Form 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 September 30, 2000 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 September 30, 2000 Voting common stock 6,077,804.10 Non-voting common stock 480,321.30 6,558,125.40 PAGE 2 OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES TABLE OF CONTENTS Part I. Financial Information Page Item 1. Financial Statements Condensed Consolidated Balance Sheets September 30, 2000 (unaudited) and December 31, 1999.......................3 Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2000 (unaudited) and 1999 (unaudited)...........4 Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2000 (unaudited) and 1999 (unaudited)...........5 Notes to Condensed Consolidated Financial Statements (unaudited)...........6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................................8 Item 3. Quantitative and Qualitative Disclosures About Market Risk................11 Part II. Other Information......................................................13 PAGE 3 OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share and per share amounts) September 30 December 31, 2000 1999 Unaudited Audited ASSETS Cash and cash equivalents $ 9,792 $ 6,059 Cash and cash equivalents held for clients 24,272 22,521 Accounts receivable - trade, less allowance for doubtful receivables of $459 and $529 58,423 52,082 Purchased loans and accounts receivable portfolios 27,004 39,947 Property and equipment, net 45,503 43,647 Intangible assets, net 419,204 410,471 Deferred financing costs, less accumulated amortization of $3,560 and $248 23,913 27,224 Other assets 29,914 22,761 TOTAL $ 638,025 $ 624,712 ========= ========= LIABILITIES AND STOCKHOLDERS' DEFICIT Accounts payable - trade $ 8,249 $ 6,801 Collections due to clients 24,272 22,521 Accrued salaries, wages and benefits 13,768 17,009 Debt 537,541 518,307 Other liabilities 74,415 68,306 Commitments and contingencies (Note 2) Mandatorily redeemable preferred stock; redemption amount of $119,112 98,820 85,716 and $107,877 Stockholders' deficit: Voting common stock; $.01 par value; authorized 15,000,000 shares, 9,156,053.17 shares issued 92 90 Non-voting common stock; $.01 par value; authorized 2,000,000 shares, 480,321.30 issued and outstanding 5 5 Paid-in capital 200,137 196,339 Accumulated deficit (182,975) (155,525) 17,259 40,909 Notes receivable from management for shares sold (1,442) - Common stock in treasury, at cost; 3,078,249.07 shares (134,857) (134,857) Total stockholders' deficit (119,040) (93,948) TOTAL $ 638,025 $ 624,712 ========= ========= 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 Nine Months Ended September 30, September 30, September September 2000 1999 2000 1999 REVENUES $ 133,871 $ 122,987 $ 404,494 $ 380,063 EXPENSES: Salaries and benefits 66,026 60,076 198,443 182,238 Service fees and other operating and administrative expenses 41,897 37,440 126,908 117,334 Amortization of purchased loans and accounts receivable portfolios 6,591 9,317 21,376 29,794 Amortization of goodwill and other intangibles 3,980 4,112 11,929 12,316 Depreciation expense 3,956 3,735 12,067 10,960 Nonrecurring realignment expenses 1,742 - 2,742 - Compensation expense related to redemption of stock options - - 187 - Total expenses 124,192 114,680 373,652 352,642 OPERATING INCOME 9,679 8,307 30,842 27,421 OTHER EXPENSE - - - 76 INTEREST EXPENSE - Net 15,377 13,005 44,829 38,214 LOSS BEFORE INCOME TAXES (5,698) (4,698) (13,987) (10,869) PROVISION FOR INCOME TAXES 65 - 359 375 NET LOSS (5,763) (4,698) (14,346) (11,244) PREFERRED STOCK DIVIDEND REQUIREMENTS AND ACCRETION OF SENIOR PREFERRED STOCK 4,497 527 13,104 1,033 NET LOSS TO COMMON STOCKHOLDERS $ (10,260) $ (5,225) $ (27,450) $ (12,277) ========== ========== ========== ========== The accompanying notes are an integral part of the unaudited condensed consolidated financial statements. PAGE 5 OUTSOURCING SOLUTIONS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands) Nine Months Ended September 30, 2000 1999 OPERATING ACTIVITIES AND PORTFOLIO PURCHASING: Net loss $ (14,346) $ (11,244) Adjustments to reconcile net loss to net cash from operating activities and portfolio purchasing: Depreciation and amortization 27,308 25,645 Amortization of purchased loans and accounts receivable portfolios 21,376 29,794 Change in assets and liabilities: Purchases of loans and accounts receivable portfolios (8,433) (15,188) Accounts receivable and other assets (10,370) (7,707) Accounts payable, accrued expenses and other liabilities 3,957 (9,625) Net cash from operating activities and portfolio purchasing 19,492 11,675 INVESTING ACTIVITIES: Acquisition of property and equipment (13,883) (14,163) Payment for acquisition, net of cash acquired (15,150) - Purchases of loans and accounts receivable portfolios for resale to FINCO (70,721) (44,485) Sales of loans and accounts receivable portfolios to FINCO 70,721 44,485 Investment in FINCO - (2,500) Other (1,361) (608) Net cash from investing activities (30,394) (17,271) FINANCING ACTIVITIES: Borrowings under revolving credit agreement 244,350 223,150 Repayments under revolving credit agreement (227,850) (208,750) Repayments of debt (2,512) (12,607) Proceeds from issuance of common stock 401 - Proceeds from term loans 246 - Deferred financing fees - (175) Net cash from financing activities 14,635 1,618 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,733 (3,978) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 6,059 8,814 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 9,792 $ 4,836 ========= ========== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during period for interest $ 32,230 $ 33,264 ========= ========== Net cash paid during period for taxes $ 241 $ 158 ========= ========== SUPPLEMENTAL DISCLOSURE OF NONCASH INFORMATION: Paid preferred stock dividends through issuance of preferred stock $ - $ 1,519 ========= ========== Accrued dividends on mandatorily redeemable preferred stock $ 11,235 $ - ========= ========== Accretion of mandatorily redeemable preferred stock $ 1,869 $ - ========= ========== Notes receivable for common stock $ 1,400 $ - ========= ========== 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 accounting principles generally accepted in the United States 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 accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring items) considered necessary for a fair presentation have been included. Operating results for the three and nine months ended September 30, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. 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, 1999. Comprehensive loss for the periods presented is equal to the Company's net loss as the Company had no other comprehensive income (loss) items. NOTE 2. 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 acquisition of The Union Corporation, 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 September 30, 2000. NOTE 3. PURCHASED LOANS AND ACCOUNTS RECEIVABLE PORTFOLIOS FINANCING OSI Funding LLC ("FINCO") is a special-purpose finance company with the Company owning approximately 78% of the financial interest but having only approximately 29% of the voting rights. The following summarizes the transactions between the Company and FINCO for the periods ended September 30: Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 Sales of purchased loans and accounts receivable portfolios by the Company to FINCO $ 16,415 $ 15,161 $ 70,721 $ 44,485 Servicing fees paid by FINCO to the Company $ 10,319 $ 3,913 $ 19,656 $ 9,758 Sales of purchased loans and accounts receivable portfolios ("Receivables") 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. In conjunction with sales of Receivables to FINCO and the servicing agreement, the Company recorded servicing assets which are being amortized over the servicing agreement. The carrying value of such servicing assets, which are included in other assets in the accompanying condensed consolidated balance sheet, was $5,605 at September 30, 2000 and was $1,300 at December 31, 1999. At September 30, 2000 and December 31, 1999, FINCO had unamortized Receivables of $73,776 and $42,967, respectively. At September 30, 2000 and December 31, 1999, FINCO had outstanding borrowings of $61,533 and $32,051, respectively, under its revolving warehouse financing arrangement. NOTE 4: ACQUISITION On September 29, 2000, the Company through a newly formed limited liability company, RWC Consulting Group, LLC, acquired certain assets and assumed certain liabilities of RWC Consulting Group, Inc. ("RWC"), a service company providing highly-skilled consultants to banks to assist in their back office functions. Total consideration for RWC includes cash of approximately $15,150 including transaction costs of $150, voting common stock worth $2,000 (53,376.03 shares) and an 18% unsecured, subordinated note of $5,000 (interest compounded annually and principal and interest due September 29, 2003). The cash portion of the purchase price was financed under the Company's revolving credit facility. The acquisition was accounted for under the purchase method and the excess of cost over the fair value of the net assets acquired is amortized on a straight-line basis over 30 years. The acquisition contains a certain contingent payment obligation based on the attainment of a certain financial performance target over the next three years. The future contingent payment obligation, if any, will be accounted for as additional goodwill as the payment is made. NOTE 5: NONRECURRING EXPENSES In continuing the adopted strategy to align the Company along business services and establish call centers of excellence, the Company incurred $1,742 and $2,742 of nonrecurring realignment expenses in the three months and the nine months ended September 30, 2000, respectively. These expenses include costs resulting from closure of certain call centers, severance associated with these office closures and certain other one-time costs. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Three Months Ended September 30, 2000 Compared to Three Months Ended September 30, 1999 Revenues for the three months ended September 30, 2000 were $133.9 million compared to $123.0 million in the same period last year - an increase of 8.8%. The revenue increase of $10.9 million was due to increased collection, outsourcing and portfolio services revenues. Revenues from collection services were $89.4 million for the three months ended September 30, 2000 compared to $88.2 million in the comparable period in 1999. The increase in collection services revenue was primarily attributable to increased government and letter series business. Partially offsetting this increase, however, was lower revenue from telecommunications business and the continued weakness in the bankcard market. The outsourcing services revenue of $19.5 million compared favorably to $15.1 million in 1999 due to increased revenue from new and existing business. Revenues from portfolio services increased 26.9% to $25.0 million for the three months ended September 30, 2000 from $19.7 million for the comparable period in 1999. The increased revenue was primarily due to higher servicing fee revenues for the off-balance sheet collections of FINCO portfolios partially offset by lower revenues from on-balance sheet portfolios resulting in the shift from on-balance sheet ownership of purchased loans and accounts receivable portfolios to off-balance sheet. During the three months ended September 30, 2000, the Company recorded revenue from FINCO servicing fees of $10.3 million compared to servicing fees of $3.9 million for the three months ended September 30, 1999. Operating expenses, inclusive of salaries and benefits, service fees and other operating and administrative expenses, were $107.9 million for the three months ended September 30, 2000 and $97.5 million for the comparable period in 1999 - an increase of 10.7%. The increase in these operating expenses resulted primarily from higher collection expenses, increased collection-related expenses due to the increased revenues of collection and outsourcing services and increased collection expenses associated with collections of on and off-balance sheet purchased portfolios. For the three months ended September 30, 2000, amortization and depreciation charges of $14.5 million were lower than the $17.2 million for the comparable period in 1999 by $2.7 million. The lower amortization and depreciation charges resulted primarily from lower portfolio amortization as a result of the shift towards off-balance sheet purchased loans and accounts receivable portfolios. In continuing with the strategy to align the Company along business services and establish call centers of excellence by industry specialization adopted in early 1999, the Company incurred nonrecurring realignment expenses of $1.7 million which includes costs for closure of certain call centers, severance associated with these office closures and certain other one-time costs. These costs were recognized as incurred in 2000. Earnings before interest expense, taxes, depreciation and amortization (EBITDA) for the three months ended September 30, 2000 was $24.2 million. Adding back the nonrecurring charges, EBITDA of $25.9 million for the three months ended September 30, 2000 compared favorably to $25.5 million for the same period in 1999. Operating income of $9.7 million for the three months ended September 30, 2000 compared favorably to last year's operating income of $8.3 million for the same period. Adding back the nonrecurring charges of $1.7 million, operating income was $11.4 million for the three months ended September 30, 2000 compared to $8.3 million for the same period in 1999 - an increase of 37%. The shift to off-balance sheet ownership of portfolios has negatively impacted EBITDA as revenue is recognized for off-balance sheet portfolios when servicing fees (a certain percentage of collections) are earned whereas for on-balance sheet portfolios the Company recognizes revenue when collections are received. Nevertheless, operating income has been positively impacted by lower amortization as the Company amortizes only on-balance sheet portfolios, which have become smaller. Net interest expense for the three months ended September 30, 2000 was $15.4 million compared to $13.0 million for the comparable period in 1999. The increase was due primarily to higher interest rates and higher amortization of deferred financing fees. The provision for income taxes of $0.1 million was provided for state income tax obligations, which the Company cannot offset currently by net operating losses. Due to the factors stated above, the net loss for the three months ended September 30, 2000 of $5.8 million compared unfavorably to the net loss of $4.7 million for the three months ended September 30, 1999. Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30, 1999 Revenues for the nine months ended September 30, 2000 were $404.5 million compared to $380.1 million in the same period last year - an increase of 6.4%. The revenue increase of $24.4 million was due to increased collection, outsourcing and portfolio services revenues. Revenues from collection services were $281.9 million for the nine months ended September 30, 2000 compared to $275.0 million in the comparable period in 1999 due primarily to increased government and letter series business partially offset by lower telecommunications business and the continued weakness in the bankcard market. The outsourcing services revenue of $54.4 million compared favorably to $43.5 million in 1999 due to increased revenue from new and existing business. Revenues from portfolio services increased to $68.2 million for the nine months ended September 30, 2000 from $61.6 million for the comparable period in 1999. The increased revenues was due to higher servicing fee revenues for the off-balance sheet collections of FINCO portfolios partially offset by lower revenues from on-balance sheet portfolios resulting in the shift from on-balance sheet ownership of purchased loans and accounts receivable portfolios to off-balance sheet. During the nine months ended September 30, 2000, the Company recorded revenue from FINCO servicing fees of $19.7 million compared to servicing fees of $9.8 million for the nine months ended September 30, 1999. Operating expenses, inclusive of salaries and benefits, service fees and other operating and administrative expenses, were $325.4 million for the nine months ended September 30, 2000 and $299.6 million for the comparable period in 1999 - an increase of 8.6%. The increase in these operating expenses resulted primarily from higher collection expenses, increased collection-related expenses due to the increased revenues of collection and outsourcing services and increased collection expenses associated with the increase in collections of on and off-balance sheet purchased portfolios partially offset by lower consulting expenses. For the nine months ended September 30, 2000, amortization and depreciation charges of $45.4 million were lower than $53.1 million for the comparable period in 1999 - a decrease of 14.5%. The lower amortization and depreciation charges resulted primarily from lower portfolio amortization as a result of the shift towards off-balance sheet purchased loans and accounts receivable portfolios. In continuing with the strategy to align the Company along business services and establish call centers of excellence by industry specialization adopted in early 1999, the Company incurred nonrecurring realignment expenses of $2.7 million which includes costs for closures of certain call centers, severance associated with these office closures and certain other one-time costs. These costs were recognized as incurred in 2000. In the nine months ended September 30, 2000, the Company incurred approximately $0.2 million of additional compensation expense resulting from the redemption of vested stock options. Earnings before interest expenses, taxes, depreciation and amortization (EBITDA) for the nine months ended September 30, 2000 was $76.2 million. Adding back the nonrecurring charges and the additional compensation expense, EBITDA was $79.1 million for the nine months ended September 30, 2000 compared to $80.5 million for the same period in 1999. The decrease of $1.4 million was primarily attributable to the increased collection expenses in relation to the revenue reported from the collections of purchased portfolios partially offset by the contribution from increased collection and outsourcing services revenues and lower consulting expenses. While EBITDA was down slightly due to the off-balance sheet ownership of the portfolios, depreciation and amortization also declined resulting in operating income of $30.8 million. Adding back the nonrecurring charges of $2.7 million and the additional compensation expense of approximately $0.2 million, operating income was $33.7 million for the nine months ended September 30, 2000 compared to $27.4 million for the same period in 1999. Net interest expense for the nine months ended September 30, 2000 of $44.8 million compared unfavorably to $38.2 million for the same period in 1999 due primarily to higher interest rates and higher amortization of deferred financing fees. The provision for income taxes of $0.4 million was provided for state and foreign income tax obligations, which the Company cannot offset currently by net operating losses. Due to the factors stated above, the net loss for the nine months ended September 30, 2000 of $14.3 million compared unfavorably to the net loss of $11.2 million for the nine months ended September 30, 1999. Financial Condition, Liquidity and Capital Resources At September 30, 2000, the Company had cash and cash equivalents of $9.8 million. The Company's credit agreement provides for a $75.0 million revolving credit facility, which allows the Company to borrow for working capital, general corporate purposes and acquisitions, subject to certain conditions. As of September 30, 2000, the Company had $29.5 million outstanding under the revolving credit facility leaving $39.0 million, after outstanding letters of credit, available under the revolving credit facility. Since December 31, 1999, cash and cash equivalents increased $3.7 million primarily due to cash from operating activities and portfolio purchasing of $19.5 million and net cash from financing activities of $14.6 million offset by the use of cash of $30.4 million primarily for capital expenditures of $13.9 million and $15.2 million for the acquisition of certain assets of RWC. In addition to the cash consideration of $15.2 million, the purchase price included voting common stock worth $2.0 million and a $5.0 million 18% unsecured, subordinated note along with a contingent payment obligation. The Company also held $26.2 million of cash for clients in restricted trust accounts at September 30, 2000. At September 30, 1999, the Company had cash and cash equivalents of $4.8 million. Since December 31, 1998, cash and cash equivalents decreased $4.0 million primarily due to cash utilized for the net repayment of debt of $12.6 million and capital expenditures of $14.2 million offset by cash from operating activities and portfolio purchasing of $11.7 million and increased borrowings under the revolving credit facility of $14.4 million. For the first nine months in 2000, the Company made capital expenditures of $13.9 million primarily for the replacement and upgrading of equipment, expansion of facilities and expansion and conversion of the Company's information services systems. The Company anticipates capital spending of approximately $18.0 million during 2000, which the Company intends to fund from cash flow from operations and if necessary, borrowings under the revolving credit facility. Recent Accounting Pronouncements In June 1998, the FASB issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, which was amended by SFAS No. 138, Accounting for Derivative Instruments and Hedging Activities, which is effective for fiscal years beginning after June 15, 2000. In September 1999, the FASB issued SFAS No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities - a replacement of FASB Statement No. 125, which is effective for the Company's fiscal year 2001. The Company has determined that these statements along with SAB No. 101, Revenue Recognition in Financial Statements, will not have a material impact on the consolidated statement of operations and consolidated balance sheet. 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 anticipated costs and outcome of legal proceedings and environmental liabilities, (2) statements regarding the Company's expected capital expenditures and the funding thereof, (3) any statements preceded by, followed by or that include the word "believes," "expects," "anticipates," "intends," "should," "may," or similar expressions; and (4) 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) legal proceedings, (8) environmental investigations and clean up efforts, (9) expected synergies, economies of scale and cost savings from acquisitions by the Company not being fully realized or realized within the expected time frames, (10) costs of operational difficulties related to integrating the operations of acquired companies with the Company's operations being greater than expected, (11) unanticipated realignment costs, (12) 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, and (13) factors discussed from time to time in the Company's public filings. 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. At December 31, 1999 (the most recent completed fiscal year), the Company had no outstanding interest rate agreements. Pursuant to the Company's credit agreement, the Company was obligated to secure interest rate protection in the nominal amount of $150.0 million by July 2000. In June 2000, the Company entered into interest rate collared swap agreements with several financial institutions for interest rate protection on the $150.0 million. Since June 30, 2000, there have been no material changes in these agreements. In October 2000, the Company entered into an interest rate swap agreement maturing November 2006 relating to $50.0 million nominal amount of its 11.0% senior subordinated notes. Under the agreement, the Company pays floating one month LIBOR plus 3.51%, capped at 11.0% until November 2002 and 15.0% thereafter. The financial institution has the right to call the agreement, at its discretion, after November 2001. 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, 1999. Item 2. Changes in Securities See Note 4 of the Condensed Consolidated Financial Statements included elsewhere herein. Item 3. Defaults Upon Senior Securities None Item 4. Submission of Matters to a Vote of Security Holders None Item 5. Other Information None Item 6. Exhibits and Reports on Form 8-K (a). Exhibits Exhibit 2 Asset Purchase Agreement dated September 26, 2000 by and among Outsourcing Solutions Inc., RWC Consulting Group, LLC, RWC Consulting Group, Inc., and Robert W. Curtis, Jr. Exhibit 3 By-laws of the Company. Exhibit 4.1 Second Supplemental Indenture dated as of July 16, 2000 by and among the Company, the Additional Guarantors and Wilmington Trust Company, as trustee. Exhibit 4.2 Third Supplemental Indenture dated as of September 29, 2000 by and among the Company, the Additional Guarantors and Wilmington Trust Company, as trustee. Exhibit 4.3 Release of Subsidiary Guarantee of OSI Education Services, Inc. Exhibit 27 Financial Data Schedule (Unaudited) (b). Reports on Form 8-K There were no reports on Form 8-K filed for the three-month period ended September 30, 2000. 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/ Gary L. Weller Gary L. Weller Executive Vice President and Chief Financial Officer Date: November 13, 2000

