 1.5% or (b) at the reserve adjusted Eurodollar rate plus 2.5%. Also, outstanding under the Revolving Facility are letters of credit of $1,656. The Agreement is guaranteed by all of the Company's present domestic subsidiaries and is secured by all of the stock of the Company's present domestic subsidiaries and by substantially all of the Company's domestic property assets. The Agreement contains certain covenants the more significant of which limit dividends, asset sales, acquisitions and additional indebtedness, as well as requires the Company to satisfy certain financial performance ratios. NOTE 4. LITIGATION From time to time, the Company and certain of its subsidiaries are subject to various investigations, claims and legal proceedings covering a wide range of matters that arise in the normal course of business and are routine to the nature of the Company's businesses. In addition, as a result of the Union acquisition, certain subsidiaries of the Company are a party to several on-going environmental remediation investigations by federal and state governmental agencies and clean-ups and, along with other companies, has been named a "potentially responsible party" for certain waste disposal sites. While the results of litigation cannot be predicted with certainty, the Company has provided for the estimated uninsured amounts and costs to resolve the pending suits and management, in consultation with legal counsel, believes that reserves established for the ultimate resolution of pending matters are adequate at March 31, 1999. NOTE 5. 8% NONVOTING CUMULATIVE REDEEMABLE EXCHANGEABLE PREFERRED STOCK In January 1999, the Company increased its authorized 8% Nonvoting Cumulative Redeemable Exchangeable Preferred Stock from 1,000,000 shares to 1,250,000 shares. NOTE 6. PURCHASED LOANS AND ACCOUNTS RECEIVABLE PORTFOLIOS FINANCING The following summarizes the transactions between the Company and OSI Funding Corp. ("FINCO"), a qualifying special-purpose finance company formed in the fourth quarter of 1998, for the three months ended March 31, 1999: Sales of purchased loans and accounts receivable portfolios by the Company to FINCO $17,658 Servicing fees paid by FINCO to the Company $1,843 Sales of purchased loans and accounts receivable portfolios by the Company to FINCO were in the same amount and occurred shortly after such portfolios were acquired by the Company from the various unrelated sellers. Accordingly, no gain or loss was recorded by the Company on the sales to FINCO. At March 31, 1999, FINCO had outstanding borrowings of $22,380. NOTE 7. NEW ACCOUNTING PRONOUNCEMENT In January 1999, the Company adopted Statement of Position No. 98-1, Accounting for Costs of Computer Systems Developed or Obtained for Internal Use, ("SOP 98-1"), which is effective for fiscal years beginning after December 15, 1998. The adoption of SOP 98-1 did not have a material impact on the consolidated statement of operations and consolidated balance sheet for the quarter ended and at March 31, 1999. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Three Months Ended March 31, 1999 Compared to Three Months Ended March 31, 1998 Revenues for the three months ended March 31, 1999 were $129.2 million compared to $114.8 million in the same period last year - an increase of 12.6%. The revenue increase of $14.4 million was due primarily to increased fee, outsourcing and portfolio services revenues of $7.1 million - an increase of 6.2% over last year, and $7.3 million from the acquisition of Union. Revenues from fee services were $93.7 million for the three months ended March 31, 1999 compared to $86.4 million in the comparable period in 1998. The increase in fee revenues was due to a 1.9% increase in existing business and $5.7 million from the Union acquisition. Revenues from purchased portfolio services increased to $21.7 million for the three months ended March 31, 1999 compared to $18.5 million in 1998 - up 16.7%. The increased revenue was attributable to strategic sales of on-balance sheet portfolios. Revenues from purchased portfolio services excluding the sales of on-balance sheet portfolios were flat with last year due to slightly lower collections of on-balance sheet portfolios offset by the servicing fee revenue on the FINCO (formed in the fourth quarter of 1998) collections of $4.7 million. The outsourcing services revenue of $13.8 million compared favorably to prior year of $9.9 million due to increased revenue from existing business of 23.0% and $1.6 million from the Union acquisition. Operating expenses for the three months ended March 31, 1999 were $120.1 million compared to $105.9 million for the comparable period in 1998. Operating expenses, exclusive of amortization and depreciation charges, were $101.1 million for the three months ended March 31, 1999 and $90.2 million for the comparable period in 1998 - an increase of 12.1%. The increase in operating expenses, exclusive of amortization and depreciation charges, resulted primarily from the Union acquisition, higher collection-related expenses associated with the increased