ASSET PURCHASE AGREEMENT by and among Outsourcing Solutions Inc., RWC Consulting Group, LLC, RWC Consulting Group, Inc., and Robert W. Curtis, Jr. Dated September 26, 2000 TABLE OF CONTENTS ASSET PURCHASE AGREEMENT SECTION PAGE ARTICLE I....................................................................................1 DEFINITIONS...............................................................................1 AAA Rules...............................................................................1 Affiliate...............................................................................1 Affiliated Group........................................................................1 Agreement...............................................................................1 Arbiter.................................................................................1 Arbitration Demand......................................................................2 Assets..................................................................................2 Assignment and Assumption Agreement.....................................................2 Assumed Liabilities.....................................................................3 Baseline EBITDA.........................................................................3 Bill of Sale............................................................................3 Business................................................................................3 Buyer...................................................................................3 Buyer Indemnified Persons...............................................................3 Closing.................................................................................3 Closing Audit...........................................................................3 Closing Balance Sheet...................................................................3 Closing Date............................................................................3 Closing Financial Statements............................................................3 Closing Statement.......................................................................4 Code....................................................................................4 Confidential Information................................................................4 Contract................................................................................4 Court...................................................................................4 Covenant Not to Compete.................................................................4 Current Assets..........................................................................4 Current Liabilities.....................................................................4 Dispute Period..........................................................................4 Disputed Matters........................................................................4 Disputes................................................................................4 Dollars.................................................................................4 Earnings................................................................................4 Earn-Out Payment........................................................................4 EBITDA..................................................................................4 Effective Time..........................................................................5 Employment Agreements...................................................................5 Environmental Laws......................................................................5 ERISA...................................................................................5 Excluded Assets.........................................................................5 Existing Project........................................................................5 Final Payment...........................................................................5 Financial Statements....................................................................5 GAAP....................................................................................5 Government..............................................................................5 Hazardous Materials.....................................................................5 HSR Act.................................................................................6 Indemnified Losses......................................................................6 Indemnified Party.......................................................................6 Indemnifying Party......................................................................6 Initial Payment.........................................................................6 Intellectual Property...................................................................6 Interim Balance Sheet...................................................................6 Interim Statements......................................................................6 Law.....................................................................................6 Liabilities.............................................................................6 Lien....................................................................................7 Losses..................................................................................7 Net Worth...............................................................................7 Net Worth Target........................................................................7 Notice of Dispute.......................................................................7 Notice of Objection.....................................................................7 OSI.....................................................................................7 OSI SEC Reports.........................................................................7 OSI Stock...............................................................................7 Ordinary Course.........................................................................7 Party...................................................................................7 Payment Period..........................................................................7 Person..................................................................................8 Plan....................................................................................8 Post-Closing Audit......................................................................8 Promissory Note.........................................................................8 Property................................................................................8 Purchased Assets........................................................................8 Restricted Period.......................................................................8 Returns.................................................................................8 Seller..................................................................................8 Seller Indemnified Persons..............................................................8 Shareholder.............................................................................8 Stockholders' Agreement.................................................................8 Tax Affiliate...........................................................................9 Taxes...................................................................................9 Third Person............................................................................9 Third Person Claim......................................................................9 ARTICLE II...................................................................................9 PURCHASE AND SALE OF ASSETS...............................................................9 2.1 Assets to be Purchased..............................................................9 2.2 Assumed Liabilities.................................................................9 2.3 Consideration......................................................................10 2.4 Post-Closing Adjustments to the Initial Payment....................................10 2.5 Allocation of Consideration........................................................10 2.6 Closing............................................................................11 2.7 Deliveries of Seller at the Closing................................................11 2.8 Deliveries of Buyer at the Closing.................................................11 2.9 The Closing Balance Sheet and the Closing Statement................................11 2.10 Earn-Out Payment..................................................................12 ARTICLE III.................................................................................13 REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER.................................13 3.1 Corporate Existence and Power of Seller............................................13 3.2 Approval and Enforceability of Agreement...........................................14 3.3 Financial Statements...............................................................15 3.4 Events Subsequent to December 31, 1999.............................................15 3.5 Assets in Possession of Others.....................................................16 3.6 Accounts and Notes Receivable......................................................16 3.7 Undisclosed Liabilities............................................................17 3.8 Taxes..............................................................................17 3.9 Real Property - Owned..............................................................18 3.10 Personal Property - Owned.........................................................18 3.11 Real and Personal Property - Leased from Seller...................................18 3.12 Real and Personal Property - Leased to Seller.....................................18 3.13 Intellectual Property.............................................................19 3.14 Necessary Property and Transfer of Purchased Assets...............................20 3.15 Use and Condition of Property.....................................................20 3.16. Licenses and Permits.............................................................20 3.17. Contracts--Disclosure............................................................21 3.18. Customer Contracts...............................................................22 3.19. Contracts--Validity, Etc.........................................................22 3.20. No Breach of Law or Governing Document...........................................22 3.21. Litigation and Arbitration.......................................................23 3.22. Directors, Officers, Employees and Consultants...................................23 3.23. Indebtedness to and from Directors, Officers and Others..........................23 3.24. Outside Financial Interests......................................................23 3.25. Payments, Compensation and Perquisites of Agents and Employees...................24 3.26. Labor Contracts..................................................................24 3.27. Employee Benefit Plans...........................................................24 3.28. Overtime, Back Wages, Vacation and Minimum Wages.................................24 3.29. Discrimination, Workers Compensation and Occupational Safety and Health..........25 3.30. Labor Disputes; Unfair Labor Practices...........................................25 3.31. Insurance Policies...............................................................25 3.32. Guarantees.......................................................................25 3.33. Environmental Matters............................................................26 3.34. Broker's Fees....................................................................27 3.35. Foreign Assets and Operations....................................................27 3.36. Service Warranties and Guarantees................................................27 3.37. Books and Records................................................................27 3.38. Truthfulness....................................................................27 ARTICLE IV..................................................................................28 REPRESENTATIONS AND WARRANTIES OF BUYER..................................................28 4.1 Corporate Existence of Buyer.......................................................28 4.2 Approval of Agreement..............................................................28 4.3 No Breach of Articles or Indentures................................................29 4.4 Broker's Fees......................................................................29 4.5 Capital Stock, Capitalization of OSI; SEC Filings..................................29 ARTICLE V...................................................................................29 COVENANTS CONCERNING SELLER..............................................................29 5.1 Operation of the Business..........................................................30 5.2 Preservation of Business...........................................................30 5.3 Insurance and Maintenance of Property..............................................31 5.4 Full Access........................................................................31 5.5 Books, Records and Financial Statements............................................31 5.6 Governmental Filings...............................................................31 5.7 Tax Matters........................................................................31 ARTICLE VI..................................................................................32 OTHER AGREEMENTS.........................................................................32 6.1 Change of Seller's Name............................................................32 6.2 Seller's Employees.................................................................32 ARTICLE VII.................................................................................33 COVENANT NOT TO COMPETE..................................................................33 7.1 Covenant Not to Compete............................................................33 7.2 Employees..........................................................................34 7.3 Confidentiality....................................................................34 7.4 Remedies...........................................................................35 7.5 Permitted Investments..............................................................35 ARTICLE VIII................................................................................35 CONDITIONS TO BUYER'S OBLIGATIONS........................................................35 8.1. Representations and Warranties of Seller and Shareholder..........................35 8.3. Performance of this Agreement.....................................................35 8.4. No Material Adverse Change and No Extraordinary Distributions.....................36 8.5. Certificate of Seller and Shareholder.............................................36 8.6. Employment Agreements.............................................................36 8.7. Audits............................................................................36 8.8. No Lawsuits.......................................................................36 8.9. No Restrictions...................................................................36 8.10. Consents.........................................................................36 8.11. Releases.........................................................................37 8.12. Documents........................................................................37 8.13. Due Diligence....................................................................37 8.15. Further Assurances...............................................................38 ARTICLE IX..................................................................................38 CONDITIONS TO SELLER'S OBLIGATIONS.......................................................38 9.1. Representations and Warranties of Buyer and OSI...................................38 9.2. Performance of this Agreement.....................................................38 9.3. Certificate of Buyer..............................................................38 9.4. Employment Agreements.............................................................38 9.5. Payment of Initial Payment........................................................38 9.6. No Lawsuits.......................................................................39 9.7. Documents.........................................................................39 9.8. Further Assurances................................................................40 ARTICLE X...................................................................................40 INDEMNIFICATION..........................................................................40 10.1. Survival of Representations and Warranties.......................................40 10.2. Seller's Indemnification.........................................................40 10.3. Buyer's Indemnification..........................................................42 10.4. Notice of Claim..................................................................42 10.5. Right to Contest Claims of Third Persons.........................................42 10.6. Set-Off Rights...................................................................43 ARTICLE XI..................................................................................43 MISCELLANEOUS............................................................................43 11.1. Assignment; Binding Agreement....................................................43 11.2. Termination of Agreement.........................................................44 11.3. Manner and Effect of Termination.................................................44 11.4. Non-Disclosure of Information....................................................45 11.5. Bulk Sales.......................................................................45 11.6. Entire Agreement and Modification................................................45 11.7. Severability.....................................................................45 11.8. Counterparts.....................................................................45 11.9. Headings; Interpretation.........................................................45 11.10. Arbitration, Choice of Forum and Governing Law..................................45 11.11. Payment of Fees and Expenses....................................................46 11.12. Notices.........................................................................47 ASSET PURCHASE AGREEMENT THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made as of this 26th day of September, 2000, by and among, on one hand, Outsourcing Solutions Inc., a Delaware corporation ("OSI"), and RWC Consulting Group, LLC, a Delaware limited liability company and a subsidiary of OSI ("Buyer"), and on the other hand, RWC Consulting Group, Inc., a Texas corporation ("Seller"), and Robert W. Curtis, Jr. ("Shareholder"). Certain defined terms are set forth in Article I. RECITALS A. Buyer desires to purchase from Seller the Purchased Assets and to assume the Assumed Liabilities, on the following terms and conditions; and B. Seller desires to sell to Buyer the Purchased Assets and to assign to Buyer the Assumed Liabilities, on the following terms and conditions. NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants, representations, warranties, conditions and agreements hereinafter expressed, the Parties agree as follows: ARTICLE I DEFINITIONS "AAA Rules" means the Commercial Arbitration Rules of the American Arbitration Association, as amended from time to time. "Affiliate" means a Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, the Person referred to. In this definition, "control" means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of securities, by contract, or otherwise. "Affiliated Group" has the meaning set forth in Section 1504 of the Code. "Agreement" has the meaning set forth in the Preamble. "Arbiter" means the individual appointed under Section 2.9(c). "Arbitration Demand" has the meaning set forth in Section 11.10(a). "Assets" means all assets and property and associated rights and interests, real, personal and mixed, tangible and intangible, of whatever kind, owned or used by Seller, except Excluded Assets. Without limiting the generality of the foregoing, the Assets include the following items: (a) all assets reflected and/or described on the Interim Balance Sheet, except any such assets which have been disposed of in the Ordinary Course since the Interim Balance Sheet date and except Excluded Assets; (b) all assets owned or used by Seller which have been fully depreciated or written off; (c) all assets acquired by Seller since the Interim Balance Sheet date; (d) all accounts receivable of Seller; (e) all supplies of Seller; (f) all Contracts of Seller with suppliers, consultants or customers; (g) all machinery, equipment and tools of Seller; (h) all Intellectual Property of Seller and documentation thereof and the right and power to assert, defend and recover title thereto in the same manner and to the same extent as Seller could or could cause to be done if the transactions contemplated hereby did not occur, and the right to recover for past damages on account of the infringement, misuse, or theft thereof; (i) all records, including business, computer, engineering and other records, and all associated documents, discs, tapes and other storage or recordkeeping media of Seller, including but not limited to all sales data, customer lists, accounts, bids, contracts, supplier records and other data and information of the Business; (j) all of Seller's rights and claims against others under Contracts; and (k) all other claims against others, rights and choses in action, liquidated or unliquidated, of Seller arising from the Business, including those arising under insurance policies and those related to the Assumed Liabilities. "Assignment and Assumption Agreement" means the form of instrument set forth as Exhibit A. "Assumed Liabilities" means Liabilities of Seller to the extent they are incurred in the Ordinary Course of the Business and to the extent they are: (a) Liabilities that are (i) quantified on the Closing Balance Sheet and the Closing Statement, and if incurred on or before the date of the Interim Balance Sheet, quantified thereon, or (ii) included in the calculation of the Final Payment; or (b) executory obligations arising from the Business which are specifically set forth on Schedule 1.1(a) hereto to the extent such obligations are to be performed after the Effective Time and are accompanied by a correlated duty of performance or payment on the part of the other party(s) thereto. "Baseline EBITDA" has the meaning set forth in Section 2.10(a). "Bill of Sale" means the form of instrument set forth as Exhibit B. "Business" means the business and operations of Seller including without limitation the business generally conducted under the trade name "RWC Consulting Group, Inc." "Buyer" has the meaning set forth in the Preamble. "Buyer Indemnified Persons" has the meaning set forth in Section 10.2(a). "Closing" means the consummation of the transactions contemplated by this Agreement. "Closing Audit" has the meaning set forth in Section 2.9(a). "Closing Balance Sheet" has the meaning set forth in Section 2.9(a). "Closing Date" means September 29, 2000 or, if the conditions to the Closing are not by then satisfied, on such date within three business days following satisfaction of such conditions (other than conditions to be satisfied at the Closing according to the terms thereof). "Closing Financial Statements" means the Closing Balance Sheet and the Closing Statement prepared pursuant to Section 2.9(a). "Closing Statement" has the meaning set forth in Section 2.9(a). "Code" means the Internal Revenue Code of 1986, as amended. "Confidential Information" has the meaning set forth in Section 7.3. "Contract" means any contract, agreement, arrangement, understanding, lease, indenture, evidence of indebtedness, binding commitment or instrument, purchase order or offer, written or oral, entered into or made by or on behalf of Seller, or to which Seller is a party or by which it or its property is bound. "Court" means any court, grand jury, administrative or regulatory body, Government agency, arbitration or mediation panel or similar body. "Covenant Not to Compete" means the obligations of Seller and Shareholder under Article VII. "Current Assets" shall be determined in accordance with Schedule 2.9(a) and shall mean (a) accounts receivable and (b) prepaid expenses and supplies. "Current Liabilities" shall be determined in accordance with Schedule 2.9(a) and shall mean accounts payable and accrued expenses. "Dispute Period" has the meaning set forth in Section 2.9(b). "Disputed Matters" has the meaning set forth in Section 2.10(c). "Disputes" has the meaning set forth in Section 11.10(a). "Dollars" or "$" means United States Dollars. "Earnings" shall mean earnings of Buyer for purposes of calculating the Earn-Out Payment. "Earn-Out Payment" has the meaning set forth in Section 2.10(a). "EBITDA" has the meaning set forth in Section 2.10(a). "Effective Time" means the effective time of the Closing, which shall be as of 11:59 p.m. on the Closing Date. "Employment Agreements" means the forms of employment and non-competition agreements set forth as Exhibits C and D. "Environmental Laws" has the meaning set forth in Section 3.33(a). "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "Excluded Assets" means the Assets identified in Schedule 1.1(b). "Existing Project" has the meaning set forth in Section 6.2. "Final Payment" means the Initial Payment as adjusted pursuant to Section 2.4(a). "Financial Statements" means the June 30, 2000 Financial Statements, 1999 Financial Statements and the 1998 Financial Statements. "June 30, 2000 Financial Statements" means Seller's balance sheet at June 30, 2000 and the related statement of income and combined statements of cash flows for the 6 month period then ended, together with any notes or schedules thereto. "1999 Financial Statements" means Seller's balance sheet at December 31, 1999 and the related statement of income and combined statements of cash flows for the 12 month period then ended, together with any notes or schedules thereto. "1998 Financial Statements" means Seller's balance sheet at December 31, 1998 and the related statement of income and combined statements of cash flows for the 12 month period then ended, together with any notes or schedules thereto. "GAAP" means U.S. generally accepted accounting principles. "Government" means the United States of America, any other nation or sovereign state, any federal, bilateral or multilateral governmental authority, any state, possession, territory, county, district, municipality, city or other governmental unit or subdivision, and any branch, agency, or judicial body of any of the foregoing. "Hazardous Materials" has the meaning set forth in Section 3.33(e). "HSR Act" means the Hart-Scott-Rodino Antitrust Improvement Act of 1976, or the rules relating thereto. "Indemnified Losses" has the meaning set forth in Section 10.2(a). "Indemnified Party" has the meaning set forth in Section 10.4. "Indemnifying Party" has the meaning set forth in Section 10.4. "Initial Payment" means Fifteen Million Dollars ($15,000,000). "Intellectual Property" means all of the following (in whatever form or medium) which are used, owned by or licensed to Seller: (a) patents and patent applications, (b) copyrights and registrations thereof, (c) mask works and registrations and applications for registration thereof, (d) computer software (whether in source code or object code), data and documentation, (e) trade secrets and confidential business information, whether patentable or unpatentable and whether or not reduced to practice, works-for-hire, firmware, programs, know-how, manufacturing and productions processes and techniques, research and development information, inventions, discoveries, projections, analyses, market studies, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans, proprietary prospect lists, and customer and supplier lists and information, (f) trademarks, service marks, trade names, corporate names, domain names and applications and registrations therefor and (g) other proprietary rights relating to any of the foregoing. "Interim Balance Sheet" means the balance sheet at August 31, 2000 included in the Interim Statements. "Interim Statements" means the Interim Balance Sheet and the related statements of income and retained earnings and statements of cash flows of Seller for the eight month period then ended, together with any notes or schedules thereto. "Law" means any statute, law, treaty, ordinance, rule, regulation, instrument, directive, decree, order or injunction of any Government, quasi-governmental authority or Court, and includes rules or regulations of any regulatory or self-regulatory authority compliance with which is required by law. "Liabilities" means all liabilities and/or obligations, whether or not required to be reflected on the financial statements of a business. "Lien" means any lien, security interest, mortgage, option, lease, tenancy, occupancy, covenant, condition, easement, agreement, hypothecation, restriction, pledge, charge, claim or other encumbrance of every kind and nature. "Losses" has the meaning set forth in Section 10.2(a). "Net Worth" means Seller's Current Assets minus Current Liabilities plus the net book value of fixed assets, calculated in accordance with historical accounting practices of Seller applied on a consistent basis. "Net Worth Target" has the meaning set forth in Section 2.4(a). "Notice of Dispute" means a notice to Buyer delivered pursuant to Section 2.9, specifying in reasonable detail all points of disagreement with the Closing Balance Sheet and the Closing Statement. "Notice of Objection" has the meaning set forth in Section 2.10(c). "OSI" has the meaning set forth in the Preamble. "OSI SEC Reports" has the meaning set forth in Section 3.2(c). "OSI Stock" means 53,376.03 shares of voting common stock, par value $0.01 per share, of OSI ($37.47 per share having an aggregate market value of $2,000,000). "Ordinary Course" means, with respect to the Business, only the ordinary course of commercial operations customarily engaged in by such Business consistent with past practices, and specifically does not include (a) any activity (i) involving the purchase or sale of a business or of any product line or business unit, (ii) involving modification or adoption of any Plan or (iii) which requires approval by the board of directors or shareholders of an entity engaged in a business or (b) the incurrence of any Liability for any tort or any breach or violation of or default under any Contract or any Law. "Party" means any of Buyer and OSI, or Seller and Shareholder, and "Parties" means all of them. "Payment Period" has the meaning set forth in Section 2.10(a). "Person" means any natural person; any corporation, partnership, limited liability company, limited liability partnership, joint venture, association, company or other legal entity; and any Government. "Plan" means any agreement, arrangement, plan or policy, qualified or non-qualified, whether or not considered legally binding, that involves (a) any pension, retirement, profit sharing, deferred compensation, bonus, stock option, stock purchase, phantom stock, health, welfare or incentive plan; or (b) welfare or "fringe" benefits, including without limitation any voluntary employees' beneficiary associations or related trusts, vacation, severance, disability, medical, hospitalization, dental, life and other insurance, tuition, company car, club dues, income tax preparation, sick leave, maternity, paternity or family leave, child care or other benefits; or (c) any employment, consulting, engagement or retainer agreement or arrangement. "Post-Closing Audit" has the meaning set forth in Section 2.10(c). "Promissory Note" means the form of instrument set forth as Exhibit E. "Property" has the meaning set forth in Section 3.33(a). "Purchased Assets" means the Assets excluding the Excluded Assets. "Restricted Period" has the meaning set forth in Section 7.1(a). "Returns" means returns, reports, estimated tax and informational statements and returns relating to Taxes which are, were or will be required by Law to be filed by Seller or other Tax Affiliate of Seller in connection with the Business, and all information returns (e.g., Form W-2, Form 1099) and reports relating to Taxes or Plans. Any one of the foregoing Returns may be referred to sometimes as a "Return." "Seller" has the meaning set forth in the Preamble. "Seller Indemnified Persons" has the meaning set forth in Section 10.3(a). "Shareholder" has the meaning set forth in the Preamble. "Stockholders' Agreement" has the meaning set forth in Section 4.5(b). "Tax Affiliate" means any member of an Affiliated Group of which Seller is or was a member, or any member of a combined or unitary group of which Seller is or was a member. "Taxes" means all taxes, charges, fees, levies or other like assessments imposed or assessed by any Government, including without limitation income, gross receipts, profits, windfall profit, employment (including Social Security, state pension plans and unemployment insurance), withholding, payroll, franchise, gross receipts, sales, use, transfer, stamp, occupation, real or personal property, ad valorem, value added, premium and excise taxes; Pension Benefit Guaranty Corporation premiums and any other like Government charges; and shall include all penalties, fines, assessments, additions to tax and interest resulting from, attributable to, or incurred in connection with such Taxes or any contest or dispute thereof. Any one of the foregoing Taxes may be referred to sometimes as a "Tax." "Third Person" has the meaning set forth in Section 10.5. "Third Person Claim" has the meaning set forth in Section 10.5. ARTICLE II PURCHASE AND SALE OF ASSETS 2.1 Assets to be Purchased. Subject to the terms and conditions hereof, on the Closing Date and as of the Effective Time, Seller agrees to sell to Buyer, free and clear of all Liens, all right, title and interest of Seller to and in all of the Purchased Assets. 2.2 Assumed Liabilities. (a) Subject to the terms and conditions hereof, on the Closing Date and as of the Effective Time, Buyer agrees to assume only the Assumed Liabilities. (b) Notwithstanding the foregoing, if the assignment or transfer of any obligation or instrument would cause a breach thereof and if a required consent to such assignment or transfer has not been obtained, then, at Buyer's election and in its sole discretion, and subject to Buyer's right to require strict compliance with Section 8.10 hereof, such obligation or instrument shall not be assigned or transferred to Buyer, but Buyer shall act as agent for Seller in order to obtain for Buyer the benefits under such obligation or instrument. (c) EXCEPT AS EXPRESSLY AND UNAMBIGUOUSLY PROVIDED IN THIS SECTION 2.2, NEITHER BUYER NOR ANY AFFILIATE OF BUYER ASSUMES OR AGREES TO BECOME LIABLE FOR OR SUCCESSOR TO ANY LIABILITIES OR OBLIGATIONS WHATSOEVER, LIQUIDATED OR UNLIQUIDATED, KNOWN OR UNKNOWN, CONTINGENT OR OTHERWISE, WHETHER OF SELLER, ANY AFFILIATE OF SELLER, ANY PREDECESSOR THEREOF, OR ANY OTHER PERSON, OR OF THE BUSINESS. NO OTHER STATEMENT IN OR PROVISION OF THIS AGREEMENT AND NO OTHER STATEMENT, WRITTEN OR ORAL, ACTION OR FAILURE TO ACT INCLUDES OR CONSTITUTES ANY SUCH ASSUMPTION OR AGREEMENT, AND ANY STATEMENT TO THE CONTRARY BY ANY PERSON IS UNAUTHORIZED AND HEREBY DISCLAIMED. 2.3 Consideration. The consideration for the Purchased Assets shall be the aggregate of (a) the Final Payment, (b) the OSI Stock, (c) the Promissory Note, (d) the Earn-Out Payment, if any, provided for in Section 2.10, and (e) the amount of the Assumed Liabilities. 2.4 Post-Closing Adjustments to the Initial Payment. (a) To the extent the Net Worth is greater than $1,125,000 (the "Net Worth Target"), the Initial Payment shall (on a post-closing basis pursuant to Section 2.4(b)) be increased on a dollar-for-dollar basis by an amount equal to such excess. To the extent the Net Worth is less than the Net Worth Target, the Initial Payment shall (on a post-closing basis pursuant to Section 2.4(b)) be decreased on a dollar-for-dollar basis by an amount equal to such deficit. The Initial Payment as so adjusted is hereinafter referred to as the "Final Payment." The Net Worth and the Final Payment shall be determined based on the Closing Balance Sheet and the Closing Statement (as finally determined under Section 2.9). (b) Not more than 5 business days after final determination of the Final Payment, (i) Buyer shall pay to Seller the amount, if any, by which the Final Payment exceeds the Initial Payment or (ii) Seller shall pay to Buyer the amount, if any, by which the Final Payment is less than the Initial Payment. Any payment or distribution from Buyer or Seller so required to be made shall be by wire transfer of immediately available funds and shall bear interest from the Closing Date through the date of payment at the prime lending rate of Bank of America from time to time prevailing. 2.5 Allocation of Consideration. The consideration provided for in Section 2.3 shall be allocated among the Purchased Assets, the Assumed Liabilities and Covenant Not to Compete as provided in Schedule 2.5 hereto, or as mutually agreed to in writing by the Parties after the determination of the Final Payment. Such allocation shall be prepared in accordance with Section 1060 of the Code. 2.6 Closing. The Closing shall take place at 10:00 a.m. on the Closing Date or such other time as the Parties agree at the offices of Bryan Cave LLP, 211 N. Broadway, One Metropolitan Square, Suite 3600, St. Louis, Missouri 63102. 2.7 Deliveries of Seller at the Closing. At the Closing, subject to the conditions to Seller's obligations in Article IX, Seller shall execute and deliver or cause to be delivered the documents identified in Article VIII. 2.8 Deliveries of Buyer at the Closing. At the Closing, subject to the conditions to the Buyer's obligations in Article VIII, Buyer shall (a) execute and deliver or cause to be delivered the documents identified in Article IX, (b) transfer the Initial Payment by wire transfer of immediately-available funds to an account or accounts designated by Seller not less than two business days before the Closing Date, (c) deliver certificates evidencing the OSI Stock to Seller and/or Shareholder, as an assignee of Seller, and (d) execute and deliver the Promissory Note. 2.9 The Closing Balance Sheet and the Closing Statement. (a) As of the Closing Date, Buyer shall conduct an audit and examination of the Purchased Assets and Assumed Liabilities (the "Closing Audit") at Buyer's sole cost and expense. Seller, at its sole cost and expense, may have a representative review all final work papers in connection with the Closing Audit. On the basis of such Closing Audit, Buyer shall prepare a balance sheet as of the Closing Date (the "Closing Balance Sheet") and a statement of net assets as of the Closing Date (the "Closing Statement"), reflecting the book value, as of the Closing Date, of the Purchased Assets less the Assumed Liabilities, in accordance with the principles and procedures as outlined on Schedule 2.9(a) applied consistently with the accounting policies and procedures followed in preparing the Financial Statements. The Closing Balance Sheet and the Closing Statement are herein referred to as the "Closing Financial Statements." Buyer shall deliver the Closing Financial Statements to Seller not later than 60 calendar days after the Closing Date. (b) If Seller disputes the Closing Financial Statements as delivered by Buyer, then not more than 20 calendar days after the date Seller receives the Closing Financial Statements (the "Dispute Period") Seller shall provide Buyer a Notice of Dispute. If during the Dispute Period Seller fails to deliver a Notice of Dispute, the Closing Financial Statements shall be deemed final and binding at the end of the Dispute Period. (c) Upon receipt of the Notice of Dispute within the Dispute Period, Buyer shall promptly consult with Seller with respect to Seller's specified points of disagreement in an effort to resolve the dispute. If any such dispute cannot be resolved by Buyer and Seller within 20 calendar days after Buyer receives the Notice of Dispute, they shall refer the dispute to a partner in Ernst & Young, LLP certified public accountants (the "Arbiter"), as an arbitrator to finally determine, as soon as practicable, and in any event within 30 calendar days after such reference, all points of disagreement with respect to the Closing Financial Statements. For purposes of such arbitration, each Party shall submit proposed Closing Financial Statements; Buyer's proposals need not be identical to the Closing Financial Statements delivered pursuant to Section 2.9(a). The Arbiter shall apply the terms of this Section 2.9, and shall otherwise conduct the arbitration under such procedures as the Parties may agree or, failing such agreement, under the AAA Rules. The fees and expenses of the arbitration and the Arbiter incurred in connection with the arbitration of the Closing Financial Statements shall be allocated, to the extent practical, between the Parties by the Arbiter in proportion to the extent either Party did not prevail on items in dispute in the Closing Financial Statements; provided, that such fees and expenses shall not include, so long as a Party complies with the procedures of this Section 2.9, the other Party's outside counsel or accounting fees. All determinations by the Arbiter shall be final, conclusive and binding with respect to the Closing Financial Statements and the allocation of arbitration fees and expenses. 2.10 Earn-Out Payment. (a) If Buyer achieves average Earnings before interest expense, taxes, depreciation and amortization, each item determined in accordance with GAAP consistently applied ("EBITDA"), in excess of $6,500,000 (the "Baseline EBITDA") for the three full fiscal years beginning January 1, 2001 and ending December 31, 2003 (the "Payment Period"), Buyer will pay Seller in cash an amount equal to two times the amount by which the average EBITDA for the Payment Period exceeds the Baseline EBITDA (the "Earn-Out Payment"). EBITDA shall be determined for purposes of this Agreement with the earn-out principles and procedures set forth on Schedule 2.10(a). The Parties agree and acknowledge that as of the date of this Agreement and until the end of the Payment Period, it is impossible to calculate the value, if any, of the Earn-Out Payment to Seller. (b) To the extent OSI determines an Earn-Out Payment is due to Seller, Buyer will pay (and OSI will cause Buyer to pay) to Seller a preliminary payment of such Earn-Out Payment due pursuant to Section 2.10(a) on the date Buyer submits its preliminary determination to Seller pursuant to Section 2.10(c). Buyer shall pay any additional payments required pursuant to Section 2.10(a) promptly following the final and binding determination, pursuant to this Agreement, of the Earn-Out Payment for the Payment Period. To the extent the amount of the Earn-Out Payment is less than the preliminary payment previously paid for the Payment Period, Seller shall refund the amount in excess to Buyer promptly following the final and binding determination, pursuant to this Agreement, of the Earn-Out Payment. (c) The determination of the amount of the Earn-Out Payment shall be determined by OSI promptly after the completion of the Payment Period based on an audit and examination of the financial statements of Buyer for the Payment Period ("Post-Closing Audit"). The Post-Closing Audit shall be conducted at OSI's sole cost and expense. The determination of the amount of the Earn-Out Payment (or of the determination that no Earn-Out Payment is due) shall be submitted to Seller within 90 calendar days after the end of the Payment Period. After such submission and upon request of Seller, OSI will provide Seller with reasonable access to its records relating to the determination of the amount of the Earn-Out Payment. If Seller does not object to the determination by OSI of the Earn-Out Payment by written notice of objection (the "Notice of Objection") delivered to OSI within 20 calendar days after receipt by Seller of such determination, the proposed Earn-Out Payment shall be deemed final and binding. If Seller delivers a Notice of Objection to the determination of the Earn-Out Payment within the appropriate time period, such Notice of Objection to describe in reasonable detail Seller's proposed adjustments to the proposed determination of the Earn-Out Payment, Seller and OSI shall negotiate in good faith to resolve any differences. If after 15 calendar days following such notice any of such objections have not been resolved (the "Disputed Matters"), then such Disputed Matters shall be submitted to arbitration in Atlanta, Georgia. The Arbiter (as defined in Section 2.9) shall consider only the Disputed Matters, and the arbitration shall be conducted in accordance with the Commercial Rules of the American Arbitration Association then in effect. The Arbiter shall act promptly to resolve all Disputed Matters and its decision with respect to all Disputed Matters shall be final and binding upon the Parties hereto and shall not be appealable to any court. The Arbiter shall render an opinion in writing setting forth the basis of its decision on the Disputed Matters. Each Party shall pay all costs and expenses incurred by such Party incident to the arbitration, provided the costs and expenses of the Arbiter shall be shared equally by Seller and OSI. Any portion of the Earn-Out Payment that is affected by the Disputed Matter shall not be distributed until the resolution of the Disputed Matter, and upon such resolution any increase in the Earn-Out Payment shall be distributed to Seller, or any decrease in the Earn-Out Payment shall be repaid to OSI by Seller. ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER AND SHAREHOLDER Each of Seller and Shareholder, jointly and severally, hereby makes the following representations and warranties, each of which Seller and Shareholder represent and warrant is true and correct on the date hereof and shall be true and correct on the Closing Date and each of which shall survive the Closing Date and the transactions contemplated hereby pursuant to Section 10.1. 3.1 Corporate Existence and Power of Seller. (a) True and complete copies of the articles of incorporation and bylaws and all amendments thereto of Seller, have been delivered to Buyer. Seller is a corporation duly organized, validly existing and in good standing under the Laws of the state of its incorporation. (b) Seller has the corporate power and authority to own and use its Assets and to transact the business in which it is engaged, holds all franchises, licenses, permits necessary and required therefor, is duly licensed or qualified to do business as a foreign corporation and is in good standing in each jurisdiction where such license or qualification is required, except where the failure to be so qualified would not have a material adverse effect upon the business, condition (financial or otherwise) or operations of the Business. Seller does not, in the Ordinary Course, qualify to do business in states where it conducts temporary operations in connection with the Business. Seller has the corporate power to enter into this Agreement, to perform its obligations hereunder, and to consummate the transactions contemplated hereby. Seller has no direct or indirect subsidiaries or other entity in which it has a controlling interest nor does Seller have any direct or indirect ownership or beneficial interest in any other entity or enterprise. 3.2 Approval and Enforceability of Agreement. (a) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized, approved and ratified by all necessary corporate action on the part of Seller. At the Closing, Seller will deliver to Buyer correct and complete copies of the resolutions of Seller, certified by its secretary, giving authorization and approval of the transactions contemplated hereby. Such resolutions shall not have been altered, amended or revoked. Seller has full corporate authority to enter into and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated hereby. Shareholder has the full power, legal right and capacity to enter into and deliver this Agreement, to perform his obligations hereunder and to consummate the transactions contemplated hereby. (b) Assuming due execution and delivery hereof by Buyer and OSI, this Agreement is the legal, valid and binding obligation of Seller and Shareholder, enforceable against each of Seller and Shareholder according to its terms except that (i) such enforcement may be limited by or subject to any bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to or limiting creditors' rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the discretion of the Court before which any proceeding therefor may be brought. (c) Seller is acquiring the shares of common stock consisting of the OSI Stock for its own account, for investment purposes and without any view to resale or distribution of such shares or any portion thereof except that such shares may be distributed to Shareholder. Each of Seller and Shareholder is an "accredited investor" as defined in Rule 501 of Regulation D under the Securities Act of 1933, as amended. Each of Seller and Shareholder has sufficient experience in business, financial and investment matters to be able to evaluate the risk involved in the purchase of the OSI Stock and to make an informative investment decision with respect to such purchase. Each of Seller and Shareholder acknowledges that the purchase of the OSI Stock is a speculative investment which involves a risk of loss by Seller or Shareholder, as the case may be, of its or his investment in the OSI Stock. Each of Seller and Shareholder further acknowledges receipt of OSI's Registration Statement on Form S-4, as filed with the Securities and Exchange Commission on April 24, 1997, OSI's annual report on Form 10-K for the period ending December 31, 1999, OSI's quarterly reports on Form 10-Q for the periods ending March 31 and June 30, 2000, and OSI's current report on Form 8-K dated June 30, 2000 (collectively, the "OSI SEC Reports"). Each of Seller and Shareholder represents that it or he has had a reasonable time prior to the execution hereof to review the OSI SEC Reports and has had the opportunity to ask an officer of OSI questions related to the OSI SEC reports. 3.3 Financial Statements. Attached as Schedule 3.3 hereto are the Financial Statements and the Interim Statements. The Financial Statements and Interim Statements were derived from the books and records of the Business and (a) are true, complete and correct and (b) present fairly the financial position, results of operations and cash flows of the Business at the dates and for the periods indicated. The Interim Statements were prepared on a basis consistent with the Financial Statements. 3.4 Events Subsequent to December 31, 1999. Since December 31, 1999, except as set forth on Schedule 3.4, there has been no: (a) change in the business, condition (financial or otherwise) or operations of Seller other than changes in the Ordinary Course, which individually or in the aggregate has been materially adverse to the Business; (b) unexpected or early termination (or threatened termination) of a customer account; (c) damage, destruction or loss, whether covered by insurance or not, affecting any Purchased Asset; (d) increase in or commitment to increase compensation, benefits or other remuneration to or for the benefit of any shareholder, member, partner, director, officer, employee or agent of Seller, or, in connection with the Business, any other Person or any benefits granted under any Plan with or for the benefit of any such shareholder, member, partner, director, officer, employee, agent or Person; (e) transaction entered into or carried out by Seller other than in the Ordinary Course of the Business; (f) borrowing or incurrence of any indebtedness, contingent or other, by or on behalf of Seller, or any endorsement, assumption or guarantee of payment or performance of any Indebtedness or Liability of any other Person or entity by Seller; (g) change made by Seller in its Tax or financial accounting or any Tax election including without limitation the election to be treated as an S Corporation within the meaning of Section 1361 of the Code; (h) grant of any Lien with respect to the Purchased Assets; (i) transfer of any Assets other than arm's length sales, leases or dispositions in the Ordinary Course of the Business; (j) modification or termination (other than a termination due to expiration) of any Contract or any material term thereof; (k) lease or acquisition of any capital assets included in the Purchased Assets with a value greater than $10,000 per item; (l) loan or advance to any Person; or (m)commitment or agreement by Seller to do any of the foregoing items (d) through (l). 3.5 Assets in Possession of Others. Except for the two laptop computers described on Schedule 3.5 which are in the possession of the employees set forth on Schedule 3.5, ------------ Seller does not hold title to or ownership of any Assets in the possession of Persons other than Seller. 3.6 Accounts and Notes Receivable. All accounts and notes receivable of Seller as of the Closing Date shall be reflected on the Closing Financial Statements, and shall be (a) valid, genuine and subsisting, (b) arose or will have arisen in the Ordinary Course of the Business, (c) subject to no defenses, set-offs, counterclaims, or Liens, and (d) current and fully collectible. All accounts or notes receivable of Seller in existence on the Closing Date will be paid in full on or before 90 calendar days after the Closing Date. Any accounts or notes receivable with respect to which Buyer makes a claim for indemnification under Article X and has received full consideration from Seller or Shareholder for such accounts or notes receivable will be transferred to Seller. 