revenues and increased consulting expenses. Of the $120.1 million in operating expenses for the three months ended March 31, 1999, $19.0 million was attributable to amortization and depreciation charges compared to $15.7 million for the same period last year - an increase of 21.4%. The higher amortization and depreciation charges resulted from additional depreciation and amortization of goodwill related to the Union acquisition and increased portfolio amortization resulting from increased portfolio sales of certain on-balance sheet portfolios. As a result of the above, the Company generated operating income of $9.1 million for the three months ended March 31, 1999 compared to $9.0 million for the comparable period in 1998. Earnings before interest expense, taxes, depreciation and amortization (EBITDA) for the three months ended March 31, 1999 was $28.1 million compared to $24.6 million for the same period in 1998. The increase of $3.5 million consisted of $0.7 million as a result of the Union acquisition with the remaining $2.8 million primarily attributable to the increased revenue from existing business of $7.1 million. Net interest expense for the three months ended March 31, 1999 was $12.6 million compared to $11.2 million for the comparable period in 1998. The increase was due to additional indebtedness incurred to finance the Union acquisition. Consistent with management's assessment made in the fourth quarter of 1997, the potential tax benefits generated by additional net operating loss carryovers or the future reversal of the net deductible temporary differences for the three months ended March 31, 1999 and 1998 were fully offset by a net valuation allowance of $1.4 million and $0.9 million, respectively. Minority interest in 1998 resulted from the Union acquisition. On January 23, 1998, the Company acquired approximately 77% of the outstanding common stock of Union through a tender offer. The acquisition of all remaining outstanding common stock of Union was completed on March 31, 1998. The Company recognized minority interest in earnings of Union during the period from January 23, 1998 to March 31, 1998. Due to the factors stated above, the net loss for the three months ended March 31, 1999 of $3.6 million compared unfavorably to the net loss of $2.8 million for the three months ended March 31, 1998. Financial Condition, Liquidity and Capital Resources At March 31, 1999, the Company had cash and cash equivalents of $12.4 million. The Company's credit agreement provides for a $58.0 million revolving credit facility, which allows the Company to borrow for working capital, general corporate purposes and acquisitions, subject to certain conditions. As of March 31, 1999, the Company had outstanding $27.0 million under the revolving credit facility leaving $29.4 million, after outstanding letters of credit, available under the revolving credit facility. Since December 31, 1998, cash and cash equivalents increased $3.6 million primarily due to cash from operations of $12.1 million offset primarily by cash utilized for the net repayment of debt of $2.8 million, purchases of loans and accounts receivable portfolios of $2.4 million and capital expenditures of $3.4 million. The Company also held $29.5 million of cash for clients in restricted trust accounts at March 31, 1999. For the first three months in 1999, the Company made capital expenditures of $3.4 million primarily for the replacement and upgrading of equipment and expansion of the Company's information services systems. The Company anticipates spending approximately $17.5 million for 1999. Year 2000 As the Year 2000 approaches, many corporate systems worldwide could malfunction or produce incorrect results because they cannot process date-related information properly. Dates play a key role in dependable functioning of the software applications, software systems, information technology infrastructure, and embedded technology (i.e., non-technical assets such as time clocks and building services) the Company relies upon in day-to-day operations for innumerable tasks. This includes any tasks requiring date-dependent arithmetic calculations, sorting and sequencing data, and many other functions. The Company identified this problem as a key focus during 1997 and as part of any subsequent due-diligence procedures related to acquisitions completed during 1998. The Company has assessed the impact of Year 2000 issues on the processing date-related information for all of its information systems infrastructure (e.g., production systems) and significant non-technical assets. As the new millennium approaches, the Company has developed and implemented a Year 2000 program to deal with this important issue in an effective and timely manner. This problem has received significant senior management attention and resources. Management reviews have been held on this topic. During 1998 and 1999, the Company's Board of Directors received and will continue to receive quarterly reports at each regular Board meeting regarding the Company's overall Year 2000 compliance status