3.7 Undisclosed Liabilities. Seller has no Liabilities whatsoever, known or unknown, asserted or unasserted, liquidated or unliquidated, accrued, absolute, contingent or otherwise, and, there is no basis for any claim against Seller for any such Liability except (a) to the extent set forth on the Closing Financial Statements, (b) to the extent set forth on Schedule 3.7, or (c) Liabilities incurred in the Ordinary Course of the Business, none of which, to the knowledge of Seller, will, or could, have a material adverse effect upon the business, condition (financial or otherwise) or operations of the Business. 3.8 Taxes. (a) All Tax and information Returns required to be filed by Seller on or prior to the Closing Date with respect to Taxes have been or will be timely filed. (b) All amounts shown on each of such Returns have been paid or will be paid when due. (c) Any Taxes which are to be assumed by Buyer in respect of the Purchased Assets which at the Closing Date are not yet due and owing will be adequately reflected on the Closing Balance Sheet as a reserve for Taxes. (d) There are no grounds for the assertion or assessment of any Taxes against Seller, the Purchased Assets or the Business other than those reflected or reserved against on the Closing Balance Sheet. (e) Neither the Purchased Assets nor the Business are and will be encumbered by any Liens arising out of any unpaid Taxes and there are no grounds for the assertion or assessment of any Liens against the Purchased Assets or the Business in respect of any Taxes. (f) The transactions contemplated by this Agreement will not give rise to (i) the creation of any Liens against the Purchased Assets or the Business in respect of any Taxes or (ii) the assertion of any additional Taxes against the Purchased Assets or the Business. (g) There is no action or proceeding or unresolved claim for assessment or collection, pending or threatened, by, or present or expected dispute with, any Government authority for assessment or collection from Seller of any Taxes of any nature affecting the Purchased Assets or the Business. (h) There is no extension or waiver of the period for assertion of any Taxes against Seller affecting the Purchased Assets or the Business. (i) Seller is not a "foreign person" within the meaning of Section 1445(f)(3) of the Code. (j) None of the Purchased Assets or Assumed Liabilities are subject to, or constitute, a safe harbor lease within the meaning of Section 168(f)(8) of the Code prior to its repeal. (k) None of the Purchased Assets have been financed with, or directly or indirectly secures, any industrial revenue bonds or debt, the interest on which is tax exempt under Section 103(a) of the Code. (l) None of the Purchased Assets or Assumed Liabilities will constitute a partnership, joint venture, or other arrangement or contract that could be treated as a partnership for federal income tax purposes. (m) None of the Purchased Assets consist of stock in a subsidiary of Seller. (n) None of the Purchased Assets are tax-exempt use property within the meaning of Section 168(h) of the Code. (o) None of the Purchased Assets are subject to a tax indemnification agreement. (p) Seller has made a valid election to be treated as an S corporation within the meaning of section 1361 of the Code, and such election has been in effect since July 14, 1998 through the Closing Date. Seller has qualified and will qualify as an S corporation at all times from election up to the Closing Date. 3.9 Real Property - Owned. Seller has no interest in, or any right or obligation to acquire any interest in, any parcel of real property. 3.10 Personal Property - Owned. Seller has good and marketable title to all of the personal property included in the Purchased Assets, free and clear of all Liens, and there exists no restriction on the use or transfer of such property that would have a material adverse effect upon the business, condition (financial or otherwise) or operations of the Business. 3.11 Personal Property - Leased from Seller. Seller has no right, title or interest as a lessor or sublessor of any personal property. 3.12 Real and Personal Property - Leased to Seller. Set forth on Schedule 3.12 hereto is a description of each lease under which Seller is the lessee of any real property. Seller has no right, title or interest as a lessee or sublessee of any personal property. Seller has delivered to Buyer a true, correct and complete copy of each lease identified on Schedules 3.12. The premises or property described in said leases are presently occupied or used by Seller as lessee under the terms of such leases. Except as set forth on Schedules 3.12, all rentals due under such leases have been paid, and there exists no default under the terms of such leases and no event has occurred which, upon passage of time or the giving of notice, or both, would result in any event of default or prevent Seller from exercising and obtaining the benefits of any rights or options contained therein. Seller has all right, title and interest of the lessee under the terms of said leases, free of all Liens and all such leases are valid and in full force and effect. Except as set forth on Schedules 3.12, no consent is necessary for the assignment to Buyer of such leases under which Seller is lessee. Upon the Closing, Buyer will have all right, title and interest of the lessee under the terms of such leases, free of all Liens. To the knowledge of Seller, there is no default or basis for acceleration or termination under, nor has any event occurred nor does any condition exist which, with the passage of time or the giving of notice, or both, would constitute a default or basis for acceleration under any underlying lease, agreement, mortgage or deed of trust, which default or basis for acceleration would adversely affect any lease described on Schedules 3.12 or the property or use of the property covered by such lease. To the knowledge of Seller, there will be no default or basis for acceleration under any such underlying lease, agreement, mortgage or deed of trust as a result of the transactions provided for in this Agreement. 3.13 Intellectual Property. (a) Schedule 3.13 contains a true, complete and accurate list of all the Intellectual Property. Schedule 3.13 accurately identifies, where appropriate, one or more of the following, by country, for each item of the Intellectual Property: filing date, issue date, classification of invention or goods covered, licenser, license date and licensed subject matter. Seller has not nor has it ever granted any licenses or other right to any third party with respect to any item of the Intellectual Property. (b) Seller represents and warrants as follows: (i) the Intellectual Property is valid and enforceable and encompasses all proprietary rights necessary for the conduct of the Business as presently conducted (free and clear of all Liens); (ii) Seller has taken all actions necessary to maintain and protect the Intellectual Property; (iii) to the knowledge of Seller, the owners of the Intellectual Property licensed to Seller have taken all actions necessary to maintain and protect the Intellectual Property subject to such licenses; (iv) there has been no claim made against Seller asserting the invalidity, misuse or unenforceability of any of the Intellectual Property or challenging Seller's right to use or ownership of any of the Intellectual Property, and there are no grounds for any such claim or challenge; (v) Seller is not aware of any infringement or misappropriation of any of the Intellectual Property or of any facts raising a likelihood of infringement or misappropriation; (vi) the conduct of the Business has not infringed or misappropriated, and does not infringe or misappropriate, any intellectual property or proprietary right of any other entity; (vii) no loss of any of the Intellectual Property is threatened, pending or reasonably foreseeable; and (viii) the consummation of the transactions contemplated by this Agreement will not alter, impair or extinguish any of the Intellectual Property. 3.14 Necessary Property and Transfer of Purchased Assets. The Purchased Assets and the Assumed Liabilities constitute all of Seller's property and property rights now used, useful or necessary for the conduct of the Business in the manner and to the extent presently conducted by Seller. Except as set forth on Schedule 3.14 hereto, no consent is necessary to, and there exists no restriction on, the transfer of any of the Purchased Assets or the assignment of the Assumed Liabilities to Buyer. There exists no condition, restriction or reservation on the part of Seller affecting the title to or utility of the Purchased Assets or Assumed Liabilities which would prevent Buyer from occupying or utilizing the Purchased Assets or enforcing the rights under the Assumed Liabilities, or any part thereof, to the same full extent that Seller might continue to do so if the sale and transfer contemplated hereby did not take place. Upon the Closing, good and marketable title to the Purchased Assets and the rights under the Assumed Liabilities shall be vested in Buyer free and clear of all taxes and Liens. 3.15 Use and Condition of Property. (a) All of the Purchased Assets are in good operating condition and repair (normal wear and tear excepted) as required for their use in the Business as presently conducted, and conform to all applicable Laws. No notice of any violation of any Law relating to any of the Purchased Assets has been received by Seller except such as have been fully complied with. All improvements located on, and the use presently being made of all real property included in, the Purchased Assets or leased pursuant to the Assumed Liabilities comply with all applicable zoning and building code ordinances and all applicable fire, environmental, occupational safety and health standards and similar standards established by Law, and the same use thereof by Buyer will not result in any violation of any such code, ordinance or standard. To the knowledge of Seller, there is no pending, proposed or threatened change in any such code, ordinance or standard which would adversely affect the Business or the use of the Purchased Assets. (b) To the knowledge of Seller, there is no pending, proposed or threatened condemnation proceeding or similar action affecting the Purchased Assets or with respect to any streets or public amenities appurtenant thereto or in the vicinity thereof which would adversely affect the Business or the use of the Purchased Assets. 3.16. Licenses and Permits. Set forth on Schedule 3.16 hereto is a description of each license or permit required for the conduct of the Business and a list of where licenses or permits may be required together with the name of the government agency or entity issuing such license or permit. The licenses and permits set forth on Schedule 3.16 are valid and in full force and effect. Except as noted on Schedule 3.16, such licenses and permits are freely transferable by Seller, and upon the Closing, Buyer will have all right, title and interest of the holder thereof. 3.17. Contracts--Disclosure. Except as set forth in Schedule 3.17 there is not outstanding: (a) Any single Contract providing for an expenditure by Seller in excess of $10,000 over the remaining life of such Contract for the purchase of any real property, machinery, equipment or other items which are in the nature of capital investment. (b) Any single Contract providing for an expenditure by Seller in excess of $10,000 for the purchase of raw materials, supplies, component parts or any other items or services. (c) Any Contract to sell products or to provide services to third Persons which (i) is at a price which would result in a net loss on the sale of such products or providing of such services or (ii) is pursuant to terms or conditions which Seller cannot reasonably expect to satisfy or fulfill in their entirety, or (iii) involves more than $10,000. (d) Any Contract for materials, supplies, component parts or other items or services in excess of the normal, ordinary, usual and current requirements of the Business or at a price in excess of the current reasonable market price. (e) Any revocable or irrevocable guaranty, indemnity or power of attorney. (f) Any evidence of indebtedness, loan agreement, indenture, promissory note, letter of credit, foreign exchange contract, conditional sales agreement or other similar type of agreement. (g) Any Contract which involves (i) a sharing of profits, (ii) future payments of $10,000 or more per annum to other Persons, or (ii) any joint venture, partnership or similar arrangement. (h) Any Contract involving any sales agency, sales representation, distributorship or franchise. (i) Any Contract containing covenants expressly limiting the freedom of Seller to compete in any line of business or with any Person or in any area. (j) Any Contract not made in the Ordinary Course of the Business. (k) Any other material Contract which is not cancelable without penalty on 30 calendar days' notice or less and which is not set forth on another Schedule. 3.18. Customer Contracts. Seller has delivered a true, correct and complete summary of the amounts and terms of all customer service contracts, to which Seller is a party (a "Customer Contract"). Schedule 3.18 sets forth all Customer Contracts of Seller, including the expiration date, and the outstanding payments due to Seller under each Customer Contract. Except as set forth in Schedule 3.18, Seller is not a party to any customer service contract. On the Closing Date, Schedule 3.18 shall set forth all Customer Contracts of Seller as of the Closing Date. Set forth on Schedule 3.18 is a list of all retainers or prepayments required or paid under any Customer Contract as of the date hereof and which, if already paid, represents partial or complete compensation for work not yet performed. Attached to Schedule 3.18 is a true, correct and complete copy of the standard form Customer Contract of Seller. Except as set forth on Schedule 3.18, Seller is not a party to any Customer Contract which has terms that vary in any material respect from the terms set forth in the standard form of Customer Contract attached hereto in Schedule 3.18. Except as set forth on Schedule 3.18, there are no obligations of Seller, in writing or otherwise, to perform any material services. 3.19. Contracts--Validity, Etc. (a) Each Contract, including each Customer Contract, is a valid and binding obligation of the parties thereto, enforceable in accordance with its terms and in full force and effect. (b) Neither Seller nor, to the knowledge of Seller, any other party to any Contract, including each Customer Contract, is in breach or violation thereof or default thereunder. To the knowledge of Seller, no event has occurred which, through the passage of time or the giving of notice, or both, would constitute, and except as set forth on Schedule 3.14, neither the execution of this Agreement nor the Closing of the transactions contemplated hereby does or will constitute or result in, a breach or violation of or default under any Contract, including a Customer Contract, or would cause the acceleration of any obligation of any party thereto or the creation of a Lien upon any Purchased Asset. No obligations under any Contract, including a Customer Contract, will result in a loss to Buyer or would result in a loss to Seller, assuming it continues the Business in the manner presently conducted. Neither Seller nor Shareholder has any knowledge or information of any facts indicating, nor any other reason to believe, that any party to a Customer Contract has intent to terminate such Contract or to materially diminish the terms of such Contract or that any party to a Customer Contract will not continue to be a customer of the Business after the Closing. (c) Each Contract, including each Customer Contract, will be duly assigned to Buyer on the Closing Date and upon such assignment, Buyer will acquire all right, title and interest of Seller in and to such Contract and will be substituted for Seller under the terms of such Contract. Except as set forth on Schedule 3.14, no consent is required for such assignment. 3.20. No Breach of Law or Governing Document. Seller has complied with and is not in default under or in breach or violation of, (a) any applicable Law of any Government body (including, without limitation, the Fair Debt Collection Practices Act and any state or local counterpart or equivalent), (b) any franchise or license, or (c) any provision of its articles of incorporation or bylaws. Neither the execution of this Agreement nor the consummation of the transactions contemplated hereunder does or will constitute or result in any such default, breach or violation. No government permits or consents are necessary to effect the transactions contemplated hereby. No Ultimate Parent Entity of Seller, together with all entities it controls, is a $10 million person under the HSR Act. As used in this Section 3.20, the terms "Ultimate Parent Entity," "control" and "$10 million person" shall be defined by the HSR Act. 3.21. Litigation and Arbitration. There is no suit, claim, action or proceeding now pending or, to the knowledge of Seller, threatened before any Court, nor, to the knowledge of Seller, are there any grounds therefor, to which Seller is a party or which may result in any Order, Liability, or other determination which will, or could, have any adverse effect upon any Purchased Asset or upon the business, condition (financial or otherwise) or operations of the Business. No such Order has been entered against Seller, nor has any such Liability been incurred which has, or could have, such effect. There is no claim, action or proceeding now pending or, to the knowledge of Seller, threatened before any Court which will, or could, prevent or hamper the consummation of the transactions contemplated by this Agreement. 3.22. Directors, Officers, Employees and Consultants. Set forth on Schedule 3.22 hereto is a complete list of: (a) all directors of Seller; (b) all officers (with office held) of Seller; (c) all employees of Seller; and (d) all consultants to Seller; together, in each case, with the current rate of compensation payable to each. 3.23. Indebtedness to and from Directors, Officers and Others. Seller is not indebted to any director, officer, employee or agent of Seller except for amounts due as normal salaries, wages and bonuses and in reimbursement of ordinary expenses on a current basis and no shareholder, director, officer, employee or agent of Seller is indebted to Seller. 3.24. Outside Financial Interests. No director or officer of Seller nor the owner of more than 5% of the capital stock of Seller has any direct or indirect financial interest in any competitor with or supplier or customer of Seller; provided, however, that for this purpose ownership of corporate securities having no more than 2% of the outstanding voting power of any competitor, supplier or customer for which securities are listed on any national securities exchange or authorized for quotation on the Automated Quotations System of the National Association of Securities Dealers, Inc. shall not be deemed to be such a financial interest provided such Person has no other connection or relationship with such competitor, supplier or customer. 3.25. Payments, Compensation and Perquisites of Agents and Employees. All payments to agents, consultants and others made by Seller in connection with the Business have been in payment of bona fide fees and commissions and not as bribes, illegal or improper payments. Seller has properly and accurately reflected on its books and records all compensation paid to and perquisites provided to or on behalf of its consultants, agents and employees. Such compensation and perquisites have been properly and accurately disclosed in the Financial Statements and Interim Statements and other public or private reports, records or filings of Seller, to the extent required by Law. 3.26. Labor Contracts. Seller is not a party to any union collective bargaining, works council, joint or multi-employer association, employee committee or similar Contract. There are no negotiations, demands or proposals which are pending or which have been made which concern matters now covered, or that would be covered, by the type of Contracts listed in this Section. 3.27. Employee Benefit Plans. Except for the RWC Consulting Group, Inc. Money Purchase Plan, Seller has never been a party to, does not maintain and is not required to contribute to, nor has Seller ever maintained or been required to contribute to an "employee benefit plan" as defined in Section 3(3) of ERISA. Except for the RWC Consulting Group, Inc. Money Purchase Plan and the employment and consulting Contracts set forth on Schedule 3.27, Seller has never been a party to, does not maintain and is not required to contribute to, nor has Seller ever maintained or been required to contribute to a Plan. True, correct and complete copies of all documents creating or evidencing any such employment or consulting Contract listed on Schedule 3.27 have been delivered to Buyer. There are no Liabilities related to or that could arise from the RWC Consulting Group, Inc. Money Purchase Plan, including Seller's termination of such plan, that will pass to Buyer as result of the transactions contemplated hereby. 3.28. Overtime, Back Wages, Vacation and Minimum Wages. No present or former employee of Seller has any claim against Seller (whether under any Law, Contract or otherwise) on account of or for (a) overtime pay, other than overtime pay for the current payroll period, (b) wages or salary (excluding current bonus, accruals and amounts accruing under pension and profit-sharing Plans) for any period other than the current payroll period, (c) vacation, time off or pay in lieu of vacation or time off, other than that earned in respect of the current fiscal year or (d) any violation of any statute, ordinance or regulation relating to minimum wages or maximum hours of work. 3.29. Discrimination, Workers Compensation and Occupational Safety and Health. No Person or party (including, but not limited to, any Government) has any claim, notice of claim, charge, lawsuit or basis thereof, against Seller arising out of any Law relating to discrimination in employment or employment practices or occupational safety and health standards, and no such claim, notice of claim, charge of lawsuit is pending or, to the knowledge of Seller, threatened against Seller. Seller has not received any notice from any Person alleging a violation of any such Law or occupational safety or health standards. Seller has no outstanding Contracts or obligations to indemnify any Person for violation of the Laws and standards set forth in this Section. Seller has filed any required EEO-1 reports and affirmative action plans with appropriate Government agencies. There are no pending workers compensation claims involving Seller. Seller has delivered to Buyer a true, correct and complete list of all workers compensation claims made during the past two years. 3.30. Labor Disputes; Unfair Labor Practices. There is neither pending nor, to the knowledge of Seller, threatened, any labor dispute, strike or work stoppage which affects or which may affect the Business, and Seller is not currently covered by any injunction issued by any Court. Neither Seller nor any of its agents, representatives or employees, has committed any unfair labor practice as defined in the National Labor Relations Act of 1947, as amended. There is not now pending or threatened any charge or complaint against Seller by the National Labor Relations Board, any state or local labor or employment agency or any representative thereof, and the execution of this Agreement and the consummation of the transactions contemplated hereunder will not result in any such charge or complaint, nor is there pending or threatened any grievance or arbitration under any labor or employment Contract. No right of representation by a labor organization exists respecting the employees of Seller, nor is there pending a representation election. No collective bargaining Contract is currently being negotiated and no organizing effort is currently being made with respect to the employees of Seller. Seller has no ongoing or future Liabilities under any settlement Contract or consent decree with respect to labor matters. 3.31. Insurance Policies. Set forth on Schedule 3.31 hereto is a list of all insurance policies and bonds in force covering or relating to the Purchased Assets or the Business, including without limitation all properties, operations or personnel of Seller. 3.32. Guarantees. Seller is not a guarantor, indemnitor, surety or accommodation party or otherwise liable for any indebtedness of any other Person, firm or corporation, except as endorser of checks received and deposited in the Ordinary Course. 3.33. Environmental Matters. (a) Seller's use of the real property set forth on Schedule 3.12 ("Property") complies and has at all times complied with, and does not cause, has not caused, and will not cause Liability to be incurred by Seller under any Laws, including without limitation the codes, licenses and permits of all Governments relating to the protection of health, safety or the environment, including by way of illustration and not by way of limitation: the Clean Air Act; the Federal Water Pollution Control Act; the Resource Conservation and Liability Act; the Toxic Substance Control Act; the Comprehensive Environmental Response and Liability Act; the Hazardous Materials Transportation Act; the Atomic Energy Act; the Emergency Planning and Community Right-to-Know Act; and the Oil Pollution Prevention Act; and all amendments to each thereto, and all other applicable environmental Laws (collectively, "Environmental Laws"). Seller is not in violation of, and has not violated, in connection with the ownership, use, maintenance or operation of the Property and the conduct of the Business, any Environmental Laws. (b) There are no past, pending or, to the knowledge of Seller, threatened investigations, inquiries, notices or other proceedings by any Government or any foreign governmental entity with respect to Seller in connection with the actual or alleged violation of, or Liability arising under, any Environmental Laws with respect to the Property. (c) Seller has all necessary permits, registrations, approvals, certificates and licenses relating to the protection of health, safety or the environment as required by the Environmental Laws. Seller has previously delivered to Buyer or its representatives true, accurate and complete copies of any and all such permits, registrations, approvals, certificates and licenses. (d) To the knowledge of Seller, there are no Environmental Laws which require any work, repairs, construction or capital expenditures with respect to the Property, nor has Seller received any notice of any of the same. (e) During Seller's occupancy of the Property there has been no spill, discharge, leak, emission, injection, disposal, dumping, emptying, escape, leaching, pumping or release of any kind on, beneath or above the Property or into the environment surrounding or adjoining the Property of any pollutants, contaminants, hazardous substances, hazardous chemicals, toxic chemicals, extremely hazardous substances, petroleum products, petroleum substances, toxic substances, hazardous wastes, infectious wastes, radioactive materials, asbestos fibers or solid wastes (collectively as "Hazardous Materials"), including but not limited to those defined in the Environmental Laws. (f) During Seller's period of occupancy of the Property there has been no past, and there is no current or anticipated, storage, disposal, use, generation, manufacture, refinement, transportation, production or treatment of any Hazardous Materials at or upon the Property. (g) Seller knows of no information that any Person, including any employee, may have any life threatening health condition or long term disability as a result of the prior use of the Property or as a result of the release of any Hazardous Materials on the Property or into the environment surrounding the Property. (h) No asbestos fibers or materials or polychlorinated biphenyls (PCBs) are on the Property. 