and readiness. An independent consulting firm has been retained to provide independent verification and testing of the production systems. Under the direction of the Company's Senior Vice President and Chief Information Officer, the Company has established a program management structure, a management process and methodology and proactive client and vendor management strategies to manage the Year 2000 risk. Because many of the Company's client relationships are supported through computer-system interfaces, it is critical that the Company works proactively with its clients to achieve Year 2000 compliance. The Company has established a proactive client management strategy focused on enabling the Company to work together with clients to assure Year 2000 compliance between respective computer systems. The implementation of the client management strategy commenced in 1998. Letters were sent to significant clients, inquiring about their Year 2000 compliance plans and status. The Company has established a follow-up process with each key client, taking a proactive, customer-focused approach to achieving Year 2000 compliance with its customers. The Company has also communicated with its strategic suppliers and equipment vendors, including suppliers of non-technical assets, seeking assurances that they and their products will be Year 2000 ready. The Company's goal is to obtain as much detailed information as possible about its strategic suppliers and equipment vendors' Year 2000 plans to identify those companies which appear to pose any significant risk of failure to perform their obligations to the Company as a result of the Year 2000. The Company has compiled detailed information regarding all of its strategic suppliers and equipment vendors. This will be an ongoing process during the Year 2000 project. For those strategic suppliers and equipment vendors whose response was not satisfactory, the Company has developed contingency plans to ensure that sufficient alternative resources are available to continue with business operations. The target date for completion of all production systems and significant non-production systems (e.g., predictive dialer systems, phone switches, wide area network hardware), including non-technical assets, is June 1999. Testing is well underway for all systems with completion anticipated to be no later than June 1999. Spending for modifications and updates are being expensed as incurred and is not to have a material impact on the results of operations or cash flows. The cost of the Company's Year 2000 project is being funded from cash flows generated from operations. The Company estimates that its total Year 2000 expenses will be in the range of $1.4 to $1.6 million. To date, the Company has expended approximately $1.3 million, primarily for contract programmers and consulting costs associated with the evaluation, assessment and remediation of computer systems. The Company is dependent upon its own internal computer technology and relies upon the timely performance of its suppliers and customers and their systems. A substantial part of the Company's day-to-day operations is dependent on power and telecommunications services, for which alternative sources of services may be limited. A large-scale Year 2000 failure could impair the Company's ability to provide timely performance results required by the Company's customers, thereby causing potential liability, lost revenues and additional expenses, the amounts which have not been estimated. The Company's Year 2000 project seeks to identify and minimize this risk and includes testing of its in-house applications, purchased software and hardware to ensure that all such systems will function before and after the Year 2000. The Company is continually refining its understanding of the risk the Year 2000 poses to its strategic suppliers and customers based upon information obtained through its surveys. This refinement will continue through 1999. The Company's Year 2000 project includes the development of contingency plans for business critical systems, as well as for strategic suppliers and customers to attempt to minimize disruption to its operations in the event of a Year 2000 failure. The Company will be formulating plans to address a variety of failure scenarios, including failures of its in-house applications, as well as failures of strategic suppliers and customers. The Company anticipates that it will complete Year 2000 contingency planning by June 1999. Forward-Looking Statements The following statements in this document are or may constitute forward-looking statements made in reliance upon the safe harbor of the Private Securities Litigation Reform Act of 1995: (1) statements concerning the cost and successful implementation of the Company's Year 2000 initiatives, (2) statements concerning the anticipated costs and outcome of legal proceedings and environmental liabilities, (3) statements regarding the Company's expected capital expenditures, (4) any statements preceded by, followed by or that include the word "believes," "expects," "anticipates," "intends," "should," "may," or similar expressions; and (5) other statements contained or incorporated by reference in this document regarding matters that are not historical facts. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to: (1) the demand for the Company's services, (2) the demand for accounts receivable management generally, (3) general economic conditions, (4) changes in interest rates, (5) competition, including but not limited to pricing pressures, (6) changes in governmental regulations including, but not limited to the federal Fair Debt Collection Practices Act and comparable state statutes, (7) the status and effectiveness of the Company's Year 2000 efforts, (8) legal proceedings, (9) environmental investigations and clean up efforts, (10) the Company's ability to rationalize operations of recent acquisitions, and (11) the Company's ability to generate cash flow or obtain financing to fund its operations, service its indebtedness and continue its growth and expand successfully into new markets and services. These forward-looking statements speak only as of the date they were made. These cautionary statements should be considered in connection with any written or oral forward-looking statements that the Company may issue in the future. The Company does not undertake any obligation to release publicly any revisions to such forward-looking statements to reflect later events or circumstances or to reflect the occurrence of unanticipated events. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is subject to the risk of fluctuating interest rates in the normal course of business. From time to time and as required by the Company's credit agreement, the Company will employ derivative financial instruments as part of its risk management program. The Company's objective is to manage risks and exposures and not to trade such instruments for profit or loss. Since December 31, 1998 (the most recent completed fiscal year), there have been no material changes in the reported market risks. PART II. OTHER INFORMATION Item 1. Legal Proceedings From time to time, the Company and certain of its subsidiaries are involved in various investigations, claims and legal proceedings covering a wide range of matters that arise in the normal course of business and are routine to the nature of the Company's business. Other information with respect to legal proceedings appears in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. Item 2. Changes in Securities None Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders In January 1999, pursuant to written consent of shareholders of the Company's voting common stock and preferred stock, the Company amended and restated its certificate of incorporation to increase its authorized 8% Nonvoting Cumulative Redeemable Exchangeable Preferred Stock from 1,000,000 shares to 1,250,000 shares. These consents were executed by holders of 2,831,126.01 shares of the Company's voting common stock and 973,322.32 shares of the Company's preferred stock. Pursuant to the same written consent, the same holders of the Company's voting common stock (1) elected the following persons to serve as directors of the Company until the next annual meeting of shareholders, such persons constituting all directors of the Company: Timothy G. Beffa, David E. De Leeuw, David G. Hanna, Frank J. Hanna, III, Courtney F. Jones, Robert A. Marshall, William B. Hewitt, David E. King, Nathan W. Pearson, Jr., Jeffrey E. Stiefler and Tyler T. Zachem; (2) approved, ratified and adopted indemnification agreements by and between the Company and all persons who serve as directors of the Company from time to time and such certain officers of the Company as specified from time to time by the Chief Executive Officer; and (3) approved, ratified and adopted all prior acts of the Company's Board of Directors. Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a). Exhibits Exhibit 10 Form of Indemnity Agreement, entered into by and between the Company and its directors and certain officers. Exhibit 27 Financial Date Schedule (Unaudited) (b). Reports on Form 8-K There were no reports on Form 8-K filed for the three-month period ended March 31, 1999. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. OUTSOURCING SOLUTIONS INC. (Registrant) /s/ TIMOTHY G. BEFFA ----------------------------------------------------- Timothy G. Beffa President and Chief Executive Officer /s/ DANIEL T. PIJUT ----------------------------------------------------- Daniel T. Pijut Vice President, Corporate Controller and Chief Accounting Officer Date: May 14, 1999 EX-27 2 FDS -- FOR 1999 1ST QTR. 10-Q
5 Note: This schedule contains summary financial information extracted from the Form 10-Q for the Quarter Ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 0001027574 Outsourcing Solutions Inc. and Subsidiaries 1,000 3-MOS DEC-31-1999 JAN-01-1999 MAR-31-1999 41,932 0 44,726 1,002 33,418 131,519 68,582 28,732 622,051 125,640 0 0 13,159 53 0 622,051 0 129,247 0 120,160 76 0 12,565 (3,554) 0 (3,554) 0 0 0 (3,544) 0 0