3.34. Broker's Fees. Seller has retained Geneva Corporate Finance, Inc. and agreed to pay its fees with respect to the transactions contemplated by this Agreement. Except with respect to Seller's agreement with Geneva Corporate Finance, Inc., neither Seller nor Shareholder has retained any broker, finder or agent or agreed to pay any brokerage fees, finder's fees or commissions with respect to the transactions contemplated by this Agreement. 3.35. Foreign Assets and Operations. Seller has no interests in any real property or tangible or intangible property located outside of the United States, including any stock, securities or investments in, claims against, or receivables from any entities or Persons with substantially all their property or business so located. Seller has not conducted the Business outside the United States. 3.36. Service Warranties and Guarantees. There are no service warranties or guarantees used or made by Seller except for any warranties or guarantees made in the Customer Contracts set forth on Schedule 3.18. 3.37. Books and Records. The books of account, stock record books and minute books and other corporate records of Seller are in all material respects complete and correct, have been maintained in accordance with good business practices and the matters contained therein are accurately reflected on the Financial Statements and Interim Statements. The minute books and stock books of Seller have been made available to Buyer and are correct and complete to the date hereof. 3.38. Truthfulness. To the knowledge of Seller, no representation or warranty of Seller or Shareholder herein and no statement or certificate furnished or to be furnished by or on behalf of Seller or Shareholder pursuant to this Agreement or in connection with the transactions contemplated hereby contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements contained herein or therein not misleading. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER Each of Buyer and OSI, jointly and severally, hereby makes the following representations and warranties, each of which is true and correct on the date hereof and except for changes expressly permitted by this Agreement, shall be true and correct on the Closing Date and each of which shall survive the Closing Date and the transactions contemplated hereby pursuant to Section 10.1. 4.1 Corporate Existence of Buyer. Buyer is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Delaware. Buyer has the limited liability company power and authority to own and use its properties and to transact the business in which it is engaged. OSI is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware. OSI has the corporate power and authority to own and use its properties and to transact the business in which it is engaged. 4.2 Approval of Agreement. (a) The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized and approved by all necessary corporate or limited liability company action of Buyer and OSI, and such authorization and approval have not been revoked. Pursuant to such authorization and approval, and each of Buyer and OSI has full corporate or limited liability company power and authority to enter into this Agreement, and to perform its obligations hereunder and thereunder, and to consummate the transactions contemplated hereby. (b) Assuming due execution and delivery hereof by Seller and Shareholder, this Agreement is the legal, valid and binding obligation of each of Buyer and OSI, enforceable against each according to its terms except that (i) such enforcement may be limited by or subject to any bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to or limiting creditors' rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the discretion of the Court before which any proceeding therefor may be brought. (c) Neither Buyer nor OSI is required to obtain any third party contractual consents to effect the transactions contemplated hereby 4.3 No Breach of Articles or Indentures. The execution of this Agreement and the consummation of the transactions contemplated hereby have not and will not constitute or result in the breach of any of the provisions of, or constitute a default under any material indenture, evidence of indebtedness or other commitment to which Buyer or OSI is a party or by which either is bound, which breach or default would have a material adverse effect on OSI and its subsidiaries, taken as a whole. The execution of this Agreement and the consummation of the transactions contemplated hereby have not and will not constitute or result in the breach of any of the provisions of the articles of organization or operating agreement of Buyer or the certificate of incorporation or by-laws of OSI. 4.4 Broker's Fees. Neither Buyer nor OSI has retained any broker, finder or agent or agreed to pay any brokerage fees, finder's fees or commissions with respect to the transactions contemplated by this Agreement. 4.5 Capital Stock, Capitalization of OSI; SEC Filings. (a) The OSI Stock to be received by Seller in accordance with the terms of this Agreement will be duly authorized, validly issued, fully paid and nonassessable. (b) The authorized capital stock of OSI consists of (i) 15,000,000 shares of OSI voting common stock, of which 6,024,428.07 shares are duly authorized and validly issued and outstanding, fully paid and nonassessable on the date hereof, (ii) 2,000,000 shares of OSI non-voting common stock, of which 480,321.30 shares are duly authorized and validly issued and outstanding, fully paid and nonassessable on the date hereof, (iii) 300,000 shares of OSI preferred stock, of which 107,000 shares are duly authorized and validly issued and outstanding, fully paid and nonassessable on the date hereof. Except for the OSI preferred stock, OSI non-voting common stock, for rights contained in that certain Stockholders Agreement dated as of December 10, 1999, by and among OSI and certain stockholders of OSI (the "Stockholders' Agreement") and for options granted and to be granted under OSI's 1995 Stock Option and Stock Award Plan and OSI's 2000 Equity Incentive Plan, there are no outstanding securities convertible into or exchangeable for the capital stock of OSI and there are no outstanding options, rights (preemptive or otherwise), or warrants to purchase or to subscribe for any shares of such stock or other securities of OSI. ARTICLE V COVENANTS CONCERNING SELLER Seller covenants and agrees with Buyer that, from and after the date of this Agreement and until the Closing Date, Seller will conduct the Business subject to the following provisions and limitations: 5.1 Operation of the Business. Without the prior written consent of Buyer, Seller will not: (a) Grant any increase in the rate of pay of any of its employees, grant any increase in the salaries of any officer, employee or agent, enter into or increase the benefits provided under any bonus, profit-sharing, incentive compensation, pension, retirement, medical, hospitalization, life insurance or other insurance plan or plans, or other contracts or commitments, or in any other way increase in any amount the benefits or compensation of any such officer, employee or agent. (b) Enter into any employment Contract or collective bargaining agreement. (c) Enter into any Contract or engage in any transaction which is not in the usual and Ordinary Course or which is inconsistent with past practices. (d) Sell or dispose of or encumber any Assets. (e) Make, or enter into any Contract for, any capital expenditure or enter into, modify, amend, or cancel any lease of capital equipment or real property. (f) Enter into any Contract, whether for the purchase or sale of inventory, supplies, other products or services or otherwise other than in the Ordinary Course. (g) Create, assume, incur or guarantee any indebtedness other than (i) in the usual and Ordinary Course of the Business and with a maturity date of less than one year or (ii) that incurred pursuant to existing Contracts disclosed in the Schedules delivered pursuant to this Agreement. (h) Make or institute any unusual method of transacting business or change any accounting procedures or practices or its financial structure. (i) Make any amendments to or changes in its articles of incorporation or bylaws. (j) Perform any act, or attempt to do any act, or permit any act or omission to act, which will cause a breach of any material Contract. 5.2 Preservation of Business. Seller shall carry on the Business diligently and substantially in the same manner as heretofore conducted and shall use commercially reasonably efforts to keep its business organizations intact, including keeping available the services of its present employees and preserving its present relationships with suppliers and customers and others having business relations with Seller. Seller shall perform all obligations required to be performed by it under any Contract or lease. 5.3 Insurance and Maintenance of Property. Seller will cause all the Purchased Assets and all property owned or leased pursuant to the Assumed Liabilities to be insured against all ordinary and insurable risks (except in respect of any leased property where the terms of the lease do not impose on lessee the obligation to maintain insurance and where the loss of such property would not materially adversely affect the conduct of the Business) and will operate, maintain and repair all of such property in a careful, prudent and efficient manner. 5.4 Full Access. Representatives of Buyer shall have full access at all reasonable times to all premises, properties, books, records, Contracts, tax records and documents of Seller relating to the Business, and Seller will furnish to Buyer any information in respect of the Business as Buyer may from time to time request. Such examination and investigation by Buyer shall not affect the warranties and representations of Seller and Shareholder contained in this Agreement. 5.5 Books, Records and Financial Statements. Seller shall maintain its books and financial records on a basis consistent with the past practices of Seller. Said books and financial records shall fairly and accurately reflect the operations of the Business. 5.6 Governmental Filings. Seller will cooperate with Buyer in making, as soon as practicable following the execution hereof, all filings required by any Government in connection with the transactions contemplated by this Agreement. All information provided by Seller in connection with such filings will be true, accurate and complete and will comply with all applicable Laws. 5.7 Tax Matters. (a) Seller shall pay all applicable sales, use or other similar transfer Taxes that are, or become, due or payable as a result of the sale, conveyance, assignment, transfer or delivery of the Purchased Assets hereunder, whether levied on Buyer, the Purchased Assets or Seller. Seller, in the case of the Purchased Assets, shall prepare, subject to Buyer's reasonable approval, and file any Returns required in respect of such Taxes. (b) All real estate, personal property, ad valorem and any other local or state Taxes relating to the Purchased Assets or the Business which shall be accrued but unpaid as of the Effective Time, or which shall be paid as of the Effective Time but relate in whole or in part to periods after the Effective Time, shall be prorated to the Effective Time and shall be reflected on the Closing Balance Sheet. Any such prorated Taxes which may be ultimately assessed after the Effective Time shall be paid by Seller to Buyer or Buyer to Seller, as the case may be, within thirty days of such determination. (c) Seller and Buyer shall report Buyer's purchase of the Purchased Assets pursuant to Section 1060 of the Code and other applicable Laws in a consistent manner and shall take no position contrary thereto. Such allocation shall be as set forth in Schedule 2.5. Buyer and Seller each shall be responsible for the preparation of any statements and forms to be filed pursuant to Section 1060 of the Code or in accordance with other applicable Law. (d) Seller agrees to furnish or cause to be furnished, upon request, as promptly as practicable, such information and assistance (including access to books and records) relating to the Purchased Assets and the Assumed Liabilities as is reasonably necessary for the preparation of any Return for Taxes, claims for refund or audit or prosecution or defense of any claim, suit or proceeding relating to any proposed adjustment of Taxes paid. (e) Seller, upon request, shall use its reasonable efforts to provide or obtain from any taxing authority any certificate or other document necessary to mitigate, reduce or eliminate any Taxes (including additions thereto or interest and penalties thereon) that otherwise would be imposed with respect to the transactions contemplated in this Agreement. (f) Seller shall furnish to Buyer, as provided in Section 1445(b)(2) of the Code, an affidavit pursuant to Section 1445(a), stating under penalties of perjury, Transferor's United States taxpayer identification number and that the Transferor is not a foreign person. ARTICLE VI OTHER AGREEMENTS 6.1 Change of Seller's Name. On October 2, 2000, Seller shall change its name to some name other than "RWC Consulting Group" or any variation or abbreviation thereof, and file appropriate notification of its change of name in all jurisdictions where such notification is required; provided, however, that Seller may use a variation or abbreviation of the name "RWC Consulting Group" as an assumed name or a d/b/a for the sole purpose of fulfilling its obligations under Section 6.2 hereof and upon completion of its obligations under Section 6.2 hereof, Seller shall immediately cease use such assumed name or d/b/a. Seller will take all steps as may be appropriate to insure to Buyer the continued right to use the name "RWC Consulting Group" and all variants thereof in connection with Buyer's operation of the Business. 6.2 Seller's Employees. For so long as a project set forth on Schedule 3.18 has any outstanding obligations to be performed under it (an "Existing Project"), Seller shall continue to employ those employees and continue to use the services of those independent contractors who were employed or hired for that Existing Project even if the term extends beyond the Closing Date. Pursuant to this Agreement, Buyer is assuming any outstanding obligations of Seller under an Existing Project following the Closing Date; provided, however, that Seller shall make available its employees and independent contractors who were employed or hired for an Existing Project to assist Buyer in performing any outstanding obligations under such Existing Project. Seller shall continue to be responsible for all Liabilities and obligations due to its employees and independent contractors until the completion of the Existing Project for which such employees and/or independent contractors were employed or hired, except for the payroll and related expenses of employees and costs and wages of independent contractors since the last ADP payroll disbursement date before the Closing Date which will be assumed by Buyer. Buyer shall reimburse Seller for all out-of-pocket expenses arising in the Ordinary Course of the Business incurred by Seller after the Closing Date associated with the continued employment of an employee or the use of an independent contractor for an Existing Project; provided that it is hereby acknowledged that Buyer is not assuming any Liability arising from or related to Seller's employees and independent contractors, except for the payroll and related expenses of employees and costs and wages of independent contractors since the last ADP payroll disbursement date before the Closing Date which will be assumed by Buyer.. Upon completion of an Existing Project, those employees or independent contractors of Seller who were hired for that completed Existing Project and who are not employed or hired by Seller for any other Existing Project shall no longer be employed or hired by Seller, or if Buyer should so determine, in its sole discretion, to employ or hire such employees or independent contractors of Seller prior to the completion of an Existing Project, Seller shall release such employee or independent contractor from employment or hire. Following such time, Buyer, in its sole discretion, may seek to employ or hire such employee or independent contractor. Each of Seller and Shareholder acknowledge that Buyer will determine, in its sole discretion, the classification of each person hired by Buyer and the method of compensation for such persons. Nothing in this Section 6.2 shall be construed to deem Buyer a joint employer of Seller's employees and independent contractors, and in the event that Buyer is deemed to be a joint employer of Seller's employees and independent contractors, Seller and Shareholder, jointly and severally, hereby agree to indemnify Buyer for any and all Liability which may be attributed to Buyer as a joint employer. Additionally, Seller and Shareholder, jointly and severally, hereby agree to indemnify Buyer for any and all Liability relating to or arising from a breach, based on the actions of Seller, of a representation, warranty or covenant of Seller in any Contract set forth on Schedule 3.18. Any indemnity set forth in this Section 6.2 shall be made in accordance with the provisions of Article X hereof, without regard to the limitations contained in Section 10.2(b). ARTICLE VII COVENANT NOT TO COMPETE 7.1 Covenant Not to Compete. (a) As a further inducement to Buyer to purchase the Purchased Assets and to assume the Assumed Liabilities, each of Seller and Shareholder agrees that for the period from the Closing Date until the expiration of five years from the Closing Date (the "Restricted Period"), each of Seller and Shareholder will not, directly or indirectly: (i) engage in or in any way own, manage, operate, control or otherwise advise or assist or be actively connected with any enterprise which engages in, or otherwise carries on, any business activity which is in competition with the current Business of Seller; or (ii) solicit or accept competitive business from, or provide competitive products or services to, any customers (whether or not such Persons have done business with Seller once or more than once) or accounts of Seller (prior to the Closing Date) or Buyer (after the Closing Date). (b) It is expressly understood and agreed that although Seller, Shareholder and Buyer consider the restrictions contained in this Section to be reasonable in the context in which made, if a final judicial determination is made that the time, territory, scope or any other restriction contained in this Section is unreasonable or otherwise unenforceable, neither this Agreement nor the provisions of this Section shall be rendered void, but shall be deemed amended to apply as to such maximum scope, time and territory and to such other extent as such Court may judicially determine or indicate to be reasonable, and as so modified, the restrictions contained in this Section shall be binding and enforceable. 7.2 Employees. Except as contemplated in Section 6.2, each of Seller and Shareholder agrees that during the Restricted Period neither it nor its successors or assigns will hire any Person who is or shall be in the employ or service of Seller on or after the Closing Date and whom Buyer intends to employ, or seek to entice, induce or in any manner influence any such employee to leave his or her employment or not accept employment from Buyer. 7.3 Confidentiality. Each of Seller and Shareholder will not at any time disclose to any Person other than Buyer or use any "Confidential Information" (as hereinafter defined) owned, possessed, licensed or used by or relating to the Business, whether or not such information is embodied in writing or other physical form. For purposes of this Agreement, the phrase "Confidential Information" means all trade names, trademarks, service marks, patents and trade secrets and any and all other information not publicly available which relates to specific matters concerning the Business, such as, without limiting the generality of the foregoing, engineering, design, manufacturing, maintenance and repair information; computer software and programs; component sourcing and supply information; identities of suppliers, customers and contractors; product distribution information; pricing and compensation policies; sales or financing procedures or methods; operational methods; strategic plans; internal financial information; research and development plans and activities; and acquisition and expansion plans. Each of Seller and Shareholder recognizes and agrees that all documents and objects containing any Confidential Information, whether developed by Seller, Shareholder or by someone else for Seller, will after the Closing Date become the exclusive property of Buyer. 7.4 Remedies. Because the breach or anticipated breach of the restrictive covenants provided for in this Article VII will result in immediate and irreparable harm and injury to Buyer, for which it will not have an adequate remedy at law, each of Seller and Shareholder agrees that Buyer shall be entitled to relief in equity to temporarily, preliminarily and/or permanently enjoin such breach or anticipated breach and to seek any and all other legal and equitable remedies to which Buyer may be entitled. Should such action be taken and an injunction issued, Buyer shall be entitled to reimbursement of attorneys' fees and costs incurred. 7.5 Permitted Investments. Nothing contained herein shall restrict Seller and Shareholder from owning two percent (2%) or less of the corporate securities of any Person in competition with the Business which securities are listed on any national securities exchange or authorized for quotation on the Automated Quotations System of the National Association of Securities Dealers, Inc., if such Person has no other connection or relationship, direct or indirect, with the issuer of such securities. ARTICLE VIII. CONDITIONS TO BUYER'S OBLIGATIONS The obligations of Buyer to consummate the transactions provided for in this Agreement shall be subject to the satisfaction of each of the following conditions on or before the Closing Date, subject to the right of Buyer to waive any one or more of such conditions: 8.1. Representations and Warranties of Seller and Shareholder. The representations and warranties of Seller and Shareholder contained in this Agreement, including the Schedules hereto, and in the certificates and papers to be delivered to Buyer pursuant hereto and in connection herewith shall be true and correct in all material respects on the date hereof and on the Closing Date (except for changes specifically permitted hereunder) as though such representations and warranties were made on the Closing Date. 8.2. [Intentionally omitted.] 8.3. Performance of this Agreement. Seller and Shareholder shall have duly performed or complied with all of the obligations to be performed or complied with by it or him under the terms of this Agreement on or prior to the Closing Date. 8.4. No Material Adverse Change and No Extraordinary Distributions. There shall have been no material adverse change, actual or threatened, in the Business (including the Purchased Assets, the Assumed Liabilities and relationships with customers), whether or not covered by insurance, as a result of any cause whatsoever. 8.5. Certificate of Seller and Shareholder. Buyer shall have received a certificate signed by the President of Seller and Shareholder dated as of the Closing Date and subject to no qualification certifying that the conditions set forth in Sections 8.1, 8.3, 8.4, 8.8, 8.9, 8.10, and 8.11 hereof have been fully satisfied. Such certificate shall be deemed a representation and warranty of Seller and Shareholder under this Agreement. 8.6. Employment Agreements. Robert W. Curtis, Jr. shall have executed and delivered an Employment Agreement in substantially the form attached hereto as Exhibit C and J. Griffin Gunter, Jr. shall have executed and delivered an Employment Agreement in substantially the form attached hereto as Exhibit D. 8.7. Audits. PricewaterhouseCoopers LLP shall have completed the audits and examinations of Seller's financial statements for the year ended December 31, 1999 and for the six months ended June 30, 2000 and Buyer shall be satisfied in all respects with the results of such audits. 8.8. No Lawsuits. No suit, action or other proceeding or investigation shall be threatened or pending before or by any Court or Government concerning this Agreement or the consummation of the transactions contemplated hereby, or in connection with any claim against Seller not disclosed on the Schedules hereto. No Government shall have threatened or directed any request for information concerning this Agreement, the transactions contemplated hereby or the consequences or implications of such transactions to Buyer, to Seller, or to any officer, director, employee or agent of them. 8.9. No Restrictions. There shall exist no conditions, restrictions or reservations affecting the title to or utility of the Purchased Assets and the rights under the Assumed Liabilities which would prevent Buyer from occupying and utilizing the Purchased Assets, or any part thereof, to the same full extent that Seller might continue to do so if the sale and transfer contemplated hereby did not take place. 8.10. Consents. All consents and approvals necessary to ensure that Buyer will continue to have the same full rights in respect to the Purchased Assets and the Assumed Liabilities as Seller had immediately prior to the consummation of the transactions contemplated hereunder, including, without limitation, the consent of Seller's landlord to the assignment to and assumption by Buyer of the lease obligations under the Commercial Lease Agreement between Shane Schleyer and Shareholder dated October 10, 1999, and the consent of the Seller's customers to the assignment of the contracts set forth in Schedule 3.14, shall have been obtained. 8.11. Releases. At or prior to the Closing Date, Seller shall have delivered to Buyer the written release of all Liens relating to the Purchased Assets, executed by the holder of or parties to each such Lien. The releases shall be reasonably satisfactory in substance and form to Buyer and its counsel. 8.12. Documents. Buyer shall have received from Seller or Shareholder on the Closing Date: (a) The Bill of Sale and other appropriate documents conveying to Buyer good and marketable title to the Purchased Assets, duly executed by Seller. (b) The Assignment and Assumption Agreement and other appropriate assignments, with related consents, if any are so required, duly executed by Seller. (c) An assignment and assumption of lease agreement, pursuant to which Shareholder assigns to Buyer the lease under the Commercial Lease Agreement between Shane Schleyer and Shareholder dated October 10, 1999, duly executed by Shareholder. (d) The Stockholders' Agreement, duly executed by Seller and/or Shareholder, if Seller assigns all or a portion of the OSI Stock to Shareholder. (e) An executed legal opinion from Jackson Walker L.L.P., counsel to Seller and Shareholder, dated the Closing Date substantially in the form attached hereto as Exhibit F. (f) A certificate of good standing of Seller dated within five days of the Closing Date, from the Secretary of State of the State of Texas. (g) A copy, certified by the Secretary of Seller to be true, complete and correct as of the Closing Date, of the articles of incorporation and bylaws of Seller and all resolutions, authorizations, consents, approvals and/or ratifications of the shareholders and directors of Seller required for the authorization of Seller to enter into this Agreement and consummate the transactions contemplated hereunder. Such certificate shall also contain a certification of the incumbency and genuineness of the signatures of the officers of Seller executing any document to be delivered to Buyer and shall be deemed a representation and warranty of Seller and Shareholder under this Agreement. 8.13. Due Diligence. Buyer shall be satisfied in all respects with the results of its customer, employee and independent contractor due diligence review of the Business. 8.14. Further Assurances. Buyer shall have received such further instruments and documents as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained and the performance of all conditions to the consummation of such transactions. ARTICLE IX. CONDITIONS TO SELLER'S OBLIGATIONS The obligations of Seller to consummate the transactions provided for in this Agreement shall be subject to the satisfaction of each of the following conditions on or before the Closing Date, subject to the right of Seller to waive any one or more of such conditions: 9.1. Representations and Warranties of Buyer and OSI. The representations and warranties of Buyer and OSI contained in this Agreement, including the Schedules hereto, and in the certificates and papers to be delivered to Seller pursuant hereto and in connection herewith shall be true and correct in all material respects on the date hereof and on the Closing Date (except for changes specifically permitted hereunder) as though such representations and warranties were made on the Closing Date. 9.2. Performance of this Agreement. Buyer and OSI shall have duly performed or complied with all of the obligations to be performed or complied with by it under the terms of this Agreement on or prior to the Closing Date. 9.3. Certificate of Buyer. Seller shall have received a certificate signed by an officer of Buyer and OSI dated as of the Closing Date and subject to no qualification certifying that the conditions set forth in Sections 9.1, 9.2, and 9.5 hereof have been fully satisfied. Such certificate shall be deemed a representation and warranty of Buyer and OSI hereunder. 9.4. Employment Agreements. Buyer shall have executed and delivered the Employment Agreements in substantially the form attached hereto as Exhibits C and D. 9.5. Payment of Initial Payment. On the Closing Date, Seller shall have received from Buyer the Initial Payment to be delivered under Section 2.8 hereof. 9.6. No Lawsuits. No suit, action or other proceeding or investigation shall be threatened or pending before or by any Court or Government concerning this Agreement or the consummation of the transactions contemplated hereby. No Government shall have threatened or directed any request for information concerning this Agreement, the transactions contemplated hereby or the consequences or implications of such transactions to Buyer, to Seller, or to any officer, director, employee or agent of it. 9.7. Documents. Seller and Shareholder shall have received from Buyer or OSI on the Closing Date: (a) The Assignment and Assumption Agreement, duly executed by Buyer. (b) The Promissory Note, duly executed by OSI. (c) Certificates in valid form evidencing the OSI Stock. (d) An assignment and assumption of lease agreement, pursuant to which Buyer assumes the lease obligations under the Commercial Lease Agreement between Shane Schleyer and Shareholder dated October 10, 1999, duly executed by Buyer. (e) An executed legal opinion from Bryan Cave LLP, counsel to Buyer and OSI, dated the Closing Date substantially in the form attached hereto as Exhibit G. (f) A certificate of good standing of Buyer dated within five days of the Closing Date, from the Secretary of State of the State of Delaware. (g) A certificate of good standing of OSI dated within five days of the Closing Date, from the Secretary of State of Delaware. (h) A copy, certified by the Member of Buyer to be true, complete and correct as of the Closing Date, of the articles of organization and operating agreement of Buyer and all resolutions, authorizations, consents, approvals and/or ratifications of the members of Buyer required for the authorization of Buyer to enter into this Agreement and consummate the transactions contemplated hereunder. Such certificate shall also contain a certification of the incumbency and genuineness of the signatures of the officers of Buyer executing any document to be delivered to Seller and shall be deemed a representation and warranty of Buyer under this Agreement. (i) A copy, certified by the Secretary of OSI to be true, complete and correct as of the Closing Date, of the certificate of incorporation and by-laws of OSI and all resolutions, authorizations, consents, approvals and/or ratifications of the directors of OSI required for the authorization of OSI to enter into this Agreement and consummate the transactions contemplated hereunder. Such certificate shall also contain a certification of the incumbency and genuineness of the signatures of the officers of OSI executing any document to be delivered to Seller and shall be deemed a representation and warranty of OSI under this Agreement. 9.8. Further Assurances. Seller shall have received such further instruments and documents as may reasonably be required to carry out the transactions contemplated hereby and to evidence the fulfillment of the agreements herein contained and the performance of all conditions to the consummation of such transactions. ARTICLE X. INDEMNIFICATION 10.1. Survival of Representations and Warranties. The representations and warranties of the Parties made in this Agreement or in any exhibit, statement, Schedule, certificate, instrument or document delivered pursuant hereto shall survive the Closing and shall remain in effect for a period of two years from the Closing Date and shall thereupon terminate and be of no further force and effect; provided, however, that the foregoing shall not apply to representations and warranties under Sections 3.2, 3.8, 3.27 and 3.34, which shall survive for the period equal to the applicable statute of limitations period; and provided, further, that this shall not prohibit any claim for Indemnified Losses pursuant to Section 10.2 after such applicable survival period with respect to Indemnified Losses as to which the Indemnifying Party has received notice in accordance with this Article X prior to the expiration of such survival period. 10.2. Seller's Indemnification. (a) Seller and Shareholder hereby jointly and severally agree to hold Buyer, OSI and the shareholders, directors, officers, employees, Affiliates, successors, assigns and agents of each of them (collectively, the "Buyer Indemnified Persons") harmless from, against and in respect of, and waives any claim for contribution or indemnity with respect to, any and all claims, losses, damages, Liabilities, expenses or costs ("Losses"), plus reasonable attorneys' fees and expenses incurred in connection with Losses and/or enforcement of this Agreement, plus interest from the date incurred through the date of payment at the prime lending rate of Bank of America from time to time prevailing (in all, "Indemnified Losses") incurred or to be incurred by any of them to the extent resulting from or arising out of, or alleged to result from or arise out of: (i) any breach or violation of the representations and warranties, of Seller and Shareholder contained in Article III of this Agreement; (ii) any breach or violation of the covenants or agreements of Seller contained in this Agreement, or in any exhibit, statement, Schedule, certificate, instrument or document delivered pursuant hereto, including the provisions of this Article X; (iii) Any Liability of Seller not expressly assumed by Buyer hereunder, without regard to the fact that any indemnifiable matter described in this subsection (iii) may have been disclosed in the Schedules or in any documents included or referred to therein or may be otherwise known to Buyer at the date of this Agreement or on the Closing Date; (iv) The assertion of any claim by a party to any Contract assumed by Buyer relating to the performance of such Contract to the extent the claim relates to the portion of such Contract completed by Seller prior to the Closing; and (v) without being limited by the foregoing subsections (i) through (iv) and without regard to whether any one or more of the items listed in this subsection (v) may be disclosed in the Schedules or otherwise known to Buyer as of the date of this Agreement or on the Closing Date except to the extent of the amounts reflected on the Closing Statement: (A) All Taxes of Seller and Shareholder and Seller's or Shareholder's Liability for its own Taxes or its Liability, if any (for example, by reason of transferee Liability or application of Treas. Reg. Section 1.1502-6) for Taxes of others, and fines and penalties and reasonable expenses (including but not limited to reasonable attorneys' fees and expenses) payable with respect to or arising out of any claim or assessment for such Taxes against Buyer or the Purchased Assets, (1) for any taxable period ending on or before the Closing Date, except to the extent such Taxes are reflected as a Tax Liability on the Closing Statement, (2) for any taxable period resulting from a breach of any of the representations or warranties contained in Section 3.8 hereof, or (3) sustained in a tax period of Buyer ending after the Closing Date arising out of the settlement or other resolution of a proposed tax adjustment which relates to a tax period ending on or before the Closing Date; and (B) Seller's termination of any of its employees, except to the extent the amounts of such Losses are reflected on the Closing Statement. (b) The Buyer Indemnified Persons shall not be entitled to recover Indemnified Losses (i) pursuant to Section 10.2(a)(i) (other than for a breach of a representation and warranty in Section 3.2, Section 3.6, Section 3.8 and Section 3.27), unless such Indemnified Losses exceed $100,000 in the aggregate, and then only to the extent of amounts in excess of $100,000; or (ii) to the extent such Indemnified Losses exceed the aggregate consideration paid for the Purchased Assets as contemplated under Section 2.3 of this Agreement, once Seller or Shareholder has made payments to or on behalf of Buyer Indemnified Persons with respect to such Indemnified Losses in such amount. 10.3. Buyer's Indemnification. Buyer and OSI hereby jointly and severally agree to hold Seller, Shareholder and their shareholders, directors, officers, employees, Affiliates, successors, assigns and agents of each of them (collectively, the "Seller Indemnified Persons") harmless from, against and in respect of, and waives any claim for contribution or indemnity with respect to, any and all Indemnified Losses incurred or to be incurred by any of them, to the extent resulting from or arising out of, or alleged to result from or arise out of: (a) any breach or violation of the representations, warranties, covenants and agreements of Buyer and OSI contained in this Agreement, or in any exhibit, statement, Schedule, certificate, instrument or document delivered pursuant hereto, including the provisions of this Article X; or (b) any Liability of Buyer with respect to the Assumed Liabilities. 10.4. Notice of Claim. In the event that Buyer seeks indemnification on behalf of a Buyer Indemnified Person, or Seller seeks indemnification on behalf of a Seller Indemnified Person, such Party seeking indemnification (the "Indemnified Party") shall give written notice to the other Party (the "Indemnifying Party") specifying the facts constituting the basis for such claim and the amount, to the extent known, of the claim asserted. With respect to claims other than Third Person Claims, the Indemnifying Party shall have 20 calendar days after the Indemnified Party provides notice to the Indemnifying Party to make such investigation of the claim as the Indemnifying Party deems necessary or desirable. For purposes of such investigation, the claimant agrees to make available to the Indemnifying Party or its authorized representative(s) the information relied upon by the claimant to substantiate the claim. If the Indemnified Party and the Indemnifying Party agree at or prior to the expiration of such 20 day period (or any mutually agreed upon extension thereof) to the validity and amount of such claim, the Indemnifying Party shall pay the amount of such claim not more than 10 calendar days after agreement. If the Indemnified Party and the Indemnifying Party do no agree within such period (or any mutually agreed upon extension thereof), the Indemnified Party may seek any available legal remedy. 10.5. Right to Contest Claims of Third Persons. If an Indemnified Party is entitled to indemnification hereunder because of a claim asserted by any claimant (other than an indemnified person hereunder) ("Third Person"), the Indemnified Party shall give the Indemnifying Party reasonably prompt notice thereof after such assertion is actually known to the Indemnified Party; provided, however, that the right of a Person to be indemnified hereunder in respect of claims made by a Third Person shall not be adversely affected by a failure to give such notice unless, and then only to the extent that, an Indemnifying Party is prejudiced thereby. The Indemnifying Party shall have the right, upon written notice to the Indemnified Party, and using counsel reasonably satisfactory to the Indemnified Party, to investigate, secure, contest or settle the claim alleged by such Third Person (a "Third Person Claim"), provided that the Indemnifying Party has unconditionally acknowledged to the Indemnified Party in writing his or its obligation to indemnify the persons to be indemnified hereunder with respect to such Third Person Claim; the Indemnified Party may thereafter participate in (but not control) the defense of any such Third Person Claim with its own counsel at its own expense, unless separate representation is necessary to avoid a conflict of interest, in which case such representation shall be at the expense of the Indemnifying Party. Unless and until the Indemnifying Party so acknowledges his or its obligation to indemnify, the Indemnified Party shall have the right, at its option, to assume and control defense of the matter and to look to the Indemnifying Party for the full amount of the costs of defense. The failure of the Indemnifying Party to respond in writing to the aforesaid notice of the Indemnified Party with respect to such Third Person Claim within 20 calendar days after receipt thereof shall be deemed an election not to defend the same. If the Indemnifying Party does not so acknowledge his or its obligation to indemnify and assume the defense of any such Third Person Claim within the 20 calendar days, (a) the Indemnified Party may defend against such claim, in such manner as it may deem appropriate, including, but not limited to, settling such claim, after giving notice of the same to the Indemnifying Party, on such terms as the Indemnified Party may deem appropriate, and (b) the Indemnifying Party may participate in (but not control) the defense of such action, with its own counsel at its own expense. If the Indemnifying Party thereafter seeks to question the manner in which the Indemnified Party defended such Third Person Claim or the amount or nature of any such settlement, the Indemnifying Party shall have the burden to prove by clear and convincing evidence that conduct of the Indemnified Party in the defense and/or settlement of such Third Person Claim constituted gross negligence or willful misconduct. The Parties shall make available to each other all relevant information in their possession relating to any such Third Person Claim and shall cooperate in the defense thereof. 10.6. Set-Off Rights; Payment with OSI Stock. Subject to complying with the procedures of Sections 10.4 and/or 10.5, Buyer or OSI shall have the right to seek, in their sole discretion, satisfaction of Indemnified Losses: (a) from Seller or Shareholder or (b) by offsetting Indemnified Losses against any payments due under the Promissory Note and any Earn-Out Payment which may be due to Seller pursuant to Section 2.10. Either Shareholder or Buyer may elect to have Indemnified Losses satisfied with OSI Stock valued at the per share price as specified in the definition of OSI Stock set forth in Article I and to the extent Shareholder or Seller holds such OSI Stock. ARTICLE XI. MISCELLANEOUS 11.1. Assignment; Binding Agreement. (a) This Agreement and all or any part of Buyer's rights and obligations hereunder may be assigned by Buyer at any time to any one or more Affiliates of Buyer. Buyer shall cause such Affiliate(s) to perform any of Buyer's obligations hereunder which are assigned to such Affiliate(s). (b) Neither this Agreement nor any of Seller's rights or obligations hereunder may be assigned by Seller without Buyer's prior written consent. (c) This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and to their respective successors and permitted assigns. 11.2. Termination of Agreement. This Agreement and the transactions contemplated hereby may be terminated prior to the Closing Date only as follows: (a) By mutual consent of Buyer and Seller. (b) By either Buyer or Seller if the Closing shall not have occurred on or before October 31, 2000, or such other date, if any, as Buyer and Seller shall agree upon. (c) By Buyer if Buyer determines, in its sole discretion, that the transaction contemplated hereby has become inadvisable or impractical (i) as a result of Buyer's investigation of the Business prior to the Closing pursuant to Section 8.13 or (ii) by reason of the institution or threat by any Person, Governmental or otherwise, of any litigation, investigation or proceeding (it being understood and agreed that, without limiting the generality of the foregoing, a written request by Government authorities for information with respect to the proposed transactions may be deemed to be a threat of litigation, investigation or proceedings). 11.3. Manner and Effect of Termination. (a) Any action by Seller to terminate this Agreement and the transactions contemplated hereby, as provided in Section 11.2 hereof, shall be taken by its Board of Directors. Any such action by Buyer shall be taken by its Manager, its President or any appropriately authorized officer. (b) If this Agreement is terminated pursuant to Section 11.2 hereof without fault of either Party or breach of this Agreement, all obligations of Seller and Buyer hereunder shall terminate, without Liability of Seller to Buyer or of Buyer to Seller. In such event, each Party hereto shall pay all legal and other costs and expenses incurred by such Party in connection with this Agreement and the transactions contemplated hereby. (c) Nothing in this Section or elsewhere in this Agreement shall impair or restrict the rights of any Party to any and all remedies at law or in equity in the event of a breach of or default under this Agreement. 11.4. Non-Disclosure of Information. Without the prior written consent of Buyer, Seller will not disclose or reveal to any third Person any confidential, non-public or commercially valuable information (a) concerning Buyer to which Seller was exposed in connection with this Agreement or (b) concerning the Business. 11.5. Bulk Sales. Buyer hereby waives compliance with any applicable State Uniform Commercial Code or other statutory provisions governing bulk sales. Seller agrees to indemnify, defend and hold harmless Buyer from any and all loss, cost or expenses, resulting from the assertion of claims made against the Purchased Assets sold hereunder or against Buyer by creditors of Seller under any bulk sales Law with respect to Liabilities of Seller not assumed by Buyer hereunder, such indemnity to be in accordance with the provisions of Article X hereof, without regard to the limitations contained in Section 10.2(b). 11.6. Entire Agreement and Modification. This Agreement, including the Schedules and Exhibits attached hereto and the documents to be delivered pursuant hereto, constitutes the entire agreement between the Parties. No changes of, modifications of, amendments to, or additions to this Agreement shall be valid unless the same shall be in writing and signed by all Parties hereto. 11.7. Severability. If any provision of this Agreement shall be determined to be contrary to Law and unenforceable by any court of law, the remaining provisions shall be severable and enforceable in accordance with their terms. 11.8. Counterparts. This Agreement may be executed in one or more identical counterparts, each of which shall be deemed an original but all of which together will constitute one and the same instrument. This Agreement may be executed and thereafter transmitted by telecopier, and the telecopier receipt shall constitute an original. 11.9. Headings; Interpretation. The table of contents and article and section headings contained in this Agreement are inserted for convenience only and shall not affect in any way the meaning or interpretation of the Agreement. Both Parties have participated substantially in the negotiation of this Agreement, and each Party hereby disclaims any defense or assertion in any litigation or arbitration that any ambiguity herein should be construed against the draftsman. 11.10. Arbitration, Choice of Forum and Governing Law. (a) The Parties agree to submit any and all disputes arising from or in connection with this Agreement, whether based on contract, tort, common law, equity, statute, regulation, order or otherwise, but excluding any disputes arising under Article VII or governed by the arbitration provisions in Section 2.9 or 2.10 ("Disputes"), including Disputes arising in connection with claims by third persons, to arbitration, for final and binding resolution; provided, that the foregoing shall not preclude equitable or other judicial relief to enforce the provisions hereof or to preserve the status quo pending resolution of Disputes hereunder. This provision constitutes a binding arbitration clause under applicable Law. Either Party may initiate arbitration of a Dispute by delivery of a demand therefor in writing (the "Arbitration Demand") to the other Party. The arbitration shall be conducted in Atlanta, Georgia, by a sole arbitrator selected by agreement of the Parties not later than 10 days after delivery of the Arbitration Demand or, failing such agreement, appointed pursuant to the AAA Rules. If the arbitrator becomes unable to serve, his or her successor(s) shall be similarly selected or appointed. The arbitration shall be conducted pursuant to the Federal Arbitration Act and the Missouri Uniform Arbitration Act and such procedures as the Parties may agree or, in the absence of or failing such agreement, pursuant to the AAA Rules. Notwithstanding the foregoing, (i) each Party shall be allowed to conduct discovery through written requests for information, document requests, requests for stipulation of fact, and depositions; (ii) the nature and extent of such discovery shall be determined by the arbitrator, taking into account the needs of the Parties and the desirability of making discovery expeditious and cost-effective; (iii) the arbitrator may issue orders to protect the confidentiality of information to be disclosed in discovery; (iv) the arbitrator's discovery rulings may be enforced in a court of competent jurisdiction; (v) each Party shall provide to the other, reasonably in advance of any hearing, copies of all documents which a Party intends to present in such hearing; (vi) all hearings shall be conducted on an expedited schedule; and (vii) all proceedings shall be confidential, except that either Party may at its expense make a stenographic record thereof. The arbitrator shall complete all hearings not later than 90 days after his or her selection or appointment, and shall make a final award not later than 30 days thereafter. The award shall be in writing and shall specify the factual and legal bases for the award. The arbitrator shall apportion all costs and expenses of the arbitration, including the arbitrator's fees and expenses and fees and expenses of experts and attorneys between the prevailing and non-prevailing Party as the arbitrator shall deem fair and reasonable. Notwithstanding the foregoing, in no event may the arbitrator award multiple, punitive or exemplary damages. (b) In light of the Parties' interests in ensuring that disputes regarding the interpretation, validity and enforceability of this Agreement are resolved on a uniform basis, and the execution of, and the making of, this Agreement in Missouri, the Parties agree that (i) any litigation involving any noncompliance with or breach of Article VII this Agreement, or regarding the interpretation, validity and/or enforceability of Article VII of this Agreement, shall be filed and conducted in the state or federal courts in St. Louis, Missouri, and (ii) the Agreement, for purposes of arbitration and litigation proceedings, shall be interpreted in accordance with and governed by the laws of the State of Missouri, without regard for any conflict of law principles. 11.11. Payment of Fees and Expenses. Each Party hereto shall pay all fees and expenses incurred by such Party incident to the negotiation, preparation and execution of this Agreement and the consummation of the transactions contemplated hereby, including the fees of counsel, accountants and other experts of such Party and any finder's or brokerage fees incurred by such Party. 11.12. Notices. All notices, requests, demands and other communications hereunder shall be deemed to have been duly given if the same shall be in writing and shall be delivered (a) personally, (b) by registered or certified mail, postage prepaid, (c) by facsimile transmission (with a copy confirmed by mail) or (d) by overnight delivery service and addressed as set forth below: (a) If to Buyer or OSI: Outsourcing Solutions Inc. 390 South Woods Mill Road, Suite 350 Chesterfield, MO 63017 Attention: President and CEO Fax: (314) 576-1867 copy to (which shall not constitute notice): Bryan Cave LLP One Metropolitan Square 211 N. Broadway, Suite 3600 St. Louis, MO 63102 Attention: Peter D. Van Cleve Fax: (314) 259-2020 (b) If to Seller and Shareholder: RWC Consulting Group, Inc. 128 W. Blanco Suite 8 Boerne, Texas 78006 Attention: Robert W. Curtis, Jr. Fax: (830) 249-1721 copy to (which shall not constitute notice): Jackson Walker L.L.P. 901 Main Street Suite 6000 Dallas, Texas 75202 Attention: Brad Whitlock Fax: (214) 953-5822 Any such notice shall be effective upon receipt. Any Party may change the address to which notices are to be addressed by giving the other Party notice in the manner herein set forth. THIS AGREEMENT CONTAINS AN ARBITRATION PROVISION WHICH MAY BE ENFORCED BY THE PARTIES HERETO. IN WITNESS WHEREOF, the Parties hereto have executed this Agreement, on the day and year first above written. RWC CONSULTING GROUP, LLC By: Name: Title: OUTSOURCING SOLUTIONS INC. By: Name: Title: RWC CONSULTING GROUP, INC. By: Name: Title: Robert W. Curtis, Jr. TABLE OF EXHIBITS AND SCHEDULES Exhibits Exhibit A Form of Assignment and Assumption Agreement Exhibit B Form of Bill of Sale Exhibit C Form of Employment Agreement for Robert W. Curtis, Jr. Exhibit D Form of Employment Agreement for J. Griffin Gunter, Jr. Exhibit E Form of Promissory Note Exhibit F Form of Opinion of Jackson Walker L.L.P. Exhibit G Form of Opinion of Bryan Cave LLP Schedules Schedule 1.1(a) Assumed Liabilities Schedule 1.1(b) Excluded Assets Schedule 2.5 Allocation of Consideration Schedule 2.9(a) Closing Financial Statements Principles and Procedures Schedule 2.10(a) Earn-Out Principles and Procedures Schedule 3.3 Financial Statements Schedule 3.4 Events Subsequent to December 31, 1999 Schedule 3.5 Laptop Computers Schedule 3.7 Undisclosed Liabilities Schedule 3.12 Real Property - Leased to Seller Schedule 3.13 Intellectual Property Schedule 3.14 Necessary Property and Transfer of Purchased Assets Schedule 3.16 Licenses and Permits Schedule 3.17 Contracts - Disclosure Schedule 3.18 Customer Contracts Schedule 3.22 Directors, Officers, Employees and Consultants Schedule 3.27 Employee Benefit Plans Schedule 3.31 Insurance Policies