EX-10 3 INDEMNITY AGREEMENT INDEMNITY AGREEMENT This Indemnity Agreement, dated as of ______________, is made by and between Outsourcing Solutions Inc., a Delaware corporation (the "Company"), ______________ (the "Indemnitee"), an "agent" (as hereinafter defined) of the Company. R E C I T A L S A. The Company recognizes that competent and experienced persons are increasingly reluctant to serve as directors or officers of corporations unless they are protected by comprehensive liability insurance or indemnification, or both, due to increased exposure to litigation costs and risks resulting from their service to such corporations, and due to the fact that the exposure frequently bears no reasonable relationship to the compensation of such directors and officers; B. The statutes and judicial decisions regarding the duties of directors and officers are often difficult to apply, ambiguous, or conflicting, and therefore fail to provide such directors and officers with adequate, reliable knowledge of legal risks to which they are exposed or information regarding the proper course of action to take; C. The Company and the Indemnitee recognize that plaintiffs often seek damages in such large amounts and the costs of litigation may be so enormous (whether or not the case is meritorious), that the defense and/or settlement of such litigation is often beyond the personal resources of officers and directors; D. The Company believes that it is unfair for its directors and officers to assume the risk of huge judgments and other expenses which may occur in cases in which the director or officer received no personal profit and in cases where the director or officer was not culpable; E. The Company, after reasonable investigation, has determined that the liability insurance coverage presently available to the Company is inadequate to cover all possible exposure for which the Indemnitee should be protected and/or unreasonably expensive. The Company believes that the interests of the Company and its shareholders would best be served by a combination of such insurance (if reasonably available) and the indemnification by the Company of the directors and officers of the Company; F. Section 145 of the General Corporation Law of Delaware ("Section 145"), under which the Company is organized, empowers the Company to indemnify its officers, directors, employees and agents by agreement and to indemnify persons who serve, at the request of the Company, as the directors, officers, employees or agents of other corporations or enterprises, and expressly provides that the indemnification provided by Section 145 is not exclusive; G. The Board of Directors has determined that contractual indemnification as set forth herein is not only reasonable and prudent but necessary to promote the best interests of the Company and its shareholders; H. The Company desires and has requested the Indemnitee to serve or continue to serve as a director or officer of the Company free from undue concern for claims for damages arising out of or related to such services to the Company; and I. The Indemnitee is willing to serve, or to continue to serve, the Company, only on the condition that he is furnished the indemnity provided for herein. A G R E E M E N T NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, the parties hereto, intending to be legally bound, hereby agree as follows: 1. Definitions. (a) Agent. For purposes of this Agreement, "agent" of the Company means any person who is or was a director, officer, employee or other agent of the Company or a subsidiary of the Company; or is or was serving at the request of, for the convenience of, or to represent the interest of the Company or a subsidiary of the Company as a director, officer, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust or other enterprise; or was a director, officer, employee or agent of a foreign or domestic corporation which was a predecessor corporation of the Company, or was a director, officer, employee or agent of another enterprise at the request of, for the convenience of, or to represent the interests of such predecessor corporation. (b) Expenses. For purposes of this Agreement, "expenses" includes all direct and indirect costs of any type or nature whatsoever (including, without limitation, all attorneys' fees and related disbursements, other out-of-pocket costs and reasonable compensation for time spent by the Indemnitee for which he is not otherwise compensated by the Company or any third party, provided that the rate of compensation and estimated time involved is approved by the Board of Directors), actually and reasonably incurred by the Indemnitee in connection with either the investigation, defense or appeal of a proceeding or establishing or enforcing a right to indemnification under this Agreement, Section 145 or otherwise, and amounts paid in settlement by or on behalf of Indemnitee, but shall not include any final judgments, fines or penalties actually levied against the Indemnitee. (c) Proceedings. For the purposes of this Agreement, "proceeding" means any threatened, pending, or completed action, suit or other proceeding, whether civil, criminal, administrative, investigative or any other type whatsoever. (d) Subsidiary. For purposes of this Agreement, "subsidiary" means any corporation,limited liability company, partnership, joint venture or any similar entity of which more than 40% of the outstanding securities, interests, or similar ownership instruments are owned directly or indirectly by the Company, by the Company and one or more other subsidiaries, or by one or more other subsidiaries. (e) Other Enterprise. For purposes of this Agreement, "other enterprise" shall include employee benefit plans; references to "fines" shall include any excise tax assessed with respect to any employee benefit plans; references to "serving at the request of the Company" shall include any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants, or beneficiaries; any person who acts in good faith and in a manner he reasonably believes to be in the best interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Company" as referred to in this Agreement. 2. Agreement to Serve. The Indemnitee agrees to serve and/or continue to serve as an agent of the Company, at its will (or under separate agreement, if such agreement exists), in the capacity Indemnitee currently serves as an agent of the Company, so long as he is duly appointed or elected and qualified in accordance with the applicable provisions of the Bylaws of the Company or any subsidiary of the Company or until such time as he tenders his resignation in writing, provided, however, that nothing contained in this Agreement is intended to create any right to continued employment by Indemnitee in any capacity. 3. Indemnity in Third Party Proceedings. The Company shall indemnify the Indemnitee if the Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding (other than a proceeding by or in the name of the Company to procure judgment in its favor) by reason of the fact that the Indemnitee is or was an agent of the Company, or by reason of any act or inaction by him in any such capacity, against any and all expenses and liabilities of any type whatsoever (including, but not limited to, judgments, fines and penalties), actually and reasonably incurred by him in connection with the investigation, defense, settlement or appeal of such proceeding, but only if the Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any proceeding by judgment, order of court, settlement, conviction or on plea of nolo contendere, or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith in a manner which he reasonably believed to be in the best interests of the Company, and with respect to any criminal proceedings, that such person had reasonable cause to believe that his conduct was unlawful. 4. Indemnity in Derivative Actions. The Company shall indemnify the Indemnitee if the Indemnitee is a party to or threatened to be made a party to or otherwise involved in any proceeding by or in the name of the Company to procure a judgment in its favor by reason of the fact that the Indemnitee is or was an agent of the Company, or by reason of any act or inaction by him in any such capacity, against all expenses actually and reasonably incurred by the Indemnitee in connection with the investigation, defense, settlement, or appeal of such proceeding, but only if the Indemnitee acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Company, except that no indemnification under this subsection shall be made in respect of any claim, issue or matter as to which the Indemnitee shall have been finally adjudged to be liable to the Company by a court of competent jurisdiction due to willful misconduct of a culpable nature in the performance of his duty to the Company, unless and only to the extent that any court in which such proceeding was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as such court shall deem proper. 5. Indemnification of Expenses of Successful Party. Notwithstanding any other provisions of this Agreement, to the extent that the Indemnitee has been successful on the merits or otherwise in defense of any proceeding or in defense of any claim, issue or matter therein, including the dismissal of an action without prejudice, the Company shall indemnify the Indemnitee against all expenses actually and reasonably incurred in connection with the investigation, defense or appeal of such proceeding. 6. Partial Indemnification. If the Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of any expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines or penalties), actually and reasonable incurred by him in the investigation, defense, settlement or appeal of a proceeding but is not entitled, however, to indemnification for the total amount thereof, the Company shall nevertheless indemnify the Indemnitee for the portion thereof to which the Indemnitee is entitled. 7. Advancement of Expenses. Subject to Section 11(a) below, the Company shall advance all expenses incurred by the Indemnitee in connection with the investigation, defense, settlement or appeal of any proceeding to which the Indemnitee is a party or is threatened to be made a party by reason of the fact that the Indemnitee is or was an agent of the Company. Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that the Indemnitee is not entitled to be indemnified by the Company as authorized by this Agreement. The advances to be made hereunder shall be paid by the Company to or on behalf of the Indemnitee within thirty (30) days following delivery of a written request therefor by the Indemnitee to the Company. 8. Notice and Other Indemnification Procedures. (a) Promptly after receipt by the Indemnitee of notice of the commencement of or the threat of commencement of any proceeding, the Indemnitee shall, if the Indemnitee believes that indemnification with respect thereto may be sought from the Company under this Agreement, notify the Company of the commencement or threat of commencement thereof. (b) Any indemnification requested by the Indemnitee under Section 3 and/or 4 hereof shall be made no later than forty-five (45) days after receipt of the written request of Indemnitee unless a determination is made within said forty-five (45) day period (i) by the Board of Directors of the Company by a majority vote of a quorum thereof consisting of directors who are not parties to such proceedings, or (ii) in the event such a quorum is not obtainable, at the election of the Company, either by independent legal counsel in a written opinion or by a panel of arbitrators, one of whom is selected by the Company, another of whom is selected by the Indemnitee and the last of whom is selected by the first two arbitrators so selected, that the Indemnitee has not met the relevant standards for indemnification set forth in Section 3 and 4 hereof. (c) Notwithstanding a determination under Section 8(b) above that the Indemnitee is not entitled to indemnification with respect to any specific proceeding, the Indemnitee shall have the right to apply to any court of competent jurisdiction for the purpose of enforcing the Indemnitee's right to indemnification pursuant to this Agreement. The burden of proving that the indemnification or advances are not appropriate shall be on the Company. Neither the failure of the Company (including its Board of Directors or independent legal counsel or the panel of arbitrators) to have made a determination prior to the commencement of such action that indemnification or advances are proper in the circumstances because the Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including its Board of Directors or independent legal counsel or the panel of arbitrators) that the Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create any presumption that the Indemnitee has not met the applicable standard of conduct. (d) The Company shall indemnify the Indemnitee against all expenses incurred in connection with any hearing or proceeding under this Section 8 unless a court of competent jurisdiction finds that each of the claims and/or defenses of the Indemnitee in any such proceeding was frivolous or in bad faith. 9. Assumption of Defense. In the event the Company shall be obligated to pay the expenses of any proceeding against the Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel reasonably acceptable to the Indemnitee, upon the delivery to the Indemnitee of written notice of its election to do so. After delivery of such notice, approval of such counsel by the Indemnitee and the retention of such counsel by the Company, the Company will not be liable to the Indemnitee under this Agreement for any fees of counsel subsequently incurred by the Indemnitee with respect to the same proceeding, provided that (i) the Indemnitee shall have the right to employ his counsel in such proceeding at the Indemnitee's expense; and (ii) if (a) the employment of counsel by the Indemnitee has been previously authorized in writing by the Company, (b) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and the Indemnitee in the conduct of any such defense, or (c) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, the fees and expenses of the Indemnitee's counsel shall be at the expense of the Company. 10. Insurance. The Company may, but is not obligated to, obtain directors' and officers' liability insurance ("D&O Insurance") as may be or become available in reasonable amounts from established and reputable insurers with respect to which the Indemnitee is named as an insured. Notwithstanding any other provision of the Agreement, the Company shall not be obligated to indemnify the Indemnitee for expenses, judgments, fines or penalties, which have been paid directly to the Indemnitee by D&O Insurance. If the Company has D&O Insurance in effect at the time the Company receives from the Indemnitee any notice of the commencement of a proceeding, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the policy. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policy. 11. Exceptions. Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement: (a) Claims Initiated by Indemnitee. To indemnify or advance expenses to the Indemnitee with respect to proceedings or claims initiated or brought voluntarily by the Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement or any other statute or law or otherwise as required under Section 145, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors finds it to be appropriate; or (b) Action for Indemnification. To indemnify the Indemnitee for any expenses incurred by the Indemnitee with respect to any proceeding instituted by the Indemnitee to enforce or interpret this Agreement, if a court of competent jurisdiction determines that each of the material assertions made by the Indemnitee in such proceeding was not made in good faith or was frivolous; or (c) Unauthorized Settlements. To indemnify the Indemnitee under this Agreement for any amounts paid in settlement of a proceeding affected without the Company's written consent. The Company shall not settle any proceeding without the Indemnitee's written consent. Neither the Company nor Indemnitee will unreasonably withhold consent to any proposed settlement; or (d) Certain Matters. To indemnify the Indemnitee on account of any proceeding with respect to (i) remuneration paid to Indemnitee if it is determined by final judgment or other final adjudication that such remuneration was in violation of law, (ii) which final judgment is rendered against the Indemnitee for an accounting of profits made from the purchase or sale by Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions of any federal, state or local statute, or (iii) which it is determined by final judgment or other final adjudication that the Indemnitee's conduct was knowingly fraudulent or dishonest. 12. Nonexclusivity. The provisions for indemnification and advancement of expenses set forth in this Agreement shall not be deemed exclusive of any other rights which the Indemnitee may have under any provision of law, the Company's Certificate of Incorporation or Bylaws, in any court in which a proceeding is brought, the vote of the Company's shareholders or disinterested directors, other agreements or otherwise, both as to action in his official capacity and to action in another capacity while occupying his position as an agent of the Company, and the Indemnitee's rights hereunder shall continue after the Indemnitee has ceased acting as an agent of the Company and shall inure to the benefit of the heirs, executors and administrators of the Indemnitee. 13. Subrogation. In the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and shall do everything that may be necessary to secure such rights, including the execution of such documents necessary to enable the Company effectively to bring suit to enforce such rights. 14. Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to provide indemnification to the Indemnitee to the fullest extent now or hereafter permitted by law. 15. Severability. If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever, (i) the validity, legality and enforceability of the remaining provisions of the Agreement (including without limitation, all portions of any paragraphs of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, all portions of any paragraph of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that are not themselves invalid, illegal or unenforceable) shall be construed so as to give effect to the intent manifested by the provision held invalid, illegal or unenforceable and to give effect to Section 14 hereof. 16. Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. 17. Successor and Assigns. The terms of this Agreement shall bind, and shall inure to the benefit of, the successors and assigns of the parties hereto. 18. Notice. All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed duly given (i) if delivered by hand and receipted for by the party addressee or (ii) if mailed by certified or registered mail with postage prepaid, on the third business day after the mailing date. Addresses for notice to either party are as shown on the signature page of this Agreement, or as subsequently modified by written notice. 19. Governing Law. This Agreement shall be governed exclusively by and construed according to the laws of the State of Delaware, as applied to contracts between Delaware residents entered into and to be performed entirely within Delaware. If a court of competent jurisdiction shall make a final determination that the provisions of the law of any state other than Delaware govern indemnification by the Company of its officers and directors, then the indemnification provided under this Agreement shall in all instances be enforceable to the fullest extent permitted under such law, notwithstanding any provision of this Agreement to the contrary. The parties hereto have entered into this Indemnity Agreement effective as of the date first above written. OUTSOURCING SOLUTIONS INC. By -------------------------------------- Timothy G. Beffa President, Chief Executive Officer Address: 390 South Woods Mill Road Suite 350 St. Louis, MO 63017 Indemnitee: ------------------------- Address: ------------------------- -----END PRIVACY-ENHANCED MESSAGE-----