BY-LAWS OF OUTSOURCING SOLUTIONS INC. ARTICLE I STOCKHOLDERS Section 1. Annual Meeting. The annual meeting of the stockholders of the Corporation shall be held either within or without the State of Delaware, at such place as the Board of Directors may designate in the call or in a waiver of notice thereof, on the first Monday in May of each year beginning with the year 1996 (or if such day be a legal holiday, then on the next succeeding day not a holiday) at 10 a.m., for the purpose of electing directors and for the transaction of such other business as may properly be brought before the meeting. Section 2. Special Meetings. Special Meetings of the stockholders may be called by the Board of Directors or by the President, and shall be called by the President or by the Secretary upon the written request of the holders of record of at least twenty-five per cent (25%) of the shares of stock of the Corporation, issued and outstanding and entitled to vote, at such times and at such place either within or without the State of Delaware as may be stated in the call or in a waiver of notice thereof. Section 3. Notice of Meetings. Notice of the time, place and purpose of every meeting of stockholders shall be delivered personally or mailed not less than ten days nor more than sixty days previous thereto to each stockholder of record entitled to vote, at his post office address appearing upon the records of the Corporation or at such other address as shall be furnished in writing by him to the Corporation for such purpose. Such further notice shall be given as may be required by law or by these ByLaws. Any meeting may be held without notice if all stockholders entitled to vote are present in person or by proxy, or if notice is waived in writing, either before or after the meeting, by those not present. Section 4. Quorum. The holders of record of at least a majority of the shares of the stock of the Corporation, issued and outstanding and entitled to vote, present in person or by proxy, shall, except as otherwise provided by law or by these By-Laws, constitute a quorum at all meetings of the stockholders; if there be no such quorum, the holders of a majority of such shares so present or represented may adjourn the meeting from time to time until a quorum shall have been obtained. Section 5. Organization of Meetings. Meetings of the stockholders shall be presided over by the Chairman of the Board, if there be one, or if he is not present by the President, or if he is not present, by a chairman to be chosen at the meeting. The Secretary of the Corporation, or in his absence an Assistant Secretary, shall act as Secretary of the meeting, if present. Section 6. Voting. At each meeting of stockholders, except as otherwise provided by statute or the Certificate of Incorporation, every holder of record of stock entitled to vote shall be entitled to one vote in person or by proxy for each share of such stock standing in his name on the records of the Corporation. Elections of directors shall be determined by a plurality of the votes cast thereat and, except as otherwise provided by statute, the Certificate of Incorporation, or these By-Laws, all other action shall be determined by a majority of the votes cast at such meeting. Each proxy to vote shall be in writing and signed by the stockholder or by his duly authorized attorney. At all elections of directors, the voting shall be by ballot or in such other manner as may be determined by the stockholders present in person or by proxy entitled to vote at such election. With respect to any other matter presented to the stockholders for their consideration at a meeting, any stockholder entitled to vote may, on any question, demand a vote by ballot. A complete list of the stockholders entitled to vote at each such meeting, arranged in alphabetical order, with the address of each, and the number of shares registered in the name of each stockholder, shall be prepared by the Secretary and shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 7. Inspectors of Election. The Board of Directors in advance of any meeting of stockholders may appoint one or more Inspectors of Election to act at the meeting or any adjournment thereof. If Inspectors of Election are not so appointed, the chairman of the meeting may, and on the request of any stockholder entitled to vote, shall appoint one or more Inspectors of Election. Each Inspector of Election, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of Inspector of Election at such meeting with strict impartiality and according to the best of his ability. If appointed, Inspectors of Election shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by law. Section 8. Action by Consent. Any action required or permitted to be taken at any meeting of stockholders may be taken without a meeting, without prior notice and without a vote, if, prior to such action, a written consent or consents thereto, setting forth such action, is signed by the holders of record of shares of the stock of the Corporation, issued and outstanding and entitled to vote thereon, having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. ARTICLE II DIRECTORS Section 1. Number, Quorum, Term Vacancies Removal. The Board of Directors of the Corporation shall consist of at least six and not more than fifteen persons. The number of directors may be changed by a resolution passed by a majority of the whole Board or by a vote of the holders of record of at least a majority of the shares of stock of the Corporation, issued and outstanding and entitled to vote. A majority of the members of the Board of Directors then holding office (but not less than one-third of the total number of directors nor less than two directors) shall constitute a quorum for the transaction of business, but if at any meeting of the Board there shall be less than a quorum present, a majority of those present may adjourn the meeting from time to time until a quorum shall have been obtained. Directors shall hold office until the next annual election and until their successors shall have been elected and shall have qualified, unless sooner displaced. Whenever any vacancy shall have occurred in the Board of Directors, by reason of death, resignation, or otherwise, other than removal of a director with or without cause by a vote of the stockholders, it shall be filled by a majority of the remaining directors, though less than a quorum (except as otherwise provided by law), or by the stockholders, and the person so chosen shall hold office until the next annual election and until his successor is duly elected and has qualified. Any one or more of the directors of the Corporation may be removed either with or without cause at any time by a vote of the holders of record of at least a majority of the shares of stock of the Corporation, issued and outstanding and entitled to vote, and thereupon the term of the director or directors who shall have been so removed shall forthwith terminate and there shall be a vacancy or vacancies in the Board of Directors, to be filled by a vote of the stockholders as provided in these By-Laws. Section 2. Meetings, Notice. Meetings of the Board of Directors shall be held at such place either within or without the State of Delaware, as may from time to time be fixed by resolution of the Board, or as may be specified in the call or in a waiver of notice thereof. Regular meetings of the Board of Directors shall be held at such times as may from time to time be fixed by resolution of the Board, and special meetings may be held at any time upon the call of two directors, the Chairman of the Board, if one be elected, or the President, by oral, telegraphic or written notice, duly served on or sent or mailed to each director not less than two days before such meeting. A meeting of the Board may be held without notice immediately after the annual meeting of stockholders at the same place at which such meeting was held. Notice need not be given of regular meetings of the Board. Any meeting may be held without notice, if all directors are present, or if notice is waived in writing, either before or after the meeting, by those not present. Any member of the Board of Directors, or any committee thereof, may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other and participation in a meeting by such means shall constitute presence in person at such meeting. Section 3. Committees. The Board of Directors may, in its discretion, by resolution passed by a majority of the whole Board, designate from among its members one or more committees which shall consist of two or more directors. The Board may designate one or more directors as alternate members of any such committee, who may replace any absent or disqualified member at any meeting of the committee. Such committees shall have and may exercise such powers as shall be conferred or authorized by the resolution appointing them. A majority of any such committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. The Board shall have power at any time to change the membership of any such committee, to fill vacancies in it, or to dissolve it. Section 4. Action by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors, or of any committee thereof, may be taken without a meeting, if prior to such action a written consent or consents thereto is signed by all members of the Board, or of such committee as the case may be, and such written consent or consents is filed with the minutes of proceedings of the Board or committee. Section 5. Compensation. The Board of Directors may determine, from time to time, the amount of compensation which shall be paid to its members. The Board of Directors shall also have power, in its discretion, to allow a fixed sum and expenses for attendance at each regular or special meeting of the Board, or of any committee of the Board; in addition the Board of Directors shall also have power, in its discretion, to provide for and pay to directors rendering services to the Corporation not ordinarily rendered by directors, as such, special compensation appropriate to the value of such services, as determined by the Board from time to time. ARTICLE III OFFICERS Section 1. Titles and Election. The officers of the Corporation, who shall be chosen by the Board of Directors at its first meeting after each annual meeting of stockholders, shall be a President, a Treasurer and a Secretary. The Board of Directors from time to time may elect a Chairman of the Board, one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and such other officers and agents as it shall deem necessary, and may define their powers and duties. Any number of offices may be held by the same person. Section 2. Terms of Office. The officer shall hold office until their successors are chosen and qualify. Section 3. Removal. Any officer may be removed, either with or without cause, at any time, by the affirmative vote of a majority of the Board of Directors. Section 4. Resignations. Any officer may resign at any time by giving written notice to the Board of Directors or to the Secretary. Such resignation shall take effect at the time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 5. Vacancies. If the office of any officer or agent becomes vacant by reason of death, resignation, retirement, disqualification, removal from office or otherwise, the directors may choose a successor, who shall hold office for the unexpired term in respect of which such vacancy occurred. Section 6. Chairman of the Board. The Chairman of the Board of Directors, if one be elected, shall preside at all meetings of the Board of Directors and of the stock holders, and he shall have and perform such other duties as from time to time may be assigned to him by the Board of Directors. Section 7. President. The President shall be the Chief Executive Officer of the Corporation and, in the absence of the Chairman, shall preside at all meetings of the Board of Directors, and of the stockholders. He shall exercise the powers and perform the duties usual to the chief executive officer and, subject to the control of the Board of Directors, shall have general management and control of the affairs and business of the Corporation; he shall appoint and discharge employees and agents of the Corporation (other than officers elected by the Board of Directors) and fix their compensation; and he shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall have the power to execute bonds, mortgages and other contracts, agreements and instruments of the Corporation, and shall do and perform such other duties as from time to time may be assigned to him by the Board of Directors. Section 8. Vice Presidents. If chosen, the Vice Presidents, in the order of their seniority, shall, in the absence or disability of the President, exercise all of the powers and duties of the President. Such Vice Presidents shall have the power to execute bonds, notes, mortgages and other contracts, agreements and instruments of the Corporation, and shall do and perform such other duties incident to the office of Vice President and as the Board of Directors, or the President shall direct. Section 9. Secretary. The Secretary shall attend all sessions of the Board and all meetings of the stockholders and record all votes and the minutes of proceedings in a book to be kept for that purpose. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors. The Secretary shall affix the corporate seal to any instrument requiring it, and when so affixed, it shall be attested by the signature of the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer who may affix the seal to any such instrument in the event of the absence or disability of the Secretary. The Secretary shall have and be the custodian of the stock records and all other books, records and papers of the Corporation (other than financial) and shall see that all books, reports, statements, certificates and other documents and records required by law are properly kept and filed. Section 10. Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys, and other valuable effects in the name and to the credit of the Corporation, in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the directors whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. Section 11. Duties of Officers may be Delegated. In case of the absence or disability of any officer of the Corporation, or for any other reason that the Board may deem sufficient, the Board may delegate, for the time being, the powers or duties, or any of them, of such officer to any other officer, or to any director. ARTICLE IV INDEMNIFICATION Section 1. Actions by Others. The Corporation (1) shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director or an officer of the Corporation and (2) except as otherwise required by Section 3 of this Article, may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was an employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, agent of or participant in another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. Section 2. Actions by or in the Right of the Corporation. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee, agent of or participant in another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit 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 which the Delaware Court of Chancery or such other court shall deem proper. Section 3. Successful Defense. To the extent that a person who is or was a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1 or Section 2 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. Section 4. Specific Authorization. Any indemnification under Section 1 or Section 2 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in said Sections 1 and 2. Such determination shall be made (1) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (3) by the stockholders. Section 5. Advance of Expenses. Expenses incurred by any person who may have a right of indemnification under this Article in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding as authorized by the Board of Directors in the specific case upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation pursuant to this Article. Section 6. Right of Indemnity not Exclusive. The indemnification provided by this Article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. Section 7. Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of or participant in another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article, Section 145 of the General Corporation Law of the State of Delaware or otherwise. Section 8. Invalidity of any Provisions of this Article. The invalidity or unenforceability of any provision of this Article shall not affect the validity or enforceability of the remaining provisions of this Article. ARTICLE V CAPITAL STOCK Section 1. Certificates. The interest of each stockholder of the Corporation shall be evidenced by certificates for shares of stock in such form as the Board of Directors may from time to time prescribe. The certificates of stock shall be signed by the President or a Vice President and by the Secretary, or the Treasurer, or an Assistant Secretary, or an Assistant Treasurer, sealed with the seal of the Corporation or a facsimile thereof, and countersigned and registered in such manner, if any, as the Board of Directors may by resolution prescribe. Where any such certificate is countersigned by a transfer agent other than the Corporation or its employee, or registered by a registrar other than the Corporation or its employee, the signature of any such officer may be a facsimile signature. In case any officer or officers who shall have signed, or whose facsimile signature or signatures shall have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates shall have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures shall have been used thereon had not ceased to be such officer or officers of the Corporation. Section 2. Transfer. The shares of stock of the Corporation shall be transferred only upon the books of the Corporation by the holder thereof in person or by his attorney, upon surrender for cancellation of certificates for the same number of shares, with an assignment and power of transfer endorsed thereon or attached thereto, duly executed, with such proof of the authenticity of the signature as the Corporation or its agents may reasonably require. Section 3. Record Dates. The Board of Directors may fix in advance a date, not less than ten nor more than sixty days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the distribution or allotment of any rights, or the date when any change, conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any such dividend, or to receive any distribution or allotment of such rights, or to exercise the rights in respect of any such change, conversion or exchange of capital stock, and in such case only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting, or to receive payment of such dividend, or to receive such distribution or allotment or rights or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. Section 4. Lost Certificates. In the event that any certificate of stock is lost, stolen, destroyed or mutilated, the Board of Directors may authorize the issuance of a new certificate of the same tenor and for the same number of shares in lieu thereof. The Board may in its discretion, before the issuance of such new certificate, require the owner of the lost, stolen, destroyed or mutilated certificate, or the legal representative of the owner to make an affidavit or affirmation setting forth such facts as to the loss, destruction or mutilation as it deems necessary, and to give the Corporation a bond in such reasonable sum as it directs to indemnify the Corporation. ARTICLE VI CHECKS, NOTES, ETC. Section 1. Checks, Notes, Etc. All checks and drafts on the Corporation's bank accounts and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, may be signed by the President or any Vice President and may also be signed by such other officer or officers, agent or agents, as shall be thereunto authorized from time to time by the Board of Directors. ARTICLE VII MISCELLANEOUS PROVISIONS Section 1. Offices. The registered office of the Corporation shall be located at the office of the Prentice-Hall Corporation System, Inc., in the City of Dover, County of Kent, in the State of Delaware and said Corporation shall be the registered agent of this Corporation in charge thereof. The Corporation may have other offices either within or without the State of Delaware at such places as shall be determined from time to time by the Board of Directors or the business of the Corporation may require. Section 2. Fiscal Year. The fiscal year of the Corporation shall be determined by the Board of Directors. Section 3. Corporate Seal. The seal of the Corporation shall be circular in form and contain the name of the Corporation, and the year and state of its incorporation. Such seal may be altered from time to time at the discretion of the Board of Directors. Section 4. Books. There shall be kept at such office of the Corporation as the Board of Directors shall determine, within or without the State of Delaware, correct books and records of account of all its business and transactions, minutes of the proceedings of its stockholders, Board of Directors and committees, and the stock book, containing the names and addresses of the stockholders, the number of shares held by them, respectively, and the dates when they respectively became the owners of record thereof, and in which the transfer of stock shall be registered, and such other books and records as the Board of Directors may from time to time determine. Section 5. Voting of Stock. Unless otherwise specifically authorized by the Board of Directors, all stock owned by the Corporation, other than stock of the Corporation, shall be voted, in person or by proxy, by the President or any Vice President of the Corporation on behalf of the Corporation. ARTICLE VIII AMENDMENTS Section 1. Amendments. The vote of the holders of at least a majority of the shares of stock of the Corporation, issued and outstanding and entitled to vote, shall be necessary at any meeting of stockholders to amend or repeal these By-Laws or to adopt new by-laws. These ByLaws may also be amended or repealed, or new bylaws adopted, at any meeting of the Board of Directors by the vote of at least a majority of the entire Board; provided that any by-law adopted by the Board may be amended or repealed by the stockholders in the manner set forth above. Any proposal to amend or repeal these By-Laws or to adopt new bylaws shall be stated in the notice of the meeting of the Board of Directors or the stockholders, or in the waiver of notice thereof, as the case may be, unless all of the directors or the holders of record of all of the shares of stock of the Corporation, issued and outstanding and entitled to vote, are present at such meeting.

SECOND SUPPLEMENTAL INDENTURE, dated as of July 16, 2000 (the "Supplemental Indenture") between Outsourcing Solutions, Inc., a corporation organized under the laws of the State of Delaware (the "Company"), and University Accounting Service, LLC, a Wisconsin limited liability company ("Additional Guarantor") (as defined below) and Wilmington Trust Company (the "Trustee"), as Trustee under the Indenture (as defined below). Capitalized terms used and not defined herein shall have the same meanings given in the Indenture unless otherwise indicated. WHEREAS, the Company, the Guarantors thereto and the Trustee are parties to that certain Indenture dated as of November 6, 1996 (the "Indenture") pursuant to which the Company issued its 11% Senior Subordinated Notes 2006 (the "Notes") and the Guarantors guaranteed the obligations of the Company under the Indenture and the Notes; WHEREAS, pursuant to Section 4.18 of the Indenture, if the Company acquires or creates any additional subsidiary which is a domestic Restricted Subsidiary, each such subsidiary shall execute and deliver a supplemental indenture pursuant to which such subsidiary shall unconditionally guaranty the Company's obligations under the Notes; WHEREAS, each of the Additional Guarantors is a domestic Restricted Subsidiary of the Company; WHEREAS, the Company and the Trustee desire to have the Additional Guarantor enter into this Supplemental Indenture and agree to guaranty the obligations of the Company under the Indenture and the Notes and the Additional Guarantor desires to enter into the Supplemental Indenture and to guaranty the obligations of the Company under the Indenture and the Notes as of such date; WHEREAS, Section 9.1 of the Indenture provides that the Company, the Guarantors and the Trustee may, without the written consent of the holders of the outstanding Notes, amend the Indenture as provided herein; WHEREAS, by entering into this Supplemental Indenture, the Company, and the Trustee have consented to amend the Indenture in accordance with the terms and conditions herein; and WHEREAS, each Guarantor hereby acknowledges and consents to amend the Indenture in accordance with the terms and conditions herein; WHEREAS, all acts and things prescribed by the Articles of Organization and the Limited Liability Company Agreement (each as now in effect) of the Additional Guarantor necessary to make this Supplemental Indenture a valid instrument legally binding on the Additional Guarantor for the purposes herein expressed, in accordance with its terms, have been duly done and performed; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company, the Additional Guarantor and the Trustee hereby agree for the benefit of each other and the equal and ratable benefit of the holders of the Notes as follows: 1. Additional Guarantor as Guarantor. As of the date hereof and pursuant to this Indenture Supplement, the Additional Guarantor shall become a Guarantor under clause (ii) of the definition of Guarantor in the Indenture in accordance with the terms and conditions of the Indenture and shall assume all rights and obligations of a Guarantor thereunder. 2. Compliance with and Fulfillment of Condition of Section 4.18. The execution and delivery of this Supplemental Indenture by the Additional Guarantor (along with such documentation relating thereto as the Trustee shall require, including, without limitation, an Opinion of Counsel as to the enforceability of the Supplemental Indenture and an Officer's Certificate) fulfills the obligations of the Company under Section 4.18 of the Indenture. 3. Construction. For all purposes of this Supplemental Indenture, except as otherwise herein expressly provided or unless the context otherwise requires: (i) the terms and expressions used herein shall have the same meanings as corresponding terms and expressions used in the Indenture; and (ii) the words "herein," "hereof" and "hereby" and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular Section hereof. 4. Trustee Acceptance. The Trustee accepts the amendment of the Indenture effected by this Supplemental Indenture, as hereby amended, but only upon the terms and conditions set forth in the Indenture, as hereby amended, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee in the performance of its duties and obligations under the Indenture, as hereby amended. Without limiting the generality of the foregoing, the Trustee has no responsibility for the correctness of the recitals of fact herein contained which shall be taken as the statements of each of the Company and the Additional Guarantor, respectively, and makes no representations as to the validity or enforceability against any of the Company or the Additional Guarantor. 5. Indenture Ratified. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. 6. Holders Bound. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of the Notes heretofore or hereafter authenticated and delivered shall be bound hereby. 7. Successors and Assigns. This Supplemental Indenture shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 8. Counterparts. This Supplemental Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and all of such counterparts shall together constitute one and the same instrument. 9. Governing Law. This Supplemental Indenture shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to principles of conflicts of laws. IN WITNESS WHEREOF, the Company, the Additional Guarantor and the Trustee have caused this Supplemental Indenture to be duly executed as of the date first above written. COMPANY: OUTSOURCING SOLUTIONS INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President ADDITIONAL GUARANTOR: UNIVERSITY ACCOUNTING SERVICE, LLC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President TRUSTEE: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as trustee By: /s/ Bruce L. Bisson Bruce L. Bisson Title: Vice President ACKNOWLEDGED AND CONSENTED: OSI SUPPORT SERVICES, INC. (formerly known as Payco American Corporation) By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President OSI COLLECTION SERVICES, INC. (formerly known as Payco-General American Credits, Inc.) By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President OSI EDUCATION SERVICES, INC. (formerly known as University Accounting Service, Inc.) By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President JENNIFER LOOMIS & ASSOCIATES, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President ASSET RECOVERY & MANAGEMENT CORP. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President QUALINK, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President INDIANA MUTUAL CREDIT ASSOCIATION, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President GRABLE, GREINER & WOLFF, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President PROFESSIONAL RECOVERIES, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President PAYCO AMERICAN INTERNATIONAL CORP. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President OSI PORTFOLIO SERVICES, INC. (formerly known as Account Portfolios, Inc.) By: /s/ Timothy G. Beffa Timothy G. Beffa Title: Chairman GULF STATE CREDIT, L.L.C. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: Chairman PERIMETER CREDIT, L.L.C. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: Chairman NORTH SHORE AGENCY, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: Vice President THE UNION CORPORATION By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President OSI OUTSOURCING SERVICES, INC. (formerly known as Interactive Performance, Inc.) By: /s/ Timothy G. Beffa Timothy G. Beffa Title: Chairman TRANSWORLD SYSTEMS, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: Vice President UCO PROPERTIES, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President UNION SPECIALTY STEEL CASTING CORPORATION By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President UNION FINANCIAL SERVICES GROUP, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President AMERICAN RECOVERY COMPANY, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President C.S.N. CORP. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President GENERAL CONNECTOR CORPORATION By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President U.C.O.-M.B.A. CORPORATION By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President GUARANTEE University Accounting Service, LLC (the "Guarantor") has unconditionally guaranteed on a senior basis (the "Guarantee") that the Principal of, interest and Additional Interest, if any, on and any Additional Amounts, if any, with respect to the Security upon which this notation is endorsed, will be duly and punctually paid in full when due, whether at maturity, by acceleration or otherwise, and interest on overdue Principal, and (to the extent permitted by law) interest on any interest or Additional Interest, if any, on or Additional Amounts, if any, with respect to the Securities and all other Obligations of the Company to the Holders or the Trustee under the Securities or the Indenture (including fees, expenses or other Obligations) will be promptly paid in full or performed. The obligations of the Guarantor to the Holders of Securities and to the Trustee pursuant to the Guarantee and the Indenture and the Second Supplemental Indenture are expressly set forth, and are senior obligations of each such Guarantor to the extent and in the manner provided, in Article X of the Indenture, and reference is made to such Indenture for the precise terms of the Guarantee therein made. A trustee, director, officer, employee, stockholder or incorporator, as such of the Guarantor shall not have any liability for any obligations of the Guarantor under the Securities, the Indenture, the Supplemental Indenture or the Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Guarantee. All capitalized terms used but not defined herein shall have the meaning ascribed to them in the Security upon which this notation is endorsed. As used herein the "Second Supplemental Indenture" means the Second Supplemental Indenture, dated as of July 15, 2000, among the Company, the Original Guarantors (as defined therein), the Additional Guarantors (as defined therein) and the Trustee. The Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Securities upon which the Guarantee is noted shall have been executed by the Trustee under the Indenture and the Second Supplemental Indenture by the manual signature of one of its authorized officers. Guarantor: University Accounting Service, LLC By: /s/ Timothy G. Beffa Name: Timothy G. Beffa Title: President

THIRD SUPPLEMENTAL INDENTURE, dated as of September 29, 2000 (the "Supplemental Indenture") between Outsourcing Solutions, Inc., a corporation organized under the laws of the State of Delaware (the "Company"), and RWC CONSULTING GROUP, LLC, a Delaware limited liability company, and OSI OUTSOURCING SERVICES INTERNATIONAL, LTD., a Delaware corporation ("Additional Guarantors") (as defined below) and Wilmington Trust Company (the "Trustee"), as Trustee under the Indenture (as defined below). Capitalized terms used and not defined herein shall have the same meanings given in the Indenture unless otherwise indicated. WHEREAS, the Company, the Guarantors thereto and the Trustee are parties to that certain Indenture dated as of November 6, 1996 (the "Indenture") pursuant to which the Company issued its 11% Senior Subordinated Notes 2006 (the "Notes") and the Guarantors guaranteed the obligations of the Company under the Indenture and the Notes; WHEREAS, pursuant to Section 4.18 of the Indenture, if the Company acquires or creates any additional subsidiary which is a domestic Restricted Subsidiary, each such subsidiary shall execute and deliver a supplemental indenture pursuant to which such subsidiary shall unconditionally guaranty the Company's obligations under the Notes; WHEREAS, each of the Additional Guarantors is a domestic Restricted Subsidiary of the Company; WHEREAS, the Company and the Trustee desire to have the Additional Guarantors enter into this Supplemental Indenture and agree to guaranty the obligations of the Company under the Indenture and the Notes and the Additional Guarantors desire to enter into the Supplemental Indenture and to guaranty the obligations of the Company under the Indenture and the Notes as of such date; WHEREAS, Section 9.1 of the Indenture provides that the Company, the Guarantors and the Trustee may, without the written consent of the holders of the outstanding Notes, amend the Indenture as provided herein; WHEREAS, by entering into this Supplemental Indenture, the Company, and the Trustee have consented to amend the Indenture in accordance with the terms and conditions herein; and WHEREAS, each Guarantor hereby acknowledges and consents to amend the Indenture in accordance with the terms and conditions herein; WHEREAS, all acts and things prescribed by the Certificate of Incorporation, Bylaws, Articles of Organization and the Limited Liability Company Agreement (as appropriate, each as now in effect) of the Additional Guarantors necessary to make this Supplemental Indenture a valid instrument legally binding on the Additional Guarantors for the purposes herein expressed, in accordance with its terms, have been duly done and performed; NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Company, the Additional Guarantors and the Trustee hereby agree for the benefit of each other and the equal and ratable benefit of the holders of the Notes as follows: 1. Additional Guarantors as Guarantors. As of the date hereof and pursuant to this Indenture Supplement, each of the Additional Guarantors shall become a Guarantor under clause (ii) of the definition of Guarantor in the Indenture in accordance with the terms and conditions of the Indenture and shall assume all rights and obligations of a Guarantor thereunder. 2. Compliance with and Fulfillment of Condition of Section 4.18. The execution and delivery of this Supplemental Indenture by the Additional Guarantors (along with such documentation relating thereto as the Trustee shall require, including, without limitation, an Opinion of Counsel as to the enforceability of the Supplemental Indenture and an Officer's Certificate) fulfills the obligations of the Company under Section 4.18 of the Indenture. 3. Construction. For all purposes of this Supplemental Indenture, except as otherwise herein expressly provided or unless the context otherwise requires: (i) the terms and expressions used herein shall have the same meanings as corresponding terms and expressions used in the Indenture; and (ii) the words "herein," "hereof" and "hereby" and other words of similar import used in this Supplemental Indenture refer to this Supplemental Indenture as a whole and not to any particular Section hereof. 4. Trustee Acceptance. The Trustee accepts the amendment of the Indenture effected by this Supplemental Indenture, as hereby amended, but only upon the terms and conditions set forth in the Indenture, as hereby amended, including the terms and provisions defining and limiting the liabilities and responsibilities of the Trustee in the performance of its duties and obligations under the Indenture, as hereby amended. Without limiting the generality of the foregoing, the Trustee has no responsibility for the correctness of the recitals of fact herein contained which shall be taken as the statements of each of the Company and the Additional Guarantors, respectively, and makes no representations as to the validity or enforceability against any of the Company or the Additional Guarantors. 5. Indenture Ratified. Except as expressly amended hereby, the Indenture is in all respects ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. 6. Holders Bound. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of the Notes heretofore or hereafter authenticated and delivered shall be bound hereby. 7. Successors and Assigns. This Supplemental Indenture shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns. 8. Counterparts. This Supplemental Indenture may be executed in any number of counterparts, each of which when so executed shall be deemed to be an original, and all of such counterparts shall together constitute one and the same instrument. 9. Governing Law. This Supplemental Indenture shall be governed by and construed in accordance with the internal laws of the State of New York without giving effect to principles of conflicts of laws. IN WITNESS WHEREOF, the Company, the Additional Guarantors and the Trustee have caused this Supplemental Indenture to be duly executed as of the date first above written. COMPANY: OUTSOURCING SOLUTIONS INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President ADDITIONAL GUARANTORS: RWC CONSULTING GROUP, LLC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: Chairman OSI OUTSOURCING SERVICES INTERNATIONAL, LTD. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: Chairman of the Board TRUSTEE: WILMINGTON TRUST COMPANY, not in its individual capacity but solely as trustee By: /s/ Bruce L. Bisson Bruce L. Bisson Title: Vice President ACKNOWLEDGED AND CONSENTED: OSI SUPPORT SERVICES, INC. (formerly known as Payco American Corporation) By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President OSI COLLECTION SERVICES, INC. (formerly known as Payco-General American Credits, Inc.) By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President OSI EDUCATION SERVICES, INC. (formerly known as University Accounting Service, Inc.) By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President JENNIFER LOOMIS & ASSOCIATES, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President ASSET RECOVERY & MANAGEMENT CORP. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President QUALINK, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President INDIANA MUTUAL CREDIT ASSOCIATION, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President GRABLE, GREINER & WOLFF, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President PROFESSIONAL RECOVERIES, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President PAYCO AMERICAN INTERNATIONAL CORP. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President OSI PORTFOLIO SERVICES, INC. (formerly known as Account Portfolios, Inc.) By: /s/ Timothy G. Beffa Timothy G. Beffa Title: Chairman GULF STATE CREDIT, L.L.C. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: Chairman PERIMETER CREDIT, L.L.C. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: Chairman NORTH SHORE AGENCY, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: Vice President THE UNION CORPORATION By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President OSI OUTSOURCING SERVICES, INC. (formerly known as Interactive Performance, Inc.) By: /s/ Timothy G. Beffa Timothy G. Beffa Title: Chairman TRANSWORLD SYSTEMS, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: Vice President UCO PROPERTIES, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President UNION SPECIALTY STEEL CASTING CORPORATION By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President UNION FINANCIAL SERVICES GROUP, INC. By: //s/ Timothy G. Beffa Timothy G. Beffa Title: President AMERICAN RECOVERY COMPANY, INC. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President C.S.N. CORP. By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President GENERAL CONNECTOR CORPORATION By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President U.C.O.-M.B.A. CORPORATION By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President UNIVERSITY ACCOUNTING SERVICE, LLC By: /s/ Timothy G. Beffa Timothy G. Beffa Title: President GUARANTEE RWC Consulting Group, LLC (the "Guarantor") has unconditionally guaranteed on a senior basis (the "Guarantee") that the Principal of, interest and Additional Interest, if any, on and any Additional Amounts, if any, with respect to the Security upon which this notation is endorsed, will be duly and punctually paid in full when due, whether at maturity, by acceleration or otherwise, and interest on overdue Principal, and (to the extent permitted by law) interest on any interest or Additional Interest, if any, on or Additional Amounts, if any, with respect to the Securities and all other Obligations of the Company to the Holders or the Trustee under the Securities or the Indenture (including fees, expenses or other Obligations) will be promptly paid in full or performed. The obligations of the Guarantor to the Holders of Securities and to the Trustee pursuant to the Guarantee and the Indenture and the Second Supplemental Indenture are expressly set forth, and are senior obligations of each such Guarantor to the extent and in the manner provided, in Article X of the Indenture, and reference is made to such Indenture for the precise terms of the Guarantee therein made. A trustee, director, officer, employee, stockholder or incorporator, as such of the Guarantor shall not have any liability for any obligations of the Guarantor under the Securities, the Indenture, the Supplemental Indenture or the Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Guarantee. All capitalized terms used but not defined herein shall have the meaning ascribed to them in the Security upon which this notation is endorsed. As used herein the "Third Supplemental Indenture" means the Third Supplemental Indenture, dated as of September 29, 2000, among the Company, the Original Guarantors (as defined therein), the Additional Guarantors (as defined therein) and the Trustee. The Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Securities upon which the Guarantee is noted shall have been executed by the Trustee under the Indenture and the Third Supplemental Indenture by the manual signature of one of its authorized officers. Guarantor: RWC Consulting Group, LLC By: /s/ Timothy G. Beffa Name: Timothy G. Beffa Title: Chairman GUARANTEE OSI Outsourcing Services International, Ltd. (the "Guarantor") has unconditionally guaranteed on a senior basis (the "Guarantee") that the Principal of, interest and Additional Interest, if any, on and any Additional Amounts, if any, with respect to the Security upon which this notation is endorsed, will be duly and punctually paid in full when due, whether at maturity, by acceleration or otherwise, and interest on overdue Principal, and (to the extent permitted by law) interest on any interest or Additional Interest, if any, on or Additional Amounts, if any, with respect to the Securities and all other Obligations of the Company to the Holders or the Trustee under the Securities or the Indenture (including fees, expenses or other Obligations) will be promptly paid in full or performed. The obligations of the Guarantor to the Holders of Securities and to the Trustee pursuant to the Guarantee and the Indenture and the Second Supplemental Indenture are expressly set forth, and are senior obligations of each such Guarantor to the extent and in the manner provided, in Article X of the Indenture, and reference is made to such Indenture for the precise terms of the Guarantee therein made. A trustee, director, officer, employee, stockholder or incorporator, as such of the Guarantor shall not have any liability for any obligations of the Guarantor under the Securities, the Indenture, the Supplemental Indenture or the Guarantee or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Security waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Guarantee. All capitalized terms used but not defined herein shall have the meaning ascribed to them in the Security upon which this notation is endorsed. As used herein the "Third Supplemental Indenture" means the Third Supplemental Indenture, dated as of September 29, 2000, among the Company, the Original Guarantors (as defined therein), the Additional Guarantors (as defined therein) and the Trustee. The Guarantee shall not be valid or obligatory for any purpose until the certificate of authentication on the Securities upon which the Guarantee is noted shall have been executed by the Trustee under the Indenture and the Third Supplemental Indenture by the manual signature of one of its authorized officers. Guarantor: OSI Outsourcing Services International, Ltd. By: /s/ Timothy G. Beffa Name: Timothy G. Beffa Title: Chairman of the Board

RELEASE OF SUBSIDIARY GUARANTEE Wilmington Trust Company, as trustee (the "Trustee") under the Indenture (the "Indenture"), dated November 6, 1996, among the Outsourcing Solutions Inc., the subsidiary guarantors named therein and the Trustee, hereby acknowledges and agrees that in accordance with Section 11.04 of the Indenture, effective September 30, 2000, OSI Education Services, Inc. is released and relieved of its Obligations under its Subsidiary Guarantee and any Liens in favor of the Trustee in the assets of OSI Education Services, Inc. are released. Capitalized terms not otherwise defined herein shall have the meaning ascribed to such terms in the Indenture. WILMINGTON TRUST COMPANY, not in its individual capacity, but solely as trustee By: /s/ Bruce L. Bisson Title: Vice President

5 Note: This schedule contains summary financial information extracted from the Form 10-Q for the Quarter Ended September 30, 2000 and is qualified in its entirety by reference to such financial statements. 0001027574 Outsourcing Solutions Inc. 1,000 9-MOS DEC-31-2000 JAN-01-2000 SEP-30-2000 34,064 0 58,882 459 0 0 0 48,210 638,025 0 0 98,820 0 97 0 638,025 0 404,494 0 373,652 0 0 44,829 (13,987) 359 (14,346) 0 0 0 (14,346) 0 0